Steady demand for loans and banking services and tight expense controls pushed Mercantile Bankshares Corp.'s net income up 15.4 percent in the first quarter of 1997, the company said yesterday.
Mercantile reported $32 million net income in the first quarter that ended March 31, or 67 cents a share, compared with $27.7 million, or 58 cents for the same quarter a year earlier.
"They are clicking on all cylinders," said John M. Kline, a banking analyst with Ryan, Beck & Co. in West Orange, N.J.
The earnings surprised Kline and other Wall Street analysts, who expected the company to earn 65 cents a share.
"It was another quarter where they actually exceeded my expectations," said Katrina Blecher, a banking analyst with New York-based Gruntal & Co. "It clearly shows the quality of this company."
Mercantile's shares rose 75 cents yesterday to close at $34.75.
Several factors made this quarter a good one for Mercantile, Maryland's largest independent banking company with $6.7 billion in assets.
Net interest income, generated primarily from loans and fees on loans, was up 7 percent to $80.2 million in the quarter, compared with $75 million a year earlier.
Non-interest income -- which includes income from trust operations, mortgage banking fees and service charges on deposit accounts -- was up 7.6 percent to $23 million.
Income from its trust operations was up 6.6 percent to $12.1 million, and service charges on deposit accounts grew 4.9 percent to $4.1 million. These gains were partially offset by a securities loss of $1.2 million in the quarter.
Troubled loans fell 6.1 percent to $22.7 million, and the company wrote off $929,000 in loans compared to recovering $200,000 for the same time a year earlier.
"Their credit quality just gets better," Blecher said. "They are bucking a lot of trends in this industry. Problems that are dragging down a lot of other banks just keep on passing them by."
The bank kept a tight grip on expenses. Its efficiency ratio fell to 47.23 percent in the quarter, down from 49.71 percent the same time a year earlier. The ratio means that it costs the bank about 47 cents to generate $1 in revenue. Many banks of similar size have ratios in the high 50s or 60s.
The company returned 1.98 percent on assets beating the average 1.28 percent recorded by 25 banks of similar size.
Kline thinks that Mercantile, with its hefty capital base, is in position to make an acquisition: "They have been kind of quiet in Pennsylvania. I wouldn't rule out an acquisition in Pennsylvania in '97."
Pub Date: 4/15/97