UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-5127
------------------------------
MERCANTILE BANKSHARES CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-0898572
-------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 Hopkins Plaza, Baltimore, Maryland 21201
-------------- --------------
(Address of principal executive (Zip code)
offices)
(410) 237-5900
------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
As of October 31, 1995, registrant had outstanding 46,894,048 shares of Common
Stock.
PAGE 1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
MERCANTILE BANKSHARES CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, December 31,
(Dollars in thousands, except per share data) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks......................................................... $ 268,559 $ 257,046
Interest-bearing deposits in other banks........................................ 100 100
Investment securities:
U.S. Treasury and government agencies
Held-to-maturity--market value of $1,146,113 (1995) and $1,210,799 (1994). 1,147,194 1,251,514
Available-for-sale at fair value.......................................... 286,357 329,552
States and political subdivisions
Held-to-maturity--market value of $13,097 (1995) and $13,054 (1994)....... 13,021 13,581
Other investments
Held-to-maturity--market value of $7,442 (1995) and $8,833 (1994)......... 6,122 8,183
Available-for-sale at fair value.......................................... 4,505 3,434
--------- ---------
Total investment securities......................................... 1,457,199 1,606,264
--------- ---------
Federal funds sold.............................................................. 26,250
Securities purchased under resale agreement..................................... 50,000
Loans........................................................................... 4,120,195 3,938,095
Less: allowance for loan losses................................................. (87,235) (91,257)
--------- ---------
Loans, net.......................................................... 4,032,960 3,846,838
--------- ---------
Bank premises and equipment, less accumulated depreciation of
$75,240 (1995) and $72,349 (1994)............................................. 74,912 74,259
Other real estate owned, net.................................................... 2,758 10,165
Excess cost over equity in affiliated banks, net................................ 18,014 18,862
Other assets.................................................................... 124,552 124,691
--------- ---------
Total assets........................................................ $6,055,304 $5,938,225
========= =========
LIABILITIES
Deposits:
Noninterest-bearing deposits................................................ $ 919,218 $ 954,228
Interest-bearing deposits................................................... 4,036,497 3,811,165
--------- ---------
Total deposits...................................................... 4,955,715 4,765,393
Short-term borrowings........................................................... 248,527 356,268
Accrued expenses and other liabilities.......................................... 74,096 61,177
Long-term debt.................................................................. 25,776 31,470
--------- ---------
Total liabilities................................................... 5,304,114 5,214,308
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized 2,000,000 shares; issued and
outstanding--None
Common stock, $2 par value; authorized 67,000,000 shares;
issued 47,037,485 shares in 1995 and 48,114,014 shares in 1994................ 94,075 96,228
Capital surplus................................................................. 49,946 22,988
Retained earnings............................................................... 604,545 606,972
Unrealized gains (losses) on securities, net.................................... 2,624 (2,271)
--------- ---------
Total stockholders' equity.......................................... 751,190 723,917
--------- ---------
Total liabilities and stockholders' equity...................... $6,055,304 $5,938,225
========= =========
See notes to consolidated financial statements
</TABLE>
PAGE 2
MERCANTILE BANKSHARES CORPORATION
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
For the 9 Months Ended For the 3 Months Ended
September 30, September 30,
(Dollars in thousands, except per share data) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................ $282,137 $229,354 $ 95,709 $ 81,517
--------- --------- --------- ---------
Interest and dividends on investment securities:
Taxable interest income............................. 60,018 65,179 19,856 21,490
Tax-exempt interest income.......................... 486 533 160 173
Dividends........................................... 336 252 113 108
Other investment income............................. 156 209 38 71
--------- --------- --------- ---------
60,996 66,173 20,167 21,842
--------- --------- --------- ---------
Other interest income................................. 2,278 501 1,957 225
--------- --------- --------- ---------
Total interest income..................... 345,411 296,028 117,833 103,584
--------- --------- --------- ---------
INTEREST EXPENSE
Interest on deposits.................................. 119,340 92,322 42,090 31,950
Interest on short-term borrowings..................... 11,611 8,265 3,180 2,996
Interest on long-term debt............................ 1,400 1,599 410 530
--------- --------- --------- ---------
Total interest expense.................... 132,351 102,186 45,680 35,476
--------- --------- --------- ---------
NET INTEREST INCOME .................................. 213,060 193,842 72,153 68,108
Provision for loan losses............................. 5,098 4,585 2,123 1,583
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES .. 207,962 189,257 70,030 66,525
--------- --------- --------- ---------
NONINTEREST INCOME
Trust division services............................... 32,601 32,601 11,053 10,742
Rental income......................................... 6,697 6,437 2,174 2,108
Service charges on deposit accounts................... 11,758 11,704 3,927 3,945
Other fees............................................ 15,235 16,101 5,408 6,295
Investment securities gains and (losses).............. (1,833) (1,257) 9 (1,071)
Other income.......................................... 765 4,453 373 311
--------- --------- --------- ---------
Total noninterest income.................. 65,223 70,039 22,944 22,330
--------- --------- --------- ---------
NONINTEREST EXPENSES
Salaries.............................................. 69,984 65,220 23,145 22,367
Employee benefits..................................... 18,420 18,132 5,935 5,768
Occupancy expense of bank premises.................... 13,565 13,725 4,747 4,668
Furniture and equipment expenses...................... 11,444 10,199 3,376 3,500
Communications and supplies........................... 7,205 6,881 2,400 2,133
FDIC insurance premium expense........................ 5,743 8,186 272 2,724
Other expenses........................................ 22,424 27,204 9,468 9,443
--------- --------- --------- ---------
Total noninterest expenses................ 148,785 149,547 49,343 50,603
--------- --------- --------- ---------
Income before income taxes............................ 124,400 109,749 43,631 38,252
Applicable income taxes............................... 46,908 42,167 16,461 14,486
--------- --------- --------- ---------
NET INCOME .......................................... $ 77,492 $ 67,582 $ 27,170 $ 23,766
========= ========= ========= =========
NET INCOME PER SHARE OF COMMON STOCK (2) ............. $1.63 $1.40 $.58 $.49
========= ========= ========= =========
See notes to consolidated financial statements
</TABLE>
PAGE 3
MERCANTILE BANKSHARES CORPORATION
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
<CAPTION>
For the 9 Months Ended
INCREASE IN CASH AND CASH EQUIVALENTS September 30,
(Dollars in thousands) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans........................................................ $ 280,447 $ 226,113
Interest and dividends on investment securities................................... 60,027 65,806
Other interest income............................................................. 2,153 632
Noninterest income................................................................ 67,910 72,185
Interest paid..................................................................... (128,008) (102,677)
Noninterest expenses paid......................................................... (132,488) (134,798)
Income taxes paid................................................................. (47,619) (43,650)
--------- ---------
Net cash provided by operating activities............................. 102,422 83,611
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities held-to-maturity................ 138,934 200,884
Proceeds from sales of investment securities available-for-sale................... 71,721 191,151
Proceeds from maturities of investment securities available-for-sale.............. 209,028 47,897
Purchases of investment securities held-to-maturity............................... (38,935) (233,636)
Purchases of investment securities available-for-sale............................. (225,542) (129,327)
Net increase in customer loans.................................................... (193,622) (102,857)
Capital expenditures.............................................................. (6,455) (6,639)
Proceeds from sales of other real estate owned.................................... 8,439
--------- ---------
Net cash used in investing activities................................. (36,432) (32,527)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in noninterest-bearing deposits...................................... (35,010) (28,644)
Net decrease in NOW and savings accounts.......................................... (157,382) (33,178)
Net increase in certificates of deposit........................................... 382,714 87,721
Net increase (decrease) in short-term borrowings.................................. (107,741) 10,938
Repayment of long-term debt....................................................... (5,694) (655)
Proceeds from issuance of shares.................................................. 3,298 6,365
Repurchase of common shares....................................................... (28,493) (10,352)
Dividends paid.................................................................... (29,919) (25,365)
--------- ---------
Net cash provided by financing activities............................. 21,773 6,830
--------- ---------
Net increase in cash and cash equivalents......................................... 87,763 57,914
Cash and cash equivalents at beginning of period.................................. 257,146 176,771
--------- ---------
Cash and cash equivalents at end of period........................................ $344,909 $ 234,685
========= =========
</TABLE>
<TABLE>
<CAPTION>
For the 9 Months Ended
Reconciliation of net income to net cash provided by operating activities September 30,
(Dollars in thousands) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income........................................................................ $ 77,492 $67,582
--------- ---------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 5,802 5,622
Provision for loan losses....................................................... 5,098 4,585
Write-down of other real estate owned........................................... 1,370 4,566
Investment securities (gains) and losses........................................ 1,833 1,257
Amortization of excess cost over equity in affiliates........................... 848 848
Increase in interest receivable................................................. (2,784) (3,477)
Decrease in other receivables................................................... 854 843
(Increase) decrease in other assets............................................. 2,067 (2,793)
Increase (decrease) in interest payable......................................... 4,343 (491)
Increase in accrued expenses.................................................... 6,210 6,552
Decrease in taxes payable....................................................... (711) (1,483)
--------- ---------
Total adjustments..................................................... 24,930 16,029
--------- ---------
Net cash provided by operating activities......................................... $102,422 $83,611
========= =========
See notes to consolidated financial statements
</TABLE>
PAGE 4
MERCANTILE BANKSHARES CORPORATION
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Unrealized
Gains
Common Capital Retained (Losses) on
(Dollars in thousands, except per share data) Stock Surplus Earnings Securities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993............................. $96,470 $26,958 $551,513
Unrealized gains (losses) on securities at January 1,
1994................................................... $ 1,059
Net income............................................. 67,582
Cash dividends paid:
Common stock ($.54 per share)........................ (24,771)
By affiliated bank prior to affiliation.............. (594)
Issuance of 89,608 shares for dividend
reinvestment and stock purchase plan................. 179 1,539
Issuance of 16,853 shares for employee stock
purchase dividend reinvestment plan.................. 34 300
Issuance of 301,690 shares for employee stock option
plan................................................... 604 3,709
Purchase of 520,000 shares under stock repurchase plan. (1,040) (9,312)
Change in unrealized gains (losses) on securities...... (2,585)
--------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 1994............................ $96,247 $23,194 $593,730 $(1,526)
========= ========= ========= =========
BALANCE, DECEMBER 31, 1994............................. $96,228 $22,988 $606,972 $(2,271)
Net income............................................. 77,492
Cash dividends paid:
Common stock ($.63 per share)........................ (29,919)
Issuance of 90,308 shares for dividend
reinvestment and stock purchase plan................. 181 1,888
Issuance of 30,395 shares under exercise of stock
appreciation rights.................................. 61 678
Issuance of 19,132 shares for employee stock
purchase dividend reinvestment plan.................. 38 394
Transfer to capital surplus............................ 50,000 (50,000)
Purchase of 1,219,064 shares under stock repurchase
plan................................................... (2,438) (26,055)
Issuance of 2,700 shares for employee stock option plan 5 53
Change in unrealized gains (losses) on securities...... 4,895
--------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 1995 ......................... $94,075 $49,946 $604,545 $2,624
========= ========= ========= =========
See notes to consolidated financial statements
</TABLE>
PAGE 5
MERCANTILE BANKSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) The statements include the accounts of the Corporation and all of its
affiliates, with all significant intercompany transactions eliminated, and
in the opinion of management, include all adjustments necessary for a fair
presentation of the results for the interim period. All such adjustments
are of a normal recurring nature. In view of the changing conditions in the
national economy, the effect of actions taken by regulatory authorities and
normal seasonal factors, the results for the interim period are not
necessarily indicative of annual performance.
2) Year to date per share amounts are based on the weighted average number of
common shares outstanding during the period of 47,658,146 shares for 1995
and 48,181,692 shares for 1994.
3) Amounts reported for 1994 have been restated to include the accounts of The
National Bank of Fredericksburg, Fredericksburg, Virginia, which became an
affiliate in November 1994. The affiliation was accounted for as a pooling
of interests. The accompanying statement of consolidated income for 1994
includes total income of $13,012,000 and net income of $1,985,000 for the
nine months ended September 30, 1994, applicable to The National Bank of
Fredericksburg.
On October 31, 1995, the Corporation acquired all the outstanding 771,241
shares of The Sparks State Bank ("Sparks"), Sparks, Maryland. The affil-
iation was recorded under the purchase method of accounting. As of
September 30, 1995, Sparks had total assets of $196,883,000 (about 3.3% of
the combined assets of Mercantile Bankshares Corporation and its
affiliates), deposits of $167,360,000, loans (net of unearned income) of
$134,255,000 and stockholders' equity of $22,739,000. For the nine months
ended September 30, 1995, Sparks had net income of $2,399,000. Sparks,
organized in 1916, is headquartered in Sparks, Maryland, and has offices in
Kingsville, Parkton, Phoenix and Maryland Line, Maryland.
4) The Corporation adopted the provisions of Statements of Financial
Accounting Standards ("SFAS") No. 114 and 118, "Accounting by Creditors for
Impairment of a Loan" on January 1, 1995. Under these standards, a loan is
considered impaired, based upon current information and events, if it is
probable that the Corporation will not collect all principal and interest
payments according to the contractual terms of the loan agreement.
Generally, a loan is considered impaired once either principal or interest
payments become 90 days past due at the end of a calendar quarter. A loan
may be considered impaired sooner if, in management's judgement, such
action is warranted. The impairment of a loan is measured based upon the
present value of expected future cash flows discounted at the loan's
effective interest rate, or the fair value of the collateral if the
repayment is expected to be provided predominantly by the underlying
collateral. Interest income on impaired loans is recognized on the cash
basis. A majority of the Corporation's impaired loans are measured by
reference to the fair value of the collateral. Information with respect to
impaired loans and the related valuation allowance (if the measure of the
impaired loan is less than the recorded investment) is shown below.
<TABLE>
<CAPTION>
(Dollars in thousands) SEPTEMBER 30, 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Impaired loans with a valuation allowance........................................................ $ 4,362
Impaired loans with no valuation allowance....................................................... 14,301
---------
Total impaired loans........................................................................... $ 18,663
=========
Allowance for loan losses applicable to impaired loans........................................... $ 1,898
Allowance for loan losses applicable to other than impaired loans................................ 85,337
---------
Total allowance for loan losses................................................................ $ 87,235
=========
Year-to-date interest income on impaired loans recorded on the cash basis........................ $ 281
=========
Year-to-date average recorded investment in impaired loans during the period..................... $ 24,900
=========
Quarter-to-date interest income on impaired loans recorded on the cash basis..................... $ 222
=========
Quarter-to-date average recorded investment in impaired loans during the period.................. $ 21,000
=========
</TABLE>
NOTE: Impaired loans do not include large groups of smaller balance
homogeneous loans that are evaluated collectively for impairment (e.g.
residential mortgages and consumer installment loans). The allowance for loan
losses related to these loans is included in the allowance for loan losses
applicable to other than impaired loans.
5) Various commitments to extend credit (lines of credit) are made in the
normal course of banking business. At September 30, 1995, total unused
lines of credit approximated $1,706,227,300. In addition, letters of credit
are issued for the benefit of customers by affiliated banks. Outstanding
letters of credit were $107,918,700 at September 30, 1995.
PAGE 6
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MERCANTILE BANKSHARES CORPORATION
EARNINGS SUMMARY
Net income for the third quarter of 1995 was $.58 per share, an increase of
18% over the $.49 per share for the comparable period last year. Consolidated
net income was $27,170,000, an increase of 14% over the $23,766,000 for the
third quarter of 1994. Amounts originally reported for 1994 have been restated
to include the accounts of The National Bank of Fredericksburg,
Fredericksburg, Virginia, which became an affiliate in November 1994. The
affiliation was accounted for as a pooling of interests.
Net income for the nine months ended September 30, 1995 was $1.63 per share,
an increase of 16% over the $1.40 per share earned in the same period in 1994.
Consolidated net income was $77,492,000, a 15% increase over the $67,582,000
for the first nine months of 1994.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the three months ended September 30, 1995 was 6%
higher than the amount for the comparable period in 1994 due to an increase of
3% in net interest margin on earning assets (taxable equivalent) and an
increase of 3% in average earning assets. Contributing to the increase in net
interest margin were higher interest rates which lead to greater benefits from
our high level of noninterest-bearing funds and a shift in the earning asset
mix. Average loans increased by 8% over the third quarter of 1994 to
$4,080,100,000 for the third quarter of 1995. Average loans as a percentage of
average earning assets increased to 72% for the third quarter of 1995,
compared to 69% of average earning assets for the same period in 1994.
Meanwhile, the average for total investment securities, federal funds sold and
securities purchased under resale agreements declined to $1,606,800,000, or
28% of average earning assets for the three months ended September 30, 1995,
from $1,713,700,000, or 31% of average earning assets for the comparable
period in 1994.
Net interest income for the nine months ended September 30, 1995 was 10%
higher than the amount for the comparable period in 1994 due to an increase of
7% in net interest margin on earning assets (taxable equivalent) and an
increase of 3% in average earning assets. Contributing to the increase in net
interest margin were higher yields on average earning assets (which were
partially offset by higher interest rates paid on interest-bearing funds) and
a shift in the earning asset mix. Average loans increased by 8% over the first
three quarters of 1994 to $4,042,300,000 for the first three quarters of 1995.
Average loans as a percentage of average earning assets increased to 72% for
the first nine months of 1995, compared to 68% of average earning assets for
the same period in 1994. Meanwhile, the average for total investment
securities, federal funds sold and securities purchased under resale
agreements declined to $1,562,600,000, or 28% of average earning assets for
the nine months ended September 30, 1995, from $1,730,900,000, or 32% of
average earning assets for the comparable period in 1994.
NONINTEREST INCOME
Total noninterest income for the quarter ended September 30, 1995 increased
3% to $22,944,000 from $22,330,000 for the third quarter of 1994 primarily
because of $9,000 in gains on investment securities during the third quarter
of 1995 compared to $1,071,000 in losses on securities in the third quarter of
1994 and a 3% increase in trust fees for the quarter. The increase was
partially offset by a decline in mortgage banking fees during the third
quarter of 1995 compared to the third quarter of 1994.
For the first nine months of 1995, total noninterest income decreased 7% to
$65,223,000 from $70,039,000 for the first nine months of 1994. Factors
contributing to this decline include $1,833,000 in losses on investment
securities during the first nine months of 1995 compared to $1,257,000 in
losses on securities in 1994, a decrease in mortgage banking fees, and a non-
recurring gain of $3,137,000 on the sale of an asset during the first quarter
of 1994.
NONINTEREST EXPENSES
Total noninterest expenses, excluding the provision for loan losses, for the
third quarter of 1995 decreased 2% from the comparable period in 1994. During
the third quarter, the FDIC reduced bank insurance premium rates and rebated a
portion of the second quarter premium. This reduced third quarter FDIC
insurance premium expense by $2,955,000.
For the first three quarters of 1995, total noninterest expenses, excluding
the provision for loan losses, decreased 1% from the comparable period in
1994. Other expenses for the first nine months of 1995 reflect the previously
mentioned second quarter sale of foreclosed property and include a net
recovery of foreclosed property related expenses of $1,940,000 compared to a
charge of $4,870,000 for the first nine months of 1994. Other expenses also
reflect the FDIC insurance premium refund which was received in the third
quarter of 1995.
ANALYSIS OF FINANCIAL CONDITION
Investment securities decreased 9% to $1,457,199,000 at September 30, 1995
from $1,606,264,000 at December 31, 1994 in order to provide funding for loan
growth. Total loans outstanding increased by 5% to $4,120,195,000 at September
30, 1995 from $3,938,095,000 at December 31, 1994.
Total deposits increased 4% to $4,955,715,000 at September 30, 1995 from
$4,765,393,000 at December 31, 1994. However, noninterest-bearing deposits
declined 4% to $919,218,000 or 19% of total deposits at September 30, 1995
compared to $954,228,000, or 20% of total deposits at December 31, 1994 while
interest-bearing deposits increased 6% to $4,036,497,000 or 81% of total
deposits at September 30, 1995 compared to $3,811,165,000, or 80% of total
deposits at December 31, 1994. This shift in deposit mix is attributed to
higher rates paid on time deposits in the first three quarters of 1995
compared to the rates paid at the end of 1994.
PAGE 7
ASSET QUALITY
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, the Corporation's 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. During the nine months ended
September 30, 1995, non-performing assets decreased $18,841,000 to
$24,972,000. Other real estate owned, one of the components of non-performing
assets, decreased $7,407,000 mainly due to sales of foreclosed properties
while non-performing loans, the other component, decreased $11,434,000.
PAGE 8
<TABLE>
<CAPTION>
Non-Performing Assets SEPTEMBER 30, December 31,
(Dollars in thousands) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual loans (1)............................................................. $21,795 $33,645
Renegotiated loans (1)............................................................ 419 3
Loans contractually past due 90 days or more and still accruing interest.......... NONE NONE
--------- ---------
Total non-performing loans.................................................... 22,214 33,648
Other real estate owned........................................................... 2,758 10,165
--------- ---------
Total non-performing assets................................................... $24,972 $43,813
========= =========
</TABLE>
1) Total interest on these loans is not considered to be material in any of
the periods reported herein. Aggregate gross interest income of $1,691,000
and $3,230,000 for 1995 and 1994 respectively, on non-accrual and
renegotiated loans, would have been recorded if these loans had been
accruing on their original terms throughout the period or since origination
if held for part of the period. The amount of interest income on the non-
accrual and renegotiated loans that was recorded totalled $778,000 and
$1,524,000 for 1995 and 1994, respectively.
NOTE: As of September 30, 1995, the Corporation was monitoring loans estimated
to aggregate $4,021,000 not currently classified as non-accrual or
renegotiated loans. These loans have characteristics which indicate they may
result in such classification in the future.
Provision and Allowance for Loan Losses
Each affiliate is required to maintain an adequate allowance for loan losses
and their boards of directors, along with corporate management, maintain a
regular overview to assure that adequacy. On a periodic basis, significant
credit exposures, non-accrual loans, impaired loans, other non-performing
assets and various statistical measurements of asset quality are examined to
assure the adequacy of the allowance for loan losses.
The following table presents a summary of the activity in the Allowance for
Loan Losses.
<TABLE>
<CAPTION>
For the 9 Months Ended For the 3 Months Ended
Allowance for Loan Losses September 30, September 30,
(Dollars in thousands) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance balance--beginning........................... $ 91,257 $ 92,567 $ 89,547 $ 94,157
Charge-offs:
Commercial, financial and agricultural............... (6,681) (863) (2,900) (457)
Real estate--construction............................ (1,125) (918) (1,016) (311)
Real estate--mortgage................................ (1,396) (644) (347) (48)
Consumer............................................. (1,472) (1,252) (587) (401)
--------- --------- --------- ---------
Totals............................................. (10,674) (3,677) (4,850) (1,217)
--------- --------- --------- ---------
Recoveries:
Commercial, financial and agricultural............... 617 602 156 112
Real estate--construction............................ 50 22
Real estate--mortgage................................ 192 112 73 57
Consumer............................................. 695 838 164 335
--------- --------- --------- ---------
Totals............................................. 1,554 1,552 415 504
--------- --------- --------- ---------
Net charge-offs........................................ (9,120) (2,125) (4,435) (713)
Provision for loan losses.............................. 5,098 4,585 2,123 1,583
--------- --------- --------- ---------
Allowance balance--ending.............................. $ 87,235 $ 95,027 $ 87,235 $ 95,027
========= ========= ========= =========
Average loans outstanding during period................ $4,042,300 $3,734,500 $4,080,100 $3,783,700
========= ========= ========= =========
Net charge-offs (annualized) as a percentage of average .30% .08% .43% .07%
loans outstanding during period...................... ========= ========= ========= =========
Allowance for loan losses at period end as a percentage 2.2 % 2.5 % 2.1 % 2.5 %
of average loans..................................... ========= ========= ========= =========
Allowance for loan losses at period end as a percentage
of non-performing loans at period end................ 392.7 % 207.5 %
========= =========
</TABLE>
Charge-Offs
Intensive collection efforts continue after charge-off in order to maximize
the recovery of amounts previously charged off. Net charge-offs were
$9,120,000 for the first three quarters of 1995 versus $2,125,000 during the
first nine months of 1994. For further details of charge-offs and recoveries
see the preceding Allowance For Loan Losses table.
PAGE 9
MERCANTILE BANKSHARES CORPORATION
<TABLE>
ANALYSIS OF INTEREST RATES AND INTEREST DIFFERENTIALS
The following table presents the distribution of the average consolidated
balance sheets, interest income/expense and annualized yields earned and rates
paid through the first nine months of the year.
<CAPTION>
(Dollars in thousands) 1995 1994
------------------------------------------ ------------------------------------------
Average Income*/ Yield*/ Average Income*/ Yield*/
Balance Expense Rate Balance Expense Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans:
Commercial........................ $1,333,300 $ 96,610 9.7% $1,227,800 $ 73,200 8.0%
Mortgage and construction......... 2,221,300 153,803 9.3 2,036,400 128,271 8.4
Consumer.......................... 487,700 34,426 9.4 470,300 30,111 8.6
--------- --------- --------- ---------
Total loans................... 4,042,300 284,839 9.4 3,734,500 231,582 8.3
--------- --------- --------- ---------
Federal funds sold.................. 42,700 1,820 5.7 15,200 453 4.0
Securities purchased under resale
agreements........................ 11,300 455 5.4
Securities:
Taxable securities
U.S. Treasury securities........ 1,461,700 59,024 5.4 1,662,100 64,018 5.2
U.S. Agency securities.......... 25,200 994 5.3 29,100 1,161 5.3
Other stocks and bonds.......... 8,500 553 8.7 10,200 520 6.8
Tax-exempt securities
States and political
subdivisions.................. 13,200 768 7.8 14,300 842 7.9
--------- --------- ---------
Total securities.............. 1,508,600 61,339 5.4 1,715,700 66,541 5.2
--------- --------- --------- ---------
Interest-bearing deposits in other
banks............................. 100 3 4.0 600 48 10.7
--------- --------- --------- ---------
Total earning assets.......... 5,605,000 348,456 8.3 5,466,000 298,624 7.3
--------- ---------
Cash and due from banks............... 195,800 196,800
Bank premises and equipment, net...... 75,200 73,800
Other assets.......................... 140,500 147,000
Less: allowance for loan losses....... (91,800) (94,200)
--------- ---------
Total assets.................. $5,924,700 $5,789,400
========= =========
Interest-bearing liabilities
Deposits:
Savings deposits.................. $2,198,800 48,985 3.0 $2,425,000 48,121 2.7
Time deposits..................... 1,717,600 70,355 5.5 1,375,000 44,201 4.3
--------- --------- --------- ---------
Total interest-bearing
deposits.............................. 3,916,400 119,340 4.1 3,800,000 92,322 3.2
Short-term borrowings............... 284,600 11,611 5.5 313,600 8,265 3.5
Long-term debt...................... 28,600 1,400 6.5 32,000 1,599 6.7
--------- --------- --------- ---------
Total interest-bearing funds.. 4,229,600 132,351 4.2 4,145,600 102,186 3.3
--------- ---------
Noninterest-bearing deposits.......... 881,900 889,600
Other liabilities and accrued expenses 68,600 56,600
--------- ---------
Total liabilities............. 5,180,100 5,091,800
Stockholders' equity.................. 744,600 697,600
--------- ---------
Total liabilities and
stockholders' equity ....... $5,924,700 $5,789,400
========= =========
Net interest income................... $216,105 $196,438
========= =========
Net interest rate spread.............. 4.1% 4.0%
Effect of noninterest-bearing funds... 1.0 .8
--------- ---------
Net interest margin on earning assets. 5.1% 4.8%
========= =========
Taxable-equivalent adjustment included
in:
Loan income....................... $ 2,702 $ 2,228
Investment securities income...... 343 368
--------- ---------
Total......................... $ 3,045 $ 2,596
========= =========
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35%.
</TABLE>
PAGE 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits--
Exhibit 27--Financial Data Schedule
(b) No Forms 8-K filed.
PAGE 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERCANTILE BANKSHARES CORPORATION
November 13, 1995 /s/ H. Furlong Baldwin
By: H. Furlong Baldwin
Chairman of the Board and
Chief Executive Officer
November 13, 1995 /s/ Kenneth A. Bourne, Jr.
By: Kenneth A. Bourne, Jr.
Exec. Vice President and Treasurer
PAGE 12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MERCANTILE BANKSHARES CORPORATION SEPTEMBER 30, 1995 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 268,559,000
<INT-BEARING-DEPOSITS> 100,000
<FED-FUNDS-SOLD> 26,250,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,166,337,000
<INVESTMENTS-MARKET> 290,862,000
<LOANS> 4,120,195,000
<ALLOWANCE> 87,235,000
<TOTAL-ASSETS> 6,055,304,000
<DEPOSITS> 4,955,715,000
<SHORT-TERM> 248,527,000
<LIABILITIES-OTHER> 74,096,000
<LONG-TERM> 25,776,000
<COMMON> 94,075,000
0
0
<OTHER-SE> 657,115,000
<TOTAL-LIABILITIES-AND-EQUITY> 6,055,304,000
<INTEREST-LOAN> 282,137,000
<INTEREST-INVEST> 60,996,000
<INTEREST-OTHER> 2,278,000
<INTEREST-TOTAL> 345,411,000
<INTEREST-DEPOSIT> 119,340,000
<INTEREST-EXPENSE> 132,351,000
<INTEREST-INCOME-NET> 213,060,000
<LOAN-LOSSES> 5,098,000
<SECURITIES-GAINS> (1,833,000)
<EXPENSE-OTHER> 148,785,000
<INCOME-PRETAX> 124,400,000
<INCOME-PRE-EXTRAORDINARY> 124,400,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,492,000
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
<YIELD-ACTUAL> 5.15
<LOANS-NON> 21,795,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 419,000
<LOANS-PROBLEM> 4,021,000
<ALLOWANCE-OPEN> 91,257,000
<CHARGE-OFFS> 10,674,000
<RECOVERIES> 1,554,000
<ALLOWANCE-CLOSE> 87,235,000
<ALLOWANCE-DOMESTIC> 87,235,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
