Mercantile Bankshares has modest earnings gain Baltimore firm remains consistent

October 14, 1993|By David Conn | David Conn,Staff Writer

Mercantile Bankshares Corp., in the face of a sluggish regional economy, yesterday showed a modest improvement in earnings for the latest quarter.

The 8 percent increase in third-quarter earnings came as a sharp drop in the amount the company set aside to reserve for problem loans was offset by an equally large fall in gains from investment securities since last year.

"It's fairly consistent," Alex Hart, an analyst at Ferris, Baker Watts Inc., said of the earnings. "It always has been, and it probably always will be. I'll take consistency in a screwy market, especially in a market that's inflated."

Mercantile has retained a corps of loyal followers who rely on the Baltimore-based company's plodding but steady advancement in the face of mercurial competitors.

Mercantile further rewarded its investors last month by declaring a 3-for-2 stock split and by increasing its quarterly dividend by 3 cents a share, to 25.5 cents. The combined result was a 70 percent increase in the payout to shareholders the day it took place, Sept. 30.

For the three months that ended Sept. 30, Mercantile earned $20.6 million, or 45 cents a share, compared with last year's third-quarter earnings of $19.1 million, or 42 cents a share. Profits were practically the same as in the second quarter this year.

"They're treading water," said John Heffern, an analyst at Alex. Brown Inc. "I think their prospects for growth are tied to the prospects for growth in the local economy. This region continues to be one of the weaker ones in terms of loan growth."

A lack of strong growth in assets at the company, the parent of Mercantile-Safe Deposit & Trust Co., gave rise to some worries about its ability to squeeze out profits now that it cannot rely as much on gains from the fall in interest rates.

"I wish at a time when a lot of other guys are showing asset growth that they would grow a little, too," Mr. Hart said. Still, he said, the company's "loan portfolio continues to look very healthy, and the profitability continues to look good."

It was the loan portfolio -- or one large loan in particular -- that forced Mercantile a year ago to set aside an extraordinary reserve of $33 million. In last year's third quarter, the company recognized the losses it expected to face on the default on a $21 million loan by Eli S. Jacobs, former owner of the Orioles.

In the latest quarter, the loss reserves fell to $2.3 million, which should have driven earnings higher. But the company also saw gains from investment securities fall to nearly nothing this year, from nearly $26 million last year.

Mercantile Bankshares

.. .. .. .. .. .. .. ..Ticker .. .. .. .. .. ..Yesterday's

.. .. .. .. .. .. .. ...Symbol .. .. .. .. Cls... .. .Chg.

.. .. .. .. .. .. .. .. .MRBK .. .. .. .. .21 1/2 .. .. .. + 1/4

Period ended

Sept. 30 .. .. .. .. ..3rd qtr. .. ..Year ago .. .. ..Chg.

Net Income .. .. .. ...$20,580 .. .. .$19,088 .. .. .+7.8%

Primary EPS .. .. .. .. .$0.45 .. .. ...$0.42 .. .. .+7.1%

Annualized return

on avg. assets .. .. .. ..1.5% .. .. .. .1.4% .. .. .. .--

Add. to allowance

for loan losses .. .. ...$2,257 .. ...$33,348 .. .. .93.2%

.. .. .. .. .. .. .. .. ..9 mos. .. .Year ago .. .. ...Chg.

Net Income .. .. .. .. .$61,486 .. ...$56,746 .. .. ..+8.4%

Primary EPS .. . .. .. ...$1.34 .. .. ..$1.25 .. .. ..+7.2%

Annualized

return on assets .. .. .. .1.5% .. .. ...1.4% .. .. .. ..--

Add. to allowance

for loan losses .. .. ....$9,472 .. ..$40,228 .. .. .-76.5%

Balances as of

.. .. .. .. .. .. ..9/30/93 .. .. .. .. .9/30/92

Assets .. .. .. ..$5,547,175 .. .. .. .. $5,329,666 .. .+4.1%

Deposits .. .. ...$4,494,818 .. .. .. ...$4,383,295 .. .+2.5%

Loans outst. .. ..$3,553,556 .. .. .. ...$3,526,864 .. .+0.8%

Loan loss

reserve .. .. .. .. .$90,401 .. .. .. ... .$102,686 .. -12.0%

Figures in thousands (except per share data.)

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