FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-5127
MERCANTILE BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0898572
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 Hopkins Plaza, Baltimore, Maryland 21201
(Address of principal executive offices)
(Zip Code)
(410) 237-5900
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
As of October 31, 1994, registrant had outstanding 45,886,924 shares
of Common Stock.
<PAGE> 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Published Financial Statements, as required by Rule
10-01 of Regulation S-X, are set forth on pages
4 thru 7 of Exhibit 20, attached hereto and
incorporated herein.
Note - Commitments:
Various commitments to extend credit (lines of credit)
are made in the normal course of banking business. At
September 30, 1994, total unused lines of credit approximated
$1,502,467,300. In addition, letters of credit are
issued for the benefit of customers by affiliated banks.
Outstanding letters of credit were $96,269,000 at
September 30, 1994.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(a) Management's Discussion and Analysis of Financial
Condition and Results of Operations as required by
Item 303 of Regulation S-K is included on page 8 of
Exhibit 20, attached hereto and incorporated herein.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 20 - Financial Information. See Part I
(b) No forms 8-K filed.
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MERCANTILE BANKSHARES CORPORATION
H. Furlong Baldwin
Chairman of the Board
Kenneth A. Bourne, Jr.
Exec. Vice President and Treasurer
<PAGE> 3
MERCANTILE BANKSHARES CORPORATION
THIRD QUARTER REPORT
1994
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
TO OUR SHAREHOLDERS:
Net income per share for the three months ended September 30, 1994 increased
11.1% to $.50 compared to $.45 for the same period last year. For the first
nine months of 1994 net income was $1.43 per share, an increase of 6.7% over
the $1.34 per share for the comparable period in 1993.
At September 30, 1994, total assets were $5,625,615,000, an increase of 1.4%
over the $5,547,175,000 at September 30, 1993 and total stockholders' equity
was $690,346,000, an increase of 7.6% over the comparable amount last year.
For more detailed analyses of quarterly results, please see Management's
Discussion on page 8.
The following key ratios are generally considered measures of earnings and
financial strength. The annualized return on average total assets was 1.6% and
the annualized return on average equity was 13.0% for the first nine months of
1994. Average equity as a percentage of average total assets was 12.2%. The
allowance for loan losses was 2.5% of total loans at the end of the quarter.
H. Furlong Baldwin
Chairman of the Board
Two Hopkins Plaza/P.O. Box 1477/Baltimore, Maryland 21203/(410)237-5900
CONTENTS
Principal Affiliates ................................. 2
Consolidated Financial Summary ....................... 3
Consolidated Balance Sheets .......................... 4
Statement of Consolidated Income ..................... 5
Statement of Consolidated Cash Flows ................. 6
Statement of Changes in Consolidated
Stockholders' Equity ................................. 7
Notes to Consolidated Financial
Statements ........................................... 7
Management's Discussion and Analysis of
Financial Condition and Results
of Operations ........................................ 8
Officers and Directors ............................... 10
Corporate Information ................................ 11
<PAGE> 1
PRINCIPAL AFFILIATES (see APPENDIX)
1. THE ANNAPOLIS
BANKING AND
TRUST CO.
Robert E. Henel, Jr.,
President and CEO
Main Street & Church
Circle
Annapolis, Md. 21401
410/268-3366
2. BALTIMORE
TRUST CO.
Robert E. Dickerson,
President and CEO
One West Church Street
Selbyville, De. 19975
302/436-8236
3. BANK OF SOUTHERN
MARYLAND
Wesley E. Hughes, Jr.,
President and CEO
304 Charles Street
LaPlata, Md. 20646
301/934-1000
4. CALVERT BANK AND
TRUST CO.
Harold J. Kahl,
Chairman, President and CEO
Calvert Village
Shopping Center
P.O. Box 590
Prince Frederick, Md. 20678
410/535-3535
5. THE CHESTERTOWN
BANK OF
MARYLAND
R. Raymond Tarrach,
President and CEO
211 High Street
Chestertown, Md. 21620
410/778-2400
6. THE CITIZENS
NATIONAL BANK
Martin A. Sharpless,
President and CEO
Fourth & Main Streets
Laurel, Md. 20707
301/725-3100
7. COUNTY BANKING
& TRUST CO.
S. Dell Foxx,
President and CEO
123 North Street
P.O. Box 100
Elkton, Md. 21921
410/398-2600
8. THE EASTVILLE BANK
Robert L. Simpson,
President and CEO
16485 Lankford Highway
P.O. Box 7
Eastville, Va. 23347
804/678-5187
9. FARMERS &
MERCHANTS BANK--
EASTERN SHORE
H. B. Rew, Jr.,
President and CEO
25275 Lankford Highway
P.O. Box 623
Onley, Va. 23418
804/787-4111
10. THE FIDELITY BANK
C. Joseph Cunningham, III,
President and CEO
59 East Main Street
Frostburg, Md. 21532
301/689-1111
11. THE FIRST NATIONAL
BANK OF ST. MARY'S
John A. Candela,
President and CEO
5 East Park Avenue
P.O. Box 655
Leonardtown, Md. 20650
301/475-8081
12. THE FOREST HILL
STATE BANK
Paul E. Peak,
President and CEO
130 South Bond Street
Bel Air, Md. 21014
410/838-6131
13. FREDERICKTOWN
BANK & TRUST CO.
Robert E. Gearinger,
Chairman and CEO
30 North Market Street
Frederick, Md. 21701
301/662-8231
14. MERCANTILE-SAFE
DEPOSIT &
TRUST CO.
H. Furlong Baldwin,
Chairman and CEO
2 Hopkins Plaza
Baltimore, Md. 21201
410/237-5900
15. PENINSULA BANK
Jeffrey F. Turner,
President and CEO
11738 Somerset
Avenue
P.O. Box 219
Princess Anne, Md. 21853
410/651-2400
16. THE PEOPLES BANK
OF MARYLAND
Jeffrey N. Heflebower,
President and CEO
205 Market Street
Denton, Md. 21629
410/479-2600
17. POTOMAC VALLEY
BANK
Kenneth C. Cook,
President and CEO
702 Russell Avenue
Gaithersburg, Md. 20877
301/963-7600
18. ST. MICHAELS BANK
William W. Duncan, Jr.,
President and CEO
213 Talbot Street
P.O. Box 70
St. Michaels, Md. 21663
410/745-5091
19. WESTMINSTER BANK
AND TRUST CO.
Ferdinand A. Ruppel, Jr.,
President and CEO
71 East Main Street
Westminster, Md. 21157
410/848-9300
- -------------------------------
MERCANTILE
MORTGAGE
CORPORATION
Paul W. Parks,
President and CEO
200 East Redwood
Street
Baltimore, Md. 21202
410/347-8940
<PAGE> 2
<TABLE>
CONSOLIDATED FINANCIAL SUMMARY
<CAPTION>
For the 9 Months Ended For the 3 Months Ended
September 30, September 30,
(Dollars in thousands, except per % Increase % Increase
share data) 1994 1993 (Decrease) 1994 1993 (Decrease)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income .................. $186,558 $177,456 5% $65,531 $59,808 10%
Net interest income--
taxable equivalent ................. 188,896 180,091 5 66,336 60,740 9
Provision for loan losses ............ 4,560 9,472 (52) 1,558 2,257 (31)
Net income 65,597 61,486 7 23,024 20,580 12
------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net income ........................... $ 1.43 $ 1.34 7% $ .50 $ .45 11%
Dividends paid ....................... .54 .47 15 .20 .17 18
Book value at period end ............. 15.05 13.95 8
Market value at period end ........... 22 1/8 20 7/8 6
Market range:
High ............................... 23 1/8 23 7/8 (3) 23 1/8 21 1/8 9
Low ................................ 17 3/4 19 3/8 (8) 19 1/2 19 7/8 (2)
------------------------------------------------------------------------------------------
AVERAGE CONSOLIDATED BALANCE SHEETS
Total loans .......................... $3,588,900 $3,506,900 2% $3,635,900 $3,515,700 3%
Total earning assets ................. 5,248,800 5,069,200 4 5,277,900 5,162,700 2
Total assets ......................... 5,552,700 5,377,300 3 5,586,100 5,474,300 2
Total deposits ....................... 4,476,200 4,396,300 2 4,515,700 4,451,400 1
Stockholders' equity ................. 676,500 623,600 8 690,100 637,600 8
------------------------------------------------------------------------------------------
RATIOS (Net income annualized)
Return on average assets ............. 1.58% 1.53% 3% 1.64% 1.49% 10%
Return on average equity ............. 12.96 13.18 (2) 13.24 12.81 3
Average equity to average assets ..... 12.18 11.60 5 12.35 11.65 6
Net interest rate spread--taxable
equivalent ......................... 4.02 3.96 2 4.15 3.88 7
Effect of noninterest-bearing funds--
taxable equivalent ................. .79 .79 .84 .79 6
Net interest margin on earning
assets--taxable equivalent ......... 4.81 4.75 1 4.99 4.67 7
Provision for loan losses (annualized)
to period end loans ................ .17 .36 (53) .17 .25 (32)
Net charge-offs (annualized) to
period end loans ................... .07 .28 (75) .07 .09 (22)
Non-performing loans to period end
loans .............................. 1.24 1.84 (33)
Allowance for loan losses to period
end loans .......................... 2.52 2.54 (1)
Allowance for loan losses to
non-performing loans ............... 203.85 138.24 47
Other real estate owned to period
end loans and OREO ................. .46 .60 (23)
Non-performing assets to period
end loans and OREO ................. 1.69 2.43 (30)
------------------------------------------------------------------------------------------
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share SEPTEMBER 30, December 31,
data) 1994 1993
- ---------------------------------------------------------------------------
ASSETS
Cash and due from banks .................. $ 218,487 $ 161,526
Interest-bearing deposits in other banks . 350 600
Investment securities:
U.S. Treasury and government agencies
Held-to-maturity--market value of
$1,230,590 (1994) and $1,700,347
(1993) ............................. 1,254,134 1,676,498
Available-for-sale at fair value ... 339,978
States and political subdivisions
Held-to-maturity--market value of
$2,398 (1994) and $3,633 (1993) .... 2,345 3,498
Other investments
Held-to-maturity--market value of
$5,127 (1994) and $7,074 (1993) .... 4,486 4,422
Available-for-sale at fair value ... 3,484
------------- -------------
Total investment securities .... 1,604,427 1,684,418
------------- -------------
Federal funds sold ...................... 1,350 550
Loans .................................... 3,673,350 3,577,420
Less: allowance for loan losses .......... (92,591) (89,827)
------------- -------------
Loans, net ..................... 3,580,759 3,487,593
------------- -------------
Bank premises and equipment, less
accumulated depreciation of
$67,399 (1994) and $59,937 (1993) ...... 69,148 67,940
Other real estate owned .................. 16,916 21,163
Excess cost over equity in affiliated
banks, net ............................. 19,145 19,993
Other assets ............................. 115,033 110,225
------------- -------------
Total assets ................... $5,625,615 $5,554,008
============= =============
LIABILITIES
Deposits:
Noninterest-bearing deposits ......... $ 880,777 $ 914,773
Interest-bearing deposits ............ 3,666,615 3,609,191
------------- -------------
Total deposits ................. 4,547,392 4,523,964
Short-term borrowings .................... 303,034 292,096
Accrued expenses and other liabilities ... 53,148 50,702
Long-term debt ........................... 31,695 32,350
------------- -------------
Total liabilities .............. 4,935,269 4,899,112
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized
2,000,000 shares; issued and
outstanding--None
Common stock, $2 par value; authorized
67,000,000 shares;
issued 45,885,310 shares in 1994 and
45,997,159 shares in 1993 .............. 91,771 91,994
Capital surplus .......................... 25,466 29,230
Retained earnings ........................ 574,498 533,672
Unrealized gains (losses) on securities .. (1,389)
------------- -------------
Total stockholders' equity ..... 690,346 654,896
------------- -------------
Total liabilities and
stockholders' equity ...... $5,625,615 $5,554,008
============= =============
[FN]
See notes to consolidated financial statements
<PAGE> 4
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
For the 9 Months Ended For the 3 Months Ended
(Dollars in thousands, except per share September 30, September 30,
data) 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................. $220,548 $213,263 $78,448 $71,671
------------- ------------- ------------- -------------
Interest and dividends on investment
securities:
Taxable interest income .................. 63,214 62,810 20,831 20,867
Tax-exempt interest income 126 242 38 67
Dividends ................................ 228 217 95 68
Other investment income .................... 15 19 6 6
------------- ------------- ------------- -------------
63,583 63,288 20,970 21,008
------------- ------------- ------------- -------------
Other interest income ...................... 403 1,288 179 741
------------- ------------- ------------- -------------
Total interest income ............ 284,534 277,839 99,597 93,420
------------- ------------- ------------- -------------
INTEREST EXPENSE
Interest on deposits ....................... 88,114 93,503 30,540 31,049
Interest on short-term borrowings .......... 8,263 5,881 2,996 2,091
Interest on long-term debt ................. 1,599 999 530 472
------------- ------------- ------------- -------------
Total interest expense ........... 97,976 100,383 34,066 33,612
------------- ------------- ------------- -------------
NET INTEREST INCOME ........................ 186,558 177,456 65,531 59,808
Provision for loan losses .................. 4,560 9,472 1,558 2,257
------------- ------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES ..................................... 181,998 167,984 63,973 57,551
------------- ------------- ------------- -------------
NONINTEREST INCOME
Trust division services .................... 32,293 30,174 10,631 10,257
Rental income .............................. 6,365 5,249 2,086 1,703
Service charges on deposit accounts ........ 10,959 11,507 3,682 3,905
Other fees ................................. 15,675 13,636 6,237 4,839
Investment securities gains and (losses) ... (1,257) (224) (1,071) (68)
Other income ............................... 4,453 1,455 311 494
------------- ------------- ------------- -------------
Total noninterest income ......... 68,488 61,797 21,876 21,130
------------- ------------- ------------- -------------
NONINTEREST EXPENSES
Salaries ................................... 62,683 59,187 21,545 20,031
Employee benefits .......................... 17,456 15,855 5,523 5,282
Net occupancy expense of bank premises ..... 13,042 11,643 4,438 4,094
Furniture and equipment expenses ........... 9,768 9,081 3,337 3,096
Communications and supplies ................ 6,576 6,728 2,035 2,240
FDIC insurance premium expense ............. 7,837 7,654 2,608 2,543
Other expenses ............................. 26,213 18,584 9,171 6,635
------------- ------------- ------------- -------------
Total noninterest expenses ....... 143,575 128,732 48,657 43,921
------------- ------------- ------------- -------------
Income before income taxes ................. 106,911 101,049 37,192 34,760
Applicable income taxes .................... 41,314 39,563 14,168 14,180
------------- ------------- ------------- -------------
NET INCOME ................................. $ 65,597 $ 61,486 $23,024 $20,580
============= ============= ============= =============
NET INCOME PER SHARE OF COMMON STOCK (2) ... $1.43 $1.34 $.50 $.45
============= ============= ============= =============
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 5
STATEMENT OF CONSOLIDATED CASH FLOWS
Increase (decrease) in cash and cash For the 9 Months Ended
equivalents September 30,
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans ............... $ 217,361 $ 212,929
Interest and dividends on investment
securities ............................. 63,146 62,526
Other interest income .................... 514 1,171
Noninterest income ....................... 70,169 62,268
Interest paid ............................ (98,695) (101,975)
Noninterest expenses paid ................ (128,240) (116,404)
Income taxes paid ........................ (43,513) (38,529)
------------- -------------
Net cash provided by operating
activities ................... 80,742 81,986
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment
securities held-to-maturity ............ 3,006
Proceeds from maturities of investment
securities held-to-maturity ............ 197,895 207,366
Proceeds from sales of investment
securities available-for-sale .......... 191,151
Proceeds from maturities of investment
securities available-for-sale .......... 42,346
Purchase of investment securities held-to-
maturity ............................... (230,639) (332,496)
Purchase of investment securities
available-for-sale ..................... (124,330)
Net increase in customer loans ........... (98,045) (72,394)
Capital expenditures ..................... (6,562) (5,633)
------------- -------------
Net cash used in investing
activities ................... (28,184) (200,151)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in noninterest-bearing
deposits ............................... (33,996) (22,702)
Net increase (decrease) in NOW and savings
accounts ............................... (36,483) 67,302
Net increase (decrease) in certificates of
deposit ................................ 93,907 (66,947)
Net increase in short-term borrowings .... 10,938 46,371
Proceeds from issuance of long-term debt . 24,000
Repayment of long-term debt .............. (655) (6,538)
Proceeds from issuance of shares ......... 6,365 3,391
Repurchase of common shares .............. (10,352)
Dividends paid ........................... (24,771) (21,566)
------------- -------------
Net cash provided by financing
activities ................... 4,953 23,311
------------- -------------
Net increase (decrease) in cash and cash
equivalents ............................ 57,511 (94,854)
Cash and cash equivalents at beginning of
period ................................. 162,676 334,716
------------- -------------
Cash and cash equivalents at end of period
........................................ $ 220,187 $ 239,862
============= =============
Reconciliation of net income to net cash For the 9 Months Ended
provided by operating activities September 30,
(Dollars in thousands) 1994 1993
- -----------------------------------------------------------------------------
Net income ............................... $65,597 $61,486
------------- -------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .......... 5,354 5,078
Provision for loan losses .............. 4,560 9,472
Write-down of other real estate owned .. 4,566 109
Investment securities (gains) and losses
........................................ 1,257 224
Amortization of excess cost over equity
in affiliates .......................... 848 848
Increase in interest receivable ........ (3,513) (1,213)
Decrease in other receivables .......... 424 247
(Increase) decrease in other assets .... (1,719) 3,298
Decrease in interest payable ........... (719) (1,592)
Increase in accrued expenses ........... 6,286 2,995
Increase (decrease) in taxes payable ... (2,199) 1,034
------------- -------------
Total adjustments .............. 15,145 20,500
------------- -------------
Net cash provided by operating activities $80,742 $81,986
============= =============
[FN]
See notes to consolidated financial statements
<PAGE> 6
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<CAPTION>
Unrealized Gains
(Dollars in thousands, except per share (Losses) on
data) Common Stock Capital Surplus Retained Earnings Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 ............. $61,035 $56,452 $480,641
Net income ............................. 61,486
Cash dividends paid:
Common stock ($.47 per share) ........ (21,566)
Issuance of 47,535 shares for dividend
reinvestment and stock purchase plan . 95 1,363
Issuance of 3,963 shares under exercise
of stock appreciation rights ......... 8 123
Issuance of 8,658 shares for employee
stock purchase dividend reinvestment
plan ................................. 18 257
Issuance of 73,633 shares for employee
stock option plan .................... 147 1,427
Issuance of 15,323,429 shares for a
three-for-two
stock dividend ....................... 30,647 (30,694)
------------- ------------- -------------
BALANCE, SEPTEMBER 30, 1993 ............ $91,950 $28,928 $520,561
============= ============= =============
BALANCE, DECEMBER 31, 1993 ............. $91,994 $29,230 $533,672
Unrealized gains (losses) on securities
at January 1, 1994 ................... $ 1,105
Net income ............................. 65,597
Cash dividends paid:
Common stock ($.54 per share) ........ (24,771)
Issuance of 89,608 shares for dividend
reinvestment and stock purchase plan . 179 1,539
Issuance of 16,853 shares for employee
stock purchase dividend reinvestment
plan ................................. 34 300
Issuance of 301,690 shares for employee
stock option plan .................... 604 3,709
Purchase of 520,000 shares under stock
repurchase plan ...................... (1,040) (9,312)
Change in unrealized gains (losses) on
securities ........................... (2,494)
------------- ------------- ------------- -------------
BALANCE, SEPTEMBER 30, 1994 ..... $91,771 $25,466 $574,498 $(1,389)
============== ============= ============= =============
___________________________________________________________________________________________________________________________________
</TABLE>
NOTES
1) The statements include the accounts of the Corporation and all of its
affiliates, with all significant intercompany transactions eliminated, and
in the opinion of management, include all adjustments necessary for a fair
presentation of the results for the interim period. All such adjustments
are of a normal recurring nature. Effective with the beginning of the 1994
fiscal year, the Corporation adopted the provisions of FASB Statement No.
115, Accounting for Certain Investments in Debt and Equity Securities.
Implementation of this pronouncement did not have a material effect on the
financial statements of the Company. In view of the changing conditions in
the national economy, the effect of actions taken by regulatory authorities
and normal seasonal factors, the results for the interim period are not
necessarily indicative of annual performance. Previously reported average
loan balances have been reclassified to conform to the 1994 presentation.
2) Year to date per share amounts are based on the weighted average number of
common shares outstanding during the period or 45,943,764 shares for 1994
and 45,872,521 shares for 1993.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income per share for the three months ended September 30, 1994 increased
11% to $.50 compared to $.45 for the same period in 1993. Net income per share
for the first three quarters of 1994 was $1.43, an increase of 7% over the
$1.34 per share for the comparable period last year. Year to date per share
amounts are based on the weighted average number of common shares outstanding
of 45,943,764 for 1994 and 45,872,521 for 1993.
Net interest income for the first nine months of 1994 was 5% higher than the
amount for the comparable period in 1993 due to an increase of 4% in average
earning assets and a slight increase in net interest margin on earning assets.
Total noninterest income increased 11% primarily due to the first quarter sale
of an asset at a gain of $3,137,000 which is included in other income. Total
noninterest expenses, excluding the provision for loan losses, for the first
three quarters of 1994 increased 12% over the comparable period in 1993
largely due to a $4,457,000 increase in charges for reserves against the
carrying value of other real estate owned which is included in other expenses.
The provision for loan losses for the first nine months of 1994 was $4,560,000
compared to $9,472,000 for the same period of 1993.
During the quarter ended September 30, 1994, non-performing assets decreased
$8,652,000 to $62,337,000. Non-performing loans, one of the components of non-
performing assets, decreased $7,719,000 and other real estate owned, the other
component, decreased $933,000. Net charge-offs were $633,000 in the third
quarter of 1994 and $786,000 in the comparable quarter of 1993. The allowance
for loan losses was $92,591,000 at September 30, 1994 or 204% of non-
performing loans.
Average total deposits for the first nine months were $4,476,200,000, up 2%
over the $4,396,300,000 for the comparable period in 1993. Average total loans
for the first nine months of 1994 were $3,588,900,000 which was 2% higher than
in 1993.
<PAGE> 8
<TABLE>
ANALYSIS OF INTEREST RATES AND INTEREST DIFFERENTIALS
The following table presents the distribution of the average consolidated
balance sheets, interest income/expense and annualized yields earned and rates
paid through the first nine months of the year.
<CAPTION>
1994 1993
---------------------------------------- ---------------------------------------
Average Income*/ Yield*/ Average Income*/ Yield*/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans:
Commercial ....................... $1,215,200 $ 71,788 7.9 % $1,158,200 $ 65,136 7.5%
Mortgage and construction ........ 1,917,400 121,751 8.5 1,861,500 118, 789 8.5
Consumer ......................... 456,300 29,214 8.6 487,200 31,747 8.7
------------- ------------- ------------- -------------
Total loans .................. 3,588,900 222,753 8.3 3,506,900 215,672 8.2
------------- ------------- ------------- -------------
Federal funds sold ................. 11,600 348 4.0 34,500 754 2.9
Securities purchased under resale
agreements .................... 300 7 3.1 20,400 482 3.2
Securities:
Taxable securities
U.S. Treasury securities ....... 1,638,600 63,185 5.2 1,494,300 62,662 5.6
U.S. Agency securities ......... 400 29 9.7 2,400 148 8.2
Other stocks and bonds ......... 5,700 303 7.1 4,800 321 8.9
Tax-exempt securities
States and political
subdivisions ................. 2,700 199 9.9 5,000 383 10.2
------------- ------------- ------------- -------------
Total securities ............. 1,647,400 63,716 5.2 1,506,500 63,514 5.6
------------- ------------- ------------- -------------
Interest-bearing deposits in other
banks .......................... 600 48 10.7 900 52 7.7
------------- ------------- ------------- -------------
Total earning assets ......... 5,248,800 286,872 7.3 5,069,200 280,474 7.4
Cash and due from banks .............. 185,600 186,300
Bank premises and equipment, net ..... 68,400 65,300
Other assets ......................... 141,500 146,500
Less: allowance for loan losses ...... (91,600) (90,000)
------------- -------------
Total assets ................. $5,552,700 $5,377,300
============= ==============
Interest-bearing liabilities
Deposits:
Savings deposits ................. $2,325,000 46,059 2.6 $2,275,800 49,441 2.9
Time deposits .................... 1,307,100 42,055 4.3 1,328,000 44,062 4.4
------------- ------------- ------------- -------------
Total interest-bearing
deposits ................... 3,632,100 88,114 3.2 3,603,800 93,503 3.5
Short-term borrowings .............. 313,600 8,263 3.5 286,900 5,881 2.7
Long-term debt ..................... 32,000 1,599 6.7 18,400 999 7.3
------------- ------------- ------------- -------------
Total interest-bearing funds . 3,977,700 97,976 3.3 3,909,100 100,383 3.4
------------- -------------
Noninterest-bearing deposits ......... 844,100 792,500
Other liabilities and accrued
expenses............................ 54,400 52,100
------------- -------------
Total liabilities ............ 4,876,200 4,753,700
Stockholders' equity ................. 676,500 623,600
------------- -------------
Total liabilities and
stockholders' equity ...... $5,552,700 $5,377,300
============== =============
Net interest income .................. $188,896 $180,091
============= =============
Net interest rate spread ............. 4.0% 4.0%
Effect of noninterest-bearing funds .. .8 .8
-------- --------
Net interest margin on earning assets 4.8% 4.8%
======== ========
Taxable-equivalent adjustment included
in:
Loan income ...................... $ 2,205 $ 2,409
Investment securities income ..... 133 226
------------- -------------
Total ........................ $ 2,338 $ 2,635
============= =============
<FN>
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35%.
</TABLE>
<PAGE> 9
MERCANTILE BANKSHARES CORPORATION
OFFICERS
H. Furlong Baldwin
Chairman of the Board and Chief Executive Officer
Douglas W. Dodge
Vice Chairman of the Board
Edward K. Dunn, Jr.
President
Kenneth A. Bourne, Jr.
Executive Vice President and Treasurer
Hugh W. Mohler
Executive Vice President
Jay M. Wilson
Executive Vice President
John A. O'Connor, Jr.
Senior Vice President and Secretary
Robert W. Johnson
Senior Vice President
O. James Talbott, II
Senior Vice President
Brian B. Topping
Vice President
Jerry F. Graham
Vice President and Controller
DIRECTORS
H. Furlong Baldwin
Chairman of the Board and Chief
Executive Officer of Mercantile
Bankshares Corporation and
Chairman of the Board and Chief
Executive Officer of Mercantile-
Safe Deposit & Trust Company
Thomas M. Bancroft, Jr.
Former Chairman of the Board and
Chief Executive Officer of The
New York Racing Association
Richard O. Berndt
Partner in the law firm of
Gallagher, Evelius & Jones
James A. Block, M.D.
President and Chief Executive
Officer of Johns Hopkins Health
System and The Johns Hopkins
Hospital
George L. Bunting, Jr.
President and Chief Executive
Officer of Bunting Management
Group
Douglas W. Dodge
Vice Chairman of the Board of
Mercantile Bankshares
Corporation and President and
Chief Operating Officer of
Mercantile-Safe Deposit & Trust
Company
Edward K. Dunn, Jr.
President of Mercantile
Bankshares Corporation and a
Vice Chairman of the Board of
Mercantile-Safe Deposit & Trust
Company
B. Larry Jenkins
Chairman of the Board, President
and Chief Executive Officer of
Monumental Life Insurance
Company and a Senior Vice
President of AEGON USA, Inc.
Robert D. Kunisch
Chairman of the Board, President
and Chief Executive Officer of
PHH Corporation
William J. McCarthy
Principal of William J.
McCarthy, P.C., a Partner in the
law firm of Venable, Baetjer and
Howard
Morris W. Offit
Chairman of the Board and Chief
Executive Officer of OFFITBANK
Christian H. Poindexter
Chairman of the Board and Chief
Executive Officer of Baltimore
Gas & Electric Company
William C. Richardson
President of The Johns Hopkins
University
Bishop L. Robinson
Secretary of the Department of
Public Safety and Correctional
Services for the State of
Maryland
Donald J. Shepard
Chairman of the Board, President
and Chief Executive Officer of
AEGON USA, Inc.
Brian B. Topping
Vice President of Mercantile
Bankshares Corporation and a
Vice Chairman of the Board of
Mercantile-Safe Deposit & Trust
Company
Calman J. Zamoiski, Jr.
Chairman of the Board of
Independent Distributors,
Incorporated
<PAGE> 10
CORPORATE INFORMATION
STRUCTURE/STRATEGY
Mercantile Bankshares Corporation is a multi-bank holding company with
nineteen affiliate banks and a mortgage banking company. Each member bank
operates as a community bank, with its own name, management, Board of
Directors and tradition of community service.
While operating as a community bank, with a high degree of local autonomy and
community identification, each affiliate is able to offer the more
sophisticated services and outstanding financial strength of a major banking
organization.
Our policy, across the affiliate system, is to establish ongoing customer
relationships founded on service and to focus on those particular services we
know how to perform well.
PERSONAL BANKING
The banking affiliates of Mercantile Bankshares Corporation have 144 retail
banking offices providing personal banking services. Services include deposit
vehicles such as checking accounts, NOW accounts, Money Market Deposit
Accounts, Certificates of Deposit and Individual Retirement Accounts. Loans
are made to individuals to meet a variety of consumer needs.
CORPORATE BANKING
Each of the Corporation's affiliates pursues a commercial banking program
serving local businesses. Specialized corporate banking services are centered
at Mercantile-Safe Deposit & Trust Company. Corporate banking services include
the making of various types of commercial and real estate loans, accepting
deposits, cash management and short-term money market investing.
TRUST AND INVESTMENT
The Trust Division of Mercantile-Safe Deposit & Trust Company provides
services to individuals, corporations and non-profit institutions. Services
for individuals include investment management, estate settlement, living and
testamentary trusts and custody of securities. Employee benefit plans, master
and directed trusteeship and corporate financial services are provided to
businesses. Endowment trusts are managed for non-profit institutions. The
Trust Division is also investment advisor to M.S.D.&T. Funds, Inc., which
provides a series of open-ended, no-load mutual funds.
MORTGAGE BANKING
Through offices in Maryland and Delaware, Mercantile Mortgage Corporation
generates and services real estate mortgage loans and construction loans, as
principal and as agent. Residential and commercial real estate appraisals are
offered through an appraisal subsidiary.
_______________________________________________________________________________
STOCK INFORMATION
The common stock of Mercantile Bankshares Corporation is traded over-the-
counter in the NASDAQ National Market System under the symbol MRBK.
AUTOMATIC DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Mercantile Bankshares Corporation offers its shareholders of common stock a
Plan whereby they may automatically invest their cash dividends in Mercantile
stock at a price which is 5% less than the market price on the dividend
payment date. Plan participants may also make additional cash payments to
purchase stock through the Plan at the market price. Mercantile Bankshares
Corporation absorbs all fees and transaction costs. Shareholders who wish to
enroll in the Plan should contact the Corporation's Transfer Agent.
DIVIDEND DISBURSING AGENT AND TRANSFER AGENT FOR STOCK
Mercantile-Safe Deposit & Trust Company
Corporate Trust Department
2 Hopkins Plaza, P.O. Box 2258
Baltimore, Maryland 21203
410/237-5211
<PAGE> 11
APPENDIX
Appearing at the top of page 2 of the Third Quarter Report to Shareholders
next to the heading "PRINCIPAL AFFILIATES", is the outline of a map of the
state of Maryland, the eastern shore of Virginia and southern Delaware.
Shown in the approximate geographic location of each bank affiliate's
headquarters are the numbers 1 through 19 which correspond to the numerical
listing of affiliates contained on the same page.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1994 AND THE INCOME STATEMENT FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994. THIS SCHEDULE INCLUDES INFORMATION NORMALLY REQUIRED TO BE
DISCLOSED IN QUARTERLY REPORTS. GUIDE 3 INFORMATION IS NOT REQUIRED AND IS
THEREFORE OMITTED IN THIS SCHEDULE.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 218,487,000
<INT-BEARING-DEPOSITS> 350,000
<FED-FUNDS-SOLD> 1,350,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,260,965,000
<INVESTMENTS-MARKET> 1,238,115,000
<LOANS> 3,673,350,000
<ALLOWANCE> 92,591,000
<TOTAL-ASSETS> 5,625,615,000
<DEPOSITS> 4,547,392,000
<SHORT-TERM> 303,034,000
<LIABILITIES-OTHER> 53,148,000
<LONG-TERM> 31,695,000
<COMMON> 91,771,000
0
0
<OTHER-SE> 598,575,000
<TOTAL-LIABILITIES-AND-EQUITY> 5,625,615,000
<INTEREST-LOAN> 220,548,000
<INTEREST-INVEST> 63,583,000
<INTEREST-OTHER> 403,000
<INTEREST-TOTAL> 284,534,000
<INTEREST-DEPOSIT> 88,114,000
<INTEREST-EXPENSE> 97,976,000
<INTEREST-INCOME-NET> 186,558,000
<LOAN-LOSSES> 4,560,000
<SECURITIES-GAINS> (1,257,000)
<EXPENSE-OTHER> 143,575,000
<INCOME-PRETAX> 106,911,000
<INCOME-PRE-EXTRAORDINARY> 106,911,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,597,000
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
