Compared with other large banking companies, Mercantile Bankshares Corp. could have thrown a party yesterday at its annual shareholders meeting.
But not this year.
Given the sorry state of the nation's banking industry, there was little to celebrate -- even for Mercantile, whose performance last year measured at or near the top of most industry lists.
"1990 was an extraordinary environment, to say the least, in the banking industry," H. Furlong Baldwin, chairman and chief executive of Mercantile, told a small gathering of shareholders yesterday.
"1991 will continue to be difficult for the industry and your bank," he said.
Some economists are hailing a pending recovery, but "we don't see it yet in this community," he said.
Coming from a man whose bank posted its 15th consecutive increase in annual earnings last year and voted to boost its annual dividend for the 14th consecutive year, these cautious tones and somber notes were particularly striking.
While many banking companies were recording sharp decreases in earnings, Mercantile Bankshares, which has $4.8 billion in assets and 19 banking subsidiaries, earned $18.5 million during the first quarter, up slightly from last year's comparable period.
Despite the increase, however, Mercantile has not been immune to the slumping economy and the widespread real estate problems.
Although the banking company enjoys a relatively low exposure to the risky real estate construction sector -- less than 10 percent of its banks' loans are in that area --Mercantile still saw its percentage of non-performing loans climb nearly 80 percent over the past 12 months.
About 1.4 percent of the banks' loans were listed as non-performing as of March 31, well below many other banks in the area.
But Mr. Baldwin said that he expected the level of troubled loans both at his bank and throughout the industry to increase during the next two quarters.
Why? The industry, he said, was paying for the "self-imposed excesses in the 1980s."
In turn, the early 1990s would be remembered as "watershed years in our industry," he said.
Later, Mr. Furlong added, "Watershed is not a synonym for funeral, but a synonym for change."
With but a few questions from a single stockholder, the meeting was over in less than 30 minutes.