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 June 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 July 31, 1994, registrant had outstanding 45,890,679 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
June 30, 1994, total unused lines of credit approximated
$1,529,852,400. In addition, letters of credit are
issued for the benefit of customers by affiliated banks.
Outstanding letters of credit were $97,161,400 at
June 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 4. Submission of Matters to Vote of Security Holders.
Description of matters voted upon and vote at
Annual Meeting of Shareholders held April 27, 1994.
Results on voting for Election of Directors:
DIRECTORS FOR WITHHELD
====================== ========== ========
H. Furlong Baldwin 38,283,299 232,823
Thomas M. Bancroft, Jr. 38,282,465 233,657
Richard O. Berndt 38,296,583 219,538
James A. Block, M.D. 38,277,166 238,955
George L. Bunting, Jr. 38,297,089 219,032
Douglas W. Dodge 38,299,468 216,653
Edward K. Dunn, Jr. 38,297,389 218,733
B. Larry Jenkins 38,298,059 218,063
Robert D. Kunisch 38,297,223 218,898
William J. McCarthy 38,296,091 220,031
Morris W. Offit 38,290,868 225,253
Christian H. Poindexter 38,266,392 249,730
William C. Richardson 38,268,523 247,598
Bishop L. Robinson 38,247,477 268,645
Donald J. Shepard 38,300,135 215,987
Brian B. Topping 38,295,785 220,337
Jay M. Wilson 38,299,428 216,693
Calman J. Zamoiski, Jr. 38,296,230 219,892
Results on Voting on Ratification of Appointment of Auditor
(Coopers & Lybrand)
FOR AGAINST ABSTAINED
38,206,150 103,477 206,493
Results on voting on approval of the Mercantile Bankshares
Corporation and Affiliates Annual Incentive Compensation
Plan
FOR AGAINST ABSTAINED
36,646,088 1,174,672 695,360
There were no broker non-votes on these matters.
<PAGE> 2
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 10-A - Mercantile Bankshares Corporation
and Affiliates Annual Incentive
Compensation Plan (as amended to date)
filed herewith.
Exhibit 20 - Financial Information. See Part I.
(b) No Forms 8-K filed.
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
Exhibit 10-A
MERCANTILE BANKSHARES CORPORATION AND AFFILIATES
ANNUAL INCENTIVE COMPENSATION PLAN
(as amended)
1. PURPOSE
This Annual Incentive Compensation Plan (the "Plan") is intended as an
incentive to increase the profitability of Mercantile Bankshares Corporation
(the "Corporation") and its Affiliated Corporations, as defined in Section 3,
by providing an opportunity for certain key executive employees, whose
efforts are deemed to have a direct impact on the earnings of the Corporation
or its Affiliated Corporations, (the "Participants") designated by the
Compensation Committee (the "Committee") of the Corporation's Board of
Directors to earn incentive payments for outstanding ability, achievement and
performance and thereby to participate in the overall profitability of the
Corporation. Participants may be classified as Class I, Class II or Class
III Participants ("Class of Participants") depending upon and in recognition
of their varying corporate responsibilities. It is intended that the Plan
encourage these key executive employees to attain pre-established goals by
providing recognition and awards in the form of cash.
Those chosen as Participants shall be eligible to receive a maximum
Incentive Award, as defined in Section 5, in an amount not to exceed the
maximum percent of salary shown on Exhibit A for the applicable Class of
Participant.
One portion of the Incentive Award shall be based on the net operating
income of the particular Affiliated Corporation employing the Participant, or
the division of the Affiliated Corporation to which that Participant is
assigned and shall not exceed the maximum percent of salary based on net
operating income shown on Exhibit A for the applicable Class of Participant,
as more particularly described in Section 5.
The other portion shall be based on the earnings per share of the
Corporation and shall not exceed the maximum percent of salary based on
earnings per share shown on Exhibit A for the applicable Class of
Participant, as more particularly described in Section 5.
2. ADMINISTRATION
The Plan shall be administered by the Committee as it shall, from time
to time, be constituted. In addition to its duties as described in this
Plan, the Committee shall interpret the Plan, may prescribe, amend and
rescind rules and regulations relating to the Plan and shall make all other
determinations necessary or advisable for the administration of the Plan.
The interpretation and construction by the Committee of any provision of the
Plan, or award made under the Plan, and any decision or action made or taken
by it in connection with the Plan shall be conclusive and binding. The
Committee may, at the expense of the Corporation, retain counsel to advise
it. No member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith, or upon the advice of
counsel, with respect to the Plan or any award made under the Plan.
<PAGE> 1
3. AFFILIATED CORPORATIONS
Affiliated Corporations (the "Affiliates") are those corporations or
other forms of business entities, more than 50% of the voting interest of
which is owned or controlled, directly or indirectly, from time to time, by
the Corporation and which have furnished the Committee with a certified copy
of a resolution evidencing adoption of this Plan.
4. PARTICIPANTS
Eligibility
Individuals eligible to be Participants in the Plan, and to receive
Incentive Awards under the Plan, shall be those key executive employees of
the Corporation and its Affiliates as the Committee, in its sole discretion,
shall select.
A Participant for any calendar year shall be eligible to receive an
Incentive Award for that year. However the Committee may, in its sole
discretion, deny any such Incentive Award or authorize payment of part
thereof to any Participant for any calendar year who is not a full time
employee on December 31 of that calendar year or whose employment terminates
for any reason during that calendar year, or who is granted a leave of
absence during that calendar year.
Selection
The Committee, prior to December 31 of the year preceding each calendar
year for which any award may be made (the "Award Year"), (prior to April 1,
1994 for the 1994 Award Year), shall select those individuals who are to be
Participants in the Plan for that particular Award Year, designate the
Participant as a Class I, Class II or Class III Participant, determine
whether the portion of the Participant's award attributable to net operating
income shall be based on the total net operating income of the Affiliate
employing the Participant, or the net operating income of the particular
division of the Affiliate to which the Participant is assigned and designate
the Base Year for purposes of Section 5. Failing a specific classification,
a Participant shall be deemed to be a Class III Participant. Each
Participant shall be notified of selection promptly.
5. THE INCENTIVE AWARD
(a) Definitions
For purposes of determining Incentive Awards made under the Plan:
Incentive Award shall mean cash payments made pursuant to the
computation described in Section 5(b) below.
Award Year shall mean that particular calendar year for which an award
may be made under this Plan.
Earnings Per Share shall mean the dollar amount of the consolidated
earnings per share of the Corporation's common stock.
Net Operating Income shall mean the dollar amount of the net after tax
operating income of each Affiliate or one or more divisions of an
Affiliate, as the Committee shall determine.
<PAGE> 2
Base Year Earnings Per Share shall mean Earnings Per Share as stated in
the Corporation's Annual Report to Shareholders, for the Base Year,
which Earnings Per Share may be adjusted, as necessary, from time to
time, to reflect mergers, acquisitions, sales, stock dividends, or other
corporate changes affecting earnings per share.
Base Year Net Operating Income shall mean the Net Operating Income for
the Base Year, as reported to the Board of Directors of the Corporation,
or otherwise published, which Net Operating Income may be adjusted, as
necessary, from time to time, to reflect mergers, acquisitions, sales,
stock dividends, intercorporate and intracorporate transfers of
operations or operating divisions, or other corporate changes.
Preceding Year Earnings Per Share shall mean the Earnings Per Share for
the year preceding the Award Year, to be stated in the Corporation's
Annual Report to Shareholders for the Award Year, which may be adjusted,
as necessary, from time to time, to reflect mergers, acquisitions,
sales, stock dividends, or other corporate changes affecting earnings
per share.
Preceding Year Net Operating Income shall mean the Net Operating Income
for the year preceding the Award Year, as reported to the Board of
Directors of the Corporation, or otherwise published, which may be
adjusted, as necessary, from time to time, to reflect mergers,
acquisitions, sales, stock dividends, intercorporate and intracorporate
transfers of operations or operating divisions, or other corporate
changes.
Award Year Earnings Per Share shall mean the Earnings Per Share for the
Award Year.
Award Year Net Operating Income shall mean the Net Operating Income for
the Award Year.
Annual Rate of Growth shall be the percent determined by calculating
the annual rate of growth between: (1) the Preceding Year Earnings Per
Share and the Award Year Earnings Per Share and (2) the Preceding Year
Net Operating Income and the Award Year Net Operating Income, as the
case may be.
Compounded Rate of Growth shall be the percent determined by calculating
the annual compounded percentage rate of growth between (1) the Base
Year Earnings Per Share and the Award Year Earnings Per Share, and (2)
the Base Year Net Operating Income and the Award Year Net Operating
Income, as the case may be.
Salary shall mean the Participant's base rate of pay for the calendar
year immediately preceding the Award Year.
Salary Award Percentage shall be the percent of salary based on varying
rates of growth a shown on Exhibit "B".
(b) Computation
The Committee, prior to March 1 following each Award Year, shall compute
the Annual Rate of Growth and the Compounded Rate of Growth of both Award
Year Earnings Per Share, and Award Year Net Operating Income for each
Affiliate, or division of an Affiliate,that employs a Participant.
<PAGE> 3
If the Compounded Rate of Growth of the Award Year Earnings Per Share
shall not exceed 5.00%, then no cash payment shall be made based on Award
Year Earnings Per Share. If the Compounded Rate of Growth of the Award Year
Earnings Per Share shall exceed 5.00%, each Participant shall be entitled to
receive a cash payment equal to that percent of salary opposite the rate of
growth equal to the Annual Rate of Growth as shown on Exhibit "B" for the
Class of Participant applicable to that Participant.
If the Compounded Rate of Growth of the Award Year Net Operating Income
for any Affiliate, or a division of the Affiliate where applicable, shall not
exceed 5.00%, then no cash payment shall be made to any Participant employed
by such Affiliate, or such division, based on Award Year Net Operating
Income. If the Compounded Rate of Growth of the Award Year Net Operating
Income for any Affiliate, or such division, shall exceed 5.00%, each
Participant employed by such Affiliate, or such division, shall be entitled
to receive a cash payment equal to that percent of salary opposite the rate
of growth equal to that Affiliate's, or such division's Annual Rate of Growth
as shown on Exhibit "B" for the Class of Participant applicable to that
Participant.
Percentages used in determining Annual Rate of Growth exceeding 5.00%
shall be rounded to the nearest whole percent.
No Participant shall be entitled to receive in total Incentive Awards
more than the percent of Salary applicable to the Class of that Participant
as shown on Exhibit "A" for any one calendar year, nor shall any Participant
receive an Incentive Award in excess of $750,000 for any one calendar year.
(c) Notification of Award
The Committee, prior to the March 1 following each Award Year shall
determine, based on the above Computation, whether any Participant shall be
entitled to an Incentive Award under the Plan and shall make such award. The
Committee shall then notify all Participants of the results of its
determination and shall advise each Affiliate employing a Participant of the
amount to be paid that Participant.
6. PAYMENT
(a) Payment of Incentive Awards made under this Plan shall be paid in
cash promptly upon receipt of the notice described in Section 5 by each
Affiliate with respect to Participants employed by that Affiliate.
(b) Payment of an Incentive Award due a Participant who dies after
December 31 of the Award Year shall be made to the person, estate, trust,
organization or other entity designated by the Participant to receive
benefits under the Corporation's or any Affiliate's Group Life Insurance
Policy unless another Beneficiary is designated by the Participant. In the
absence of any Beneficiary so designated, the estate of the Participant shall
be the Beneficiary.
7. COMMITTEE REPORTS
The Committee shall file with the Board of Directors of the Corporation,
and each Affiliate employing a Participant, on or before April 1 of each
calendar year, a report which shall set forth
(a) The total Incentive Awards paid under the Plan for the prior year
together with the basis for the computation of those awards, and
<PAGE> 4
(b) The Participants, and their total salary, selected for the year in
which the report is made.
8. REVOCATION OR REDUCTION OF SELECTION OR AWARD
Any Incentive Award made by the Committee, or the selection of a
Participant by the Committee, may be revoked or, in the case of an Incentive
Award, reduced by the Committee at any time if such Participant's employment
by the Corporation, or an Affiliate, is terminated because of dishonesty,
fraud, embezzlement, conviction of a felony, or for any other reason as
determined in the sole discretion of the Committee.
9. ASSIGNMENT
A Participant's rights and interests under this Plan may not be
assigned, transferred, pledged or hypothecated and are not subject to
attachment, garnishment, execution or any other creditor's processes and, to
the extent permitted by law, the Corporation and any Affiliate shall not be
bound by any attempted assignment, alienation or creditor's process and shall
be entitled to make any payment under the Plan directly to a Participant or
Beneficiary.
10. NO EMPLOYMENT CONTRACT
Nothing contained in this Plan, nor any selection or award made pursuant
to this Plan shall confer upon any Participant any rights to continue in the
employ of the Corporation or any Affiliate or to interfere in any way with
the right of the Corporation or any Affiliate to reduce a Participant's
compensation at any time and all Participants shall remain subject to
discharge, or compensation reduction, the same as if this Plan had not been
adopted.
11. AMENDMENT OR TERMINATION
This Plan may be amended or terminated at any time by action of the
Board of Directors of the Corporation and notice of such action shall be
given promptly to the Boards of Directors of the Affiliates.
12. EFFECTIVE DATE
This Plan shall be effective January 1, 1981.
<PAGE> 5
EXHIBIT "A"
MAXIMUM ANNUAL AMOUNT OF AWARD
Maximum % of Salary
Based On
___________________________________
Class of Maximum % Earnings Per Net Operating
Participant of Salary Share Income
___________ _________ ____________ _____________
Class I 65.0 32.5 32.5
Class II 50.0 25.0 25.0
Class III 33.0 16.5 16.5
EXHIBIT "B"
PERCENT OF SALARY AWARD BY CLASSIFICATION OF PARTICIPANT
Annual Rate Class Class Class
Of Growth I II III
______________ ___________ ___________ ____________
5 0 0 0
6 3.25 2.50 1.65
7 6.50 5.00 3.30
8 9.75 7.50 4.95
9 13.00 10.00 6.60
10 16.25 12.50 8.25
11 19.50 15.00 9.90
12 22.75 17.50 11.55
13 26.00 20.00 13.20
14 29.25 22.50 14.85
15 32.50 25.00 16.50
<PAGE> 6
MERCANTILE BANKSHARES CORPORATION
SECOND QUARTER REPORT
1994
FOR THE SIX MONTHS ENDED JUNE 30, 1994
TO OUR SHAREHOLDERS:
Net income per share for the three months ended June 30, 1994 was $.47
compared to $.44 for the comparable period last year. For the first six months
of 1994 net income was $.93 per share, an increase of 4% over the $.89 per
share earned in the same period in 1993.
At June 30, 1994, total assets were $5,587,145,000, an increase of 3% over
the $5,445,708,000 at June 30, 1993 and total stockholders' equity was
$676,409,000, an increase of 8% over the comparable amount last year. For more
detailed analyses of quarterly results, please see Management's Discussion on
page 8.
Certain key ratios measure earnings and financial strength. The annualized
return on average total assets was 1.5% and the annualized return on average
equity was 12.8% for the first six months of 1994. Average equity as a
percentage of average total assets was 12.1%. The allowance for loan losses
was 2.5% of total loans at the end of the quarter.
The 24th Annual Meeting of Stockholders was held at 2 Hopkins Plaza on April
27, 1994. Holders of approximately 84% of the outstanding stock (38,516,121
shares) were represented at the meeting. The stockholders elected all
directors nominated, ratified the appointment of Coopers & Lybrand as auditors
for 1994 and approved the Mercantile Bankshares Corporation and Affiliates
Annual Incentive Compensation Plan.
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 SUMMAY
<CAPTION>
For the 6 Months Ended For the 3 Months Ended
June 30, June 30,
(Dollars in thousands, except per % Increase % Increase
share data) 1994 1993 (Decrease) 1994 1993 (Decrease)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net interest income ............ $121,027 $117,648 3% $62,186 $59,375 5%
Net interest income--
taxable equivalent ........... 122,560 119,351 3 62,976 60,211 5
Provision for loan losses ...... 3,002 7,215 (58) 1,180 3,962 (70)
Net income ..................... 42,573 40,906 4 21,352 20,414 5
---------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net income ..................... $ .93 $ .89 4% $ .47 $ .44 7%
Dividends paid ................. .34 .30 13 .17 .15 13
Book value at period end ....... 14.73 13.67 8
Market value at period end ..... 19 5/8 20 3/8 (4)
Market range:
High ......................... 21 23 7/8 (12) 20 7/8 23 1/2 (11)
Low .......................... 17 3/4 19 3/8 (8) 17 3/4 19 3/8 (8)
---------------------------------------------------------------------------------------------------
AVERAGE CONSOLIDATED
BALANCE SHEETS
Total loans .................... $3,565,000 $3,502,400 2% $3,584,800 $3,527,100 2%
Total earning assets ........... 5,237,200 5,021,600 4 5,255,100 5,054,700 4
Total assets ................... 5,538,900 5,327,900 4 5,556,800 5,363,700 4
Total deposits ................. 4,456,100 4,368,300 2 4,477,300 4,398,000 2
Stockholders' equity ........... 672,900 616,500 9 682,900 624,100 9
---------------------------------------------------------------------------------------------------
RATIOS
(Net income annualized)
Return on average assets ....... 1.55% 1.55% 1.54% 1.53% 1%
Return on average equity ....... 12.76 13.38 (5)% 12.54 13.12 (4)
Average equity to average assets 12.15 11.57 5 12.29 11.64 6
Net interest rate spread--
taxable equivalent............ 3.94 4.01 (2) 4.01 4.00
Effect of noninterest-bearing
funds--taxable equivalent .... .78 .78 .80 .78 3
Net interest margin on earning
assets--taxable equivalent ... 4.72 4.79 (1) 4.81 4.78 1
Provision for loan losses
(annualized) to period end
loans ................ .17 .41 (59) .13 .45 (71)
Net charge-offs (annualized) to
period end loans ............. .06 .37 (84) .12 .58 (79)
Non-performing loans to period
end loans .................... 1.47 1.88 (22)
Allowance for loan losses to
period end loans ............. 2.53 2.50 1
Allowance for loan losses to
non-performing loans ......... 172.50 133.04 30
Other real estate owned to
period end loans and OREO .... .49 .61 (20)
Non-performing assets to period
end loans and OREO ........... 1.95 2.48 (21)
---------------------------------------------------------------------------------------------------
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share JUNE 30, December 31,
data) 1994 1993
- - ---------------------------------------------------------------------------
ASSETS
Cash and due from banks .................. $ 192,355 $ 161,526
Interest-bearing deposits in other banks . 600 600
Investment securities:
U.S. Treasury and government agencies
Held-to-maturity--market value of
$1,180,907 (1994) and $1,700,347
(1993) ............................. 1,199,824 1,676,498
Available-for-sale at fair value ... 418,990
States and political subdivisions
Held-to-maturity--market value of
$2,709 (1994) and $3,633 (1993) .... 2,646 3,498
Other investments
Held-to-maturity--market value of
$5,220 (1994) and $7,074 (1993) .... 4,627 4,422
Available-for-sale at fair value ... 3,398
-------------- --------------
Total investment securities ...... 1,629,485 1,684,418
-------------- --------------
Federal funds sold ....................... 25,725 550
Loans .................................... 3,619,176 3,577,420
Less: allowance for loan losses .......... (91,666) (89,827)
-------------- --------------
Loans, net ....................... 3,527,510 3,487,593
-------------- --------------
Bank premises and equipment, less
accumulated depreciation of
$65,665 (1994) and $59,937 (1993) ...... 68,207 67,940
Other real estate owned .................. 17,849 21,163
Excess cost over equity in affiliated
banks, net ............................. 19,427 19,993
Other assets ............................. 105,987 110,225
-------------- --------------
Total assets ..................... $5,587,145 $5,554,008
-------------- --------------
-------------- --------------
LIABILITIES
Deposits:
Noninterest-bearing deposits ......... $ 938,558 $ 914,773
Interest-bearing deposits ............ 3,610,950 3,609,191
-------------- --------------
Total deposits ................... 4,549,508 4,523,964
Short-term borrowings .................... 280,565 292,096
Accrued expenses and other liabilities ... 48,746 50,702
Long-term debt ........................... 31,917 32,350
-------------- --------------
Total liabilities ................ 4,910,736 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 45,925,976 shares in 1994 and
45,997,159 shares in 1993 .............. 91,852 91,994
Capital surplus .......................... 26,184 29,230
Retained earnings ........................ 560,645 533,672
Unrealized gains (losses) on securities .. (2,272)
-------------- --------------
Total stockholders' equity ....... 676,409 654,896
-------------- --------------
Total liabilities and
stockholders' equity ........... $5,587,145 $5,554,008
-------------- --------------
-------------- --------------
[FN]
See notes to consolidated financial statements
<PAGE> 4
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
For the 6 Months Ended For the 3 Months Ended
(Dollars in thousands, except per share June 30, June 30,
data) 1994 1993 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ................. $142,100 $141,592 $73,388 $71,271
---------------- ---------------- ---------------- ----------------
Interest and dividends on investment
securities:
Taxable interest income .................. 42,383 41,943 20,972 20,576
Tax-exempt interest income ............... 88 175 42 83
Dividends ................................ 133 149 82 83
Other investment income .................. 9 13 4 6
---------------- ---------------- ---------------- ----------------
42,613 42,280 21,100 20,748
---------------- ---------------- ---------------- ----------------
Other interest income ...................... 224 547 183 389
---------------- ---------------- ---------------- ----------------
Total interest income .............. 184,937 184,419 94,671 92,408
---------------- ---------------- ---------------- ----------------
INTEREST EXPENSE
Interest on deposits ....................... 57,574 62,454 29,130 30,936
Interest on short-term borrowings .......... 5,267 3,790 2,822 1,863
Interest on long-term debt ................. 1,069 527 533 234
---------------- ---------------- ---------------- ----------------
Total interest expense ............. 63,910 66,771 32,485 33,033
---------------- ---------------- ---------------- ----------------
NET INTEREST INCOME ........................ 121,027 117,648 62,186 59,375
Provision for loan losses .................. 3,002 7,215 1,180 3,962
---------------- ---------------- ---------------- ----------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES ..................................... 118,025 110,433 61,006 55,413
---------------- ---------------- ---------------- ----------------
NONINTEREST INCOME
Trust division services .................... 21,662 19,917 11,150 9,963
Rental income .............................. 4,279 3,546 2,114 1,694
Service charges on deposit accounts ........ 7,277 7,602 3,713 3,894
Other fees ................................. 9,438 8,797 5,120 5,135
Investment securities gains and (losses) ... (186) (156) (235) (74)
Other income ............................... 4,142 961 436 489
---------------- ---------------- ---------------- ----------------
Total noninterest income ........... 46,612 40,667 22,298 21,101
---------------- ---------------- ---------------- ----------------
NONINTEREST EXPENSES
Salaries ................................... 41,138 39,156 21,167 20,009
Employee benefits .......................... 11,933 10,573 5,850 5,297
Net occupancy expense of bank premises ..... 8,604 7,549 4,244 3,767
Furniture and equipment expenses ........... 6,431 5,985 3,130 3,095
Communications and supplies ................ 4,541 4,488 2,336 2,241
FDIC insurance premium expense ............. 5,229 5,111 2,614 2,555
Other expenses ............................. 17,042 11,949 9,120 6,462
---------------- ---------------- ---------------- ----------------
Total noninterest expenses ......... 94,918 84,811 48,461 43,426
---------------- ---------------- ---------------- ----------------
Income before income taxes ................. 69,719 66,289 34,843 33,088
Applicable income taxes .................... 27,146 25,383 13,491 12,674
---------------- ---------------- ---------------- ----------------
NET INCOME ................................. $ 42,573 $ 40,906 $21,352 $20,414
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
NET INCOME PER SHARE OF COMMON STOCK (2) ... $.93 $.89 $.47 $.44
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 5
STATEMENT OF CONSOLIDATED CASH FLOWS
Increase (decrease) in cash and cash For the 6 Months Ended
equivalents June 30,
(Dollars in thousands) 1994 1993
- - ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans ............... $ 139,748 $ 140,824
Interest and dividends on investment
securities ............................. 43,858 43,443
Other interest income .................... 326 492
Noninterest income ....................... 47,314 41,682
Interest paid ............................ (64,533) (67,989)
Noninterest expenses paid ................ (80,433) (78,180)
Income taxes paid ........................ (29,678) (24,492)
-------------- --------------
Net cash provided by operating
activities ..................... 56,602 55,780
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment
securities held-to-maturity ............ 2,582
Proceeds from maturities of investment
securities held-to-maturity ............ 141,943 142,286
Proceeds from sales of investment
securities available-for-sale .......... 121,389
Proceeds from maturities of investment
securities available-for-sale .......... 24,687
Purchase of investment securities held-to-
maturity ............................... (119,748) (113,696)
Purchase of investment securities
available-for-sale ..................... (117,303)
Net increase in customer loans ........... (42,596) (69,507)
Capital expenditures ..................... (3,762) (3,390)
-------------- --------------
Net cash provided by (used in)
investing activities ............. 4,610 (41,725)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in noninterest-
bearing deposits ....................... 23,785 (12,648)
Net increase (decrease) in NOW and savings
accounts ............................... (31,335) 21,263
Net increase (decrease) in certificates of
deposit ................................ 33,094 (47,986)
Net increase (decrease) in short-term
borrowings ............................. (11,531) 1,481
Repayment of long-term debt .............. (433) (6,315)
Proceeds from issuance of shares ......... 5,561 2,147
Repurchase of common shares .............. (8,749)
Dividends paid ........................... (15,600) (13,755)
-------------- --------------
Net cash used in financing
activities ..................... (5,208) (55,813)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents ............................ 56,004 (41,758)
Cash and cash equivalents at beginning of
period ................................. 162,676 334,716
-------------- --------------
Cash and cash equivalents at end of
period.................................. $ 218,680 $ 292,958
-------------- --------------
-------------- --------------
Reconciliation of net income to net cash For the 6 Months Ended
provided by operating activities June 30,
(Dollars in thousands) 1994 1993
- - ------------------------------------------------------------------------------
Net income ............................... $42,573 $40,906
-------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .......... 3,495 3,361
Provision for loan losses .............. 3,002 7,215
Write-down of other real estate owned .. 2,991 100
Investment securities (gains) and
losses ............................... 186 156
Amortization of excess cost over equity
in affiliates ........................ 565 565
(Increase) decrease in interest
receivable ........................... (1,005) 340
Decrease in other receivables .......... 516 859
Decrease in other assets ............... 4,728 1,631
Decrease in interest payable ........... (623) (1,218)
Increase in accrued expenses ........... 2,706 974
Increase (decrease) in taxes payable ... (2,532) 891
-------------- --------------
Total adjustments ................ 14,029 14,874
-------------- --------------
Net cash provided by operating activities $56,602 $55,780
-------------- --------------
-------------- --------------
[FN]
See notes to consolidated financial statements
<PAGE> 6
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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 $480,641
Net income ............................. 40,906
Cash dividends paid:
Common stock ($.30 per share) ........ (13,755)
Issuance of 29,407 shares for dividend
reinvestment and stock purchase plan . 59 858
Issuance of 3,963 shares under exercise
of stock appreciation rights ......... 8 123
Issuance of 5,686 shares for employee
stock purchase dividend reinvestment
plan ................................. 11 173
Issuance of 42,919 shares for employee
stock option plan .................... 86 829
------------------- ------------------- -------------------
BALANCE, June 30, 1993 ................. $61,199 $58,435 $507,792
------------------- ------------------- -------------------
------------------- ------------------- -------------------
BALANCE, DECEMBER 31, 1993 ............. $91,994 $29,230 $533,672
Unrealized gains (losses) on securities
at January 1, 1994 ................... $ 1,105
Net income ............................. 42,573
Cash dividends paid:
Common stock ($.34 per share) ........ (15,600)
Issuance of 58,079 shares for dividend
reinvestment and stock purchase plan . 116 934
Issuance of 11,173 shares for employee
stock purchase dividend reinvestment
plan ................................. 23 194
Issuance of 300,565 shares for employee
stock option plan .................... 601 3,693
Purchase of 441,000 shares under stock
repurchase plan ...................... (882) (7,867)
Change in unrealized gains (losses) on
securities ........................... (3,377)
------------------- ------------------- ------------------- -------------------
BALANCE, JUNE 30, 1994 ................. $91,852 $26,184 $560,645 $(2,272)
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
</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.
2) Year to date per share amounts are based on the weighted average number of
common shares outstanding during the period or 45,970,015 shares for 1994
and 45,841,347 shares for 1993.
3) In September 1993, the Company declared a three-for-two stock split in the
form of a stock dividend. Average shares and per share amounts have been
adjusted to give effect to the dividend.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income per share for the three months ended June 30, 1994 was $.47
compared to $.44 for the same period in 1993. Net income per share for the
first half of 1994 was $.93, an increase of 4% over the $.89 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 45,970,015 for 1994
and 45,841,347 for 1993. In September 1993, the Company declared a three-for-
two stock split in the form of a stock dividend. Average shares and per share
amounts have been adjusted to give effect to the dividend.
Net interest income for the first six months of 1994 was 3% higher than the
amount for the comparable period in 1993 due to an increase of 4% in average
earning assets which more than offset a small decline in net interest margin
on earning assets. Total noninterest income increased 15% primarily due to a
first quarter gain of $3,137,000 on the sale of an asset which is included in
other income. Total noninterest expenses, excluding the provision for loan
losses, for the first half of 1994 increased 12% over the comparable period in
1993 due largely to a $3,435,000 increase in charges for reserves against the
carrying value of other real estate owned and related operating costs which is
included in other expenses. The provision for loan losses for the first half
of 1994 was $3,002,000 compared to $7,215,000 for the first half of 1993.
During the quarter ended June 30, 1994, non-performing assets decreased
$3,534,000 to $70,989,000. Non-performing loans, one of the components of non-
performing assets, decreased $1,981,000 and other real estate owned, the other
component, decreased $1,553,000. Net charge-offs were $1,114,000 in the second
quarter of 1994 and $5,093,000 in the comparable quarter of 1993. The
allowance for loan losses was $91,666,000 at June 30, 1994 or 172% of non-
performing loans.
Average total deposits for the first six months were $4,456,100,000, up 2%
over the $4,368,300,000 for the comparable period in 1993. Average total loans
for the first six months of 1994 were $3,565,000,000 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 six 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 ...................... $1,124,200 $ 42,317 7.6% $1,121,600 $ 41,611 7.5%
Mortgage and construction ....... 1,692,400 70,204 8.4 1,599,200 67,747 8.5
Consumer ........................ 748,400 31,021 8.4 781,600 33,785 8.7
------------- ------------- ------------- -------------
Total loans ................. 3,565,000 143,542 8.1 3,502,400 143,143 8.2
------------- ------------- ------------- -------------
Federal funds sold ................ 10,100 188 3.8 29,300 425 2.9
Securities purchased under resale
agreements ........................ 500 12 4.8 5,100 87 3.4
Securities:
Taxable securities
U.S. Treasury securities ...... 1,651,300 42,360 5.2 1,470,800 41,826 5.7
U.S. Agency and other
securities .................. 500 23 9.3 2,800 117 8.4
Other stocks and bonds ........ 6,400 182 5.7 4,800 216 9.1
Tax-exempt securities
States and political
subdivisions .................. 2,800 139 10.0 5,500 273 10.0
------------- ------------- ------------- -------------
Total securities ............ 1,661,000 42,704 5.2 1,483,900 42,432 5.8
------------- ------------- ------------- -------------
Interest-bearing deposits in other
banks ............................. 600 24 8.1 900 35 7.8
------------- ------------- ------------- -------------
Total earning assets ........ 5,237,200 186,470 7.2 5,021,600 186,122 7.5
------------- -------------
Cash and due from banks ............. 183,100 184,400
Bank premises and equipment, net .... 68,300 65,300
Other assets ........................ 141,500 146,500
Less: allowance for loan losses ..... (91,200) (89,900)
------------- -------------
Total assets ................ $5,538,900 $5,327,900
------------- -------------
------------- -------------
Interest-bearing liabilities
Deposits:
Savings deposits ................ $2,328,900 30,089 2.6 $2,254,700 32,856 2.9
Time deposits ................... 1,294,700 27,485 4.3 1,340,800 29,598 4.5
------------- ------------- ------------- -------------
Total interest-bearing
deposits .................... 3,623,600 57,574 3.2 3,595,500 62 ,454 3.5
Short-term borrowings ............. 323,900 5,267 3.3 278,400 3,790 2.7
Long-term debt .................... 32,100 1,069 6.7 13,200 527 8.1
------------- ------------- ------------- -------------
Total interest-bearing funds 3,979,600 63,910 3.2 3,887,100 66,771 3.5
------------- -------------
Noninterest-bearing deposits ........ 832,500 772,800
Other liabilities and accrued
expenses .......................... 53,900 51,500
------------- -------------
Total liabilities ........... 4,866,000 4,711,400
Stockholders' equity ................ 672,900 616,500
------------- -------------
Total liabilities and
stockholders' equity ....... $5,538,900 $5,327,900
------------- -------------
------------- -------------
Net interest income ................. $122,560 $119,351
------------- -------------
------------- -------------
Net interest rate spread ............ 3.9% 4.0%
Effect of noninterest-bearing funds.. .8 .8
------------- -------------
Net interest margin on earning assets 4.7% 4.8%
------------- -------------
------------- -------------
Taxable-equivalent adjustment included
in:
Loan income ..................... $ 1,442 $ 1,551
Investment securities income .... 91 152
------------- -------------
Total ....................... $ 1,533 $ 1,703
------------- -------------
------------- -------------
<FN>
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35% for 1994 and 34% for 1993.
</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
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
Jay M. Wilson
Former President of Steeltin Can
Corporation
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 145 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 Second 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.
