Mercantile's net income jumps 13.5%

`Excellent numbers' top analysts' forecasts

October 19, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

Mercantile Bankshares Corp. reported yesterday that it earned $40.8 million in the third quarter, and its net income per share jumped 13.5 percent, beating analysts' estimates.

Profit was up 9.5 percent in the third quarter that ended Sept. 30. Net income per diluted share was 59 cents, compared with 52 cents for the corresponding period last year.

Analysts expected Maryland's largest independently owned banking company to make 56 cents a share, according to Zacks Research Inc.

"They are generating really excellent numbers in light of the fact that they have such a big equity base," said David West, a banking analyst at Richmond, Va.-based Davenport & Co. "They were a little better than what I was looking for."

Mercantile's shares rose 18.75 cents to close at $31.50 yesterday.

For the first nine months of the year, Mercantile earned $116.9 million, up 6.9 percent, compared with $109.3 million for the nine-month period a year earlier.

Net income per diluted share was up 9.9 percent, to $1.66, compared with $1.51 for the corresponding period last year. Mercantile's profit was boosted by an increase in revenue from its trust division and from an increase in service charges on deposit accounts.

The trust division made $48.3 million for the nine-month period, up 11.1 percent from a year earlier. Income from service charges on deposit accounts jumped 19 percent to $17 million in the nine-month period, compared with $14.3 million for the corresponding period last year.

Mercantile's assets were up 4.7 percent to $7.8 billion, loans rose 9.7 percent to $5.4 billion, and deposits grew 2.6 percent to $5.9 billion, compared with the corresponding period last year.

Mercantile returned 2.07 percent on its average assets for the nine months, up from 2.03 percent a year earlier. The return on average asset ratio gauges how profitably a bank uses its assets. In other words, Mercantile made $2.07 for every $100 in assets, beating the industry's average of about $1.40 for banks of similar size.

"We are very pleased with the solid performance of the company for this quarter," said David E. Borowy, Mercantile's head of investor relations.

The company's net interest margin also increased to 5.16 percent in the nine-month period, compared with 5.15 percent in the second quarter this year. The net interest margin is a ratio that measures how much a bank earns on loans and investments after interest payments to depositors and creditors.

"That was the biggest surprise," West said. "Their margin continues to hold up very nicely."

Mercantile's loan portfolio also remained solid although nonperforming loans -- loans that are past due on principal or interest 90 days -- were up 5.4 percent to $26.5 million. Despite the increase, the nonperforming loans represent 0.48 percent of total loans, down from 0.50 percent for the nine-month period a year earlier.

"They just don't deliver big surprises," West said. "They do a pretty good job of delivering pretty good quality numbers."

Pub Date: 10/19/99

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