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 March 31, 1995
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 April 30, 1995, registrant had outstanding 47,539,864 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
March 31, 1995, total unused lines of credit approximated
$1,561,926,000. In addition, letters of credit are
issued for the benefit of customers by affiliated banks.
Outstanding letters of credit were $102,736,000 at
March 31, 1995.
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
BY
H. Furlong Baldwin
Chairman of the Board
BY
Kenneth A. Bourne, Jr.
Exec. Vice President and Treasurer
PAGE 3
(THE FOLLOWING INFORMATION APPEARS ON THE FRONT COVER OF THE REPORT)
1995
MERCANTILE BANKSHARES CORPORATION
FIRST
QUARTER
REPORT
for the three months ended
March 31, 1995
[LOGO] MERCANTILE BANKSHARES CORPORATION
PAGE
[LOGO] MERCANTILE BANKSHARES CORPORATION
TO OUR SHAREHOLDERS:
Net income for the first quarter of 1995 was $.50 per share, an increase of
11.1% over the $.45 per share for the comparable period last year.
Consolidated net income for the first three months of 1995 increased 11.0% to
$24,208,000 compared to $21,818,000 for 1994.
At March 31, 1995, total assets were $5,936,738,000, an increase of 2.7%
over the $5,781,819,000 at March 31, 1994 and total stockholders' equity was
$731,954,000, an increase of 6.8% 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 1.7% and
the annualized return on average equity was 13.4% for the quarter. Average
equity as a percentage of average total assets was 12.5%. The allowance for
loan losses was 2.3% 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
P.O. Box 311
Annapolis, Md. 21404
410/268-3366
2. BALTIMORE TRUST CO.
Robert E. Dickerson,
President and CEO
One West Church Street
P.O. Box 470
Selbyville, De. 19975
302/436-8236
3. BANK OF SOUTHERN
MARYLAND
Wesley E. Hughes, Jr.,
President and CEO
304 Charles Street
P.O. Box X
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
P.O. Box 60
Chestertown, Md. 21620
410/778-2400
6. THE CITIZENS NATIONAL BANK
Peter W. Floeckher, Jr.,
President and CEO
Fourth & Main Streets
P.O. Box 10
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. 21922
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
P.O. Box 50
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
P.O. Box 1307
Bel Air, Md. 21014
410/838-6131
13. FREDERICKTOWN BANK
& TRUST CO.
Robert E. Gearinger,
Chairman and CEO
30 North Market Street
P.O. Box 510
Frederick, Md. 21705
301/662-8231
14. MERCANTILE-SAFE DEPOSIT
& TRUST CO.
H. Furlong Baldwin,
Chairman and CEO
2 Hopkins Plaza
P.O. Box 1477
Baltimore, Md. 21203
410/237-5900
15. THE NATIONAL BANK OF FREDERICKSBURG
William B. Young,
President and CEO
2403 Fall Hill Avenue
P.O. Box 7207
Fredericksburg, Va. 22404
703/899-3200
16. PENINSULA BANK
Jeffrey F. Turner,
President and CEO
11738 Somerset Avenue
P.O. Box 219
Princess Anne, Md. 21853
410/651-2400
17. THE PEOPLES BANK OF MARYLAND
Jeffrey N. Heflebower,
President and CEO
205 Market Street
P.O. Box 220
Denton, Md. 21629
410/479-2600
18. POTOMAC VALLEY BANK
Kenneth C. Cook,
President and CEO
702 Russell Avenue
Gaithersburg, Md. 20877
301/963-7600
19. ST. MICHAELS BANK
William W. Duncan, Jr.,
President and CEO
213 Talbot Street
P.O. Box 70
St. Michaels, Md. 21663
410/745-5091
20. WESTMINSTER BANK AND TRUST CO.
Ferdinand A. Ruppel, Jr.,
President and CEO
71 East Main Street
P.O. Box 29
Westminster, Md. 21158
410/848-9300
________________________________
MERCANTILE
MORTGAGE
CORPORATION
Paul W. Parks,
President and CEO
20 South Charles Street
P.O. Box 17027
Baltimore, Md. 21203
410/347-8940
PAGE 2
<TABLE>
CONSOLIDATED FINANCIAL SUMMARY
<CAPTION>
For the 3 Months Ended
March 31,
% Increase
(Dollars in thousands, except per share data) 1995 1994 (Decrease)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net interest income ..................................................... $69,333 $61,138 13%
Net interest income--taxable equivalent ................................. 70,324 61,967 13
Provision for loan losses ............................................... 1,440 1,822 (21)
Net income .............................................................. 24,208 21,818 11
-------------------------------------------------
PER COMMON SHARE DATA
Net income .............................................................. $ .50 $ .45 11%
Dividends paid .......................................................... .20 .17 18
Book value at period end ................................................ 15.36 14.23 8
Market value at period end .............................................. 22 1/8 18 1/4 21
Market range:
High .................................................................. 22 3/8 21 7
Low ................................................................... 19 1/2 18 1/4 7
-------------------------------------------------
AVERAGE CONSOLIDATED BALANCE SHEETS
Total loans ............................................................. $3,975,300 $3,688,900 8%
Total earning assets .................................................... 5,564,800 5,434,200 2
Total assets ............................................................ 5,884,400 5,754,300 2
Total deposits .......................................................... 4,687,200 4,645,600 1
Stockholders' equity .................................................... 734,500 684,100 7
-------------------------------------------------
RATIOS
(Net income annualized)
Return on average assets ................................................ 1.67% 1.54% 8%
Return on average equity ................................................ 13.37 12.93 3
Average equity to average assets ........................................ 12.48 11.89 5
Net interest rate spread--taxable equivalent ............................ 4.14 3.88 7
Effect of noninterest-bearing funds--taxable equivalent ................. .99 .74 34
Net interest margin on earning assets--taxable equivalent ............... 5.13 4.62 11
Provision for loan losses (annualized) to period end loans .............. .14 .20 (30)
Net charge-offs (annualized) to period end loans ........................ .03 (100)
Non-performing loans to period end loans ................................ .82 1.50 (45)
Allowance for loan losses to period end loans ........................... 2.28 2.54 (10)
Allowance for loan losses to non-performing loans ....................... 277.42 169.54 64
Other real estate owned to period end loans and OREO .................... .22 .56 (61)
Non-performing assets to period end loans and OREO ...................... 1.04 2.04 (49)
-------------------------------------------------
<FN>
See notes to consolidated financial statements
</TABLE>
PAGE 3
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share MARCH 31, December 31,
data) 1995 1994
- ------------------------------------------------------------------------------
ASSETS
Cash and due from banks .................. $ 241,666 $ 257,046
Interest-bearing deposits in other banks . 100 100
Investment securities:
U.S. Treasury and government agencies
Held-to-maturity--market value of
$1,206,499 (1995) and $1,210,799
(1994) ........................... 1,225,962 1,251,514
Available-for-sale at fair value ... 246,571 329,552
States and political subdivisions
Held-to-maturity--market value of
$13,077 (1995) and $13,054
(1994) ........................... 13,304 13,581
Other investments
Held-to-maturity--market value of
$9,028 (1995) and $8,833 (1994) .. 8,256 8,183
Available-for-sale at fair value ... 3,726 3,434
---------- -----------
Total investment securities ...... 1,497,819 1,606,264
---------- -----------
Federal funds sold ....................... 850
Loans .................................... 4,063,428 3,938,095
Less: allowance for loan losses .......... (92,738) (91,257)
---------- -----------
Loans, net ....................... 3,970,690 3,846,838
---------- -----------
Bank premises and equipment, less
accumulated depreciation of
$72,654 (1995) and $72,349 (1994) ...... 75,136 74,259
Other real estate owned, net ............. 8,953 10,165
Excess cost over equity in affiliated
banks, net ............................. 18,580 18,862
Other assets ............................. 122,944 124,691
---------- -----------
Total assets ..................... $5,936,738 $5,938,225
========== ===========
LIABILITIES
Deposits:
Noninterest-bearing deposits ......... $ 897,956 $ 954,228
Interest-bearing deposits ............ 3,885,700 3,811,165
---------- -----------
Total deposits ................... 4,783,656 4,765,393
Short-term borrowings .................... 319,273 356,268
Accrued expenses and other liabilities ... 70,613 61,177
Long-term debt ........................... 31,242 31,470
---------- -----------
Total liabilities ................ 5,204,784 5,214,308
---------- -----------
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 47,657,469
shares in 1995 and 48,114,014 shares in
1994 ................................... 95,315 96,228
Capital surplus .......................... 14,386 22,988
Retained earnings ........................ 621,647 606,972
Unrealized gains (losses) on securities,
net .................................... 606 (2,271)
---------- -----------
Total stockholders' equity ....... 731,954 723,917
---------- -----------
Total liabilities and
stockholders' equity .......... $5,936,738 $5,938,225
========== ===========
[FN]
See notes to consolidated financial statements
PAGE 4
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
For the 3 Months Ended
March 31,
(Dollars in thousands, except per share data) 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans ........................... $ 90,629 $71,546
--------- --------
Interest and dividends on investment securities:
Taxable interest income ............................ 20,715 22,065
Tax-exempt interest income ......................... 165 182
Dividends .......................................... 103 52
Other investment income ............................ 62 70
--------- --------
21,045 22,369
--------- --------
Other interest income ................................ 2 60
--------- --------
Total interest income ........................ 111,676 93,975
--------- --------
INTEREST EXPENSE
Interest on deposits ................................. 36,862 29,854
Interest on short-term borrowings .................... 4,958 2,447
Interest on long-term debt ........................... 523 536
--------- --------
Total interest expense ....................... 42,343 32,837
--------- --------
NET INTEREST INCOME .................................. 69,333 61,138
Provision for loan losses ............................ 1,440 1,822
--------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES... 67,893 59,316
--------- --------
NONINTEREST INCOME
Trust division services .............................. 10,742 10,611
Rental income ........................................ 2,318 2,194
Service charges on deposit accounts .................. 3,908 3,795
Other fees ........................................... 4,516 4,764
Investment securities gains and (losses) ............. (993) 49
Other income ......................................... 130 3,706
--------- --------
Total noninterest income ..................... 20,621 25,119
--------- --------
NONINTEREST EXPENSES
Salaries ............................................. 22,126 20,836
Employee benefits .................................... 6,488 6,307
Net occupancy expense of bank premises ............... 4,353 4,598
Furniture and equipment expenses ..................... 3,647 3,436
Communications and supplies .......................... 2,432 2,312
FDIC insurance premium expense ....................... 2,737 2,731
Other expenses ....................................... 8,026 8,486
--------- --------
Total noninterest expenses ................... 49,809 48,706
--------- --------
Income before income taxes ........................... 38,705 35,729
Applicable income taxes .............................. 14,497 13,911
--------- --------
NET INCOME ........................................... $ 24,208 $21,818
========= ========
NET INCOME PER SHARE OF COMMON STOCK (2) ............. $.50 $.45
========= ========
<FN>
See notes to consolidated financial statements
</TABLE>
PAGE 5
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
<CAPTION>
Increase (decrease) in cash and cash For the 3 Months Ended
equivalents March 31,
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans ........................... $ 89,976 $ 71,598
Interest and dividends on investment securities ...... 20,535 22,205
Other interest income ................................ 27 50
Noninterest income ................................... 22,157 25,062
Interest paid ........................................ (41,422) (34,162)
Noninterest expenses paid ............................ (48,186) (54,880)
Income taxes paid .................................... (4,105) (730)
---------- ----------
Net cash provided by operating activities ........ 38,982 29,143
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities
held-to-maturity ................................... 48,536 90,340
Proceeds from sales of investment securities
available-for-sale ................................. 71,721 91,094
Proceeds from maturities of investment securities
available-for-sale ................................. 28,819 1,850
Purchases of investment securities held-to-maturity .. (23,775) (59,151)
Purchases of investment securities available-for-sale. (13,157) (91,764)
Net (increase) decrease in customer loans ............ (124,848) 10,149
Capital expenditures ................................. (2,800) (1,863)
---------- ----------
Net cash provided by (used in) investing
activities ..................................... (15,504) 40,655
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in noninterest-bearing deposits ......... (56,272) (59,353)
Net increase (decrease) in NOW and savings accounts .. (104,331) 2,897
Net increase in certificates of deposit .............. 178,866 22,578
Net increase (decrease) in short-term borrowings ..... (36,995) 7,550
Repayment of long-term debt .......................... (228) (215)
Proceeds from issuance of shares ..................... 752 1,216
Repurchase of common shares .......................... (10,267) (3,293)
Dividends paid ....................................... (9,533) (8,022)
---------- ----------
Net cash used in financing activities ............ (38,008) (36,642)
---------- ----------
Net increase (decrease) in cash and cash equivalents . (14,530) 33,156
Cash and cash equivalents at beginning of period ..... 257,146 176,771
---------- ----------
Cash and cash equivalents at end of period ........... $ 242,616 $209,927
========== ==========
Reconciliation of net income to net cash For the 3 Months Ended
provided by operating activities March 31,
(Dollars in thousands) 1995 1994
- --------------------------------------------------------------------------------------------------------
Net income ........................................... $24,208 $21,818
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................... 1,923 1,799
Provision for loan losses ......................... 1,440 1,822
Write-down of other real estate owned ............. 768 1,465
Investment securities (gains) and losses .......... 993 (49)
Amortization of excess cost over equity in
affiliates ...................................... 283 283
Increase in interest receivable ................... (1,138) (122)
(Increase) decrease in other receivables .......... 543 (8)
(Increase) decrease in other assets ............... 2,341 (7,340)
Increase (decrease) in interest payable ........... 921 (1,325)
Decrease in accrued expenses ...................... (3,692) (2,381)
Increase in taxes payable ......................... 10,392 13,181
---------- ----------
Total adjustments ................................ 14,774 7,325
---------- ----------
Net cash provided by operating activities ............ $38,982 $29,143
========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
PAGE 6
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<CAPTION>
Unrealized Gains
(Losses) on
(Dollars in thousands, except per share data) Common Stock Capital Surplus Retained Earnings Securities
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 ....................... $96,470 $26,958 $551,513
Unrealized gains (losses) on securities at January
1, 1994 ........................................ $ 1,059
Net income ....................................... 21,818
Cash dividends paid:
Common stock ($.17 per share) .................. (7,826)
By affiliated bank prior to affiliation ........ (196)
Issuance of 29,851 shares for dividend
reinvestment and stock purchase plan ........... 60 461
Issuance of 5,040 shares for employee stock
purchase dividend reinvestment plan ............ 10 88
Issuance of 41,836 shares for employee stock
option plan .................................... 84 513
Purchase of 165,000 shares under stock repurchase
plan ........................................... (330) (2,963)
Change in unrealized gains (losses) on securities (2,560)
-------- -------- -------- --------
BALANCE, MARCH 31, 1994 .......................... $96,294 $25,057 $565,309 $(1,501)
======== ======== ======== ========
BALANCE, DECEMBER 31, 1994 ....................... $96,228 $22,988 $606,972 $(2,271)
Net income ....................................... 24,208
Cash dividends paid:
Common stock ($.20 per share) .................. (9,533)
Issuance of 29,711 shares for dividend
reinvestment and stock purchase plan ........... 59 568
Issuance of 6,108 shares for employee stock
purchase dividend reinvestment plan ............ 12 113
Purchase of 492,364 shares under stock repurchase
plan ........................................... (984) (9,283)
Change in unrealized gains (losses) on securities 2,877
-------- -------- -------- --------
BALANCE, MARCH 31, 1995 .......................... $95,315 $14,386 $621,647 $606
======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
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 1995
fiscal year, the Corporation adopted the provisions of FASB Statement No.
114, Accounting by Creditors for Impairment of a Loan, and FASB Statement
No. 118, Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosure. Implementation of these pronouncements 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 1995 presentation.
2) Year to date per share amounts are based on the weighted average number of
common shares outstanding during the period or 47,988,614 shares for 1995
and 48,223,970 shares for 1994.
3) Amounts reported for 1994 have been restated to include the accounts of The
National Bank of Fredericksburg, Fredericksburg, Virginia, which became an
affiliate in November 1994. The affiliation was accounted for as a pooling
of interests. The accompanying statement of consolidated income for 1994
includes total income of $4,210,000 and net income of $597,000 for the
three months ended March 31, 1994, applicable to The National Bank of
Fredericksburg.
</TABLE>
PAGE 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income for the first quarter of 1995 was $.50 per share, an increase of
11% over the $.45 per share for the comparable period last year. Consolidated
net income was $24,208,000, an increase of 11% over the $21,818,000 for the
first quarter of 1994. Year to date per share amounts are based on the
weighted average number of common shares outstanding of 47,988,614 for 1995
and 48,223,970 for 1994. Amounts originally reported have been restated to
include the accounts of The National Bank of Fredericksburg, Fredericksburg,
Virginia, which became an affiliate in November 1994. The affiliation was
accounted for as a pooling of interests.
Net interest income for the first three months of 1995 was 13% higher than
the amount for the comparable period in 1994 due to an increase of 11% in net
interest margin on earning assets and an increase of 2% in average earning
assets. Average loans increased by 8% over the first quarter of 1994 to
$3,975,300,000 for the first quarter of 1995. Average loans as a percentage of
average earning assets increased to 71% for the period ended March 31, 1995,
compared to 68% of average earning assets for the comparable period in 1994.
Meanwhile, average total investment securities declined to $1,589,200,000, or
29% of average earning assets for the period ended March 31, 1995, from
$1,739,200,000, or 32% of average earning assets for the comparable period in
1994.
Total noninterest income decreased 18% for the first three months of 1995.
Factors contributing to this decline include a gain of $3,137,000 on the sale
of an asset during the first quarter of 1994; a $993,000 loss on the sale of
investment securities during the first quarter of 1995 compared to a $49,000
gain on the sale of securities in 1994; and a decrease in mortgage banking
fees.
Total noninterest expenses, excluding the provision for loan losses, for the
first quarter of 1995 increased 2% over the comparable period in 1994. Other
expenses include $768,000 in charges for reserves against the carrying value
of other real estate owned compared to $1,465,000 in the first quarter of
1994. The provision for loan losses for the first quarter of 1995 was
$1,440,000 compared to $1,822,000 for the first quarter of 1994.
During the quarter ended March 31, 1995, non-performing assets decreased
$1,431,000 to $42,382,000. Other real estate owned, one of the components of
non-performing assets, decreased $1,212,000 and non-performing loans, the
other component, decreased $219,000. Net recoveries were $41,000 in the first
quarter of 1995 versus net charge-offs of $278,000 in the comparable quarter
of 1994. The allowance for loan losses was $92,738,000 at March 31, 1995 or
277% of non-performing loans.
Investment securities decreased 7% to $1,497,819,000 at March 31, 1995 from
$1,606,264,000 at December 31, 1994 in order to provide funding for loan
growth. Total loans outstanding increased by 3% to $4,063,428,000 at March 31,
1995 from $3,938,095,000 at December 31, 1994.
Total deposits remained essentially flat at $4,783,656,000 on March 31,
1995. However, noninterest-bearing deposits declined by 6% to $897,956,000 at
March 31, 1995 from $954,228,000 at December 31, 1994 as interest-bearing
deposits increased by 2% to $3,885,700,000 at March 31, 1995 from
$3,811,165,000 one quarter earlier. This shift in deposit mix is attributed to
higher rates paid on time deposits in the first quarter of 1995 compared to
the rates being paid at the end of 1994.
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 three months of the year.
<CAPTION>
1995 1994
--------------------------------- ----------------------------------
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 ............................... $1,304,500 $ 30,821 9.6% $1,217,800 $22,037 7.3%
Mortgage and construction ................ 2,181,300 49,493 9.2 1,989,100 40,371 8.2
Consumer ................................. 489,500 11,191 9.3 482,000 9, 842 8.3
---------- -------- ---------- -------
Total loans .......................... 3,975,300 91,505 9.3 3,688,900 72,250 7.9
---------- -------- ---------- -------
Federal funds sold ......................... 200 1 2.0 5,500 48 3.5
Securities:
Taxable securities
U.S. Treasury securities ............... 1,539,300 20,358 5.4 1,685,200 21,672 5.2
U.S. Agency securities ................. 27,200 357 5.3 29,700 393 5.4
Other stocks and bonds ................. 9,300 186 8.1 9,800 142 5.9
Tax-exempt securities
States and political subdivisions ...... 13,400 259 7.8 14,500 287 8.0
---------- -------- ---------- -------
Total securities ..................... 1,589,200 21,160 5.4 1,739,200 22,494 5.2
---------- -------- ---------- -------
Interest-bearing deposits in other banks ... 100 1 4.1 600 12 8.1
---------- -------- ---------- -------
Total earning assets ................. 5,564,800 112,667 8.2 5,434,200 94,804 7.1
Cash and due from banks ...................... 192,400 -------- 190,500 -------
Bank premises and equipment, net ............. 75,100 74,000
Other assets ................................. 144,200 149,100
Less: allowance for loan losses .............. (92,100) (93,500)
---------- ----------
Total assets ......................... $5,884,400 $5,754,300
========== ==========
Interest-bearing liabilities
Deposits:
Savings deposits ......................... $2,254,900 17,122 3.1 $2,429,000 15,478 2.6
Time deposits ............................ 1,572,600 19,740 5.1 1,357,900 14,376 4.3
---------- -------- ---------- -------
Total interest-bearing deposits ...... 3,827,500 36,862 3.9 3,786,900 29,854 3.2
Short-term borrowings ...................... 363,800 4,958 5.5 336,800 2,447 2.9
Long-term debt ............................. 31,300 523 6.8 32,200 536 6.8
---------- -------- ---------- -------
Total interest-bearing funds ......... 4,222,600 42,343 4.1 4,155,900 32,837 3.2
Noninterest-bearing deposits ................. 859,700 -------- 858,700 -------
Other liabilities and accrued expenses ....... 67,600 55,600
---------- ----------
Total liabilities .................... 5,149,900 5,070,200
Stockholders' equity ......................... 734,500 684,100
---------- ----------
Total liabilities and stockholders'
equity. . ............................ $5,884,400 $5,754,300
========== ==========
Net interest income .......................... $ 70,324 $61,967
======== =======
Net interest rate spread ..................... 4.1% 3.9%
Effect of noninterest-bearing funds .......... 1.0 .7
--- ---
Net interest margin on earning assets ........ 5.1% 4.6%
=== ===
Taxable-equivalent adjustment included in:
Loan income .............................. $ 876 $ 704
Investment securities income ............. 115 125
-------- -------
Total ................................ $ 991 $ 829
======== =======
<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 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, LLP
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
Listing as of March 31, 1995
PAGE 10
CORPORATE INFORMATION
STRUCTURE/STRATEGY
Mercantile Bankshares Corporation is a multi-
bank holding company with twenty 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 156 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 on the Nasdaq
Stock Market 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:
The Bank of New York
Mercantile Bankshares Corporation
Dividend Reinvestment and Stock Purchase Plan
P.O. Box 1958
Newark, New Jersey 07101-9774
800/524-4458
DIVIDEND DISBURSING AGENT AND TRANSFER AGENT FOR STOCK
The Bank of New York
For telephone inquiries:800/524-4458
For written inquiries:
The Bank of New York
Shareholder Relations Department 11E
P.O. Box 11258
Church Street Station
New York, New York 10286
Send certificates for transfer and address change notices to:
The Bank of New York
Receive and Deliver Department 11W
P.O. Box 11002
Church Street Station
New York, New York 10286
PAGE 11
APPENDIX
Appearing at the top of page 2 of the First Quarter Report to Shareholders
next to the heading "PRINCIPAL AFFILIATES", is the outline of a map of the
state of Maryland, the eastern shore and northern portions of Virginia and
southern Delaware. Shown in the approximate geographic location of each bank
affiliate's headquarters are the numbers 1 through 20 which correspond to the
numerical listing of affiliates contained on the same page.
(THE FOLLOWING INFORMATION APPEARS ON THE BACK COVER OF THE REPORT)
[LOGO]
MERCANTILE BANKSHARES CORPORATION
2 Hopkins Plaza
P.O. Box 1477
Baltimore, Maryland 21203
FIRST CLASS MAIL
U.S. POSTAGE PAID
PERMIT NO. 4
NEWARK, NJ
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1995 AND THE INCOME STATEMENT FOR THE THREE MONTHS ENDED
MARCH 31, 1995. 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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 241,666,000
<INT-BEARING-DEPOSITS> 100,000
<FED-FUNDS-SOLD> 850,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,247,522,000
<INVESTMENTS-MARKET> 1,228,604,000
<LOANS> 4,063,428,000
<ALLOWANCE> 92,738,000
<TOTAL-ASSETS> 5,936,738,000
<DEPOSITS> 4,783,656,000
<SHORT-TERM> 319,273,000
<LIABILITIES-OTHER> 70,613,000
<LONG-TERM> 31,242,000
<COMMON> 95,315,000
0
0
<OTHER-SE> 636,639,000
<TOTAL-LIABILITIES-AND-EQUITY> 5,936,738,000
<INTEREST-LOAN> 90,629,000
<INTEREST-INVEST> 21,045,000
<INTEREST-OTHER> 2,000
<INTEREST-TOTAL> 111,676,000
<INTEREST-DEPOSIT> 36,862,000
<INTEREST-EXPENSE> 42,343,000
<INTEREST-INCOME-NET> 69,333,000
<LOAN-LOSSES> 1,440,000
<SECURITIES-GAINS> (993,000)
<EXPENSE-OTHER> 49,809,000
<INCOME-PRETAX> 38,705,000
<INCOME-PRE-EXTRAORDINARY> 38,705,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,208,000
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<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>
