Mercantile Bankshares Corp.'s profit rose 11.8 percent in the first quarter, fueled by strong loan growth and a vibrant trust business, the company reported yesterday.
Mercantile made $41.6 million in the quarter that ended March 31, compared with $37.2 million in the first period in 1999. Net income per diluted share rose 13.2 percent to 60 cents per share, compared with 53 cents in the year-earlier period.
Mercantile, which has $8 billion in assets and is Baltimore's largest independently owned banking company, beat Wall Street's estimates by a penny per share, according to Zacks Investment Research, which surveyed 11 analysts.
"They had another great quarter," said Holly Clark, a bank analyst at BB&T Capital Markets in Richmond. "They are just a consistently strong operator."
Mercantile's shares closed at $30.0625, up 43.75 cents.
Strong growth in loans, coupled with a solid increase in income from its trust business pushed profit higher in the quarter.
Net interest income, or profit generated largely from loans, rose 8.9 percent to $96.6 million in the quarter. And loans grew to $5.9 billion, up 11.3 percent from $5.3 billion in the first quarter of 1999.
"We are pleased that we are on target," said H. Furlong Baldwin, Mercantile's chairman and chief executive. "Our earnings depend on loan growth, and that growth in loans is materializing."
Income from its trust division rose 11.5 percent to $16.9 million, up from $15.1 million in the corresponding quarter a year earlier. And service charges on deposit accounts grew 7.5 percent to $5.8 million, compared with $5.3 million.
Mercantile's deposits rose 2.9 percent to $6.1 billion, and its assets jumped 6.4 percent to $8 billion in the quarter. The company continued to outperform competitors in a number of profitability benchmarks. It returned 2.11 percent on average assets in the quarter, up from 2.01 percent in the corresponding period in 1999. In other words, Mercantile made $2.11 for every $100 in assets, beating the industry average of about $1.42.
Its net interest margin on earning assets also increased to 5.22 percent, up from 5.12 percent in the first quarter a year earlier. 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 is the highest [net interest margin] I have seen in any bank that we follow," Clark said.
Many bank margins are shrinking because it is difficult for institutions to attract deposits, which they use to fund loans, Clark said. Since they can't generate deposits, banks are borrowing from the Federal Home Loan Bank and other credit facilities, which is costly, she said.