Mercantile earnings up 12.3% in quarter Fee increases, loan growth help


July 16, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Mercantile Bankshares Corp.'s net income climbed 12.3 percent in the second quarter, driven by strong fee increases and mild growth in loans, the company said yesterday.

In the quarter that ended June 30, the Baltimore-based banking company's net income was $36.6 million, up from $32.5 million in the second quarter of 1997. Net income per share was 51 cents, up 10.9 percent from 46 cents in the year-earlier period.

"The major contributors for the quarter were trust revenues, net interest income and good expense control," said David E. Borowy, head of investor relations with Mercantile.

Total loans increased 4.1 percent in the quarter, from $4.78 billion to $4.98 billion. Net interest income, primarily from loans and fees on loans, increased 5.6 percent, from $84 million to $88.6 million.

Mercantile's credit quality also improved. In the second quarter of 1997, the company had net charge-offs of nearly $1.1 million. In this year's second quarter, Mercantile had recoveries of $134,000.

Noninterest income -- which includes income from trust operations, mortgage banking fees and service charges on deposit accounts -- rose 12.1 percent, from $24 million to $26.9 million.

One of the strongest performers in that category was the bank's trust business, which generated $14.6 million, up 14.8 percent from $12.7 million in the year-earlier quarter. Mercantile's noninterest expenses rose 2.8 percent, from $53.3 million to $54.8 million.

The company's efficiency ratio -- the amount it costs to generate $1 in revenue -- improved from 48.64 to 46.81. That means it costs Mercantile about 47 cents to generate $1 in revenue.

"The numbers for the most part are in line with what we expected," said Collyn Bement, a Baltimore-based analyst for Ferris Baker Watts. "They've had a pretty good revenue stream from their fee income. Their loan growth wasn't as strong, but they are maintaining strong credit quality."

In the first six months of the year, net income was $72 million, up 11.6 percent from the $64.6 million in year-earlier period. Earnings per share increased 9.9 percent, from 91 cents to $1.

Net interest income in the first six months increased 6 percent, from $164.2 million to $174 million. Average total loans increased 5.6 percent, from $4.69 billion to $4.96 billion. Total noninterest income increased 10.9 percent in the first six months, from $47 million to $52.1 million.

Mercantile shares gained 6.25 cents to $32.0625 yesterday.

Pub Date: 7/16/98

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