Mercantile Bankshares net up 6.4% in quarter

Rising trust business, cost controls lift profit

July 15, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

Continued expense controls and growth in its trust business drove Mercantile Bankshares Corp.'s net income up 6.4 percent to $38.9 million in the second quarter, the Baltimore-based banking company said yesterday.

Net income per share for the three months that ended June 30 was 56 cents, 9.8 percent more than in the same quarter last year and 2 cents more than 10 analysts predicted when surveyed by Zacks Investment Research. Diluted net income was 55 cents a share.

"The earnings were decent; they were in line with our expectations," said Collyn Bement, an analyst at Ferris Baker Watts in Baltimore. "There were no real surprises for the quarter."

For the first half of this year, net income was $76 million, 5.6 percent more than in the same period last year.

Mercantile Bankshares' trust business grew 13.3 percent during the quarter, to $16.5 million, and income from service charges on deposit accounts jumped 17.7 percent, to $5.7 million.

The company's efficiency ratio, which measures the money needed to generate $1 in revenue, was 47.22 percent, meaning it cost Mercantile 47.22 cents to generate $1 in revenue in the second quarter. Most banks of similar size usually have ratios in the upper 50s.

"I thought it was a very good quarter for the company," said Terry L. Troupe, Mercantile's chief financial officer.

"The return on equity was over 16 percent and was one of the best performances we've had."

The company's return on equity was 16.13 percent, up from 15.18 percent last year.

As of June 30, total loans were $5.2 billion, 7.4 percent more than on the same date last year, deposits were up 1.7 percent to $5.9 billion and total assets were $7.6 billion, up 3.9 percent.

"Obviously, I would like to see stronger loan growth, but it's a very competitive market," Troupe said. "We are showing positive growth, but I always like to see a little more."

Mercantile, the state's largest independently owned banking company, had a return on average assets -- a ratio that measures how profitably assets are used -- of 2.06 percent, which means the bank returned more than $2 for every $100 in assets. The industry average is 1.26 percent.

Total nonperforming loans -- those late on principal or interest payments -- totaled $22 million at quarter's end, down from $28 million in the same period last year.

Mercantile shares lost 50 cents yesterday to close at $33.4375.

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