Mercantile Bankshares Corp., Maryland's largest independent bank, reported yesterday that its net income climbed 25 percent as its loan portfolio and deposits grew.
The bank earned $71 million during the third quarter that ended in September, or 86 cents a share, compared with $56.8 million, or 71 cents a share, in the corresponding period last year. Those results beat Wall Street estimates by 3 cents, according to a survey of analysts by Thomson Financial.
Mercantile stock slipped 45 cents, or less than 1 percent, to close at $54.80 on the Nasdaq stock market.
Analysts said the share price was affected by investors dumping bank stocks after the Conference Board reported an unexpected drop in its Consumer Confidence Index. A slowdown in spending could hurt the economy and translate into less borrowing.
"They were down because the whole sector was down, even though they had a good quarter," said Jennifer H. Demba, an analyst at SunTrust Robinson Humphrey who doesn't own shares of Mercantile.
Mercantile's loan portfolio expanded 14 percent to $11.4 billion over the last year, fueled by its commercial real estate business. Deposits increased 12 percent to $12 billion.
The bank's net interest margin, a key measure that analysts and investors are watching closely, slipped when compared to the second quarter. The margin represents the spread between what a bank earns from loans and other investments and the interest a bank pays out. Many banks have watched their margins shrink as the Federal Reserve has raised interest rates over the last 18 months.
Edward J. "Ned" Kelly III, Mercantile's chairman and chief executive, said the acquisition of Community Bank of Northern Virginia, which had a lower margin than Mercantile, and the purchase of additional life insurance on managers led to the margin decline.
John McCune, a research director at data provider SNL Financial, pointed out that Mercantile's margin widened when compared with last year.
"That's a positive sign," he said. "It's going to be a hard time for banks right now, and Mercantile has really been able to maintain that margin."