Mercantile posts `solid' quarter

profit up 6.1% to $48.99 million

Results `very strong' in a difficult time, one admirer observes

April 24, 2003|By William Patalon III | William Patalon III,SUN STAFF

Mercantile Bankshares Corp. said yesterday that first-quarter earnings rose more than 6 percent as the Baltimore-based bank was able to boost deposits and loans despite a difficult economy.

Mercantile said it had net income of $48.99 million in its fiscal first quarter, which ended March 31, a 6.1 percent increase over net income of $46.18 million earned during the first three months of 2002. Earnings per share were 71 cents on a fully diluted basis, a jump of 7.6 percent from the 66 cents earned a year earlier, and a penny ahead of the consensus estimate of 70 cents, according to a survey of 10 analysts conducted by Zacks Investment Research.

"We posted another solid performance ... notwithstanding the persistence of difficult economic and political conditions," Edward J. "Ned" Kelly III, Mercantile's chairman, president and chief executive officer, said in a statement. "I am particularly pleased that our credit quality has held up so well in this environment and that we have been able to achieve steady growth in loans, deposits and earnings."

Mercantile shares rose $1.42, or 4 percent, to $38.13 yesterday.

"The company put up some very strong numbers considering the demons it's fighting off in this [lackluster] economy and bear market" for stocks, said analyst Gerard S. Cassidy, managing director of bank equity research for RBC Capital Markets in Portland, Maine.

Cassidy said one of the most noteworthy points about Mercantile's first quarter was how the bank continued to nimbly avoid the bad-credit problems that typically plague financial institutions in near-recessionary periods such as this one.

Between Dec. 31 and March 31, Mercantile's nonperforming assets actually declined 18 percent to $27.45 million. The bank "continues to show very strong credit quality," Cassidy said.

However, some analysts have expressed concerns about a category Mercantile has labeled as "monitored loans," or loans that could potentially be re-categorized as nonperforming in the near future. The bank said its level of monitored loans rose to $34.92 million as of March 31, a jump of $10.07 million - or 41 percent - from the $24.85 million reported as of Dec. 31.

But Cassidy said that even should those loans end up being in default, the bank could absorb the losses without any serious problem resulting.

Total loans increased 7.3 percent to $7.45 billion from last year's first quarter. Total deposits soared 13.4 percent to $8.5 billion year over year, the bank said. The bank's wealth-management business - which Mercantile has repeatedly identified as a key engine for future growth - reported a revenue increase of 5.1 percent to $17.37 million. The bank said its wealth-management numbers were bolstered by the acquisition during the quarter of Boyd Watterson Asset Management LLC, a Cleveland-based asset-management firm.

Total bank assets reached $11.02 billion as of March 31, a jump of 10.3 percent from the close of last year's first quarter, according to Mercantile.

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