Mercantile profit up 9.7% in fourth quarter

70 cents per share is in line with analysts' estimates

January 29, 2003|By William Patalon III | William Patalon III,SUN STAFF

Mercantile Bankshares Corp. reported yesterday net income of $48.5 million for its fourth quarter, a 9.7 percent increase from a year earlier and in line with analysts' estimates.

Net income on a fully diluted per share basis for the three months that ended Dec. 31 was 70 cents, up from the 63 cents reported for the fourth quarter of 2001. Baltimore-based Mercantile was expected to earn 70 cents per share, according to a survey of 11 analysts conducted by Zacks Investment Research.

"At first glance, I would have to say that there was nothing of surprise in the quarter," said Collyn Bement Gilbert, a senior vice president and banking analyst with Ryan Beck & Co. in Conshohocken, Pa.

For all of 2002, net income was $190.238 million, a 4.9 percent increase from the $181.295 million earned in 2001. Net income per share for 2002 was $2.72 on a fully diluted basis, 6.7 percent above the $2.55 reported for 2001.

"Mercantile performed well both for the year and the fourth quarter under difficult conditions," said Edward J. "Ned" Kelly III, Mercantile's president and chief executive officer. "We have hopes this year for an improving economy, more stable securities markets and geopolitical certainty. That would certainly generate a more hospitable environment. But I believe we have proven that we can deal with less-than-ideal conditions as well."

Mercantile's wealth-management business, billed as the bank's chief growth vehicle for the next few years, saw its revenue decline 3 percent in fourth-quarter 2002, compared with the 2001 quarter.

Mortgage banking revenue plunged 44.7 percent to $2.55 million in the fourth quarter because of a drop-off in loan volume and an outsourcing of the retail origination business, the bank said. The falloff was expected, Gilbert said, because the bulk of Mercantile's mortgage business is commercial.

Total assets were $10.790 billion as of Dec. 31, 2002, an increase of 8.7 percent from the $9.929 billion recorded at the end of 2001. Total loans increased 5.9 percent to $7.31 billion on Dec. 31, 2002, from $6.91 billion a year earlier.

Deposits jumped 10.9 percent to $8.261 billion from the $7.447 billion reported on Dec. 31, 2001.

Mercantile repurchased 1.384 million shares last year and has authorization to buy back an additional 1.5 million shares, the bank said.

Gilbert, the Ryan Beck analyst, said one worrisome area was the jump in the level of "monitored loans," or loans that could go bad in the near future.

Mercantile said monitored loans jumped from $1.94 million on Sept. 30, 2002, to $24.85 million as of Dec. 31, 2002 - nearly a 13-fold increase.

Mercantile attributed the increase to two loans totaling $20.9 million - which are secured by two commercial aircraft - made in 1998 to a longtime customer. Due to the downturn in the airline industry, where these aircraft were being used, Mercantile decided to move the loans into the monitored category, the bank said.

Mercantile's shares fell 34 cents to $37.53 yesterday.

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