Mercantile Bankshares Corp.'s net income jumped by more than 11 percent in the second quarter, fueled by strong loan growth and gains in its trust business, the company said yesterday.
The Baltimore-based banking company earned $32.5 million, or 46 cents a share in the quarter ended June 30, compared with $29.3 million, or 40 cents a share, for the same period a year earlier.
"It was a good, solid banking quarter," said David E. Borowy, head of investor relations with Mercantile, the state's largest independently owned banking company with $6.8 billion in assets.
Shares of Mercantile closed yesterday at $28.50, down 12.5 cents. The company declared a 3-for-2 stock split last month.
Mercantile's net income was up 13.2 percent to $64.6 million, or 91 cents a share, compared with $57 million, or 79 cents a share, for the first six months of the year.
Profits were fueled in part by brisk growth in loans and increases in businesses that generate fees.
Loans jumped 8.9 percent to $4.8 billion in the quarter. Net interest income, generated primarily from loans and fees on loans, also grew by 8.9 percent to $84 million, compared with $77.1 million a year ago.
"It's just a well-run bank," said John J. Rezai, a banking analyst with Blaylock & Partners LP, who works in the company's Baltimore office.
"Management again has shown that they can compete in what is increasingly becoming a very competitive environment," Rezai said.
Noninterest income -- which includes income from trust operations, mortgage banking fees and service charges on deposit accounts -- rose 6.8 percent to $24 million.
Income from Mercantile's trust operations was up 9 percent to $12.7 million, and service charges on deposit accounts grew 1.7 percent to $4.1 million in the quarter.
"The trust division is really the hidden asset in the company," Rezai said. "It is really a gem."
For the first half of the year, noninterest income rose 7.2 percent to $47 million. The gains were boosted by the sale of a bank-owned building for $1.2 million in the first quarter. Increases, however, were partially offset by securities losses of $1.5 million for the first six months of the year.
Mercantile's expenses grew 7.9 percent to $53.3 million in the quarter largely because of computer software upgrades for the year 2000.
The company's efficiency ratio -- or the amount of money it costs to generate $1 in revenue -- fell to 48.64 percent in the quarter.
The ratio means that it costs Mercantile about 48 cents to generate $1 in revenue. In comparison, NationsBank Corp., the country's fourth largest banking company, spends 53 cents to generate $1 in revenue.
"We have always been very lean," said Borowy, the investor relations chief. "We never splurged in the good years. At this point, it is just good expense control throughout the organization."
In the second quarter, Mercantile's nonperforming assets increased $8.7 million to $34.5 million, representing 0.71 percent of total loans.
The company said the increase was primarily attributable to a single commercial loan customer.
Pub Date: 7/16/97
