Mercantile profits up 11% over 1st quarter of '94

April 13, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

Mercantile Bankshares Corp. reported yesterday that higher interest rates and growing demand for real estate loans helped push first-quarter profits to $24.2 million, an increase of 11 percent compared with the same period last year.

It was Mercantile's biggest quarter-over-quarter growth in profits since before the 1990-1991 recession.

And it gave further evidence that the banking industry, which suffered from problem real estate loans in the early 1990s, has benefited from that sector's slow recovery.

Mercantile, which escaped most of the lending problems that weakened other locally based banks, said the real estate recovery pushed the dollar value of mortgage and construction loans on its books up 10 percent as of March 31, compared with a year earlier.

"That's a good sign," not only for the company, but for the local economy, said David E. Borowy, a spokesman for the company, which holds 20 banks in Maryland, Virginia and Delaware and a mortgage banking firm.

Overall, loans rose 8 percent, to nearly $4 billion, while deposits increased only 1 percent, to $4.7 billion.

The holding company also benefited from higher interest rates, Mr. Borowy said.

Mercantile's net interest margin -- the average difference between the rate Mercantile charged for loans and the rate it pays for deposits -- grew to 5.13 percentage points.

As a result, the company's net interest income rose 13 percent to $69.3 million in the quarter.

At the same time, the company held its operating expenses down. The company's noninterest expenses, which included salaries and benefits, rose by only $100,000 to $49.8 million.

But earnings were hurt by a drop in fees derived from mortgage banking, as well as a loss from the company's sale of low-interest-rate Treasury bills, Mr. Borowy said.

Mercantile took a $993,000 loss on the sale of securities in the quarter.

The company's total assets rose 2 percent to $5.9 billion, and its return on assets rose slightly to 1.67 percent.

In Nasdaq trading, Mercantile's stock closed down 37.5 cents to $22.25 a share before earnings were released.

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