Mercantile Bankshares Inc., the region's 10th-largest bank company, bucked the downward trend in banks' earnings and reported a 4 percent profit gain for the first nine months and a fractional rise for the third quarter.

Mercantile Vice Chairman Edward Dunn said the gains reflected the company's strong real estate loan portfolio and conservative lending policies.

Mercantile has comparatively low rates of nonperforming loans -- those that are in default or are not paying interest -- and has made relatively small additions to the reserve that protects against loans that go sour.

Baltimore-based Mercantile said it earned $50.2 million ($1.79 a share) in the first nine months, compared with $48.2 million ($1.73) in the year-ago period. Its profits rose 0.5 percent in the third quarter, to $15.9 million from $15.8 million.

Total assets rose 8 percent over the year to $4.4 billion as of Sept. 30. The bank's nonperforming loans accounted for 0.83 percent of total loans. Mercantile doubled its contribution to its loan-loss reserve in the quarter, adding $4.45 million, compared with a $2.2 million addition in the 1989 third quarter.

Provident Bankshares Corp., the Baltimore-based bank holding company, said a rise in non-interest income boosted its third-quarter earnings to $1 million (17 cents a share) from $956,000 (16 cents) in the 1989 third quarter.

For the first nine months, Provident Bankshares lost $4.9 million.

Nonperforming assets and past-due loans, mostly related to real estate, were $30.2 million, or 3.58 percent of total outstanding loans, as of Sept. 30. The amount was more than a year ago, but less than what was reported at the end of the second quarter.

The reserve for loan losses was 1.63 percent of total loans as of Sept. 30, compared with 1.31 percent as of Sept. 30, 1989. Assets increased 17 percent to $1.5 billion, up from $1.3 billion reported a year ago.

Provident Bankshares, established in 1987, is the parent of the 104-year-old Provident Bank of Maryland.

Baltimore Bancorp reported a third-quarter profit of $5.021 million slightly higher than the $5.019 million posted for the third quarter of 1989. For both third quarters, per-share earnings totaled 39 cents.

Earnings for the first nine months of 1990 were $15.54 million, a dip from $15.72 million in the first nine months of 1989. Per-share earnings in both periods were $1.21.

Harry L. Robinson, chief executive officer, said the major contributors to the slight gain were rising net interest margins, significant growth in certain fee income and mortgage banking operations, and relatively low credit losses.

Investment gains fell in the third quarter compared with 1989, but were offset by debt reductions, the company said.

Baltimore Bancorp's consolidated total loans rose 2.9 percent to $2.265 billion and core deposits increased 6.2 percent to $2.09 billion between this year's third quarter and last year's.

The company's troubled loans also rose. Nonperforming loans were 0.81 percent of total loans as of Sept. 30, compared with 0.65 percent at Sept. 30, 1989.

Net loan write-offs on an annualized basis were 0.23 percent of average loans, versus 0.19 percent for the similar period last year. The allowance for loan losses was 0.86 percent of loans, an increase from 0.76 percent as of Sept. 30, 1989.

Franklin Federal Savings and Loan Association, a Richmond-based thrift, reported a $1 million drop in profits in the fiscal year ended June 30 because of additions to its reserve against potential loan losses.

The thrift said it earned $2.3 million in the fiscal year, compared with $3.3 million the year before. Its loan-loss reserve totals $32.2 million, or 11 percent of assets.

Franklin Federal, which operates as a mutual association and is owned by its customers, has been rated the strongest thrift in the state by Sheshunoff Information Services Inc., a Texas-based research and analysis firm that studies reserves, assets and the amount of risk in loan and investment portfolios at financial institutions.

Owens & Minor Inc., a Richmond-based distributor of medical and surgical supplies, said its third-quarter earnings rose almost 86 percent, while its nine-month profit almost tripled.

The company said third-quarter profit totaled $2.5 million (29 cents), compared with $1.3 million (16 cents) in the same period a year earlier, an increase of 85.7 percent. Revenue rose almost 19 percent, to $310 million from $261.3 million in the 1989 third quarter.

For the first nine months, profit totaled $6 million (70 cents), up 167.5 percent from $2.2 million (27 cents) in the same period of 1989. Sales rose almost 34 percent, to $903.3 million from $675.8 million.

Legg Mason Inc., the Baltimore-based financial services company, reported fractional gains in profits for the fiscal second quarter and first half ended Sept. 30.

The company said its earnings rose 1 percent in the second quarter, to $3.5 million (39 cents) from $3.4 million (38 cents) in the 1989 second quarter. Revenue fell slightly, to $61.9 million from $62 million.

Legg Mason earned $6.6 million (74 cents) in the fiscal first half, compared with $6.5 million (72 cents) in the same period a year ago. Its revenue rose 1 percent in the half, to $122.1 million from $121.4 million in the 1989 first half.