Mercantile Bankshares Corp.'s net income rose almost 11 percent in the first quarter, led by gains in its lending and trust business, the company reported yesterday.
The Baltimore-based financial institution, Maryland's largest independently owned banking company, reported net income of $35.5 million for the first quarter ended March 31, a 10.9 percent boost compared with the same period last year, when it earned $32 million.
Net income per share rose 8.9 percent to 49 cents, up from 45 cents in the same period a year ago, beating analysts' estimates by a penny.
Mercantile's shares closed yesterday at $38.75, up 6.25 cents.
"It's another solid quarter for the Merc," said John J. Rezai, a Baltimore-based director of research with Blaylock Partners L.P. "This is a bank with slow but steady growth whose balance sheet numbers continue to be good despite a very competitive environment in the mid-Atlantic.
"Part of the reason for their continued strength is that to my mind nobody does relationship banking better than Mercantile."
As testament to that, trust division services and interest and fees on loans fueled Mercantile's sound bottom line in the quarter.
Loan fees and interest -- the bank's largest source of income -- rose 6.9 percent to $109.5 million, up from $102.4 million in the same period last year.
Other fees, such as charges for automated teller machines, also rose in the quarter. They were up 11.6 percent to $6.5 million, compared with $5.8 million in the same quarter of 1997.
Income from Mercantile's trust division services jumped 14.5 percent to $13.8 million, up from $12.1 million, the bank reported.
Such income increases, said Rezai, are laudable, as Mercantile faces intensified competition from large out-of-state banking institutions, such as NationsBank.
"Mercantile is very good at building relationships with customers," said Rezai. "I think that is reflected best in the growth seen in its trust division."
Nonperforming loans and other bad debts continued to be less than 1 percent of Mercantile's total loan portfolio, further underscoring the institution's sound financial balance sheet, analysts said. Net interest income, which comes primarily from loan fees and expenses, increased 6.5 percent to $85.4 million in the first quarter.
Mercantile returned 2.04 percent on average assets in the quarter, up from 1.98 percent in the same period last year. The ratio means the company earned 2.04 cents on every $100 in assets.
Loans grew 7.2 percent to $4.9 billion, beating the national average of about 4 percent. Deposits also increased, up 6.2 percent to $5.6 billion, and assets rose 7.4 percent to $7 billion.
Analysts expect Mercantile, flush with capital, to continue its recent strategy of acquiring community banks with strong balance sheets. Last year the institution bought Home Bank of Newark, and Farmers Bank of Mardela Springs.