FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_______________________to_________________
Commission file number 0-5127
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Mercantile Bankshares Corporation
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(Exact name of registrant as specified in its charter)
Maryland 52-0898572
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Two Hopkins Plaza, P. O. Box 1477, Baltimore, Maryland 21203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 237-5900
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to section 12(g) of the Act:
Common Stock ($2 par value)
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(Title of class)
Preferred Stock Purchase Rights
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(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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At February 28, 1995, the aggregate market value of shares of Common Stock
held by non-affiliates of Registrant (including fiduciary accounts administered
by affiliates) was $984,228,903.75 based on the last sale price on the Nasdaq
Stock Market on February 28, 1995.
As of February 28, 1995, 47,732,598 shares of common stock were
outstanding.
Documents Incorporated by Reference: Parts I, II and IV - Portions of
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Registrant's Annual Report to Stockholders for year ended December 31, 1994, as
indicated, Part III - Definitive Proxy Statement of Registrant filed with the
Securities and Exchange Commission under Regulation 14A.
1
PART I
ITEM 1. BUSINESS
General
Mercantile Bankshares Corporation ("Mercshares") was incorporated under the
laws of Maryland on May 27, 1969. Mercshares is a bank holding company
registered under the Bank Holding Company Act of 1956 and, as of December 31,
1994, owned substantially all of the outstanding shares of capital stock of
twenty banks (the "Affiliated Banks"): The Annapolis Banking and Trust Company
("Annapolis"), Baltimore Trust Company ("Baltimore Trust"), Bank of Southern
Maryland ("Southern"), Calvert Bank and Trust Company ("Calvert"), The
Chestertown Bank of Maryland ("Chestertown"), The Citizens National Bank
("Citizens"), County Banking & Trust Company ("County"), The Eastville Bank
("Eastville"), Farmers & Merchants Bank - Eastern Shore ("Farmers & Merchants"),
The Fidelity Bank ("Fidelity"), The First National Bank of St. Mary's ("First
National"), The Forest Hill State Bank ("Forest Hill"), Fredericktown Bank &
Trust Company ("Fredericktown"), Mercantile-Safe Deposit and Trust Company
("Merc-Safe"), The National Bank of Fredericksburg ("Fredericksburg"), Peninsula
Bank ("Peninsula"), The Peoples Bank of Maryland ("Peoples"), Potomac Valley
Bank ("Potomac"), St. Michaels Bank ("St. Michaels") and Westminster Bank and
Trust Company of Carroll County ("Westminster"). Mercshares also owns all of
the outstanding shares of Mercantile Mortgage Corporation, a mortgage banking
company, MBC Agency, Inc., an insurance agency and MBC Realty, Inc., which owns
and operates various properties used by Merc-Safe. Merc-Safe owns all of the
outstanding shares of Mercantile Pennsylvania Corporation which makes extensions
of credit in Pennsylvania. MBC Agency, Inc., owns all of the outstanding shares
of Mercantile Life Insurance Company, which is in the business of reinsuring
credit insurance made available through the Affiliated Banks. Mercantile
Mortgage Corporation owns all of the outstanding shares of Benchmark Appraisal
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Group, Inc. which appraises real property in connection with loans made by
Mercantile Mortgage Corporation, certain of the Affiliated Banks, and others.
The Affiliated Banks, Mercantile Mortgage Corporation, MBC Agency, Inc.,
Mercantile Life Insurance Company, MBC Realty, Inc., Mercantile Pennsylvania
Corporation and Benchmark Appraisal Group, Inc. are herein referred to as
"Affiliates." For information on the location and number of offices of the
Affiliated Banks and Mercantile Mortgage Corporation, at December 31, 1994, see
pages 42 to 47 of Registrant's Annual Report to Stockholders for the year ended
December 31, 1994, which information is incorporated by reference herein.
On December 15, 1994, Mercshares and The Sparks Bank ("Sparks Bank"),
Sparks, Maryland, reached an agreement under which Mercshares proposes to
acquire all of the outstanding 771,241 shares of Sparks Bank in a statutory
share exchange transaction. The maximum number of shares of Mercshares common
stock issuable will be 1,804,700. The affiliation is subject to approval by the
Virginia State Corporation Commission, Bureau of Financial Institutions, the
Maryland Bank Commissioner, the Federal Reserve Board and by the holders of two-
thirds of the outstanding shares of voting stock of Sparks Bank.
As of December 31, 1994, Sparks Bank had total assets of $191,028,000
(about 3% of the combined assets of Mercshares and its Affiliates), deposits of
$163,520,000, loans (net of unearned income) of $128,785,000 and stockholders
equity of $19,769,000. For the year ended December 31, 1994, Sparks Bank had
net income of $2,397,000. Sparks Bank was incorporated in 1916 and has five
offices located in Baltimore County, Maryland.
Mercshares periodically reviews and considers possible acquisitions of
banks and corporations performing related activities and discusses such possible
acquisitions with managements of the subject companies, and such acquisitions
may be made from time to time. Such acquisitions are normally subject to
regulatory approval.
3
Operations
The Affiliated Banks are engaged in a general commercial and retail banking
business with normal banking services, including acceptance of demand, savings
and time deposits and the making of various types of loans. Merc-Safe offers
a full range of personal trust services, investment management services and (for
corporate and institutional customers) investment advisory, financial and
pension and profit sharing services. As of December 31, 1994, assets under the
investment supervision of Merc-Safe's trust division had an estimated value of
$9.3 billion, assets held in its personal and corporate custody accounts had an
estimated value of $13.8 billion and assets held in escrow accounts had an
estimated value of $0.4 billion.
Mercantile Mortgage Corporation, through offices in Maryland and Delaware,
arranges for and services various types of mortgage loans as principal and as
agent primarily for non-affiliated institutional investors and also for the
Affiliated Banks. Benchmark Appraisal Group, Inc., which is owned by Mercantile
Mortgage Corporation, appraises real property in connection with loans made by
Mercantile Mortgage Corporation, certain of the Affiliated Banks, and others.
Mercantile Pennsylvania Corporation makes various commercial extensions of
credit in Pennsylvania.
MBC Agency, Inc., provides, under group policies, credit life insurance in
connection with extensions of credit by Affiliated Banks. Mercantile Life
Insurance Company, which is owned by MBC Agency, Inc., reinsures the insurance
provided by that Company.
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Statistical Information
The statistical information required in this Item 1 is incorporated by
reference to the information appearing in Registrant's Annual Report to
Stockholders for the year ended December 31, 1994, as follows:
Disclosure Required by Guide 3 Reference to 1994 Annual Report
(I) Distribution of Assets,
Liabilities and Stockholder
Equity; Interest Rates and
Interest Differential . . .Analysis of Interest Rates and
Interest Differentials (pages 6-7)
. . .Rate/Volume Analysis (page 8)
. . .Non-performing Assets (pages 16-17)
(II) Investment Portfolio . . .Bond Investment Portfolio (page 11)
(III) Loan Portfolio . . .Year-End Loan Data (page 40)
. . .Loan Maturity Schedule (page 13)
. . .Asset/Liability Management
(pages 12-14)
. . .Non-performing Assets (pages 16-17)
(IV) Summary of Loan Loss
Experience . . .Allowance for Loan Losses (page 14)
and Credit Risk Analysis
(pages 13, 15)
. . .Allocation of Allowance for Loan
Losses (page 15)
(V) Deposits . . .Analysis of Interest Rates and
Interest Differentials (pages 6-7)
. . .Notes to Financial Statements,
Note 5 - Deposits (page 28)
(VI) Return on Equity
and Assets . . .Return on Equity and Assets
(page 39)
(VII) Short-Term Borrowings . . .Notes to Financial Statements,
Note 6 (page 28)
5
Employees
At December 31, 1994, Mercshares and its Affiliates had approximately 789
officers and 2,056 other employees.
Competition
The banking business, in all of its phases, is highly competitive. Within
their service areas, the Affiliated Banks compete with commercial banks
(including local banks and branches or affiliates of other larger banks),
savings and loan associations and credit unions for loans and deposits, and with
insurance companies and other financial institutions for various types of loans.
These Banks also face competition for commercial and retail banking business
from banks and financial institutions located outside their service areas.
Maryland law currently provides that companies based in Alabama, Arkansas,
Delaware, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina,
Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia and the
District of Columbia are permitted to own Maryland banks or bank holding
companies, so long as their states have reciprocal statutes. However, the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "1994
Interstate Act"), which became law September 29, 1994, provides, among other
things that, over time, bank holding companies that are adequately capitalized
and managed will be permitted to acquire banks in any state, preempting
essentially all state laws prohibiting interstate bank acquisitions and mergers,
subject to certain state "opt out" rights with respect to interstate mergers.
As a result of this and other provisions of the Interstate Act, competition may
increase.
While Mercshares is the second largest bank holding company headquartered in
Maryland, it is the largest independent bank holding company in the state. Its
largest subsidiary, Merc-Safe, is the sixth largest commercial bank in Maryland.
Mercshares also competes with Maryland-based bank subsidiaries of the
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first, fourth, sixth, ninth and twenty-fifth largest bank holding companies in
the United States as well as banking subsidiaries of other non-Maryland bank
holding companies. Measured in terms of assets under investment supervision,
Merc-Safe believes it is one of the largest trust institutions in southeastern
United States. Merc-Safe competes for various classes of fiduciary and
investment advisory business with other banks and trust companies, insurance
companies, investment counseling firms, mutual funds and others.
Mercantile Mortgage Corporation, Benchmark and Mercantile Pennsylvania
Corporation are relatively small competitors in their areas of activity. MBC
Agency, Inc., is limited to providing credit life, health and accident insurance
in connection with credit extended by the Affiliated Banks.
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Supervision and Regulation
Mercshares
Mercshares, as a registered bank holding company, is subject to regulation and
examination by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956 (the "Act") and is required to file with the
Board of Governors quarterly and annual reports and such additional information
as the Board of Governors may require pursuant to the Act. With certain
exceptions, Mercshares is prohibited from acquiring direct or indirect ownership
or control of more than 5% of any class of the voting shares of any company
which is not a bank or bank holding company and from engaging in any business
other than that of banking or of managing or controlling banks or of furnishing
services to, or performing services for, its Affiliated Banks. The Act and
Regulations promulgated under the Act require prior approval of the Board of
Governors of the Federal Reserve System of the acquisition by Mercshares of more
than 5% of any class of the voting shares of any additional bank. With certain
exceptions relating to troubled banks receiving assistance from the Federal
Deposit Insurance Corporation, it also prohibits, until September 29, 1995, the
acquisition by Mercshares of a bank located outside the State of Maryland unless
statutory laws of the state in which such bank is located specifically authorize
such acquisition. Maryland has enacted regional reciprocal banking legislation
that creates a vehicle for acquisitions across state lines with respect to
certain designated states.
Further, under Section 106 of the 1970 Amendments to the Bank Holding Company
Act and the Board's Regulations, bank subsidiaries of bank holding companies are
prohibited from engaging in certain tie-in arrangements with bank
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holding companies and their non-bank subsidiaries in connection with any
extension of credit or provision of any property or services. The Act,
generally, restricts activities of all bank holding companies and their
subsidiaries to banking, and the business of managing and controlling banks, and
to other activities which are determined by the Board of Governors of the
Federal Reserve System to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Mercshares is also
subject to certain restrictions with respect to engaging in the securities
business.
It is Federal Reserve Policy that a bank holding company should serve as a
source of financial strength for and commit resources to support each of its
subsidiary banks even in circumstances in which it might not do so (or may not
legally be required or financially able to do so) absent such a policy.
Changes in control of Mercshares and its Affiliated Banks are regulated under
the Bank Holding Company Act of 1956, the Change in Bank Control Act of 1978 and
various state laws.
Affiliated Banks
All Affiliated Banks, with the exception of Citizens, Baltimore Trust,
Eastville, Farmers & Merchants, First National and Fredericksburg are Maryland
banks, subject to the banking laws of Maryland and to regulation by the Bank
Commissioner of Maryland, who is required by statute to make at least one
examination in each calendar year. Their deposits are insured by, and they are
subject to certain provisions of Federal law and regulations and examination by,
the Federal Deposit Insurance Corporation.
In addition, Annapolis, Forest Hill and St. Michaels are members of the
Federal Reserve System, and are thereby subject to regulation by the Board of
Governors of that System.
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Citizens, First National and Fredericksburg are national banks subject to
regulation and regular examination by the Comptroller of the Currency in
addition to regulation and examination by the Board of Governors of the Federal
Reserve System and the Federal Deposit Insurance Corporation which insures their
deposits.
Eastville and Farmers & Merchants are Virginia banks, subject to the banking
laws of Virginia and to regulation by its State Corporation Commission, which
is required by statute to make at least two examinations in every three year
period. Their deposits are insured by, and they are subject to certain
provisions of Federal law and regulation and examination by, the Federal Deposit
Insurance Corporation.
Baltimore Trust is a Delaware bank, subject to the banking laws of Delaware
and to regulation by the Delaware State Bank Commissioner, who is required by
statute to make periodic examinations. Its deposits are insured by, and it is
subject to certain provisions of Federal law and regulation and examination by
the Federal Deposit Insurance Corporation.
Mercshares and its Affiliates are subject to the provisions of Section 23A of
the Federal Reserve Act which limit the amount of loans or extensions of credit
to, and investments in, Mercshares and its nonbanking Affiliates by the
Affiliated Banks, and Section 23B of the Federal Reserve Act which requires that
transactions between the Affiliated Banks and Mercshares and its nonbanking
Affiliates be on terms and under circumstances that are substantially the same
as with non-affiliates. Under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, there are circumstances under which Affiliated Banks
could be responsible to the Federal Deposit Insurance Corporation for losses
incurred by it with respect to other Affiliated Banks.
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Other Affiliates
As affiliates of Mercshares, the nonbanking Affiliates are subject to
examination by the Board of Governors of the Federal Reserve System and, as
affiliates of the Affiliated Banks, they are subject to examination by the
Federal Deposit Insurance Corporation and the Bank Commissioner of Maryland.
In addition, MBC Agency, Inc. and Mercantile Life Insurance Company are subject
to licensing and regulation by state insurance authorities.
Recent Banking Legislation
The 1994 Interstate Act (the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994), enacted into law September 29, 1994, made a number of
major changes that will have a significant effect on competition among, and the
operations of, banks. Although there are numerous provisions, the principal
elements include those summarized below.
Commencing September 29, 1995, bank holding companies that are adequately
capitalized and managed will be permitted to acquire banks in any state,
essentially preempting state laws prohibiting interstate bank acquisitions.
Commencing June 1, 1997, adequately capitalized and managed banks will be able
to engage in interstate branching by merging banks in different states. States
may elect not to permit such branching by adopting specific legislation before
June 1, 1997 in which case out-of-state banks generally will not be able to
branch into such states, and banks headquartered in such states generally will
not be permitted to branch into other states. In addition, states may elect to
permit such branching earlier by adopting specific legislation to that effect
prior to June 1, 1997, which must be applicable to all out-of-state banks and
permit interstate merger transactions with all out-of-state banks. States may
also elect, by legislation, to permit acquisitions of existing branches of banks
by out-of-state banks without the acquisition of the entire bank.
With respect to both interstate acquisitions and branching through mergers,
states may require that banks to be acquired have been in existence for a period
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of time (not more than five years), may limit, on a non-discriminatory basis,
the percent of deposits within a state that may be held by a bank, or bank
holding company, and may adopt, on a non-discriminatory basis, laws relating to
the operations of a bank within the state. The Federal Reserve Board may not
permit an acquisition, and the responsible federal agency may not permit a
merger, that would result in the acquiring institution controlling more than 10%
of total insured deposits in the U. S., or 30% of a state's insured deposits
(other than in connection with an initial entry into a state or with an
interstate merger involving affiliated banks), although this 30% limit may be
increased or decreased by a state on a non-discriminatory basis. The pertinent
federal agencies must take into account the acquiring institution's record under
the Community Reinvestment Act and any applicable state community reinvestment
laws. States may impose filing requirements and may continue to regulate
intrastate branching in a non-discriminatory way, examine banks and branches
operated in that state, impose non-discriminatory notification and reporting
requirements, adopt laws relating to community reinvestment, consumer protection
and fair lending, and exercise taxing authority.
The appropriate federal banking agency may permit an adequately capitalized
and managed bank to open and operate an interstate branch de novo in any state
that has a law expressly permitting all out-of-state banks to open and operate
such a branch, provided the bank complies with state filing and community
reinvestment requirements.
Commencing September 29, 1995, subsidiaries of the same bank holding company
may act as agents for one another in receiving deposits, closing and servicing
loans and accepting loan payments without being deemed branches, but the new
authority does not extend to originating or approving loans or opening deposit
accounts.
Generally, foreign banks will be allowed to engage in interstate banking in
the same way as domestic banks without establishing U. S. banks subsidiaries.
There are many other provisions of the 1994 Interstate Act, such as
prohibitions against interstate branches being operated primarily to produce
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deposits, requiring hearings on closing of certain branches, and requiring
separate evaluations and ratings of a bank's Community Reinvestment Act
performance in each state in which it operates, and separate evaluations for
each metropolitan area and for the remaining non-metropolitan area in which the
bank maintains a branch.
Although the 1994 Interstate Act, and regulations implementing its provisions,
become effective over a multi-year period so that the ultimate impact cannot now
be predicted, it is clear that it will have a substantial impact on the manner
in which the banking business in the United States is conducted.
In addition, the Riegle Community Development and Regulatory Improvement Act
of 1994, which contains a number of provisions affecting the operations of
financial institutions, became law September 23, 1994. Among these provisions
are those that, (1) establish a Community Development Financial Institutions
Fund to promote economic revitalization and development in communities
considered to be financially underserved, through investment in Community
Development Financial Institutions, (2) add additional protections to
individuals entering into reverse mortgage transactions and "high cost" mortgage
transactions, (3) remove certain existing impediments to the securitization of
small business loans and leases in an effort to improve access to capital by
small businesses, (4) reduce or simplify administrative requirements, previously
imposed by regulations, of financial institutions to the extent consistent with
safe and sound banking practices, (5) reduce and revise reporting requirements
relating to money laundering and, (6) improve compliance with the National Flood
Insurance Program by lenders and secondary market purchasers in order to
increase participation nationally by individuals with mortgaged homes or
businesses in special flood hazard areas who have not purchased or maintained
flood insurance coverage. Proposed regulations designed to implement certain
provisions of this law have been issued. The various provisions of this Act
should facilitate the operations of banks but their overall impact cannot be
predicted.
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Effects of Monetary Policy
All commercial banking operations are affected by the Federal Reserve System's
conduct of monetary policy and its policies change from time to time based on
changing circumstances. A function of the Federal Reserve System is to regulate
the national supply of bank credit in order to achieve economic results deemed
appropriate by its Board of Governors, including efforts to combat unemployment,
recession or inflationary pressures. Among the instruments of monetary policy
used to implement these objectives are open market operations in U.S. Government
securities, changes in the discount rate charged on bank borrowings and changes
in reserve requirements against bank deposits. These means are used in varying
combinations to influence overall growth of bank loans, investments and
deposits, and they also affect interest rates charged on loans or paid on
deposits.
In recent years, Federal legislation has changed some of the restrictions
under which banks and other financial institutions have operated historically.
The monetary policies of bank regulatory and other authorities have affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. In view of changing conditions in the national economy,
in the money markets, and in the relationships of international currencies, as
well as the effect of legislation and of actions by monetary and fiscal
authorities, no prediction can be made as to possible future changes in interest
rates, deposit levels, loan demand, or the business and earnings of the
Affiliated Banks.
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ITEM 2. PROPERTIES
The main offices of Merc-Safe and Mercshares are located in a 21-story
building at Hopkins Plaza in Baltimore owned by MBC Realty, Inc., a wholly owned
subsidiary of Mercshares. At December 31, 1994, approximately 134,000 square
feet were occupied by Merc-Safe and Mercshares. At December 31, 1994, Merc-Safe
also occupied approximately 132,000 square feet of leased space in a building
located in Linthicum, Maryland, in which its operations and certain other
departments are located. This building is also owned by MBC Realty, Inc. Of
the 17 banking and bank-related offices occupied by Merc-Safe, 6 are owned in
fee, 4 are owned subject to ground leases and 7 are leased with aggregate annual
rentals of approximately $733,000, not including rentals for the main office and
adjacent premises owned by MBC Realty, Inc. Merc-Safe is the owner of an office
building in Towson, Maryland, which houses Merc-Safe's branch administrative
offices and one of its Baltimore County banking offices.
Of the 138 banking offices of the other Affiliated Banks, 77 are owned in fee,
8 are owned subject to ground leases and 53 are leased, with aggregate annual
rentals of approximately $3,044,000 as of December 31, 1994.
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ITEM 3. LEGAL PROCEEDINGS
There was no matter which is required to be disclosed in this Item 3 pursuant
to the instructions contained in the form for this report.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders which is required to be disclosed
pursuant to the instructions contained in the form for this report.
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SPECIAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of Registrant are:
Name Position Age
H. Furlong Baldwin Chairman of the Board and
Chief Executive Officer 63
Douglas W. Dodge Vice Chairman of the Board 62
Edward K. Dunn, Jr. President and Director 59
Kenneth A. Bourne, Jr. Executive Vice President and
Treasurer 52
Hugh W. Mohler Executive Vice President 49
Jay M. Wilson Executive Vice President 48
Brian B. Topping Vice President 60
John A. O'Connor, Jr. Senior Vice President
and Secretary 63
Robert W. Johnson Senior Vice President 52
O. James Talbott, II Senior Vice President 51
No family relationships, as defined by the Rules and Regulations of the
Securities and Exchange Commission, exist among any of the Executive Officers.
All officers are elected annually by the Board of Directors and hold office
at the pleasure of the Board.
Mr. Baldwin has been Chairman of the Board of Mercshares since 1984, and has
been its Chief Executive Officer since 1976. He has been Chairman of the Board
and Chief Executive Officer of Merc-Safe since 1976.
Mr. Dodge has been Vice Chairman of the Board of Mercshares since 1984 and
President of Merc-Safe since 1983.
Mr. Dunn has been President of Mercshares and a Vice Chairman of the Board of
Merc-Safe since 1991. He was Chairman of the Executive Committee of Mercshares
and of Merc-Safe from 1988 to 1991.
Mr. Bourne has been Executive Vice President of Mercshares since 1989 and was
elected Treasurer in February, 1994. He was a Senior Vice President of Merc-
Safe from 1981 until March, 1994 when he was elected an Executive Vice
President.
Mr. Mohler was elected an Executive Vice President of Mercshares in March,
1994. He was a Senior Vice President of Merc-Safe from March, 1994 until
September, 1994 when he was elected an Executive Vice President. He was
President and Chief Executive Officer of Peninsula from 1978 until February,
1994.
18
Mr. Wilson was elected an Executive Vice President of Mercshares and Merc-Safe
in September, 1994. He was a consultant to U. S. Can Corporation from January,
1994 until September, 1994 and President and Chief Executive Officer of Steeltin
Can Corporation from 1978 until January, 1994. Mr. Wilson served as a Director
of Mercshares and Merc-Safe from 1989 until September, 1994.
Mr. Topping has been Vice President of Mercshares since 1988. He has served
as a Vice Chairman of the Board of Merc-Safe since 1984.
Mr. O'Connor has been Secretary of Mercshares and Merc-Safe since 1971. He
was Vice President of Merc-Safe from 1971 to 1978 when be became Senior Vice
President. He was a Vice President of Mercshares from 1986 until 1989 when he
became a Senior Vice President. He has been General Counsel for Mercshares and
Merc-Safe since 1970.
Mr. Johnson has been Senior Vice President of Mercshares since 1989. He has
been a Vice President of Merc-Safe since 1982.
Mr. Talbott has been a Senior Vice President of Mercshares since 1989. He has
been a Vice President of Merc-Safe since 1977.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item 5 is incorporated by reference to the
information appearing under the captions "Dividends" on page 18 and "Recent
Common Stock Prices" on page 19 of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1994.
20
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is incorporated by reference to the
information appearing under the caption "Five Year Selected Financial Data" on
page 40 of the Registrant's Annual Report to Stockholders for the year ended
December 31, 1994.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information required by this Item 7 is incorporated by reference to the
information appearing under the caption "Management's Discussion" on pages 4 to
19 of the Registrant's Annual Report to Stockholders for the year ended
December 31, 1994.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 and the auditor's report thereon are
incorporated by reference to pages 19 to 37 of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1994.
23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There was no matter which is required to be disclosed in this Item 9 pursuant
to the instructions contained in the form for this report.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 with respect to the Executive
Officers of Registrant appears in Part I of this Report.
The remaining information required by this Item 10 is incorporated by
reference to the definitive proxy statement of Registrant filed with the
Securities and Exchange Commission under Regulation 14A.
25
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to the
definitive proxy statement of Registrant filed with the Securities and Exchange
Commission under Regulation 14A.
26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference to the
definitive proxy statement of Registrant filed with the Securities and Exchange
Commission under Regulation 14A.
27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13, is incorporated by reference to the
definitive proxy statement of Registrant filed with the Securities and Exchange
Commission under Regulation 14A.
28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report, except
as indicated.
(1) (2) The financial statements and schedules filed herewith or incorporated
by reference are listed in the accompanying Index to Financial Statements.
(3) Exhibits filed herewith or incorporated by reference herein are set forth
in the following table prepared in accordance with Item 601 of Regulation S-K.
Exhibit Table
(3) Charter and by-laws
A. Charter of the Registrant (Exhibits 3-A(1) through 3-A(5)
listed below are incorporated by reference to Exhibits 3-
A(1) through 3-A(5) to Form S-1 of the Registrant, No. 2-
39545, Exhibit 3-A(6) listed below is incorporated by
reference to Exhibit 3-A(6) of Form S-1 of the Registrant,
No. 2-41379, Exhibit 3-A(7) listed below is incorporated by
reference to Registrant's Annual Report on Form 10-K for
the year ended 1993, Exhibit 3-A(7), Commission File
No. 0-5127, Exhibit 3-A(8) listed below is incorporated by
reference to Registrant's Annual Report on Form 10-K for the
year ended 1993, Exhibit 3-A(8), Commission File No. 0-5127,
Exhibit 3-A(9) listed below is incorporated by reference to
Exhibit B attached to Exhibit 4-A of Form 8-K of Registrant
filed September 27, 1989, Commission File No. 0-5127, Exhibit
3-A(10) listed below is incorporated by reference to
Exhibit B attached to Exhibit 4-A of Form 8-K of the Registrant
filed January 9, 1990, Commission File No. 0-5127, and Exhibit
3-A(11) listed below is incorporated by reference to
Exhibit 3-A(11) of the Annual Report on Form 10-K for the
year ended
29
December 31, 1990, Commission File No. 0-5127).
(1) Articles of Incorporation effective May 27, 1969.
(2) Articles of Amendment effective June 6, 1969.
(3) Articles Supplementary effective August 28, 1970.
(4) Articles of Amendment effective December 14, 1970.
(5) Articles Supplementary effective May 10, 1971.
(6) Articles Supplementary effective July 30, 1971.
(7) Articles of Amendment effective May 8, 1986.
(8) Articles of Amendment effective April 27, 1988.
(9) Articles Supplementary effective September 13, 1989.
(10) Articles Supplementary effective January 3, 1990.
(11) Articles of Amendment effective April 26, 1990.
B. By-Laws of the Registrant, as amended to date (filed
herewith).
(4) Instruments defining the rights of security holders, including
indentures, Charter and by-laws: See Item 14(a)(3) above.
A. Rights Agreement dated as of September 12, 1989 between
Registrant and the Rights Agent, including Form of Rights
Certificate and Articles Supplementary (Incorporated by
reference to Form 8-K of the Registrant filed September 27,
1989, Exhibit 4-A, Commission File No. 0-5127).
B. First Amendment, dated as of December 31, 1989, to Rights
Agreement dated as of September 12, 1989 between Registrant
and the Rights Agent, including amended Form of Rights
Certificate and amended Form of Articles Supplementary
(Incorporated by reference to Form 8-K of the Registrant
filed January 9, 1990, Exhibit 4-A, Commission File
No. 0-5127).
C. Second Amendment, dated as of September 30, 1993, to Rights
Agreement dated as of September 12, 1989 between Registrant
and the Rights Agent, including amended Form of Rights
Certificate (Incorporated by reference to Form 8-K of the
Registrant filed September 30, 1993, Exhibit 4-A,
Commission File No. 0-5127).
D. Amendment No. 1 to Registrant's Registration Statement on
Form 8-B, amending description of securities previously
filed (Incorporated by reference to Form 8 filed December
20, 1991, Commission File No. 0-5127).
30
(10) Material contracts - Each material contract listed herein is filed
as a management contract or compensatory plan or arrangement, with
the exception of Exhibits 10 B and 10 I.
A. Mercantile Bankshares Corporation and Affiliates Annual
Incentive Compensation Plan, as amended through March 14,
1995 (filed herewith).
B. Dividend Reinvestment and Stock Purchase Plan of Mercantile
Bankshares Corporation (Incorporated by reference to the
Plan text included in the Form S-3 Registration No. 33-
44376.)
C. Executive Employment Agreement dated March 24, 1982,
between Mercantile Bankshares Corporation, Mercantile-Safe
Deposit and Trust Company and H. Furlong Baldwin, as
amended by Agreements dated March 13, 1984 and December 13,
1988 (Incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989,
Exhibit 10 D, Commission File No. 0-5127).
D. Deferred Compensation Agreement, including supplemental
pension and thrift plan arrangements, dated September 30,
1982, between Mercantile-Safe Deposit and Trust Company and
H. Furlong Baldwin, as amended by Agreements dated as of
October 24, 1983, March 13, 1984, January 1, 1987, December 8,
1987 and January 1, 1989 (Incorporated by reference to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, Exhibit 10 E, Commission File No. 0-5127).
E. Deferred Compensation Agreement, including supplemental
pension and thrift plan arrangements, dated September 30,
1982, between Mercantile-Safe Deposit and Trust Company and
Douglas W. Dodge, as amended by Agreements dated as of
October 24, 1983, March 13, 1984, January 1, 1987, December 8,
1987 and January 1, 1989 (Incorporated by reference to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, Exhibit 10 F,
31
Commission File No. 0-5127).
F. Mercantile Bankshares Corporation and Participating
Affiliates Unfunded Deferred Compensation Plan for
Directors, as amended through January 1, 1984 (Incorporated
by reference to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989, Exhibit 10 G, Commission
File No. 0-5127).
G. Executive Employment Agreement dated March 13, 1984,
between Mercantile Bankshares Corporation, Mercantile-Safe
Deposit and Trust Company and Douglas W. Dodge, as amended
by Agreement dated December 13, 1988 (Incorporated by
reference to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989, Exhibit 10 I, Commission
File No. 0-5127).
H. Mercantile Bankshares Corporation 1985 Executive Stock
Appreciation Rights Plan dated December 10, 1985
(Incorporated by reference to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989, Exhibit 10 K,
Commission File No. 0-5127).
I. Mercantile Bankshares Corporation Employee Stock Purchase
Dividend Reinvestment Plan dated February 13, 1995 (filed
herewith).
J. Mercantile Bankshares Corporation 1985 Stock Option Plan,
as amended, (Incorporated by reference to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1992, Exhibit 10 J, Commission File No. 0-5127).
K. Deferred Compensation Agreement, including supplemental
pension and thrift plan arrangements, dated September 30,
1982 between Mercantile-Safe Deposit and Trust Company and
Brian B. Topping, as amended by Agreements dated as of
October 24, 1983, March 13, 1984, January 1, 1987, December 8,
1987, and January 1, 1989 (Incorporated by reference to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, Exhibit
32
10 N, Commission File No. 0-5127).
L. Executive Employment Agreement dated March 13, 1984 between
Mercantile Bankshares Corporation, Mercantile-Safe Deposit
and Trust Company and Brian B. Topping as restated
September 13, 1988 and amended December 13, 1988
(Incorporated by reference to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, Exhibit 10 L,
Commission File No. 0-5127).
M. Executive Employment Agreement dated December 13, 1988
between Mercantile Bankshares Corporation, Mercantile-Safe
Deposit and Trust Company and Edward K. Dunn, Jr.
(Incorporated by reference to Registrant's Annual Report on
Form 10-K for year ended December 31, 1993, Exhibit 10 M,
Commission File No. 0-5127).
N. Executive Severance Agreements dated as of December 31,
1989 between Mercantile Bankshares Corporation and
Mercantile-Safe Deposit and Trust Company, and each of
H. Furlong Baldwin, Douglas W. Dodge, Edward K. Dunn, Jr.,
Brian B. Topping, and John A. O'Connor, Jr. (Incorporated
by reference to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989, Exhibit 10 Q, Commission
File No. 0-5127).
O. Mercantile Bankshares Corporation Omnibus Stock Plan
(Incorporated by reference to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990, Exhibit 10 O,
Commission File No. 0-5127).
P. Supplemental Pension Agreement dated January 10, 1992
between Mercantile Bankshares Corporation, Mercantile-Safe
Deposit and Trust Company and Edward K. Dunn, Jr.
(Incorporated by reference to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991, Exhibit 10 P,
Commission File No. 0-5127).
Q. Supplemental Pension Agreement, dated February 10, 1995,
33
between Mercantile Bankshares Corporation and Mercantile-
Safe Deposit and Trust Company, Peninsula Bank and Hugh W.
Mohler (filed herewith).
R. Mercantile Bankshares Corporation and Participating
Affiliates Supplemental Cash Balance Executive Retirement
Plan, dated April 27, 1994, effective January 1, 1994
(filed herewith).
S. Mercantile Bankshares Corporation and Participating
Affiliates Supplemental 401(k) Executive Retirement Plan,
dated December 13, 1994, effective January 1, 1995 (filed
herewith).
(13) Annual Report to security holders for the year ended December 31,
1994 (filed herewith).
(22) Subsidiaries of the Registrant
Information as to subsidiaries of the Registrant (filed herewith)
(24) Consent
Consent of Certified Public Accountants (filed herewith)
(25) Power of Attorney
Power of Attorney dated March 14, 1995 (filed herewith)
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this Report.
34
INDEX TO FINANCIAL STATEMENTS
The Report of Independent Certified Public Accountants as pertaining to the
Consolidated Financial Statements of Mercantile Bankshares Corporation and
Affiliates and related notes is incorporated by reference to page 19 of the
Registrant's Annual Report to Stockholders for the year ended December 31,
1994.
Consolidated Financial Statements and related notes are incorporated by
reference to the Registrant's Annual Report to Stockholders for the year ended
December 31, 1994, and may be found on the pages of said Report as indicated in
parentheses:
Consolidated Balance Sheets, December 31, 1994 and 1993 (page 20)
Statement of Consolidated Income for the years ended December 31,
1994, 1993 and 1992 (page 21)
Statement of Consolidated Cash Flows for the years ended December 31,
1994, 1993 and 1992 (pages 22 and 23)
Statement of Changes in Consolidated Stockholders' Equity for the
years ended December 31, 1994, 1993 and 1992 (page 24)
Notes to Consolidated Financial Statements (pages 25 to 37)
Supplementary Data:
Quarterly Results of Operations are incorporated by reference to the
information appearing under the caption "Quarterly Results of
Operations" on page 34 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1994.
Financial Statement Schedules are omitted because of the absence of the
conditions under which they are required or because the information
called for is included in the Consolidated Financial Statements or
notes thereto.
35
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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: /S/ H. Furlong Baldwin March 28, 1995
H. Furlong Baldwin, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Principal Executive Officer
/S/ H. Furlong Baldwin March 28, 1995
H. Furlong Baldwin, Chairman of the
Board and Chief Executive Officer
Principal Financial Officer
/S/ Kenneth A. Bourne, Jr. March 28, 1995
Kenneth A. Bourne, Jr.
Executive Vice President and Treasurer
Principal Accounting Officer
/S/ Jerry F. Graham March 28, 1995
Jerry F. Graham
Vice President and Controller
A majority of the Board of Directors: Douglas W. Dodge, Robert D. Kunisch,
Christian H. Poindexter, William C. Richardson, Morris W. Offit, Brian B.
Topping, George L. Bunting, Jr., Donald J. Shepard, James A. Block, Calman J.
Zamoiski, Jr., Bishop L. Robinson, Thomas M. Bancroft, Jr., B. Larry Jenkins,
Richard O. Berndt, William J. McCarthy.
By: /S/ H. Furlong Baldwin March 28, 1995
H. Furlong Baldwin
For Himself and as Attorney-in-Fact
36
Exhibit (3)B
BYLAWS
MERCANTILE BANKSHARES CORPORATION
ARTICLE I
Section 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation for the election of directors and the transaction of such
other business as may properly come before the meeting shall be held at the
time and on the day in April of each year as shall be fixed from time to time
by the Board of Directors or by the Executive Committee. Notice of the time
and place of such annual meeting shall be given to each stockholder in the
manner provided in Section 1 of Article X of these bylaws not less than ten
days nor more than ninety days before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may
be called at any time by the Board of Directors, the Chairman of the Board,
the Vice-Chairman of the Board, the President, or as otherwise provided by
law. Notice of the time, place and purpose of each special meeting of
stockholders shall be given to each stockholder in the manner provided in
Section 1 of Article X of these bylaws not less than ten days nor more than
ninety days before the meeting. No business shall be transacted at a special
meeting except that specified in the notice.
Section 3. Removal of Directors. At any special meeting of the
stockholders called in the manner provided for by this Article, the
stockholders, by a majority of the votes entitled to be cast by the
stockholders entitled to vote thereon, may remove any director or directors
from office and may elect a successor or successors to fill any resulting
vacancies from the remainder of his or their terms.
Section 4. Voting; Proxies; Record Date. At all meetings of
stockholders any stockholder shall be entitled to vote by proxy. Such proxy
shall be in writing and signed by the stockholder or by his duly authorized
attorney in fact. It shall be dated but need not be
PAGE 1
sealed, witnessed or acknowledged. The Board of Directors may fix the record
date for the determination of stockholders entitled to vote in the manner
provided in Article IX, Section 4 of these bylaws.
Section 5. Quorum. If at any annual or special meeting of stockholders
a quorum shall fail to attend, those attending in person or by proxy may, by
majority of the votes entitled to be cast, adjourn the meeting from time to
time, not exceeding sixty days in all, and thereupon any business may be
transacted which might have been transacted at the meeting originally called
had the same been held at the time so called.
Section 6. Filing Proxies. At all meetings of stockholders, the
proxies shall be filed with and be verified by the Secretary of the
Corporation or, if the meeting shall so decide, by the Secretary of the
meeting.
Section 7. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation in the State of Maryland or
at such other place either within or without the State of Maryland as may be
designated in the notice of the meeting.
Section 8. Order of Business. At all meetings of stockholders, any
stockholder present and entitled to vote in person or by proxy shall be
entitled to require, by written request to the Chairman of the meeting, that
the order of business shall be as follows:
(1) Organization.
(2) Proof of notice of meeting or of waivers thereof.
(The certificate of the Secretary of the Corporation, of the affidavit of any
other person who mailed or published the notice or caused the same to be
mailed or published, being proof of service of notice.)
(3) Submission by Secretary, or by Inspectors, if any shall have been
elected or appointed, of list of stockholders entitled to vote, present in
person or by proxy.
PAGE 2
(4) If an annual meeting or a special meeting called for that purpose,
reading of unapproved minutes of preceding meetings and action thereon.
(5) Reports.
(6) The election of directors if an annual meeting or a special meeting
called to elect directors, or to remove directors and elect their successors.
(7) Unfinished business.
(8) New Business.
(9) Adjournment.
Section 9. Advance Notice of Matters to be Presented at an Annual
Meeting of Stockholders.
At an annual meeting of the stockholders, commencing with the annual
meeting to be held in 1996, only such business shall be conducted as shall
have been properly brought before the meeting as set forth below. To be
properly brought before an annual meeting, such business must (1) be
specified in the notice of the meeting (or any supplement thereto) given by
the Corporation pursuant to Section 1 of Article X of these bylaws, or (2)
be brought before the meeting by or under the direction of the Board of
Directors (or the Chairman or Vice Chairman of the Board or the President),
or (3) be properly brought before the meeting by a stockholder. In addition
to any other applicable requirements, for business to be properly brought
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
Secretary at the principal executive offices of the Corporation, not less
than 20 days nor more than 30 days prior to the meeting (or, with respect to
a proposal required to be included in the Company's proxy statement pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, or its successor
provision, the earlier date such proposal was received); provided, however,
that in the event that less than 30 days' notice or
PAGE 3
prior disclosure by the Corporation of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received by the Secretary not later than the close of business on the 10th
day following the earlier of the day on which the Corporation's notice of the
date of the annual meeting was mailed or the day on which the Corporation's
first public disclosure of the date of the annual meeting was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii) the
name and record address of the stockholder proposing such business, (iii) the
class and number of shares of the Corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in these bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 9; provided, however, that nothing in
this Section 9 shall be deemed to preclude discussion by any stockholder of
any business properly brought before the annual meeting in accordance with
such procedures.
The presiding officer at the meeting shall have the authority, if the
facts warrant, to determine that business was not properly brought before the
meeting in accordance with the provisions of this Section 9, and if he should
so determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Section 10. Advance Notice of Nominees for Directors. Only persons who
are nominated in accordance with the following procedures shall be eligible
for election as directors at any meeting of stockholders held after the
annual meeting in 1995. Nominations of persons for election to the Board of
Directors of the Corporation may be made at an annual meeting of stockholders
or at a special meeting of stockholders as to which the notice of meeting
PAGE 4
provides for election of directors, by or under the direction of the Board
of Directors, or by any nominating committee or person appointed by the Board
of Directors, or by any stockholder of the Corporation entitled to vote for
the election of directors at the meeting who complies with the notice
procedures set forth in this Section 10. Such nominations, other than those
made by or under the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary. To be timely, such
stockholder's notice shall be delivered to or mailed and received by the
Secretary at the principal executive offices of the Corporation not less than
20 days nor more than 30 days prior to the meeting; provided, however, that
in the event that less than 30 days' notice or prior public disclosure of the
date of the meeting is given or made by the Corporation to stockholders,
notice by the stockholder to be timely must be so received by the Secretary
no later than the close of business on the 10th day following the earlier of
the day on which the Corporation's notice of the date of the meeting was
mailed or the day on which the Corporation's first public disclosure of the
date of the meeting was made. Such stockholder's notice shall set forth: (a)
as to each person who the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of stock of the Corporation
which are beneficially owned by the person, and (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934 or any successor rule thereto; and (b) as to the
stockholder giving the notice, (i) the name and record address of the
stockholder and (ii) the class and number of shares of the Corporation which
are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
nominee
PAGE 5
to serve as a director of the Corporation. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth herein.
The presiding officer at the meeting shall have the authority, if the
facts warrant, to determine that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
ARTICLE II
Directors.
Section 1. Powers. The Board of Directors shall have the control and
management of the affairs, business and properties of the Corporation. They
shall have and exercise in the name of the Corporation and on behalf of the
Corporation all the rights and privileges legally exercisable by the
Corporation, except as otherwise provided by law, by the Charter or by these
bylaws. A director need not be a stockholder.
Section 2. Number. There shall be seventeen directors. The number of
directors may be decreased to not less than seven or increased to not more
than thirty from time to time by amendment of this bylaw by the stockholders
or by the Board of Directors. Each director, unless sooner removed by the
stockholders, shall serve until the next annual meeting of stockholders or
until his successor shall be elected and shall have qualified.
No person shall be eligible for election as a director, either by the
stockholders or by the Board of Directors, who at the time of such proposed
election has passed his 70th birthday.
Section 3. Vacancies. If the office of a director becomes vacant, or
if the number of directors is increased, such vacancy may be filled by the
Board by a vote of a majority of directors then in office although such
majority is less than a quorum. The stockholders may, however, at any time
during the term of such director, elect some other person to fill said
vacancy and thereupon the election by the Board shall be superseded and such
election by the
PAGE 6
stockholders shall be deemed a filling of the vacancy and not a removal and
may be made at any meeting called for that purpose.
If the entire Board of Directors shall become vacant, any stockholder
may call a special meeting in the same manner that the President may call
such meeting, and directors for the unexpired term may be elected at the said
special meeting, in the manner provided for their election at annual
meetings.
Section 4. Meetings. Four or more regular meetings of the Board of
Directors shall be held at an office of the Corporation each year. One of
such meetings shall be held on the same day as and immediately following the
annual meeting of stockholders and the remaining meetings shall be held on
such days and at such times as shall be fixed by the chief executive officer
but there shall be at least one regular meeting in each calendar quarter.
Notice of the date and time of every regular meeting shall be mailed or
telegraphed or given personally to each director not less than five days
before the meeting.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by the Board of Directors, the Executive Committee,
the Chairman of the Board, the Vice-Chairman of the Board or the President
and shall be called at the request of two or more directors. Notice of the
time and place of any special meeting shall be given to each director 8in the
manner provided in Section 2 of Article X of these bylaws not less than
twenty-four hours before the meeting.
Section 6. Quorum. One-third of the total number of directors, but not
less than four, shall constitute a quorum for the transaction of business.
If less than a quorum be present at any meeting duly called, a majority of
those present may adjourn the meeting from time to time with notice to absent
directors.
PAGE 7
Section 7. Place of Meetings. Regular or special meetings of the Board
may be held within or without the State of Maryland as the Board may from
time to time determine. The time and place of a meeting may be fixed by the
party making the call.
Section 8. Rules and Regulations. The Board of Directors may adopt
such rules and regulations for the conduct of their meetings and the
management of the affairs of the Corporation as they may deem proper and not
inconsistent with the laws of the State of Maryland or these bylaws or the
Charter.
Section 9. Compensation. The directors may receive a stated salary for
their services or a fixed sum and expenses of attendance may be allowed for
attendance at each regular or special meeting of the Board of Directors.
Such stated salary or attendance fee shall be determined by resolution of the
Board unless the stockholders have adopted a resolution relating thereto.
Nothing herein contained shall be construed to preclude a director from
serving in any other capacity and receiving compensation therefor.
ARTICLE III
Committees.
Section 1. Executive Committee. There shall be an Executive Committee
of such number not more than fourteen nor less than seven as the Board of
Directors may determine. The Chairman of the Board, the Vice-Chairman of the
Board, the President and the chief executive officer if an officer other than
the officers stated above, shall be members ex officio. The remaining
members shall be elected annually by the Board of Directors from among its
members, preferably at the first meeting after the annual meeting of
stockholders, and shall serve during the pleasure of the Board. The chief
executive officer or such other person as shall be designated by the Board
shall act as chairman of the committee. Additional or substitute members may
be elected by the Board at any time. In addition, the chief executive
officer shall have power to make temporary appointments to the committee of
members of the
PAGE 8
Board of Directors to serve as additional members or to act in the place and
stead of members of the committee who temporarily cannot attend its meetings.
The Executive Committee shall have and may exercise, so far as may be
permitted by law, all of the powers of the Board of Directors during
intervals between meetings thereof.
Section 2. Other Committees. The Board of Directors may also appoint
from their number other committees and, to the extent permitted by law, may
delegate to any such committee the exercise of powers of the Board of
Directors during intervals between meetings thereof. The Chairman of the
Board, the Vice-Chairman of the Board, the President and the chief executive
officer if an officer other than the officers stated above, shall be members
ex officio of all such committees.
Section 3. Committee Meetings. All actions of any committee shall be
recorded in minutes of its meetings and all such actions shall be reported
to the next succeeding meeting of the Board of Directors. Meetings of any
committee may be held at any time and place upon the call of the Chairman of
the Board, the Vice-Chairman of the Board, the President, the chief executive
officer if an officer other than the officers stated above, or any other
member of the committee called to meet. Notice of the time and place of any
special meeting of any committee shall be given in the manner provided in
Section 2 of Article X of these bylaws not less than twelve hours before the
meeting. Six members of the Executive Committee and four members of any
other committee shall constitute a quorum unless otherwise provided by the
Board of Directors for any particular committee.
ARTICLE IV
Officers.
Section 1. Officers and their Duties. The officers of the Corporation
shall consist of the Chairman of the Board, the Vice-Chairman of the Board,
the President, the Secretary, the Treasurer and whenever deemed advisable by
the Board one or more executive vice presidents,
PAGE 9
one or more vice presidents, assistant secretaries, assistant treasurers or
other officers. All of said officers shall be chosen by the Board of
Directors and shall hold office only during the pleasure of the Board or
until their successors are chosen and qualify. The Chairman of the Board,
the Vice-Chairman of the Board and the President shall be chosen from among
the directors. Any two offices except those of Chairman of the Board and
Vice-Chairman of the Board, and President and Vice President may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, when such instrument is required to be
executed, acknowledged, or verified by any two or more officers. The Board
of Directors may from time to time appoint such other agents and employees,
with such powers and duties as they may deem proper.
The Board of Directors shall, from time to time, designate from among
the officers, a chief executive officer who shall direct the management of
the Corporation under the supervision of the Board of Directors or the
appropriate committees thereof and, subject to the same supervision, may also
assign to the other officers of the Corporation duties in addition to those
prescribed by these bylaws or assigned to them by the Board of Directors.
The Board of Directors may, from time to time, designate from among the
officers, the officer or officers who shall act as chief executive officer
in case of the absence or inability to act of the then designated chief
executive officer.
Section 2. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of stockholders and of the Board of Directors and
shall perform such other duties as may be assigned to him by the Board of
Directors.
Section 3. Vice-Chairman of the Board. In the absence of the Chairman
of the Board, the Vice-Chairman of the Board shall act in the place of the
Chairman of the Board and assume his duties and be vested with all his powers
and authorities. He shall perform such other duties as may be assigned to
him by the Board of Directors.
PAGE 10
Section 4. President. In the absence of the Chairman of the Board and
the Vice-Chairman of the Board, the President shall act in the place of the
Chairman of the Board and assume his duties and be vested with all his powers
and authorities. He shall perform such other duties as may be assigned to
him by the Board of Directors.
Section 5. Vice-Presidents. The executive vice-presidents and
vice-presidents shall perform such duties as the Board of Directors may
direct.
Section 6. Treasurer. The Treasurer shall perform such duties as may
be assigned to him by the Board of Directors.
Section 7. Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders and of the Board of Directors, and shall attend
to the giving and serving of all notices of the Corporation required by law
or these bylaws. He shall maintain at all times in the principal office of
the Corporation at least one copy of the bylaws with all amendments to date
and shall make the same, together with the minutes of the meetings of the
stockholders, the annual statement of the affairs of the Corporation and any
voting trust agreement on file at the office of the Corporation, available
for inspection by any officer, director or stockholder during reasonable
business hours. He shall perform such other duties as may be assigned to him
by the Board of Directors.
Section 8. Assistant Treasurer and Assistant Secretary. The assistant
treasurers and assistant secretaries shall perform such duties as may from
time to time be assigned to them by the Board of Directors.
Section 9. Substitutes. The Board of Directors may from time to time
in the absence of any one of said officers or at any other time designate any
other person or persons, on behalf of the Corporation, to sign any contracts,
deeds, notes, or other instruments in the place or stead of any of said
officers, and may designate any person to fill any one of said offices,
temporarily or for any particular purpose; and any instruments so signed in
accordance with a
PAGE 11
resolution of the Board shall be the valid act of this Corporation as fully
as if executed by any regular officer.
ARTICLE V
Resignation of Director or Officer.
Any director or officer may resign his office at any time. Such
resignation shall be made in writing and shall take effect from the time of
its receipt by the Corporation unless some other time be fixed in the
resignation, and then from that time. The acceptance of a resignation shall
not be required to make it effective unless the resignation so provides.
ARTICLE VI
Commercial Paper, Etc.
All bills, notes, checks, drafts and commercial paper of all kinds to
be executed by the Corporation as maker, acceptor, endorser, or otherwise,
and all assignments and transfers of stock, contracts or written obligations
of the Corporation, and all negotiable instruments shall be made in the name
of the Corporation and shall be signed by the President, the Treasurer or
such other person or persons as the Board of Directors may from time to time
designate.
ARTICLE VII
Fiscal Year.
The fiscal year of the Corporation shall cover such period of twelve
months as the Board of Directors may determine. In the absence of any such
determination the accounts of the Corporation shall be kept on a calendar
year basis.
ARTICLE VIII
Seal.
The seal of the Corporation shall be a circle inscribed with the name
of the Corporation and the year and State in which it is incorporated.
PAGE 12
ARTICLE IX
Miscellaneous Provisions - Stock.
Section 1. Issue. All certificates of stock shall be signed by the
Chairman of the Board, the Vice-Chairman of the Board, the President, or any
Vice-President and countersigned by the Treasurer or Assistant Treasurer or
Secretary or Assistant Secretary, any of which may be facsimile signatures
if the certificate is countersigned by the Transfer Agent, and sealed with
the seal of the Corporation.
Section 2. Transfers. No transfers of stock shall be recognized or
binding upon the Corporation until recorded on the books of the Corporation
upon surrender and cancellation of certificates for a like number of shares.
Section 3. Form of Certificates; Procedure. The Board of Directors
shall have power and authority to determine the form of stock certificates
(except in so far as prescribed by law), and to make all such rules and
regulations, as they may deem expedient concerning the issue, transfer and
registration of said certificates, and to appoint one or more transfer agents
or registrars to countersign and register the same.
Section 4. Record Dates for Dividends and Stockholders' Meetings. The
Board of Directors may fix the time, not exceeding twenty days preceding the
date of any meeting of stockholders, any dividend payment date or any date
for the allotment of rights, during which the books of the Corporation shall
be closed against transfers of stock, or the Board of Directors may fix a
date not exceeding ninety days preceding the date of any meeting of
stockholders, any dividend payment date or any date for the allotment of
rights, as a record date for the determination of the stockholders entitled
to notice of and to vote at such meeting, or entitled to receive such
dividends or rights, as the case may be, and only stockholders of record on
such date shall be entitled to notice of and to vote at such meeting or to
receive such
PAGE 13
dividends or rights, as the case may be. In the case of a meeting of
stockholders the record date shall be fixed not less than ten days prior to
the date of the meeting.
Section 5. Lost and Destroyed Certificates. The holder of any shares
of this Corporation shall immediately notify it of any loss or destruction
of the stock certificate representing such shares. A new certificate may be
issued upon satisfactory proof of the loss, or destruction, and delivery to
this Corporation of a bond which shall be in such form, contain such terms
and provisions, and have such surety or sureties as the officers of this
Corporation may direct.
ARTICLE X
Notice.
Section 1. Notice to Stockholders. Whenever by law or these bylaws
notice is required to be given to any stockholder, such notice may be given
to each stockholder by leaving the same with him or at his residence or usual
place of business, or by mailing it, postage prepaid, and addressed to him
at his address as it appears on the books of the Corporation. Such leaving
or mailing of notice shall be deemed the time of giving such notice.
Section 2. Notice to Directors and Officers. Whenever by law or these
bylaws notice is required to be given to any director or officer, such notice
may be given in any one of the following ways: by personal notice to such
director or officer, by telephone communication with such director or officer
personally, by wire addressed to such director or officer at his then address
or at his address as it appears on the books of the Corporation, or by
depositing the same in writing in the post office or in a letter box in a
post-paid, sealed wrapper addressed to such director or officer at his then
address or at his address as it appears on the books of the Corporation; and
the time when such notice shall be mailed or consigned to a telegraph company
for delivery shall be deemed to be the time of the giving of such notice.
PAGE 14
Section 3. Waiver of Notice. Notice to any stockholder or director of
the time, place and purpose of any meeting of stockholders or directors
required by these bylaws may be dispensed with if such stockholder shall
either attend in person or by proxy, or if such director shall attend in
person, or if such absent stockholder or director shall, in writing filed
with the records of the meeting either before or after the holding thereof,
waive such notice.
ARTICLE XI
Voting of Stock in Other Corporations.
Any stock in other corporations, which may from time to time be held by
the Corporation may be represented and voted at any meeting of stockholders
of such other corporations by the Chairman of the Board, Vice-Chairman of the
Board, President, or a Vice President or by proxy or proxies appointed by any
one of said officers or otherwise pursuant to authorization thereunto given
by a resolution of the Board of Directors adopted by a vote of the majority
of the Directors.
ARTICLE XII
Amendments.
These bylaws may be added to, altered, amended, repealed or suspended
by a majority vote of the entire Board of Directors at any regular meeting
of the Board or at any special meeting called for that purpose. Any action
of the Board of Directors in adding to, altering, amending, repealing or
suspending these bylaws shall be reported to the stockholders at the next
annual meeting and may be changed or rescinded by majority vote of all of the
stock then outstanding and entitled to vote. In no event shall the Board of
Directors have any power to amend this Article.
PAGE 15
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 any Incentive Award due a Participant who dies prior to
receipt of the payment of that award 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
[LOGO]
MERCANTILE BANKSHARES CORPORATION
EMPLOYEE STOCK PURCHASE DIVIDEND REINVESTMENT PLAN
750,000 SHARES OF COMMON STOCK
Dear Associate:
We are pleased to send you our most recent Prospectus which describes
Mercantile Bankshares Corporation's EMPLOYEE STOCK PURCHASE DIVIDEND
REINVESTMENT PLAN (the "Plan").
If you participate in this Plan, payroll deductions will be invested in shares
of Mercantile Bankshares Corporation common stock at the market price. Your
shares will be credited to a special Plan Account where the dividends they
generate will be reinvested. All stock purchased with dividends will be at a
savings to you of 5% off market price. As is more fully explained in this
Prospectus, market price will be the closing price on the Nasdaq National Market
on each stock purchase date or dividend reinvestment date, as the case may be.
Mercantile will pay transaction costs. This Plan is a convenient, economical way
to acquire an ownership interest in Mercantile Bankshares Corporation.
Of course, participation in the Plan is entirely voluntary and you may
participate or withdraw at your option.
The following pages contain details of the Plan. If, after reading them, you
decide to enroll, please sign and return the authorization form. If you are
already enrolled, no action is necessary, but please retain the Prospectus for
reference.
Thank you.
Sincerely yours,
H. Furlong Baldwin, Chairman
Mercantile Bankshares Corporation
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 13, 1995.
1
No person is authorized to give any information or to make any representation
other than those contained or incorporated by reference in this Prospectus in
connection with the offer contained in this Prospectus and, if given or made,
any such information or representation must not be relied upon as having been
authorized by Mercantile Bankshares Corporation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information it contains is correct at any date
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any of the securities to which it
relates in any state or other jurisdiction in which such offer or solicitation
may not lawfully be made.
Table of Contents
Page
The Plan........................................ 3
Purpose....................................... 3
Description of the Plan....................... 3
Participation in the Plan..................... 3
Payroll Deduction............................. 3
Crediting Shares to an Employee's Plan
Account......................................... 4
Holding of Shares in an Employee's Plan
Account -- Certificates......................... 5
Voting Shares Held in an Employee's Plan
Account......................................... 5
Effect of Stock Split, Stock Dividend
or Reclassification........................ 5
Withdrawing from the Plan..................... 5
Plan Administrator/Transfer Agent............. 6
Stock Subject to the Plan..................... 7
Page
Amendment or Termination of the Plan.......... 7
Interpretation and Regulations................ 7
Non-Guarantee of Employment................... 7
Application of Funds.......................... 8
Miscellaneous................................. 8
Other Information
General....................................... 8
Current Federal Income Tax Consequences of
Plan Participation.............................. 8
Creditors' Rights............................. 9
Rights Plan................................... 9
Available Information......................... 9
Experts....................................... 10
This document constitutes Prospectus information covering securities that have
been registered under the Securities Act of 1933 (the "Securities Act").
2
THE PLAN
Mercantile Bankshares Corporation is a Maryland corporation registered in 1969
as a bank holding company under the Bank Holding Company Act.
Its executive offices are located at Two Hopkins Plaza, Baltimore, Maryland
21201. The telephone number is (410) 237-5900.
Purpose
The Employee Stock Purchase Dividend Reinvestment Plan (the "Plan") is
intended to facilitate the purchase of the common stock of Mercantile Bankshares
Corporation, a Maryland corporation (the "Corporation"), by employees of the
Corporation and its affiliates, thereby providing employees with a personal
stake in the Corporation and its affiliates.
Description of the Plan
The Plan allows employees to accumulate funds, through payroll deductions, for
the purchase of the Corporation's common stock. On a date occurring during the
first 10 days of each month (the "purchase date") as determined by The Bank of
New York (the Corporation's stock transfer agent), all funds deducted from an
employee's compensation during the prior month will be used by The Bank of New
York to purchase shares of the Corporation's common stock at the market price on
the purchase date. Such shares will be credited to an individual Plan account
maintained by The Bank of New York for the participating employee. Cash
dividends on stock held in an employee's Plan account and registered in the name
of The Bank of New York, or its nominees, will automatically be reinvested in
additional shares of the Corporation's common stock at a discount of 5% from the
market price of the stock at the time of reinvestment. The Corporation will
absorb all transaction costs associated with the purchase and issuance of stock
under the Plan.
Participation in the Plan
All employees of the Corporation and its affiliates (except for executive
officers of the Corporation and summer and temporary employees of the
Corporation and its affiliates) are eligible to participate in the Plan. As used
in this Plan, the term "affiliate" shall mean each corporation, whether or not a
bank or trust company, substantially all the capital stock of which is directly
or indirectly owned (at the time of any determination of eligibility of
employees) by the Corporation.
Any eligible employee desiring to participate in the Plan must complete a
payroll deduction authorization form and return it to the affiliate that employs
the employee. Participation in the Plan will begin on the first day that amounts
are deducted from an employee's payroll pursuant to a properly submitted payroll
deduction authorization form. Payroll deductions will commence as soon as
practicable after a payroll deduction authorization form is submitted.
Payroll Deduction
A payroll deduction authorization form will authorize a regular payroll
deduction from the employee's pay in the amount specified. The authorization
will remain in effect until a new form is received by the affiliate that employs
the employee or the employee withdraws from the Plan. Payroll deductions may
only be made
3
in $10 multiples with a minimum of $10 and a maximum of $500 per pay period.
All payroll deductions made for an employee may be deposited in the
Corporation's general corporate account or may be credited to a separate account
established for purposes of the Plan, at the discretion of the Corporation. No
interest shall accrue on the payroll deductions of an employee under the Plan.
An employee may increase or decrease the rate of his or her payroll deductions
by completing and filing with the affiliate that employs the
employee a new payroll deduction authorization form. The new form becomes
effective as of
the next succeeding payroll period.
An employee who wishes to discontinue his
or her payroll deduction temporarily or
permanently may do so without withdrawing
from the Plan by sending the affiliate that
employs the employee notice of discontinuing
payroll deductions. With respect to dividend reinvestments, the employee's Plan
account will continue to be maintained by the
Transfer Agent and dividends will continue to be reinvested by the Transfer
Agent until the employee withdraws from the Plan. With respect to stock
purchases with amounts deducted from an employee's payroll, the notice of
discontinuance will become effective in the same manner as a notice of
withdrawal as described on page 5 under the heading "Withdrawing from the Plan".
Crediting Shares to an Employee's Plan Account
An individual Plan account will be maintained for each employee participating
in the Plan by The Bank of New York. Shortly after each stock purchase date,
each employee's Plan account will be credited with additional shares and/or a
fraction of a share. In the case of shares purchased with amounts deducted from
an employee's payroll the number of shares or fraction credited will be
determined by: dividing the amount withheld from an employee's pay pursuant to
the payroll deduction authorization form by the market price per share of the
Corporation's common stock on the purchase date. In the case of reinvestments of
cash dividends, the number of shares or fraction of a share of the Corporation's
common stock credited to each employee's Plan account will be determined by:
dividing the amount of the cash dividend allocable to the shares of common stock
held in the employee's Plan account on the applicable dividend record date by
95% of the market price of the Corporation's common stock on the date selected
as the dividend reinvestment date by the Transfer Agent, which date shall be not
more than 30 days after the dividend payment date. Fractional shares credited to
Plan accounts shall be computed to three decimal places, and dividends paid on
fractional shares will also be reinvested in common stock of the Corporation. No
transaction costs or brokerage fees will be deducted.
The market price of the Corporation's common stock will be the closing price
per share, as reported on the Nasdaq National Market at the close of the market
trading on the stock purchase date or other relevant date. If no closing price
is reported on that date, the market price will be the closing price on the next
preceding day on which there is a reported closing price.
Approximately 30 days following each calendar quarter (i.e. March 31, June 30,
September 30 and December 31) each employee who participates in the Plan will be
sent a statement summarizing the activity in the account for that calendar
quarter and for the year-to-date. Information on the statement
4
will include the amount withheld and the date of such withholding pursuant to
the payroll authorization form for the calendar quarter, the dollar amount of
the dividends invested, the price at which shares were actually acquired, the
number of shares acquired and the total number of shares in the employee's Plan
account. These statements should be retained by the employee for tax purposes.
Holding of Shares in an Employee's Plan Account--Certificates
Shares in an employee's Plan account will be held in the name of The Bank of
New York or its nominees. This facilitates processing and permits ownership of
fractional shares. Upon written request of any employee who has one or more
whole shares of the Corporation's common stock credited to his or her Plan
account, The Bank of New York will issue a stock certificate for such shares to
the employee. Such request may be a request for a particular number of whole
shares or a blanket request covering all whole shares which may be credited to
the employee's Plan account at that time. No certificates for fractional shares
will be issued. Dividends on shares represented by stock certificates issued to
an employee will not be automatically reinvested in the Corporation's common
stock but will be paid to the employee. Of course, an employee who holds stock
registered in his name may elect to participate in the Dividend Reinvestment
Plan maintained by the Corporation for its stockholders generally.
Voting Shares Held in an Employee's Plan Account
Shares held in the employee's Plan account may be voted in person or by proxy
by the employee. Both the number of shares registered in an employee's name and
shares in an employee's Plan account will appear on the proxy sent to each
employee who participates in the Plan.
Effect of Stock Split, Stock Dividend or
Reclassification
If the Corporation should effect a common stock split, issue a stock dividend,
or effect a
reverse stock split or reclassification which would affect the outstanding
common stock of the Corporation, the shares in an employee's Plan account will
be appropriately adjusted.
Withdrawing from the Plan
An employee may withdraw from the Plan at any time by sending the Transfer
Agent written notice of his or her desire to withdraw from the Plan. An employee
will also be deemed to have withdrawn from the Plan if his or her employment is
terminated for any reason. For this purpose, termination of employment shall be
deemed to occur when a participant in the Plan is no longer employed by the
Corporation or any affiliate. Withdrawal from the Plan will be effective as
follows:
a. With respect to the payroll deductions, notice of withdrawal received by
the Transfer Agent at least 10 business days before a scheduled payroll
deduction date will be effective on such payroll deduction date; otherwise,
it will be effective on the next succeeding payroll deduction date. Because
of these time restrictions, employees who terminate employment may have
amounts withheld from their final pay.
b. Any cash accumulated through payroll deductions prior to the termination of
payroll deductions will be invested in common stock of the Corporation on
the stock purchase date immediately following
5
such termination, and no further investments through payroll deduction will
be made.
c. If notice of withdrawal is received by the Transfer Agent at least 10
business days before a dividend record date, it will become effective
immediately with respect to dividends and the next dividend will be paid to
the employee in cash. If notice of withdrawal is received after 10 business
days prior to the dividend record date, that period's dividend may be
reinvested before withdrawal from the Plan becomes effective.
All full shares in a withdrawing employee's Plan account will be registered in
the employee's name and a stock certificate for full shares, plus a check for
any fractional share, will be sent by the Transfer Agent to the employee as
promptly as practical after notice of withdrawal. The amount of the check for a
fractional share will represent the appropriate fraction of the share's market
value on a date within 5 days prior to issuance of the check. There will be no
charge for issuing certificates on the termination of a Plan account.
In the event that the Participant receives a hardship distribution from The
Employees' Thrift Plan of Mercantile Bankshares Corporation and Participating
Affiliates, payroll deductions under this Plan will be suspended for a
twelve-month period commencing with the date of the hardship distribution.
Plan Administrator
Transfer Agent
Certain aspects of the Plan will be administered by Mercantile-Safe Deposit
and Trust Company, a wholly owned affiliate of the Corporation (the "Plan
Administrator"). The address of the Plan Administrator is:
Mercantile-Safe Deposit and Trust Company
Attn: Corporate Secretary
P.O. Box 1477, Baltimore, Maryland 21203
Telephone: (410) 237-5900
The Plan Administrator will have the responsibility for:
-- furnishing employees with payroll deduction authorization forms, when
requested. (Payroll deduction forms must be obtained through the affiliate
for which the employee actually works.)
-- answering questions and general inquiries about the Plan.
Questions relating to these functions should be directed to the Plan
Administrator at the above address.
Certain other administrative aspects of the Plan will be conducted by The Bank
of New York (the "Transfer Agent"). The address of the Transfer Agent is:
The Bank of New York
Mercantile Bankshares Corporation
Employee Stock Purchase Dividend
Reinvestment Plan
P.O. Box 1958
Newark, NJ 07101-9774
(800) 524-4458
The Transfer Agent will have the responsibility for:
-- selecting purchase dates for stock purchased with amounts deducted from a
participant's payroll, selecting purchase
dates for executing purchases with
6
dividends paid to participant's Plan account and coordinating with the
Corporation the issuance of shares of common stock pursuant to the Plan.
-- record keeping of activity of each employee's Plan account and the
preparation and mailing of quarterly statements outlining the activity of
the Plan account for each employee.
-- effecting an employee's withdrawal from the Plan upon his or her written
request or termination of employment.
Questions relating to these functions should be directed to the Transfer Agent
at the above address.
If the payroll deduction authorization form or any instruction furnished to
the Plan Administrator, the employee's employer or the Transfer Agent is
unclear, they may return such form or ignore such instruction without incurring
any liability. Neither the Corporation, the Plan Administrator, the employee's
employer nor the Transfer Agent will be liable for any act done in good faith or
for any good faith omission to act, including, but not limited to, failure to
effect the withdrawal of an employee until it has received written notice that
the employee either desires to voluntarily withdraw from the Plan or the
employee has terminated his or her employment.
Neither the Corporation, the Plan Administrator, the employee's employer nor
the Transfer Agent can assure that employees will receive a profit or will not
suffer a loss on the shares purchased for them under the Plan.
Both The Bank of New York and Mercantile-Safe Deposit and Trust Company were
appointed by the Board of Directors of the Corporation and will continue to
serve in their appointed capacities unless and until replaced by amendment to
the Plan adopted by the Corporation.
Stock Subject to the Plan
Shares to be used in the Plan will be issued from previously authorized but
unissued shares of common stock. The number of shares of common stock currently
reserved for issuance under the Plan is 750,000 shares, which amount is subject
to change by the Corporation.
Amendment or Termination of the Plan
The Corporation reserves the right to amend, modify, suspend or terminate the
Plan at any time at its discretion. Employees who participate in the Plan will
be notified of any change, suspension or termination.
In the event that all the shares to be used in the Plan have been purchased by
participating employees, no additional shares may be purchased under the Plan by
eligible employees until additional shares have been authorized under the Plan
by the Board of Directors of the Corporation.
Interpretation and Regulations
The Corporation reserves the right to interpret and regulate the Plan as it
deems necessary or desirable in connection with the Plan's operations.
Non-Guarantee of Employment
Nothing in this Plan should be construed as a contract of employment between
the Corporation (or an affiliate) and its employees, or as a contractual right
to continue in the employ of the Corporation (or an affiliate) or as a
limitation of the right of the Corporation (or
7
an affiliate) to discharge its employees at any time.
Application of Funds
The net proceeds from sales of stock pursuant to the Plan will be added to the
Corporation's general funds and will be used for general corporate purposes.
Miscellaneous
a. The headings in this Plan are for reference purposes only and shall not
affect the meaning or interpretation of the Plan.
b. This Plan shall be governed by, and construed in accordance with, the laws
of the State of Maryland without regard to any conflict of laws, rules and
principles.
c. All notices and other communications made or given pursuant to this Plan
will be sufficiently made or given if mailed, postage prepaid, addressed to
the employee at the address contained in the records of the Transfer Agent,
the Corporation or an affiliate: to the Corporation, if addressed to the
attention of its Corporate Secretary, at its principal office, Mercantile
Bank and Trust Building, Two Hopkins Plaza, Baltimore, Maryland 21201; to
the Plan Administrator if addressed to the Plan Administrator,
Mercantile-Safe Deposit and Trust Company, Attn: Corporate Secretary, P.O.
Box 1477, Baltimore, Maryland 21203; or to the Transfer Agent if addressed
to the Transfer Agent, The Bank of New York, Mercantile Bankshares
Corporation Employee Stock Purchase Dividend Reinvestment Plan, P.O. Box
1958, Newark, NJ 07101-9774.
OTHER INFORMATION
General
The Plan was adopted by the Corporation's Board of Directors in 1986. The Plan
is not subject to the Employee Retirement Income Security Act of 1974 (ERISA)
and is not qualified under Section 401(a) of the Internal Revenue Code of 1986.
The Plan does not impose any restriction on resale of shares of the
Corporation's common stock acquired by employees under the Plan.
Current Federal Income Tax Consequences of Plan Participation
Through payroll deductions, Plan participants will be purchasing the
Corporation's common stock at its market price. Consequently, Plan participants
will not recognize any income on the purchase of shares pursuant to the Plan
through payroll deductions. The amount paid for the stock will be the tax basis
of the purchased shares for purposes of computing capital gain or loss on any
subsequent disposition.
Plan participants will, however, recognize income with respect to dividends
paid and reinvested, calculated as follows. One hundred percent of the market
value of the common stock purchased with reinvested dividends will constitute
taxable income in the year shares are purchased, regardless of the fact that
these shares are purchased at a 5% discount from market value. The tax basis of
shares purchased with reinvested dividends is the market price per share of the
common stock
8
on the date acquired rather than the discounted price per share.
Each participant should consult his or her own tax or financial advisor as to
the specific federal, state, and local tax consequences of any acquisitions of
common stock under the Plan by such participant.
Creditors' Rights
Stock held under the Plan for a Plan participant may, under some
circumstances, become subject to liens or other preferential rights of creditors
of the participant, depending upon the terms of any agreement between the
creditor and the participant and provisions of applicable law.
Rights Plan
Shares of common stock of the Corporation carry certain rights ("Rights")
which under certain circumstances may become exercisable for the purchase of (or
exchangeable for) preferred stock or common stock of the Corporation, or other
securities, pursuant to the Shareholders Protection Rights Agreement ("Rights
Plan") of the Corporation. In general, these Rights may become exercisable
within ten days after a person or group acquires or makes a tender or exchange
offer to acquire the beneficial ownership of 10% or more of the outstanding
common stock of the Corporation, or at such earlier or later time after such
event as the Board of Directors of the Corporation may determine. Until the
Rights become exercisable, they will not be separable from the common stock and
will automatically trade with the common stock. Further information concerning
the Rights, the Rights Plan and securities issuable pursuant to the Rights Plan
is contained in the documents incorporated by reference herein and listed under
"Available Information".
Available Information
Delivered with or prior to the delivery of this Prospectus is a copy of the
Corporation's latest Annual Report to Stockholders.
Any Plan participant may obtain without charge, upon written or oral request,
the following documents (excluding exhibits) filed by the Corporation with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934 (the "Exchange Act"), which documents are incorporated
herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1993;
2. Quarterly Report on Form 10-Q for the three months ended March 31, 1994;
the six months ended June 30, 1994; and the nine months ended September 30,
1994;
3. Description of Common Stock of the Corporation (and associated Rights)
contained or incorporated in the registration statements filed by the
Corporation under the Exchange Act, including any statements or reports
filed for the purpose of updating such description; and
4. All documents filed by the Corporation with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
date of this Prospectus, which documents shall be deemed to be incorporated
by reference herein from the respective dates of their filing with the
Commission.
Requests for documents should be directed to John A. O'Connor, Jr., Senior
Vice President and Secretary, Two Hopkins Plaza, Baltimore,
9
Maryland 21201, telephone number (410) 237-5900. Unless otherwise specified by
the requesting party, requests for documents incorporated by reference to
Exchange Act filings will be satisfied by the sending or delivery of the
Description of Common Stock (and associated Rights) and the most recently filed
Annual Report on Form 10-K together with documents subsequently filed pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act.
In addition, the Corporation is required to send or deliver to Plan
participants copies of all reports, proxy statements and other communications
distributed to its security holders generally, no later than the time such
material is sent to security holders.
Experts
The consolidated financial statements of Mercantile Bankshares Corporation and
Affiliates for the fiscal year ended December 31, 1993, incorporated by
reference into the Annual Report on Form 10-K of the Corporation for the fiscal
year ended December 31, 1993, have been audited by Coopers & Lybrand L.L.P.,
independent public accountants, as set forth in their report dated January 21,
1994, accompanying such financial statements and have been incorporated herein
by reference in reliance upon the report of such firm, which report is given
upon their authority as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by reference in
the registration statement of which this Prospectus is a part that have been
audited and are the subject of a report by independent public accountants will
be so incorporated by reference in reliance upon such reports and upon the
authority of such firms as experts in accounting and auditing to the extent
covered by consents filed with the Commission.
10
AMENDED AND RESTATED SUPPLEMENTAL
PENSION AGREEMENT
THIS AMENDED AGREEMENT, made in triplicate this 10th
day of February, 1995, by and between Mercantile-Safe Deposit
and Trust Company ("Employer"), Peninsula Bank ("Peninsula"),
Mercantile Bankshares Corporation ("Bankshares") and Hugh W.
Mohler ("Employee"),
WITNESSETH:
WHEREAS, on October 19, 1978, Employee entered into
a supplemental pension agreement with Peninsula (the
"Agreement") whereby Peninsula agreed to pay to Employee, at
Employee's early retirement date or normal retirement date
under what is now known as The Cash Balance Plan for
Employees of Mercantile Bankshares Corporation and
Participating Affiliates (the "Plan"), a monthly pension
equal to the amount Employee would have received under the
Plan had his employment with Peninsula commenced on February
1, 1968, reduced by the amount of Employee's monthly pension
payable under the Plan; and
WHEREAS, Peninsula is an affiliate of Employer; and
WHEREAS, Employee's employment has been transferred
from Peninsula to Employer; and
WHEREAS, Employer desires to assume any and all
rights, obligations and liabilities of Peninsula arising
under the Agreement and to undertake certain other
obligations as provided for hereunder; and
WHEREAS, Peninsula desires to transfer to Employer
any and all rights, obligations, and liabilities it may have
under the Agreement along with any amounts Peninsula may have
accrued to provide for payment of benefits under the
Agreement; and
WHEREAS, Employee desires that said transfer be
effected.
NOW, THEREFORE, THE AGREEMENT IS HEREBY AMENDED AND
RESTATED IN ITS ENTIRETY AS FOLLOWS:
1. Purpose. This Amended Agreement shall constitute a
complete amendment and restatement of the Agreement and the
rights, benefits and interests of the Employee shall be
determined under the provisions of this Amended Agreement.
2. Supplemental Pension. At such time as the Employee
or the Employee's beneficiary designated under the Plan
("Beneficiary") commences the receipt of benefits under the
Plan, Employee, or Employee's Beneficiary in the event of
Employee's death,
PAGE 1
shall be entitled to receive a benefit
under this Amended Agreement calculated in accordance with
the benefit formula contained in the Plan, as amended from
time to time, as if Employee had commenced employment with
Employer on February 1, 1968, and payable in the same form as
elected by the Employee or payable to the Employee's
Beneficiary under the Plan. The benefit payable hereunder as
calculated under the foregoing provisions of this paragraph
shall be reduced dollar for dollar by benefits actually paid
to Employee or the Employee's Beneficiary from the Plan.
3. Supplemental Cash Balance SERP Benefit. The
Employee or, in the event the Employee dies before complete
distribution of the benefits described in this paragraph, the
Employee's beneficiary designated under the Mercantile
Bankshares Corporation and Participating Affiliates
Supplemental Cash Balance Executive Retirement Plan, as
amended from time to time (the "Cash Balance SERP"), shall be
entitled to a Supplemental Cash Balance SERP Benefit under
this Amended Agreement. The amount of this Supplemental Cash
Balance SERP Benefit shall be equal to the aggregate amount
credited to a bookkeeping reserve account, where such
bookkeeping reserve account is credited annually, commencing
with the calendar year beginning January 1, 1994, with an
amount equal to:
(a) the amount that the Employer would have
credited to the Cash Balance SERP as Contribution
Credits (as such term is defined in the Cash Balance
SERP) on behalf of the Employee if such Contribution
Credits had been determined as if the Employee had
commenced employment with the Employer on February 1,
1968 for purposes of calculating the Employee's credits
under the Plan and the Cash Balance SERP; reduced by
(b) the amount that the Employer actually credits
to the Cash Balance SERP on behalf of the Employee as
Contribution Credits for such year.
In addition, the bookkeeping reserve account shall be
credited with Interest Credits (as such term is defined in
the Cash Balance SERP) under the same terms and conditions as
Interest Credits are credited under the Cash Balance SERP.
The aggregate amount credited to the bookkeeping reserve
account shall be paid as a Supplemental Cash Balance SERP
Benefit to the Employee or his beneficiary, at the same time
and in the same manner as benefits from the Cash Balance SERP
are paid to or on behalf of the Employee or his beneficiary.
4. Agreement Not Funded. Effective as of the date of
this Amended Agreement, Peninsula shall transfer to Employer
any amounts accrued by Peninsula to provide for the payment
of benefits to Employee, provided, however, that anything in
this paragraph to the contrary notwithstanding, the Employer
and the Employee agree that any amounts payable under this
Amended Agreement are not funded. The Employer shall not be
required to reserve, or otherwise set aside, physically or
legally, any funds for the payment of its obligations
hereunder. The obligations of the Employer with respect to
PAGE 2
benefits payable hereunder shall be paid out of the
Employer's general assets and shall not be secured by any
form of trust, escrow, evidence of indebtedness or otherwise.
Employee has no property interest, legal or equitable, in any
specific asset of the Employer and has no right greater than,
nor has any preference or priority over, the rights of any
unsecured general creditor of the Employer.
5. No Agreement of Employment. Nothing in this Amended
Agreement shall be deemed to be a contract, guarantee or
condition of employment.
6. Non-Assignability. All rights and benefits under
this Amended Agreement are personal to Employee or his
Beneficiary and shall not be subject to any voluntary or
involuntary alienation, assignment, pledge, transfer or other
disposition.
7. Miscellaneous.
(a) Wherever the term "Plan" appears in this
Amended Agreement, that term shall refer to The Cash Balance
Plan for Employees of Mercantile Bankshares Corporation and
Participating Affiliates, as that Plan shall be amended from
time to time, and any restatement or successor to that Plan,
it being the intent of the parties that the provisions of
that Plan, as amended or restated, or any successor plan, at
the time of Employee's termination of service shall govern.
In the event that the Employer terminates the Plan for any
reason and does not immediately initiate sponsorship of a
successor plan, the benefits under this Amended Agreement
shall be determined with respect to the terms of the
terminated Plan, notwithstanding when such benefits become
payable.
(b) This Amended Agreement shall be governed by
and construed in accordance with the laws of the State of
Maryland, without reference to the principles of conflict of
laws.
(c) This Amended Agreement shall not be amended
or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors, assigns
and legal representatives.
(d) This Amended Agreement shall inure to the
benefit of and be enforceable by Employee's legal
representatives and shall be binding upon Employer and its
successors and assigns.
(e) In the event that the Employer fails to pay
any benefit due under this Amended Agreement, Bankshares
shall be jointly and severally liable for the payment of such
benefit.
IN WITNESS WHEREOF, the Employee has hereunto set his
hand and the proper officers of each of Peninsula, Employer
and Bankshares have caused this Amended
PAGE 3
and Restated Agreement to be executed in the names of Peninsula,
Employer and Bankshares and on their behalf, all as of the day and
year first above written.
WITNESS:
/s/Ruth Nash /s/Hugh W. Mohler
(SEAL)
Hugh W. Mohler
ATTEST: Peninsula Bank
/s/Jerry Briele By:/s/Jeffrey F. Turner
(SEAL)
Jeffrey F. Turner
President and Chief Executive
Officer
ATTEST: Mercantile-Safe
Deposit and Trust Company
/s/John A. O'Connor, Jr. By:/s/H. Furlong Baldwin
(SEAL)
John A. O'Connor, Jr. H. Furlong Baldwin,
Secretary Chairman and Chief
Executive Officer
ATTEST: Mercantile
Bankshares Corporation
/s/John A. O'Connor, Jr. By:/s/H. Furlong Baldwin
(SEAL)
John A. O'Connor, Jr.
H. Furlong Baldwin, Chairman
Secretary
PAGE 4
MERCANTILE BANKSHARES CORPORATION
AND PARTICIPATING AFFILIATES
SUPPLEMENTAL CASH BALANCE EXECUTIVE RETIREMENT PLAN
Effective January 1, 1994
PAGE
MERCANTILE BANKSHARES CORPORATION
AND PARTICIPATING AFFILIATES
SUPPLEMENTAL CASH BALANCE EXECUTIVE RETIREMENT PLAN
Table of Contents
Page
ARTICLE I PURPOSE AND EFFECTIVE DATE 1
1.1 Purpose 1
1.2 Effective Date 1
ARTICLE II DEFINITIONS 2
2.1 Definitions 2
ARTICLE III ELIGIBILITY 4
ARTICLE IV CONTRIBUTION AND INTEREST CREDITS 5
4.1 Accounts 5
4.2 Contribution Credits 5
4.3 Interest Credits 5
4.4 Vesting 6
ARTICLE V PAYMENT OF BENEFITS 7
5.1 Time and Manner of Distributions 7
5.2 Death of Participant After Commencement
of Benefit Payments 7
5.3 Incapacity of Recipient 7
ARTICLE VI FUNDING 8
ARTICLE VII ADMINISTRATION 9
7.1 Administration 9
7.2 Determinations 9
7.3 General 9
PAGE i
Page
ARTICLE VIII CLAIMS PROCEDURE 10
8.1 Claim for Benefits 10
8.2 Notice of Denial 10
8.3 Right to Reconsideration 10
8.4 Review of Documents 10
8.5 Decision by the Administrator 11
8.6 Notice by the Administrator 11
8.7 Committee Review 11
ARTICLE IX AMENDMENT, DISCONTINUANCE, AND TERMINATION 12
ARTICLE X MISCELLANEOUS 13
10.1 Non-Guarantee of Employment 13
10.2 Rights of Participants to Benefits 13
10.3 No Assignment 13
10.4 Withholding 13
10.5 Account Statements 13
10.6 Masculine, Feminine, Singular and Plural 13
10.7 Governing Law 13
10.8 Titles 13
10.9 Other Plans 13
PAGE ii
MERCANTILE BANKSHARES CORPORATION
AND PARTICIPATING AFFILIATES
SUPPLEMENTAL CASH BALANCE EXECUTIVE RETIREMENT PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.1 Purpose. The Plan is intended to provide
deferred compensation for a select group of management or
highly compensated employees of the Employer. The Plan is an
unfunded plan that is not intended to be (i) subject to Parts
2, 3 or 4 of Title I, Subtitle B of the Employee Retirement
Income Security Act of 1974, or (ii) qualified under Section
401(a) of the Internal Revenue Code.
1.2 Effective Date. The effective date for this Plan
shall be January 1, 1994.
PAGE 1
ARTICLE II
DEFINITIONS
2.1 Definitions. As used herein, the following terms
shall have the following meanings:
(a) Account. The bookkeeping reserve account
established and maintained for each Participant pursuant to
Section 4.1 for purposes of determining the amount payable to
the Participant pursuant to Article V.
(b) Administrator. The Employee Benefit
Administration Committee, the members of which shall be
appointed from time to time by the Employee Benefit Committee
of the Board of Directors of the Sponsor, which shall be
responsible for the general administration of the Plan except
as otherwise specified.
(c) Beneficiary. The person(s) or entity(ies)
designated by a Participant to receive Plan benefits in the
event of the Participant's death, such designation to be made
in writing on a form satisfactory to the Administrator and
effective when received by the Administrator. Any such
designation shall be deemed to revoke any and all prior
designations. If the Participant has not designated a
Beneficiary, or if no Beneficiary survives the Participant, the
aggregate amount then credited to the Participant's Account
shall be paid pursuant to Article V to the person or persons in
the first of the following classes of successive preference
Beneficiaries surviving at the death of the Participant: the
Participant's (1) widow or widower, (2) lineal descendants, per
stirpes, (3) parents, (4) estate. The Administrator shall
decide which Beneficiaries, if any, shall have been validly
designated and the Administrator's decision shall be binding
and conclusive on all persons.
(d) Board. The Board of Directors of the
Sponsor or, if the Board so directs, the Employee Benefit
Committee of such Board of Directors acting on behalf of the
Board in the exercise of any and all powers and duties of the
Board pursuant to this Plan.
(e) Cash Balance Plan. The Cash Balance Plan
for Employees of Mercantile Bankshares Corporation and
Participating Affiliates, amended and restated as of January 1,
1991, and as amended from time to time.
(f) Code. The Internal Revenue Code of 1986, as
amended.
(g) Committee. The Employee Benefit Committee
of the Board of Directors of the Sponsor.
PAGE 2
(h) Compensation. Compensation shall mean
Compensation as such term may be defined from time to time in
the Cash Balance Plan for purposes of calculating benefit
accruals thereunder as set forth in Section 1.1(p)(1) of the
Cash Balance Plan or any successor Section; provided, however,
that for purposes of this Plan, Compensation shall include any
amount which would otherwise be deemed to be Compensation under
the Cash Balance Plan but for the fact that it is voluntarily
deferred by the Participant under a nonqualified deferred
compensation agreement or plan. Notwithstanding the foregoing,
Compensation under this Plan shall not be limited by any
monetary denomination specified from time to time by the
Secretary of the Treasury with respect to the application of
Code Sec. 401(a)(17) to qualified retirement plans.
(i) Contribution Credits. Amounts allocated to
the Participant's Account pursuant to Section 4.2.
(j) Employer. The Sponsor, its successors and
assigns, any affiliated corporation or business organization of
the Sponsor, and any organization into which an Employer may be
merged or consolidated or to which all or substantially all of
its assets may be transferred.
(k) Interest Credits. Amounts allocated to the
Participant's Account pursuant to Section 4.3.
(l) Participant. An individual who is eligible
to participate pursuant to Article III.
(m) Plan. The Mercantile Bankshares Corporation
and Participating Affiliates Supplemental Cash Balance
Executive Retirement Plan as set forth herein and as amended
from time to time.
(n) Sponsor. Mercantile Bankshares Corporation
and any successor.
(o) Valuation Date. The last business day of
each calendar year, or such other or additional days as the
Administrator may deem necessary or appropriate.
PAGE 3
ARTICLE III
ELIGIBILITY
All employees of the Employer whose Compensation
payable for services rendered during a calendar year exceeds
$150,000 and who shall be approved by the Committee for
participation shall be eligible to participate in the Plan;
provided, however, that any such employees who have entered
into individual deferred compensation agreements (pursuant to
which such employees voluntarily elect to defer any portion of
their current compensation) with the Employer on or before
January 1, 1994, shall not be eligible to participate in the
Plan (unless or until otherwise determined by the Board).
PAGE 4
ARTICLE IV
CONTRIBUTION AND INTEREST CREDITS
4.1 Accounts. The Administrator shall establish an
Account on behalf of each Participant which shall be credited
or debited, as the case may be, with Contribution Credits
pursuant to Section 4.2, Interest Credits as provided in
Section 4.3, and payments pursuant to Article V. Each such
Account shall consist of such subaccounts as are necessary or
desirable to the Administrator for the convenient
administration of the Plan. The Accounts and subaccounts shall
be bookkeeping reserve accounts only and shall not require
segregation of any funds of the Sponsor or the Employer or
provide any Participant with any rights to any assets of the
Sponsor or the Employer, except, to the extent applicable, as a
general creditor thereof. Neither a Participant nor a
Participant's Beneficiary shall have any right to receive
payment of any amount credited to the Participant's Account
except as expressly provided in Article V of this Plan.
4.2 Contribution Credits.
(a) As of the last day of each calendar year
beginning on or after January 1, 1994, the Account of each
Participant under this Plan shall be credited with Contribution
Credits in an amount equal to the difference between (i) the
aggregate amount credited to the Participant's account under
the Cash Balance Plan for such calendar year pursuant to
Sections 4.2(b) and (c) thereof, and (ii) the aggregate amount
that would have been credited to the Participant's account
under the Cash Balance Plan for such calendar year pursuant to
Sections 4.2(b) and (c) thereof if the provisions of such
Sections 4.2(b) and (c) were applied using the Participant's
Compensation as defined in this Plan.
(b) In the event that a Participant's benefit
payments under the Cash Balance Plan are required to be limited
because of the application of Section 415 of the Code, then, if
such benefit limitation has not already been provided for by
this Plan, an amount equal to the actuarial equivalent of such
benefit limitation shall be added to the Participant's Account
and shall be treated as a Contribution Credit.
4.3 Interest Credits.
(a) As of each Valuation Date (and such other
dates as the Administrator, in its sole and absolute
discretion, may determine), the Account of each Participant
shall be credited with interest (Interest Credits) at the per
annum rate equal to the average of the value of interest rates
on 52-week U.S. Treasury Bills, determined as of the first day
of each calendar month in the preceding calendar year,
compounded annually, with respect to all amounts credited to
the Participant's Account; provided, however, that in no event
PAGE 5
shall the Interest Credits be less than 4% or more than 12% per
annum (compounded annually, as provided above). For purposes
of this Section 4.3, the value of the interest rate on a U.S.
Treasury Bill as of a particular date shall equal the average
auction rate for the week in which the date falls, as reported
in the Federal Reserve Bulletin.
(b) The Interest Credit under this Section 4.3
for any Valuation Date shall be determined prior to crediting a
Participant's Account with any amount determined under Section
4.2 with respect to such calendar year and shall be based on
the balance of the Participant's Account as of the immediately
preceding Valuation Date, with appropriate adjustments for
payments made therefrom since such Valuation Date.
Notwithstanding anything in the Plan to the contrary, in the
event that the balance of a Participant's Account shall be
distributed prior to the last day of a calendar year (as of
which the interest would ordinarily be credited), the Interest
Credit otherwise allocable to such Participant's Account for
such year shall be prorated, based upon the number of complete
calendar months which have elapsed from the first day of such
calendar year to the date of distribution.
4.4 Vesting. Each Participant shall be at all times
fully vested in and have a nonforfeitable right to the
aggregate amount credited to the Participant's Account.
PAGE 6
ARTICLE V
PAYMENT OF BENEFITS
5.1 Time and Manner of Distributions. Upon the
earlier of a Participant's termination of employment or death,
the Administrator shall commence payment of the Participant's
Account to the Participant or the Participant's Beneficiary, as
applicable, as soon as practicable thereafter; provided,
however, that the Committee may determine in its sole and
absolute discretion to delay payment commencement to any
Participant if necessary to avoid application of the deduction
limitation of Section 162(m) of the Code to the Employer. All
distributions shall be based on the value of a Participant's
Account measured as of the Valuation Date immediately preceding
the date of distribution. The form of distribution shall be
determined in the sole and absolute discretion of the
Administrator and shall either be in the form of a single-sum
payment or in substantially equal annual installments (adjusted
periodically to reflect interest credited on the Participant's
Account pursuant to Section 4.3) over a period of time, not to
exceed ten years. In the event that the Participant's Account
is distributed in installments, the Administrator may in its
sole and absolute discretion at any point in time during the
payout period pay the remaining balance of the Participant's
Account in a single-sum payment.
5.2 Death of Participant After Commencement of
Benefit Payments. In the event that a Participant dies after
the commencement of benefit payments and prior to the
Participant having received 100% of the value of the
Participant's Account, the balance of the Participant's Account
shall be paid to the Participant's Beneficiary in accordance
with the method of distribution already in effect, subject to
the sole and absolute discretion of the Administrator to pay
the remaining balance of the Participant's Account to the
Beneficiary in a single-sum payment.
5.3 Incapacity of Recipient. If any person entitled
to a distribution under this Plan is deemed by the
Administrator to be incapable of personally receiving and
giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed
guardian or other legal representative of such person, the
Administrator may provide for such payment or any part thereof
to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such
person. Any such payment shall be a payment for the account of
such person and a complete discharge of any liability of the
Sponsor, the Employer and the Plan therefor.
PAGE 7
ARTICLE VI
FUNDING
The obligations of the Employer to pay benefits under
this Plan shall be interpreted solely as an unfunded, but
binding, contractual obligation of the Employer to pay only
those amounts credited to the Participant's Account pursuant to
Article IV in the manner and under the conditions prescribed in
Article V. Any assets set aside, including any assets
transferred to a rabbi trust or purchased by the Employer with
respect to amounts payable under the Plan, shall be subject to
the claims of the Employer's general creditors, and no person
other than the Employer shall, by virtue of the provisions of
the Plan, have any interest in such assets.
PAGE 8
ARTICLE VII
ADMINISTRATION
7.1 Administration. Except as otherwise provided
herein, the Plan shall be administered by the Administrator.
The Administrator shall be the named fiduciary for purposes of
the claims procedure pursuant to Article VIII only and shall,
except as the Committee may otherwise determine, have authority
to act to the full extent of its absolute discretion to:
(a) Interpret the Plan;
(b) Resolve and determine all disputes or
questions arising under the Plan, including the power to
determine the rights of Participants and Beneficiaries, and
their respective benefits, and to remedy any ambiguities,
inconsistencies or omissions in the Plan;
(c) Create and revise rules and procedures for
the administration of the Plan and prescribe such forms as may
be required for Participants to make elections under, and
otherwise participate in, the Plan; and
(d) Take any other actions and make any other
determinations as it may deem necessary and proper for the
administration of the Plan.
Any expenses incurred in the administration of the Plan shall
be paid by the Sponsor or the Employer.
7.2 Determinations. Except as the Committee may
otherwise determine (and subject to the claims procedure set
forth in Article VIII), all decisions and determinations by the
Administrator shall be final and binding upon all Participants
and Beneficiaries.
7.3 General. No member of the Administrator or of
the Committee shall participate in any matter involving any
questions relating solely to his own participation or benefits
under this Plan. The Administrator and the Committee shall be
entitled to rely conclusively upon, and shall be fully
protected in any action or omission taken by it in good faith
reliance upon, the advice or opinion of any persons, firms or
agents retained by it, including but not limited to
accountants, actuaries, counsel and other specialists. Nothing
in this Plan shall preclude the Sponsor or any Employer from
indemnifying the members of the Administrator and of the
Committee for all actions under this Plan, or from purchasing
liability insurance to protect such persons with respect to the
Plan.
PAGE 9
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim for Benefits. Each person eligible for a
benefit under the Plan shall apply for such benefit by filing a
claim with the Administrator on a form or forms prescribed by
the Administrator. If no form or forms have been prescribed, a
claim for benefits shall be made in writing to the
Administrator setting forth the basis for the claim. Each
person making a claim for benefits shall furnish the
Administrator with such documents, evidence, data, or
information in support of such claim as the Administrator
considers necessary or desirable.
8.2 Notice of Denial. If a claim for benefits under
this Plan is denied, either in whole or in part, the
Administrator shall advise the claimant in writing of the
amount of his benefit, if any, and the specific reasons for the
denial. The Administrator shall also furnish the claimant at
that time with a written notice containing:
(a) A specific reference to pertinent Plan
provisions;
(b) A description of any additional material or
information necessary for the claimant to perfect his claim, if
possible, and an explanation of why such material or
information is needed; and
(c) An explanation of the Plan's claim review
procedure.
The written notice of claim denial shall be provided to the
claimant within a reasonable period of time, but not more than
ninety days after receipt of the claim by the Administrator,
unless special circumstances require an extension of time for
processing the claim, in which case the Administrator shall
provide a written notice of such extension to the claimant
before the expiration of the initial ninety day period. In no
event shall such extension exceed ninety days from the end of
such initial period.
8.3 Right to Reconsideration. Within sixty days of
receipt of the information described in Section 8.2 above, the
claimant shall, if he desires further review, file a written
request for reconsideration with the Administrator.
8.4 Review of Documents. So long as the claimant's
request for review is pending (including the sixty day period
described in Section 8.3 above), the claimant or his duly
authorized representative may review pertinent Plan documents
(and any pertinent related documents) and may submit issues and
comments in writing to the Administrator.
PAGE 10
8.5 Decision by the Administrator. Subject to
Section 8.7, a final and binding decision shall be made by the
Administrator within sixty days of the filing by the claimant
of his request for reconsideration; provided, however, that if
the Administrator, in its discretion, feels that a hearing with
the claimant or his representative present is necessary or
desirable, this period shall be extended an additional sixty
days.
8.6 Notice by the Administrator. The Administrator's
decision shall be conveyed to the claimant in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific
references to the pertinent Plan provisions on which the
decision is based.
8.7 Committee Review. Anything in this Plan to the
contrary notwithstanding, the Committee may determine, in its
sole and absolute discretion, to review any claim for benefits
submitted by a claimant under this Plan.
PAGE 11
ARTICLE IX
AMENDMENT, DISCONTINUANCE, AND TERMINATION
The Committee retains the right to modify or amend the
Plan at any time and from time to time, and the Board retains
the right to discontinue or terminate the Plan at any time and
from time to time; provided, however, that no modification,
amendment, discontinuance or termination shall adversely affect
the rights of Participants to receive in accordance with the
Plan amounts credited to the Accounts maintained on their
behalf before such modification, amendment, discontinuance or
termination. Notice of every such modification, amendment,
discontinuance or termination shall be given in writing to each
Participant. In the case of termination of the Plan, any
amounts credited to the Account of a Participant may, in the
sole discretion of the Committee, be distributed in full to
such Participant as soon as reasonably practicable following
such termination.
PAGE 12
ARTICLE X
MISCELLANEOUS
10.1 Non-Guarantee of Employment. Participation in
the Plan does not give any person any right to be retained in
the service of the Employer. The right and power of the
Employer to terminate any employee is expressly reserved.
10.2 Rights of Participants to Benefits. All rights
of a Participant under the Plan to amounts credited to the
Participant's Account are unsecured contractual rights of the
Participant against the Employer. Each Employer shall be
primarily responsible for payment of benefits hereunder to the
Participants it employs and the Beneficiaries of such
Participants. In the event an Employer fails to pay such
benefits for any reason, the Sponsor shall be jointly and
severally liable for the payment of such benefits.
10.3 No Assignment. No rights or benefits under the
Plan nor amounts credited to Accounts shall be subject in any
way to voluntary or involuntary alienation, sale, transfer,
assignment, pledge, attachment, garnishment, execution, or
encumbrance, and any attempt to accomplish the same shall be
void.
10.4 Withholding. The Employer shall have the right
to deduct from any payment made hereunder any taxes required by
law to be withheld from a Participant with respect to such
payment.
10.5 Account Statements. Periodically (as determined
by the Administrator), each Participant shall receive a
statement indicating the amounts credited to and payable from
the Participant's Account.
10.6 Masculine, Feminine, Singular and Plural. The
masculine shall be read in the feminine, the singular in the
plural, and vice versa, whenever the context shall so require.
10.7 Governing Law. Except to the extent preempted
by applicable Federal laws, the Plan shall be construed
according to the laws of the State of Maryland, other than its
conflict of laws principles.
10.8 Titles. The titles to Articles and Sections in
this Plan are placed herein for convenience of reference only,
and the Plan is not to be construed by reference thereto.
10.9 Other Plans. Nothing in this Plan shall be
construed to affect the rights of a Participant, Participant's
beneficiaries, or Participant's estate to receive any
retirement or death benefit under any tax-qualified or
nonqualified pension plan, deferred compensation agreement,
insurance agreement or other retirement plan of the Sponsor or
the Employer.
PAGE 13
This Plan was adopted by the Board of Directors of
Mercantile Bankshares Corporation on the 27th day of April,
1994, and is hereby executed on behalf of the Sponsor this 27th
day of April, 1994.
WITNESS: MERCANTILE BANKSHARES
CORPORATION
/s/John A. O'Connor, Jr. By:/s/Douglas W. Dodge
Secretary
[Corporate Seal] Title: Vice Chairman of the
Board
PAGE 14
MERCANTILE BANKSHARES CORPORATION
AND PARTICIPATING AFFILIATES
SUPPLEMENTAL 401(k) EXECUTIVE RETIREMENT PLAN
Effective January 1, 1995
PAGE
MERCANTILE BANKSHARES CORPORATION
AND PARTICIPATING AFFILIATES
SUPPLEMENTAL 401(k) EXECUTIVE RETIREMENT PLAN
Table of Contents
Page
ARTICLE I PURPOSE AND EFFECTIVE DATE 1
1.1 Purpose 1
1.2 Effective Date 1
ARTICLE II DEFINITIONS 2
2.1 Definitions 2
ARTICLE III ELIGIBILITY 4
3.1 Eligibility to Participate 4
ARTICLE IV CONTRIBUTIONS, INTEREST CREDITS
AND VESTING 5
4.1 Accounts 5
4.2 Basic Contributions 5
4.3 Interest Credits 5
4.4 Vesting 6
ARTICLE V PAYMENT OF BENEFITS 7
5.1 Time and Manner of Distributions 7
5.2 Incapacity of Recipient 7
ARTICLE VI FUNDING 8
ARTICLE VII ADMINISTRATION 9
7.1 Administration 9
7.2 Determinations 9
7.3 General 9
PAGE i
Page
ARTICLE VIII CLAIMS PROCEDURE 10
8.1 Claim for Benefits 10
8.2 Notice of Denial 10
8.3 Right to Reconsideration 10
8.4 Review of Documents 10
8.5 Decision by the Administrator 11
8.6 Notice by the Administrator 11
8.7 Committee Review 11
ARTICLE IX AMENDMENT, DISCONTINUANCE, AND TERMINATION 12
ARTICLE X MISCELLANEOUS 13
10.1 Non-Guarantee of Employment 13
10.2 Rights of Participants to Benefits 13
10.3 No Assignment 13
10.4 Withholding 13
10.5 Account Statements 13
10.6 Masculine, Feminine, Singular and Plural 13
10.7 Governing Law 13
10.8 Titles 13
10.9 Other Plans 13
EXHIBIT A 15
PAGE ii
MERCANTILE BANKSHARES CORPORATION
AND PARTICIPATING AFFILIATES
SUPPLEMENTAL 401(k) EXECUTIVE RETIREMENT PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.1 Purpose. The Plan is intended to provide
deferred compensation for a select group of management or
highly compensated employees of the Employer. The Plan is an
unfunded plan that is not intended to be (i) subject to Parts
2, 3 or 4 of Title I, Subtitle B of the Employee Retirement
Income Security Act of 1974, or (ii) qualified under Section
401(a) of the Internal Revenue Code.
1.2 Effective Date. The effective date for this Plan
shall be January 1, 1995.
PAGE 1
ARTICLE II
DEFINITIONS
2.1 Definitions. As used herein, the following terms
shall have the following meanings:
(a) Account. The bookkeeping reserve account
established and maintained for each Participant pursuant to
Section 4.1 for purposes of determining the amount payable to
the Participant pursuant to Article V.
(b) Administrator. The Employee Benefit
Administration Committee, the members of which shall be
appointed from time to time by the Employee Benefit Committee
of the Board of Directors of the Sponsor, which shall be
responsible for the general administration of the Plan except
as otherwise specified.
(c) Basic Contributions. Amounts credited to
the Participant's Account pursuant to Section 4.2.
(d) Beneficiary. The person(s) or entity(ies)
designated by a Participant to receive Plan benefits in the
event of the Participant's death, such designation to be made
in writing on a form satisfactory to the Administrator and
effective when received by the Administrator. Any such
designation shall be deemed to revoke any and all prior
designations. If the Participant has not designated a
Beneficiary, or if no Beneficiary survives the Participant, the
aggregate amount then credited to the Participant's Account
shall be paid pursuant to Article V to the person or persons in
the first of the following classes of successive preference
Beneficiaries surviving at the death of the Participant: the
Participant's (1) widow or widower, (2) lineal descendants, per
stirpes, (3) parents, (4) estate. The Administrator shall
decide which Beneficiaries, if any, shall have been validly
designated and the Administrator's decision shall be binding
and conclusive on all persons.
(e) Board. The Board of Directors of the
Sponsor or, if the Board so directs, the Employee Benefit
Committee of such Board of Directors acting on behalf of the
Board in the exercise of any and all powers and duties of the
Board pursuant to this Plan.
(f) Code. The Internal Revenue Code of 1986, as
amended.
(g) Committee. The Employee Benefit Committee
of the Board of Directors of the Sponsor.
PAGE 2
(h) Compensation. Compensation shall mean
Compensation as such term may be defined from time to time in
the Thrift Plan for purposes of calculating contributions
thereunder as set forth in Section 1.1(o)(1) of the Thrift Plan
or any successor Section (See Exhibit A); provided, however,
that for purposes of this Plan, Compensation shall include any
amount which would otherwise be deemed to be Compensation under
the Thrift Plan but for the fact that it is voluntarily
deferred by the Participant under a nonqualified deferred
compensation agreement or plan. Notwithstanding the foregoing,
Compensation under this Plan shall not be limited by any
monetary denomination specified from time to time by the
Secretary of the Treasury with respect to the application of
Code Sec. 401(a)(17) to qualified retirement plans.
(i) Employer. The Sponsor, its successors and
assigns, any affiliated corporation or business organization of
the Sponsor, and any organization into which an Employer may be
merged or consolidated or to which all or substantially all of
its assets may be transferred.
(j) Interest Credits. Amounts credited to the
Participant's Account pursuant to Section 4.3.
(k) Participant. An individual who is eligible
to participate pursuant to Article III.
(l) Plan. The Mercantile Bankshares Corporation
And Participating Affiliates Supplemental 401(k) Executive
Retirement Plan as set forth herein and as amended from time to
time.
(m) Sponsor. Mercantile Bankshares Corporation
and any successor.
(n) Thrift Plan. The Employees' Thrift Plan Of
Mercantile Bankshares Corporation And Participating Affiliates,
amended and restated as of January 1, 1989, and as amended from
time to time.
(o) Valuation Date. The last business day of
each calendar year, or such other or additional days as the
Administrator may deem necessary or appropriate.
(p) Year of Service. Year of Service shall mean
Year of Service as such term may be defined from time to time
in the Thrift Plan for purposes of determining eligibility
thereunder as set forth in Section 1.1(tt) of the Thrift Plan
or any successor Section.
PAGE 3
ARTICLE III
ELIGIBILITY
3.1 Eligibility to Participate.
(a) Initial Eligibility. All employees of the
Employer who satisfy all of the following eligibility criteria:
(1) have the title of vice president or a
more senior position, and
(2) have Compensation payable for services
rendered during the calendar year in excess of
$150,000 (as indexed by the Secretary of the Treasury
pursuant to Code Sec. 401(a)(17)(B)), and
(3) have completed one Year of Service (or
other period of service as may be determined from time
to time in the discretion of the Committee, which
discretion may be exercised with respect to individual
employees without affecting the eligibility criteria
for other employees), and
(4) have been approved by the Committee for
participation,
shall be eligible to participate in the Plan; provided,
however, that any such employees who have entered into
individual deferred compensation agreements (pursuant to which
such employees voluntarily elect to defer any portion of their
current compensation) with the Employer on or before January 1,
1994, shall not be eligible to participate in the Plan (unless
or until otherwise determined by the Board).
(b) Continued Participation. A Participant's
participation in the Plan shall continue until the Participant
terminates services as an employee for all Employers under the
Plan, unless such participation is sooner terminated in the
discretion of the Committee.
PAGE 4
ARTICLE IV
CONTRIBUTIONS, INTEREST CREDITS AND VESTING
4.1 Accounts. The Administrator shall establish an
Account on behalf of each Participant which shall be credited
or debited, as the case may be, with Basic Contributions
pursuant to Section 4.2, Interest Credits pursuant to Section
4.3, and payments pursuant to Article V. Each such Account
shall consist of such subaccounts as are necessary or desirable
to the Administrator for the convenient administration of the
Plan. The Accounts and subaccounts shall be bookkeeping
reserve accounts only and shall not require segregation of any
funds of the Sponsor or the Employer or provide any Participant
with any rights to any assets of the Sponsor or the Employer,
except, to the extent applicable, as a general creditor
thereof. Neither a Participant nor a Participant's Beneficiary
shall have any right to receive payment of any amount credited
to the Participant's Account except as expressly provided in
Article V of this Plan.
4.2 Basic Contributions.
(a) In General. As of the last business day of
each calendar year beginning on or after January 1, 1995, the
Account of each eligible Participant under this Plan shall be
credited with Basic Contributions in an amount equal to 3% (or
such other percentage as may be determined from time to time in
the discretion of the Committee with respect to all eligible
Participants collectively) of that portion of the Participant's
Compensation for such calendar year that exceeds $150,000 (as
indexed by the Secretary of the Treasury pursuant to Code
Sec. 401(a)(17)(B)). Subject to the provisions of Article IX,
Basic Contributions shall be credited to each eligible
Participant's Account each calendar year regardless of whether
such Participant is employed by the Employer on the last day of
such calendar year.
(b) Opening Account Balance. Each employee
eligible to participate in this Plan on January 1, 1995, shall
have Basic Contributions credited to his Account as of January
1, 1995, equal to 3% of that portion of the Participant's 1994
Compensation that exceeded $150,000.
4.3 Interest Credits. As of each Valuation Date (and
such other dates as the Administrator, in its discretion, may
determine), the Account of each Participant shall be credited
with interest (Interest Credits) at the per annum rate of 5%,
with respect to all amounts credited to the Participant's
Account. The Interest Credit under this Section 4.3 for any
Valuation Date shall be determined prior to crediting a
Participant's Account with any amount determined under Section
PAGE 5
4.2 with respect to such calendar year and shall be based on
the balance of the Participant's Account as of the immediately
preceding Valuation Date, with appropriate adjustments for
payments made therefrom since such Valuation Date.
Notwithstanding anything in the Plan to the contrary, in the
event that the balance of a Participant's Account shall be
distributed prior to the last day of a calendar year (as of
which the interest would ordinarily be credited), the Interest
Credit otherwise allocable to such Participant's Account for
such year shall be prorated, based upon the number of complete
calendar months which have elapsed from the first day of such
calendar year to the date of distribution.
4.4 Vesting. Each Participant shall be at all times
fully vested in and have a nonforfeitable right to the
aggregate amount credited to the Participant's Account.
PAGE 6
ARTICLE V
PAYMENT OF BENEFITS
5.1 Time and Manner of Distributions. Upon the
earlier of a Participant's termination of employment or death,
the Administrator shall distribute in a single-sum payment to
the Participant or the Participant's Beneficiary, as
applicable, as soon as practicable thereafter an amount equal
to the aggregate amount credited to the Participant's Account
under the Plan; provided, however, that the Committee may
determine in its sole and absolute discretion to delay
distribution to any Participant if necessary to avoid
application of the deduction limitation of Code Sec. 162(m) to the
Employer. All distributions shall be based on the value of a
Participant's Account measured as of the Valuation Date
immediately preceding the date of distribution.
5.2 Incapacity of Recipient. If any person entitled
to a distribution under this Plan is deemed by the
Administrator to be incapable of personally receiving and
giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed
guardian or other legal representative of such person, the
Administrator may provide for such payment or any part thereof
to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such
person. Any such payment shall be a payment for the account of
such person and a complete discharge of any liability of the
Sponsor, the Employer and the Plan therefor.
PAGE 7
ARTICLE VI
FUNDING
The obligations of the Employer to pay benefits under
this Plan shall be interpreted solely as an unfunded, but
binding, contractual obligation of the Employer to pay only
those amounts credited to the Participant's Account pursuant to
Article IV in the manner and under the conditions prescribed in
Article V. Any assets set aside, including any assets
transferred to a rabbi trust or purchased by the Employer with
respect to amounts payable under the Plan, shall be subject to
the claims of the Employer's general creditors, and no person
other than the Employer shall, by virtue of the provisions of
the Plan, have any interest in such assets.
PAGE 8
ARTICLE VII
ADMINISTRATION
7.1 Administration. Except as otherwise provided
herein, the Plan shall be administered by the Administrator.
The Administrator shall be the named fiduciary for purposes of
the claims procedure pursuant to Article VIII only and shall,
except as the Committee may otherwise determine, have authority
to act to the full extent of its absolute discretion to:
(a) interpret the Plan, including any
ambiguities therein;
(b) resolve and determine all disputes or
questions arising under the Plan, including the power to
determine the rights of Participants and Beneficiaries, and
their respective benefits, and to remedy any ambiguities,
inconsistencies or omissions in the Plan;
(c) create and revise rules and procedures for
the administration of the Plan and prescribe such forms as may
be required for Participants to make elections under, and
otherwise participate in, the Plan; and
(d) take any other actions and make any other
determinations as it may deem necessary and proper for the
administration of the Plan.
Any expenses incurred in the administration of the Plan shall
be paid by the Sponsor or the Employer.
7.2 Determinations. Except as the Committee may
otherwise determine (and subject to the claims procedure set
forth in Article VIII), all decisions and determinations by the
Administrator shall be final and binding upon all Participants
and Beneficiaries.
7.3 General. No member of the Administrator or of
the Committee shall participate in any matter involving any
questions relating solely to such member's own participation or
benefits under this Plan. The Administrator and the Committee
shall be entitled to rely conclusively upon, and shall be fully
protected in any action or omission taken by it in good faith
reliance upon, the advice or opinion of any persons, firms or
agents retained by it, including but not limited to
accountants, actuaries, counsel and other specialists. Nothing
in this Plan shall preclude the Sponsor or any Employer from
indemnifying the members of the Administrator and of the
Committee for all actions under this Plan, or from purchasing
liability insurance to protect such persons with respect to the
Plan.
PAGE 9
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim for Benefits. Each person eligible for a
benefit under the Plan shall apply for such benefit by filing a
claim with the Administrator on a form or forms prescribed by
the Administrator. If no form or forms have been prescribed, a
claim for benefits shall be made in writing to the
Administrator setting forth the basis for the claim. Each
person making a claim for benefits shall furnish the
Administrator with such documents, evidence, data, or
information in support of such claim as the Administrator
considers necessary or desirable.
8.2 Notice of Denial. If a claim for benefits under
this Plan is denied, either in whole or in part, the
Administrator shall advise the claimant in writing of the
amount of the claimant's benefit, if any, and the specific
reasons for the denial. The Administrator shall also furnish
the claimant at that time with a written notice containing:
(a) a specific reference to pertinent Plan
provisions;
(b) a description of any additional material or
information necessary for the claimant to perfect the claim, if
possible, and an explanation of why such material or
information is needed; and
(c) an explanation of the Plan's claim review
procedure.
The written notice of claim denial shall be provided to the
claimant within a reasonable period of time, but not more than
90 days after receipt of the claim by the Administrator, unless
special circumstances require an extension of time for
processing the claim, in which case the Administrator shall
provide a written notice of such extension to the claimant
before the expiration of the initial 90-day period. In no
event shall such extension exceed 90 days from the end of such
initial period.
8.3 Right to Reconsideration. Within 60 days of
receipt of the information described in Section 8.2 above, the
claimant shall, if the claimant desires further review, file a
written request for reconsideration with the Administrator.
8.4 Review of Documents. So long as the claimant's
request for review is pending (including the 60-day period
described in Section 8.3 above), the claimant or the claimant's
duly authorized representative may review pertinent Plan
PAGE 10
documents (and any pertinent related documents) and may submit
issues and comments in writing to the Administrator.
8.5 Decision by the Administrator. Subject to
Section 8.7, a final and binding decision shall be made by the
Administrator within 60 days of the filing by the claimant of
the request for reconsideration; provided, however, that if the
Administrator, in its discretion, feels that a hearing with the
claimant or the claimant's representative present is necessary
or desirable, this period shall be extended an additional 60
days.
8.6 Notice by the Administrator. The Administrator's
decision shall be conveyed to the claimant in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific
references to the pertinent Plan provisions on which the
decision is based.
8.7 Committee Review. Anything in this Plan to the
contrary notwithstanding, the Committee may determine, in its
sole and absolute discretion, to review any claim for benefits
submitted by a claimant under this Plan.
PAGE 11
ARTICLE IX
AMENDMENT, DISCONTINUANCE, AND TERMINATION
The Committee retains the right to modify or amend the
Plan at any time and from time to time, and the Board retains
the right to discontinue or terminate the Plan at any time and
from time to time; provided, however, that no modification,
amendment, discontinuance or termination shall adversely affect
the rights of Participants to receive in accordance with the
Plan amounts credited to the Accounts maintained on their
behalf before such modification, amendment, discontinuance or
termination. Notice of every such modification, amendment,
discontinuance or termination shall be given in writing to each
Participant. In the case of termination of the Plan, any
amounts credited to the Account of a Participant may, in the
sole discretion of the Committee, be distributed in full to
such Participant as soon as reasonably practicable following
such termination.
PAGE 12
ARTICLE X
MISCELLANEOUS
10.1 Non-Guarantee of Employment. Participation in
the Plan does not give any person any right to be retained in
the service of the Employer. The right and power of the
Employer to terminate any employee is expressly reserved.
10.2 Rights of Participants to Benefits. All rights
of a Participant under the Plan to amounts credited to the
Participant's Account are unsecured contractual rights of the
Participant against the Employer. Each Employer shall be
primarily responsible for payment of benefits hereunder to the
Participants it employs and the Beneficiaries of such
Participants. In the event an Employer fails to pay such
benefits for any reason, the Sponsor shall be jointly and
severally liable for the payment of such benefits.
10.3 No Assignment. No rights or benefits under the
Plan nor amounts credited to Accounts shall be subject in any
way to voluntary or involuntary alienation, sale, transfer,
assignment, pledge, attachment, garnishment, execution, or
encumbrance, and any attempt to accomplish the same shall be
void.
10.4 Withholding. The Employer shall have the right
to deduct from any payment made hereunder any taxes required by
law to be withheld from a Participant with respect to such
payment.
10.5 Account Statements. Periodically (as determined
by the Administrator), each Participant shall receive a
statement indicating the amounts credited to and payable from
the Participant's Account.
10.6 Masculine, Feminine, Singular and Plural. The
masculine shall be read in the feminine, the singular in the
plural, and vice versa, whenever the context shall so require.
10.7 Governing Law. Except to the extent preempted
by applicable Federal laws, the Plan shall be construed
according to the laws of the State of Maryland, other than its
conflict of laws principles.
10.8 Titles. The titles to Articles and Sections in
this Plan are placed herein for convenience of reference only,
and the Plan is not to be construed by reference thereto.
10.9 Other Plans. Nothing in this Plan shall be
construed to affect the rights of a Participant, Participant's
beneficiaries, or Participant's estate to receive any
PAGE 13
retirement or death benefit under any tax-qualified or
nonqualified pension plan, deferred compensation agreement,
insurance agreement or other retirement plan of the Sponsor or
the Employer.
This Plan was adopted by the Board of Directors of
Mercantile Bankshares Corporation on the 13th day of December,
1994, and is hereby executed on behalf of the Sponsor this 13th
day of December, 1994.
ATTEST: MERCANTILE BANKSHARES
CORPORATION
/s/John A. O'Connor, Jr. By:/s/Edward K. Dunn, Jr.
Secretary
[Seal] Title: President
PAGE 14
EXHIBIT A
The definition of Compensation as set forth in this
Plan cross references to the definition of Compensation as it
appears from time to time under the Employees' Thrift Plan Of
Mercantile Bankshares Corporation And Participating Affiliates
("Thrift Plan"). The definition of Compensation under the
Thrift Plan, as set forth in Section 1.1(o)(1) thereof, in
effect on January 1, 1995, is as follows:
(o) "Compensation" shall mean an Employee's pay determined
as follows:
(1) . . ., Compensation shall mean the total
remuneration received by an Employee from the Employer
during a Plan Year for personal services rendered, and
currently includible in his gross income for income tax
purposes, including base salary, overtime, bonuses and
other extra compensation. Notwithstanding the foregoing,
Compensation shall not include (A) contributions, credits
or benefits paid or accrued under this Plan or any other
qualified or nonqualified retirement plan, deferred
compensation plan, stock-related plan, welfare benefit plan
or fringe benefit plan of the Employer, (B) any lump sum
settlement payments with respect to any employment
agreement under rules uniformly applicable to all Employees
similarly situated, (C) compensation (whether in cash,
stock or otherwise) resulting from the grant, exercise or
cancellation of or election, vesting, or lapse of
restrictions with respect to stock awards, stock options,
stock appreciation rights or disposition of the underlying
stock, (D) payments under any individual contractual
arrangement for deferred compensation unless such contract
otherwise provides, or (E) direct reimbursement for
expenses. In all cases, however, notwithstanding any
exclusions specified above, Compensation shall include any
amount which would otherwise be deemed Compensation under
this Section 1.1(o)(1) but for the fact that it is deferred
under a salary reduction agreement under this Plan or any
plan described in Section 401(k), 402(h) or 125 of the Code.
This definition of Compensation is included in this
Exhibit A for convenience of reference only. Insofar as the
definition of Compensation under the Thrift Plan is modified
from time to time, such modification shall be effective with
respect to this Plan at the same time and shall supersede the
definition set forth in this Exhibit A.
PAGE 15
(The following information appears on the front cover of the Annual Report
to Shareholders)
1994
MERCANTILE BANKSHARES CORPORATION
Annual Report
[LOGO] MERCANTILE BANKSHARES CORPORATION
(The following information appears on the inside front cover of the Annual
Report to Shareholders)
Mercantile Bankshares Corporation is
A Family of Community Banks
What is a community bank?
A community bank retains its identity and historic community ties.
Customer-related decisions are made locally.
Deposits are gathered in the community and reinvested in the community.
Bank Directors are local people who understand community needs.
The bank is managed by citizens who live and work in the community.
What are the customer benefits of a community bank relationship?
Our customers count on us for personalized, knowledgeable service.
They trust us to respond to their particular question or problem.
Lending decisions are made promptly and on the basis of local knowledge.
Our whole approach is different from the standardized responses and products
developed in distant cities by large national organizations.
To whom does the community bank lend? to local businesses such as: hardware
stores . medical and dental practices . farmers . nursing homes . marinas .
trucking companies . commercial watermen . automobile dealerships .
grocery stores . sawmills . gas stations . building supply companies .
contractors - to individuals for: home improvement . purchasing automobiles,
recreational vehicles, boats, aircraft . home ownership . academic tuition .
personal lines of credit - to local civic institutions such as: day care
centers . churches . fire departments . community hospitals . historic
preservation societies . nonprofit providers of low cost home construction
and rehabilitation. What are the benefits of affiliation with Mercantile
Bankshares? Customers can take advantage of the more specialized corporate
banking and trust services provided by the largest affiliate, Mercantile-Safe
Deposit & Trust Company. In addition, customers enjoy the combined benefits
and strength of a major banking organization. What is the importance to the
community-at-large of its community bank? A strong civic structure requires
the on-going volunteer and charitable support of people who have long-term
connections to their community. The staff and boards of our community banks,
recognizing that their banks prosper as the community prospers, have
established and will maintain those civic relationships.
The Annapolis Banking and Trust Company Annapolis, Maryland
Baltimore Trust Company Selbyville, Delaware
Bank of Southern Maryland La Plata, Maryland
Calvert Bank and Trust Company Prince Frederick, Maryland
The Chestertown Bank of Maryland Chestertown, Maryland
The Citizens National Bank Laurel, Maryland
County Banking & Trust Company Elkton, Maryland
The Eastville Bank Eastville, Virginia
Farmers & Merchants Bank - Eastern Shore Onley, Virginia
The Fidelity Bank Frostburg, Maryland
The First National Bank of St. Mary's Leonardtown, Maryland
The Forest Hill State Bank Bel Air, Maryland
Fredericktown Bank & Trust Company Frederick, Maryland
Mercantile-Safe Deposit & Trust Company Baltimore, Maryland
The National Bank of Fredericksburg Fredericksburg, Virginia
Peninsula Bank Princess Anne, Maryland
The Peoples Bank of Maryland Denton, Maryland
Potomac Valley Bank Gaithersburg, Maryland
St. Michaels Bank St. Michaels, Maryland
Westminster Bank and Trust Company of Caroll County Westminster, Maryland
Mercantile Mortgage Corporation Baltimore, Maryland
PAGE
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per Increase
share data) 1994 1993 (Decrease)
------------------------------------------------------------------------
FOR THE YEAR
Net interest income.............. $262,956 $246,482 7%
Net income....................... 90,441 83,468 8
Cash dividends paid.............. 34,982 30,173 16
Net income per share............. 1.88 1.73 9
Dividend paid per common share... .74 .64 16
Average deposits................. 4,692,500 4,625,200 1
Average loans.................... 3,765,200 3,647,000 3
Average investment securities.... 1,700,100 1,611,200 6
------------ ------------ ------------
AT YEAR END
Assets........................... $5,938,225 $5,789,620 3%
Deposits......................... 4,765,393 4,737,243 1
Loans, net....................... 3,846,838 3,628,780 6
Investment securities............ 1,606,264 1,753,974 (8)
Stockholders' equity............. 723,917 674,941 7
Book value per common share...... 15.05 13.99 8
------------ ------------ ------------
RATIOS
Return on average assets......... 1.6% 1.5% 7%
Return on average stockholders'
equity......................... 12.8 12.8
Average stockholders'
equity/average assets.......... 12.1 11.5 5
------------ ------------ ------------
STATISTICS
Banking offices.................. 155 150 5
Employees........................ 2,845 2,854 (9)
Shareholders..................... 8,669 7,804 865
Average number of common shares
outstanding.................... 48,165,833 48,138,635 27,198
Common shares outstanding........ 48,114,014 48,235,087 (121,073)
------------ ------------ ------------
CONTENTS
Consolidated Financial Highlights.......................................... 1
To Our Shareholders........................................................ 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 4
Report of Independent Accountants.......................................... 19
Consolidated Balance Sheets................................................ 20
Statement of Consolidated Income........................................... 21
Statement of Consolidated Cash Flows....................................... 22
Statement of Changes in Consolidated Stockholders' Equity.................. 24
Notes to Consolidated Financial Statements................................. 25
Five Year Statistical Summary.............................................. 38
Five Year Selected Financial Data.......................................... 40
Five Year Summary of Consolidated Income................................... 41
Principal Affiliates....................................................... 42
Mercantile Bankshares Corporation.......................................... 48
Corporate Information...................................................... 49
1
TO OUR SHAREHOLDERS
Mercantile Bankshares Corporation Reported its 19th consecutive year of
increases in consolidated net income. Net income per share was $1.88 in 1994,
an increase of 9% over the $1.73 per share in 1993. Total consolidated net
income was $90,441,000 compared to $83,468,000 in 1993, an increase of 8%.
Per share amounts are based on the weighted average number of common
shares outstanding, 48,165,833 for 1994 and 48,138,635 for 1993. In accordance
with generally accepted accounting principles, all amounts originally reported
for 1993 have been restated to include the accounts of The National Bank of
Fredericksburg, which became an affiliate in November, 1994.
Our history of profitability and capital strength has allowed us to
increase total cash dividends paid per share for 18 consecutive years. While
maintaining great capital strength and financing the growth of your company,
in 1994 total dividends paid per share were $.74, a 15.6% increase over the
$.64 paid in 1993. Also of interest to shareholders, in December, 1994, the
Board of Directors authorized a buy-back of 2,000,000 shares of Mercantile
Bankshares common stock, in addition to the approximately 411,000 shares
remaining, at year end, under a prior authorization of 1,000,000 shares.
At December 31, 1994, total assets at Mercantile Bankshares Corporation
were $5,938,225,000 compared to $5,789,620,000 at December 31, 1993. On a
daily average basis, total assets rose 3% to $5,801,600,000, average total
loans rose 3% to $3,765,200,000 and total average investment securities rose
6% to $1,700,100,000.
The 3% increase in average total loans in 1994 reflected a decline in the
consumer loan segment of 5% from 1993, a commercial and industrial loan
increase of 4%, and a 5% increase in real estate and construction loans
combined.
In 1994, return on average assets, a measure of profitability, was 1.56%,
up 5% from 1.48% in 1993, continuing to place us in the top tier of U. S.
banks. Average shareholders' equity in Mercantile Bankshares Corporation
increased by 8% to $704,400,000. The return on average equity, which is
constrained by our large equity base, was 12.84% compared to 12.82% in 1993. A
measure of capital strength, the ratio of average equity to average assets,
was 12.14% in 1994 versus 11.55% in 1993 and remains among the strongest of
the nation's largest banking organizations.
Asset quality at Mercantile Bankshares, as measured by commonly used
statistics, is approaching its more traditional levels. A program of carefully
managed reduction in non-performing loans produced a 49% decrease in total
non-performing loans in 1994 to $33,648,000 at year end. Total non-performing
assets, which include other real estate owned as well as non-performing loans,
were $43,813,000 at year end 1994, down 51% from 1993. The ratio of total
non-performing assets to period end loans plus other real estate owned
decreased 53% from the prior year to 1.11% at year end 1994.
Our policy is to maintain an adequate allowance against the possibility of
decline in the value of non-performing assets. The provision for loan losses
in 1994 was $7,056,000 compared to $12,969,000 in 1993. In addition, the
provision for decline in the market value of other real estate owned was
$5,945,000 in 1994 compared to $468,000 in 1993. In 1994, loans charged off,
net of recoveries, totalled $8,366,000 compared to $11,466,000 in 1993. The
allowance for loan losses at December 31, 1994 was $91,257,000 versus
$92,567,000 in the prior year. At year end 1994, the allowance for loan losses
was 271% of total non-performing loans compared to 140% at year end 1993 and
2.3% of total year end loans compared to 2.5% at year end 1993.
Average total deposits for the year ended December 31, 1994 were
$4,692,500,000, a 1% increase over 1993. Deposit mix remained relatively
constant, year over year, with total certificates of deposit accounting for
29% of average total deposits and a combination of Savings, NOW and Money
Market accounts comprising 52%.
Net interest income for 1994 increased 7% over 1993 to $262,956,000. There
was a 3% increase in average earning assets, to $5,478,000,000, and a 4%
increase in net interest margin on earning assets, which rose to 4.9% in 1994.
In general, Mercantile Bankshares' large capital base and significant demand
deposits, both sources of funding which are not sensitive to interest rate
fluctuations, generate improved interest rate margins in a rising interest
rate environment. Net interest rate spread, the difference between the yield
realized on average earning assets and the interest rate paid for average
interest-bearing funds, increased 5% to 4.1%.
Total noninterest income increased 7% over 1993 to $92,186,000. The income
from trust division services was $43,360,000, up 4% over 1993. Other
noninterest income rose 159% over 1993 to $4,737,000, which included a gain of
$3,137,000 from the sale of an asset.
Noninterest expense, excluding the provision for loan losses, was
$201,200,000, an increase of 9% over the prior year. Salary and employee
benefit expenses, combined, are the largest part of noninterest expense and
were $110,870,000, up 4% over 1993. As mentioned above, another important item
in noninterest expense was an increase over 1993 of $5,477,000 in the
provision for decline in the market value of other real estate owned.
2
In 1994, we lost an energetic, well-respected associate. Charles E. A.
McCarthy III, Executive Vice President in charge of commercial banking at our
largest affiliate, Mercantile-Safe Deposit & Trust, died after a brief
illness.
Douglas W. Dodge, Vice Chairman of the Board of Mercantile Bankshares
Corporation and President and Chief Operating Officer of Mercantile-Safe
Deposit & Trust Company, announced his intention to retire as of June 30,
1995. Mr. Dodge has made many significant contributions during his 25 years of
service. The strong credit culture at Mercantile, for which he is largely
responsible, proved especially important in the early 1990s when undisciplined
credit extension put the banking industry through a severe test. Our limited
loan loss is a reflection of his work.
In 1994, Mercantile Bankshares Corporation strengthened its management
team with the promotion and addition of several key people. Among them were
Edward K. Dunn, Jr., Vice Chairman of the Board of Mercantile-Safe Deposit &
Trust Company and President of Mercantile Bankshares Corporation, who added
the duties of chief operating officer of Mercantile-Safe Deposit & Trust
Company, effective January 1, 1995. Hugh W. Mohler was elected Executive Vice
President of Mercantile-Safe Deposit & Trust Company and of Mercantile
Bankshares Corporation, with responsibility for management of the 19 community
banks. J. Marshall Reid became Executive Vice President of Mercantile-Safe
Deposit & Trust Company, where he heads up the Banking Division. Jay M. Wilson
joined the staff of Mercantile-Safe Deposit & Trust Company and Mercantile
Bankshares Corporation as an Executive Vice President.
Looking forward, growth will be achieved in two ways: by increases in banking
and in trust and investment management services and by occasional strategic
acquisitions. We can achieve internal growth by maintaining a vigorous
professional staff and assuring adequate capital to finance sound business
development. Occasionally, we are able to enter a new market, or enhance our
position in an existing market, through a cost-effective affiliation. In 1994,
we were pleased to welcome The National Bank of Fredericksburg to our family
of banks. Located in Fredericksburg, Virginia, this is our 20th banking
affiliate, our third in Virginia. The National Bank of Fredericksburg is an
excellent example of the kind of affiliation we seek: sound, well-run banks
which enjoy preeminence in their communities. We announced also the plan to
affiliate with, subject to shareholder and various regulatory approvals, The
Sparks State Bank in Sparks, Maryland, a bank with similar characteristics.
In 1995, Mercantile Bankshares Corporation celebrates 25 years in
operation. Our founding concept, that of a multi-bank holding company
structured to provide the technological and financial strengths of a major
banking organization, while maintaining the community bank focus, continues to
work well. Indeed, as national bank consolidation accelerates around us, we
find that individuals and businesses in our market areas look to us for the
kind of relationship-oriented service which is increasingly difficult to find.
In the years ahead, we will work to provide the tools and environment in which
community bank personnel can pursue their traditional roles as providers of
quality, personalized banking service.
/s/H. Furlong Baldwin
H. Furlong Baldwin, Chairman
February 27, 1995
BOARD OF DIRECTORS
William B. Potter, who had served as a Director since 1979, chose not to stand
for election at the 1994 Shareholders' Meeting.
Jay M. Wilson, a valuable Board member since 1989, resigned to join the
staffs of Mercantile-Safe Deposit & Trust Company and Mercantile Bankshares
Corporation.
3
[graph] - TOTAL ASSETS (For a description of the graph appearing in this
location see APPENDIX A, Chart A-1)
[graph] - EARNINGS GROWTH (For a description of the graph appearing in this
location see APPENDIX A, Chart A-2)
[graph] - EARNINGS PER SHARE (For a description of the graph appearing in this
location see APPENDIX A, Chart A-3)
MANAGEMENT'S DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Letter to Shareholders, and
the Consolidated Financial Statements and Notes thereto. Amounts originally
reported for 1993 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.
This Management's Discussion is intended to comply with rules of the
Securities and Exchange Commission which encourage, among other things,
analysis of important trends and material changes in components of our
financial statements which could be predictive of future results. A review of
the information presented in this Discussion will indicate changes between the
years 1993 and 1994 in asset and liability composition, levels of
non-performing assets, sources and uses of income, as well as decreases in
both non-performing assets and charge-offs. Specifics of these changes as well
as the continuing pattern of growth in earnings, total assets and
shareholders' equity can be ascertained from these presentations.
INCLUDED IN THIS DISCUSSION ARE THE FOLLOWING SECTIONS:
I. Performance Summary, 1994
II. Analysis of Operating Results
III. Analysis of Financial Condition
I. PERFORMANCE SUMMARY, 1994
Mercantile Bankshares Corporation again achieved increases in net income and
total assets in the year ended 1994 over the prior year. Average total
deposits and average total loans also increased in 1994 compared to 1993 while
non-performing assets, net charge-offs of loans and the provision for loan
losses all decreased during 1994. The year 1994 was characterized by a steady
increase in interest rates which contributed to an increase in our net
interest margin on earning assets.
II. ANALYSIS OF OPERATING RESULTS
Earnings Overview
Net income for Mercantile Bankshares was $90,441,000 compared with $83,468,000
in 1993 and $76,298,000 in 1992. On a per share basis, our 1994 earnings were
$1.88 compared with $1.73 and $1.67 in the two preceding years. Return on
average assets was 1.6% in 1994 and 1.5% in 1993 and in 1992. Return on
average equity was 12.8% in 1994 and 1993 compared with 13.3% in 1992.
4
Net Interest Income
Net interest income on a fully taxable equivalent basis was $266,477,000 in
1994, an increase of $16,246,000 or 6.5% over 1993 which in turn showed an
increase of $17,874,000 or 7.7% over 1992. The 1994 increase was attributable
to increases in both average earning assets and net interest margin on average
earning assets.
Total fully taxable equivalent interest income increased by $17,218,000 in
1994 while total interest expense increased by $972,000. In 1993, total
interest income decreased by $8,772,000 as total interest expense decreased by
$26,646,000 from 1992 levels. The net interest margin on average earning
assets was 4.9% in 1994 and 4.7% in both 1993 and 1992. Further details are
contained in the Analysis of Interest Rates and Interest Differentials on
pages 6 and 7 and in Rate/Volume Analysis on page 8.
Interest Income
In 1994, average total earning assets rose by 3.1% over 1993 which in turn was
7.6% higher than 1992. These increases had the effect of increasing fully
taxable equivalent interest income by $13,054,000 in 1994 and by $29,046,000
in 1993.
The yield realized on average total earning assets was 7.5% in 1994
compared with 7.3% in 1993 and 8.1% in 1992. The rise in yield for 1994 had
the effect of increasing fully taxable equivalent interest income by
$4,164,000. This contrasts with the decline in yield, to 7.3% in 1993 from
8.1% in 1992, which had the effect of lowering fully taxable equivalent
interest income by $37,818,000 in 1993. See page 8, Rate/Volume Analysis, for
further details. The increase in yield on average total loans is attributable
primarily to the 1994 increases in the prime rate. The prime rate, as charged
by leading financial institutions, averaged 7 1/8% for 1994 compared with
average prime rates of 6% for 1993 and 6 1/4% for 1992. The yield on our
investment securities portfolio was 5.2% in 1994 compared with a yield of 5.5%
for 1993 and 6.6% for 1992. Further details on the yields earned on loans and
other earning assets are quantified in the table on pages 6 and 7.
Interest Expense
The rate paid on average total interest-bearing funds was 3.4% for 1994 and
1993 compared with 4.3% in 1992. Total interest expense in 1994 was
$140,433,000, an increase of $972,000 from $139,461,000 in 1993. The increase
in interest expense for 1994 was attributable primarily to an increase in
average total interest-bearing funds. Total interest expense in 1993 was
$26,646,000 lower than in 1992 due primarily to lower rates in 1993 compared
with 1992. Further details on the effect of changes in rates and average
balances can be found in the Rate/Volume Analysis presented on page 8.
Average total interest-bearing funds as a percentage of average total
liabilities and shareholders' equity were 71.5% in 1994, compared with 72.5%
in 1993 and 73.8% in 1992. Based on comparison with peer group data furnished
by our regulators, Mercantile's reliance on interest-bearing funds is lower
than that of our peers. In 1994 and 1993, both we and our peers showed a
slight downward movement in the percentage of interest-bearing funds to total
funds.
[graph] - INTEREST YIELDS AND RATES (For a description of the graph appearing
in this location see APPENDIX A, Chart
A-4)
5
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.
<TABLE>
<CAPTION>
1994
------------------------------------
Average Income*/ Yield*/
(Dollars in thousands) Balance Expense Rate
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earning assets
Loans:
Commercial.................................. $1,235,800 $102,175 8.3%
Mortgage and construction................... 2,061,900 175,435 8.5
Consumer.................................... 467,500 40,522 8.7
------------- ------------
Total loans............................. 3,765,200 318,132 8.4
------------- ------------
Federal funds sold............................ 12,200 479 3.9
Securities purchased under resale
agreements..................................
Securities:
Taxable securities
U.S. Treasury securities.................. 1,647,100 84,902 5.2
U.S. Agency securities.................... 28,800 1,530 5.3
Other stocks and bonds.................... 10,100 718 7.1
Tax-exempt securities
States and political subdivisions......... 14,100 1,099 7.8
------------- ------------
Total securities........................ 1,700,100 88,249 5.2
------------- ------------
Interest-bearing deposits in other banks...... 500 50 10.0
------------- ------------
Total earning assets.................... 5,478,000 406,910 7.5
------------
Cash and due from banks......................... 196,500
Bank premises and equipment, net................ 74,000
Other assets.................................... 147,300
Less: allowance for loan losses................. (94,200)
-------------
Total assets............................ $5,801,600
-------------
-------------
Interest-bearing liabilities
Deposits:
Savings deposits............................ $2,410,400 65,488 2.7
Certificates of deposit and other time
deposits--less than $100,000.............. 1,052,100 46,261 4.4
Certificates of deposit-$100,000 and over... 339,900 14,448 4.3
------------- ------------
Total interest-bearing deposits......... 3,802,400 126,197 3.3
Short-term borrowings......................... 314,400 12,111 3.9
Long-term debt................................ 31,900 2,125 6.7
------------- ------------
Total interest-bearing funds............ 4,148,700 140,433 3.4
------------
Noninterest-bearing deposits.................... 890,100
Other liabilities and accrued expenses.......... 58,400
-------------
Total liabilities....................... 5,097,200
Stockholders' equity............................ 704,400
-------------
Total liabilities and stockholders'
equity................................ $5,801,600
-------------
-------------
Net interest income............................. $266,477
------------
------------
Net interest rate spread........................ 4.1%
Effect of noninterest-bearing funds............. .8
---------
Net interest margin on earning assets........... 4.9%
---------
---------
Taxable-equivalent adjustment included in:
Loan income................................... $3,038
Investment securities income.................. 483
------------
Total................................... $3,521
------------
------------
<FN>
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35% for 1994 and 1993 and 34% for 1992.
Previously reported average loan balances have been reclassified to conform to
the 1994 presentation.
</TABLE>
6
<TABLE>
<CAPTION>
1993 1992
-------------------------------------- --------------------------------------
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........................... $1,186,600 $89,755 7.6% $1,116,900 $87,644 7.8%
Mortgage and construction............ 1,970,100 166,016 8.4 1,796,300 162,644 9.1
Consumer............................. 490,300 42,841 8.7 524,800 50,157 9.6
------------ ------------ ------------ ------------
Total loans...................... 3,647,000 298,612 8.2 3,438,000 300,445 8.7
------------ ------------ ------------ ------------
Federal funds sold..................... 37,600 1,107 2.9 42,400 1,530 3.6
Securities purchased under resale
agreements........................... 15,700 499 3.2 8,700 343 3.9
Securities:
Taxable securities
U.S. Treasury securities........... 1,552,000 85,075 5.5 1,431,000 94,402 6.6
U.S. Agency securities............. 36,700 2,136 5.8 5,500 464 8.4
Other stocks and bonds............. 6,900 892 12.9 4,900 459 9.4
Tax-exempt securities
States and political subdivisions.. 15,600 1,289 8.3 7,300 748 10.2
------------ ------------ ------------ ------------
Total securities................. 1,611,200 89,392 5.5 1,448,700 96,073 6.6
------------ ------------ ------------ ------------
Interest-bearing deposits in other
banks................................ 1,000 82 8.2 900 73 8.1
------------ ------------ ------------ ------------
Total earning assets............. 5,312,500 389,692 7.3 4,938,700 398,464 8.1
------------ ------------
Cash and due from banks.................. 196,500 181,400
Bank premises and equipment, net......... 71,500 65,000
Other assets............................. 151,000 144,500
Less: allowance for loan losses.......... (92,900) (78,600)
------------ ------------
Total assets..................... $5,638,600 $5,251,000
------------ ------------
------------ ------------
Interest-bearing liabilities
Deposits:
Savings deposits..................... $2,390,600 68,587 2.9 $2,025,200 72,866 3.6
Certificates of deposit and other
time deposits--less than $100,000.. 1,086,600 50,093 4.6 1,201,300 67,470 5.6
Certificates of deposit--$100,000 and
over............................... 302,500 11,418 3.8 327,000 14,414 4.4
------------ ------------ ------------ ------------
Total interest-bearing deposits.. 3,779,700 130,098 3.4 3,553,500 154,750 4.4
Short-term borrowings.................. 286,100 7,824 2.7 308,600 10,150 3.3
Long-term debt......................... 22,000 1,539 7.0 15,500 1,207 7.8
------------ ------------ ------------ ------------
Total interest-bearing funds..... 4,087,800 139,461 3.4 3,877,600 166,107 4.3
------------ ------------
Noninterest-bearing deposits............. 845,500 746,200
Other liabilities and accrued expenses... 54,200 53,500
------------ ------------
Total liabilities................ 4,987,500 4,677,300
Stockholders' equity..................... 651,100 573,700
------------ ------------
Total liabilities and
stockholders' equity........... $5,638,600 $5,251,000
------------ ------------
------------ ------------
Net interest income...................... $250,231 $232,357
------------ ------------
------------ ------------
Net interest rate spread................. 3.9% 3.8%
Effect of noninterest-bearing funds...... .8 .9
------------ ------------
Net interest margin on earning assets.... 4.7% 4.7%
------------ ------------
------------ ------------
Taxable-equivalent adjustment included in:
Loan income............................ $3,162 $3,439
Investment securities income........... 587 378
------------ ------------
Total............................ $3,749 $3,817
------------ ------------
------------ ------------
</TABLE>
7
RATE/VOLUME ANALYSIS
A rate/volume analysis, which demonstrates changes in taxable equivalent
interest income and expense for significant assets and liabilities, appears
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 vs. 1993 1993 vs. 1992
Due to variances in Due to variances in
----------------------------------- -----------------------------------
(Dollars in thousands) Rates Volumes Total Rates Volumes Total
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans:
Commercial (1)....................... $8,698 $3,722 $12,420 $(3,358) $5,469 $2,111
Mortgage & construction (2).......... 1,683 7,736 9,419 (12,365) 15,737 3,372
Consumer............................. (327) (1,992) (2,319) (4,019) (3,297) (7,316)
----------- ----------- ----------- ----------- ----------- -----------
Total loans...................... 10,054 9,466 19,520 (19,742) 17,909 (1,833)
Taxable securities (3)................... (5,945) 4,992 (953) (17,420) 10,198 (7,222)
Tax-exempt securities (3)................ (66) (124) (190) (309) 850 541
Federal funds sold/repos................. 112 (1,239) (1,127) (348) 81 (267)
Interest-bearing deposits in other banks. 9 (41) (32) 1 8 9
----------- ----------- ----------- ----------- ----------- -----------
Total interest income............ 4,164 13,054 17,218 (37,818) 29,046 (8,772)
----------- ----------- ----------- ----------- ----------- -----------
Interest paid on:
Savings deposits....................... (3,667) 568 (3,099) (17,426) 13,147 (4,279)
Certificates of deposit and other time
deposits less than $100,000.......... (2,242) (1,590) (3,832) (10,935) (6,442) (17,377)
Certificates of deposit-$100,000 and
over................................. 1,618 1,412 3,030 (1,916) (1,080) (2,996)
Short-term borrowings.................. 3,513 774 4,287 (1,586) (740) (2,326)
Long-term debt......................... (107) 693 586 (174) 506 332
----------- ----------- ----------- ----------- ----------- -----------
Total interest expense........... (885) 1,857 972 (32,037) 5,391 (26,646)
----------- ----------- ----------- ----------- ----------- -----------
Net interest earned...................... $5,049 $11,197 $16,246 $(5,781) $23,655 $17,874
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<FN>
(1) Tax equivalent adjustments of $961,000 for 1994, $1,475,000 for 1993 and
$1,538,000 for 1992 are included in the calculation of commercial loan
rate variances.
(2) Tax equivalent adjustments of $2,077,000 for 1994, $1,687,000 for 1993 and
$1,901,000 for 1992 are included in the calculation of mortgage and
construction loan rate variances.
(3) Tax equivalent adjustments of $483,000 for 1994, $587,000 for 1993 and
$378,000 for 1992 are included in the calculation of investment
securities rate variances.
</TABLE>
NONINTEREST INCOME
A schedule of noninterest income over the past three years is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, % Change
----------------------------------- -----------------------
(Dollars in thousands) 1994 1993 1992 1994/1993 1993/1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust division services.................. $43,360 $41,673 $39,903 4% 4%
Rental income............................ 8,491 7,060 6,799 20 4
Service charges on deposit accounts...... 15,655 16,367 15,140 (4) 8
Other fees .............................. 21,342 19,582 17,242 9 14
Investment securities gains and (losses). (1,399) (195) 26,010 (617) (101)
Other income............................. 4,737 1,826 1,894 159 (4)
----------- ----------- -----------
Total............................ $92,186 $86,313 $106,988 7% (19)%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
NONINTEREST EXPENSES
<TABLE>
A schedule of noninterest expenses over the past three years is presented
below:
<CAPTION>
YEAR ENDED DECEMBER 31, % Change
----------------------------------- -----------------------
(Dollars in thousands) 1994 1993 1992 1994/1993 1993/1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits........... $110,870 $106,437 $95,086 4% 12%
Occupancy and equipment expenses......... 32,227 29,813 27,089 8 10
Communications and supplies.............. 9,182 9,413 8,588 (2) 10
FDIC insurance premium expense........... 10,911 10,699 9,883 2 8
Other expenses........................... 38,010 27,493 26,760 38 3
----------- ----------- -----------
Total............................ $201,200 $183,855 $167,406 9% 10%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
8
Noninterest Income
Total noninterest income, including investment securities gains or losses, was
$92,186,000 in 1994, an increase of $5,873,000 or 7% above 1993 which was
$20,675,000 or 19% below 1992. The increase in other income for 1994 was
primarily due to the first quarter sale of an asset at a gain of $3,137,000.
Revenues from trust services, the largest source of noninterest income,
were $43,360,000 for 1994, an increase of 4% or $1,687,000 over 1993. Net
income after the provision for income taxes for the Trust Division of
Mercantile-Safe Deposit & Trust Company in 1994 was $10,772,000 compared with
$9,805,000 in 1993 and $9,267,000 in 1992.
Other fees rose $1,760,000 or 9% over 1993 while 1993 amounts were 14%
over 1992. This reduced rate of growth was due to a slowing in residential
mortgage activity in 1994.
Sales of investment securities for 1994 and 1993 resulted in net losses of
$1,399,000 and $195,000, respectively. Net gains of $26,010,000 were realized
in 1992.
Noninterest Expenses
Total noninterest expenses, excluding the provision for loan losses, in 1994
totalled $201,200,000, a 9% increase over $183,855,000 in 1993 which was 10%
higher than 1992. In 1994 and 1993, costs (such as write-downs, professional
fees and operating expenses of foreclosed properties) associated with carrying
and reducing non-performing assets contributed to above normal increases in
other expenses. The largest of these costs, the provision for decline in the
market value of other real estate owned, was $5,945,000 in 1994 compared to
$468,000 in 1993. With our significantly reduced level of non-performing
assets, such expenses should decrease in 1995.
Salaries and employee benefits, which totalled $110,870,000 in 1994,
comprised 55.1% of noninterest expense. The increase of $4,433,000 or 4.2%
over the prior year was largely due to the salaries component which increased
$3,692,000 or 4.4%. Salaries and employee benefits totalled $106,437,000 in
1993 an increase of $11,351,000 or 11.9% over 1992. The salaries component
increased $6,569,000 or 8.6% due in part to mortgage refinancing commissions
and wages paid by our mortgage subsidiary during 1993. Employee benefits
expense was up $741,000 or 3.2% over 1993 which was $4,782,000, or 26.0%
higher than 1992. A significant part of the increase in benefits expense was
from added medical insurance costs and pension expense.
As a result of continued emphasis on the importance of expense control,
Mercantile Bankshares' efficiency ratio (recurring noninterest expenses,
excluding the provision for loan losses, divided by the sum of recurring
noninterest income, excluding securities gains and losses, plus taxable
equivalent net interest income) has remained relatively low and compares
favorably to those of our peers. The Mercantile Bankshares efficiency ratio
was 54.7%, 54.5% and 52.4% for 1994, 1993 and 1992, respectively.
III. ANALYSIS OF FINANCIAL CONDITION
Securities
Mercantile Bankshares' securities portfolio is structured to provide liquidity
and to contribute to earnings. As in the past, our portfolio consists almost
exclusively of short- and intermediate-term U.S. Treasury securities. Income
from the securities portfolio was $87,766,000 in 1994, $1,039,000 or 1% below
1993. Securities income of $88,805,000 in 1993 was $6,890,000, or 7% less than
in 1992. Income from the securities portfolio benefited from a 6% increase in
the portfolio's average balance in 1994, but not enough to offset the negative
effect of the decline in the yield on securities to 5.2% in 1994 from 5.5% in
1993.
[graph] - SOURCES OF INCOME (For a description of the graph appearing in this
location see APPENDIX A, Chart A-5)
[graph] - USES OF INCOME (For a description of the graph appearing in this
location see APPENDIX A, Chart A-6)
9
At year end 1994 and 1993, the average maturity of the bond portfolio
stood at 1.5 years and 2.0 years, respectively. As a result of reinvesting
maturing securities at higher rates during 1994, the yield on Mercantile's
bond portfolio was 5.3% at December 31, 1994, up slightly from 5.2% at the end
of the preceding year.
Mercantile Bankshares availed itself of favorable market conditions during
the third quarter of 1992 to sell, at a gain, U.S. Treasury securities with
average maturities of one and three quarters years. Proceeds were reinvested
in Treasury securities with a moderately longer maturity so that the average
maturity of Mercantile's bond portfolio at year end 1992 was 2.6 years as
compared with 1.6 years at December 31, 1991. By lengthening the maturities
somewhat, we were able to obtain better yields for a longer period of time
than would otherwise have been available, but not so high as the yields
originally available on the securities sold at a profit.
The market value of our bond investment portfolio as of December 31, 1994
was 97.0% of amortized cost compared to 101.4% at December 31, 1993 and 100.6%
at December 31, 1992. At December 31, 1994, our bond investment portfolio had
an amortized cost value of $1,603,994,000. On that date, $64,512,000 of these
investments had unrealized gains of $138,000. The remaining $1,539,482,000 of
these investments had unrealized losses of $47,562,000. More information on
the bond investment portfolio is shown in the table on page 11.
Loans
For the first time in three years, both average total loans and yields
increased. As a consequence, fully taxable equivalent interest income from
loans in 1994 amounted to $318,132,000, 6.5% above the $298,612,000 realized
in 1993 which in turn was 0.6% lower than the $300,445,000 realized in 1992.
Increases in commercial and real estate loans (mortgage and construction
loans) more than offset a decrease in consumer loans. Average commercial loans
(including industrial, financial and agricultural) grew 4.1% in 1994 to an
average balance of $1,235,800,000 while real estate loans increased 4.7% to an
average balance of $2,061,900,000.
It is significant that a large portion of the real estate loan portfolio
consists of loans to individuals on their residences. At December 31, 1994,
40% of total real estate loans were one to four family residential mortgages
and 6% were home equity loans. Commercial mortgages made up 39% of the real
estate portfolio followed by construction loans at 15% of the portfolio. A
large percentage of the commercial mortgages and construction loan balances
outstanding at December 31, 1994, were for owner occupied properties. We are
mindful of the risks associated with some types of real estate loans. However,
given the nature of these loans at Mercantile Bankshares, and our familiarity
with our borrowers and the region, we believe it is consistent with sound
banking practices to continue to extend real estate credits to carefully
selected customers.
Consumer loan volume continued to decrease as our banks exercised prudence
in the intensely competitive indirect auto paper market which has been
characterized by shrinking margins and lenient credit standards.
For further comparative information on the components of the loan
portfolio, see the Five Year Selected Financial Data table on page 40.
Sources and Uses of Funds
Mercantile Bankshares' funding sources (i.e., deposits, shareholders' equity
and short-term borrowings) grew 3% in 1994 compared with 7% in the prior year.
Noninterest-bearing deposits grew 5% to $890,100,000 on average in 1994,
compared with $845,500,000 in 1993 and $746,200,000 in 1992. This was the
second consecutive year that noninterest-bearing deposits increased as a
portion of average total deposits. If interest rates continue to rise as they
did in 1994, we expect to see a reversal in this trend as more funds flow into
interest-bearing deposit accounts. Savings and NOW
10
BOND INVESTMENT PORTFOLIO
The following summary shows the maturity distribution, average maturity and
average yields for the bond investment portfolio at December 31, 1994, 1993
and 1992.
<TABLE>
<CAPTION>
DECEMBER 31, 1994 December 31, 1993 December 31, 1992
----------------------------------- ----------------------------------- -----------------------------------
Tax Tax Tax
Equivalent Equivalent Equivalent
Amortized Market Yield To Amortized Market Yield To Amortized Market Yield To
(Dollars in thousands) Cost Value Maturity Cost Value Maturity Cost Value Maturity
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
held-to-maturity
U.S. Treasury and
other U.S. government
agencies:
Within 1 year...... $209,330 $207,073 5.2% $392,419 $397,018 5.6% $256,455 $260,949 7.1%
1-5 years.......... 1,035,085 997,072 5.6 1,317,350 1,336,613 5.1 1,220,287 1,224,182 5.7
5-10 years......... 6,214 5,786 6.0 20,578 20,878 5.8 16,947 17,289 6.9
After 10 years..... 885 868 7.4 1,891 1,902 7.5
----------- ----------- ----------- ----------- ----------- -----------
Total............ $1,251,514 $1,210,799 5.5% $1,732,238 $1,756,411 5.2% $1,493,689 $1,502,420 5.9%
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Average maturity
(years)........ 1.5 2.0 2.6
----------- ----------- -----------
----------- ----------- -----------
States and political
subdivisions:
Within 1 year...... $616 $615 8.3% $1,485 $1,483 9.3% $2,080 $2,099 10.4%
1-5 years.......... 10,767 10,381 7.5 11,180 11,634 6.8 2,907 2,999 9.4
5-10 years......... 2,143 2,003 7.8 2,399 2,509 7.7 740 776 9.8
After 10 years..... 55 55 11.9 55 55 11.9 355 356 12.7
----------- ----------- ----------- ----------- ----------- -----------
Total............ $13,581 $13,054 7.6% $15,119 $15,681 7.0% $6,082 $6,230 10.0%
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Average maturity
(years)........ 3.7 2.5 3.3
----------- ----------- -----------
----------- ----------- -----------
Other bonds, notes
and debentures:
Within 1 year...... $1,800 $1,796 7.1% $194 $194 4.9%
1-5 years.......... 1,398 1,354 6.7 1,402 1,503 6.7 $286 $286 5.8%
5-10 years.........
After 10 years..... 6 6 9.1 13 15 8.2 12 14 8.2
----------- ----------- ----------- ----------- ----------- -----------
Total............ $3,204 $3,156 6.9% $1,609 $1,712 6.5% $298 $300 5.9%
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Average maturity
(years)........ 1.6 2.6 7.1
----------- ----------- -----------
----------- ----------- -----------
Totals:
Within 1 year...... $211,746 $209,484 5.2% $394,098 $398,695 5.6% $258,535 $263,048 7.1%
1-5 years.......... 1,047,250 1,008,807 5.6 1,329,932 1,349,750 5.1 1,223,480 1,227,467 5.7
5-10 years......... 8,357 7,789 6.5 22,977 23,387 5.9 17,687 18,065 7.0
After 10 years..... 946 929 7.7 1,959 1,972 7.6 367 370 12.6
----------- ----------- ----------- ----------- ----------- -----------
Total ........... $1,268,299 $1,227,009 5.5% $1,748,966 $1,773,804 5.2% $1,500,069 $1,508,950 5.9%
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Average maturity
(years)........ 1.5 2.0 2.6
----------- ----------- -----------
----------- ----------- -----------
Securities
available-for-sale
U.S. Treasury and
other U.S. government
agencies:
Within 1 year...... $269,092 $265,167 4.1%
1-5 years.......... 65,094 63,048 5.5
5-10 years......... 1,500 1,337 5.3
After 10 years.....
----------- -----------
Total............ $335,686 $329,552 4.4%
----------- ----------- -----------
----------- ----------- -----------
Average maturity
(years)........ .6
-----------
-----------
Other bonds, notes
and debentures:
Within 1 year......
1-5 years..........
5-10 years.........
After 10 years..... $9 $9 6.4%
----------- -----------
Total............ $9 $9 6.4%
----------- ----------- -----------
----------- ----------- -----------
Average maturity
(years)........ 18.8
-----------
-----------
Totals:
Within 1 year...... $269,092 $265,167 4.1%
1-5 years.......... 65,094 63,048 5.5
5-10 years......... 1,500 1,337 5.3
After 10 years..... 9 9 6.4
----------- -----------
Total............ $335,695 $329,561 4.4%
----------- ----------- -----------
----------- ----------- -----------
Average maturity
(years)........ .6
-----------
-----------
</TABLE>
11
accounts increased to 34% of average total deposits in 1994 compared with 33%
of average total deposits in 1993 and 27% in 1992. The average balance of
large denomination CD's (those $100,000 or more) increased to $339,900,000 in
1994 but remained 7% of average total deposits compared with $302,500,000 or
7% of average total deposits one year ago and $327,000,000 or 8% two years
ago.
Average money market accounts decreased both in dollars and as a portion
of average total deposits in each of the past two years. Average money market
accounts comprised 18% of average total deposits in 1994 compared with 19% and
20% in 1993 and 1992, respectively. Certificates of deposit in amounts of less
than $100,000 decreased to 22% of average total deposits compared with 23% of
average total deposits in 1993 and 28% in 1992.
Average shareholders' equity increased by 8% to $704,400,000 in 1994, due
principally to growth in retained earnings.
Average short-term borrowings increased by $28,300,000 during 1994 to
$314,400,000 as a result of increases in overnight federal funds purchases and
repurchase agreements.
Average loans increased 3% during 1994 but did not change as a portion of
average total earning assets. Average loans as a portion of average total
earning assets were 69% in both 1994 and 1993 compared with 70% in 1992. As
funding sources have increased more rapidly than loans, management has
invested its excess funds in short-term U.S. Treasury securities positioning
Mercantile Bankshares to take advantage of anticipated increases in loan
demand. Investment securities rose to 31% of average total earning assets in
1994 from 30% in 1993 and 29% in 1992. Further details of the composition of
our average total earning assets and of our deposit mix are shown in the
tables below.
Asset/Liability Management
Asset/liability management involves the funding and investment strategies
necessary to maintain an appropriate balance between interest sensitive assets
and liabilities. It also involves providing adequate liquidity while
sustaining stable growth in net interest income. Regular
COMPOSITION OF EARNING ASSETS
<TABLE>
<CAPTION>
Average Balances
---------------------------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans.......................... $3,765,200 69% $3,647,000 69% $3,438,000 70% $3,306,400 71% $3,181,900 77%
Investment securities*......... 1,700,600 31 1,612,200 30 1,449,600 29 1,169,500 25 836,900 20
Federal funds sold............. 12,200 37,600 1 42,400 1 43,600 1 46,000 1
Securities purchased under
resale agreements............ 15,700 8,700 162,100 3 70,400 2
----------- ------- ----------- ------- ----------- ------- ----------- ------- ----------- -------
Total.................... $5,478,000 100% $5,312,500 100% $4,938,700 100% $4,681,600 100% $4,135,200 100%
----------- ------- ----------- ------- ----------- ------- ----------- ------- ----------- -------
----------- ------- ----------- ------- ----------- ------- ----------- ------- ----------- -------
<FN>
*Includes interest-bearing deposits in other banks.
</TABLE>
DEPOSIT MIX
<TABLE>
<CAPTION>
Average Balances
---------------------------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits... $890,100 19% $845,500 18% $746,200 17% $678,100 17% $650,900 18%
Interest-bearing deposits:
Savings, NOW................. 1,577,100 34 1,505,000 33 1,178,100 27 830,700 20 729,400 20
Money market................. 833,300 18 885,600 19 847,100 20 719,300 18 520,500 14
CDs and other time less than
$100,000................... 1,052,100 22 1,086,600 23 1,201,300 28 1,393,700 34 1,261,200 34
CDs $100,000 and over........ 339,900 7 302,500 7 327,000 8 454,500 11 509,800 14
----------- ------- ----------- ------- ----------- ------- ----------- ------- ----------- -------
Total.................... $4,692,500 100% $4,625,200 100% $4,299,700 100% $4,076,300 100% $3,671,800 100%
----------- ------- ----------- ------- ----------- ------- ----------- ------- ----------- -------
----------- ------- ----------- ------- ----------- ------- ----------- ------- ----------- -------
</TABLE>
12
review and analysis of deposit and loan trends, cash flows in various
categories of loans and monitoring of interest spread relationships are vital
to this process.
Mercantile Bankshares seeks to contain the risks associated with interest
rate fluctuations by managing the balance between interest sensitive assets
and liabilities. Managing to mitigate interest rate risk is, however, an
inexact science. Not only does the interval until repricing of interest rates
of assets and liabilities change from day to day as the assets and liabilities
change but, for some assets and liabilities, contractual maturity and the
actual maturity experienced are not the same. For example, residential
mortgages or pools of such mortgages may have contractual maturities well in
excess of five years but, depending upon the interest rate carried by the
specific mortgages and the then currently prevailing rate of interest, such
mortgages may be prepaid in weeks. Similarly, demand deposits by contract may
be withdrawn in their entirety upon demand and savings deposits may be
withdrawn on seven days notice. While these contracts are extremely short, it
has been Mercantile Bankshares' experience that these pools of funds, when
considered as a whole, have a multi-year duration. As seen in the Interest
Rate Sensitivity Analysis on page 14, asset sensitivity indicates that, given
the composition of assets and liabilities at December 31, 1994, more
interest-earning assets than interest-bearing liabilities are subject to
repricing within the next 12 months. The data in this table suggests that net
interest income should tend to increase somewhat in a rising interest rate
environment and decrease in a declining rate environment.
The conduct of our banking business requires that we maintain adequate
liquidity to meet changes in composition and volume of assets and liabilities
due to seasonal, cyclical or other reasons. Normally, this requires
maintaining a prospective liquidity sufficient to meet our clients' demand for
loans. In 1994, growth of deposits, coupled with limited growth in loan
demand, resulted in the increase in investment securities previously
discussed. We limited the maturity, and therefore the yield, of securities
purchased with new funds because we anticipate their need to satisfy loan
demand in the markets we serve.
Credit Risk Analysis
Our loans and commitments are substantially to borrowers located in our
immediate region. We have limited our participation in multi-bank credits
where we are not the managing or agent bank. We do not purchase loan
participations from syndicating banks or other unaffiliated financial
institutions.
Central to the operation of a sound and successful financial institution
is the balanced management of asset growth and credit quality. Responsibility
for loan underwriting and monitoring is clearly fixed on key management
personnel in each of our affiliates and ultimately upon the board of directors
of each affiliate. These responsibilities are supported at the
[graph] - LOAN COMPOSITION AND GROWTH (For a description of the graph appearing
in this location see APPENDIX A,
Chart A-7)
LOAN MATURITY SCHEDULE
The following table illustrates loan diversity by maturity distribution for
commercial, financial and agricultural and real estate-construction loans as
of December 31, 1994.
Maturing
-----------------------------------------------
Over 1
1 year through Over 5
(Dollars in thousands) or less 5 years years Total
--------------------------------------------------------------------------
Commercial, financial and $498,998 $477,755 $334,311 $1,311,064
agricultural............
Real estate-construction.. 137,010 139,149 42,372 318,531
----------- ----------- ----------- -----------
Total............... $636,008 $616,904 $376,683 $1,629,595
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Of the $993,587,000 loans maturing after one year, $274,940,000 or 28% have
predetermined interest rates and $718,647,000 or 72% have floating interest
rates.
13
INTEREST RATE SENSITIVITY ANALYSIS (1)
<TABLE>
<CAPTION>
At December 31, 1994
-----------------------------------------------------------------------------------
Over Over Over
3 months 6 months 1 year Non-
Within thru thru thru After sensitive
(Dollars in millions) 3 months 6 months 1 year 5 years 5 years funds Total
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Securities (2)................... $76.5 $133.0 $271.3 $1,112.3 $10.8 $2.5 $1,606.4
Loans............................ 2,267.9 105.4 229.4 1,109.4 226.0 3,938.1
Other assets..................... 392.2 392.2
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total...................... 2,344.4 238.4 500.7 2,221.7 236.8 394.7 5,936.7
----------- ----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES & EQUITY
Money market deposit accounts.... 817.2 817.2
Time deposits.................... 408.8 208.3 234.6 631.1 1.8 1,484.6
Other deposits (3)............... 474.6 1,968.8 2,443.4
Short-term borrowings............ 375.0 375.0
Long-term debt................... .2 .2 .5 22.9 7.7 31.5
Other liabilities................ 61.1 61.1
Stockholders' equity............. 723.9 723.9
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total...................... 2,075.8 208.5 235.1 654.0 1,978.3 785.0 $5,936.7
----------- ----------- ----------- ----------- ----------- ----------- -----------
Excess........................... $268.6 $29.9 $265.6 $1,567.7 $(1,741.5) $(390.3)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Accumulated excess............... $268.6 $298.5 $564.1 $2,131.8 $390.3
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Accumulated excess as a percent
of total....................... 4.5% 5.0% 9.5% 35.9% 6.6%
<FN>
(1) These data are adjusted for atypical behavior in assets and liabilities,
principally in usable demand deposits and in amounts due from non-affiliated
banks including items in the process of collection.
(2) Includes interest-bearing deposits in other banks.
(3) Reflects behavior experience which often differs from legal withdrawal
provisions.
</TABLE>
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
(Dollars in thousands) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance balance-beginning......... $92,567 $88,261 $65,932 $54,471 $48,720
Allowance of acquired bank.......... 2,803
Charge-offs:
Commercial, financial and
agricultural.................... 4,262 7,845 21,258 3,709 2,954
Real estate-construction.......... 2,405 1,258 240 271 3,538
Real estate-mortgage.............. 2,000 2,491 697 4,378 638
Consumer.......................... 1,862 2,676 3,019 3,841 4,264
----------- ----------- ----------- ----------- -----------
Totals........................ 10,529 14,270 25,214 12,199 11,394
----------- ----------- ----------- ----------- -----------
Recoveries:
Commercial, financial and
agricultural.................... 729 1,500 637 1,062 253
Real estate-construction.......... 224
Real estate-mortgage.............. 185 148 131 188 10
Consumer.......................... 1,025 1,156 1,429 1,560 1,881
----------- ----------- ----------- ----------- -----------
Totals........................ 2,163 2,804 2,197 2,810 2,144
----------- ----------- ----------- ----------- -----------
Net charge-offs..................... 8,366 11,466 23,017 9,389 9,250
Provision for loan losses........... 7,056 12,969 45,346 20,850 15,001
----------- ----------- ----------- ----------- -----------
Allowance balance-ending............ $91,257 $92,567 $88,261 $65,932 $54,471
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Average loans outstanding during
year.............................. $3,765,200 $3,647,000 $3,438,000 $3,306,400 $3,181,900
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Percent of net charge-offs to
average loans outstanding during
year.............................. .22% .31% .67% .28% .29%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Percent of allowance for loan losses
at year-end to average loans...... 2.4% 2.5% 2.6% 2.0% 1.7%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
14
Allocation of Allowance for Loan Losses
The allowance for possible loan losses has been allocated to the various
categories of loans, as required by the Securities and Exchange Commission.
This allocation does not limit the amount of the allowance available to absorb
losses from any type of loan and should not be viewed as an indicator of the
specific amount or specific loan categories in which future charge-offs may
ultimately occur. The tables below present this allocation, along with the
percentage distribution of loan amounts in each category, at the dates shown.
For a historical analysis of the allowance for loan losses, see the caption
below for Provision and Allowance for Loan Losses.
</TABLE>
<TABLE>
<CAPTION>
Allowance Amount Allocated as of December 31,
-----------------------------------------------------------
(Dollars in thousands) 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance amount allocated to:
Commercial, financial and agricultural...... $25,600 $26,200 $24,500 $16,480 $13,500
Real estate-construction.................... 10,900 11,700 12,000 9,900 7,300
Real estate-mortgage........................ 5,100 5,000 4,400 3,300 1,800
Consumer.................................... 5,500 5,600 7,900 5,900 4,900
Allowance amount not allocated................ 44,157 44,067 39,461 30,352 26,971
----------- ----------- ----------- ----------- -----------
Total..................................... $91,257 $92,567 $88,261 $65,932 $54,471
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
COMPOSITION OF LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural........ 33.3% 33.3% 32.3% 32.6% 34.5%
Real estate-construction...................... 8.1 8.6 9.1 9.8 9.7
Real estate-mortgage.......................... 46.5 45.6 44.4 41.7 37.9
Consumer...................................... 12.1 12.5 14.2 15.9 17.9
----------- ----------- ----------- ----------- -----------
Total..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
holding company level by appropriate underwriting guidelines and effective
ongoing loan review. In addition, each affiliate bank has set an internal
limit on the maximum amount of credit that may be extended to a single
borrower that is well below the regulatory maximum.
Provision and Allowance for Loan Losses
Each affiliate is required to maintain an adequate allowance for loan losses
and Corporate management and the boards of directors maintain a regular
overview to assure that adequacy. On a periodic basis, we examine significant
credit exposures, non-accrual and other non-performing assets and various
statistical measurements of asset quality to assure the adequacy of our
allowance for loan losses. During 1994, $7,056,000 in provision for loan loss
expense was incurred, down from $12,969,000 and $45,346,000 in 1993 and 1992,
respectively. The decision to lower the provision was influenced, in part, by
continuing decreases in the levels of non-performing loans and net charge-offs
in 1994. Non-performing loans declined by $32,415,000 or 49% between December
31, 1993 and December 31, 1994 while net charge-offs dropped by $3,100,000 or
27% during the same period.
The allowance for loan losses, as a percentage of average loans, was 2.4%
at December 31, 1994 compared with 2.5% and 2.6% the two preceding years. The
allowance for loan losses decreased 1% from year end 1993 to year end 1994.
However, due to the decrease in non-performing loans between those two dates,
the allowance for loan losses as a percentage of non-performing loans
increased from 140% to 271%. Further details of the allowance for loan losses
are shown in the tables on pages 14 and 15.
Charge-Offs
Charge-offs before recoveries in 1994 were $10,529,000, down from $14,270,000
in 1993; which in turn was down from $25,214,000 in 1992. Allowance For Loan
Losses, on page 14, shows that the reduction in charge-offs of commercial,
financial and agricultural, mortgage, and consumer loans more than offset an
increase in charge-offs of construction loans in 1994. Charge-offs of
commercial, financial and agricultural loans were $4,262,000 in 1994, down
$3,583,000 from $7,845,000 in 1993, which in turn was down $13,413,000 from an
historical high of $21,258,000 in 1992. Mortgage loans totalling $2,000,000
were charged off in 1994, a decrease of
15
[graph] - ALLOWANCE AS A % OF AVERAGE LOANS;
CHARGE-OFFS (Net of Recoveries) AS A % OF AVERAGE LOANS
(For a description of the graph appearing in
this location see APPENDIX A, Chart A-8)
$491,000 from the $2,491,000 charged off in 1993 but not as low as the
$697,000 reported in 1992. The charge-off of consumer loans declined for the
fifth straight year to $1,862,000 in 1994 from $2,676,000 in 1993 and
$3,019,000 in 1992. Charge-offs of construction loans increased by $1,147,000
to $2,405,000 in 1994, compared with charge-offs of $1,258,000 and $240,000 in
1993 and 1992, respectively.
Intensive collection efforts continue after charge-off in order to
maximize the recovery of amounts previously charged off. Recoveries as a
percentage of loans charged off were 21% in 1994, 20% in 1993 and 9% in 1992.
Recoveries in a given year may or may not relate to loans charged off in that
year.
Net charge-offs decreased to $8,366,000 in 1994 from $11,466,000 in 1993
and well below the $23,017,000 in 1992. Net charge-offs as a percentage of
average loans were .22%, .31% and .67% for the years ended 1994, 1993 and
1992, respectively.
Non-Performing Assets
Non-performing assets consist of non-accrual loans, renegotiated loans and
other real estate owned (i.e., real estate acquired in foreclosure or in lieu
of foreclosure). With respect to non-accrual loans, our policy is that
regardless of the value of the underlying collateral and/or guarantees, no
interest is accrued on the entire balance once either principal or interest
payments on any loan become 90 days past due at the end of a calendar quarter.
All accrued and uncollected interest on such loans is eliminated from the
income statement and is recognized only as collected. A loan may be put on
non-accrual status sooner than this standard if, in management's judgement,
such action is warranted.
Non-performing assets have fallen to their lowest year end level since
December 31, 1990. At year end 1994, non-performing assets were $43,813,000
compared with $88,721,000 and $94,167,000 in 1993 and 1992, respectively.
Non-performing assets reached their peak in the third quarter of 1992, due
primarily to a $21,300,000 loan to one borrower, and have decreased fairly
steadily since that time.
Non-performing loans decreased 49% to $33,648,000 at December 31, 1994
from $66,063,000 one year earlier. In addition, at December 31, 1994, there
was one restructured loan of $7,300,000 that was performing in accordance with
its new terms and, accordingly, is not included in the accompanying table of
non-performing assets. Other real estate owned decreased 55% to $10,165,000 at
December 31, 1994 from $22,658,000 one year earlier. This decrease was
primarily attributable to the sale of a foreclosed property (other real estate
owned) and to a 1994 provision of $5,945,000 for decline in the market value
of other real estate owned.
Attention is directed to the data in Non-Performing Assets on page 17
which shows the changes in the amounts of various categories of non-performing
assets over the last five years, and sets forth the relationship between
non-performing loans and total loans and total allowance for loan losses.
Shareholders' Equity
Adequate capital is vital to financial institutions. It is requisite to
sustaining growth, providing a measure of protection against unanticipated
declines in asset values and helping safeguard the funds of depositors.
Capital also provides a source of funds to meet loan demand and enables
the company to manage its assets and liabilities effectively.
Shareholders' equity increased 7% to $723,917,000 at year end 1994 from
$674,941,000 at year end 1993 which, in turn, was a 13% increase from
$598,128,000 at year end 1992. These increases are primarily attributable to
retained earnings. Book value per share was $15.05 at the end of 1994, $13.99
in 1993 and $13.07 in 1992. Our ratio of average equity to average assets was
12.1% in 1994 compared with 11.5% in 1993 and 10.9% in 1992, among the very
strongest in the industry each year.
Various bank regulatory agencies have implemented stringent capital
guidelines which are directly related to a bank's risk-based capital ratios.
By regulatory definition, a "well capitalized" bank faces fewer regulatory
hindrances in its operations than institutions which are classified at the
other end of the spectrum as "critical-
16
NON-PERFORMING ASSETS
A five-year comparison of non-performing assets is presented below:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
(Dollars in thousands) 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans (1)........... $33,645 $66,063 $70,602 $58,994 $34,035
Renegotiated loans (1).......... 3 3,105 593 29
Loans contractually past due 90
days or more and still
accruing interest............. 40 497
----------- ----------- ----------- ----------- -----------
Total non-performing loans.... 33,648 66,063 73,707 59,627 34,561
Other real estate owned......... 10,165 22,658 20,460 27,116 4,744
----------- ----------- ----------- ----------- -----------
Total non-performing assets... $43,813 $88,721 $94,167 $86,743 $39,305
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Non-performing loans as a
percentage of period end loans .85% 1.78% 2.11% 1.77% 1.04%
Non-performing assets as a
percentage of period end loans
and other real estate owned... 1.11% 2.37% 2.68% 2.55% 1.18%
Allowance for loan losses as a
percentage of non-performing
loans......................... 271.21% 140.12% 119.75% 110.57% 157.61%
<FN>
(1) Total interest on these loans is not considered to be material in any of
the years reported herein. Aggregate gross interest income of $3,230,000
and $5,841,000 in 1994 and 1993 respectively, on non-accrual and
renegotiated loans, would have been recorded if these loans had been
accruing on their original terms throughout the period. The amount of
interest income on the non-accrual and renegotiated loans that was
recorded totalled $1,524,000 and $2,800,000 in 1994 and 1993,
respectively.
Note: In addition to the above loans, certain other loans, estimated to
aggregate $7,071,000 at December 31, 1994, are currently being paid out in
accordance with their terms, but, in the opinion of management, there is
serious doubt as to the ability of the borrowers to comply with the repayment
terms in the future. While management does not anticipate any loss not
previously provided for on these loans, economic conditions may be such as to
necessitate future modifications in the repayment terms.
</TABLE>
ly undercapitalized." For instance, only "well-capitalized" banks can accept
brokered deposits without regulatory approval in advance. In addition, FDIC
deposit insurance premium rates are significantly lower for banks with higher
capital levels as compared to poorly capitalized banks.
By bank regulation, the total risk-based capital ratio, the tier one
risk-based capital ratio and the tier one leverage ratio must be at least
equal to 8%, 4% and 4%, respectively. At December 31, 1994, these three ratios
for Mercantile Bankshares were 19.6%, 18.3% and 12.1%, substantially in excess
of the minimums required. As of December 31, 1993, they were 19.6%, 18.2% and
11.5%, respectively. The table on page 18 shows the components of the
risk-based capital and leverage ratios.
Bank regulatory agencies also impose certain restrictions on the payment
of dividends, extensions of credit and transfer of assets from subsidiaries to
bank holding companies. Historically, these restrictions have not limited
dividend payments at Mercantile Bankshares and it is not anticipated that they
will have a constraining impact in the future. In addition to dividend
restrictions, capital requirements are also affected by off-balance sheet
risks. These include such items as letters of credit and commitments to extend
credit. Refer to Note #8 on page 29 for information regarding Mercantile
Bankshares' commitments.
In December 1994, the Board of Directors approved a plan authorizing the
Corporation to purchase up to 2,000,000 shares of its common stock, in
addition to 411,000 shares remaining under the Corporation's previously
announced program to purchase up to 1,000,000 shares. Purchased shares will be
used from time to time for corporate purposes including issuance under the
Corporation's dividend reinvestment plans and stock-based compensation plans.
The total number of shares purchased under the two authorizations was 589,000
as of December 31, 1994.
[graph] - RISK-BASED CAPITAL RATIOS* (For a description of the graph appearing
in this location see APPENDIX A,
Chart A-9)
Dividends
For the eighteenth consecutive year, the annual dividend paid on common stock
exceeded the prior year's level. Effective with the September 1994 dividend,
the
17
RISK-BASED CAPITAL
DECEMBER 31,
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992 1991
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier one capital:
Stockholders' equity.... $726,688 $675,441 $598,628 $542,599
Less: goodwill and other
intangible assets..... (21,432) (19,993) (21,123) (22,254)
------------- ------------- ------------- -------------
Total Tier one
capital........... 705,256 655,448 577,505 520,345
Tier two capital:
Allowable allowance for
loan losses........... 48,598 45,493 42,937 42,184
Allowable unsecured
long-term debt........ 1,000 2,000 4,000 6,000
------------- ------------- ------------- -------------
Tier two capital
additions......... 49,598 47,493 46,937 48,184
------------- ------------- ------------- -------------
Total capital....... $754,854 $702,941 $624,442 $568,529
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Risk-adjusted assets...... $3,845,146 $3,592,661 $3,389,608 $3,350,944
Quarterly average assets
(net of goodwill and
other intangible assets) $5,816,368 $5,721,307 $5,317,877 $5,088,646
Risk-based capital ratios:
Tier one capital.......... 18.3% 18.2% 17.0% 15.5%
Total capital............. 19.6 19.6 18.4 17.0
Tier one leverage ratio*.. 12.1% 11.5% 10.9% 10.2%
<FN>
*Tier one capital/quarterly average assets (net of goodwill and other
intangible assets)
</TABLE>
DIVIDENDS
1994 1993
-----------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
-----------------------------------------------------------------------------
Common dividends.. .20 .20 .17 .17 .17 .17 .15 .15
Mercantile Bankshares has paid quarterly cash dividends on its Common Stock
since September 1970 when such stock was first issued. Mercantile Bankshares
intends to consider quarterly payment of dividends on its Common Stock, but
such payment is necessarily dependent upon many factors, including the future
earnings and financial requirements of Mercantile Bankshares and its
affiliates.
quarterly dividend rate was raised from $.17 to $.20 per share. Management
will periodically evaluate whether this is an appropriate rate in light of
Mercantile Bankshares' capital strength, profitability and concerns about
problems facing the economy and the banking industry in general. The annual
dividends paid per common share were $.74 in 1994, $.64 in 1993 and $.58 in
1992. Total cash dividends paid were $34,982,000 in 1994, $30,173,000 in 1993
and $26,454,000 in 1992. The chart appearing above presents dividends paid
over the last two years.
Acquisitions and Commitments
In December 1994, the Corporation entered into an agreement to acquire all of
the outstanding shares of The Sparks State Bank, Sparks, Maryland. Under the
terms of the agreement, Mercantile Bankshares will issue 2 1\3 shares for
each share of the common stock of Sparks. The affiliation is subject to
regulatory and shareholders' approvals. It is anticipated that this
affiliation will be completed during 1995.
In November 1994, the Corporation completed its affiliation with The
National Bank of Fredericksburg, Fredericksburg, Virginia, in a tax-free
exchange of stock. Shareholders of the National Bank received 2.84 shares of
Mercantile Bankshares stock for each of the 788,112 shares of the National
Bank capital stock and cash in lieu of any fractional shares. The affiliation
was accounted for as a pooling of interests.
Further information regarding these affiliations is presented in Footnote
#14 to the financial statements.
Commitments for 1995 include plans for approximately $7,500,000 of capital
expenditures, consisting primarily of con-
18
struction and improvements of new and existing banking offices of affiliate
banks.
Recent FASB Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, was issued in May 1993 and later amended
by SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures, in October 1994. Both are effective for financial
statements issued for fiscal years beginning after December 15, 1994. These
Statements establish the accounting and reporting requirements for all
impaired loans. Under these statements a loan is impaired when, based on
current information and events, it is probable that a creditor will be unable
to collect all amounts due according to the loan's contractual terms. These
Statements were implemented January 1, 1995 and did not have a material effect
on the financial statements of Mercantile Bankshares.
Also issued in October 1994 was SFAS No. 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments. This statement
is effective for financial statements issued for fiscal years beginning after
December 15, 1994. Mercantile Bankshares neither holds nor issues derivative
financial instruments. Therefore, SFAS No. 119 had no effect on the financial
statements of Mercantile Bankshares.
RECENT COMMON STOCK PRICES
MARKET PRICES*
1994 1993
-------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
-------------------------------------------------------------------------
High..... 22 1/4 23 1/8 20 7/8 21 21 3/4 21 1/8 23 1/2 23 7/8
Low...... 18 3/8 19 1/2 17 3/4 18 1/4 18 19 7/8 19 3/8 20 7/8
*The stock of Mercantile Bankshares Corporation is traded on the Nasdaq Stock
Market under the symbol MRBK. The quotations represent actual transactions.
As of February 28, 1995, there were 8,538 stockholders of record.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and The Board of Directors,
Mercantile Bankshares Corporation:
We have audited the accompanying consolidated balance sheets of Mercantile
Bankshares Corporation and Affiliates as of December 31, 1994 and 1993, and
the related statements of consolidated income, changes in consolidated
stockholders' equity, and consolidated cash flows for each of the three years
in the period ended December 31, 1994. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Mercantile Bankshares Corporation and Affiliates as of December 31, 1994
and 1993, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Corporation changed its method of accounting for certain investments in debt
and equity securities during 1994.
(sig)
Baltimore, Maryland
January 20, 1995
19
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
(Dollars in thousands, except per share
data) 1994 1993
---------------------------------------------------------------------
ASSETS
Cash and due from banks (6)................ $257,046 $172,526
Interest-bearing deposits in other banks... 100 600
Investment securities held-to-maturity..... 1,273,278 1,753,974
Investment securities available-for-sale... 332,986
Federal funds sold......................... 3,645
Loans (3).................................. 3,938,095 3,721,347
Less: allowance for loan losses (1),(3).... (91,257) (92,567)
------------ ------------
Loans, net........................... 3,846,838 3,628,780
------------ ------------
Bank premises and equipment, net (1),(4)... 74,259 73,350
Other real estate owned, net (1)........... 10,165 22,658
Excess cost over equity in affiliated
banks, net (1)............................. 18,862 19,993
Other assets............................... 124,691 114,094
------------ ------------
Total...................................... $5,938,225 $5,789,620
------------ ------------
------------ ------------
LIABILITIES
Deposits:
Noninterest-bearing deposits........... $954,228 $960,475
Interest-bearing deposits.............. 3,811,165 3,776,768
------------ ------------
Total deposits....................... 4,765,393 4,737,243
Short-term borrowings (6).................. 356,268 292,096
Accrued expenses and other liabilities..... 61,177 52,990
Long-term debt (7)......................... 31,470 32,350
------------ ------------
Total liabilities.................... 5,214,308 5,114,679
------------ ------------
COMMITMENTS AND CONTINGENCIES (4),(8)
STOCKHOLDERS' EQUITY (9)
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 48,114,014
shares in 1994 and 48,235,087 shares in
1993..................................... 96,228 96,470
Capital surplus............................ 22,988 26,958
Retained earnings.......................... 606,972 551,513
Unrealized gains (losses) on securities,
net...................................... (2,271)
------------ ------------
Total stockholders' equity........... 723,917 674,941
------------ ------------
Total.............................. $5,938,225 $5,789,620
------------ ------------
------------ ------------
See notes to consolidated financial statements
20
STATEMENT OF CONSOLIDATED INCOME
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) 1994 1993 1992
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (1).......................... $315,094 $295,450 $297,006
--------- --------- --------
Interest and dividends on investment securities:
Taxable interest income............................... 86,432 87,211 94,866
Tax-exempt interest income............................ 696 816 481
Dividends............................................. 365 313 303
Other investment income............................... 273 465 45
--------- --------- --------
87,766 88,805 95,695
--------- --------- --------
Other interest income................................... 529 1,688 1,946
--------- --------- --------
Total interest income............................... 403,389 385,943 394,647
--------- --------- --------
INTEREST EXPENSE
Interest on deposits (5)................................ 126,197 130,098 154,750
Interest on short-term borrowings....................... 12,111 7,824 10,150
Interest on long-term debt.............................. 2,125 1,539 1,207
--------- --------- --------
Total interest expense.............................. 140,433 139,461 166,107
--------- --------- --------
NET INTEREST INCOME..................................... 262,956 246,482 228,540
Provision for loan losses (1),(3)....................... 7,056 12,969 45,346
--------- --------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES..... 255,900 233,513 183,194
--------- --------- --------
NONINTEREST INCOME
Trust division services (1)............................. 43,360 41,673 39,903
Rental income........................................... 8,491 7,060 6,799
Service charges on deposit accounts..................... 15,655 16,367 15,140
Other fees.............................................. 21,342 19,582 17,242
Investment securities gains and (losses) (2),(10)....... (1,399) (195) 26,010
Other income............................................ 4,737 1,826 1,894
--------- --------- --------
Total noninterest income............................ 92,186 86,313 106,988
--------- --------- --------
NONINTEREST EXPENSES
Salaries................................................ 86,941 83,249 76,680
Employee benefits (12).................................. 23,929 23,188 18,406
Net occupancy expense of bank premises (1),(4).......... 18,250 16,633 15,196
Furniture and equipment expenses (1),(4)................ 13,977 13,180 11,893
Communications and supplies............................. 9,182 9,413 8,588
FDIC insurance premium expense.......................... 10,911 10,699 9,883
Other expenses.......................................... 38,010 27,493 26,760
--------- --------- --------
Total noninterest expenses.......................... 201,200 183,855 167,406
--------- --------- --------
Income before income taxes........................ 146,886 135,971 122,776
Applicable income taxes (1),(10).................. 56,445 52,503 46,478
--------- --------- --------
NET INCOME...................................... $90,441 $83,468 $76,298
--------- --------- --------
--------- --------- --------
NET INCOME PER SHARE OF COMMON STOCK (9)................ $1.88 $1.73 $1.67
</TABLE>
See notes to consolidated financial statements
21
STATEMENT OF CONSOLIDATED CASH FLOWS
Increase (decrease) in cash and cash equivalents
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans.......................................... $309,072 $295,695 $300,857
Interest and dividends on investment securities..................... 89,990 88,335 94,837
Other interest income............................................... 614 1,712 1,985
Noninterest income.................................................. 94,000 86,023 80,495
Interest paid....................................................... (139,535) (140,058) (171,725)
Noninterest expenses paid........................................... (184,907) (164,706) (149,851)
Income taxes paid................................................... (56,554) (52,306) (65,077)
--------- --------- -----------
Net cash provided by operating activities....................... 112,680 114,695 91,521
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities ....................... 3,192 949,178
Proceeds from maturities of investment securities held-to-maturity.. 280,527 315,841 452,510
Proceeds from sales of investment securities available-for-sale..... 191,151
Proceeds from maturities of investment securities
available-for-sale................................................ 82,829
Purchases of investment securities held-to-maturity................. (270,545) (506,369) (1,535,301)
Purchases of investment securities available-for-sale............... (141,383)
Net increase in customer loans...................................... (225,114) (111,620) (134,145)
Capital expenditures................................................ (8,566) (9,709) (7,218)
Proceeds from sales of other real estate owned...................... 6,548
--------- --------- -----------
Net cash used in investing activities........................... (84,553) (308,665) (274,976)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in noninterest-bearing deposits............. (6,247) 24,250 94,114
Net increase (decrease) in NOW and savings accounts................. (109,455) 87,000 430,159
Net increase (decrease) in certificates of deposit.................. 143,852 (92,110) (281,004)
Net increase (decrease) in short-term borrowings.................... 64,172 6,527 (46,240)
Proceeds from issuance of long-term debt............................ 24,000
Repayment of long-term debt......................................... (880) (6,758) (1,501)
Proceeds from issuance of shares.................................... 7,087 4,158 6,185
Repurchase of common shares......................................... (11,299) (421)
Dividends paid...................................................... (34,982) (30,173) (26,454)
--------- --------- -----------
Net cash provided by financing activities....................... 52,248 16,473 175,259
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents (1)............ 80,375 (177,497) (8,196)
Cash and cash equivalents at beginning of year...................... 176,771 334,716 342,912
Adjustment for affiliation (14)..................................... 19,552
--------- --------- -----------
Cash and cash equivalents at end of year............................ $257,146 $176,771 $334,716
--------- --------- -----------
--------- --------- -----------
</TABLE>
See notes to consolidated financial statements
22
Reconciliation of net income to net cash provided by operating activities
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income.......................................................... $90,441 $83,468 $76,298
--------- --------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 7,657 7,728 6,997
Provision for loan losses....................................... 7,056 12,969 45,346
Write-down of other real estate owned........................... 5,945 468 3,247
Investment securities (gains) and losses........................ 1,399 195 (26,010)
Provision for deferred taxes (benefit).......................... (1,141) (2,624) (10,349)
Amortization of excess cost over equity in affiliates........... 1,131 1,130 1,131
(Increase) decrease in interest receivable...................... (3,713) (201) 3,032
(Increase) decrease in other receivables........................ 415 (485) (483)
(Increase) decrease in other assets............................. (6,158) 4,086 (29)
Increase (decrease) in interest payable......................... 898 (597) (5,618)
Increase in accrued expenses.................................... 7,718 5,737 6,209
Increase (decrease) in taxes payable............................ 1,032 2,821 (8,250)
--------- --------- -----------
Total adjustments............................................. 22,239 31,227 15,223
--------- --------- -----------
Net cash provided by operating activities........................... $112,680 $114,695 $91,521
--------- --------- -----------
--------- --------- -----------
</TABLE>
See notes to consolidated financial statements
23
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED
DECEMBER 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Unrealized
Gains
Common Capital Retained (Losses) on
(Dollars in thousands, except per share
data) Stock Surplus Earnings Securities
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992................... $60,499 $50,803 $430,797
Net income................................. 76,298
Cash dividends paid:
Common stock ($.58 per share)............ (26,454)
Issuance of 62,836 shares for dividend
reinvestment and stock purchase plan..... 126 1,677
Issuance of 27,086 shares under exercise
of stock appreciation rights............. 54 773
Issuance of 11,700 shares for employee
stock purchase dividend reinvestment plan 23 315
Issuance of 166,718 shares for employee
stock option plan........................ 333 2,884
--------- --------- ---------
BALANCE, DECEMBER 31, 1992 ................ 61,035 56,452 480,641
Adjustment for affiliation (14)............ 4,476 (2,272) 17,577
Net income................................. 83,468
Cash dividends paid:
Common stock ($.64 per share)............ (29,385)
By affiliated bank prior to affiliation.. (788)
Issuance of 76,986 shares for dividend
reinvestment and stock purchase plan..... 154 1,844
Issuance of 3,963 shares under exercise of
stock appreciation rights................ 8 123
Issuance of 14,232 shares for employee
stock purchase dividend reinvestment plan 29 358
Issuance of 82,016 shares for employee
stock option plan........................ 164 1,525
Issuance of 15,324,194 shares for a
three-for-two stock dividend............. 30,648 (30,695)
Purchase of 21,900 shares under stock
repurchase plan.......................... (44) (377)
--------- --------- ---------
BALANCE, DECEMBER 31, 1993 ................ 96,470 26,958 551,513
Unrealized gains (losses) on securities at
January 1, 1994.......................... $1,059
Net income................................. 90,441
Cash dividends paid:
Common stock ($.74 per share)............ (34,387)
By affiliated bank prior to affiliation.. (595)
Issuance of 122,718 shares for dividend
reinvestment and stock purchase plan..... 245 2,093
Issuance of 22,019 shares for employee
stock purchase dividend reinvestment plan 44 392
Issuance of 301,690 shares for employee
stock option plan........................ 604 3,709
Purchase of 567,500 shares under stock
repurchase plan.......................... (1,135) (10,164)
Change in unrealized gains (losses) on
securities............................... (3,330)
--------- --------- --------- -----------
BALANCE, DECEMBER 31, 1994 (9)............. $96,228 $22,988 $606,972 $(2,271)
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
See notes to consolidated financial statements
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
The consolidated financial statements include the accounts of Mercantile
Bankshares Corporation ("Mercshares") and all of its affiliates, with all
significant intercompany transactions eliminated. The investment in affiliates
is recorded on the books of the holding company on the basis of its equity in
the net assets of the affiliates. The excess of the cost of Mercshares'
investment over its equity in the net assets of purchased banks is being
amortized on a straight-line basis over a period of 25 to 40 years from the
respective dates of affiliation. Accumulated amortization amounted to
$12,622,000 and $11,491,000 at December 31, 1994 and 1993, respectively.
Mercshares and its affiliates use the accrual basis of accounting, except
for trust income which is recorded on the modified accrual basis. Assets
(other than cash deposits) held for others under fiduciary and agency
relationships are not included in the accompanying balance sheets since they
are not assets of Mercshares or its affiliates.
B. Securities
Mercshares implemented the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities, effective on January 1, 1994. Investment securities consist
mainly of U.S. Government securities. A substantial portion of the investment
securities are acquired with the intent and ability to hold until maturity and
are carried at cost, adjusted for amortization of premiums and accretion of
discounts. A smaller portion of the investment securities are acquired to be
held for indefinite periods of time and are characterized as
"available-for-sale." These securities may be sold in response to changes in
interest rates and/or prepayment risk or for liquidity management purposes and
are carried at fair value. Any unrealized appreciation or depreciation in the
market value of available-for-sale securities is reported as a separate
component of stockholders' equity net of applicable taxes. Adjusted cost is
used to compute gains or losses on the sales of securities which are reported
in the Statement of Consolidated Income.
Upon adoption of SFAS No. 115 the Company classified $462,478,000 of debt
and equity securities with a market value of $464,289,000 as
available-for-sale.
C. Loans
Interest income is accrued at the contractual rate on the principal amount
outstanding. When scheduled principal or interest payments are past due 90
days or more on any loan, the accrual of interest income is discontinued and
recognized only as collected. Previously accrued but uncollected interest on
these loans is charged against interest income. Generally, the loan is
restored to an accruing status when all amounts past due have been paid.
D. Allowance for Loan Losses
The allowance for loan losses is estimated to provide adequately for possible
future losses on existing loans. The allowance is increased by the loan loss
provision charged to operating expenses and reduced by loan charge-offs, net
of recoveries. The provision for loan losses is based on a continuing review
of the loan portfolios, past loss experience and current economic conditions
which may affect the borrower's ability to pay.
E. Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed using both the
straight-line and accelerated methods over the estimated useful lives of the
properties. Expenditures for repairs and maintenance are charged to operating
expenses as incurred. Expenditures for improvements which extend the life of
an asset are capitalized and depreciated over the asset's remaining useful
life. Gains or losses realized on the disposition of properties are reflected
in consolidated income.
F. Other Real Estate Owned
Other real estate owned consists primarily of real estate obtained through
foreclosure or acceptance of deeds in lieu of foreclosure. Other real estate
owned is held for sale and is stated at lower of cost or market.
G. Income Taxes
Deferred income taxes are calculated by applying enacted statutory tax rates
to temporary differences consisting of all significant items which are
reported for tax purposes in different years than for accounting purposes.
H. Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing deposits in other banks, federal funds
sold and securities purchased under resale agreements. Generally, federal
funds are purchased and sold for one-day periods; securities purchased/sold
under resale agreements are purchased/sold for periods of one to sixty days.
25
2. INVESTMENT SECURITIES
The amortized cost and market values of investment securities at December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------- -----------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
(Dollars in thousands) Cost Gains Losses Value Cost Gains Losses Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held-to-maturity
U.S. Treasury................... $1,229,027 $98 $39,552 $1,189,573 $1,699,171 $24,710 $709 $1,723,172
U.S. government agencies........ 22,487 1,261 21,226 33,067 263 91 33,239
States and political
subdivisions.................. 13,581 40 567 13,054 15,119 566 4 15,681
Other bonds, notes and
debentures.................... 3,204 48 3,156 1,609 103 1,712
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total bonds................... 1,268,299 138 41,428 1,227,009 1,748,966 $25,642 $804 1,773,804
----------- -----------
----------- -----------
Other investments............... 4,979 698 5,677 5,008 7,658
----------- ----------- ----------- ----------- ----------- -----------
Total ...................... $1,273,278 $836 $41,428 $1,232,686 $1,753,974 $1,781,462
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Securities available-for-sale
U.S. Treasury................... $330,485 $5,872 $324,613
U.S. government agencies........ 5,201 262 4,939
Other bonds, notes and
debentures.................... 9 9
----------- ----------- -----------
Total bonds................... 335,695 6,134 329,561
Other investments............... 1,023 $2,402 3,425
----------- ----------- ----------- -----------
Total....................... $336,718 $2,402 $6,134 $332,986
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The amortized cost and market values of the bond investment portfolio by
contractual maturity at December 31, 1994 and 1993 are shown below:
1994 1993
--------------------- ---------------------
Amortized Market Amortized Market
(Dollars in thousands) Cost Value Cost Value
---------------------------------------------------------------------------
Securities held-to-maturity
Within 1 year................ $211,746 $209,484 $394,098 $398,695
1-5 years.................... 1,047,250 1,008,807 1,329,932 1,349,750
5-10 years................... 8,357 7,789 22,977 23,387
After 10 years............... 946 929 1,959 1,972
---------- ---------- ---------- ----------
Total ................... $1,268,299 $1,227,009 $1,748,966 $1,773,804
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Securities available-for-sale
Within 1 year................ $269,092 $265,167
1-5 years.................... 65,094 63,048
5-10 years................... 1,500 1,337
After 10 years............... 9 9
---------- ----------
Total ................... $335,695 $329,561
---------- ----------
---------- ----------
At December 31, 1994 and 1993, no single issue of investment securities
exceeded ten percent of stockholders' equity.
At December 31, 1994 and 1993, securities with an amortized cost of
$436,512,000 and $405,342,000, respectively, were pledged as collateral for
certain deposits as required or permitted by law.
The gross realized gains and losses on debt and non-debt securities for
1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------------- ----------------- -----------------
Gross Gross Gross Gross Gross Gross
Realized Realized Realized Realized Realized Realized
(Dollars in thousands) Gains Losses Gains Losses Gains Losses
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Debt securities
Held-to-maturity............................ $16 $25,254 $379
Available-for-sale.......................... $261 $1,102
Non-debt securities
Held-to-maturity............................ 557 76 $287 1,258 123
Available-for-sale.......................... 12 13
-------- -------- -------- -------- -------- --------
Total..................................... $273 $1,672 $92 $287 $26,512 $502
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
26
3. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31, 1994 and 1993 are as follows:
(Dollars in thousands) 1994 1993
-----------------------------------------------------------
Bank affiliates:
Commercial................... $1,311,064 $1,240,951
Mortgage..................... 1,804,621 1,650,228
Construction................. 311,806 312,346
Consumer..................... 477,694 466,552
------------- -------------
Total...................... 3,905,185 3,670,077
------------- -------------
Bank-related affiliates:
Mortgage..................... 26,185 45,215
Construction................. 6,725 6,055
------------- -------------
Total...................... 32,910 51,270
------------- -------------
Total loans.............. $3,938,095 $3,721,347
------------- -------------
------------- -------------
At December 31, 1994 and 1993, $33,645,000 and $66,063,000 respectively, are
considered non-accrual loans (loans in which interest income is recognized
only as collected). See Note 1C for an explanation of the non-accrual loan
policy.
The changes in the allowance for loan losses follow:
<TABLE>
<CAPTION>
Bank-
(Dollars in thousands) Banks Related Total
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1992.................................................. $65,295 $637 $65,932
Provision charged to operating expense.................................. 44,924 422 45,346
Recoveries.............................................................. 2,197 2,197
Charge-offs............................................................. (25,214) (25,214)
-------- ------- --------
Balance, December 31, 1992................................................ 87,202 1,059 88,261
Allowance of acquired bank.............................................. 2,803 2,803
Provision charged to operating expense.................................. 12,849 120 12,969
Recoveries.............................................................. 2,804 2,804
Charge-offs............................................................. (14,270) (14,270)
-------- ------- --------
Balance, December 31, 1993................................................ 91,388 1,179 92,567
Provision charged to operating expense.................................. 7,016 40 7,056
Recoveries.............................................................. 2,163 2,163
Charge-offs............................................................. (10,529) (10,529)
-------- ------- --------
BALANCE, DECEMBER 31, 1994................................................ $90,038 $1,219 $91,257
-------- ------- --------
-------- ------- --------
</TABLE>
4. BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1994 and 1993 consist of the
following:
(Dollars in thousands) 1994 1993
----------------------------------------------------
Land............................ $16,076 $15,475
Buildings and leasehold
improvements.................. 87,395 81,243
Equipment....................... 43,137 39,477
--------- ---------
146,608 136,195
Accumulated depreciation and
amortization.................. (72,349) (62,845)
--------- ---------
Bank premises and equipment, net $74,259 $73,350
--------- ---------
--------- ---------
Mercshares' bank affiliates conduct a major part of their branch banking
operations from leased facilities. Generally, the initial terms of the leases
range from a period of 1 to 15 years. Most of the leases contain options which
enable the affiliates to renew the lease at the fair rental value for periods
of 1 to 20 years. In addition to minimum rentals, certain leases have
escalation clauses based upon various price indices and include provisions for
additional payments to cover taxes, insurance and maintenance.
27
Total rental expense for 1994, 1993 and 1992 was:
(Dollars in thousands) 1994 1993 1992
---------------------------------------------------------------------------
Bank premises......................................... $4,015 $3,323 $2,796
Equipment............................................. 4,069 3,885 3,570
------ ------ ------
Total rental expense................................ $8,084 $7,208 $6,366
------ ------ ------
------ ------ ------
At December 31, 1994, the aggregate minimum rental commitments under
noncancelable operating leases are as follows: 1995-$6,285,000; 1996-
$5,165,000; 1997-$4,536,000; 1998-$3,845,000; 1999-$2,273,000; thereafter-
$8,635,000.
5. DEPOSITS
Included in time deposits are certificates of deposit issued in denominations
of $100,000 or more which totalled $414,292,000 and $290,023,000 at December
31, 1994 and 1993, respectively. Other time deposits issued in denominations
of $100,000 or more totalled $1,335,000 and $2,640,000 at December 31, 1994
and 1993, respectively.
At December 31, 1994, the amount outstanding and maturity distribution of
time certificates of deposit issued in amounts of $100,000 or more and other
time deposits of $100,000 or more are presented in the following table:
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------
TOTAL Over 3 Over 6
DECEMBER 3 months through through Over 12
(Dollars in thousands) 31, 1994 or less 6 months 12 months months
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Time certificates of deposit-
$100,000 or more.................. $414,292 $164,199 $39,591 $39,221 $171,281
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Other time deposits-
$100,000 or more.................. $1,335 $1,335
------------ -----------
------------ -----------
</TABLE>
Interest on deposits for the years ended December 31, 1994, 1993 and 1992
consists of the following:
(Dollars in thousands) 1994 1993 1992
-------------------------------------------------------------------------
Savings deposits.............................. $65,488 $68,587 $72,866
Certificates of deposit ($100,000 or more).... 14,448 11,418 14,414
Other time deposits........................... 46,261 50,093 67,470
-------- -------- --------
Total interest on deposits.................. $126,197 $130,098 $154,750
-------- -------- --------
-------- -------- --------
6. SHORT-TERM BORROWINGS
The following table summarizes Mercshares' short-term borrowings and their
weighted average interest rates at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
Year-end During year
------------- ----------------------
1994 (Dollars in thousands) Amount Rate Highest Average Rate
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal funds purchased and securities sold under repurchase agreements.. $280,355 5.6% $290,477 $234,638 3.9%
Commercial paper......................................................... 74,310 4.9 85,135 78,570 3.7
Notes payable-U.S. Treasury.............................................. 1,603 5.2 2,196 1,192 3.8
-------- --------
Total................................................................ $356,268 5.5% $314,400 3.9%
-------- ---- -------- ----
-------- ---- -------- ----
1993 (Dollars in thousands)
---------------------------
Federal funds purchased and securities sold under repurchase agreements.. $194,480 2.6% $216,024 $178,037 2.7%
Commercial paper......................................................... 95,334 2.9 127,871 106,778 2.8
Notes payable-U.S. Treasury.............................................. 2,282 2.8 2,590 1,285 2.3
-------- --------
Total................................................................ $292,096 2.7% $286,100 2.7%
-------- ---- -------- ----
-------- ---- -------- ----
</TABLE>
During 1994 and 1993, commercial paper borrowings were partially supported by
back-up lines of credit which ranged from a low of $41,500,000 to a high of
$51,500,000. Unused lines of credit at December 31, 1994 were $41,500,000.
These lines of credit are paid for on a fee basis ranging from .15% to .25%
annually.
28
7. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1993 consists of the following:
(Dollars in thousands) 1994 1993
-------------------------------------------------------
3% Unsecured debenture................. $315 $364
6% Mortgage note....................... 2,052 2,880
6.13% Unsecured senior notes........... 9,000 9,000
6.45% Unsecured senior notes........... 7,500 7,500
6.64% Unsecured senior notes........... 7,500 7,500
8.5% Unsecured note.................... 5,000 5,000
Other.................................. 103 106
------- -------
Total long-term debt............... $31,470 $32,350
------- -------
------- -------
The 3% debenture is payable $15,000 quarterly until July 1, 1996, and the
remaining balance in five equal annual payments with maturity on July 1, 2001.
All payments include principal and interest, and Mercshares has the option to
prepay any or all of the remaining principal balance on any payment date.
The 6% mortgage is collateralized by a first deed of trust on bank
premises which have a net book value of approximately $10,833,000 at December
31, 1994. The mortgage, including interest, is payable $81,500 monthly with
maturity on July 31, 1996.
The 6.13% senior notes are due on July 15, 1998. Interest is payable
semi-annually, on January 15 and July 15, until maturity.
The 6.45% senior notes are due on July 15, 1999. Interest is payable
semi-annually, on January 15 and July 15, until maturity.
The 6.64% senior notes are due on July 15, 2000. Interest is payable
semi-annually, on January 15 and July 15, until maturity.
The 8.5% note is due on May 15, 1996. Interest is payable semi-annually,
on May 15 and November 15, until maturity.
The annual maturities on all long-term debt over the next five years are:
1995-$932,000; 1996-$6,203,000; 1997-$51,000; 1998-$9,051,000; 1999-
$7,551,000.
8. COMMITMENTS
Various commitments to extend credit (lines of credit) are made in the normal
course of banking business. Letters of credit are also issued for the benefit
of customers by affiliated banks. These commitments are subject to loan
underwriting standards and geographic boundaries consistent with Mercshares'
loans outstanding. Mercshares' lending activities are concentrated in
Maryland, Delaware and Virginia.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Total commitments to extend
credit at December 31, 1994, include $1,450,319,000 in adjustable rate loan
commitments and $85,988,000 in fixed rate loan commitments. Fixed rate
commitments are at current market rates with $82,880,000 expiring within one
year and the remaining $3,108,000 expiring on various dates through December
1999. Total commitments to extend credit at December 31, 1993, included
$1,473,617,000 in adjustable rate loan commitments and $76,489,000 in fixed
rate loan commitments. Fixed rate commitments, at December 31, 1993, were at
current market rates with $67,692,000 expiring within one year and the
remaining $8,797,000 expiring on various dates through December 1998.
Standby letters of credit are commitments issued to guarantee the
performance of a customer to a third party. Outstanding letters of credit were
$98,458,000 at December 31, 1994 and $98,370,000 at December 31, 1993.
29
9. STOCKHOLDERS' EQUITY
In September 1993, the Company declared a three-for-two stock split in the
form of a stock dividend on the Company's common stock, payable September 30,
1993. Shares, average shares and per share amounts in the accompanying
financial statements and notes thereto have been adjusted to give effect to
the split. The par value of $2.00 per share has been assigned to additional
shares of common stock issued in connection with the stock split, and the
aggregate value of these shares, net of fractional shares paid in cash, was
credited to common stock and a similar amount charged to capital surplus.
Year-to-date per share amounts are based on the weighted average number of
common shares outstanding during the period or 48,165,833 shares for 1994,
48,138,635 shares for 1993 and 47,826,852 shares for 1992.
The Board of Directors has the authority to classify and reclassify any
unissued shares of preferred stock by fixing the preferences, rights, voting
powers (which may include separate class voting on certain matters),
restrictions and qualifications, dividends, times and prices of redemption
and conversion rights.
The Company has a Dividend Reinvestment and Stock Purchase Plan. The Plan
allows shareholders to automatically invest their cash dividends in Company
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. The number of shares of
common stock which remain available for issuance under the plan is 1,145,975
shares. The Company reserves the right to amend, modify, suspend or terminate
the Plan at any time at its discretion.
The Company has an Employee Stock Purchase Plan. The Plan allows employees
(other than executive officers of the Company) to purchase stock through
payroll deduction and dividend reinvestment at the then current market price
for employee purchases and at 95% of market for dividend reinvestment. The
number of shares of common stock which remain available for issuance under the
Plan is 690,293 shares. The Company reserves the right to amend, modify,
suspend or terminate the Plan at any time at its discretion.
The Company has an Executive Stock Appreciation Rights Plan which gives
the holder of a right, subject to the terms and conditions of the Plan, the
right to receive an amount of stock, cash or a combination of stock and cash,
equal to any appreciation (between the time of the grant and the time of
exercise of the right) in the fair market value of one share of the Company's
common stock. At December 31, 1994, 157,500 rights were exercisable at a price
of $14.33. Compensation expense recognized in connection with the Plan was $0,
$240,000 and $956,000 in 1994, 1993 and 1992, respectively.
Pursuant to a Shareholders Protection Rights Agreement adopted in
September 1989, each share of outstanding common stock carries a right,
initially for the purchase of 1/200 of a share of preferred stock at an
exercise price of $60 (subject to adjustment). The rights, which do not carry
voting or dividend rights, may be redeemed by Mercshares at $.0033 per right.
The rights expire on September 29, 1999 unless sooner exercised, exchanged or
redeemed. The rights will not become exercisable and will not trade separately
from the common stock until the tenth day (or such other date as the Board of
Directors selects) after commencement of a tender or exchange offer for, or
acquisition by a person or group of, 10% or more of the outstanding common
stock. Upon exercisability of the rights after acquisition by a person or
group ("acquiring person") of 10% or more of the outstanding common stock or
upon certain business combinations or other defined transactions involving
Mercshares, each right (except rights of the acquiring person, which become
void) will entitle its holder to acquire common stock (or in Mercshares'
discretion, preferred stock) of Mercshares, or common stock of the acquiring
entity in a business combination or other defined transaction, with a value of
twice the then current exercise price of the right. In certain such cases,
Mercshares may exchange one share of common stock (or in Mercshares'
discretion, 1/200 of a share of preferred stock) for each right which has not
become void. The Board of Directors has classified 1,600,000 shares of
preferred stock as Class A Preferred Stock for potential issuance on exercise
of rights.
In December 1994, the Board of Directors approved a plan authorizing the
Corporation to purchase up to 2,000,000 shares of its common stock, in
addition to 410,600 shares remaining under the Corporation's previously
announced program to purchase up to 1,000,000 shares. Purchases may be made
from time to time in the open market or in privately negotiated transactions.
Purchased shares will be used from time to time for corporate purposes
including issuance under the Corporation's dividend reinvestment plans and
stock-based compensation plans. The total number of shares purchased under the
two authorizations was 589,400 as of December 31, 1994.
Cash dividends paid to the holding company (Mercantile Bankshares
Corporation) by its consolidated subsidiaries for the years ended 1994, 1993,
and 1992 were $36,069,000, $32,412,000 and $32,058,000, respectively.
The amount of dividends that Mercshares' affiliates could have paid to the
holding company without approval from bank regulators at December 31, 1994 was
$440,736,000.
30
10. INCOME TAXES
Applicable income taxes on net income for 1994, 1993 and 1992 consist of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------- -------------------------- --------------------------
(Dollars in thousands) Federal State Total Federal State Total Federal State Total
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current:
Provision exclusive of security
transactions.............................. $48,841 $9,239 $58,080 $45,470 $9,734 $55,204 $38,077 $8,705 $46,782
Provision (benefit) related to security
transactions.............................. (407) (87) (494) (62) (15) (77) 8,224 1,821 10,045
Deferred (benefit)............................ (916) (225) (1,141) (2,265) (359) (2,624) (8,506) (1,843) (10,349)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total....................................... $47,518 $8,927 $56,445 $43,143 $9,360 $52,503 $37,795 $8,683 $46,478
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1994 and 1993 are as follows:
(Dollars in thousands) 1994 1993
-----------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses.................................. $34,598 $34,879
Accrued employee benefits.................................. 10,056 8,561
Accrued other expenses..................................... 201 1,644
Write-downs of other real estate owned..................... 2,180 1,428
Net unrealized loss on available-for-sale securities....... 1,461
Other 475 337
------- -------
Total deferred tax assets................................ 48,971 46,849
------- -------
Deferred tax liabilities:
Depreciation............................................... 448 812
Prepaid items.............................................. 177 233
Other...................................................... 15 75
------- -------
Total deferred tax liabilities........................... 640 1,120
------- -------
Net deferred tax assets.................................. $48,331 $45,729
------- -------
------- -------
Deferred tax expense (benefit) resulting from temporary differences in the
recognition of income and expense for tax and financial statement purposes is
attributable to:
(Dollars in thousands) 1994 1993 1992
--------------------------------------------------------------
Provision for loan losses......... $281 $(749) $(8,736)
Accrued expenses.................. (1,569) (2,176) (1,134)
Cash basis tax reporting.......... (235) 262 (89)
Other items, net.................. 382 39 (390)
-------- ------- ---------
Total deferred tax expense
(benefit)................. $(1,141) $(2,624) $(10,349)
-------- ------- ---------
-------- ------- ---------
A reconciliation between actual tax expense and taxes computed at the
statutory federal rate of 35% for the two years ended December 31, 1994 and
34% for the year ended December 31, 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------- --------------------- ---------------------
% of % of % of
Pretax Pretax Pretax
(Dollars in thousands) Amount Income Amount Income Amount Income
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax computed at statutory rate........... $51,410 35.0% $47,590 35.0% $41,744 34.0%
Increases (decreases) in tax resulting
from:
Tax-exempt interest income............. (2,073) (1.4) (2,196) (1.6) (2,274) (1.8)
State income taxes, net of Federal
income tax benefit................... 5,735 3.9 6,081 4.5 5,680 4.6
Other, net............................. 1,373 .9 1,028 .7 1,328 1.1
----------- --------- ----------- --------- ----------- ---------
Actual tax expense................... $56,445 38.4% $52,503 38.6% $46,478 37.9%
----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- ---------
</TABLE>
31
11. RELATED PARTY TRANSACTIONS
In the normal course of banking business, loans are made to officers and
directors of Mercshares and its affiliates, as well as to their related
interests. In the opinion of management, these loans are consistent with sound
banking practices, are within regulatory lending limitations and do not
involve more than the normal risk of collectibility. At December 31, 1994 and
1993, loans to executive officers and directors of Mercshares and its
principal affiliates, including loans to their related interests, totalled
$57,543,000 and $69,449,000, respectively. During 1994, loan additions and
loan deletions were $19,894,000 and $31,800,000, respectively.
12. EMPLOYEE BENEFITS
Mercshares is sponsor of an employees' cash balance pension plan which a
majority of its affiliates have adopted. Each plan participant who was
employed on January 1, 1991, was credited under the cash balance plan with a
frozen accrued benefit representing the benefit he had earned under the plan,
determined as of December 31, 1990, and based generally on past service and
career average annual compensation. For service on and after January 1, 1991,
the cash balance plan is designed to maintain separate participant accounts
for each eligible employee. These cash balance accounts are credited with
annual contribution allocations equal to various percentages of compensation
based on years of credited service and age. Mercshares' policy is to fund the
pension plan annually under the Projected Unit Credit Actuarial Cost Method.
Mercshares is also sponsor of an unfunded, nonqualified, supplemental cash
balance pension plan. All employees of Mercshares and its affiliates having
compensation for a calendar year in excess of $150,000 (as adjusted under the
Internal Revenue Code) and who are approved for participation by the Employee
Benefit Committee of Mercshares are eligible participants under this plan
except individuals who, on or prior to January 1, 1994, entered into
individual deferred compensation agreements under which they may elect to
defer a portion of their current compensation. At the end of a calendar year,
the account of each participant is credited with an amount equal to the
difference between the amount with which the participant's account under the
cash balance pension plan would have been credited but for the compensation
limitation imposed by the Internal Revenue Code and the amount actually
credited to the participant's account under the cash balance pension plan.
Interest allocations, tied to a Treasury Bill rate, are credited annually
to the cash balance accounts under both pension plans. Assets of both plans
are held in trusteed accounts which invest primarily in equity and fixed
income securities.
Total net pension expense for the cash balance pension plan for the years
ended December 31, 1994, 1993 and 1992 was $2,585,000, $2,289,000 and
$1,740,000, respectively. The following tables set forth the financial status
of the cash balance pension plan at December 31, 1994 and 1993 and the
composition of total net pension expense for 1994, 1993 and 1992.
At December 31,
-----------------
(Dollars in thousands) 1994 1993
-------------------------------------------------------------------------
Accumulated benefit obligation:
Vested............................................... $53,698 $52,218
Nonvested............................................ 3,472 3,756
-------- --------
Total.............................................. $57,170 $55,974
-------- --------
-------- --------
Plan assets at fair value.............................. $59,345 $60,490
Less: Projected benefit obligation..................... (63,756) (64,668)
-------- --------
Plan assets less than projected benefit obligation..... (4,411) (4,178)
Plus: Unrecognized net loss............................ 120 3,290
Unrecognized prior service cost.................... 1,738 592
Less: Unamortized net asset from adoption of FASB
Statement No. 87..................................... (4,862) (5,557)
-------- --------
Pension expense accrued............................ $(7,415) $(5,853)
-------- --------
-------- --------
32
YEAR ENDED DECEMBER 31,
--------------------------
(Dollars in thousands) 1994 1993 1992
------------------------------------------------------------
Total Net Pension Expense:
Service cost................... $2,732 $2,743 $2,413
Interest cost.................. 5,085 4,526 3,980
Actual return on assets........ (663) (6,256) (2,999)
Net amortization and deferral.. (4,569) 1,276 (1,654)
-------- -------- --------
Total........................ $2,585 $2,289 $1,740
-------- -------- --------
-------- -------- --------
Assumptions:
Discount rate.................. 8.5% 7.3% 7.7%
Average increase in future
compensation levels.......... 5.5% 5.5% 6.5%
Expected long-term rate of
return on assets............. 8.0% 8.0% 8.0%
In addition to providing pension benefits, the Company and its affiliates
provide certain health care and life insurance benefits for retired employees.
The Company's employees were eligible for company paid health care benefits if
their age plus length of service was equal to at least 65 as of December 31,
1990. The Company's employees may become eligible for company paid life
insurance benefits if they qualify for retirement while working for the
Company.
Mercshares has a contributory thrift plan under the provisions of Section
401(k) of the Internal Revenue Code. Generally, employees with a minimum of
one year of service are eligible for participation in the plan. Mercshares
also sponsors an unfunded, nonqualified supplemental thrift plan. All vice
presidents and above who participate in the thrift plan, who have compensation
for a calendar year in excess of $150,000 (as adjusted under the Internal
Revenue Code) and who are approved for participation by the Employee Benefit
Committee of Mercshares are eligible participants under this plan except
individuals who, on or prior to January 1, 1994, entered into individual
deferred compensation agreements under which they may elect to defer a portion
of their current compensation. The total expense for these plans in 1994, 1993
and 1992 was $3,586,000, $3,152,000 and $3,243,000, respectively.
13. STOCK PLANS
1985 STOCK OPTION PLAN
The 1985 Plan provided for the granting of options and/or stock appreciation
rights to key employees of Mercshares or its affiliates, to purchase not in
excess of 2,100,000 shares of Mercshares common stock at the market value on
the date granted. Stock appreciation rights could have been granted in
conjunction with all or any part of any option. No stock appreciation rights
were issued under the 1985 Plan. Generally, options became exercisable
cumulatively at the rate of 25% a year commencing one year after date of grant
and terminating five years from date of grant. Under the plan, a total of
2,033,175 options were granted. Of those granted, 1,796,273 options were
exercised and 236,902 options were terminated.
A summary of options exercised under the 1985 Plan during the years 1994,
1993 and 1992 follows:
Year Ended December 31,
-------------------------------------
1994 1993 1992
--------------------------------------------------------------
Options exercised....... 304,164 119,843 275,004
Price................... $14.33 $11.59-$14.33 $10.50-$14.33
OMNIBUS STOCK PLAN
The Omnibus Stock Plan permits the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock and
phantom stock units ("Stock Incentives") to key employees of Mercshares or its
affiliates. The Omnibus Stock Plan provides for issuance, not in excess of
1,935,000 shares, of Mercshares authorized but unissued common stock,
generally at market value on the date granted. Generally, options become
exercisable cumulatively at the rate of 25% a year commencing one year after
date of grant and terminating ten years from date of grant. However, if
certain earnings per share of Mercshares and net operating income of
affiliates are not achieved, all or a portion of the options that become
exercisable are forfeited and become available for further grants. As of
December 31, 1994, 1993 and 1992, Stock Incentives, in the form of stock
options, outstanding totalled 280,125, 560,250 and 840,375, respectively. All
were granted at a price of $14.83 per share. During 1994 and 1993, 280,125
Stock Incentives were forfeited and during 1992, 316,125 Stock Incentives were
forfeited. At December 31, 1994, no Stock Incentives were exercisable.
33
14. AFFILIATIONS
In 1994, the Corporation completed its affiliation with The National Bank of
Fredericksburg, Fredericksburg, Virginia in a tax-free exchange of stock.
Shareholders of Fredericksburg National Bancorp, Inc. received 2.84 shares of
Mercshares stock for each of the 788,112 shares of Fredericksburg National
Bancorp, Inc. capital stock and cash in lieu of any fractional share. The
affiliation was accounted for as a pooling of interests. However, due to
immateriality, the consolidated financial statements for periods prior to 1993
have not been restated to include the accounts of this bank. Total income and
net income of this bank for the period during 1994 prior to affiliation
totalled $16,009,000 and $2,322,000, respectively.
The 1993 results of operations as originally reported have been restated
to reflect the accounts of the pooled bank as follows:
Net
income
per share
1993 (Dollars in thousands, Total Net of common
except per share data) income income stock
--------------------------------------------------------
Originally reported.......... $454,938 $82,416 $1.80
Results of pooled bank....... 17,318 1,052
-------- -------
As restated.................. $472,256 $83,468 $1.73
-------- -------
-------- -------
In December 1994, the Corporation announced its plan of affiliation with
The Sparks State Bank, Sparks, Maryland, in a tax-free exchange of stock.
Shareholders of Sparks Bank will receive 2 1/3 shares of Mercshares stock for
each of the 771,241 shares of Sparks Bank capital stock and cash in lieu of
any fractional share. This affiliation is expected to be accounted for as a
purchase. The results of operations of Sparks Bank prior to the affiliation
date are not expected to be material to Mercshares' results of operations.
For the year ended December 31, 1994 Sparks Bank reported net income of
$2,397,000 and average total assets of $188,471,000.
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations:
Three months ended
----------------------------------
1994 (Dollars in thousands,
except per share data) Dec. 31 Sept. 30 June 30 March 31
------------------------------------------------------------------------------
Net interest income........................ $69,114 $68,108 $64,596 $61,138
Provision for loan losses.................. 2,471 1,583 1,180 1,822
Net income................................. 22,859 23,766 21,998 21,818
Per share of common stock.................. .48 .49 .46 .45
Three months ended
----------------------------------
1993 (Dollars in thousands,
except per share data) Dec. 31 Sept. 30 June 30 March 31
------------------------------------------------------------------------------
Net interest income........................ $62,399 $61,989 $61,581 $60,513
Provision for loan losses.................. 3,207 2,297 4,062 3,403
Net income................................. 21,457 21,106 21,074 19,831
Per share of common stock.................. .44 .44 .44 .41
34
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the disclosure requirements of Statement of Financial
Accounting Standards No. 107, the estimated fair values of Mercshares'
financial instruments at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
Book Fair Book Fair
(Dollars in thousands) Value Value Value Value
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and short-term investments.......... $257,146 $257,146 $176,771 $176,771
Investment securities.................... 1,606,264 1,565,672 1,753,974 1,781,462
Loans.................................... 3,938,095 3,721,347
Less: allowance for loan losses.......... (91,257) (92,567)
------------- -------------
Loans, net........................... 3,846,838 3,801,030 3,628,780 3,748,895
------------- ------------- ------------- -------------
Total financial assets............... $5,710,248 $5,623,848 $5,559,525 $5,707,128
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LIABILITIES
Deposits................................. $4,765,393 $4,706,090 $4,737,243 $4,737,413
Short-term borrowings.................... 356,268 356,268 292,096 292,096
Long-term debt........................... 31,470 30,481 32,350 33,705
------------- ------------- ------------- -------------
Total financial liabilities.............. $5,153,131 $5,092,839 $5,061,689 $5,063,214
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The following methods and assumptions were used to estimate the fair value
disclosures for financial instruments as of December 31, 1994 and 1993:
Cash and Short-Term Investments
The amounts reported in the balance sheet approximate the fair values of these
assets. Short-term investments include interest-bearing deposits in other
banks, federal funds sold and securities purchased under resale agreements.
Investment Securities
Fair values are based on quoted market prices.
Loans
The fair value of loans is estimated using discounted cash flow analyses based
on contractual repayment schedules and discount rates which are believed to
reflect current credit quality and other related factors. These factors
provide for the effect of interest over time, as well as losses expected over
the life of the loan portfolio and recovery of other operating expenses.
Deposits
The fair value of demand deposits, savings accounts and money market deposits
is the amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated by discounting the
expected future cash flows using a discount rate with factors similar to those
used above for the loans. The credit quality factor used reflects the overall
credit quality of Mercshares and not its customers.
Short-Term Borrowings
The amounts reported in the balance sheet approximate the fair values because
of the short duration of those instruments.
Long-Term Debt
Fair value is estimated by discounting the future cash flows using estimates
of rates currently available to Mercshares and its affiliates for debt with
similar terms and remaining maturities.
Limitations
The valuation techniques employed above involve uncertainties and are affected
by assumptions used and judgments regarding prepayments, credit risk, future
loss experience, discount rates, cash flows and other factors. Therefore,
derived fair values cannot be substantiated by comparison to independent
markets or to other financial institutions. The reported fair values do not
necessarily represent what Mercshares would realize in immediate sales or
other dispositions. Changes in assumptions could significantly affect the
reported fair values.
35
17. MERCANTILE BANKSHARES CORPORATION (PARENT CORPORATION ONLY) FINANCIAL
INFORMATION
BALANCE SHEETS
DECEMBER 31,
(Dollars in thousands, except per share data) 1994 1993
------------------------------------------------------------------------------
ASSETS
Cash........................................................ $2,257 $4,025
Investment in bank affiliates............................... 662,327 609,426
Investment in bank-related affiliates....................... 20,584 18,161
Interest-bearing deposit with bank affiliate................ 24,000 24,000
Securities purchased under resale agreements with bank
affiliate................................................. 71,310 74,334
Loans and advances to bank-related affiliates............... 30,500 49,645
Other investments, at cost.................................. 525 900
Excess cost over equity in affiliates....................... 18,862 19,993
Other assets................................................ 1,449 1,464
-------- --------
Total................................................... $831,814 $801,948
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper.......................................... $74,310 $95,334
Accounts payable and other liabilities.................... 4,587 2,673
Long-term debt............................................ 29,000 29,000
-------- --------
Total liabilities......................................... 107,897 127,007
-------- --------
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 48,114,014 shares in 1994 and
48,235,087 shares in 1993 .............................. 96,228 96,470
Capital surplus........................................... 22,988 26,958
Retained earnings......................................... 606,972 551,513
Unrealized gain (losses) on securities.................... (2,271)
-------- --------
Total stockholders' equity.............................. 723,917 674,941
-------- --------
Total................................................. $831,814 $801,948
-------- --------
-------- --------
STATEMENT OF INCOME
(Dollars in thousands)
-----------------------
For the Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------
INCOME
Dividends from bank affiliates..................... $35,809 $32,181 $31,783
Dividends from bank-related affiliates............. 260 230 275
Interest-bearing deposit with bank affiliate....... 942 346
Interest on securities purchased under resale
agreements with bank affiliate................... 2,705 2,581 2,501
Interest on loans to bank-related affiliates....... 1,464 1,386 1,797
Other income....................................... 2 11
------- ------- -------
Total income................................... 41,180 36,726 36,367
------- ------- -------
EXPENSES
Amortization of excess cost over equity
in affiliates.................................... 1,131 1,130 1,131
Interest on short-term borrowings.................. 2,940 3,012 3,321
Interest on long-term debt......................... 1,958 1,285 845
Other expenses..................................... 1,965 1,648 2,004
------- ------- -------
Total expenses................................. 7,994 7,075 7,301
------- ------- -------
Income before income tax benefit and equity in
undistributed net income of affiliates........... 33,186 29,651 29,066
Income tax (benefit)............................... 488 (133) (697)
------- ------- -------
32,698 29,784 29,763
Equity in undistributed net income of:
Bank affiliates.................................. 55,320 51,172 44,359
Bank-related affiliates.......................... 2,423 2,512 2,176
------- ------- -------
NET INCOME..................................... $90,441 $83,468 $76,298
------- ------- -------
------- ------- -------
36
17. MERCANTILE BANKSHARES CORPORATION (PARENT CORPORATION ONLY) FINANCIAL
INFORMATION (cont.)
STATEMENT OF CASH FLOWS
(Dollars in thousands)
Increase (decrease) in cash and cash equivalents --------------------------
For the Years Ended December 31, 1994 1993 1992
------------------------------------------------------------------------------
[S] [C] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Dividends from affiliates.......................... $36,069 $32,411 $32,058
Interest on securities purchased under resale
agreements with bank affiliate................... 2,705 2,581 2,501
Interest on loans to bank-related affiliates....... 1,459 1,368 1,849
Other income....................................... 1,244 (69) 260
Interest paid...................................... (4,898) (3,647) (4,166)
Other expenses..................................... (1,998) (1,721) (2,447)
Income tax benefit................................. 1,183 692 1,315
-------- -------- --------
Net cash provided by operating activities...... 35,764 31,615 31,370
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans to affiliates..... 19,145 (6,395) 1,900
Net (increase) decrease in other investments....... 375 226 (480)
Investment in affiliates........................... (453) (4,000)
-------- -------- --------
Net cash provided by (used in) investing
activities................................... 19,067 (6,169) (2,580)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in commercial paper................... (21,024) (10,903) (1,698)
Proceeds from issuance of long-term debt........... 24,000
Payment of long-term debt.......................... (5,000)
Proceeds from issuance of shares................... 7,087 4,158 6,185
Repurchase of common shares........................ (11,299) (421)
Dividends paid..................................... (34,387) (29,385) (26,454)
-------- -------- --------
Net cash used in financing activities.......... (59,623) (17,551) (21,967)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents...................................... (4,792) 7,895 6,823
Cash and cash equivalents at beginning of year..... 102,359 94,470 87,647
Adjustment for affiliation......................... (6)
-------- -------- --------
Cash and cash equivalents at end of year........... $97,567 $102,359 $94,470
-------- -------- --------
-------- -------- --------
Reconciliation of net income to net (Dollars in thousands)
cash provided by operating activities --------------------------
For the Years Ended December 31, 1994 1993 1992
------------------------------------------------------------------------------
Net income......................................... $90,441 $83,468 $76,298
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net income of
affiliates..................................... (57,743) (53,684) (46,535)
Amortization of excess cost over equity in
affiliates..................................... 1,131 1,130 1,131
(Increase) decrease in interest receivable....... 337 (364) 52
(Increase) decrease in other receivables......... (40) (71) 249
Increase in interest payable..................... 650
Decrease in accrued expenses..................... (33) (73) (443)
Increase in taxes payable........................ 1,671 559 618
-------- -------- --------
Total adjustments.............................. (54,677) (51,853) (44,928)
-------- -------- --------
Net cash provided by operating activities.......... $35,764 $31,615 $31,370
-------- -------- --------
-------- -------- --------
37
FIVE YEAR STATISTICAL SUMMARY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(Dollars in thousands) 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEET STATISTICS
Average loans:
Commercial (including time & demand) loans.. $1,235,800 $1,186,600 $1,116,900 $1,086,700 $1,050,900
Mortgage and construction loans............. 2,061,900 1,970,100 1,796,300 1,644,200 1,507,600
Consumer loans.............................. 467,500 490,300 524,800 575,500 623,400
----------- ----------- ----------- ----------- -----------
Total loans............................... 3,765,200 3,647,000 3,438,000 3,306,400 3,181,900
----------- ----------- ----------- ----------- -----------
Federal funds sold............................ 12,200 37,600 42,400 43,600 46,000
Securities purchased under resale agreements.. 15,700 8,700 162,100 70,400
Average securities:
U.S. government obligations................. 1,675,900 1,588,700 1,436,500 1,150,700 806,300
States and political subdivisions........... 14,100 15,600 7,300 11,800 19,000
Other investments*.......................... 10,600 7,900 5,800 7,000 11,600
----------- ----------- ----------- ----------- -----------
Total securities.......................... 1,700,600 1,612,200 1,449,600 1,169,500 836,900
----------- ----------- ----------- ----------- -----------
Total earning assets.................... $5,478,000 $5,312,500 $4,938,700 $4,681,600 $4,135,200
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Average deposits:
Noninterest-bearing deposits................ $890,100 $845,500 $746,200 $678,100 $650,900
Savings deposits............................ 2,410,400 2,390,600 2,025,200 1,550,000 1,249,900
Time deposits............................... 1,392,000 1,389,100 1,528,300 1,848,200 1,771,000
----------- ----------- ----------- ----------- -----------
Total deposits............................ $4,692,500 $4,625,200 $4,299,700 $4,076,300 $3,671,800
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Average borrowed funds:
Short-term borrowings....................... $314,400 $286,100 $308,600 $321,300 $216,100
Long-term debt.............................. 31,900 22,000 15,500 16,900 19,700
----------- ----------- ----------- ----------- -----------
Total borrowed funds...................... $346,300 $308,100 $324,100 $338,200 $235,800
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
AVERAGE RATES**
Loans:
Commercial (including time & demand) loans.. 8.3% 7.6% 7.8% 9.7% 11.3%
Mortgage and construction loans............. 8.5 8.4 9.0 10.2 10.8
Consumer loans.............................. 8.7 8.7 9.5 11.0 11.8
Total loans............................... 8.4 8.2 8.7 10.2 11.2
Federal funds sold............................ 3.9 2.9 3.6 5.9 8.0
Securities purchased under resale agreements.. 3.2 3.9 6.0 7.5
Securities:
U.S. government obligations................. 5.2 5.5 6.6 7.7 8.6
States and political subdivisions........... 7.8 8.3 10.2 10.9 11.1
Other investments*.......................... 7.2 12.3 9.2 9.1 8.6
Total securities.......................... 5.2 5.5 6.6 7.8 8.6
Composite rate earned................... 7.5% 7.3% 8.1% 9.4% 10.6%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Deposits:
Savings deposits............................ 2.7% 2.9% 3.6% 5.1% 5.5%
Time deposits............................... 4.4 4.4 5.4 7.0 8.2
Total interest-bearing deposits........... 3.3 3.4 4.4 6.2 7.1
Borrowed funds:
Short-term borrowings....................... 3.9 2.7 3.3 5.4 7.3
Long-term debt.............................. 6.7 7.0 7.8 7.7 8.1
Total borrowed funds...................... 4.2 3.0 3.5 5.5 7.3
Composite rate paid..................... 3.4% 3.4% 4.3% 6.1% 7.1%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
<FN>
*Includes interest-bearing deposits in other banks.
**Presented on a tax equivalent basis.
</TABLE>
38
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RETURN ON EQUITY AND ASSETS
Average total assets.......................... $5,801,600 $5,638,600 $5,251,000 $4,992,500 $4,411,800
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Average stockholders' equity.................. $704,400 $651,100 $573,700 $520,800 $467,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Return on average total assets................ 1.6% 1.5% 1.5% 1.4% 1.6%
Return on average stockholders' equity........ 12.8% 12.8% 13.3% 13.5% 14.7%
Average stockholders' equity as a percentage
of average total assets..................... 12.1% 11.5% 10.9% 10.4% 10.6%
Dividends paid per share as a percentage of
net income per share........................ 39.4% 37.0% 34.7% 36.8% 35.1%
Sources of Income
Commercial (including time & demand) loans.... 20.4% 18.6% 17.2% 20.3% 23.5%
Mortgage and construction loans............... 35.0 34.8 32.0 32.4 32.4
Consumer loans................................ 8.1 9.1 10.0 12.4 14.9
Federal funds sold............................ .1 .2 .3 .5 .7
Securities purchased under resale agreements.. .1 .1 1.9 1.1
Securities.................................... 17.8 18.9 19.1 17.6 14.4
----------- ----------- ----------- ----------- -----------
Total interest income..................... 81.4 81.7 78.7 85.1 87.0
Trust division services....................... 8.7 8.8 8.0 6.9 6.9
Other income.................................. 9.9 9.5 13.3 8.0 6.1
----------- ----------- ----------- ----------- -----------
Total income.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME
(Taxable Equivalent)
Interest earned:
Loans....................................... $318,132 $298,612 $300,445 $338,471 $356,762
Federal funds sold.......................... 479 1,107 1,530 2,588 3,669
Securities purchased under resale agreements 499 343 9,731 5,253
Taxable securities.......................... 87,200 88,185 95,398 89,359 69,980
Tax-exempt securities....................... 1,099 1,289 748 1,285 2,113
----------- ----------- ----------- ----------- -----------
Total interest income..................... 406,910 389,692 398,464 441,434 437,777
----------- ----------- ----------- ----------- -----------
Interest paid:
Savings deposits............................ 65,488 68,587 72,866 78,848 68,601
Time deposits............................... 60,709 61,511 81,884 130,180 144,994
----------- ----------- ----------- ----------- -----------
Total interest-bearing deposits........... 126,197 130,098 154,750 209,028 213,595
Short-term borrowings....................... 12,111 7,824 10,150 17,236 15,729
Long-term debt.............................. 2,125 1,539 1,207 1,298 1,589
----------- ----------- ----------- ----------- -----------
Total interest expense.................... 140,433 139,461 166,107 227,562 230,913
----------- ----------- ----------- ----------- -----------
Net interest income..................... $266,477 $250,231 $232,357 $213,872 $206,864
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
39
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(Dollars in thousands, except per share
data) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME........................ $262,956 $246,482 $228,540 $208,609 $200,086
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME................................. $90,441 $83,468 $76,298 $70,562 $68,856
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME PER SHARE OF COMMON STOCK....... $1.88 $1.73 $1.67 $1.56 $1.55
TOTAL ASSETS............................... $5,938,225 $5,789,620 $5,459,577 $5,216,802 $4,885,599
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LONG-TERM DEBT............................. $31,470 $32,350 $15,108 $16,609 $17,298
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PROVISION FOR LOAN LOSSES.................. $7,056 $12,969 $45,346 $20,850 $15,001
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PER SHARE CASH DIVIDENDS
Common..................................... $.74 $.64 $.58 $.57 1/3 $.54 1/3
CASH DIVIDENDS DECLARED AND PAID
On common stock............................ $34,982 $30,173 $26,454 $25,936 $23,624
YEAR END LOAN DATA
Commercial, financial and agricultural..... $1,311,064 $1,240,951 $1,126,191 $1,100,212 $1,142,359
Real estate-construction................... 318,531 318,401 317,074 330,276 320,918
Real estate-mortgage:
Commercial............................... 832,290 728,290 613,903 542,582 474,219
1-4 family residential................... 866,004 831,236 814,037 745,636 669,190
Home equity lines........................ 132,512 135,917 121,049 118,400 112,362
Consumer................................... 477,694 466,552 497,220 537,831 593,762
----------- ----------- ----------- ----------- -----------
Total loans............................ 3,938,095 3,721,347 3,489,474 3,374,937 3,312,810
Less:
Allowance for loan losses................ (91,257) (92,567) (88,261) (65,932) (54,471)
----------- ----------- ----------- ----------- -----------
Loans, net............................. $3,846,838 $3,628,780 $3,401,213 $3,309,005 $3,258,339
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
40
FIVE YEAR SUMMARY OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months Ended
For the Years Ended December 31, December 31,
----------------------------------------------------------- -----------------------
(Dollars in thousands) 1994 1993 1992 1991 1990 1994 1993
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............ $315,094 $295,450 $297,006 $333,767 $350,831 $85,740 $74,094
Interest and dividends on securities.. 87,766 88,805 95,695 89,929 70,898 21,593 22,512
Other interest income................. 529 1,688 1,946 12,475 9,270 28 160
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest income............. 403,389 385,943 394,647 436,171 430,999 107,361 96,766
----------- ----------- ----------- ----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits.................. 126,197 130,098 154,750 209,028 213,595 33,875 31,884
Interest on short-term borrowings..... 12,111 7,824 10,150 17,236 15,729 3,846 1,943
Interest on long-term debt............ 2,125 1,539 1,207 1,298 1,589 526 540
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest expense............ 140,433 139,461 166,107 227,562 230,913 38,247 34,367
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME................... 262,956 246,482 228,540 208,609 200,086 69,114 62,399
Provision for loan losses............. 7,056 12,969 45,346 20,850 15,001 2,471 3,207
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES....................... 255,900 233,513 183,194 187,759 185,085 66,643 59,192
----------- ----------- ----------- ----------- ----------- ----------- -----------
NONINTEREST INCOME
Trust division services............... 43,360 41,673 39,903 35,353 33,968 10,759 11,203
Service charges on deposit accounts... 15,655 16,367 15,140 13,233 11,093 3,951 4,141
Other income.......................... 33,171 28,273 51,945 27,679 18,950 7,437 7,509
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total noninterest income.......... 92,186 86,313 106,988 76,265 64,011 22,147 22,853
----------- ----------- ----------- ----------- ----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits........ 110,870 106,437 95,086 87,699 82,617 27,518 26,963
Net occupancy and equipment expenses.. 32,227 29,813 27,089 26,153 25,539 8,303 7,965
FDIC insurance premium expense........ 10,911 10,699 9,883 9,034 4,433 2,725 2,683
Other expenses........................ 47,192 36,906 35,348 29,542 29,372 13,107 10,156
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total noninterest expenses........ 201,200 183,855 167,406 152,428 141,961 51,653 47,767
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes............ 146,886 135,971 122,776 111,596 107,135 37,137 34,278
Applicable income taxes............... 56,445 52,503 46,478 41,034 38,279 14,278 12,821
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCOME............................ $90,441 $83,468 $76,298 $70,562 $68,856 $22,859 $21,457
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
41
PRINCIPAL AFFILIATES
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1994
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[logo] CARL A. TENHOOPEN, JR. GEORGE R. BENSON, JR. ASSETS LIABILITIES AND EQUITY
THE ANNAPOLIS Chairman of the Board CLARENCE A. BLACKWELL -------------------------- -----------------------------
BANKING AND TRUST ROBERT E. HENEL, JR. BENNETT CRAIN, JR. Cash and due Total deposits $223,983
COMPANY President and RALPH W. CROSBY from banks $14,824
Main Street and Chief Executive Officer FRANCIS E. GARDINER, JR. Short-term
Church Circle CAROLYN D. O'LEARY ROBERT E. HENEL, JR. Earning assets 247,344 borrowings 14,515
Annapolis, Executive Vice President JOHN K. HOPKINS
Maryland 21401 ERNEST R. AMADIO JOHN R. MOSES Allowance for Other liabilities and
410/268-3366 Senior Vice President JAMES O. OLFSON loan losses (2,598) accrued expenses 1,408
11 Offices WILLIAM A. BUSIK JOHN W. RENARD
Senior Vice President PATRICIA A. ROCHE, PH.D. Other assets 6,000 Long-term debt -
RANDALL M. ROBEY CARL A. TENHOOPEN, JR. ---------
Senior Vice President THOMAS O. TILGHMAN, JR. Stockholders' equity 25,664
and ---------
Chief Financial Officer Total liabilities
LYNDALL R. WARD Total assets $265,570 and equity $265,570
Senior Vice President --------- ---------
PAMELA A. BOWEN --------- ---------
Vice President and
Corporate Secretary Net income $3,713
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] ROBERT E. DICKERSON THURMAN ADAMS, JR. ASSETS LIABILITIES AND EQUITY
BALTIMORE TRUST President and EUGENE BUNTING -------------------------- -----------------------------
COMPANY Chief Executive Officer ROBERT E. DICKERSON Cash and due Total deposits $188,557
One West Church D. BRENT HURLEY DAVID C. DOANE from banks $6,900
Street Senior Vice President SALLY W. HICKMAN Short-term
Selbyville, B. PHILIP LYNCH, JR. D. BRENT HURLEY Earning assets 223,405 borrowings 9,790
Delaware 19975 Vice President and RICHARD I. LEWIS
302/436-8236 Cashier JAY C. MURRAY Allowance for Other liabilities and
5 Offices JANET L. MCCABE WILLIAM O. MURRAY loan losses (2,631) accrued expenses 1,673
Vice President and P. COLEMAN TOWNSEND, JR.
Secretary PAUL G. TOWNSEND Other assets 6,082 Long-term debt -
RUSSELL D. BRITTINGHAM ---------
Vice President and Stockholders' equity 33,736
Trust Officer ---------
KENNETH R. GRAHAM
Vice President Total liabilities
Total assets $233,756 and equity $233,756
--------- ---------
--------- ---------
Net income $4,050
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] WESLEY E. HUGHES, JR. WARREN E. BARLEY ASSETS LIABILITIES AND EQUITY
BANK OF SOUTHERN President and KENNETH O. DIXON -------------------------- -----------------------------
MARYLAND Chief Executive Officer WESLEY E. HUGHES, JR. Cash and due Total deposits $134,816
304 Charles Street JAMES E. SHOOK EVELYN SUSAN HUNGERFORD from banks $7,308
LaPlata, Senior Vice President EDWARD L. SANDERS, JR. Short-term
Maryland 20646 JAMES F. DIMISA ROBERT J. SCHICK Earning assets 146,345 borrowings -
301/934-1000 Vice President and JOHN L. SPRAGUE
6 Offices Cashier Allowance for Other liabilities and
J. WAYNE WELSH loan losses (1,699) accrued expenses 835
Vice President
DIANE M. KESTLER Other assets 4,391 Long-term debt -
Controller ---------
Stockholders' equity 20,694
---------
Total liabilities
Total assets $156,345 and equity $156,345
--------- ---------
--------- ---------
Net income $2,555
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] HAROLD J. KAHL GORDON F. BOWEN ASSETS LIABILITIES AND EQUITY
CALVERT BANK AND Chairman of the Board, MARY E. EISENMAN -------------------------- -----------------------------
TRUST COMPANY President and BEDFORD C. GLASCOCK Cash and due Total deposits $122,019
Calvert Village Chief Executive Officer ALLEN S. HANDEN from banks $4,182
Shopping Center EARL M. THOMPSON HAROLD J. KAHL Short-term
P.O. Box 590 Chairman of the LARRY D. KELLEY Earning assets 133,878 borrowings 3,075
Prince Frederick, Executive Committee MAURICE T. LUSBY, III
Maryland 20678 HARRY B. ZINN JOHN D. MURRAY Allowance for Other liabilities and
410/535-3535 Executive Vice President GUFFRIE M. SMITH, JR. loan losses (1,618) accrued expenses 670
5 Offices R. LINDA HIPSLEY W. DAVID SNEADE
Vice President and EARL M. THOMPSON Other assets 2,606 Long-term debt -
Treasurer B. EDGAR WOODBURN ---------
LEONARD J. CLEMENTS Stockholders' equity 13,284
Vice President ---------
KIMBERLEY L. GREEN
Vice President and Total liabilities
Controller Total assets $139,048 and equity $139,048
JANICE M. LOMAX --------- ---------
Corporate Secretary --------- ---------
JUDITH T. MCMANUS
Vice President and Net income $2,738
Assistant Corporate ---------
Secretary ---------
ROBERT A. RIFFE
Assistant Vice President
PATRICIA A. DIEDRICH
Assistant Vice President
</TABLE>
42
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1994
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[logo] R. RAYMOND TARRACH DAVID O. V. BARROLL ASSETS LIABILITIES AND EQUITY
THE CHESTERTOWN President and JAMES B. CLEMENTS -------------------------- -----------------------------
BANK OF MARYLAND Chief Executive Officer EDWIN C. FRY Cash and due Total deposits $137,599
211 High Street LARRY L. RASH EDWARD S. GILLESPIE from banks $ 6,232
Chestertown, Senior Vice President GEORGE H. GODFREY Short-term
Maryland 21620 and Senior Loan Officer C. DAVID HAACKE Earning assets 156,788 borrowings 4,020
410/778-2400 SHARON A. USILTON FRANKLIN T. HOGANS
8 Offices Vice President and WILLIAM M. KNIGHT Allowance for Other liabilities and
Senior Administrative R. CLAYTON MITCHELL loan losses (1,680) accrued expenses 1,414
Officer CHARLES A. SCHELTS
R. RAYMOND TARRACH Other assets 4,396 Long-term debt -
---------
Stockholders' equity 22,703
---------
Total liabilities
Total assets $165,736 and equity $165,736
--------- ---------
--------- ---------
Net income $2,791
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] J. DONALD HENYON WILLIAM H. CARTER, JR. ASSETS LIABILITIES AND EQUITY
THE CITIZENS Chairman of the Board CHARLES E. CASTLE, JR. -------------------------- -----------------------------
NATIONAL BANK MARTIN A. SHARPLESS MARTIN L. GOOZMAN Cash and due Total deposits $388,051
Fourth and President and J. DONALD HENYON from banks $24,411
Main Streets Chief Executive Officer THOMAS E. LYNCH Short-term
Laurel, RONALD P. GUDBRANDSEN FRED L. MCKEE Earning assets 436,155 borrowings 20,260
Maryland 20707 Executive Vice President HUGH W. MOHLER
301/725-3100 and Senior Loan Officer F. ALLEN MOTHERSHEAD Allowance for Other liabilities and
301/953-3044 CHARLES M. HEISHMAN MICHELE K. RYAN loan losses (5,952) accrued expenses 1,849
410/792-7626 Executive Vice President MARTIN A. SHARPLESS
17 Offices and Cashier Other assets 12,298 Long-term debt -
---------
Stockholders' equity 56,752
---------
Total liabilities
Total assets $466,912 and equity $466,912
--------- ---------
--------- ---------
Net income $6,916
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] S. DELL FOXX THOMAS F. BRADLEE ASSETS LIABILITIES AND EQUITY
COUNTY BANKING & President and BRUCE A. FINK -------------------------- -----------------------------
TRUST Chief Executive Officer CHARLES J. FOLEY, JR., Cash and due Total deposits $228,455
COMPANY BRUCE A. FINK M.D. from banks $7,948
123 North Street Executive Vice President S. DELL FOXX Short-term
P.O. Box 100 RAYMOND A. HAMM, JR. SAMUEL M. GAWTHROP, JR. Earning assets 249,712 borrowings 6,940
Elkton, Executive Vice President HARRY E. HAMMOND
Maryland 21921 RALPH R. LANPHAR Allowance for Other liabilities and
410/398/2600 HOWARD D. MCFADDEN loan losses (3,176) accrued expenses 1,219
9 Offices G. EUGENE MACKIE
F. GROVE MILLER Other assets 8,186 Long-term debt -
---------
Stockholders' equity 26,056
---------
Total liabilities
Total assets $262,670 and equity $262,670
--------- ---------
--------- ---------
Net income $4,105
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] ROBERT L. SIMPSON WILLIAM F. BERNART ASSETS LIABILITIES AND EQUITY
THE EASTVILLE President and CHARLES W. DICKINSON, IV -------------------------- -----------------------------
BANK Chief Executive Officer CROXTON GORDON Cash and due Total deposits $20,371
16485 Lankford CHARLES W. DICKINSON, IV RUSSELL KELLAM from banks $612
Highway Vice President and KATHERINE T. MEARS Short-term
P.O. Box 7 Secretary J. THOMAS SAVAGE Earning assets 26,249 borrowings 625
Eastville, ROBERT L. SIMPSON
Virginia 23347 Allowance for Other liabilities and
804/678-5187 loan losses (513) accrued expenses 99
1 Office
Other assets 767 Long-term debt -
---------
Stockholders' equity 6,020
---------
Total liabilities
Total assets $27,115 and equity $27,115
--------- ---------
--------- ---------
Net income $600
---------
---------
</TABLE>
43
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1994
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[logo] GEORGE N. MCMATH L. FRANKLIN DAVIS ASSETS LIABILITIES AND EQUITY
FARMERS & Chairman of the Board M. CARTER DAVIS, JR. -------------------------- -----------------------------
MERCHANTS BANK- H. B. REW, JR. JOHN H. DUER, III Cash and due Total deposits $112,113
EASTERN SHORE President and DONALD JOSEPH LEONARD from banks $5,703
25275 Lankford Chief Executive Officer W. REVELL LEWIS, III Short-term
Highway GENE H. CROCKETT NORMAN JAMES MARSHALL Earning assets 127,232 borrowings 700
P.O. Box 623 Executive Vice President GEORGE N. MCMATH
Onley, TED D. DUER H. B. REW, JR. Allowance for Other liabilities and
Virginia 23418 Senior Vice President, THOMAS N. RICHARDSON loan losses (1,540) accrued expenses 660
804/787-4111 Cashier and Secretary RALPH L. SELBY, JR.
804/824-3052 ELIZABETH A. KERNS RICHARD W. YOUNG Other assets 3,821 Long-term debt -
4 Offices Vice President and ---------
Assistant Secretary Stockholders' equity 21,743
---------
Total liabilities
Total assets $135,216 and equity $135,216
--------- ---------
--------- ---------
Net income $2,468
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] ROBERT L. CUNNINGHAM FRANCIS X. COSGROVE ASSETS LIABILITIES AND EQUITY
THE FIDELITY BANK Chairman of the Board C. JOSEPH CUNNINGHAM, III -------------------------- -----------------------------
59 East Main C. JOSEPH CUNNINGHAM, III ROBERT L. CUNNINGHAM Cash and due Total deposits $30,932
Street President and JAMES P. KREILING from banks $1,449
Frostburg, Chief Executive Officer HUGH A. MCMULLEN Short-term
Maryland 21532 JAMES P. KREILING JAMES A. POLAND Earning assets 33,389 borrowings -
301/689-1111 Senior Vice President MATTHEW SKIDMORE, SR.
3 Offices F. EMMETT SMITH Allowance for Other liabilities and
loan losses (347) accrued expenses 159
Other assets 850 Long-term debt -
---------
Stockholders' equity 4,250
---------
Total liabilities
Total assets $35,341 and equity $35,341
--------- ---------
--------- ---------
Net income $283
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] JOSEPH M. GOUGH, JR. SAMUEL M. BAILEY, JR. ASSETS LIABILITIES AND EQUITY
THE FIRST Chairman of the Board MARTIN A. BARLEY -------------------------- -----------------------------
NATIONAL BANK JOHN A. CANDELA JOSEPH E. BELL II Cash and due Total deposits $210,218
OF ST. MARY'S President and WALTER R. BLAIR, JR. from banks $6,909
5 East Park Avenue Chief Executive Officer ELMER BROWN Short-term
P.O. Box 655 GEORGE A. FERGUSON EDWARD S. BURROUGHS Earning assets 233,934 borrowings 1,603
Leonardtown, Vice President, Cashier, JOHN A. CANDELA
Maryland 20650 Senior Operations Officer, FORD L. DEAN Allowance for Other liabilities and
301/475-8081 and Secretary to the Board GEORGE A. FERGUSON loan losses (2,549) accrued expenses 1,214
7 Offices DAN KUBICAN JOSEPH M. GOUGH, JR.
Vice President and NELL Q. LEVAY Other assets 5,596 Long-term debt -
Senior Loan Officer JOSEPH F. MITCHELL ---------
GENEVIEVE M. HUNT EDMUND W. WETTENGEL Stockholders' equity 30,855
Vice President and ---------
Controller
Total liabilities
Total assets $243,890 and equity $243,890
--------- ---------
--------- ---------
Net income $5,452
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] PAUL E. PEAK THOMAS A. BURKE ASSETS LIABILITIES AND EQUITY
THE FOREST HILL President and HARON DAHAN -------------------------- -----------------------------
STATE BANK Chief Executive Officer JOHN B. DINNING Cash and due Total deposits $191,661
130 South Bond RUSSELL R. CULLUM ANN K. EDIE from banks $7,682
Street Executive Vice President HENRY S. HOLLOWAY Short-term
Bel Air, MICHAEL F. ALLEN RICHARD E. KINARD Earning assets 215,643 borrowings 14,437
Maryland 21014 Senior Vice President RALPH L. KLEIN
410/838/6131 DONALD E. KERR, JR. C. RAY MANN Allowance for Other liabilities and
Baltimore: Senior Vice President PAUL E. PEAK loan losses (2,355) accrued expenses 1,109
410/879/1475 BARBARA LEE RUDOLPH
7 Offices R. EDWARD SCHUELER, JR. Other assets 7,267 Long-term debt -
F. D. WHITEFORD ---------
Stockholders' equity 21,030
---------
Total liabilities
Total assets $228,237 and equity $228,237
--------- ---------
--------- ---------
Net income $3,183
---------
---------
</TABLE>
44
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1994
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[logo] ROBERT E. GEARINGER W. BERT ANDERSON ASSETS LIABILITIES AND EQUITY
FREDERICKTOWN BANK Chairman of the Board and MARVIN E. AUSHERMAN -------------------------- -----------------------------
& Chief Executive Officer GEORGE W. BRUCHEY Cash and due Total deposits $167,662
TRUST COMPANY J. BRIAN GAENG DAVID P. CHAPIN from banks $6,272
30 North Market President CALEB C. EWING, JR. Short-term
Street ROBERT M. ESLINGER J. BRIAN GAENG Earning assets 187,832 borrowings 4,263
Frederick, Senior Vice President ROBERT E. GEARINGER
Maryland 21701 ELIZABETH M. GROSSNICKLE RICHARD L. KESSLER Allowance for Other liabilities and
301/662-8231 Vice President and CHRISTOPHER T. KLINE loan losses (3,701) accrued expenses 1,630
7 Offices Treasurer DAVID C. MEADOWS
PETER H. PLAMONDON Other assets 6,368 Long-term debt -
KLARE S. SUNDERLAND ---------
Stockholders' equity 23,216
---------
Total liabilities
Total assets $196,771 and equity $196,771
--------- ---------
--------- ---------
Net income $2,540
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
[logo] H. FURLONG BALDWIN H. FURLONG BALDWIN ASSETS LIABILITIES AND EQUITY
MERCANTILE-SAFE Chairman of the Board and THOMAS M. BANCROFT, JR. -------------------------- -----------------------------
DEPOSIT & Chief Executive Officer RICHARD O. BERNDT Cash and due Total deposits $1,692,419
TRUST COMPANY EDWARD K. DUNN, JR. JAMES A. BLOCK, M.D. from banks $171,482
2 Hopkins Plaza Vice Chairman of GEORGE L. BUNTING, JR. Short-term
Baltimore, the Board DOUGLAS W. DODGE Earning assets 2,048,993 borrowings 297,328
Maryland 21201 BRIAN B. TOPPING EDWARD K. DUNN, JR.
410/237/5900 Vice Chairman of B. LARRY JENKINS Allowance for Other liabilities and
17 Offices the Board ROBERT D. KUNISCH loan losses (41,650) accrued expenses 30,643
DOUGLAS W. DODGE WILLIAM J. MCCARTHY
President and MORRIS W. OFFIT Other assets 82,121 Long-term debt -
Chief Operating Officer CHRISTIAN H. POINDEXTER ----------
KENNETH A. BOURNE, JR. WILLIAM C. RICHARDSON Stockholders' equity 240,556
Executive Vice President BISHOP L. ROBINSON ----------
JOSEPH A. DIGUARDO DONALD J. SHEPARD
Executive Vice President BRIAN B. TOPPING Total liabilities
JAMES D. HARDESTY CALMAN J. ZAMOISKI, JR. Total assets $2,260,946 and equity $2,260,946
Executive Vice President ---------- ----------
HUGH W. MOHLER ---------- ----------
Executive Vice President
J. MARSHALL REID Net income $34,714
Executive Vice President ----------
JACK E. STEIL ----------
Executive Vice President
DONALD J. TRUFANT
Executive Vice President
JAY M. WILSON
Executive Vice President
---------------------------------------------------------------------------------------------------------------------------------
[logo] J. WILLIAM POOLE LELAND H. BAKER ASSETS LIABILITIES AND EQUITY
THE NATIONAL Chairman of the Board JOHN H. CHICHESTER -------------------------- -----------------------------
BANK OF WILLIAM B. YOUNG GEORGE C. FREEMAN Cash and due Total deposits $209,586
FREDERICKSBURG President and THOMAS C. GOODLOE from banks $14,445
2403 Fall Hill Chief Executive Officer DUVAL Q. HICKS, JR. Short-term
Avenue WILLIAM E. MILBY JOHN A. JAMISON Earning assets 217,895 borrowings 6,600
Fredericksburg, Executive Vice President CHARLES T. LEWIS
Virginia 22401 and CHARLES A. MCCORMACK Allowance for Other liabilities and
703/899-3200 Cashier WILLIAM E. MILBY loan losses (2,587) accrued expenses 1,966
7 Offices OLLIE K. STEPHENS J. WILLIAM POOLE
Senior Vice President FRANK C. SILVEY Other assets 9,645 Long-term debt -
LLOYD B. HARRISON WILLIAM B. YOUNG ---------
Senior Vice President Stockholders' equity 21,246
---------
Total liabilities
Total assets $239,398 and equity $239,398
--------- ---------
--------- ---------
Net income $2,325
---------
---------
</TABLE>
45
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1994
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[logo] HUGH W. MOHLER CHARLES A. BRUCE, JR. ASSETS LIABILITIES AND EQUITY
PENINSULA Chairman of the Board FRANK B. HANNA, SR. -------------------------- -----------------------------
BANK JEFFREY F. TURNER HENRY H. HANNA, III Cash and due Total deposits $300,730
11738 Somerset President and CHARLES R. JENKINS, SR. from banks $13,609
Avenue Chief Executive Officer JOHN R. LERCH Short-term
P.O. Box 219 JOHN S. DIPIETRO HUGH W. MOHLER Earning assets 339,839 borrowings 18,480
Princess Anne, Executive Vice President GEORGE A. PURNELL
Maryland 21853 and Secretary E. SCOTT TAWES Allowance for Other liabilities and
410/651-2400 WILLIAM T. STURGIS CASEY I. TODD loan losses (5,840) accrued expenses 3,272
16 Offices Executive Vice President, JEFFREY F. TURNER
Senior Loan Officer and ROBERT B. TWILLEY, JR. Other assets 13,453 Long-term debt 103
Regional Officer WADE D. WARD ---------
MORRIS A. BOZMAN Stockholders' equity 38,476
Senior Vice President and ---------
Regional Officer
JERRY C. BRIELE Total liabilities
Vice President and Total assets $361,061 and equity $361,061
Treasurer --------- ---------
JEFFREY M. SMITH --------- ---------
Vice President and
Regional Officer Net income $5,405
W. THOMAS MEARS ---------
Assistant Vice President ---------
and
Assistant Regional Officer
---------------------------------------------------------------------------------------------------------------------------------
THE PEOPLES JEFFREY N. HEFLEBOWER RICHARD A. EDWARDS ASSETS LIABILITIES AND EQUITY
BANK OF President and JEFFREY N. HEFLEBOWER -------------------------- -----------------------------
MARYLAND Chief Executive Officer CALVERT C. MERRIKEN, JR. Cash and due Total deposits $67,551
205 Market Street E. JOHN MILLS from banks $2,859
Denton, JOSEPH D. QUINN Short-term
Maryland 21629 HARRY H. RIECK, JR. Earning assets 72,889 borrowings 1,425
410/479-2600 A. ORRELL SAULSBURY, III
5 Offices RICHARD T. WARFIELD Allowance for Other liabilities and
loan losses (892) accrued expenses 496
Other assets 2,934 Long-term debt -
---------
Stockholders' equity 8,318
---------
Total liabilities
Total assets $77,790 and equity $77,790
--------- ---------
--------- ---------
Net income $1,053
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
POTOMAC JAMES J. CROMWELL JOSEPH L. ALFANDRE ASSETS LIABILITIES AND EQUITY
VALLEY BANK Chairman of the Board KENNETH A. BOURNE, JR. -------------------------- -----------------------------
702 Russell Avenue KENNETH C. COOK STEPHEN E. CHASE Cash and due Total deposits $141,558
Gaithersburg, President and KENNETH C. COOK from banks $6,720
Maryland 20877 Chief Executive Officer JAMES J. CROMWELL Short-term
301/963-7600 R. DENNIS HOMBERG R. DENNIS HOMBERG Earning assets 154,863 borrowings 5,720
6 Offices Vice Chairman of the Board BRUCE MACKEY
FRANCIS R. MASSICOTTE EDWARD J. MILLER Allowance for Other liabilities and
Senior Vice President and WILLIAM C. MOYER loan losses (2,143) accrued expenses 774
Corporate Secretary REX L. STURM
WILLIAM W. WEST Other assets 3,033 Long-term debt -
Senior Vice President and ---------
Chief Lending Officer Stockholders' equity 14,421
ARREL E. GODFREY ---------
Senior Vice President
Total liabilities
Total assets $162,473 and equity $162,473
--------- ---------
--------- ---------
Net income $1,922
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
ST. MICHAELS WILLIAM W. DUNCAN, JR. WILLIAM W. DUNCAN, JR. ASSETS LIABILITIES AND EQUITY
BANK President and PAMELA P. GARDNER -------------------------- -----------------------------
213 Talbot Street Chief Executive Officer MAURICE E. NEWNAM, III Cash and due Total deposits $96,684
P.O. Box 70 R. IVAN THAMERT NORMAN M. SHANNAHAN, III from banks $2,532
St. Michaels, Executive Vice President R. IVAN THAMERT Short-term
Maryland 21663 CLIFFORD L. HILK JOHN R. VALLIANT Earning assets 106,562 borrowings 1,930
410/745-5091 Senior Vice President and ROBERT B. VOJVODA
5 Offices Senior Loan Officer DAVID N. WEISE Allowance for Other liabilities and
ANITA N. PARROTT DONALD R. YOUNG loan losses (3,864) accrued expenses 593
Senior Vice President and
Chief Financial Officer Other assets 3,633 Long-term debt -
---------
Stockholders' equity 9,656
---------
Total liabilities
Total assets $108,863 and equity $108,863
--------- ---------
--------- ---------
Net income $1,355
---------
---------
</TABLE>
46
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1994
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[logo] JOHN C. SCHAEFFER ROBERT R. BOWMAN ASSETS LIABILITIES AND EQUITY
WESTMINSTER BANK Chairman of the Board DANIEL S. DULANY -------------------------- -----------------------------
AND TRUST FERDINAND A. RUPPEL, JR. ROBERT L. JONES Cash and due Total deposits $195,134
COMPANY OF President and JOHN E. MCGINNIS from banks $7,880
CARROLL COUNTY Chief Executive Officer G. THOMAS MULLINIX Short-term
71 East Main MARLIN L. RITTASE MARLIN L. RITTASE Earning assets 213,735 borrowings 4,972
Street Executive Vice President FERDINAND A. RUPPEL, JR.
Westminster, JOHN C. SCHAEFFER Allowance for Other liabilities and
Maryland 21157 MERHLE B. WARFIELD, JR. loan losses (2,702) accrued expenses 747
410/848-9300
9 Offices Other assets 5,592 Long-term debt -
---------
Stockholders' equity 23,652
---------
Total liabilities
Total assets $224,505 and equity $224,505
--------- ---------
--------- ---------
Net income $2,960
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
MERCANTILE PAUL W. PARKS H. FURLONG BALDWIN ASSETS LIABILITIES AND EQUITY
MORTGAGE President and RICHARD O. BERNDT -------------------------- -----------------------------
CORPORATION Chief Executive Officer DOUGLAS W. DODGE Cash and due Total deposits $-
20 South Charles MICHAEL S. CORDES EDWARD K. DUNN, JR. from banks $4,026
Street, 3rd Floor Executive Vice President WILLIAM J. MCCARTHY Short-term
Baltimore, and PAUL W. PARKS Earning assets 32,911 borrowings 30,500
Maryland 21201 Chief Operating Officer CHRISTIAN H. POINDEXTER
410/347-8940 KEVIN J. MICHNO DONALD J. SHEPARD Allowance for Other liabilities and
14 Offices Senior Vice President CALMAN J. ZAMOISKI, JR. loan losses (1,219) accrued expenses 2,937
JANET M. CHANCE
Vice President for Quality Other assets 4,213 Long-term debt -
Control and Compliance ---------
NANCY M. HAUPRICH Stockholders' equity 6,494
Vice President for ---------
Construction
KEVIN P. MCCARTHY Total liabilities
Vice President for Total assets $39,931 and equity $39,931
Construction --------- ---------
CHARLES RILEY --------- ---------
Vice President for Realtor
Production Net income $1,100
JOHN M. SCHWANKY ---------
Vice President for ---------
Servicing
SALLI M. SEIFERT
Vice President for
Administration
---------------------------------------------------------------------------------------------------------------------------------
MBC AGENCY, INC. KENNETH A. BOURNE, JR. H. FURLONG BALDWIN ASSETS LIABILITIES AND EQUITY
2 Hopkins Plaza President KENNETH A. BOURNE, JR. -------------------------- -----------------------------
Baltimore, JOHN A. O'CONNOR, JR. EDWARD K. DUNN, JR. Cash and due Total deposits $-
Maryland 21201 Secretary WILLIAM J. MCCARTHY from banks $330
410/347-8294 WILLIAM T. SKINNER, JR. Short-term
Treasurer Earning assets 2,354 borrowings -
DENNIS W. KREINER
Assistant Secretary Allowance for Other liabilities and
loan losses - accrued expenses 1,433
Other assets 30 Long-term debt -
---------
Stockholders' equity 1,281
---------
Total liabilities
Total assets $2,714 and equity $2,714
--------- ---------
--------- ---------
Net income $272
---------
---------
---------------------------------------------------------------------------------------------------------------------------------
MBC REALTY, INC. JOSEPH A. DIGUARDO H. FURLONG BALDWIN ASSETS LIABILITIES AND EQUITY
2 Hopkins Plaza President JOSEPH A. DIGUARDO -------------------------- -----------------------------
Baltimore, RAY W. HAMM, SR. DOUGLAS W. DODGE Cash and due Total deposits $-
Maryland 21201 Executive Vice President EDWARD K. DUNN, JR. from banks $563
410/237-5377 and General Manager Short-term
VERNON D. CONWAY Earning assets - borrowings -
Senior Vice President
JOHN A. O'CONNOR, JR. Allowance for Other liabilities and
Secretary loan losses - accrued expenses 2,027
PERRY H. SOUZIS
Treasurer Other assets 16,617 Long-term debt 2,367
LARRY D. SMITH ---------
Assistant Treasurer Stockholders' equity 12,786
---------
Total liabilities
Total assets $17,180 and equity $17,180
--------- ---------
--------- ---------
Net income $1,312
---------
---------
</TABLE>
47
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
[dagger]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, a private
financial management company
[dagger]DOUGLAS W. DODGE
Vice Chairman of the Board of Mercantile Bankshares Corporation and President
of Mercantile-Safe Deposit & Trust Company
[dagger]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, providing individual life insurance and a Senior Vice
President of AEGON USA, Inc., the parent company of Monumental Life Insurance
Company
[dagger]*[solid triangle]ROBERT D. KUNISCH
Chairman of the Board, President and Chief Executive Officer of PHH
Corporation, transnational business services
[dagger]WILLIAM J. MCCARTHY
Principal of William J. McCarthy, P.C., a Partner in the law firm of Venable,
Baetjer and Howard, LLP
[dagger][solid triangle]MORRIS W. OFFIT
Chairman of the Board and Chief Executive Officer of OFFITBANK, a private bank
offering integrated investment services
[dagger][solid triangle]CHRISTIAN H. POINDEXTER
Chairman of the Board and Chief Executive Officer of Baltimore Gas & Electric
Company, a gas and electric utility
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
[solid triangle]DONALD J. SHEPARD
Chairman of the Board, President and Chief Executive Officer of AEGON USA,
Inc., a holding company owning insurance and insurance related companies
BRIAN B. TOPPING
Vice President of Mercantile Bankshares Corporation and a Vice Chairman of the
Board of Mercantile-Safe Deposit & Trust Company
[dagger][solid triangle]CALMAN J. ZAMOISKI, JR.
Chairman of the Board of Independent Distributors, Incorporated, general
wholesale distributors
[dagger]Member of Executive Committee
*Member of Audit Committee
[solid triangle]Member of Compensation Committee
Listing as of March 13, 1995
48
PAGE
(The following information appears on the inside back cover of the Annual
Report to Shareholders)
CORPORATE INFORMATION
CORPORATE PROFILE
Mercantile Bankshares Corporation is a multibank holding company organized
in 1969 under the laws of Maryland. On January 1, 1995, its principal
affiliates were twenty banks and a mortgage banking company. The affiliated
banks are engaged in a general personal and corporate banking business. The
Corporation's largest bank, Mercantile-Safe Deposit & Trust Company, also
provides a full range of trust services.
PERSONAL BANKING
The banking affiliates of Mercantile Bankshares Corporation have 155 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.
ACCOUNTANTS
Coopers & Lybrand L.L.P.
217 East Redwood Street
Baltimore, Maryland 21202-3316
ANNUAL MEETING OF SHAREHOLDERS
10:30 A.M., Wednesday,
April 26, 1995
2 Hopkins Plaza, Baltimore, Maryland
ANNUAL REPORT TO SECURITIES & EXCHANGE COMMISSION
Form 10-K will be furnished to stockholders without charge upon written
request. Exhibits thereto furnished upon payment of $3.00 per set. Direct
request to Secretary.
HEADQUARTERS
2 Hopkins Plaza, P.O. Box 1477
Baltimore, Maryland 21203
410/237-5900
STOCK INFORMATION
The common stock of Mercantile Bankshares Corporation is traded on the Nasdaq
Stock Market under the symbol MRBK.
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
AUTOMATIC DIVIDENT 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
PAGE
(The following information appears on the back cover of the Annual Report
to Shareholders)
[LOGO] MERCANTILE BANKSHARES CORPORATION
Baltimore, Maryland
PAGE
______________________________________________________________________________
APPENDIX A
Chart A-1 located on page 4 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a line graph
depicting the increase in year end total assets of Mercantile Bankshares
Corporation from December 31, 1990 to December 31, 1994:
TOTAL ASSETS
(Dollars in millions) December 31
1990 1991 1992 1993 1994
Total Assets........$4,886 $5,217 $5,460 $5,790 $5,938
------------------------------------------------------------------------------
Chart A-2 located on page 4 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a line graph
depicting the increase in annual net income of Mercantile Bankshares
Corporation from 1990 to 1994:
NET INCOME
(Dollars in millions)
5 Year Compound Growth Rate: 6.4%
1990 1991 1992 1993 1994
Net Income.......... $68.9 $70.6 $76.3 $83.5 $90.4
------------------------------------------------------------------------------
Chart A-3 located on page 4 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a line graph
depicting the increase in annual earnings per share of Mercantile Bankshares
Corporation from 1990 to 1994:
EARNINGS PER SHARE
(In dollars)
5 Year Compound Growth Rate: 4.5%
1990 1991 1992 1993 1994
Earnings per share.......... $1.55 $1.56 $1.67 $1.73 $1.88
------------------------------------------------------------------------------
Chart A-4 located on page 5 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a line graph
depicting the decrease in both the average annual yield earned on earning
assets and the average annual rate paid on interest-bearing funds by
Mercantile Bankshares Corporation from 1990 to 1994:
INTEREST YIELDS AND RATES
(Tax equivalent basis)
1990 1991 1992 1993 1994
Average yield earned on
earning assets..................... 10.6% 9.4% 8.1% 7.3% 7.5%
Average rate paid on
interest-bearing funds............. 7.1% 6.1% 4.3% 3.4% 3.4%
------------------------------------------------------------------------------
Chart A-5 located on page 9 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a bar graph
depicting the annual sources of revenues for Mercantile Bankshares Corporation
from 1990 to 1994:
SOURCES OF INCOME
(Dollars in millions)
1990 1991 1992 1993 1994
Interest and fees on loans......... 71% 65% 59% 63% 63%
Other interest and dividend income. 16% 20% 20% 19% 18%
Trust division..................... 7% 7% 8% 9% 9%
Other income....................... 6% 8% 13% 9% 10%
Total.............................. 100% 100% 100% 100% 100%
Total of all sources of income..... $495.0 $512.4 $501.6 $472.3 $495.6
------------------------------------------------------------------------------
Chart A-6 located on page 9 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a bar graph
depicting the annual uses of income for Mercantile Bankshares Corporation
from 1990 to 1994:
USES OF INCOME
(Dollars in millions)
1990 1991 1992 1993 1994
Interest expense................... 46% 44% 33% 29% 28%
Provision for loan losses.......... 3% 4% 9% 3% 2%
Salaries and employee benefits..... 17% 17% 19% 23% 22%
Other expenses..................... 12% 13% 15% 16% 18%
Applicable income taxes............ 8% 8% 9% 11% 12%
Net income......................... 14% 14% 15% 18% 18%
Total.............................. 100% 100% 100% 100% 100%
Total of all uses of income........ $495.0 $512.4 $501.6 $472.3 $495.6
------------------------------------------------------------------------------
Chart A-7 located on page 13 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a bar graph
depicting the composition of average annual loans of Mercantile Bankshares
Corporation from 1990 to 1994:
LOAN COMPOSITION AND GROWTH
Average Loans (Dollars in millions)
5 Year Compound Growth Rate: 4.8%
1990 1991 1992 1993 1994
Commercial, financial
and agricultural.......... 33% 33% 33% 33% 33%
Real estate - construction
and mortgage.............. 47% 50% 52% 54% 55%
Consumer................... 20% 17% 15% 13% 12%
Total...................... 100% 100% 100% 100% 100%
Total average loans....... $3,181.9 $3,306.4 $3,438.8 $3,647.0 $3,765.2
-------------------------------------------------------------------------------
Chart A-8 located on page 16 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a line graph
depicting the annual changes in the ratio of loan loss allowance as a % of
average loans and the ratio of net charge-offs as a % of average loans of
Mercantile Bankshares Corporation from 1990 to 1994:
ALLOWANCE AS A % OF AVERAGE LOANS;
CHARGE-OFFS (Net of Recoveries)
AS A % OF AVERAGE LOANS
1990 1991 1992 1993 1994
Loan loss allowance as a % of
average loans..................... 1.71% 1.99% 2.57% 2.54% 2.42%
Net charge-offs as a % of
average loans..................... .29% .28% .67% .31% .22%
------------------------------------------------------------------------------
Chart A-9 located on page 17 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a bar graph
depicting the year end levels of tier one and tier two risk-based capital
ratios of Mercantile Bankshares Corporation from 1991 to 1994:
RISK-BASED CAPITAL RATIOS*
1991 1992 1993 1994
Tier two........................... 1.5% 1.4% 1.4% 1.3%
Tier one........................... 15.5% 17.0% 18.2% 18.3%
(Regulatory tier one minimum is 4%.)
* Tier one and tier two equity as percentages of risk-adjusted total assets
at December 31.
------------------------------------------------------------------------------
Exhibit 22
(22) SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME INCORPORATION
The Annapolis Banking and Trust Company Maryland
Baltimore Trust Company Delaware
Bank of Southern Maryland Maryland
Calvert Bank and Trust Company Maryland
The Chestertown Bank of Maryland Maryland
The Citizens National Bank United States
County Banking & Trust Company Maryland
The Eastville Bank Virginia
Farmers & Merchants Bank - Eastern Shore Virginia
The Fidelity Bank Maryland
The First National Bank of St. Mary's United States
The Forest Hill State Bank Maryland
Fredericktown Bank & Trust Company Maryland
MBC Agency, Inc. Maryland
Mercantile Life Insurance Company Arizona
MBC Realty, Inc. Maryland
Mercantile Mortgage Corporation Maryland
Benchmark Appraisal Group, Inc. Maryland
Mercantile-Safe Deposit and Trust Company Maryland
Mercantile Pennsylvania Corporation Maryland
The National Bank of Fredericksburg United States
Peninsula Bank Maryland
The Peoples Bank of Maryland Maryland
Potomac Valley Bank Maryland
St. Michaels Bank Maryland
Westminster Bank and Trust Company of
Carroll County Maryland
Each of the foregoing subsidiaries conducts business under its corporate name.
Exhibit 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference into the Registration Statements
on Form S-3 (No. 33-44376) and Forms S-8 (No. 33-44373, 33-44374 and 33-44375)
of Mercantile Bankshares Corporation of our report dated January 20, 1995, on
our audit of the consolidated financial statements of Mercantile Bankshares
Corporation and Affiliates as of December 31, 1994, and 1993 and for each of the
three years in the period ended December 31, 1993, which report is incorporated
by reference in the Annual Report on Form 10-K for the year ended December 31,
1994, of Mercantile Bankshares Corporation.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 28, 1995
Exhibit 25
MERCANTILE BANKSHARES CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Directors of
MERCANTILE BANKSHARES CORPORATION, a Maryland Corporation, hereby constitute
and appoint H. FURLONG BALDWIN and EDWARD K. DUNN, JR., or either of them
acting alone, the true and lawful agents and attorneys in fact of the
undersigned in each case with full power and authority in either of said agents
and attorneys in fact, to sign for the undersigned and in their respective
names as Directors of the Corporation the Annual Report of the Corporation to
the Securities and Exchange Commission for the year 1994, on Form 10-K, filed
under the Securities Exchange Act of 1934, as amended, and any amendment or
amendments to such Form 10-K hereby ratifying and confirming all acts taken by
such agents and attorneys in fact, or either of them, as herein authorized.
Date: March 14, 1995
/s/ Douglas W. Dodge Director /s/ Bishop L. Robinson Director
Douglas W. Dodge Bishop L. Robinson
/s/ Robert D. Kunisch Director /s/ Thomas M. Bancroft, Jr. Director
Robert D. Kunisch Thomas M. Bancroft, Jr.
/s/ Christian H. Poindexter Director /s/ B. Larry Jenkins Director
Christian H. Poindexter B. Larry Jenkins
/s/ William C. Richardson Director /s/ Richard O. Berndt Director
William C. Richardson Richard O. Berndt
/s/ Morris W. Offit Director /s/ William J. McCarthy Director
Morris W. Offit William J. McCarthy
/s/ Brian B. Topping Director Director
Brian B. Topping
/s/ George L. Bunting, Jr. Director Director
George L. Bunting, Jr.
/s/ Donald J. Shepard Director Director
Donald J. Shepard
/s/ James A. Block Director Director
James A. Block
/s/ Calman J. Zamoiski, Jr. Director Director
Calman J. Zamoiski, Jr.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1994 AND THE INCOME STATEMENT FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1994. THIS SCHEDULE INCLUDES INFORMATION NORMALLY REQUIRED
TO BE DISCLOSED IN ANNUAL REPORTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 257,046,000
<INT-BEARING-DEPOSITS> 100,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 332,986,000
<INVESTMENTS-CARRYING> 1,273,278,000
<INVESTMENTS-MARKET> 1,232,686,000
<LOANS> 3,938,095,000
<ALLOWANCE> 91,257,000
<TOTAL-ASSETS> 5,938,225,000
<DEPOSITS> 4,765,393,000
<SHORT-TERM> 356,268,000
<LIABILITIES-OTHER> 61,177,000
<LONG-TERM> 31,470,000
<COMMON> 96,228,000
0
0
<OTHER-SE> 627,689,000
<TOTAL-LIABILITIES-AND-EQUITY> 5,938,225,000
<INTEREST-LOAN> 315,094,000
<INTEREST-INVEST> 87,766,000
<INTEREST-OTHER> 529,000
<INTEREST-TOTAL> 403,389,000
<INTEREST-DEPOSIT> 126,197,000
<INTEREST-EXPENSE> 140,433,000
<INTEREST-INCOME-NET> 262,956,000
<LOAN-LOSSES> 7,056,000
<SECURITIES-GAINS> (1,399,000)
<EXPENSE-OTHER> 38,010,000
<INCOME-PRETAX> 146,886,000
<INCOME-PRE-EXTRAORDINARY> 146,886,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,441,000
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.9
<LOANS-NON> 33,645,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 3,000
<LOANS-PROBLEM> 7,071,000
<ALLOWANCE-OPEN> 92,567,000
<CHARGE-OFFS> 10,529,000
<RECOVERIES> 2,163,000
<ALLOWANCE-CLOSE> 91,257,000
<ALLOWANCE-DOMESTIC> 91,257,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
