Mercantile earnings jump 12%

October 14, 1994|By David Conn | David Conn,Sun Staff Writer

Mercantile Bankshares Corp., profiting from the slowly improving regional economy, yesterday turned in another solid improvement in earnings for the latest quarter.

The company, parent of Mercantile Safe Deposit and Trust Co., earned $23.0 million during the third quarter, a 12 percent increase over earnings of $20.6 million a year ago. Earnings per share rose to 50 cents in the latest period, which ended Sept. 30, up from 45 cents a year ago.

Mercantile's gains were based on a higher level of business loans, although consumer loans dropped off slightly. At the same time, the company's expenses from soured loans continued to diminish, as the economy made life a bit easier for Mercantile's customer base of predominantly business borrowers.

For the first nine months of the year, earnings of $65.6 million, or $1.43 a share, were 6.7 percent higher than the same period a year ago.

In the third quarter, total loans were up 3 percent, to just over $3.6 billion, led by both commercial and real estate loans. Consumer lending -- home equity, auto loans and the like -- fell off slightly, at about $450 million during the period.

David Borowy, Mercantile's investor relations director, said the competition for consumer lending is coming not from other banks, but from nontraditional sources.

"We believe it's more the captive finance companies of the large auto manufacturers, offering extremely low-rate, fixed-rate loans for five years or longer," Mr. Borowy said. "And that is considered to be too much of a risk for Mercantile to enter into that competition, especially in a rising rate environment."

But he said the total increase in lending is "a very encouraging sign."

The company's administrative expenses rose 11 percent. One area that drove expenses higher was the cost of carrying foreclosed real estate, which contributed to a $2.5 million increase, or 38 percent, in its general category of "other expenses."

That expense "reflects a soft real estate market in general for properties that we still have in our portfolio that we're trying to sell," Mr. Borowy explained.

But another cost of bad loans, the provision set aside to cover future lending problems, fell to less than $1.6 million, down 31 percent from a year ago, when the loan loss provision was $2.3 million. That provision, determined each quarter by the banking company's management, is deducted from earnings.

Mercantile's stock rose 37.5 cents yesterday, to close at $21.875. The earnings report was released after the market closed.

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Mercantile Bankshares Corp.

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

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

.. .. .. .. .. .. .. .. ... MRBK ... ... .. 21 7/8 .. .. + 3/8

Period ended

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

Net Income ... .. .. .. ... $23,024 ... ... $20,580 ... .. +11.9%

Primary EPS .. .. .. .. ... $0.50 .. .. ... $0.45 .. .. .. +11.0%

Annualized return

on avg. assets .. .. .. .. 1.64% .. .. .. 1.49%

Add. to allowance

for loan losses .. .. .. .. $1,558 .. .. .. $2,257 .. .. .. -31.0%

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

Net Income .. ... .. .. ... $65,597 ... ... $61,486 ... ... +6.7%

Primary EPS ... .. .. .. .. $1.43 ... .. .. $1.34 .. .. ... +6.7%

Annualized return

on avg. assets. .. .. .. .. 1.58% .. .. .. 1.53%

Add. to allowance

for loan losses .. .. .. .. $4,560 ... .. $9,472 .. .. .. -51.9%

Balances as of .. .. .. 9/30/94 .. .. .. .. .. .. 9/30/93

Assets .. .. .. .. ... $5,625,615 .. .. .. .. ... $5,547,175 ... +1.4%

Deposits .. .. ... ... $4,547,392 .. .. .. .. ... $4,494,818 ... +1.2%

Loans outst. ... .. .. $3,673,350 .. .. .. .. ... $3,553,556 ... +3.4%

Loan loss

reserve .. .. .. .. .. $92,591 .. .. .. .. .. ... $90,401 ... ... +2.4%

Figures in thousands (except per share data.)

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