While most bank stocks fell Thursday, shares of Mercantile Bancorp. rose amid rumors of an imminent takeover.

Sources said officers from First Union Corp. were poring over St. Louis- based Mercantile's books in an effort to reach an agreement on a merger.

First Chicago NBD Corp., which has publicly announced its intent to grow through acquisitions, is considered another likely buyer, industry sources said.

And Banc One Corp., which failed in its bid for Boatmen's Bancshares, could also make an offer.

A deal could be announced by next week. "The feeling is a takeover could be near," said Michael Ancell, a banking analyst at Edward D. Jones & Co., St. Louis.

Mercantile is the largest bank in Missouri. Banks with No. 1 market share are considered the most attractive acquisitions, commanding the highest takeover premiums. For example, Barnett Banks Inc. of Jacksonville, Fla., recently fetched four times its book value from NationsBank Corp.

But even at 3.5 times book value, which is what First Union paid for Signet Banking Corp. of Richmond, Va., Mercantile shareholders would receive $83.20 per share. Its stock closed up 81.25 cents, at $75.

Other bank stocks lost ground Thursday amid a general market retreat, based on nagging investor concerns about third-quarter corporate profits.

Activity in shares of Summit Bancorp was halted early in the day because of a trading imbalance between sellers and buyers.

The banking company, the largest independent left in New Jersey, has been touted as a prime takeover target, and its stock has run up 40% since January. That may have led investors to take profits, said bank analyst Michael L. Mayo of Credit Suisse First Boston.

"Banks with No. 1 market shares are clearly on the radar screen of acquiring banks," said Mr. Mayo, who has a "strong buy" on Princeton-based Summit. But he said, "Investors can make a lot of money in takeover targets without an actual takeover."

Anthony R. Davis, the bank analyst at Dillon Read & Co., agreed that profit taking was in order for Summit shareholders. "It's a candidate on everybodies list of takeovers," he said. But trading at 15.5 times 1998 earnings, the bank is "a full multiple higher than our typical bank," said Mr. Davis.

Although Summit was down, ending the day off $1.813, at $60.50, Albank Financial Corp. of Albany, N.Y., was up 7.51%, to $44.75, on resurfaced takeover rumors. "It's a name that has been mentioned by a number of analysts as a well-run, well-positioned entity," said Frank Barkocy of Josephthal Lyon & Ross.

Jay Suskind, head trader at Ryan Beck & Co., West Orange, N.J., said the pop in Albank's price "could be partially fueled by takeover rumors, as well as a reallocation of funds from the large bank stocks into the smaller banks."

"Albank is one of many of our regionals up strongly," said Mr. Suskind.

Virginia bank stocks got another boost from merger activity in the state. George Mason Bankshares of Fairfax agreed to sell to United Bankshares of Parkersburg, W.Va., lifting the shares of neighboring franchises.

Meanwhile, Essex Bancorp, a $174 million-asset bank in Norfolk, was up 66.67%, or $1.25, to $3.125.Life Bancorp of Norfolk gained 37.5 cents, to $25.25.

Another takeover candidate, Hibernia Bancorp. of New Orleans, was downgraded to "neutral" from "outperform" by analyst Jacqueline Reeves at Smith Barney. She cut her rating on valuation. "At $17 and change, the bank is above our price target."

However, Ms. Reeves said Hibernia, with No. 1 market share in Louisiana, could command $22 a share-a conservative estimate-if it is sold.

Hibernia's stock fell 43.75 cents, to $16.25.

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