FORM 10-K
United States
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, 1995
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
--------------------------------------------------
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.)
Two Hopkins Plaza, P. O. Box 1477, Baltimore, Maryland 21203
- ------------------------------------------------------ ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 237-5900
----------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
- ------------------------ -----------------------------------------
- ------------------------ -----------------------------------------
Securities registered pursuant to section 12(g) of the Act:
Common Stock ($2 par value)
-----------------------------------------------------------
(Title of class)
Preferred Stock Purchase Rights
-------------------------------------------------------------------
(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
----------- -----------
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. [ ]
- ------------------------------------------------------------------------------
At February 29, 1996, the aggregate market value of shares of Common
Stock held by non-affiliates of Registrant (including fiduciary accounts
administered by affiliates) was $1,241,690,400 based on the last sale price
on the Nasdaq Stock Market on February 29, 1996.
As of February 29, 1996, 47,769,418 shares of common stock were
outstanding.
Documents Incorporated by Reference: Parts I, II and IV - Portions of
------------------------------------
Registrant's Annual Report to Stockholders for year ended December 31, 1995,
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,
1995, owned substantially all of the outstanding shares of capital stock of
twenty-one 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"), The Sparks State Bank ("Sparks Bank") 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 and Hopkins Plaza Agency, Inc.,
which acts as agent in the sale of fixed rate annuities. MBC Agency, Inc.,
owns all of the outstanding shares of Mercantile Life Insurance Company,
which is in the business of reinsuring credit insurance
2
made available through the Affiliated Banks. Mercantile Mortgage Corporation
owns all of the outstanding shares of Benchmark Appraisal 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,
Hopkins Plaza Agency, Inc. 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, 1995, see pages 46 to 51 of Registrant's Annual Report to
Stockholders for the year ended December 31, 1995, which information is
incorporated by reference herein.
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, 1995, assets under the investment supervision of Merc-Safe's
trust division had an estimated value of $10.5 billion, assets held in its
personal and corporate custody accounts had an estimated value of $16.0
billion and assets held in escrow accounts had an estimated value of $10
million.
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. 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.
Hopkins Plaza Agency, Inc. acts as agent in the sale of fixed rate
annuities.
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.
4
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, 1995, as follows:
Disclosure Required by Guide 3 Reference to 1995 Annual Report
- ------------------------------ -------------------------------
(I) Distribution of Assets,
Liabilities and Stockholder
Equity; Interest Rates and
Interest Differential . . . . . Analysis of Interest Rates and
Interest Differentials (pages 8-9)
. . . . . Rate/Volume Analysis (page10)
. . . . . Non-performing Assets (pages 18-19)
(II) Investment Portfolio . . . . . Bond Investment Portfolio (page 13)
(III) Loan Portfolio . . . . . Year-End Loan Data (page 44)
. . . . . Loan Maturity Schedule (page 15)
. . . . . Asset/Liability Management
(pages 15-16)
. . . . . Non-performing Assets (pages 18-19)
(IV) Summary of Loan Loss
Experience . . . . . Allowance for Loan Losses (page 17)
and Credit Risk Analysis (page 16)
. . . . . Allocation of Allowance for Loan
Losses (page17)
(V) Deposits . . . . . Analysis of Interest Rates and
Interest Differentials (pages 8-9)
. . . . . Notes to Financial Statements,
Note 5- Deposits (page 31)
(VI) Return on Equity
and Assets . . . . . Return on Equity and Assets (page 43)
(VII) Short-Term Borrowings . . . . . Notes to Financial Statements, Note
6 (page 31)
5
Employees
At December 31, 1995, Mercshares and its Affiliates had approximately 1,813
officers and 1,997 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. The Affiliated Banks also face competition for commercial and
retail banking business from banks and financial institutions located outside
their service areas. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "1994 Interstate Act"), which became law
September 29, 1994, provided, 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 well as certain
state "opt-in" rights with respect to other vehicles for interstate branching
and with respect to acceleration of the interstate merger provisions of the
1994 Interstate Act. Maryland and Virginia, and various other states, have
"opted-in" and generally accelerated these provisions, initially on a
reciprocal basis, to the full extent permitted by the 1994 Interstate Act.
As a result of this and other provisions of the Interstate Act and related
state actions, 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
6
Maryland. Mercshares also competes with Maryland-based bank subsidiaries of
the first, third, sixth and eighth 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 the
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.
Hopkins Plaza Agency, Inc., commenced business in 1996 and is a small
competitor in its area of activity.
7
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.
Further, under Section 106 of the 1970 Amendments to the Act and the
Board's Regulations, bank subsidiaries of bank holding companies are
prohibited from engaging in certain tie-in arrangements with bank holding
companies and their non-bank subsidiaries in connection with any extension of
credit or provision of any property or services. In 1995, the Federal
Reserve Board reduced the tie-in arrangement restrictions in certain defined
discount pricing circumstances.
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
8
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.
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.
9
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.
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., Mercantile Life Insurance Company and Hopkins
10
Plaza Agency, Inc. are subject to licensing and regulation by state insurance
authorities.
Recent Banking Legislation
The 1994 Interstate Act made a number of major changes that will have a
significant effect on 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 are 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 merger generated 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 apply equally 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 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
11
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 also permit an adequately
capitalized and managed bank to open and operate an interstate branch de novo
in any state that has a law that applies equally to all banks and expressly
permits 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. bank
subsidiaries.
There are many other provisions of the 1994 Interstate Act, such as
prohibitions against interstate branches being operated primarily to produce
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
12
the manner in which the banking business in the United States is conducted.
In this regard also, Maryland and Virginia, and various other states, have
adopted legislation accelerating implementation of the interstate merger
provisions of the 1994 Interstate Act and "opting-in" to its provisions with
respect to interstate de novo branching and interstate acquisition of
existing branches without acquisition of the whole institution. Generally
speaking, these "opt-in" provisions are initially on a reciprocal basis.
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, (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, and (7)
ameliorate certain provisions of Section 39 of the Federal Deposit Insurance
Act relating to the establishment of regulatory requirements with respect to
asset quality, among other things. Regulations and standards 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.
13
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 the purchase and sale of 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 the general level of interest rates and the general
availability of credit. More specifically, actions by the Board of Governors
of the Federal Reserve influence the levels of interest rates paid on
deposits and other bank funding sources and charged on bank loans as well as
the level of availability of bank funds with which loans and investments can
be made.
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.
14
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, 1995, approximately 134,000
square feet were occupied by Merc-Safe and Mercshares. At December 31, 1995,
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 18 banking and bank-related offices occupied by
Merc-Safe, five are owned in fee, four are owned subject to ground leases and
nine are leased with aggregate annual rentals of approximately $755,000, 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 144 banking offices of the other Affiliated Banks, 80 are owned in
fee, nine are owned subject to ground leases and 55 are leased, with
aggregate annual rentals of approximately $3,054,000 as of December 31, 1995.
15
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.
16
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.
17
SPECIAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of Registrant are:
Name Position Age
H. Furlong Baldwin Chairman of the Board and 64
Chief Executive Officer
Edward K. Dunn, Jr. President and Director 60
Kenneth A. Bourne, Jr. Executive Vice President 53
and Treasurer
Hugh W. Mohler Executive Vice President 50
Jay M. Wilson Executive Vice President 49
Brian B. Topping Vice President 61
John A. O'Connor, Jr. Senior Vice President 64
and Secretary
Robert W. Johnson Senior Vice President 53
O. James Talbott, II Senior Vice President 52
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. Dunn has been President of Mercshares since 1991. He has served as
President and Chief Operating Officer of Merc-Safe since July, 1995. 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.
Mr. Wilson was elected an Executive Vice President of Mercshares and
18
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.
19
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 20 and
"Recent Common Stock Prices" on page 21 of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1995.
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 44 of the Registrant's Annual Report to
Stockholders for the year ended December 31, 1995.
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 6 to 21 of the Registrant's Annual Report to Stockholders for the
year ended December 31, 1995.
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 22 to 41 of the Registrant's
Annual Report to Stockholders for the year ended December 31, 1995.
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.
24
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 G.
A. Mercantile Bankshares Corporation and Affiliates Annual
Incentive Compensation Plan, as amended through March 14,
1995 (Incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994,
Exhibit 10 A, Commission File No. 0-5127).
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
31
(Incorporated by reference to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1989,
Exhibit 10 F, Commission File No. 0-5127), as amended by
Agreement dated June 13, 1995 (filed herewith).
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), as amended and
restated effective December 31, 1995 (filed herewith).
G. Mercantile Bankshares Corporation Employee Stock Purchase
Dividend Reinvestment Plan dated February 13, 1995
(Incorporated by reference to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994,
Exhibit 10 I, Commission File No. 0-5127).
H. 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
10 N, Commission File No. 0-5127).
I. 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).
J. Executive Employment Agreement dated December 13, 1988
between
32
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).
K. 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, 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).
L. 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).
M. 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).
N. Supplemental Pension Agreement, dated February 10, 1995,
between Mercantile Bankshares Corporation and Mercantile-
Safe Deposit and Trust Company, Peninsula Bank and Hugh
W. Mohler (Incorporated by reference to Registrant's
Annual Report on Form 10-K for the year ended December
31, 1994, Exhibit 10 Q, Commission File No. 0-5127).
O. Mercantile Bankshares Corporation and Participating
Affiliates Supplemental Cash Balance Executive Retirement
Plan, dated April 27, 1994, effective January 1, 1994
(Incorporated by
33
reference to Registrant's Annual Report of Form 10-K for
year ended December 31, 1994, Exhibit 10 R, Commission
File No. 0-5127).
P. Mercantile Bankshares Corporation and Participating
Affiliates Supplemental 401(k) Executive Retirement Plan,
dated December 13, 1994, effective January 1, 1995
(Incorporated by reference to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994,
Exhibit 10 S, Commission File No. 0-5127).
Q. Mercantile Bankshares Corporation Option Agreement with
each of H. Furlong Baldwin (dated August 22, 1995 for
80,000 options), Edward K. Dunn, Jr. (dated August 17,
1995 for 45,000 options), Brian B. Topping (dated August
23, 1995 for 35,000 options), Hugh W. Mohler (dated
August 22, 1995 for 30,000 options) and Jay M. Wilson
(dated August 18, 1995 for 30,000 options) the Net
Operating Income of each being that of Mercantile-Safe
Deposit and Trust Company, (filed herewith).
R. Mercantile Bankshares Corporation Retainer Stock Plan For
Non-Employee Directors dated March 12, 1996 (filed
herewith).
(13) Annual Report to security holders for the year ended December
31, 1995 (filed herewith).
(21) Subsidiaries of the Registrant
Information as to subsidiaries of the Registrant (filed
herewith)
(23) Consent
Consent of Certified Public Accountants (filed herewith)
(24) Power of Attorney
Power of Attorney dated March 12, 1996 (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 41
of the Registrant's Annual Report to Stockholders for the year ended
December 31, 1995.
Consolidated Financial Statements and related notes are incorporated by
reference to the Registrant's Annual Report to Stockholders for the year
ended December 31, 1995, and may be found on the pages of said Report as
indicated in parentheses:
Consolidated Balance Sheets, December 31, 1995 and 1994 (page 22)
Statement of Consolidated Income for the years ended December
31, 1995, 1994 and 1993 (page 23)
Statement of Consolidated Cash Flows for the years ended
December 31, 1995, 1994 and 1993 (pages 24 and 25)
Statement of Changes in Consolidated Stockholders' Equity for
the years ended December 31, 1995, 1994 and 1993 (page 26)
Notes to Consolidated Financial Statements (pages 27 to 40)
Supplementary Data:
Quarterly Results of Operations are incorporated by reference to the
information appearing under the caption "Quarterly Results of
Operations" on page 37 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1995.
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, 1996
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, 1996
H. Furlong Baldwin, Chairman of the
Board and Chief Executive Officer
Principal Financial Officer
/S/ Kenneth A. Bourne, Jr. March 28, 1996
Kenneth A. Bourne, Jr.
Executive Vice President and Treasurer
Principal Accounting Officer
/S/ Jerry F. Graham March 28, 1996
Jerry F. Graham
Vice President and Controller
A majority of the Board of Directors: William J. McCarthy, Richard O.
Berndt, Thomas M. Bancroft, Jr., B. Larry Jenkins, Bishop L. Robinson,
Donald J. Shepard, Martin L. Grass, Calman J. Zamoiski, Jr., James A.
Block, Brian B. Topping, George L. Bunting, Jr., Morris W. Offit, William
C. Richardson, Robert D. Kunisch, Christian H. Poindexter.
By: /S/ H. Furlong Baldwin March 28, 1996
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
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.
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
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
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
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
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.
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
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,
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.
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
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.
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
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.
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.
15
Exhibit (10) E
SIXTH AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
This Sixth Amendment to the Deferred Compensation
Agreement is made effective as of this 13th day of June,
1995, by and between Mercantile-Safe Deposit & Trust Company
(hereinafter called "Corporation") and Douglas W. Dodge
(hereinafter called "Employee").
WHEREAS, Corporation and Employee entered into a
Deferred Compensation Agreement dated September 30, 1982,
and a First Amendment thereto dated October 24, 1983, and a
Second Amendment thereto dated March 13, 1984, and a Third
Amendment thereto dated January 1, 1987, and a Fourth
Amendment thereto dated December 8, 1987, and a Fifth
Amendment thereto dated January 1, 1989 (hereinafter
referred to as the "Agreement"); and
WHEREAS, the Agreement specifies in part that
Employee is entitled to certain supplemental retirement
benefits; and
WHEREAS, Corporation and Employee wish to modify
the terms of such supplemental retirement benefits; and
WHEREAS, Mercantile Bankshares Corporation has
approved and adopted effective as of January 1, 1991, The
Cash Balance Plan For Employees Of Mercantile Bankshares
Corporation And Participating Affiliates, amended and
restated as of January 1, 1991(the "Cash Balance Plan"), in
which Corporation is a participating employer; and
WHEREAS, in light of Mercantile Bankshares
Corporation's amendment and restatement of the Cash Balance
Plan, Corporation and Employee desire to make certain
changes to the Agreement; and
1
WHEREAS, Employee continues to perform valuable
services for Corporation and Corporation has the present
desire to retain his services until his death or retirement.
NOW, THEREFORE, in order to carry out the purposes
of the Agreement, in consideration of the foregoing and
other good and valuable consideration, receipt of which is
hereby acknowledged, Corporation and Employee hereby agree
as follows:
1. Section 5 is hereby amended effective as of
the effective date of this Amendment to read as follows:
5. Normal Retirement. If Employee remains in
------------------
Corporation's active employ until Employee attains
age sixty (60), Employee shall be entitled to
receive, when he retires or his employment
otherwise terminates other than by reason of his
death, an annual benefit until the later of (i)
Employee's death or (ii) the expiration of the
minimum term set forth below in this Section 5.
This benefit is expressed on an annual basis but
shall be payable monthly. The amount of the
benefit and the minimum term thereof will vary
based upon Employee's age at the time of
retirement or termination, as set forth below:
Employee's Age at Minimum Term for
Retirement or Annual Benefit which Benefit is
Termination Payable
----------------- -------------- ----------------
60 $67,300 20 years
61 75,700 19 years
62 85,400 18 years
63 126,000 17 years
64 126,000 16 years
65 126,000 15 years
2
Monthly payment of this benefit shall commence
within one (1) month after Employee's retirement
or termination.
2. Paragraph (b) of Section 12 is hereby amended
effective as of the effective date of this Amendment to read
as follows:
12. Coordination With Other Benefit Plans.
--------------------------------------
(b) Employee's benefits under The Cash Balance
Plan For Employees Of Mercantile Bankshares
Corporation And Participating Affiliates (the
"Cash Balance Plan"), as that plan shall exist
from time to time, shall be based on Employee's
reduced salary provided for in Section 2.
Employee shall, however, be entitled to a
Supplemental Pension Benefit under this Agreement
when he retires or his employment otherwise
terminates. The amount of this Supplemental
Pension Benefit shall be equal to the actuarial
equivalent of a single-life annuity commencing at
age 65, but without reduction in the event
payments commence on or after attainment of age
63, payable over the Employee's life, that
provides a monthly benefit of $8,645.21.
Within the 90-day period prior to Employee's
retirement or other termination of employment, and
subject to the consent of the Corporation,
Employee may choose the method of payment of this
Supplemental Pension Benefit from among the then
methods enumerated under the Cash Balance Plan;
provided, however, that in no event may a lump sum
method of payment be elected. In the event
Employee dies before the commencement of payment
of his Supplemental Pension Benefit, his
beneficiary's right to a death benefit ( if any)
attributable to such Supplemental Pension Benefit
shall be governed by the terms of the Cash Balance
Plan; the amount and form of payment of such death
benefit shall also be governed by the terms of the
Cash Balance Plan. In no event shall spousal
consent be necessary for the effectuation of any
method of payment (or for the designation of any
beneficiary) of the Supplemental Pension Benefit
even though such consent might otherwise be
required under the Cash Balance Plan. The
conversion of this Supplemental Pension Benefit to
an actuarial equivalent for purposes of this
Agreement shall be governed in all respects by the
actuarial assumptions set forth in the Cash
Balance Plan.
3
3. Effective as of the effective date of this
Amendment, Appendix I shall be deleted in its entirety.
4. In all other respects, the provisions of the
Agreement remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have
executed this Sixth Amendment to the Agreement as of the day
and year first above written.
ATTEST: Mercantile-Safe Deposit & Trust Company
/s/ John A. O'Connor, Jr. By: /s/ H. F. Baldwin
- ------------------------- ----------------------
John A. O'Connor, Jr. H. Furlong Baldwin
(SEAL)
WITNESS:
/s/ Kathleen T. Cook By: /s/ Douglas W. Dodge (SEAL)
- -------------------- -------------------------
Kathleen T. Cook Douglas W. Dodge, Executive
4
Exhibit (10) F
MERCANTILE BANKSHARES CORPORATION AND PARTICIPATING
AFFILIATES UNFUNDED DEFERRED COMPENSATION PLAN
FOR DIRECTORS
AS AMENDED AND RESTATED EFFECTIVE MARCH 12, 1996
INTRODUCTION
------------
By action of its Board of Directors dated December
14, 1982, Mercantile Bankshares Corporation (the "Sponsor")
established the Mercantile Bankshares Corporation Unfunded
Deferred Compensation Plan for Directors (the "Plan"),
effective as of January 1, 1983. The Plan was amended and
restated effective as of January 1, 1984, to include a
provision for early withdrawals in the event of financial
hardship and to make certain other changes requested by the
Internal Revenue Service. The Plan was again amended and
restated effective as of December 31, 1995, to modify the
early withdrawal provision and to add a feature by which the
rate of return credited to the accounts of participants will
be linked to the rate of return achieved by common stock of
the Sponsor. Effective as of March 12, 1996, the Plan has
again been amended and restated as hereinafter set forth to
modify the distribution provisions of the Plan. All
Affiliates which previously adopted the Plan shall continue
as participating Affiliates in the Plan, as so amended and
restated, unless and until they withdraw from such
participation pursuant to Section 9(b). Furthermore, with
the approval of the Chairman of the Board of Directors or
the President of the Sponsor, the Plan, as so amended and
restated, may be adopted by the Board of Directors of any
Affiliates of the Sponsor that are not currently
participating Affiliates (as more particularly described
herein), effective as of March 12, 1996, or as of any later
date specified by any such Affiliate at the time of its
adoption of the Plan.
1. PURPOSE
-------
The purpose of the Plan is to enable any Director
of any Corporation (as hereinafter defined) to defer receipt
of fees and other cash compensation otherwise payable for
services as a Director by so electing in accordance with the
provisions of the Plan, provided such election is made prior
to the date such compensation is earned by the Director.
2. DEFINITIONS
-----------
Under the Plan, except where the context indicates
otherwise, the following definitions apply:
(a) "Account" shall mean a bookkeeping reserve
account established and maintained for each Participant
pursuant to Section 6(a) for purposes of determining the
amount payable to the Participant pursuant to Section 7.
1
(b) "Affiliate" shall mean any corporation in
which the Sponsor owns directly or indirectly, as of the
date of adoption of the Plan by the Affiliate, at least
eighty percent (80%) of the outstanding voting stock.
(c) "Beneficiary" shall mean the person(s)
entitled, pursuant to Section 7(g) of the Plan, to receive
payments under the Plan at and after the death of the
Participant, including the person(s) designated by the
Participant, the Participant's estate or the estate of a
deceased Beneficiary, all as more particularly described in
Section 7(g).
(d) "Board of Directors" shall mean the Board of
Directors of the Sponsor or an Affiliate, as the case may
be.
(e) "Corporation" shall mean Mercantile
Bankshares Corporation and any Affiliate which has adopted
the Plan and any successor thereto by merger, consolidation
or otherwise which may agree to continue the Plan.
(f) "Committee" shall mean the committee
appointed by the Board of Directors of the Sponsor pursuant
to Section 3 to administer the Plan, as the committee may be
constituted from time to time, or, in lieu thereof, the
Board of Directors of the Sponsor.
(g) "Common Stock" shall mean shares of the
Sponsor's authorized and issued common stock, par value of
Two Dollars ($2.00) per share.
(h) "Deferral Agreement" shall mean a written
agreement, substantially in the form attached hereto as
Exhibit A, executed by the Participant, on which the
Participant specifies his or her elections pursuant to
Section 5.
(i) "Deferred Compensation" shall mean the
portion of each compensation payment which would have been
payable to the Participant in his or her capacity as a
Director while participating in the Plan (whether payable as
a directors' retainer or meeting fee or as a fee for service
on a committee of the Board of Directors) and which portion
the Director has elected to defer under the terms of an
election to participate in the Plan pursuant to Section 5.
(j) "Director" shall mean a member of the Board
of Directors of the Sponsor or any Affiliate.
(k) "Fair Market Value" of a share of Common
Stock on a particular date under the Plan shall mean the
last reported sale price per share of Common Stock, regular
way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated
transaction reporting system with respect to securities
listed or admitted to trading on a national securities
exchange or included for quotation on the Nasdaq Stock
Market, or if the Common Stock is not so listed or admitted
to trading or included for quotation, the last quoted price,
or if the Common Stock is not so quoted, the average of the
high bid and low asked prices, regular way, in the over-the-
counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System or, if
such system is no longer in use, the principal other
automated quotations system that may then be in use or, if
2
the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices, regular way, as
furnished by a professional market maker making a market in
the Common Stock as selected in good faith by the Committee
or by such other source or sources as shall be selected in
good faith by the Committee; provided, however, that the
determination of Fair Market Value shall be made by the
Committee in good faith in accordance with the Internal
Revenue Code of 1986 (as amended). If, as the case may be,
the particular date for which Fair Market Value need be
established under the Plan is not a trading day, the
determination shall be made as of the next preceding trading
day. As used herein, the term "trading day" shall mean a
day on which public trading of securities occurs and is
reported in the principal consolidated reporting system
referred to above, or if the Common Stock is not listed or
admitted to trading on a national securities exchange or
included for quotation on the Nasdaq Stock Market, any day
other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are closed.
(l) "Interest Credits" shall mean those amounts
credited to the Participant's Account pursuant to Sections
6(c) and 7(b).
(m) "Participant" shall mean a Director of any
Corporation who elects to participate in the Plan as
provided in Section 5.
(n) "Phantom Stock Credits" shall mean those
amounts credited to the Participant's Account pursuant to
Section 6(d), where each such Phantom Stock Credit is
equivalent to the Fair Market Value of one share of Common
Stock, but the crediting of which does not transfer any of
the attributes of ownership of a share of Common Stock to
the Participant.
(o) "Plan" shall mean the Mercantile Bankshares
Corporation And Participating Affiliates Unfunded Deferred
Compensation Plan For Directors, as described herein and as
amended from time to time.
(p) "Sponsor" shall mean Mercantile Bankshares
Corporation, a Maryland corporation.
(q) "Valuation Date" shall mean the last business
day of March, June, September and December.
3. ADMINISTRATION
--------------
The Plan shall be administered by the Board of
Directors of the Sponsor. In the alternative, the Board of
Directors of the Sponsor may appoint a Committee consisting
of not less than two (2) persons to administer the Plan on
behalf of the Board of Directors of the Sponsor, subject to
such terms and conditions as the Board of Directors of the
Sponsor may prescribe. The Committee shall have the
authority, in its sole and absolute discretion, to interpret
the Plan and adopt, amend, or rescind such rules and
procedures for carrying out the Plan, and to take all other
action necessary or advisable for the implementation and
administration of the Plan, as the Committee may deem
appropriate. Once appointed, the Committee shall continue
to serve until otherwise directed by the Board of Directors
of the
3
Sponsor. From time to time, the Board of Directors
of the Sponsor may increase the size of the Committee and
appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all
members of the Committee and, thereafter, directly
administer the Plan. In the event that the Board of
Directors of the Sponsor is the administrator of the Plan in
lieu of a Committee, the term "Committee" as used herein
shall be deemed to mean the Board of Directors of the
Sponsor.
4. ELIGIBILITY
-----------
Eligibility for participation in the Plan shall be
available to all Directors who are not officers of the
Sponsor or any Affiliate; provided, however, that Directors
of an Affiliate that is not a participating Affiliate as of
March 12, 1996, shall not be eligible until the later of the
date the Plan is adopted by the Affiliate's Board of
Directors or the date such adoption is approved by the
Chairman of the Board of Directors or the President of the
Sponsor. In no event shall an Affiliate's adoption of the
Plan take effect retroactively.
5. PARTICIPANT ELECTIONS
---------------------
(a) Election to Participate.
(i) Each Director who is an active
Participant in the Plan as of December 15, 1995, shall file
a new Deferral Agreement with the Committee by December 31,
1995, in order to continue active participation in the Plan.
If such Deferral Agreement is not received by the Committee
by December 31, 1995, such Participant shall, subject to
Section 5(d), cease to be an active Participant in the Plan
on December 31, 1995, and may only elect to become an active
Participant as of January 1, 1997, or January 1 of any later
calendar year by filing a Deferral Agreement to that effect
with the Committee by December 31 of the calendar year
immediately preceding the calendar year during which he or
she desires to resume participation.
(ii) Any Director who is eligible pursuant
to Section 4 on December 31, 1995, but who did not actively
participate in the Plan during 1995, may elect to become an
active Participant as of January 1, 1996, or January 1 of
any later calendar year by filing a Deferral Agreement to
that effect with the Committee by December 31 of the
calendar year immediately preceding the calendar year during
which he or she desires to commence active participation.
(iii) Any Director who first becomes
eligible on or after January 1, 1996, as a result of being
newly elected as a Director or as a result of the Affiliate
for which the Director performs services as a Director first
adopting the Plan may elect to become an active Participant
during the calendar year in which such Director first
becomes eligible by filing a Deferral Agreement to that
effect with the Committee within thirty (30) days after
first becoming eligible. Such Director shall become an
active Participant in the Plan effective as of the date the
Deferral Agreement is received by the Committee or, if
later, as of the date the Affiliate's adoption of the Plan
is effective. If a Deferral Agreement is not received by
the Committee within such thirty (30) -day period, the
Director may only elect to
4
become an active Participant as of January 1 of the subse-
quent calendar year or January 1 of any later calendar year
and shall make such election by filing a Deferral
Agreement to that effect with the Committee by
December 31 of the calendar year immediately preceding the
calendar year during which he or she desires to commence
active participation.
(iv) Unless otherwise withdrawn by the
Participant, active participation in the Plan shall continue
as to any Participant until that person ceases to be an
eligible Director. A Participant who withdraws his active
participation in the Plan or who ceases to be an eligible
Director shall, nevertheless, remain an inactive Participant
hereunder and shall remain bound by all applicable
provisions of the Plan until such time as his Account shall
be fully distributed.
(b) Deferral Agreements.
(i) Each eligible Director shall become a
Participant in the Plan as of the dates specified in Section
5(a) by filing a Deferral Agreement with the Committee in
accordance with the provisions of Section 5(a).
(ii) Each such Deferral Agreement shall
specify the percentage of compensation payable to the
Director, the receipt of which the Director elects to defer
pursuant to the Plan.
(iii) All Deferral Agreements shall be
effective prospectively and only with respect to amounts
earned by the eligible Director subsequent to the date each
such Deferral Agreement is received by the Committee.
(iv) A Deferral Agreement shall remain in
effect with respect to compensation earned by the Director
in subsequent years until a revised Deferral Agreement is
filed with the Committee that modifies any elections in
effect under the current Deferral Agreement on file with the
Committee or until the Director's active participation in
the Plan is otherwise terminated. Any such modifications to
current elections shall be effective as of January 1 of the
calendar year immediately following the year in which the
revised Deferral Agreement is received by the Committee;
provided, however, that a Director may terminate at any time
during a calendar year the election to defer the receipt of
compensation not yet earned by the Director by notifying the
Committee in writing, in which event the election to defer
shall terminate effective upon receipt of such notification
of termination. An election to defer all or any part of a
Director's annual retainer fee shall be irrevocable with
respect to the calendar year to which such deferral election
applies.
(c) Termination or Withdrawal of Participation. A
Director's termination of active participation or
termination of election to defer shall not cause
acceleration or modification of the periodic method of
payment elected by the Director pursuant to Section 7 with
respect to the balance of the Director's Account accrued as
of the effective date of such termination (or with respect
to any Interest Credits or dividend equivalent Phantom Stock
Credits credited to such Account thereafter and before the
entire balance of such Account has been distributed).
5
(d) Election to Modify Account Earnings. Any
current Director who has a balance in his or her Account as
of December 31, 1995, may elect to have such balance
converted to Phantom Stock Credits effective January 1,
1996, as more fully described in Section 6(f), and to
thereafter have credited to the Account dividend equivalent
Phantom Stock Credits, as described in Section 6(e), with
respect thereto, until such time as such individual ceases
to be a Director (at which time Interest Credits will resume
being credited to his or her Account, as provided in Section
7(b), until the entire balance of the Account has been
distributed under the Plan). To make this one-time
election, the Director must submit to the Committee, by
January 31, 1996, a written election to that effect,
substantially in the form attached hereto as Exhibit B,
executed by the Participant.
6. DEFERRED COMPENSATION ACCOUNTS
------------------------------
(a) Accounts, In General. After the effective
date of any election to participate properly filed with the
Committee by a Director, the Corporation for which the
Participant serves as a Director shall establish an Account
on its books in the name of the Director, which Account
shall be credited or debited, as the case may be, with
Deferred Compensation, Phantom Stock Credits, and/or
Interest Credits as described below, and payments pursuant
to Section 7. Each such Account shall consist of such
subaccounts as are necessary or desirable to the Committee
for the convenient administration of the Plan. The Account
and any subaccounts established thereunder shall be
bookkeeping reserve accounts only and shall not require
segregation of any funds of the Sponsor or an Affiliate or
provide any Participant with any rights to any assets of the
Sponsor or an Affiliate, 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 Section 7.
(b) 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.
(c) Deferred Compensation and Interest Credits.
All Deferred Compensation deferred by a Participant that
otherwise would have been paid to the Participant prior to
January 1, 1996, absent the Participant's election to defer
such amount pursuant to the Plan shall be credited to the
Participant's Account, denominated in dollars, as of the
Valuation Date occurring within the calendar quarter during
which such amount would have been payable to the
Participant. Unless such Account balance as of December 31,
1995, is converted to Phantom Stock Credits as described in
Section 6(f) pursuant to the Participant's election made in
accordance with Section 5(d), the dollar amount credited to
the Participant's Account shall be credited with Interest
Credits as of each succeeding Valuation Date, until the
entire balance of the Account has been distributed under the
Plan, at the annual rate of five percent (5%). The amount
of Interest Credits to be credited to a Participant's
Account on any Valuation Date shall be based on the balance
in the Participant's Account as of the immediately preceding
Valuation Date and shall take into account any distributions
made from the Account since such immediately preceding
Valuation Date.
6
(d) Deferred Compensation and Phantom Stock
Credits.
(i) All Deferred Compensation deferred by a
Participant on and after January 1, 1996, shall be credited
to the Participant's Account as of the applicable Valuation
Date in the form of Phantom Stock Credits.
(ii) The number of such Phantom Stock
Credits to be credited to each Participant's Account as of
any Valuation Date shall be determined by dividing (A) the
aggregate dollar amount of Deferred Compensation that
otherwise would have been payable to the Participant during
the calendar quarter ending on such Valuation Date absent
the Participant's election to defer such amount pursuant to
the Plan, by (B) the Fair Market Value of one share of
Common Stock on such Valuation Date. Phantom Stock Credits
shall be added to the Phantom Stock Credits previously
credited to the Participant's Account and may be credited to
such Account in whole or fractional units as applicable.
(e) Dividend Equivalents. As of each Valuation
Date, each Participant's Account that has a balance of
Phantom Stock Credits shall be credited with dividend
equivalent Phantom Stock Credits determined by dividing (i)
the aggregate dividends that the Participant would have
received during the calendar quarter ending on such
Valuation Date if the Participant were the owner of record
throughout such calendar quarter of a number of whole shares
of Common Stock equal to the number of whole Phantom Stock
Credits credited to such Participant's Account as of such
Valuation Date (but prior to the crediting of any Deferred
Compensation on such Valuation Date), by (ii) the Fair
Market Value of one share of Common Stock on such Valuation
Date. Dividend equivalent Phantom Stock Credits shall be
added to the Phantom Stock Credits previously credited to
the Participant's Account and may be credited to such
Account in whole or fractional units as applicable.
(f) Conversion of Account. Pursuant to the
provisions of Section 5(d), each Participant who is
currently a Director and who has a balance in his or her
Account as of December 31, 1995, may elect to have the total
of such balance converted to Phantom Stock Credits effective
January 1, 1996, and to thereafter have credited to the
Account dividend equivalent Phantom Stock Credits, as
described in Section 6(e), with respect thereto, until such
time as the Participant ceases to be a Director, as further
set forth in Section 7(b). Partial conversions shall not be
permitted. In the event a Participant makes this election,
the number of Phantom Stock Credits that shall be credited
to such Participant's Account as of January 1, 1996, upon
such conversion shall be determined by dividing (i) the
dollar value of the Participant's Account on December 31,
1995, after taking into account all amounts to be credited
or debited to such Account on such date, by (ii) the Fair
Market Value of one share of Common Stock on December 31,
1995. Phantom Stock Credits may be credited to Accounts in
whole or fractional units as applicable. Until such time as
such Participant ceases to be a Director, any Participant
who makes this election shall not be entitled to have
credited to his or her Account thereafter any Interest
Credits described in Section 6(c) above.
(g) Phantom Stock Credit Adjustments. The
Committee shall adjust the Phantom Stock Credits credited to
each Participant's Account as appropriate to reflect any
7
stock dividend, stock split, combination of shares, merger,
share exchange, consolidation or any other change in the
corporate structure or shares of the Sponsor.
7. DISTRIBUTIONS OF DEFERRED COMPENSATION ACCOUNTS
-----------------------------------------------
(a) Phantom Stock Credits may be redeemed only
for cash in accordance with the provisions of the Plan under
circumstances prescribed in Rule 16a-1(c)(3) (as in effect
on December 31, 1995) under The Securities Exchange Act of
1934 (the "1934 Act"). All other distributions under the
Plan shall also be made in cash.
(b) As of the Valuation Date coincident with or
immediately following the date a Participant ceases to be a
Director, the dollar amount of a Participant's Account shall
be fixed by multiplying (i) the number of Phantom Stock
Credits (including fractional units) in the Participant's
Account on such Valuation Date, after taking into account
all Deferred Compensation or dividend equivalent Phantom
Stock Credits allocable to the Account on such Valuation
Date, by (ii) the Fair Market Value of one share of Common
Stock on such Valuation Date. As of each succeeding
Valuation Date thereafter, the dollar amount credited to the
Participant's Account shall be credited with Interest
Credits, until the entire balance of the Account has been
distributed under the Plan, at the annual rate of five
percent (5%). The amount of Interest Credits to be credited
to a Participant's Account on any Valuation Date shall be
based on the balance in the Participant's Account as of the
immediately preceding Valuation Date and shall take into
account any distributions made from the Account since such
immediately preceding Valuation Date. See Exhibit C
attached hereto for a further description of the methodology
for Account conversion and the crediting of Interest
Credits.
(c) Each Participant shall elect, no later than
December 31 of the calendar year in which he or she ceases
to be a Director, the method of payment of distributions of
the Participant's Account; such election shall be
irrevocable and in writing, substantially in the form
attached hereto as Exhibit D, executed by the Participant.
A Participant may elect to receive distributions in a number
of substantially equal annual or quarterly installments
(which shall include Interest Credits, as described in
Section 7(b)) not to exceed ten (10) if the installment
payments are to be made annually, and not to exceed forty
(40) if the installment payments are to be made quarterly.
The first installment payment (whether annual or quarterly)
shall, except as provided in the immediately succeeding
sentence hereof, be made during the first calendar quarter
of the calendar year immediately following the calendar year
in which the Participant ceases to be a Director, and shall
be based on the value of the Participant's Account as of the
Valuation Date occurring in the last calendar quarter of the
calendar year in which the Participant ceases to be a
Director. Notwithstanding the immediately preceding
sentence hereof, if a Participant elects, at any time prior
to January 1 of the calendar year in which he or she ceases
to be a Director, to receive distributions in quarterly
installments, the first installment payment shall be made
during the first calendar quarter immediately following the
calendar quarter in which the Participant ceases to be a
Director, and shall be based on the value of the
Participant's Account as of the Valuation Date occurring in
the calendar quarter in which the Participant ceases to be a
Director. Amounts held for installment payments shall
continue to be credited with Interest Credits, as provided
in Section 7(b). Subsequent installments shall be made
8
during each succeeding calendar quarter, if installment
payments are to be made quarterly, or during the first
calendar quarter of each succeeding calendar year, if
installment payments are to be made annually, until the
entire balance of such Participant's Account due to that
Participant has been paid. All distributions shall be based
on the value of the Participant's Account as of the
Valuation Date immediately preceding such distribution. See
Exhibit C attached hereto for a further description of the
methodology for calculation of installment payments.
(d) Notwithstanding Section 7(c) above, any
election by a Participant as to the method of payment of
Deferred Compensation, which election was made prior to
March 12, 1996, shall remain valid and irrevocable with
respect to compensation which was deferred by the
Participant prior to March 12, 1996.
(e) The Committee shall in all events make a
single lump sum payment, notwithstanding the periodic method
elected by the Participant, if the balance of the
Participant's Account at the time of commencement of
benefits is less than Ten Thousand Dollars ($10,000). All
distributions shall be based on the value of the
Participant's Account as of the Valuation Date immediately
preceding such distribution.
(f) In the event a Participant ceases to be a
Director and becomes employed by any governmental agency
that has jurisdiction over the activities of the Sponsor or
an Affiliate (all as determined by the Committee), the
entire unpaid balance of all of such Participant's Account
shall be paid immediately, in a single lump sum payment,
without regard to the timing of distributions elected
pursuant to Section 7(c). All distributions shall be based
on the value of the Participant's Account as of the
Valuation Date immediately preceding such distribution.
(g) If a Participant dies before full payment is
made of such Participant's Account, the unpaid balance of
such Account shall be paid to the surviving Beneficiary
designated in writing by the Participant, on a designation
election substantially in the form attached hereto as
Exhibit E, and delivered to the Committee under the same
method of payment which applied or would have applied in the
case of payments to the Participant; however, in the event
of financial hardship as described at Section 17, or in the
event that the balance of the Account at that time is less
than Ten Thousand Dollars ($10,000), such unpaid
installments shall be paid in one lump sum payment to the
designated Beneficiary. The filing of a designation of
Beneficiary shall be deemed automatically to revoke any
previously filed Beneficiary designation. If (i) no
designation shall be in effect, or (ii) no designated
Beneficiary survives the Participant, or (iii) the
designated Beneficiary is the Participant's estate, then the
unpaid balance at the Participant's death shall be paid to
the estate of the Participant in one lump sum payment.
Payment to the Participant's estate or Beneficiary shall be
made or begin during the calendar quarter immediately
following the calendar quarter in which the Participant
dies. In the case of a Beneficiary who dies while receiving
installment payments, any installments payable after the
Beneficiary's death shall be paid to the deceased
Beneficiary's estate; however, in the event of financial
hardship as described at Section 17, or in the event that
the balance of the Account at that time is less than Ten
Thousand Dollars ($10,000), such unpaid installment payments
shall be paid in one lump sum payment to the deceased
Beneficiary's estate. All Beneficiaries similarly situated
shall
9
be treated alike. All distributions shall be based on the
value of the Participant's (or Beneficiary's) Account as of
the Valuation Date immediately preceding such distribution.
(h) Notwithstanding anything herein contained to
the contrary, the Committee shall have the right, in its
sole discretion, to vary the method and timing of
distributions to a Participant or Beneficiary under this
Section 7, after such Participant ceases to be a Director,
and may make such distributions in a single payment or over
a shorter or longer period of time than that elected by the
Participant
8. ASSIGNMENT AND PAYMENTS UPON INCAPACITY
---------------------------------------
(a) No right of any Participant or Beneficiary in
the Plan to receipt of a Participant's Account shall be
assignable or subject to anticipation, encumbrance, sale,
pledge, alienation, execution, levy, attachment, charge or
any other form of transfer or encumbrance of any nature
whatsoever except that a Participant may name a Beneficiary
in respect of the rights of the Participant in the event of
such Participant's death. Upon the occurrence of any event
deemed by the Corporation to be in violation, attempted
violation or to evidence any danger of violation of the
prohibition on transfers and encumbrances described in this
Section 8(a), all as determined by the Committee, the
Corporation may withhold any and all payments under the Plan
and make such payments to anyone else deemed by the
Corporation to be a natural object of the bounty of the
Participant or Beneficiary to whom such withheld payments
would otherwise have been made.
(b) If the Committee shall find that any person
to whom any payment is payable under the Plan is unable to
care for his or her affairs because of illness or accident,
or is a minor, any payment due (unless a prior claim
therefor shall have been made by a duly appointed guardian,
committee, or other legal representative) may be paid to the
spouse, a child, a parent, or a brother or sister, or to any
person deemed by the Committee to have incurred expense for
such person otherwise entitled to payment, in such manner
and proportions as the Committee may determine. Any such
payment shall be a complete discharge of the liabilities of
the Corporation to make such payment to the Participant.
9. AMENDMENT OR DISCONTINUANCE OF PLAN
-----------------------------------
(a) Except as provided in Section 9(d), the Board
of Directors of the Sponsor shall be vested with the sole
power to amend the Plan at any time and in any manner
(whether in toto or with respect to an individual
Participant) in such respects as the Board of Directors of
the Sponsor may deem advisable by an instrument in writing,
which amendment shall be binding on all parties, subject to
the principles contained in Section 9(c). Notice of any
such amendment shall be provided to all Participants and to
each Corporation promptly.
(b) The Board of Directors of any Corporation
may, by resolution adopted by a majority of the members of
the Board of Directors at a meeting at which a quorum is
present, discontinue its participation in the Plan. Notice
of such discontinuance shall be provided to the Committee
and each affected Participant promptly.
10
(c) Notwithstanding the foregoing, but subject to
Section 9(d), no amendment or discontinuance of the Plan
shall affect Participants' rights to receive distributions
of their Accounts attributable to fees deferred (including
dividend equivalent Phantom Stock Credits and Interest
Credits, as applicable) prior to the effective date of such
amendment or discontinuance.
(d) For so long as may be required to satisfy the
conditions of Rule 16b-3(c)(2)(ii) under the 1934 Act (as in
effect on December 31, 1995, or any successor provision
limiting Plan amendments as set forth below), the Plan
provisions applicable to the timing of the crediting of
Phantom Stock Credits to the Accounts of Directors of the
Sponsor may not be amended more than once every six (6)
months, other than to comport with changes in the Internal
Revenue Code of 1986 (as amended), or the Employee
Retirement Income Security Act of 1974, or the rules
thereunder.
(e) The Board of Directors of the Sponsor
reserves the right to terminate its sponsorship of the Plan,
by resolution adopted by a majority of its entire Board of
Directors, provided that at least thirty (30) days advance
written notice is provided to each other Corporation. In
the event of such termination, any Corporation, by
resolution of a majority of its Board of Directors, may
elect to continue the Plan as an individual Plan for the
benefit of such Corporation's participating Directors,
provided that such Corporation shall assume full
responsibility for administration of the Plan thereafter.
10. PLAN NOT FUNDED
---------------
(a) The Plan is not funded. The Corporation
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 each Corporation
with respect to the benefits payable hereunder shall be paid
out of such Corporation's general assets and shall not be
secured by any form of trust, escrow, evidence of
indebtedness or otherwise. No person having rights under
the Plan shall be deemed to have any property interest,
legal or equitable, in any specific asset of the Corporation
or any Common Stock of the Sponsor, and, to the extent that
any person acquires any right to receive payments under the
Plan, such right shall be no greater than, nor shall it have
preference or priority over, the rights of any unsecured
general creditor of the Corporation.
(b) A Corporation shall have the right, but shall
not be required, to segregate funds in its financial records
equal to the aggregate Accounts of its Directors, and to
invest such funds or to direct the investment of such funds
in order to produce an income return, but such funds and the
earnings thereon shall remain solely as an asset of the
Corporation.
11. COPIES OF PLAN AVAILABLE
------------------------
Copies of the Plan and any and all amendments
thereto shall be made available to all members of the Board
of Directors and Participants during normal business hours
at the office of the Secretary of the Sponsor.
11
12. SEPARATE APPLICATION OF PLAN
----------------------------
The Plan embodies the terms and conditions of the
individual unfunded deferred compensation plans of the
Sponsor and participating Affiliates, for the benefit of
their respective Directors, all of which plans shall be
governed by this instrument and collectively referred to for
convenience as the "Plan." Except as expressly provided in
the Plan, it is intended that the provisions of the Plan
shall apply separately to each Corporation and to the
Participants of each such Corporation, and the term
"Corporation" as used throughout the Plan shall be so
construed. Payment of a Participant's Account under the
Plan shall be the sole liability and obligation of the
Corporation for which the Participant served as a Director
during the respective period(s) of his or her participation
in the Plan, and not the liability or obligation of any
other Corporation. The Affiliates participating in the Plan
as of December 1, 1995, are listed on Exhibit F attached
hereto.
13. COMMON DIRECTORS
----------------
In the event that a Director serves on the Board
of Directors of more than one Corporation, the Director must
execute a separate election form as to each Corporation for
which the Director desires to have Deferred Compensation.
14. BINDING ON SUCCESSORS
---------------------
In the event that the Corporation (or any entity
resulting from any merger or consolidation referred to in
this Section 14 or which shall be a purchaser or transferee
so referred to) shall at any time be merged or consolidated
into or with any other entity or entities or in the event
that substantially all of the assets of the Corporation or
any such entity shall be sold or otherwise transferred to
another entity, the provisions of the Plan shall be binding
upon and shall inure to the benefit of the continuing entity
in (or the entity resulting from) such merger or
consolidation or the entity to which such assets shall be
sold or transferred. Except as provided in the preceding
sentence, the Plan shall not be assignable by a Corporation
or by any entity referred to in this Section 14. The
obligations and rights of a Participant under the Plan shall
not be assignable, but, in the event of the Participant's
death, such obligations and rights shall be binding upon and
inure to the benefit of such Participant's heirs, executors
or administrators.
15. CONTINUATION AS DIRECTOR
------------------------
The Plan or the payment of any benefits hereunder
shall not be construed as giving to any Director any right
to be retained as a member of the Board of Directors of any
Corporation.
16. PARTICIPATION BY MEMBERS OF COMMITTEE
-------------------------------------
No member of the Committee shall be precluded from
becoming a Participant in the Plan; however, such member
shall not be entitled to vote or act upon matters, or sign
any documents, relating specifically to such member's own
participation
12
under the Plan, except when such matters or documents
relate to benefits and administrative matters generally.
If this disqualification results in the lack of a quorum,
then the Sponsor's Board of Directors shall appoint a
sufficient number of temporary members of the Committee
who shall serve for the sole purpose of determining
such a question.
17. HARDSHIP WITHDRAWALS
--------------------
For serious financial reasons beyond the
Participant's control, and which would cause the Participant
great hardship if early withdrawal were not permitted, such
Participant may apply to the Committee for withdrawals from
the Plan prior to termination of the Participant's service
as a Director of the Corporation; provided, however, that no
early withdrawals shall be permitted with respect to any
Participant while such Participant is a Director of the
Sponsor. If such application for withdrawal is approved by
the Committee, the withdrawal will be effective at the later
of the dates specified in the Participant's application or
the date of approval by the Committee. The Committee shall
direct the Corporation to pay such amount attributable to
the balance in such Participant's Account (determined as of
the Valuation Date immediately preceding such distribution)
up to the amount necessary to meet the financial emergency.
Following withdrawal, the Participant's election to defer
shall be terminated and no new election to defer shall be
accepted or approved by the Committee for a period of no
less than six (6) months following the date of withdrawal.
Serious financial reasons may include the following:
unexpected and unreimbursed expenses of a major or emergency
nature where withdrawal of the funds would be necessary to
prevent great hardship to the Participant.
18. CLAIMS PROCEDURE
----------------
Any claim for benefits or payments under the Plan
by Participants or Beneficiaries shall be made in writing
and delivered to the Committee at the principal office of
the Sponsor. If the Participant or Beneficiary believes he
or she has been denied any benefits or payments under the
Plan, either in total or in an amount less than the full
benefit or payment the claimant would normally be entitled
to receive, the Committee shall advise the claimant in
writing of the amount of the benefit, or payment; if any,
and the specific reasons for the denial. The Committee
shall also furnish the claimant at that time with a written
notice containing:
(a) A specific reference to pertinent provisions
of the Plan.
(b) A description of any additional material or
information necessary for the claimant to perfect this
claim, if possible, and an explanation of why such material
or information is needed.
(c) An explanation of the following claim review
procedure.
Within sixty (60) days of receipt of the
information described above, the claimant shall, if further
review is desired, file a written request for
reconsideration with the Committee. So long as the
claimant's request for review is pending (including such
sixty
13
(60) day period), the claimant or his or her duly
authorized representative may review pertinent documents and
may submit issues and comments in writing to the Committee.
A final and binding decision shall be made by the
Committee within sixty (60) days of the filing by the
claimant of the request for reconsideration; provided,
however, that if the Committee, in its discretion, feels
that a hearing with the claimant or his or her
representative present is necessary or desirable, this
period shall be extended an additional sixty (60) days.
The decision by the Committee 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 provisions of the Plan on which the decision is
based.
The Committee shall use ordinary care and
diligence in the performance of its duties. The Committee
shall be entitled to rely conclusively, and shall be fully
protected in any action or omission taken by it in good
faith reliance, upon the advice or opinions of any persons,
firms or agents retained by it, including, but not limited
to, accountants, actuaries, counsel and other specialists.
Nothing contained herein shall preclude any Corporation from
indemnifying any member of the Committee for all actions
under the Plan, or from purchasing liability insurance to
protect such persons serving thereon with respect to their
duties pursuant to the Plan.
19. 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, and so as to comply with any applicable
securities exchange rules or regulations.
IN WITNESS WHEREOF, the duly authorized officers
of Mercantile Bankshares Corporation have signed and sealed
this amended and restated Plan on behalf of Mercantile
Bankshares Corporation on this 12th day of March, 1996.
ATTEST: MERCANTILE BANKSHARES
CORPORATION
/s/ John A. O'Connor, Jr. /s/ Edward K. Dunn, Jr.
- ------------------------- -----------------------
Secretary President
[SEAL]
14
EXHIBIT A
DIRECTOR'S DEFERRAL AGREEMENT
-----------------------------
To: THE ADMINISTRATIVE COMMITTEE OF THE MERCANTILE
BANKSHARES CORPORATION AND PARTICIPATING AFFILIATES
UNFUNDED DEFERRED COMPENSATION PLAN FOR DIRECTORS
I, the undersigned, a Director of_________________________
(the "Corporation") hereby acknowledge receipt of a copy of the
Mercantile Bankshares Corporation and Participating Affiliates
Unfunded Deferred Compensation Plan for Directors (the "Plan"),
and further acknowledge that my election to participate in the
Plan contained herein shall be subject in all respects to the
provisions of the Plan, as amended from time to time.
ELECTION OF DEFERRED COMPENSATION
Pursuant to the terms of the Plan, I hereby elect to defer
receipt of the percentage of each future payment of fees, as
designated below, effective prospectively as of the applicable
date determined in accordance with the provisions of Section 5 of
the Plan based upon the date this Deferral Agreement is filed
with the Committee. Different percentages may be elected for
Meeting Fees and the Annual Retainer:
_______% Board of Directors Meeting Fees
_______% Board of Directors Committee Meeting Fees
_______% Annual Retainer
Such election shall continue to be effective in accordance
with the provisions of Section 5 of the Plan until a revised
Deferral Agreement becomes effective or until I file a written
notice of termination of this deferral election with the
Committee, unless I become ineligible at an earlier date under
the terms of the Plan. I understand that my election to defer
all or any portion of my annual retainer fee shall be irrevocable
with respect to the calendar year to which such deferral election
applies.
In any event, my election to defer payment of compensation
shall be applicable only with respect to amounts earned
subsequent to the date this written notice of my election is
received by the Committee.
WITNESS: DIRECTOR
____________________ _____________________________
(Signature)
Date:____________
ACCEPTED: COMMITTEE MEMBER
Date:____________ _____________________________
By:
PAGE
EXHIBIT B
ELECTION TO CONVERT ACCOUNT TO PHANTOM STOCK CREDITS
To: THE ADMINISTRATIVE COMMITTEE OF THE MERCANTILE
BANKSHARES CORPORATION AND PARTICIPATING AFFILIATES
UNFUNDED DEFERRED COMPENSATION PLAN FOR DIRECTORS
I, the undersigned, a Director of________________________
(the "Corporation") hereby acknowledge receipt of a copy of the
Mercantile Bankshares Corporation and Participating Affiliates
Unfunded Deferred Compensation Plan for Directors (the "Plan"),
and further acknowledge that my elections pursuant to
participation in the Plan as contained herein shall be subject in
all respects to the provisions of the Plan, as amended from time
to time.
I understand that I have the one-time right, pursuant to
Section 6(f) of the Plan, to have the total balance in my Account
under the Plan as of December 31, 1995, converted to Phantom
Stock Credits effective January 1, 1996, as more fully described
in Section 6(f) of the Plan, and to thereafter have credited to
the Account dividend equivalent Phantom Stock Credits, as
described in Section 6(e) of the Plan, with respect thereto,
until I cease to be a Director. I further understand that if I
make this election I shall not be entitled to have credited to my
Account thereafter any Interest Credits described in Section 6(c)
of the Plan until such time as I cease being a Director.
Accordingly,
[] I do [] I do not
choose to make this one-time irrevocable election to have my
total Account balance converted to Phantom Stock Credits.
WITNESS: DIRECTOR
____________________ ________________________________
(Signature)
Date:_______________
ACCEPTED: COMMITTEE MEMBER
Date:_______________ ________________________________
By:
PAGE
EXHIBIT C
METHODOLOGY FOR CONVERSION OF ACCOUNT TO DOLLARS, CREDITING
-----------------------------------------------------------
INTEREST CREDITS AND INSTALLMENT PAYMENT CALCULATIONS
-----------------------------------------------------
Assume a Participant ceases to be a Director on
December 15. On the immediately following Valuation Date,
the following facts exist:
1. The Account consists of 94.3 Phantom Stock
Credits.
2. Deferred Compensation and dividend equivalent
Phantom Stock Credits are due to be allocated
and will produce an additional 2.2 Phantom
Stock Credits.
3. The Fair Market Value of one (1) share of
Common Stock on the Valuation Date is $52.87.
4. Quarterly installments will commence three
(3) days following the Valuation Date.
5. The Participant has elected to receive forty
(40) payments.
The procedure for commencing and continuing payments
shall be as follows:
1. The amounts in #1 and #2 shall be added to
produce a sum of 96.5 Phantom Stock Credits.
2. The sum of 96.5 Phantom Stock Credits will be
multiplied by $52.87 to produce a product of
$5,101.96. This will become the initial
fixed dollar value of the Participant's
Account.
3. Three (3) days after the Valuation Date, the
first payment is due the Participant. The
amount of the payment will be based on the
immediately preceding Valuation Date and will
be one-fortieth (1/40) of $5,101.96, or
$127.55.
4. As of the next Valuation Date, Interest
Credits must be credited. The Interest
Credits will be based on the value of the
Participant's Account as of the immediately
preceding Valuation Date ($5,101.96), but
minus the distribution made ($127.55) since
such Valuation Date. Interest Credits will,
therefore, be based on a dollar balance of
$4,974.41. One and one-quarter percent (1-
1/4%) (i.e., one-fourth (1/4) of five percent
(5%)) of $4,974.41 is $62.18. After
crediting Interest Credits, the new balance
in the Account is $5,036.59.
5. Shortly after the Valuation Date, another
payment will be due the Participant. The
amount of the payment will be based on the
immediately preceding Valuation Date and will
be one-thirty-ninth (1/39) of $5,036.59, or
$129.14.
Interest Credits are credited and payments are made in this
fashion, reducing the denominator of the applicable fraction by one
(1) on each subsequent Valuation Date, until the Account has been
completely distributed.
PAGE
EXHIBIT D
DESIGNATION OF METHOD OF PAYMENT
TO: THE ADMINISTRATIVE COMMITTEEE OF THE MERCANTILE
BANKSHARES CORPORATION AND PARTICIPATING AFFILIATES
UNFUNDED DEFERRED COMPENSATION PLAN FOR DIRECTORS
I, the undersigned, a Director of______________________
(the "Corporation") hereby acknowledge receipt of a copy of the
Mercantile Bankshares Corporation and Participating
Affiliates Unfunded Deferred Compensation Plan for Directors
(the "Plan"), and further acknowledge that my elections
pursuant to participation in the Plan as contained herein
shall be subject in all respects to the provisions of the
Plan, as amended from time to time.
I elect hereby that all amounts deferred under the
Plan, together with Interest Credits and/or dividend
equivalent Phantom Stock Credits credited thereon, shall be
distributed to me:
(check appropriate form of payment)
________ In substantially equal annual
installments (which shall include
Interest Credits) for ________
years (specify number not exceeding 10).
OR
________ In substantially equal quarterly
installments (which shall include
Interest Credits) for _________
quarters (specify number not exceeding 40).
The first installment (if I have so elected) shall be
paid during the first calendar quarter of the calendar year
immediately following the year in which I cease to be a
Director (unless I have made my distribution election prior
to January 1 of the calendar year in which I cease to be a
Director, in which case the first installment shall be paid
during the first calendar quarter immediately following the
calendar quarter in which I cease to be a Director), and
subsequent installments shall be paid during the first
calendar quarter of each succeeding calendar year (if I have
elected annual installments) or during each succeeding
calendar quarter (if I have elected quarterly installments)
until the entire amount credited to my Account shall have
been paid.
I understand that any elections made prior to March 12,
1996, remain valid and irrevocable with regard to any
compensation deferred pursuant to such elections. I
understand that the election made above is irrevocable and
applicable to any compensation deferred on and after March
12, 1996.
WITNESS: DIRECTOR
___________________ ________________________________
(Signature)
Date:______________
ACCEPTED: COMMITTEE MEMBER
Date:______________ ________________________________
By:
PAGE
EXHIBIT E
DESIGNATION OF BENEFICIARY
--------------------------
To: THE ADMINISTRATIVE COMMITTEE OF THE MERCANTILE
BANKSHARES CORPORATION AND PARTICIPATING AFFILIATES
UNFUNDED DEFERRED COMPENSATION PLAN FOR DIRECTORS
I hereby designate the following person(s) as my
primary Beneficiary(ies) under the Mercantile Bankshares
Corporation And Participating Affiliates Unfunded Deferred
Compensation Plan For Directors to receive any amounts that
may become payable thereunder on account of or after my
death (in the percentages set forth following their names)
in accordance with Section 7(g) of the Plan:
(give name(s), address(es), relationship(s),
social security number(s), and, if applicable,
percentage of interest).
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
If, upon my death, no primary Beneficiary is living,
such amount shall be paid to the following person(s) as my
contingent Beneficiary(ies).
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
WITNESS: DIRECTOR
___________________ ______________________________
(Signature)
Date:______________
ACCEPTED: COMMITTEE MEMBER
Date:______________ _____________________________
By:
PAGE
EXHIBIT F
AFFILIATES OF MERCANTILE BANKSHARES CORPORATION
THAT HAVE ADOPTED THE PLAN
The Annapolis Banking and Trust Company
Baltimore Trust Company
Bank of Southern Maryland
Calvert Bank & Trust Company
The Chestertown Bank of Maryland
The Citizens National Bank
County Banking and Trust Company
The Eastville Bank
Farmers and Merchants Bank - Eastern Shore
The Fidelity Bank
The First National Bank of St. Mary's
The Forest Hill State Bank
Fredericktown Bank and Trust Company
MBC Agency, Inc.
Mercantile Life Insurance Company
Mercantile Mortgage Corporation
Mercantile-Safe Deposit and Trust Company
The National Bank of Fredericksburg
Peninsula Bank
The Peoples Bank of Maryland
Potomac Valley Bank
St. Michael's Bank
Westminster Bank and Trust Company of Carroll County
EFFECTIVE AS OF DECEMBER 1, 1995
PAGE
Exhibit (10) Q
MERCANTILE BANKSHARES CORPORATION
OPTION AGREEMENT
This Option Agreement is entered into this day of
, 1995, by and between Mercantile Bankshares Corporation ("MBC"), a
Maryland corporation, and ("Grantee").
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the definitions set forth in
Sections 1.1 through 1.27 shall be applicable.
Section 1.1 Affiliate. "Affiliate" shall mean: (i) any corporation
in which MBC owns, directly or indirectly, within the meaning of Sec. 424(f) of
the Code, fifty percent (50%) or more of the total combined voting power of
all classes of stock of such corporation on a Grant Date; and (ii) any
parent corporation of MBC, within the meaning of Sec. 424(e) of the Code.
Section 1.2 Agreement. "Agreement" shall mean this Option
Agreement and shall include the applicable provisions of the Plan which is
hereby incorporated into and made a part of the Agreement.
Section 1.3 Anniversary Date. "Anniversary Date" shall mean
the first four (4) anniversaries of the Grant Date.
Section 1.4 Anniversary Date Option Amount. "Anniversary Date
Option Amount" shall mean twenty-five percent (25%) of the Option Amount.
Section 1.5 Base Year. "Base Year" shall mean the 1994
calendar year.
Section 1.6 Board. "Board" shall mean the Board of Directors
of MBC.
Section 1.7 Calculation Year. "Calculation Year" shall mean
the calendar year ending immediately prior to the calendar year in which an
Anniversary Date falls.
1
Section 1.8 Code. "Code" shall mean the Internal Revenue Code
of 1986, as amended, and any regulations issued thereunder.
Section 1.9 Committee. "Committee" shall mean the Committee
appointed pursuant to Section 3.3 of the Plan.
Section 1.10 Disability. "Disability" shall mean Grantee's
inability to engage in any substantial gainful activity, by reason of any
medically determined physical or mental impairment that may be expected to
result in death or that has lasted or may be expected to last for a
continuous period of not less than twelve (12) months, as determined by the
Committee based on proof of the existence of such disability in such form
and manner and at such times as the Committee may require.
Section 1.11 Earnings. "Earnings" shall mean the earnings per
share of Stock for a calendar year (including the Base Year), as reported
in the Annual Report to Shareholders for such calendar year and as may be
adjusted by the Committee in its discretion.
Section 1.12 Earnings AGR. "Earnings AGR" shall mean the
annual rate of growth in Earnings, expressed as a percentage (rounded up to
the nearest whole percent), determined in accordance with the following
formula:
(A-B) (100)
-----------
B
where "A" equals Earnings for the Calculation Year, and "B" equals Earnings
for the calendar year immediately preceding the Calculation Year.
Section 1.13 Earnings CGR. "Earnings CGR" shall mean the
compounded growth rate of Earnings and shall be determined by calculating
the rate of interest at which Earnings for the Base Year would have to be
invested to yield the Earnings for
2
the Calculation Year in question, assuming such interest compounded
annually during the period commencing with the first day of the calendar
year immediately succeeding the Base Year and ending on the last day of
such Calculation Year.
Section 1.14 Exercise Date. "Exercise Date" shall mean
the date on which the Committee receives the written notice required under
Section 3.4 of this Agreement that Grantee has exercised the Option.
Section 1.15 Fair Market Value. "Fair Market Value" of a
share of Stock on the Grant Date or Exercise Date, as the case may be,
shall mean the last reported sale price per share of Stock, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on a national securities exchange
or included for quotation on the NASDAQ-National Market, or if the Stock is
not so listed or admitted to trading or included for quotation, the last
quoted price, or if the Stock is not so quoted, the average of the high bid
and low asked prices, regular way, in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System or, if such system is no longer in use, the principal
other automated quotations system that may then be in use or, if the Stock
is not quoted by any such organization, the average of the closing bid and
asked prices, regular way, as furnished by a professional market maker
making a market in the Stock as selected in good faith by the Committee or
by such other source or sources as shall be selected in good faith by the
Committee; provided, however, that the determination of Fair Market Value
shall be made by the Committee in good faith in accordance with the Code.
If, as the case may be, the Grant Date or the Exercise Date is not a
trading day, the determination shall be
3
made as of the next preceding trading day. As used herein, the term
"trading day" shall mean a day on which public trading of securities occurs
and is reported in the principal consolidated reporting system referred to
above, or if the Stock is not listed or admitted to trading on a national
securities exchange or included for quotation on the NASDAQ-National
Market, any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are closed.
Section 1.16 Grant Date. "Grant Date" shall mean March 14,
1995.
Section 1.17 Incentive Stock Option. "Incentive Stock Option"
shall mean an option as defined in Sec. 422(b) of the Code.
Section 1.18 Net Operating Income. "Net Operating Income" shall
mean the dollar amount of net after tax operating income for a calendar
year for , as reported to the Board and as may be adjusted by the
Committee in its discretion.
Section 1.19 Net Operating Income AGR. "Net Operating Income
AGR" shall mean the annual rate of growth in Net Operating Income,
expressed as a percentage (rounded up to the nearest whole percent),
determined in accordance with the following formula:
(A-B) (100)
-----------
B
where "A" equals Net Operating Income for the Calculation Year, and "B"
equals Net Operating Income for the calendar year immediately preceding the
Calculation Year.
Section 1.20 Net Operating Income CGR. "Net Operating Income
CGR" shall mean the compounded growth rate of Net Operating Income,
determined by calculating the rate of interest at which Base Year Net
Operating Income would have to be invested
4
to yield the Net Operating Income for the Calculation Year in question,
assuming such interest compounded annually during the period commencing
with the first day of the calendar year immediately succeeding the Base
Year and ending on the last day of such Calculation Year.
Section 1.21 Normal Retirement Date. "Normal Retirement Date"
shall mean the first day of the month coincident with or next following the
date on which Grantee attains age sixty-five (65).
Section 1.22 Option. "Option" shall mean an option to acquire
Stock and, as is hereby designated by the Committee in accordance with and
to the fullest extent permitted by the Code and other applicable law, shall
mean an Incentive Stock Option.
Section 1.23 Option Amount. "Option Amount" shall mean shares
of Stock.
Section 1.24 Option Price. "Option Price" shall mean the price
per share of Stock at which the Option may be exercised.
Section 1.25 Plan. "Plan" shall mean the Mercantile Bankshares
Corporation Omnibus Stock Plan.
Section 1.26 Retirement. "Retirement" shall mean early or
normal retirement in accordance with the terms of The Cash Balance Plan for
Employees of Mercantile Bankshares Corporation and Participating
Affiliates, as it may exist from time to time, or any successor plan.
Section 1.27 Stock. "Stock" shall mean shares of MBC's
authorized but unissued common stock, par value of Two Dollars ($2.00) per
share.
5
ARTICLE 2
GRANT OF OPTION
Section 2.1 Grant of Option. On the Grant Date, MBC, pursuant
to the Plan, granted to Grantee an Option to purchase shares of Stock, not
to exceed the Option Amount, at an Option Price of Twenty-one Dollars and
Eighty-seven and one-half Cents ($21.875) per share.
Section 2.2 Term of Option. The Option granted pursuant to
Section 2.1 shall expire on March 13, 2005, unless all or a portion of the
Option terminates earlier pursuant to other provisions of this Agreement.
ARTICLE 3
RESTRICTIONS ON EXERCISE
Section 3.1 Termination of Option or Portion of Option. The
Option shall become exercisable, if at all, only on an Anniversary Date.
The extent to which the Option shall become exercisable on any Anniversary
Date shall be determined pursuant to the provisions of Sections 3.2 and 3.3
of the Agreement; provided that, except as otherwise provided under Section
4.4 of the Agreement, in no case shall the Option become exercisable on any
one (1) Anniversary Date for more than the Anniversary Date Option Amount.
To the extent that, by application of the provisions of Sections 3.2 or
3.3 of the Agreement, no portion of the Option becomes exercisable on an
Anniversary Date, or the Option becomes exercisable for less than the
Anniversary Date Option Amount on such Anniversary Date, the Option shall
terminate with respect to that number of shares of Stock that is equal to
the difference between the Anniversary Date Option Amount and the number of
shares of Stock as to which the Option becomes exercisable on such
Anniversary Date.
6
Section 3.2 Attainment of Earnings CGR. No portion of the
Option shall become exercisable on an Anniversary Date unless the Earnings
CGR for the Calculation Year applicable to that Anniversary Date equals or
exceeds five percent (5%). If such Earnings CGR equals or exceeds five
percent (5%), the portion of the Anniversary Date Option Amount that shall
become exercisable on such Anniversary Date shall be determined pursuant to
the provisions of Section 3.3 of the Agreement.
Section 3.3 Determination of Exercisable Portion of Anniversary
Date Option Amount.
(a) Amounts Dependent on Earnings. Subject to the provisions
of the first sentence of Section 3.2 of the Agreement, if the Earnings AGR
for the Calculation Year applicable to an Anniversary Date equals or
exceeds six percent (6%), Grantee may, on and after such Anniversary Date,
exercise the Option with respect to that percentage of the Anniversary Date
Option Amount that corresponds to the Earnings AGR in the following chart.
Anniversary Date Option
Earnings AGR Amount That May Be Exercised
6% 10%
7% 20%
8% 30%
9% 40%
10% 50%
(b) Amounts Dependent on Net Operating Income. Subject to the
provisions of the first sentence of Section 3.2 of the Agreement, if, and
only if, the Net Operating Income CGR for the Calculation Year applicable
to an Anniversary Date equals or exceeds five percent (5%) and if the Net
Operating Income AGR for such Calculation Year equals or exceeds six
percent (6%), Grantee may, on and after such Anniversary
7
Date, exercise the Option with respect to that percentage of the
Anniversary Date Option Amount that corresponds to the Net Operating Income
AGR in the following chart.
Anniversary Date Option
Net Operating Income AGR Amount That May Be Exercised
6% 10%
7% 20%
8% 30%
9% 40%
10% 50%
Section 3.4 Manner of Exercise. The Option may be exercised, in
whole or in part, by delivering written notice to the Committee in such
form as the Committee may require from time to time. Such notice shall
specify the number of shares of Stock subject to the Option as to which the
Option is being exercised, and shall be accompanied by full payment of the
Option Price of the shares of Stock as to which the Option is being
exercised. Payment of the Option Price may be made either in cash or
shares of Stock (including shares of Stock acquired upon the exercise of an
option) having a total Fair Market Value on the Exercise Date equal to the
Option Price multiplied by the number of shares of Stock as to which the
Option is being exercised. The Option may be exercised only in multiples
of whole shares and no partial shares shall be issued. If, as of the
fourth Anniversary Date, the total number of shares as to which the Option
is exercisable includes a partial share, the Option for such partial share,
whether or not previously designated by the Committee as an Incentive Stock
Option, shall be deemed to be a non-Incentive Stock Option. On the first
date, on or after the fourth Anniversary Date, that the Fair Market Value
of a share of Stock equals or exceeds the Option Price, Grantee shall be
deemed to have simultaneously exercised the Option for such partial share
and to have sold same to MBC for such Fair Market
8
Value. MBC shall remit to Grantee, in payment of the purchase price of
such partial share, the excess, if any, of the Fair Market Value of such
partial share over the Option Price.
Section 3.5 Issuance of Shares and Payment of Cash upon
Exercise. Upon exercise of the Option, in whole or in part, in accordance
with the terms of the Agreement, and upon payment of the Option Price for
the shares of Stock as to which the Option is exercised, MBC shall issue to
Grantee the number of shares of Stock so paid for, in the form of fully
paid and non-assessable Stock.
Section 3.6 Loan or Guaranty. Solely at the discretion of the
Committee, and upon Grantee's written request, MBC may, but shall not be
required to, assist Grantee in the exercise of the Option by making a loan
to Grantee or by guaranteeing a third-party loan to Grantee. Such a loan
or guaranty shall be conditioned upon prior receipt by the Committee of
satisfactory assurances of Grantee's net worth and repayment ability.
Subject to Regulations G and U of the Federal Reserve Board, any such loan
or guaranty may be in an amount up to one hundred percent (100%) of the
Option Price of the shares of Stock as to which the Option is being
exercised. All loans shall bear interest at a rate determined by the
Committee based upon loans of similar maturity, but in no event shall the
interest rate be less than the rate necessary to avoid the imputation of
interest or original issue discount under the provisions of the Code. All
other terms of any loan or guaranty (including terms of repayment) shall be
established by the Committee, subject to Regulations G and U of the Federal
Reserve Board and all other applicable federal and state laws and
regulations.
9
ARTICLE 4
TERMINATION OF OPTION
Section 4.1 Termination of Employment For Reason Other Than
Death, Disability, or Retirement. The Option granted to Grantee shall
terminate with respect to any shares of Stock as to which the Option has
not been exercised as of the date Grantee is no longer employed by either
MBC or an Affiliate for any reason other than Grantee's death, Disability
or Retirement, whether or not the Option was exercisable on such date.
Section 4.2 Upon Grantee's Death. In the event that upon
Grantee's date of death any portion of the Option is exercisable, then
Grantee's executor, personal representative or the person to whom the
Option shall have been transferred by will or the laws of descent and
distribution, as the case may be, may exercise all or any part of the
portion of the Option exercisable as of the date of death, provided such
exercise occurs within twelve (12) months after the date Grantee dies, but
not later than the end of the stated term of the Option. Upon Grantee's
death, the portion of the Option, if any, that has not become exercisable
as of the date of Grantee's death shall terminate on the date of Grantee's
death.
Section 4.3 Termination of Employment By Reason of Disability.
In the event that Grantee ceases to be an employee of MBC or an Affiliate
by reason of Disability, the portion of the Option, if any, that has become
exercisable as of the date of Disability may be exercised in whole or in
part at any time on or after the date of Disability, but not later than the
end of the stated term of the Option or as otherwise provided by the
provisions of Section 4.2 of the Agreement. Upon Grantee's termination of
employment by reason of Disability, the portion of the Option, if any, that
has not become
10
exercisable as of the date of Disability shall terminate on the date of
Disability.
Section 4.4 Termination of Employment By Reason of Retirement.
(a) Early Retirement.
(i) Exercisable Portion of Option. In the event
that Grantee ceases to be an employee of MBC or an Affiliate by reason of
Retirement at any time prior to Grantee's Normal Retirement Date, the
portion of the Option, if any, that has become exercisable as of the date
of Retirement may be exercised in whole or in part at any time on or after
the date of Retirement, but not later than the end of the stated term of
the Option or as otherwise provided by the provisions of Section 4.2 of the
Agreement.
(ii) Non-exercisable Portion of Option. In the
event that Grantee ceases to be an employee of MBC or an Affiliate by
reason of Retirement at any time prior to Grantee's Normal Retirement Date,
the portion of the Option, if any, that has not become exercisable as of
the date of Retirement shall terminate on the date of Retirement.
(b) Normal Retirement Date.
(i) Exercisable Portion of Option. In the event
that Grantee ceases to be an employee of MBC or an Affiliate by reason of
Retirement, the portion of the Option, if any, that has become exercisable
as of the date of Retirement may be exercised in whole or in part at any
time on or after the date of Retirement, but not later than the end of the
stated term of the Option or as otherwise provided by the provisions of
Section 4.2 of the Agreement.
(ii) Non-exercisable Portion of Option. In the
event that upon the occurrence of Grantee's Normal Retirement Date all or a
portion of the Option has not become exercisable solely because one (1) or
more of the first four (4) Anniversary
11
Dates have not occurred (hereinafter referred to as the "Remaining
Portion"), then such Remaining Portion shall become exercisable, if at all,
on the Anniversary Date coincident with or immediately following Grantee's
Normal Retirement Date. In all cases, the Remaining Portion shall not
include any portion of the Option that has terminated pursuant to the
provisions of Sections 3.1, 3.2, 3.3, 4.1, 4.2 or 4.3 of the Agreement.
The extent to which the Remaining Portion shall become exercisable shall be
determined pursuant to the provisions of Sections 3.2 and 3.3 of the
Agreement; provided, however, that the term "Remaining Portion" shall be
substituted for the term "Anniversary Date Option Amount" in all places
noted therein. The amount, if any, of the Remaining Portion of the Option
that becomes exercisable on such Anniversary Date may be exercised in whole
or in part at any time on or after such Anniversary Date, but not later
than the end of the stated term of the Option or as otherwise provided by
the provisions of Section 4.2 of the Agreement. Notwithstanding anything
in the Agreement to the contrary, the provisions of this Section 4.4(b)(ii)
of the Agreement shall apply as of the occurrence of Grantee's Normal
Retirement Date, regardless of whether Grantee continues to be an employee
of MBC or an Affiliate after such date.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Non-Guarantee of Employment. Nothing in the Plan or
the Agreement shall be construed as a contract of employment between MBC
(or an Affiliate) and Grantee, or as a contractual right of Grantee to
continue in the employ of MBC or an Affiliate, or as a limitation of the
right of MBC or an Affiliate to discharge Grantee at any time.
Section 5.2 No Rights of Stockholder. Grantee shall not have
any of the rights
12
of a stockholder with respect to the shares of Stock that may be issued
upon the exercise of the Option until such shares of Stock have been issued
to him upon the due exercise of the Option.
Section 5.3 Notice of Disqualifying Disposition. If Grantee
makes a disposition (as that term is defined in Sec. 424(c) of the Code) of any
shares of Stock acquired pursuant to the exercise of an Incentive Stock
Option within two (2) years of the Grant Date or within one (1) year after
the shares of Stock are transferred to Grantee, Grantee shall notify the
Committee of such disposition in writing.
Section 5.4 Withholding Taxes. MBC or any Affiliate shall have
the right to deduct from any compensation or any other payment of any kind
(including withholding the issuance of shares of Stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld
as the result of the exercise of the Option or the disposition (as that
term is defined in Sec. 424(c) of the Code) of shares of Stock acquired
pursuant to the exercise of the Option. In lieu of such deduction, MBC may
require Grantee to make a cash payment to MBC or an Affiliate equal to the
amount required to be withheld. If Grantee does not make such payment when
requested, MBC may refuse to issue any Stock certificate under the Plan
until arrangements satisfactory to the Committee for such payment have been
made.
Section 5.5 Limitation on Exercise. Notwithstanding anything in
the Plan or Agreement to the contrary, the Committee may restrict the right
to exercise the Option to the extent that such exercise would trigger an
"excess parachute payment" (as that term is defined in Sec. 280G(b) of the
Code) unless Grantee shall have the right to receive such an excess
parachute payment under an agreement with MBC or an Affiliate.
Section 5.6 Nontransferability of Option. The Option shall be
nontransferable
13
otherwise than by will or the laws of descent and distribution. During the
lifetime of Grantee, the Option may be exercised only by Grantee or, during
the period Grantee is under a legal disability, by Grantee's guardian or
legal representative.
Section 5.7 Agreement Subject to Charter and By-Laws. This
Agreement is subject to the Charter and By-Laws of MBC, and any applicable
federal or state laws, rules or regulations.
Section 5.8 Gender. As used herein the masculine shall include
the feminine as the circumstances may require.
Section 5.9 Headings. The headings in the Agreement are for
reference purposes only and shall not affect the meaning or interpretation
of the Agreement.
Section 5.10 Notices. All notices and other communications made
or given pursuant to the Agreement shall be in writing and shall be
sufficiently made or given if hand delivered or mailed by certified mail,
addressed to Grantee at the address contained in the records of MBC or an
Affiliate, or to MBC for the attention of its Secretary at its principal
office.
ARTICLE 6
SCOPE OF AGREEMENT
Section 6.1 Entire Agreement; Modification. The Agreement
contains the entire agreement between the parties with respect to the
subject matter contained herein and may not be modified, except as provided
in the Plan or in a written document signed by each of the parties hereto.
14
Section 6.2 Counterparts. The Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed
to be an original and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed the Agreement as of
the date first above written.
ATTEST: MERCANTILE BANKSHARES CORPORATION
By:
WITNESS: GRANTEE
15
MERCANTILE BANKSHARES CORPORATION
RETAINER STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
This plan (the "Plan") has been adopted on March 12, 1996 by the
Board of Directors of Mercantile Bankshares Corporation (the "Corporation"),
subject to approval by the stockholders of the Corporation, for the purpose of
allowing Directors of the Corporation (who are not officers of the Corporation
or of Affiliates of the Corporation) to elect that all or a portion of their
annual retainer for services as Directors be paid to them in the form of
Common Stock, par value $2.00 per share ("Common Stock") of the Corporation
instead of cash, thereby permitting further alignment of their interests with
those of the Stockholders of the Corporation.
1. Definitions.
Under the Plan, except where the context indicates otherwise, the
following definitions apply:
(a) "Affiliate" shall mean any corporation in which the
Corporation owns, directly or indirectly, at least 80% of the outstanding
voting stock.
(b) "Annual Retainer Fee" shall mean the annual fee as
established from time to time by the Corporation and payable to Eligible
Directors for their services as Directors of the Corporation for any calendar
year, excluding other compensation such as fees paid for attending meetings of
the Board of Directors or of committees of the Board of Directors. Annual
Retainer Fees may be reduced in proportion to any period of time in a calendar
year during which a Director has not served as a Director of the Corporation.
"Undeferred Annual Retainer Fee" shall mean all or any portion of an Annual
Retainer Fee the receipt of which shall not, on an Election Date, have been
deferred pursuant to the Mercantile Bankshares Corporation Unfunded Deferred
Compensation Plan For Directors.
(c) "Board of Directors" shall mean the Board of Directors
of the Corporation, "Director" shall mean a member of the Board of Directors,
and "Committee" shall mean the committee appointed by the Board of Directors
pursuant to Section 4 to administer the Plan.
(d) "Election Date" shall mean, as to each calendar year,
the date of the regularly scheduled December meeting of the Board of
Directors; if no such meeting is held, the Election Date shall be December 10
of such calendar year.
(e) "Eligible Director" or "Participant" shall mean a
Director who is eligible to receive an Annual Retainer Fee for service as a
Director during all or part of a calendar year and who has not been an officer
of the Corporation or of any Affiliate during such period of service.
PAGE 1
(f) "Fair Market Value" of a share of Common Stock on an
Election Date shall mean the last reported sale price per share of Common
Stock, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on a national securities
exchange or included for quotation on the Nasdaq Stock Market, or if the
Common Stock is not so listed or admitted to trading or included for
quotation, the last quoted price, or if the Common Stock is not so quoted, the
average of the high bid and low asked prices, regular way, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or, if such system is no longer in
use, the principal other automated quotations system that may then be in use
or, if the Common Stock is not quoted by any such organization, the average of
the closing bid and asked prices, regular way, as furnished by a professional
market maker making a market in the Common Stock as selected in good faith by
the Committee. If an Election Date is not a trading day, the determination
shall be made as of the next preceding trading day. As used herein, the term
"trading day" shall mean a day on which public trading of securities occurs
and is reported in the principal consolidated reporting system referred to
above, or if the Common Stock is not listed or admitted to trading on a
national securities exchange or included for quotation on the Nasdaq Stock
Market, any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are closed.
(g) "Rule 16b-3" shall mean Rule 16b-3 as in effect under
the Securities Exchange Act of 1934 ("1934 Act") on December 31, 1995, or any
successor provision prescribing conditions which, in the judgment of the
Committee, shall be necessary or desirable to exempt the issuance of
securities under the Plan (and, where permissible, the further disposition of
such securities) from Section 16(b) of the 1934 Act.
2. Elections Under the Plan. Each person who is an Eligible
Director on an Election Date in any calendar year shall have the right to
elect, within a ten-day period ending on the Election Date, to have all or a
portion (the "Elected Amount") of such Director's Undeferred Annual Retainer
Fee paid in the form of Common Stock in lieu of cash, provided that the
Elected Amount shall not be less than $3,000. The number of shares of such
Common Stock shall equal the Elected Amount divided by the Fair Market Value
of a share of Common Stock on the Election Date. Such Elected Amount and the
number of shares of Common Stock so issuable shall be adjusted by a reduction
if and to the extent necessary to avoid issuance of any fractional shares.
The shares shall be deemed issued at the close of business on the Election
Date and certificates therefor shall be delivered as soon as practicable
thereafter. Any election by an Eligible Director to receive Common Stock
under the Plan shall be made by the execution and delivery of a Director's
Election Agreement in the form of Exhibit A attached hereto, pursuant to which
the Director shall agree, to the extent required to meet the condition of
Rule 16b-3(c)(1), not to sell, transfer or otherwise dispose of said shares of
Common Stock until the expiration of six months after the applicable Election
Date.
PAGE 2
3. Consideration for Common Stock. Shares issued under the
Plan shall be issued by the Corporation from its previously authorized but
unissued Common Stock.
For purposes of the Maryland General Corporation Law, the consideration
received by the Corporation for such shares shall in each case be deemed to be
cash equal to the Elected Amount.
4. Administration. The Committee administering the Plan shall
be appointed by the Board of Directors, and shall consist of not less than two
Directors who, for so long as may be necessary to satisfy the conditions of
Rule 16b-3(c), shall be "disinterested persons" within the meaning of Rule
16b-3(c)(2). The Committee shall have the authority, in its sole and absolute
discretion, to interpret the Plan and adopt, amend, or rescind such rules and
procedures for carrying out the Plan, and to take all other action necessary
or advisable for the implementation and administration of the Plan, as the
Committee may deem appropriate. Once appointed, the Committee shall continue
to serve until otherwise directed by the Board of Directors. From time to
time, the Board of Directors may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor and fill vacancies, however
caused.
The Committee shall be fully protected in any action or omission
taken by it in good faith, including actions or omissions in reliance upon the
advice or opinions of any persons, firms, or agents retained by it or the
Corporation, including but not limited to accountants, actuaries, counsel,
other specialists or officers of the Corporation. Nothing herein contained
shall preclude the Corporation from indemnifying any Committee members for all
actions under the Plan, or from purchasing liability insurance to protect such
persons with respect to their duties pursuant to the Plan.
5. Non-Transferability. No right of a Participant to elect
Common Stock under Section 2 shall be exercisable by any other person or shall
be assignable or subject to anticipation, encumbrance, sale, pledge,
alienation, execution, levy, attachment, charge or any other form of transfer
whatsoever.
6. Term of Plan, Amendment, Limitations, Adjustments. The Plan
will continue in effect until the tenth anniversary of its approval by the
stockholders of the Corporation, subject to the right of the Board of
Directors to terminate the Plan at any earlier time. The Plan may be amended
by the Board of Directors at any time, except that (subject to section 7) for
so long as may be required to satisfy the conditions of Rule 16b-3(c)(2)(ii)
(including any successor provision limiting Plan amendments as set forth
below), the Plan provisions applicable to the timing of elections to receive
Common Stock or the amount of Common Stock issuable pursuant to such elections
may not be amended more than once every six months except as otherwise
permitted by Rule 16b-3(c)(2)(ii). No Plan amendment shall require approval
by the Stockholders of the Corporation except to the extent necessary to
maintain the Rule 16b-3 exemption from Section 16(b) of the 1934 Act.
PAGE 3
The aggregate number of shares of Common Stock issuable pursuant
to the Plan shall be limited to 300,000 shares, which number shall be subject
to adjustment to reflect any stock dividend, stock split, recapitalization,
combination or reclassification of shares ("Adjustment Transaction"). In the
event of an Adjustment Transaction, the number
of shares issuable to an Eligible Director electing to receive Common Stock as
of an Election Date shall be appropriately adjusted if the determination of
Fair Market Value per share on the Election Date shall have been based on the
number of shares of Common Stock outstanding before giving effect to the
Adjustment Transaction.
7. Rule 16b-3. The Plan is intended to comply with the
exemptive provisions of Rule 16b-3(c), including both of clauses (i) and (ii)
of Rule 16b-3(c)(2). If and to the extent that the Committee determines, upon
advice of counsel, that related requirements of any one or more of Section 2
(holding period for Common Stock issued under the Plan), Section 4 (Plan
administration by disinterested persons), Section 5 (non-transferability of
election rights) or Section 6 (limitations on Plan amendments) of the Plan are
not required (whether because of amendments to Rule 16b-3 or adoption or
amendment of other Rules under the 1934 Act, or because of interpretive advice
or other cause) to exempt or exclude Plan transactions or transactions in
securities acquired by Participants under the Plan from Section 16(b) of the
1934 Act, then the Committee may suspend the applicability of any such
requirement in whole or in part without the necessity of any amendment to the
Plan.
8. Continuation as Director, Fees. The Plan or the payment of
any benefits hereunder shall not be construed as giving to any Participant any
right to be retained as a member of the Board of Directors or to receive any
fees, including any Annual Retainer Fee, for service as a Director.
9. Governing Law. To the extent not governed by the laws of
the Untied States, the Plan shall be construed and applied in accordance with
the laws of the State of Maryland other than its conflict of laws principles.
PAGE 4
Exhibit A
DIRECTOR'S ELECTION AGREEMENT
To: The Committee of the Mercantile Bankshares Corporation
Retainer Stock Plan For Directors
I, the undersigned, a Director of Mercantile
Bankshares Corporation (the "Corporation") hereby acknowledge
receipt of a copy of the Mercantile Bankshares Corporation
Retainer Stock Plan for Directors (the "Plan").
Pursuant to the terms of the Plan, I hereby elect
to receive, in lieu of $ payable to me as all or a
portion of my Annual Retainer Fee for the year , shares
of Common Stock of the Corporation valued as of the Election
Date, in accordance with the formula set forth in the Plan.
To the extent required to meet the condition of
Rule 16b-3(c)(1), I agree not to sell, transfer or otherwise
dispose of such shares until six months have expired from and
after the Election Date.
WITNESS: DIRECTOR
Date:
ACCEPTED COMMITTEE
Date: By:
PAGE 5
(The following information appears on the front cover of the Annual Report
to Shareholders)
MERCANTILE BANKSHARES CORPORATION
ANNUAL REPORT 1995
(The following information appears on the inside front cover of the Annual
Report to Shareholders)
MERCANTILE BANKSHARES CORPORATION
is a family of community banks, each with its own name, management, board of
directors and historic ties to its community.
THE ANNAPOLIS BANKING
AND TRUST COMPANY
Robert E. Henel, Jr.
President and CEO
Annapolis, Maryland
BALTIMORE TRUST COMPANY
Robert E. Dickerson
President and CEO
Selbyville, Delaware
BANK OF SOUTHERN MARYLAND
Wesley E. Hughes, Jr.
President and CEO
La Plata, Maryland
CALVERT BANK AND TRUST COMPANY
Harold J. Kahl
Chairman, President and CEO
Prince Frederick, Maryland
THE CHESTERTOWN BANK OF MARYLAND
R. Raymond Tarrach
President and CEO
Chestertown, Maryland
THE CITIZENS NATIONAL BANK
Peter W. Floeckher, Jr.
President and CEO
Laurel, Maryland
COUNTY BANKING & TRUST COMPANY
S. Dell Foxx
President and CEO
Elkton, Maryland
The EASTVILLE BANK
Robert L. Simpson
President and CEO
Eastville, Virginia
FARMERS & MERCHANTS BANK--EASTERN SHORE
H.B. Rew, Jr.
President and CEO
Onley, Virginia
THE FIDELITY BANK
C. Joseph Cunningham, III
President and CEO
Frostburg, Maryland
THE FIRST NATIONAL BANK
OF ST. MARY'S
John A. Candela
President and CEO
Leonardtown, Maryland
THE FOREST HILL STATE BANK
Paul E. Peak
President and CEO
Bel Air, Maryland
FREDERICKTOWN BANK
& TRUST COMPANY
J. Brian Gaeng
President and CEO
Frederick, Maryland
MERCANTILE-SAFE DEPOSIT
& TRUST COMPANY
H. Furlong Baldwin
Chairman and CEO
Baltimore, Maryland
THE NATIONAL BANK OF
FREDERICKSBURG
William B. Young
President and CEO
Fredericksburg, Virginia
PENINSULA BANK
Jeffrey F. Turner
President and CEO
Princess Anne, Maryland
THE PEOPLES BANK OF MARYLAND
Jeffrey N. Heflebower
President and CEO
Denton, Maryland
POTOMAC VALLEY BANK
Kenneth C. Cook
President and CEO
Gaithersburg, Maryland
ST. MICHAELS BANK
William W. Duncan, Jr.
President and CEO
St. Michaels, Maryland
THE SPARKS STATE BANK
Bradley G. Moore
President and CEO
Sparks, Maryland
WESTMINSTER BANK AND TRUST COMPANY OF CARROLL COUNTY
Ferdinand A. Ruppel, Jr.
President and CEO
Westminster, Maryland
MERCANTILE MORTGAGE CORPORATION
Paul W. Parks
President and CEO
Baltimore, Maryland
COUNT ON US for
CONTINUITY
We value the stability that allows our banks to nurture long-term customer
relationships, through good times and bad.
FOCUS
The person responsible for making customer-related decisions is a local
person, focused on the citizens of the community in which the bank
operates.
STRENGTH
As part of Mercantile Bankshares Corporation, affiliate banks benefit from
the Corporation's outstanding financial strength and the services available
through the largest affiliate, Mercantile-Safe Deposit & Trust.
PRIDE
We work to staff our banks with well-trained people who are proud of the
job they do, their bank and its association with Mercantile Bankshares
Corporation.
INTEGRITY
An enduring banking relationship is based on trust. We cherish the
community's confidence in us as people of integrity.
COMMITMENT TO THE COMMUNITY
A strong community depends upon on-going volunteer and charitable support.
The staff and boards of our affiliates have established and will maintain
those civic relationships.
PAGE
CONSOLIDATED FINANCIAL HIGHLIGHTS
[TEXT]
<TABLE>
<CAPTION>
Increase
(Dollars in thousands, except per share data) 1995 1994 (Decrease)
<S> <C> <C> <C>
FOR THE YEAR
Net interest income............................ $ 286,788 $ 262,956 9%
Net income..................................... 104,432 90,441 15
Cash dividends paid............................ 41,013 34,982 17
Net income per share........................... 2.19 1.88 16
Dividend paid per common share................. .86 .74 16
Average deposits............................... 4,866,600 4,692,500 4
Average loans.................................. 4,079,300 3,765,200 8
Average investment securities.................. 1,515,600 1,700,100 (11)
AT YEAR END
Assets......................................... $6,349,103 $5,938,225 7%
Deposits....................................... 5,169,381 4,765,393 8
Loans, net..................................... 4,209,872 3,846,838 9
Investment securities.......................... 1,572,254 1,606,264 (2)
Stockholders' equity........................... 793,826 723,917 10
Book value per common share.................... 16.44 15.05 9
RATIOS
Return on average assets....................... 1.7% 1.6% 6%
Return on average stockholders' equity......... 13.9 12.8 9
Average stockholders' equity/average assets.... 12.6 12.1 4
STATISTICS
Banking offices................................ 162 155 7
Employees...................................... 2,810 2,845 (35)
Shareholders................................... 8,850 8,669 181
Average number of common shares
outstanding................................... 47,768,479 48,165,833 (397,354)
Common shares outstanding...................... 48,272,451 48,114,014 158,437
</TABLE>
CONTENTS
Consolidated Financial Highlights........................................ 1
To Our Shareholders...................................................... 2
Review of Services....................................................... 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................ 6
Consolidated Balance Sheets.............................................. 22
Statement of Consolidated Income......................................... 23
Statement of Consolidated Cash Flows..................................... 24
Statement of Changes in Consolidated Stockholders' Equity................ 26
Notes to Consolidated Financial Statements............................... 27
Report of Independent Accountants........................................ 41
Five Year Statistical Summary............................................ 42
Five Year Selected Financial Data........................................ 44
Five Year Summary of Consolidated Income................................. 45
Principal Affiliates..................................................... 46
Mercantile Bankshares Corporation........................................ 52
Corporate Information.................................................... 53
PAGE 1
TO OUR SHAREHOLDERS
For the 20th consecutive year, Mercantile Bankshares Corporation reported an
increase in consolidated net income. Net income per share was $2.19 in 1995, a
16% increase over the $1.88 per share in 1994. Total consolidated net income was
$104,432,000 compared to $90,441,000 in 1994, an increase of 15%.
Per share amounts are based on the weighted average number of common shares
outstanding, 47,768,479 for 1995 and 48,165,833 for 1994. Amounts reported for
1995 include the accounts of The Sparks State Bank since its affiliation with
Mercantile Bankshares Corporation on October 31, 1995.
Our history of profitability and capital strength has allowed us to increase
total cash dividends paid per share for 19 consecutive years. In 1995, total
dividends paid per share were $.86, a 16% increase over 1994.
In addition, while maintaining great capital strength and financing the
growth of your company, Mercantile Bankshares Corporation has been pursuing a
share repurchase program. In December 1995, the Board of Directors authorized
repurchase of 2,000,000 shares of Mercantile Bankshares common stock. This
followed a 2,000,000 share authorization in December 1994 and 1,000,000 shares
in 1993. The buy-backs have supported your management's strategy to enhance
shareholder value by using capital to finance growth, both internal and
external, and, when capital is not needed for that purpose, returning it to
shareholders in dividends and repurchase of shares. From December 1993 to year
end 1995, 2,420,000 shares of common stock were repurchased under the programs.
At December 31, 1995, total assets of Mercantile Bankshares Corporation were
$6,349,103,000 compared to $5,938,225,000 at December 31, 1994. On a daily
average basis, total assets rose 3% to $6,000,400,000; average total loans rose
8% to $4,079,300,000. Total average investment securities declined 11% to
$1,515,600,000, a measure taken to fund loan growth.
Average total loans increased 8% over 1994. The increase reflected a 9%
increase in average total mortgage and construction loans, which were 55% of the
total loan portfolio. Average commercial loans, which were 33% of the entire
loan portfolio, increased 9%. Average consumer loans increased 3%.
In 1995, return on average assets, a measure of profitability, was 1.74%, up
12% from 1.56% in 1994, continuing to place us in the top tier of U.S. banks.
Average shareholders' equity increased by 7% to $753,500,000. The return on
average equity, which is constrained by our large equity base, benefited from
the share repurchase program and increased 8% to 13.86% in 1995 from 12.84% in
1994. A measure of capital strength, the ratio of average equity to average
assets, was 12.56% in 1995 versus 12.14% in 1994 and remains among the strongest
of the nation's largest banking organizations.
Asset quality at Mercantile Bankshares, as measured by commonly used
statistics, was restored to our more traditional levels. At year end 1995, total
non-performing loans were down 37% from 1994 to $21,235,000. Total
non-performing loans were .49% of total loans at year end 1995, down 42% from
.85% at year end 1994. Total non-performing assets, which include other real
estate owned as well as non-performing loans, were $24,093,000 at year end 1995,
down 45% from 1994. Non-performing assets as a percentage of year end loans plus
other real estate owned was down 50% from the prior year to .56%.
The provision for loan losses in 1995 was $7,988,000 compared to $7,056,000
in 1994. In 1995, loans charged off, net of recoveries, totalled $10,665,000
compared to $8,366,000 in 1994. The allowance for loan losses at December 31,
1995 was $91,398,000 versus $91,257,000 in the prior year. At year end 1995, the
allowance for loan losses as a percentage of non-performing loans had increased
59% to 430% compared to 271% at year end 1994; the allowance was 2.12% of total
year end loans compared to 2.32% at year end 1994.
Average total deposits for the year ended December 31, 1995 were
$4,866,600,000, a 4% increase over 1994. Deposits shifted to a more costly mix
as certificates of deposit rose in 1995 from 29% to 37% of average total
deposits and the combination of Savings, NOW and Money Market accounts declined
from 52% to 45%. Demand deposits, which do not bear interest, remained
relatively constant at 18% of average total deposits.
Net interest income for 1995 increased 9% over 1994 to $286,788,000. There
was a 4% increase in average earning assets, to $5,677,700,000, and a 5%
increase in net interest margin on earning assets, which rose to 5.12% in 1995.
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 interest rate paid for average interest-bearing
funds, remained steady at 4.09%.
Total noninterest income was $88,154,000, a decline of 4% from the prior
year, due primarily to a non-recurring gain in 1994 of $3,137,000 on the sale of
an asset and higher mortgage banking fees in that year. The 1995 decline was
partially offset by modest increases in trust revenues and rental income.
Total noninterest expense, excluding the provision for loan losses, was
$200,945,000, unchanged from the prior year. Salary and employee benefit
expenses, combined, are the largest part of noninterest expense and were
$117,512,000, up 6% over 1994.
PAGE 2
Significant decreases in noninterest expense in 1995 were lower expenses related
to foreclosed property and reduced FDIC insurance premiums. Because Mercantile
Bankshares stresses efficient operations, we were pleased to be cited in an
American Banker study of the nation's 100 largest banking organizations, as of
September 30, 1995, as having achieved the fifth best efficiency ratio.
This year, our annual report includes a Review of Services. You will note that
our emphasis is on traditional, know-your-customer banking services rather than
volume-driven products. At Mercantile Bankshares Corporation,
relationship-oriented service means that customer-related decisions are made
locally, as close as possible to the customer. We can operate at that level
because of our distinctive corporate structure, a system of locally managed
community banks, with a combined size and geographic reach which allows for easy
communication.
For many years, in the annual report we have remarked on the radical changes
taking place in banking. The survivors of this upheaval seem to be settling into
three categories of banking organizations: the giant national/ international
entities; the independent community banks; and banks with a specialized market
niche. Mercantile Bankshares Corporation has the attributes of the last two of
those three. We submit that our organization is a very viable alternative to the
consolidated giants-advantageous for our customers and shareholders.
The size = success formula works better in some situations than others. In
the case of product-oriented banks, economies of scale are important to
high-volume transaction banking. When it comes to more traditional community
banking, however, wringing costs out of merged operations can take its toll on
customers and employees-without necessarily improving financial performance over
time. We take pride in the fact that Mercantile, a mid-size regional banking
institution, ranks high for credit quality, capital strength, efficiency of
operation, and profitability.
Continuing in a high performance tradition means observing certain
disciplines. We recognize that in some quarters the lessons learned from the
underwriting excesses of the 1980's are being ignored. At Mercantile Bankshares,
we will accept modest loan growth rather than sacrifice prudent pricing and
sound underwriting standards. We will continue to maintain high capital ratios
in order to be able to meet economic downturns and take advantage of
opportunities. We will continue to control operating expenses, while investing
carefully in people and systems designed to enhance future profitability.
In 1995, we were pleased to welcome our twenty-first affiliate bank, The
Sparks State Bank of Sparks, Maryland. With a long tradition of community
service, it is a fine addition to our family. Other investments made in 1995
include formation of the Private Banking Group. Located at Mercantile-Safe
Deposit & Trust, it is a logical evolutionary step in relationship banking.
Enhanced retail and corporate banking services are also outlined in this report.
As we continue to build capacity, it will be in the context of promoting
broad, long-term customer relationships. In today's world, customers value
continuity of personnel and institution. We invite them to count on us.
/s/ H. Furlong Baldwin
H. Furlong Baldwin, Chairman
February 28, 1996
BOARD OF DIRECTORS
In 1995, Mercantile Bankshares Corporation welcomed a new director. He is Martin
L. Grass, Chairman and Chief Executive Officer of Rite Aid Corporation.
In June 1995, Douglas W. Dodge retired as President of Mercantile-Safe Deposit &
Trust Company, from its Board and from the Board of Mercantile Bankshares
Corporation. During his 25 years of service, Mr. Dodge made extraordinary
contributions to the bank and the Corporation. We have expressed our gratitude
on many occasions and do so again here.
PAGE 3
REVIEW OF SERVICES
As banking undergoes radical change, the invitation to "Count on Us" has special
appeal to our customers. They look to us for traditional community banking
services augmented by access to more specialized services offered by
Mercantile-Safe Deposit & Trust Company and Mercantile Mortgage Corporation.
COMMUNITY BANKING
Twenty-one locally managed and directed affiliate banks, working through 162
banking offices, deliver traditional personal banking services to individuals
and commercial banking services to local businesses.
Despite pronouncements that hi-tech banking is replacing personal contact, we
find that people in our markets want to deal with someone who knows who they are
and can be counted on to take a continuing interest in meeting their banking
needs. Committing money to a savings account, establishing a personal line of
credit, assuming a residential mortgage none of these are "routine transactions"
to the individual involved. Business owners, too, understand the value of a
knowledgeable, on-going commercial banking relationship. Each affiliate bank,
focusing on the individuals and businesses in its own area, is able to provide
that kind of service.
Customer-related decisions are made at the community bank level, allowing
timely responses based on local knowledge. In addition, each affiliate has
responsibility for its own day-to-day administration, budget and marketing
plans, creating an entrepreneurial environment which encourages initiative.
Affiliate back-office functions, such as operations, auditing and loan review,
are consolidated at the holding company level.
New services are developed through the coordinated efforts of community bank
personnel and a centralized marketing staff. New personal services developed in
1995 for 1996 delivery include fixed income annuities. This very competitive
savings vehicle is being offered by trained and licensed personnel through
affiliate banks. Also, affiliates are modifying their Home Equity lines of
credit for greater flexibility. Personal and commercial banking services are
being supported by a significant investment in technologies designed to enhance
customer information and account access. A telephone system which gives
customers access to account information twenty-four hours a day, and allows them
to effect transfers, will be available in 1996. A Banking Twenty-Four(trademark
sign) Check Card is being introduced which allows customers to debit their
checking account electronically when making purchases. Access to automated
teller machines is being expanded with the addition to our ATM system of the MAC
network.
Community banking carries with it responsibilities. Extending credit to build
local commercial enterprise is a responsibility, as is helping professional
people get established in the community and local families pursue their
financial goals. In addition, we understand our obligation to act as civic
leaders. Our affiliate bank personnel, at all levels, invest volunteer hours and
charitable dollars in making the community a better place to live. After all,
it's their home.
TRUST AND INVESTMENT SERVICES
Trust and investment management services are provided by our largest affiliate,
Mercantile-Safe Deposit & Trust Company. At December 31, 1995, assets under
administration were $26 billion.
Long preeminent in our region for trust and investment services for
individuals and families, Mercantile manages more than $5 billion in personal
trust assets and holds a total of $7 billion under administration. Demographics
indicate significant growth opportunities in personal asset management. As baby
boomers enter middle age, they are beginning to accumulate significant savings
and to plan their estates. This generation has, as well, the prospect of
inheriting significant wealth. Competition for these assets is keen, but we are
meeting it with new and enhanced services, new marketing personnel and new
satellite offices. To take better advantage of the potential in our affiliate
banks, we have inaugurated a program to make them our partners in developing
trust and investment business in their markets. We are confident of the story we
have to tell. As trustee, we have an outstanding reputation, acquired over
decades, for investment management and wealth transfer. Mercantile's personal
investment options include a variety of equity, fixed income and money market
funds. Our investment management fees are competitive as are our investment
results.
Institutions, such as corporations, labor unions and not-for-profit
organizations, are another important client base. With $5 billion in managed
assets and a total of $19 billion under administration at year end 1995, the
institutional area has attractive potential for growth. Of special interest are
retirement plan services. In January 1995, we introduced a comprehensive package
of services for self-directed 401(k) and profit sharing plans. Services include
plan administration, participant record-keeping, employee education, trustee
services and investment management. Mercantile's plan is differentiated by its
flexible investment options, which incorporate several prominent mutual fund
companies. Our marketing effort is being expanded as we target existing and
start-up plans for companies with 50 to 3,000 employees.
Investment management and custody services for endowments and foundations are
an important and growing part of our institutional business. Planned giving is
an increasingly significant source of funds for not-for-profits but is very
complex to administer. Our new planned giving services are meeting their needs.
In addition, Mercantile is stressing
PAGE 4
custody services for endowment funds. The trend of not-for-profit boards to
diversify investment managers expands the market for our comprehensive and
integrative reporting capabilities. Again, these institutional services are
being supported by an expanded new business effort.
CORPORATE BANKING
Each affiliate bank provides commercial banking services to businesses in its
own market area. When the business requires a credit which exceeds the
affiliate's lending limit, or has a specialized financing requirement or other
specialized commercial banking need, corporate banking at Mercantile-Safe
Deposit & Trust cooperates with the affiliate to supply that service.
Mercantile-Safe Deposit & Trust corporate lenders extend credit both in their
own market area and in collaboration with affiliates. These loans are for
general business purposes such as working capital, enlarging plant, or buying
equipment and also for financing owner/user commercial real estate.
Several corporate banking units supply specialized services. They include
asset based lending, cash management, and real estate construction and
development lending.
The Asset Based Lending Group provides financing and leasing services for
businesses with special needs. Loans secured by working assets allow a company
to convert the value of its accounts receivable or inventory into cash for daily
operations. The Group also assists and provides financing for acquisitions,
management buyouts and equipment purchases. A unit dedicated to helping
customers with equipment leasing is being established. A Floorplan unit,
enlarged in 1995, helps automotive and equipment dealers finance new and used
vehicles and equipment.
Mercantile's Cash Management Services assists the business customer in
collecting, moving and investing cash. In 1995, Mercantile introduced
MercAccess, which connects the customer's personal computer to the bank in order
to receive account balance and transaction detail and to initiate wire and ACH
transactions. In addition, Mercantile's Lockbox service was significantly
enhanced to address both wholesale and retail processing needs by providing new
data capture, optic scanning and data transmission capabilities.
The Real Estate Industries Group provides construction, acquisition and
interim lending for investors and developers of income-producing real estate.
Growth in construction lending was notable in 1995, helped by the reappearance
of the capital markets which provide funding for long-term loan financing. Also
in 1995, the credit quality of the real estate lending portfolio improved as
customers, with Mercantile's on-going assistance, worked through a difficult
time in their industry.
PRIVATE BANKING
In 1995, Mercantile-Safe Deposit & Trust established the Private Banking Group.
Composed of banking and trust personnel, it combines their specialized skills to
provide financial services to people with substantial financial resources. The
group provides a full range of customized deposit and savings services, personal
and commercial credit, mortgage financing, retirement savings plans and
investment and trust services.
Early results indicate that our start-up investment in the Private Banking
Group, with its new offices and staff, will be productive. Clearly, potential
users of the service-attorneys, physicians, successful business and property
owners, senior corporate executives and others-are interested in the team
approach to delivering coordinated, tailor-made financial services.
MORTGAGE BANKING
Mercantile Mortgage Corporation, which provides mortgage banking services to the
affiliate system, is making important investments in its future. Significant
personnel improvements were made in 1995, including new heads of secondary
marketing and loan production. Two new production offices were added to the ten
already operating throughout our market area. Substantial additions were made
also to our information services as we continue to invest in the technology
necessary to produce mortgage loans efficiently. During 1995, sophisticated
mortgage origination software, coupled with training and support services, were
introduced to Mercantile Bankshares affiliate banks for use in their locations.
This system handles the entire mortgage process, from application to document
generation, enabling affiliates to satisfy their customers' desires for
long-term, fixed rate loans that are then pooled, securitized and sold by
Mercantile Mortgage Corporation, which continues to service them.
The Mercantile Mortgage portfolio of loans serviced for others was
$659,147,000 at year end 1995. Although this portfolio is not reflected on the
balance sheet, it produces a fee income which is the backbone of the mortgage
operation. In addition to the servicing portfolio, our project construction
loans grew by 24% to $74,774,000 at year end. The quality of the residential
mortgages we service remains strong, with overall delinquencies running more
than 150 basis points below industry averages in our marketplace, as reported
for June 30, 1995 by Mortgage Bankers Association of America.
Our menu of mortgage services was expanded in 1995 to include:
1) Jumbo loans (more than $207,000) at very competitive rates;
2) one-settlement construction/permanent loans;
3) new loan programs designed to help individuals with low to moderate incomes
purchase homes.
PAGE 5
[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. The accounts of The Sparks
State Bank, Sparks, Maryland, are included
for the period subsequent to October 31,
1995, the date of affiliation. The
affiliation was accounted for using the
purchase method of accounting.
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
Diccussion will indicate changes between
the years 1994 and 1995 in asset and
liability composition, sources and uses of
income, as well as evidence of improvement
in asset quality. 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, 1995
II. Analysis of Operating Results
III. Analysis of Financial Condition
I. PERFORMANCE SUMMARY, 1995
Mercantile Bankshares Corporation achieved
increases of 15% in net income and 7% in
total assets in 1995 over the prior year.
Increased net interest income more than
offset a decline in noninterest income for
1995 and led the way to increased net
income in 1995 over 1994. Although rates
have declined gradually since the middle
of 1995, the year ended December 31, 1995
was characterized by a higher average
level of interest rates than 1994. These
higher rates raised yields on earning
assets more than they increased our cost
of funds resulting in a 5% increase in our
net interest margin. The increased margin,
when coupled with a 4% increase in average
earning assets, resulted in a 9% increase
in net interest income. Average total
deposits in 1995 grew 4% over the
preceding year while average total loans
increased by 8% over the same period.
II. ANALYSIS OF OPERATING RESULTS
Earnings Overview
Net income for Mercantile Bankshares was
$104,432,000 compared with $90,441,000 in
1994 and $83,468,000 in 1993.On a per
share basis, our 1995 earnings were $2.19
compared with $1.88 and $1.73 in the two
preceding years. Return on average assets
was 1.7% in 1995; 1.6% in 1994; and 1.5%
in 1993. Return on average equity was
13.9% in 1995 and 12.8% in 1994 and 1993.
PAGE 6
Net Interest Income
Net interest income on a fully taxable
equivalent basis was $290,889,000 in
1995, an increase of $24,412,000 or
9.2% over 1994 which in turn showed an
increase of $16,246,000 or 6.5% over
1993. The 1995 increase was attributable
to an increase of 5.3% in net interest
margin on average earning assets and an
increase of 3.6% in average earning assets.
Total fully taxable equivalent interest
income increased by $64,466,000 in 1995
while total interest expense increased by
$40,054,000. In 1994, total interest income
increased by $17,218,000 as total interest
expense increased by $972,000 from 1993
levels. The net interest margin on average
earning assets was 5.1% in 1995, 4.9% in
1994 and 4.7% in 1993. Further details are
contained in the Analysis of Interest Rates
and Interest Differentials on pages 8 and 9
and in Rate/Volume Analysis on page 10.
Interest Income
The yield realized on average total earning
assets was 8.3% in 1995 compared with 7.5%
in 1994 and 7.3% in 1993. The higher yield
had the effect of increasing fully taxable
equivalent interest income by $44,820,000 and
$4,164,000 for 1995 and 1994, respectively.
See page 10, Rate/Volume Analysis for further
details. The rise in yield on average total
loans is attributable primarily to the higher
average prime rate for 1995 compared to the
previous two years. The prime rate averaged
8-3/4% for 1995 compared with 7-1/8% for 1994
and 6% for 1993. The yield on our investment
securities portfolio was 5.5% for 1995
compared with 5.2% for 1994 and 5.5% for 1993.
In 1995, average total earning assets rose by
3.6% over 1994 which in turn was 3.1% higher
than 1993. These volume increases had the effect
of increasing fully taxable equivalent interest
income by $19,646,000 in 1995 and by $13,054,000
in 1994. Further details on the yields earned on
loans and other earning assets are quantified in
the table on pages 8 and 9.
Interest Expense
Total interest expense in 1995 was $180,487,000,
an increase of $40,054,000 from $140,433,000 in
1994. The increase in interest expense for 1995
was attributable primarily to an increase in the
rate paid on average total interest-bearing funds
to 4.2% for 1995 from 3.4% for 1994 and 1993.
Total interest expense in 1994 was $972,000 higher
than 1993 due primarily to an increase in average
total interest-bearing funds. However, based on
comparison with peer group data furnished by our
regulators, Mercantile's reliance on interest-
bearing funds (as measured by the ratio of average
interest-bearing funds to average total assets)
has been lower than that of our peers for each of
the last three years. Further details on the effect
of changes in rates and average balances can be
found in the Rate/Volume Analysis presented on page 10.
[graph] - INTEREST YIELDS AND RATES (For a description of the graph appearing
in this location see APPENDIX A, Chart
A-4)
PAGE 7
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>
1995
-----------------------------------------------------
Average Income*/ Yield*/
(Dollars in thousands) Balance Expense Rate
=====================================================
<S> <C> <C> <C>
Earning assets
Loans:
Commercial......................................... $1,351,600 $130,960 9.7%
Mortgage and construction.......................... 2,244,700 206,248 9.2
Consumer........................................... 483,000 46,315 9.6
Total loans....................................... 4,079,300 383,523 9.4
Federal funds sold.................................. 62,700 3,587 5.7
Securities purchased under resale agreements........ 20,000 1,126 5.6
Securities:
Taxable securities
U.S. Treasury securities.......................... 1,466,400 79,915 5.5
U.S. Agency securities............................ 25,500 1,354 5.3
Other stocks and bonds............................ 10,200 821 8.0
Tax-exempt securities
States and political subdivisions................. 13,500 1,046 7.7
Total securities................................. 1,515,600 83,136 5.5
Interest-bearing deposits in other banks............ 100 4 4.0
Total earning assets............................. 5,677,700 471,376 8.3
Cash and due from banks.............................. 196,700
Bank premises and equipment, net..................... 75,800
Other assets......................................... 141,600
Less: allowance for loan losses...................... (91,400)
Total assets..................................... $6,000,400
Interest-bearing liabilities
Deposits:
Savings deposits................................ $2,200,200 64,732 2.9
Certificates of deposit and other time deposits-
less than $100,000........................... 1,228,000 69,857 5.7
Certificates of deposit--$100,000 and over...... 549,500 28,967 5.3
Total interest-bearing deposits............. 3,977,700 163,556 4.1
Short-term borrowings.............................. 280,900 15,123 5.4
Long-term debt..................................... 27,900 1,808 6.5
Total interest-bearing funds................ 4,286,500 180,487 4.2
Noninterest-bearing deposits.......................... 888,900
Other liabilities and accrued expenses................ 71,500
Total liabilities........................... 5,246,900
Stockholders' equity.................................. 753,500
Total liabilities and stockholders' equity.. $6,000,400
Net interest income................................... $290,889
Net interest rate spread.............................. 4.1%
Effect of noninterest-bearing funds................... 1.0
Net interest margin on earning assets................. 5.1%
Taxable-equivalent adjustment included in:
Loan income........................................ $ 3,635
Investment securities income....................... 466
Total..................................... $ 4,101
</TABLE>
[FN]
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35%.
PAGE 8
[TEXT]
<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
</TABLE>
[FN]
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35%.
<TABLE>
<CAPTION>
1993
-----------------------------------------------------
Average Income*/ Yield*/
(Dollars in thousands) Balance Expense Rate
=====================================================
<S> <C> <C> <C>
Earning assets
Loans:
Commercial......................................... $1,186,600 $ 89,755 7.6%
Mortgage and construction.......................... 1,970,100 166,016 8.4
Consumer........................................... 490,300 42,841 8.7
Total loans....................................... 3,647,000 298,612 8.2
Federal funds sold.................................. 37,600 1,107 2.9
Securities purchased under resale agreements........ 15,700 499 3.2
Securities:
Taxable securities
U.S. Treasury securities.......................... 1,552,000 85,075 5.5
U.S. Agency securities............................ 36,700 2,136 5.8
Other stocks and bonds............................ 6,900 892 12.9
Tax-exempt securities
States and political subdivisions................. 15,600 1,289 8.3
Total securities................................. 1,611,200 89,392 5.5
Interest-bearing deposits in other banks............ 1,000 82 8.2
Total earning assets............................. 5,312,500 389,692 7.3
Cash and due from banks.............................. 196,500
Bank premises and equipment, net..................... 71,500
Other assets......................................... 151,000
Less: allowance for loan losses...................... (92,900)
Total assets..................................... $5,638,600
Interest-bearing liabilities
Deposits:
Savings deposits................................ $2,390,600 68,587 2.9
Certificates of deposit and other time deposits-
less than $100,000........................... 1,086,600 50,093 4.6
Certificates of deposit--$100,000 and over...... 302,500 11,418 3.8
Total interest-bearing deposits............. 3,779,700 130,098 3.4
Short-term borrowings.............................. 286,100 7,824 2.7
Long-term debt..................................... 22,000 1,539 7.0
Total interest-bearing funds................ 4,087,800 139,461 3.4
Noninterest-bearing deposits.......................... 845,500
Other liabilities and accrued expenses................ 54,200
Total liabilities........................... 4,987,500
Stockholders' equity.................................. 651,100
Total liabilities and stockholders' equity.. $5,638,600
Net interest income................................... $250,231
Net interest rate spread.............................. 3.9%
Effect of noninterest-bearing funds................... .8
Net interest margin on earning assets................. 4.7%
Taxable-equivalent adjustment included in:
Loan income........................................ $ 3,162
Investment securities income....................... 587
Total..................................... $ 3,749
</TABLE>
[FN]
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35%.
PAGE 9
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,
1995 vs. 1994 1994 vs. 1993
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)................................. $19,211 $ 9,574 $28,785 $ 8,698 $ 3,722 $12,420
Mortgage & construction (2).................... 15,260 15,553 30,813 1,683 7,736 9,419
Consumer....................................... 4,449 1,344 5,793 (327) (1,992) (2,319)
Total loans.............................. 38,920 26,471 65,391 10,054 9,466 19,520
Taxable securities (3)............................... 4,446 (9,506) (5,060) (5,945) 4,992 (953)
Tax-exempt securities (3)............................ (6) (47) (53) (66) (124) (190)
Federal funds sold/repos............................. 1,466 2,768 4,234 112 (1,239) (1,127)
Interest-bearing deposits in other banks............. (6) (40) (46) 9 (41) (32)
Total interest income.................... 44,820 19,646 64,466 4,164 13,054 17,218
Interest paid on:
Savings deposits.................................. 4,955 (5,711) (756) (3,667) 568 (3,099)
Certificates of deposit and other time deposits
less than $100,000............................. 15,862 7,734 23,596 (2,242) (1,590) (3,832)
Certificates of deposit--$100,000 and over........ 5,610 8,909 14,519 1,618 1,412 3,030
Short-term borrowings............................. 4,302 (1,290) 3,012 3,513 774 4,287
Long-term debt.................................... (51) (266) (317) (107) 693 586
Total interest expense................... 30,678 9,376 40,054 (885) 1,857 972
Net interest earned.................................. $14,142 $10,270 $24,412 $ 5,049 $11,197 $16,246
</TABLE>
[FN]
(1) Tax equivalent adjustments of $1,328,000 for 1995, $961,000 for 1994 and
$1,475,000 for 1993 are included in the calculation of commercial loan rate
variances.
(2) Tax equivalent adjustments of $2,307,000 for 1995, $2,077,000 for 1994 and
$1,687,000 for 1993 are included in the calculation of mortgage and
construction loan rate variances.
(3) Tax equivalent adjustments of $466,000 for 1995, $483,000 for 1994 and
$587,000 for 1993 are included in the calculation of investment securities
rate variances.
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) 1995 1994 1993 1995/1994 1994/1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust division services................... $44,273 $43,360 $41,673 2% 4%
Rental income............................. 8,788 8,491 7,060 3 20
Service charges on deposit accounts....... 15,764 15,655 16,367 1 (4)
Other fees ............................... 19,975 21,342 19,582 (6) 9
Investment securities gains and (losses).. (1,715) (1,399) (195) (23) (617)
Other income.............................. 1,069 4,737 1,826 (77) 159
Total......................... $88,154 $92,186 $86,313 (4)% 7%
</TABLE>
NONINTEREST EXPENSES
A schedule of noninterest expenses over the past three years is presented below:
<TABLE>
<CAPTION>
Year Ended December 31, % Change
_______________________________________________________________________________________ _____________________________
(Dollars in thousands) 1995 1994 1993 1995/1994 1994/1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits............ $117,512 $110,870 $106,437 6% 4%
Occupancy expense of bank premises........ 18,354 18,250 16,633 1 10
Furniture and equipment expenses.......... 16,893 13,977 13,180 21 6
Communications and supplies............... 9,778 9,182 9,413 6 (2)
FDIC insurance premium expense............ 6,346 10,911 10,699 (42) 2
Other expenses............................ 32,062 38,010 27,493 (16) 38
Total......................... $200,945 $201,200 $183,855 --% 9%
</TABLE>
PAGE 10
Noninterest Income
Total noninterest income, including
investment securities gains or losses,
was $88,154,000 in 1995, $4,032,000 or 4%
below 1994 which was $5,873,000 or 7%
above 1993. The decrease in other income
for 1995 was due primarily to a non-recur-
ring gain of $3,137,000 on the sale of an
asset in 1994.
Revenues from trust services, the
largest source of noninterest income, were
$44,273,000 for 1995, an increase of 2% or
$913,000 over 1994 which in turn was up 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 1995 was $10,412,000
compared with $10,772,000 in 1994 and
$9,805,000 in 1993.
Other fees decreased by $1,367,000 or 6%
below 1994 largely due to lower mortgage
banking fees in 1995. In 1994, a higher
volume of residential mortgage refinancings
led to a $1,760,000 or 9% increase over 1993
levels.
Sales of investment securities for 1995,
1994 and 1993 resulted in net losses of
$1,715,000, $1,399,000 and $195,000,
respectively.
Noninterest Expenses
Total noninterest expenses, excluding the
provision for loan losses, were $200,945,000,
essentially unchanged from 1994. Increases
in salaries, furniture and equipment expenses,
employee benefits, and communications and
supplies were offset by lower expenses related
to foreclosed property and a reduction in FDIC
insurance premiums paid. In 1994, noninterest
expenses totalled $201,200,000, a 9% increase
over 1993.
Salaries and employee benefits totalled
$117,512,000 in 1995, $6,642,000 or 6.0% over
the $110,870,000 for 1994 which, in turn, was
up $4,433,000 or 4.2% over 1993. The increases
in both 1995 and 1994 were largely due to the
salaries and wages component which increased
$5,990,000 or 6.9% in 1995 and $3,692,000 or
4.4% in 1994. Employee benefits expense was
up $652,000 or 2.7% over 1994 which was up
$741,000 or 3.2% over 1993.
Total furniture and equipment expenses were
$16,893,000 in 1995, an increase of $2,916,000
or 20.9% over the $13,977,000 for 1994 which,
in turn, was up $797,000 or 6.0% over 1993. The
primary reason for the 1995 increase was
continuing upgrades to data processing systems.
Other expenses for 1995 totalled $32,062,000,
a decrease of $5,948,000 or 15.6% from the
$38,010,000 for 1994 which, in turn, was up
$10,517,000 or 38.3% over 1993. Other expenses
include foreclosed property related expenses.
For 1995, foreclosed property related expenses
reflect a net recovery of $1,911,000 compared
to expenses of $6,551,000 for 1994. The net
recovery is principally the result of the sale
of foreclosed property during 1995. With a
decreased level of non-performing assets in
1995, costs associated with carrying and
liquidating non-performing assets (such as
write-downs, professional fees and operating
expenses of foreclosed properties) were sig-
nificantly lower than 1994. The largest of
these costs, the provision for decline in the
market value of other real estate owned, was
$1,401,000 in 1995 compared with $5,945,000
in 1994 and $468,000 in 1993. Partially off-
setting the reduced cost benefits of lower
non-performing assets in 1995 were increases
in advertising, sales promotions, and various
other categories of expenses.
During 1995, the Federal Deposit Insurance
Corporation (FDIC) significantly lowered its
deposit insurance premiums for well capitalized
banks. As a result, insurance premiums paid by
Mercantile's bank affiliates to the FDIC in
1995 were $4,565,000 or 41.8% lower than the
$10,911,000 for 1994 which, in turn, was up
$212,000 or 2.0% over 1993.
As a result of ongoing 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 52.4%, 54.7% and
54.5% for 1995, 1994 and 1993, respectively.
[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)
PAGE 11
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 $82,670,000 in 1995, $5,096,000 or 6% below
1994. Securities income of $87,766,000 in 1994 was $1,039,000 or 1% less than in
1993. Income from the securities portfolio benefited from a 6% increase in the
portfolio's yield (from 5.2% to 5.5% in 1995), but not enough to offset the
negative effect of the 11% decline in the average balance of securities. Funds
from securities sold and some of those which matured were used to meet the
increased demand for loans in 1995.
At year end 1995 and 1994, the average maturity of the bond portfolio stood
at 1.4 years and 1.5 years, respectively. As a result of reinvesting maturing
securities at higher rates during 1995, the yield on Mercantile's bond portfolio
was 5.7% at December 31, 1995, up 8% from 5.3% at the end of the preceding year.
The market value of our bond investment portfolio as of December 31, 1995 was
100.8% of adjusted cost compared to 97.0% at December 31, 1994 and 101.4% at
December 31, 1993. At December 31, 1995, our bond investment portfolio had an
adjusted cost value of $1,548,784,000. On that date, $1,195,475,000 of these
investments had unrealized gains of $12,826,000. The remaining $353,309,000 of
these investments had unrealized losses of $1,055,000.
In November 1995, the Financial Accounting Standards Board released a special
report, "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities." This report allowed institutions to
reconsider the designations of their securities portfolio and to redesignate
securities between the held-to-maturity and available-for-sale categories
without penalty. After considering the need to maintain flexibility in managing
our investment portfolio to meet liquidity needs and to manage interest rate
risk, we have designated all U.S. Treasury securities and certain other
investments in our portfolio as available-for-sale. More information on the bond
investment portfolio is shown in the table on page 13 and in Footnote No. 2 to
the financial statements.
Loans
For the second consecutive year, both average total loans and their yields
increased. As a consequence, fully taxable equivalent interest income from loans
in 1995 amounted to $383,523,000, 20.6% above the $318,132,000 realized in 1994
which, in turn, was 6.5% higher than the $298,612,000 realized in 1993.
During 1995, average loans increased in all three categories: commercial
(including industrial, financial and agricultural); real estate loans
(residential and commercial mortgages and construction loans); and consumer.
Average commercial loans grew 9.4% in 1995 to an average balance of
$1,351,600,000, real estate loans increased 8.9% to an average balance of
$2,244,700,000 and consumer loans increased 3.3% to an average balance of
$483,000,000.
It is significant that a large portion of the real estate loan portfolio
consists of loans to individuals on their residences. At December 31, 1995, 40%
of total real estate loans were one to four family residential mortgages and 5%
were home equity loans. Commercial mortgages made up 40% 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, 1995, 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 affiliates, 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.
Growth in consumer loan volume was modest because our banks continue to
exercise prudence in an intensely competitive market characterized by thin
margins and, in some cases, by liberal credit standards.
For further comparative information on the components of the loan portfolio,
see the Five Year Selected Financial Data table on page 44.
PAGE 12
BOND INVESTMENT PORTFOLIO
The following summary shows the maturity distribution, average maturity and
average yields for the bond investment portfolio at December 31, 1995, 1994 and
1993.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994 December 31, 1993
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%
1-5 years..................... 1,035,085 997,072 5.6 1,317,350 1,336,613 5.1
5-10 years.................... 6,214 5,786 6.0 20,578 20,878 5.8
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%
Average maturity (years).... 1.5 2.0
States and political
subdivisions:
Within 1 year................. $ 1,593 $ 1,592 6.8% $ 616 $ 615 8.3% $ 1,485 $ 1,483 9.3%
1-5 years..................... 12,465 12,564 7.5 10,767 10,381 7.5 11,180 11,634 6.8
5-10 years.................... 1,175 1,197 7.9 2,143 2,003 7.8 2,399 2,509 7.7
After 10 years................ 55 55 11.9 55 55 11.9
Total....................... $15,233 $ 15,353 7.5% $ 13,581 $ 13,054 7.6% $ 15,119 $ 15,681 7.0%
Average maturity (years).... 2.9 3.7 2.5
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
5-10 years....................
After 10 years................ $ 6 $ 6 9.1% 6 6 9.1 13 15 8.2
Total....................... $ 6 $ 6 9.1% $ 3,204 $ 3,156 6.9% $ 1,609 $ 1,712 6.5%
Average maturity (years).... 21.8 1.6 2.6
Totals:
Within 1 year................. $ 1,593 $ 1,592 6.8% $ 211,746 $ 209,484 5.2% $ 394,098 $ 398,695 5.6%
1-5 years..................... 12,465 12,564 7.5 1,047,250 1,008,807 5.6 1,329,932 1,349,750 5.1
5-10 years.................... 1,175 1,197 7.9 8,357 7,789 6.5 22,977 23,387 5.9
After 10 years................ 6 6 9.1 946 929 7.7 1,959 1,972 7.6
Total ...................... $ 15,239 $ 15,359 7.5% $1,268,299 $1,227,009 5.5% $1,748,966 $1,773,804 5.2%
Average maturity (years).... 3.0 1.5 2.0
Securities available-for-sale
U.S. Treasury and other
U.S. government agencies:
Within 1 year................. $ 684,269 $ 685,346 5.4% $ 269,092 $ 265,167 4.1%
1-5 years..................... 839,428 850,072 5.9 65,094 63,048 5.5
5-10 years.................... 1,500 1,337 5.3
After 10 years................
Total....................... $1,523,697 $1,535,418 5.7% $ 335,686 $ 329,552 4.4%
Average maturity (years).... 1.4 .6
States and political
subdivisions:
After 10 years................ $ 45 $ 45 11.9%
Total....................... $ 45 $ 45 11.9%
Average maturity (years).... 20.5
Other bonds, notes and
debentures:
Within 1 year................. $ 900 $ 899 6.9%
1-5 years..................... 3,087 3,069 5.7
5-10 years.................... 2,304 2,277 5.2
After 10 years................ 3,512 3,488 6.1 $ 9 $ 9 6.4%
Total....................... $ 9,803 $ 9,733 5.8% $ 9 $ 9 6.4%
Average maturity (years).... 6.8 18.8
Totals:
Within 1 year................. $ 685,169 $ 686,245 5.4% $ 269,092 $ 265,167 4.1%
1-5 years..................... 842,515 853,141 5.9 65,094 63,048 5.5
5-10 years.................... 2,304 2,277 5.2 1,500 1,337 5.3
After 10 years................ 3,557 3,533 6.2 9 9 6.4
Total....................... $1,533,545 $1,545,196 5.7% $ 335,695 $ 329,561 4.4%
Average maturity (years).... 1.4 .6
</TABLE>
PAGE 13
Sources and Uses of Funds
Mercantile Bankshares' average balance of funding sources (i.e., deposits,
shareholders' equity, and long- and short-term borrowings) grew 3% in 1995 and
1994. Increases in deposits and shareholders' equity resulted in lower reliance
on short-term borrowings in 1995. The largest use of funds in 1995 and 1994 was
new loans.
Interest rates on deposits were higher in 1995 than 1994. Generally, in
periods of higher interest rates, depositors tend to shift their money out of
noninterest-bearing or lower rate interest-bearing deposit accounts into higher
rate interest-bearing accounts. This trend was evident at Mercantile in 1995 as
noninterest-bearing deposits, savings, NOW and money market accounts all
declined in dollar amount and as a percentage of average total deposits. More
than offsetting the decline in dollar amount were certificates of deposit
("CDs"), which rose as a percentage of average total deposits in 1995. For 1995,
average total deposits, excluding CDs, declined to $3,089,100,000 or 63% of
average total deposits from $3,300,500,000 or 71% and $3,236,100,000 or 70% for
1994 and 1993, respectively. Average total CD's increased to $1,777,500,000 or
37% of average total deposits for 1995 from $1,392,000,000 or 29% and
$1,389,100,000 or 30% for 1994 and 1993, respectively.
Interest rates on deposits in 1994 were basically flat when compared to 1993
with relatively minor changes in the deposit mix, between 1994 and 1993, as
evidence of this fact.
Average total shareholders' equity increased by 7% to $753,500,000 in 1995
compared with growth of 8% to $704,400,000 in 1994.
Due to the changes in volume of loans, investment securities, and deposits
mentioned above, average total short-term borrowings decreased by $33,500,000 to
$280,900,000 in 1995 compared with an increase of $28,300,000 during 1994 to
$314,400,000.
Average loans for 1995 totalled $4,079,300,000, an 8% increase over
$3,765,200,000 for 1994 which was 3% higher than 1993. Average loans as a
portion of average total earning assets were 72% in 1995 compared with 69% in
both 1994 and 1993.
COMPOSITION OF EARNING ASSETS
<TABLE>
<CAPTION>
Average Balances
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C <C>
Loans.......................... $4,079,300 72% $3,765,200 69% $3,647,000 69% $3,438,000 70% $3,306,400 71%
Investment securities*......... 1,515,700 27 1,700,600 31 1,612,200 30 1,449,600 29 1,169,500 25
Federal funds sold............. 62,700 1 12,200 37,600 1 42,400 1 43,600 1
Securities purchased under
resale agreements........... 20,000 15,700 8,700 162,100 3
Total.................. $5,677,700 100% $5,478,000 100% $5,312,500 100% $4,938,700 100% $4,681,600 100%
</TABLE>
[FN]
*Includes interest-bearing deposits in other banks.
DEPOSIT MIX
<TABLE>
<CAPTION>
Average Balances
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits... $ 888,900 18% $ 890,100 19% $ 845,500 18% $ 746,200 17% $ 678,100 17%
Interest-bearing deposits:
Savings, NOW................ 1,421,000 29 1,577,100 34 1,505,000 33 1,178,100 27 830,700 20
Money market................ 779,200 16 833,300 18 885,600 19 847,100 20 719,300 18
CDs and other time deposits
less than $100,000........ 1,228,000 25 1,052,100 22 1,086,600 23 1,201,300 28 1,393,700 34
CDs $100,000
and over.................. 549,500 12 339,900 7 302,500 7 327,000 8 454,500 11
Total.................. $4,866,600 100% $4,692,500 100% $4,625,200 100% $4,299,700 100% $4,076,300 100%
</TABLE>
PAGE 14
Management has used some maturing
U.S. Treasury securities as a source of
loan funding. Consequently, growth in
deposits and short-term borrowings have
not been required to keep pace with loan
growth. Investment securities decreased
to 27% of average total earning assets in
1995 from 31% in 1994 and 30% in 1993.
Further details of the composition of our
average total earning assets and of our
deposit mix are shown in the tables on
page 14.
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 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
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 much more rapidly.
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 16, asset
sensitivity indicates that, given the
composition of assets and liabilities at
December 31, 1995, 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.
At times, our efforts to mitigate our
exposure to changes in interest rates have
resulted in loan pricing policies that have
not coincided with our commercial customers'
preferences. As a result, during 1995, our
lead bank, Mercantile-Safe Deposit & Trust
Company (MSD&T), entered into a master
agreement with another leading financial
institution for the purpose of making interest
rate swap and similar interest rate protection
arrangements in connection with commercial
loans made to MSD&T's customers to enable its
customers to manage the volatility of interest
rates and associated risks. MSD&T will only
enter into specific interest rate protection
[graph] - LOAN COMPOSITION AND GROWTH (For a description of the graph appearing
in this location see APPENDIX A,
Chart A-7)
LOAN MATURITY SCHEDULE
<TABLE>
The following table illustrates loan diversity by maturity distribution for commercial, financial and agricultural and
real estate--construction loans as of December 31, 1995.
<CAPTION>
Maturing
- --------------------------------------------------------------------------------------------------------
Over 1
1 year through Over 5
(Dollars in thousands) or less 5 years years Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural.......... $500,772 $530,373 $362,000 $1,393,145
Real estate--construction........................ 139,604 161,908 62,058 363,570
Total................................... $640,376 $692,281 $424,058 $1,756,715
</TABLE>
Of the $1,116,339,000 loans maturing after one year, $291,428,000 or 26% have
predetermined interest rates and $824,911,000 or 74% have floating interest
rates.
PAGE 15
INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
At December 31, 1995
- --------------------------------------------------------------------------------------------------------------------------
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 (1).............................. $ 155.3 $188.1 $343.3 $ 855.0 $ 7.0 $ 23.7 $1,572.4
Federal Funds/repos......................... 76.1 76.1
Loans....................................... 2,460.6 110.7 265.5 1,141.9 322.6 4,301.3
Other assets................................ 399.3 399.3
Total............................... 2,692.0 298.8 608.8 1,996.9 329.6 423.0 6,349.1
LIABILITIES & EQUITY
Money market deposit accounts............... 761.9 761.9
Time deposits............................... 593.5 298.6 262.6 808.7 .7 1,964.1
Other deposits (2).......................... 438.1 2,005.3 2,443.4
Short-term borrowings....................... 281.6 281.6
Long-term debt.............................. .2 .2 .8 24.3 .1 25.6
Other liabilities........................... 78.7 78.7
Stockholders' equity........................ 793.8 793.8
Total............................... 2,075.3 298.8 263.4 833.0 2,006.1 872.5 $6,349.1
Excess...................................... $ 616.7 - $345.4 $1,163.9 $(1,676.5) $(449.5)
Accumulated excess.......................... $ 616.7 $616.7 $962.1 $2,126.0 $ 449.5
Accumulated excess as a percent
of total................................. 9.7% 9.7% 15.2% 33.5% 7.1%
</TABLE>
[FN]
(1) Includes interest-bearing deposits in other banks.
(2) Reflects behavior experience which often differs from legal withdrawal
provisions.
[TEXT]
arrangements under the master agreement with respect to which it has approved a
corresponding credit facility with the customer and as to which the customer is
entering into a corresponding interest rate protection arrangement with MSD&T.
MSD&T does not anticipate that these arrangements will expose the Corporation to
any risk beyond the normal credit risks undertaken with any lending arrangement.
As of December 31, 1995, no customer had entered into any such arrangement. 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 1995,
growth of loans, coupled with limited growth in deposits, resulted in the
decrease in investment securities previously discussed. We limited the maturity
and, therefore, the yield of securities purchased in 1995 in anticipation of
increased future 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.
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 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 1995, $7,988,000 in provision for loan loss expense was incurred,
up from $7,056,000
PAGE 16
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance balance--beginning................................... $ 91,257 $ 92,567 $ 88,261 $ 65,932 $ 54,471
Allowance of acquired bank..................................... 2,818 2,803
Charge-offs:
Commercial, financial and agricultural...................... 7,867 4,262 7,845 21,258 3,709
Real estate--construction................................... 1,134 2,405 1,258 240 271
Real estate--mortgage....................................... 1,540 2,000 2,491 697 4,378
Consumer.................................................... 2,304 1,862 2,676 3,019 3,841
Totals................................................. 12,845 10,529 14,270 25,214 12,199
Recoveries:
Commercial, financial and agricultural...................... 917 729 1,500 637 1,062
Real estate--construction................................... 52 224
Real estate--mortgage....................................... 264 185 148 131 188
Consumer.................................................... 947 1,025 1,156 1,429 1,560
Totals................................................. 2,180 2,163 2,804 2,197 2,810
Net charge-offs................................................ 10,665 8,366 11,466 23,017 9,389
Provision for loan losses...................................... 7,988 7,056 12,969 45,346 20,850
Allowance balance--ending...................................... $ 91,398 $ 91,257 $ 92,567 $ 88,261 $ 65,932
Average loans outstanding during year.......................... $4,079,300 $3,765,200 $3,647,000 $3,438,000 $3,306,400
Percent of net charge-offs to average loans outstanding
during year................................................. .26% .22% .31% .67% .28%
Percent of allowance for loan losses at year-end to
average loans............................................... 2.2% 2.4% 2.5% 2.6% 2.0%
</TABLE>
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 paragraph on page
16 for Provision and Allowance for Loan Losses.
<TABLE>
<CAPTION>
Allowance amount allocated as of December 31,
- ----------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance amount allocated to:
Commercial, financial and agricultural..... $25,400 $25,600 $26,200 $24,500 $16,480
Real estate--construction.................. 11,000 10,900 11,700 12,000 9,900
Real estate--mortgage...................... 5,200 5,100 5,000 4,400 3,300
Consumer................................... 5,300 5,500 5,600 7,900 5,900
Allowance amount not allocated................ 44,498 44,157 44,067 39,461 30,352
Total................................... $91,398 $91,257 $92,567 $88,261 $65,932
</TABLE>
COMPOSITION OF LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural........ 32.4% 33.3% 33.3% 32.3% 32.6%
Real estate--construction..................... 8.5 8.1 8.6 9.1 9.8
Real estate--mortgage......................... 48.0 46.5 45.6 44.4 41.7
Consumer...................................... 11.1 12.1 12.5 14.2 15.9
Total................................... 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
PAGE 17
[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)
in 1994 which was down from $12,969,000 in
1993. The decision to raise the provision was
influenced, in part, by an increase in net
charge-offs in 1995. Net charge-offs
increased $2,299,000 or 27% during the same
period.
The allowance for loan losses, as a
percentage of average loans, was 2.2% at
December 31, 1995 compared with 2.4% and 2.5%
the two preceding years. However, due to
steady decreases in non-performing loans, the
allowance for loan losses as a percentage of
non-performing loans was 140% at year end
1993, 271% on December 31, 1994 and 430% on
December 31, 1995. Further details of the
allowance for loan losses are shown in the
tables on page 17.
Charge-Offs
Charge-offs before recoveries in 1995 were
$12,845,000, up from $10,529,000 in 1994,
which in turn were down from $14,270,000 in
1993. Allowance For Loan Losses, on page 17,
shows that in 1995 the increase in
charge-offs of commercial, financial and
agricultural, and consumer loans more than
offset decreases in charge-offs of
construction and mortgage loans. Charge-offs
of commercial, financial and agricultural
loans were $7,867,000 in 1995, up $3,605,000
from $4,262,000 in 1994, which in turn was
down $3,583,000 from $7,845,000 in 1993.
Consumer loans totalling $2,304,000 were
charged off in 1995, an increase of $442,000
from the $1,862,000 charged off in 1994 but
not as high as the $2,676,000 reported in
1993. Charge-offs of construction loans were
$1,134,000 in 1995, compared with $2,405,000
and $1,258,000 in 1994 and 1993,
respectively. Mortgage loans totalling
$1,540,000 were charged off in 1995, a
decrease of $460,000 from the $2,000,000
charged off in 1994 which, in turn, was
$491,000 lower than the $2,491,000 reported
in 1993.
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 17% in 1995, 21% in 1994 and 20% in
1993. Recoveries in a given year may not
relate to loans charged off in that year.
Net charge-offs increased to $10,665,000
in 1995 from $8,366,000 in 1994 but were not
as high as the $11,466,000 in 1993. Net
charge-offs as a percentage of average loans
were .26%, .22%, and .31% for the years ended
1995, 1994 and 1993, 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, as a percentage of
period end loans and other real estate owned,
improved to .56% at December 31, 1995 from
1.11% and 2.37% in the two preceding years.
At year end 1995, non-performing assets were
$24,093,000 compared with $43,813,000 and
$88,721,000 in 1994 and 1993, respectively.
Non-performing assets reached their peak in
the third quarter of 1992 and have steadily
decreased since that time.
Non-performing loans decreased 37% to
$21,235,000 at December 31, 1995 compared
with $33,648,000 one year earlier. Other real
estate owned decreased 72% to $2,858,000 at
December 31, 1995 from $10,165,000 one year
earlier. This decrease was primarily
attributable to the sale of a foreclosed
property (other real estate owned) and to
charges of $1,401,000 for reserves against
the carrying value of other real estate
owned.
Attention is directed to the data in
Non-Performing Assets on page 19 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.
PAGE 18
NON-PERFORMING ASSETS
A five-year comparison of non-performing assets is presented below:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans (1)......................... $21,235 $33,645 $66,063 $70,602 $58,994
Renegotiated loans (1)........................ 3 3,105 593
Loans contractually past due 90 days or more
and still accruing interest................ 40
Total non-performing loans................. 21,235 33,648 66,063 73,707 59,627
Other real estate owned....................... 2,858 10,165 22,658 20,460 27,116
Total non-performing assets................ $24,093 $43,813 $88,721 $94,167 $86,743
Non-performing loans as a percentage of
period end loans........................... .49% .85% 1.78% 2.11% 1.77%
Non-performing assets as a percentage of
period end loans and other real estate
owned...................................... .56% 1.11% 2.37% 2.68% 2.55%
Allowance for loan losses as a percentage
of non-performing loans.................... 430.41% 271.21% 140.12% 119.75% 110.57%
</TABLE>
[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 $1,946,000 and
$3,230,000 in 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 $1,086,000 and $1,524,000 in
1995 and 1994, respectively.
Note: As of December 31, 1995, the Corporation was monitoring loans estimated to
aggregate $4,417,000 not currently classified as non-accrual or renegotiated
loans. These loans have characteristics which indicate they may result in such
classification in the future.
[TEXT]
Shareholders' Equity
Maintenance of exceptional capital
strength has long been a guiding
principle of Mercantile Bankshares.
Ample capital is necessary to sustain
growth, to provide a measure of
protection against unanticipated
declines in asset values and to
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 10%
to $793,826,000 at year end 1995 from
$723,917,000 at year end 1994 which,
in turn, was a 7% increase from
$674,941,000 at year end 1993. These
increases are primarily attributable to
growth in earnings. Book value per share
was $16.44 at the end of 1995, $15.05
in 1994 and $13.99 in 1993. Our ratio of
average equity to average assets was
12.6% in 1995 compared with 12.1% in
1994 and 11.5% in 1993, among the very
strongest in the industry each year. The
issuance of shares in the acquisition of
an affiliate bank in 1995 was offset, to
a large degree, by the acquisition and
retirement of shares under the Mercantile
Bankshares stock repurchase program which
is discussed later in this section.
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" institution,
such as Mercantile Bankshares, faces fewer
regulatory hindrances in its operations than
institutions which are classified at the
other end of the spectrum as "critically
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, 1995,
these three ratios for Mercantile Bankshares
were 19.2%, 17.9% and 12.1%, substantially
in excess of the minimums required. As of
December 31, 1994, they were 19.6%, 18.3% and
12.1%, respectively. The table on page 20
shows the components of the risk-based capital
and leverage ratios for the most recent
five-year period.
Bank regulatory agencies also impose certain
restrictions on the payment of dividends,
extensions of credit and transfer
[graph] - RISK-BASED CAPITAL RATIOS* (For a description of the graph appearing
in this location see APPENDIX A,
Chart A-9)
PAGE 19
RISK-BASED CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
(Dollars in thousands) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tier one capital:
Stockholders' equity................................ $ 783,593 $ 726,688 $ 675,441 $ 598,628 $ 542,599
Less: goodwill and other intangible assets.......... (32,645) (21,432) (19,993) (21,123) (22,254)
Total Tier one capital......................... 750,948 705,256 655,448 577,505 520,345
Tier two capital:
Allowable allowance for loan losses................. 52,835 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..................... 52,835 49,598 47,493 46,937 48,184
Total capital.................................. $ 803,783 $ 754,854 $ 702,941 $ 624,442 $ 568,529
Risk-adjusted assets................................... $4,188,251 $3,845,146 $3,592,661 $3,389,608 $3,350,944
Quarterly average assets (net of goodwill and
other intangible assets)............................ $6,192,355 $5,816,368 $5,721,307 $5,317,877 $5,088,646
Risk-based capital ratios:
Tier one capital....................................... 17.9% 18.3% 18.2% 17.0% 15.5%
Total capital.......................................... 19.2 19.6 19.6 18.4 17.0
Tier one leverage ratio*............................... 12.1% 12.1% 11.5% 10.9% 10.2%
</TABLE>
[FN]
*Tier one capital/quarterly average assets (net of goodwill and
other intangible assets)
DIVIDENDS
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common dividends.......................................... .23 .23 .20 .20 .20 .20 .17 .17
</TABLE>
[FN]
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.
[TEXT]
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 effect 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 Footnote No. 8 on page 32 for information
regarding Mercantile Bankshares' commitments.
While maintaining exceptional capital strength and financing growth of the
company, Mercantile Bankshares Corporation has been pursuing a share repurchase
program. In December 1995, the Board of Directors authorized repurchase of up to
2,000,000 shares of Mercantile Bankshares common stock. This followed
authorization of 2,000,000 shares in December 1994 and 1,000,000 shares in
December 1993. From December 1993 to year end 1995, 2,420,000 shares of common
stock were repurchased under the programs. The buybacks have supported
management's strategy to enhance shareholder value by returning capital to
shareholders in the form of dividends and repurchase of shares during periods
when capital accumulates at a rate in excess of the rate of growth of earning
assets.
PAGE 20
RECENT COMMON STOCK PRICES
MARKET PRICES*
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High...................................................... 29-1/2 27-3/4 24-1/8 22-3/8 22-1/4 23-1/8 20 7/8 21
Low....................................................... 26-5/8 22-3/8 21-1/8 19-1/2 18-3/8 19-1/2 17 3/4 18-1/4
</TABLE>
[FN]
*The stock of Mercantile Bankshares Corporation is traded on the Nasdaq National
Market under the symbol MRBK. The quotations represent actual transactions.
As of February 29, 1996, there were 8,896 stockholders of record.
[TEXT]
Dividends
For the 19th consecutive year, the annual dividend paid on common stock exceeded
the prior year's level. Effective with the September 1995 dividend, the
quarterly dividend rate was raised from $.20 to $.23 per share. Management will
periodically evaluate the dividend rate in light of Mercantile Bankshares'
capital strength, profitability and conditions prevailing in the economy in
general and the banking industry in particular. The annual dividends paid per
common share were $.86 in 1995, $.74 in 1994, and $.64 in 1993. Total cash
dividends paid were $41,013,000 in 1995, $34,982,000 in 1994 and $30,173,000 in
1993. The chart appearing on page 20 presents dividends paid over the last two
years.
Acquisitions and Commitments
After the close of business on October 31, 1995, the Corporation completed its
affiliation with The Sparks State Bank of Sparks, Maryland in a tax-free
exchange of stock. Shareholders of Sparks received 2 1/3 shares of Mercantile
Bankshares stock for each of the 771,241 shares of the Sparks capital stock and
cash in lieu of any fractional shares. The affiliation was accounted for using
the purchase method of accounting. Further information regarding this
affiliation is presented in Footnote No. 14 to the financial statements.
Commitments for 1996 include plans for approximately $8,000,000 of capital
expenditures, consisting primarily of construction and improvements of new and
existing banking offices of affiliate banks.
Recent FASB Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, was
issued in March 1995. This statement is effective for financial statements for
fiscal years beginning after December 15, 1995. This statement establishes
accounting standards for recognizing the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This pronouncement will not have a material effect on the
financial statements of the Corporation.
In May, 1995, the FASB issued SFAS No. 122, Accounting for Mortgage Servicing
Rights an Amendment of SFAS No. 65. This statement is also effective for
financial statements for fiscal years beginning after December 15, 1995 and
requires mortgage banking enterprises to recognize as separate assets rights to
service mortgage loans whether those rights are acquired or originated. This
statement will not have a material effect on the financial statements of
Mercantile Bankshares.
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, was issued in October 1995. This statement sets forth
alternative standards for recognition of the cost of stock-based employee
compensation and requires that an employer's financial statements include
certain disclosures about stock-based employee compensation arrangements
regardless of the method used to account for them. The Corporation adopted the
cost recognition provisions of this statement in 1995. See Footnote No. 13 to
the financial statements for further information.
PAGE 21
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
(Dollars in thousands, except per share data) 1995 1994
==========================================================================================================================
<S> <C> <C>
ASSETS
Cash and due from banks (6)..................................................................... $ 247,301 $ 257,046
Interest-bearing deposits in other banks........................................................ 100 100
Investment securities held-to-maturity (1),(2).................................................. 20,585 1,273,278
Investment securities available-for-sale (1),(2)................................................ 1,551,669 332,986
Federal funds sold.............................................................................. 26,081
Securities purchased under resale agreements.................................................... 49,982
Loans (3)....................................................................................... 4,301,270 3,938,095
Less: allowance for loan losses (1),(3)......................................................... (91,398) (91,257)
Loans, net.............................................................................. 4,209,872 3,846,838
Bank premises and equipment, net (1),(4)........................................................ 78,363 74,259
Other real estate owned, net (1)................................................................ 2,858 10,165
Excess cost over equity in affiliated banks, net (1)............................................ 30,251 18,862
Other assets.................................................................................... 132,041 124,691
Total................................................................................... $6,349,103 $5,938,225
LIABILITIES
Deposits:
Noninterest-bearing deposits............................................................... $ 983,021 $ 954,228
Interest-bearing deposits.................................................................. 4,186,360 3,811,165
Total deposits.......................................................................... 5,169,381 4,765,393
Short-term borrowings (6)....................................................................... 281,642 356,268
Accrued expenses and other liabilities.......................................................... 78,631 61,177
Long-term debt (7).............................................................................. 25,623 31,470
Total liabilities....................................................................... 5,555,277 5,214,308
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 48,272,451 shares in
1995 and 48,114,014 shares in 1994........................................................... 96,545 96,228
Capital surplus................................................................................. 66,107 22,988
Retained earnings............................................................................... 620,391 606,972
Unrealized gains (losses) on securities, net.................................................... 10,783 (2,271)
Total stockholders' equity.............................................................. 793,826 723,917
Total................................................................................ $6,349,103 $5,938,225
==========================================================================================================================
</TABLE>
See notes to consolidated financial statements
PAGE 22
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(Dollars in thousands, except per share data) 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (1)................................................... $379,888 $315,094 $295,450
Interest and dividends on investment securities:
Taxable interest income....................................................... 81,269 86,432 87,211
Tax-exempt interest income.................................................... 663 696 816
Dividends..................................................................... 467 365 313
Other investment income....................................................... 271 273 465
82,670 87,766 88,805
Other interest income............................................................ 4,717 529 1,688
Total interest income...................................................... 467,275 403,389 385,943
INTEREST EXPENSE
Interest on deposits (5)......................................................... 163,556 126,197 130,098
Interest on short-term borrowings................................................ 15,123 12,111 7,824
Interest on long-term debt....................................................... 1,808 2,125 1,539
Total interest expense..................................................... 180,487 140,433 139,461
NET INTEREST INCOME.............................................................. 286,788 262,956 246,482
Provision for loan losses (1),(3)................................................ 7,988 7,056 12,969
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES.............................. 278,800 255,900 233,513
NONINTEREST INCOME
Trust division services (1)...................................................... 44,273 43,360 41,673
Rental income.................................................................... 8,788 8,491 7,060
Service charges on deposit accounts.............................................. 15,764 15,655 16,367
Other fees....................................................................... 19,975 21,342 19,582
Investment securities gains and (losses) (2),(10)................................ (1,715) (1,399) (195)
Other income..................................................................... 1,069 4,737 1,826
Total noninterest income................................................... 88,154 92,186 86,313
NONINTEREST EXPENSES
Salaries......................................................................... 92,931 86,941 83,249
Employee benefits (12)........................................................... 24,581 23,929 23,188
Occupancy expense of bank premises (1),(4)....................................... 18,354 18,250 16,633
Furniture and equipment expenses (1),(4)......................................... 16,893 13,977 13,180
Communications and supplies...................................................... 9,778 9,182 9,413
FDIC insurance premium expense................................................... 6,346 10,911 10,699
Other expenses................................................................... 32,062 38,010 27,493
Total noninterest expenses................................................. 200,945 201,200 183,855
Income before income taxes.............................................. 166,009 146,886 135,971
Applicable income taxes (1),(10)........................................ 61,577 56,445 52,503
NET INCOME........................................................... $104,432 $ 90,441 $ 83,468
NET INCOME PER SHARE OF COMMON STOCK (9)......................................... $2.19 $1.88 $1.73
</TABLE>
See notes to consolidated financial statements
PAGE 23
STATEMENT OF CONSOLIDATED CASH FLOWS
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(Dollars in thousands) 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans....................................................... $ 377,105 $ 309,072 $ 295,695
Interest and dividends on investment securities.................................. 82,931 89,990 88,335
Other interest income............................................................ 4,672 614 1,712
Noninterest income............................................................... 90,350 94,000 86,023
Interest paid.................................................................... (174,929) (139,535) (140,058)
Noninterest expenses paid........................................................ (189,989) (184,907) (164,706)
Income taxes paid................................................................ (62,168) (56,554) (52,306)
Net cash provided by operating activities.................................. 127,972 112,680 114,695
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities .................................... 3,192
Proceeds from maturities of investment securities held-to-maturity............... 188,948 280,527 315,841
Proceeds from sales of investment securities available-for-sale.................. 78,232 191,151
Proceeds from maturities of investment securities available-for-sale............. 268,819 82,829
Purchases of investment securities held-to-maturity.............................. (40,953) (270,545) (506,369)
Purchases of investment securities available-for-sale............................ (384,740) (141,383)
Net increase in customer loans................................................... (243,034) (225,114) (111,620)
Capital expenditures............................................................. (9,657) (8,566) (9,709)
Proceeds from sales of other real estate owned................................... 10,629 6,548
Net cash used in investing activities...................................... (131,756) (84,553) (308,665)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in noninterest-bearing deposits.......................... 3,710 (6,247) 24,250
Net increase (decrease) in NOW and savings accounts.............................. (184,309) (109,455) 87,000
Net increase (decrease) in certificates of deposit............................... 405,705 143,852 (92,110)
Net increase (decrease) in short-term borrowings................................. (74,626) 64,172 6,527
Proceeds from issuance of long-term debt......................................... 24,000
Repayment of long-term debt...................................................... (5,937) (880) (6,758)
Proceeds from issuance of shares................................................. 4,486 7,087 4,158
Repurchase of common shares...................................................... (45,685) (11,299) (421)
Dividends paid................................................................... (41,013) (34,982) (30,173)
Net cash provided by financing activities.................................. 62,331 52,248 16,473
Net increase (decrease) in cash and cash equivalents (1)......................... 58,547 80,375 (177,497)
Cash and cash equivalents at beginning of year................................... 257,146 176,771 334,716
Adjustment for affiliation (14).................................................. 7,771 19,552
Cash and cash equivalents at end of year......................................... $ 323,464 $ 257,146 $ 176,771
</TABLE>
See notes to consolidated financial statements
PAGE 24
Reconciliation of net income to net cash provided by operating activities
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(Dollars in thousands) 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C>
Net income....................................................................... $104,432 $ 90,441 $ 83,468
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.............................................. 7,912 7,657 7,728
Provision for loan losses.................................................. 7,988 7,056 12,969
Write-down of other real estate owned...................................... 1,401 5,945 468
Investment securities (gains) and losses................................... 1,715 1,399 195
Provision for deferred taxes (benefit)..................................... 672 (1,141) (2,624)
Amortization of excess cost over equity in affiliates...................... 1,276 1,131 1,130
(Increase) in interest receivable.......................................... (2,567) (3,713) (201)
(Increase) decrease in other receivables................................... 481 415 (485)
(Increase) decrease in other assets........................................ (4,195) (6,158) 4,086
Increase (decrease) in interest payable.................................... 5,558 898 (597)
Increase in accrued expenses............................................... 4,562 7,718 5,737
Increase (decrease) in taxes payable....................................... (1,263) 1,032 2,821
Total adjustments....................................................... 23,540 22,239 31,227
Net cash provided by operating activities........................................ $127,972 $112,680 $114,695
</TABLE>
See notes to consolidated financial statements
PAGE 25
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 and 1993
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, 1993 ........................................................ $61,035 $ 56,452 $480,641
Adjustment for affiliation ...................................................... 4,476 (2,272) 17,577
Net income....................................................................... 83,468
Cash dividends paid:
Common stock ($.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 ($.74 per share)................................................. (34,387)
By affiliated bank prior to affiliation....................................... (595)
Issuance of 122,718 shares for dividend
reinvestment and stock purchase plan.......................................... 245 2,093
Issuance of 22,019 shares for employee stock
purchase dividend reinvestment plan........................................... 44 392
Issuance of 301,690 shares for employee stock option plan........................ 604 3,709
Purchase of 567,500 shares under stock repurchase plan........................... (1,135) (10,164)
Change in unrealized gains (losses) on securities................................ (3,330)
BALANCE, DECEMBER 31, 1994 ...................................................... 96,228 22,988 606,972 (2,271)
Net income....................................................................... 104,432
Cash dividends paid:
Common stock ($.86 per share)................................................. (41,013)
Issuance of 123,671 shares for dividend
reinvestment and stock purchase plan.......................................... 247 2,676
Issuance of 30,395 shares under exercise of stock
appreciation rights........................................................... 61 678
Issuance of 24,344 shares for employee stock
purchase dividend reinvestment plan........................................... 49 533
Transfer to capital surplus...................................................... 50,000 (50,000)
Purchase of 1,830,864 shares under stock repurchase plan......................... (3,662) (42,023)
Issuance of 11,578 shares for employee stock option plan......................... 23 219
Issuance of 1,799,313 shares for acquisition
of new affiliate bank (14) ................................................... 3,599 31,036
Change in unrealized gains (losses) on securities................................ 13,054
BALANCE, DECEMBER 31, 1995 (9)................................................... $96,545 $ 66,107 $620,391 $10,783
</TABLE>
See notes to consolidated financial statements
PAGE 26
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 15 to 40 years from the
respective dates of affiliation. Accumulated amortization amounted to
$13,898,000 and $12,622,000 at December 31, 1995 and 1994, 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. Investments are classified as either
"held-to-maturity" or "available-for-sale." Investment securities classified as
"held-to-maturity" 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. Investment securities classified as "available-for-sale"
are acquired to be held for indefinite periods of time and may be sold in
response to changes in interest rates and/or prepayment risk or for liquidity
management purposes. These securities are carried at fair value and 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.
In December 1995, Mercshares classified all of its U.S. Government securities
and certain other investments 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.
Mercshares 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. Implementation of this pronouncement did not have a
material effect on Mercshares' financial statements. Under these standards, a
loan is considered impaired, based upon current information and events, if it is
probable that Mercshares 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. 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. 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. A majority of Mercshares' impaired
loans are measured by reference to the fair value of the collateral. Interest
income on impaired loans is recognized on the cash basis.
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.
PAGE 27
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.
I. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. INVESTMENT SECURITIES
The amortized cost and market values of investment securities at December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
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
U.S. government agencies........ 22,487 1,261 21,226
States and political subdivi-
sions......................... $ 15,233 $ 187 $ 67 $ 15,353 13,581 40 567 13,054
Other bonds, notes
and debentures................. 6 6 3,204 48 3,156
Total bonds.................... $ 15,239 187 67 15,359 1,268,299 138 41,428 1,227,009
Other investments............... 5,346 7 5,353 4,979 698 5,677
Total ....................... $ 20,585 $ 194 $ 67 $ 20,712 $1,273,278 $ 836 $ 41,428 $1,232,686
Securities available-for-sale
U.S. Treasury................... $1,501,255 $12,565 $726 $1,513,094 $ 330,485 $ 5,872$ 324,613
U.S. government agencies........ 22,442 57 175 22,324 5,201 262 4,939
States and political subdivisions 45 45
Other bonds, notes
and debentures................. 9,803 17 87 9,733 9 9
Total bonds.................... 1,533,545 12,639 988 1,545,196 335,695 6,134 329,561
Other investments............... 1,042 5,431 6,473 1,023 $2,402 3,425
Total........................ $1,534,587 $18,070 $988 $1,551,669 $ 336,718 $2,402 $ 6,134 $ 332,986
PAGE 28
The amortized cost and market values of the bond investment portfolio by
contractual maturity at December 31, 1995 and 1994 are shown below:
</TABLE>
<TABLE>
<CAPTION>
1995 1994
Amortized Market Amortized Market
(Dollars in thousands) Cost Value Cost Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities held-to-maturity
Within 1 year.................... $ 1,593 $ 1,592 $ 211,746 $ 209,484
1-5 years........................ 12,465 12,564 1,047,250 1,008,807
5-10 years....................... 1,175 1,197 8,357 7,789
After 10 years................... 6 6 946 929
Total........................... $ 15,239 $ 15,359 $1,268,299 $1,227,009
Securities available-for-sale
Within 1 year.................... $ 685,169 $ 686,245 $ 269,092 $ 265,167
1-5 years........................ 842,515 853,141 65,094 63,048
5-10 years....................... 2,304 2,277 1,500 1,337
After 10 years................... 3,557 3,533 9 9
Total............................ $1,533,545 $1,545,196 $ 335,695 $ 329,561
</TABLE>
At December 31, 1995 and 1994, no single issue of investment securities exceeded
ten percent of stockholders' equity.
At December 31, 1995 and 1994, securities with an amortized cost of
$447,287,000 and $436,512,000, respectively, were pledged as collateral for
certain deposits as required or permitted by law.
In accordance with the terms of a special report issued by the Financial
Accounting Standards Board regarding SFAS No. 115, U.S. treasury securities
formerly classified as held-to-maturity, with an amortized cost of
$1,102,342,000, were reclassified as available for sale. The unrealized gain of
$3,884,000 on these securities, net of taxes, was recognized in a separate
component of shareholders' equity. This action was taken as a result of
Management's determination that there was a need to maintain flexibility in
managing our investment portfolio to meet liquidity needs and to manage interest
rate risk.
The gross realized gains and losses on debt and non-debt securities for 1995,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
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
Available-for-sale.............. $ 910 $261 $1,102
Non-debt securities
Held-to-maturity................ 422 557 76 $287
Available-for-sale.............. $83 466 12 13
Total.......................... $83 $1,798 $273 $1,672 $92 $287
</TABLE>
3. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31, 1995 and 1994 are as follows:
(Dollars in thousands) 1995 1994
- -------------------------------------------------------------------------------
Bank affiliates:
Commercial................................. $1,392,845 $1,311,064
Mortgage................................... 2,053,620 1,804,621
Construction............................... 356,652 311,806
Consumer................................... 478,746 477,694
Total.................................... 4,281,863 3,905,185
Bank-related affiliates:
Commercial................................. 300
Mortgage................................... 12,189 26,185
Construction............................... 6,918 6,725
Total.................................... 19,407 32,910
Total loans............................ $4,301,270 $3,938,095
PAGE 29
At December 31, 1995 and 1994, $21,235,000 and $33,645,000 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, 1993............................................................... $ 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
Allowance of acquired bank........................................................... 2,818 2,818
Provision charged to operating expense............................................... 7,988 7,988
Recoveries........................................................................... 2,180 2,180
Charge-offs.......................................................................... (12,845) (12,845)
BALANCE, DECEMBER 31, 1995............................................................. $ 90,179 $ 1,219 $ 91,398
</TABLE>
Information with respect to impaired loans and the related valuation allowance
(if the measure of the impaired loan is less than the recorded investment) as of
December 31, 1995 is shown below. Refer to Note 1C for an expanded discussion on
impaired loans.
<TABLE>
<CAPTION>
(Dollars in thousands) DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Impaired loans with a valuation allowance.................................................................... $ 4,628
Impaired loans with no valuation allowance................................................................... 13,661
Total impaired loans....................................................................................... $18,289
Allowance for loan losses applicable to impaired loans....................................................... $ 1,907
Allowance for loan losses applicable to other than impaired loans............................................ 89,491
Total allowance for loan losses............................................................................ $91,398
Year-to-date interest income on impaired loans recorded on the cash basis.................................... $ 471
Year-to-date average recorded investment in impaired loans during the period................................. $23,300
Quarter-to-date interest income on impaired loans recorded on the cash basis................................. $ 190
Quarter-to-date average recorded investment in impaired loans during the period.............................. $18,500
</TABLE>
4. BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land...................................................................................... $ 17,017 $ 16,076
Buildings and leasehold improvements...................................................... 92,688 87,395
Equipment................................................................................. 46,400 43,137
156,105 146,608
Accumulated depreciation and amortization................................................. (77,742) (72,349)
Bank premises and equipment, net.......................................................... $ 78,363 $ 74,259
</TABLE>
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.
PAGE 30
Total rental expense for 1995, 1994 and 1993 was:
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
Bank premises........................ $4,114 $4,015 $3,323
Equipment............................ 3,999 4,069 3,885
Total rental expense............... $8,113 $8,084 $7,208
At December 31, 1995, the aggregate minimum rental commitments under
noncancelable operating leases are as follows:
1996-$6,397,000; 1997-$5,648,000; 1998-$4,636,000; 1999-$2,950,000;
2000-$2,159,000; thereafter-$8,665,000.
5. DEPOSITS
Included in time deposits are certificates of deposit issued in denominations of
$100,000 or more which totalled $587,953,000 and $414,292,000 at December 31,
1995 and 1994, respectively. Other time deposits issued in denominations of
$100,000 or more totalled $1,335,000 at December 31, 1995 and 1994.
At December 31, 1995, 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
- -----------------------------------------------------------------------------------------------------------------------------------
Over 3 Over 6
TOTAL 3 months through through Over 12
(Dollars in thousands) DECEMBER 31, 1995 or less 6 months 12 months months
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Time certificates of deposit--
$100,000 or more..................................... $587,953 $284,176 $65,447 $51,615 $186,715
Other time deposits--
$100,000 or more..................................... $ 1,335 $ 1,335
</TABLE>
Interest on deposits for the years ended December 31, 1995, 1994 and 1993
consists of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Savings deposits....................................... $ 64,732 $ 65,488 $ 68,587
Certificates of deposit ($100,000 or more)............. 28,967 14,448 11,418
Other time deposits.................................... 69,857 46,261 50,093
Total interest on deposits........................... $163,556 $126,197 $130,098
</TABLE>
6. SHORT-TERM BORROWINGS
The following table summarizes Mercshares' short-term borrowings and their
weighted average interest rates at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Year-end During year
1995 (Dollars in thousands) Amount Rate Highest Average Rate
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal funds purchased and securities
sold under repurchase agreements...................... $155,090 4.8% $373,370 $188,680 5.4%
Commercial paper....................................... 125,480 5.3 125,480 87,472 5.3
Other short-term borrowings............................ 1,072 5.1 10,337 4,748 6.2
Total................................................ $281,642 5.0% $280,900 5.4%
1994 (Dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------------------
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
Other short-term borrowings............................ 1,603 5.2 2,196 1,192 3.8
Total.............................................. $356,268 5.5% $314,400 3.9%
</TABLE>
Other short-term borrowings include notes payable to the U.S. Treasury and
borrowings from the Federal Home Loan Bank. During 1995 and 1994, 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, 1995 were $41,500,000. These lines of credit are paid for
on a fee basis ranging from .10% to .15% annually.
PAGE 31
7. LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:
(Dollars in thousands) 1995 1994
- ------------------------------------------------------------------------------
3% Unsecured debenture.......................... $ 263 $ 315
6% Mortgage note................................ 1,174 2,052
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
Other........................................... 186 103
Total long-term debt........................ $25,623 $31,470
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 $10,628,000 at December 31, 1995.
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 annual maturities on all long-term debt over the next five years are:
1996-$1,229,000; 1997-$79,000; 1998-$9,082,000; 1999-$7,551,000;
2000-$7,552,000.
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, 1995, include $1,699,736,000 in adjustable rate loan commitments
and $76,214,000 in fixed rate loan commitments. Fixed rate commitments are at
current market rates with $69,328,000 expiring within one year and the remaining
$6,886,000 expiring on various dates through May 2000. Total commitments to
extend credit at December 31, 1994, included $1,450,319,000 in adjustable rate
loan commitments and $85,988,000 in fixed rate loan commitments. Fixed rate
commitments, at December 31, 1994, were 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.
Standby letters of credit are commitments issued to guarantee the performance
of a customer to a third party. Outstanding letters of credit were $111,173,000
at December 31, 1995 and $98,458,000 at December 31,1994.
PAGE 32
9. STOCKHOLDERS' EQUITY
Year-to-date per share amounts are based on the weighted average number of
common shares outstanding during the period or 47,768,479 shares for 1995,
48,165,833 shares for 1994 and 48,138,635 shares for 1993.
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, div-idends, 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 1,033,021 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
655,231 shares. The Company reserves the right to amend, modify, suspend or
terminate the Plan at any time at its discretion.
The Company had an Executive Stock Appreciation Rights Plan which gave 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, 1995, no rights remained under the Plan. Compensation expense
recognized in connection with the Plan was $66,000, $0 and $240,000 in 1995,
1994 and 1993, 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.
Since December 1993, the Board of Directors has approved plans authorizing
the Corporation to purchase up to 5,000,000 shares of its common stock.
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 number of shares
remaining available for purchase under the plans was 2,579,736 shares at
December 31, 1995.
Cash dividends paid to the holding company (Mercantile Bankshares
Corporation) by its consolidated subsidiaries for the years ended 1995, 1994,
and 1993 were $50,291,000, $36,069,000 and $32,411,000, respectively.
The amount of dividends that Mercshares' affiliates could have paid to the
holding company without approval from bank regulators at December 31, 1995 was
$496,727,000.
PAGE 33
10. INCOME TAXES
Applicable income taxes on net income for 1995, 1994 and 1993 consist of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
(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......................... $53,459 $7,955 $61,414 $48,841 $9,239 $58,080 $45,470 $9,734 $55,204
Provision (benefit) related to security
transactions......................... (424) (85) (509) (407) (87) (494) (62) (15) (77)
Deferred (benefit)....................... 486 186 672 (916) (225) (1,141) (2,265) (359) (2,624)
Total.................................. $53,521 $8,056 $61,577 $47,518 $8,927 $56,445 $43,143 $9,360 $52,503
</TABLE>
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses..................................................................... $34,275 $34,598
Accrued employee benefits..................................................................... 9,692 10,056
Accrued other expenses........................................................................ 1,646 201
Write-downs of other real estate owned........................................................ 548 2,180
Net unrealized (gain) loss on available-for-sale securities................................... (6,299) 1,461
Other........................................................................................ 451 475
Total deferred tax assets................................................................... 40,313 48,971
Deferred tax liabilities:
Depreciation.................................................................................. 221 448
Prepaid items................................................................................. 174 177
Other......................................................................................... 19 15
Total deferred tax liabilities.............................................................. 414 640
Net deferred tax assets..................................................................... $39,899 $48,331
</TABLE>
A reconciliation between actual tax expense and taxes computed at the statutory
federal rate of 35% for the three years ended December 31, 1995 follows:
<TABLE>
<CAPTION>
1995 1994 1993
% 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....................... $58,103 35.0% $51,410 35.0% $47,590 35.0%
Increases (decreases) in tax resulting from:
Tax-exempt interest income......................... (2,426) (1.5) (2,073) (1.4) (2,196) (1.6)
State income taxes, net of Federal
income tax benefit............................... 5,233 3.2 5,735 3.9 6,081 4.5
Other, net......................................... 667 .4 1,373 .9 1,028 .7
Actual tax expense............................... $61,577 37.1% $56,445 38.4% $52,503 38.6%
</TABLE>
PAGE 34
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, 1995 and 1994,
loans to executive officers and directors of Mercshares and its principal
affiliates, including loans to their related interests, totalled $77,542,000 and
$57,543,000, respectively. During 1995, loan additions and loan deletions were
$30,463,000 and $10,464,000, 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, 1995, 1994 and 1993 was $2,782,000, $2,585,000 and
$2,289,000, respectively. The following tables set forth the financial status of
the cash balance pension plan at December 31, 1995 and 1994 and the composition
of total net pension expense for 1995, 1994 and 1993.
<TABLE>
<CAPTION>
At December 31,
------------------------
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation:
Vested..................................................................................... $72,426 $53,698
Nonvested.................................................................................. 659 3,472
Total.................................................................................... $73,085 $57,170
Plan assets at fair value.................................................................... $77,799 $59,345
Less: Projected benefit obligation........................................................... (81,914) (63,756)
Plan assets less than projected benefit obligation........................................... (4,115) (4,411)
Plus: Unrecognized net loss.................................................................. 4,163 120
Unrecognized prior service cost........................................................ 1,521 1,738
Less: Unamortized net asset from adoption of FASB Statement No. 87........................... (4,167) (4,862)
Pension expense accrued................................................................ $(2,598) $(7,415)
</TABLE>
PAGE 35
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
(Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total net pension expense:
Service cost............................................................ $ 2,441 $ 2,732 $2,743
Interest cost........................................................... 5,652 5,085 4,526
Actual return on assets................................................. (13,867) (663) (6,256)
Net amortization and deferral........................................... 8,556 (4,569) 1,276
Total................................................................. $ 2,782 $ 2,585 $2,289
Assumptions:
Discount rate........................................................... 7.0% 8.5% 7.3%
Average increase in future compensation levels.......................... 4.5% 5.5% 5.5%
Expected long-term rate of return on assets............................. 8.0% 8.0% 8.0%
</TABLE>
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 1995, 1994 and 1993 was
$3,935,000, $3,586,000 and $3,152,000, respectively.
13. OMNIBUS STOCK PLAN
The Omnibus Stock Plan permits the grant of stock options and other stock
incentives to key employees of Mercshares and its affiliates. The Omnibus Stock
Plan provides for the issuance of up to 1,935,000 shares of Mercshares
authorized but unissued common stock. Options outstanding were granted at market
value and include both stock options which become exercisable cumulatively at
the rate of 25% a year and those which are exercisable immediately on grant. If
certain levels of earnings per share of Mercshares and net operating income of
affiliates are not achieved, all or a portion of those options which become
exercisable at the rate of 25% a year are forfeited and become available for
future grants. All options will terminate ten years from date of grant if not
exercised. A summary of activity under the Omnibus Stock Plan during the year
ending 1995 is as follows:
<TABLE>
<CAPTION>
Options issued
and outstanding
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance, December 31, 1994......................................................................... 0
Granted (at market value/exercise price of $21.875)................................................ 1,043,150
Terminated......................................................................................... (18,000)
Exercised.......................................................................................... (14,140)
Balance, December 31, 1995......................................................................... 1,011,010
Options exercisable at December 31, 1995........................................................... 261,010
Weighted average fair value of options granted..................................................... $4.79
Compensation cost associated with the options granted and expected to vest......................... $2,106,000
</TABLE>
The weighted average fair value of all of the options granted during 1995 is
estimated as of the date of grant using the Black-Scholes option pricing model
and assumes: (a) the grant date of March 14, 1995; (b) the exercise price of
$21.875; (c) dividend yield of 3.5%; (d) weighted average expected term of 4.3
years; (e) weighted average risk-free interest rate of 7.5%; and (f) weighted
average volatility of 22.0%. Weighted averages are used because of varying
assumed expected exercise dates. In accordance with Statement of Financial
Accounting Standards No. 123, Accounting for Stock-based Compensation, adopted
in 1995, compensation cost is determined based on the fair value of each option
and the number of options that are granted and expected to vest.
PAGE 36
14. AFFILIATIONS
In 1995, the Corporation completed its affiliation with The Sparks State Bank,
Sparks, Maryland in a tax-free exchange of stock. Shareholders of Sparks Bank
received 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. The
affiliation was accounted for as a purchase.
The results of operations of Sparks Bank subsequent to the date of
affiliation are included in Mercshares' Statement of Consolidated Income. The
results of operations of Sparks Bank prior to the date of affiliation are not
material to Mercshares' results of operations.
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations:
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------
1995 (Dollars in thousands, except per share data) Dec. 31 Sept. 30 June 30 March 31
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income....................................................... $73,728 $72,153 $71,574 $69,333
Provision for loan losses................................................. 2,890 2,123 1,535 1,440
Net income................................................................ 26,940 27,170 26,114 24,208
Per share of common stock................................................. .56 .58 .55 .50
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
</TABLE>
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, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
Book Fair Book Fair
(Dollars in thousands) Value Value Value Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and short-term investments.................................. $ 247,401 $ 247,401 $ 257,146 $ 257,146
Investment securities............................................ 1,572,254 1,572,381 1,606,264 1,565,672
Loans............................................................ 4,301,270 3,938,095
Less: allowance for loan losses.................................. (91,398) (91,257)
Loans, net................................................. 4,209,872 4,284,567 3,846,838 3,801,030
Total financial assets..................................... $6,029,527 $6,104,349 $5,710,248 $5,623,848
LIABILITIES
Deposits......................................................... $5,169,381 $5,177,324 $4,765,393 $4,706,090
Short-term borrowings............................................ 281,642 281,642 356,268 356,268
Long-term debt................................................... 25,623 26,654 31,470 30,481
Total financial liabilities................................ $5,476,646 $5,485,620 $5,153,131 $5,092,839
</TABLE>
PAGE 37
The following methods and assumptions were used to estimate the fair value
disclosures for financial instruments as of December 31, 1995 and 1994:
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.
PAGE 38
17. MERCANTILE BANKSHARES CORPORATION (PARENT CORPORATION ONLY) FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31,
(Dollars in thousands, except per share data) 1995 1994
===========================================================================================================================
<S> <C> <C>
ASSETS
Cash.......................................................................................... $ 5,265 $ 2,257
Investment in bank affiliates................................................................. 753,172 662,327
Investment in bank-related affiliates......................................................... 22,784 20,584
Interest-bearing deposit with bank affiliate.................................................. 4,000 24,000
Securities purchased under resale agreements with bank affiliate.............................. 115,480 71,310
Loans and advances to bank-related affiliates................................................. 14,000 30,500
Other investments, at cost.................................................................... 525
Excess cost over equity in affiliates......................................................... 30,251 18,862
Other assets.................................................................................. 575 1,449
Total..................................................................................... $945,527 $831,814
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper............................................................................ $125,480 $ 74,310
Accounts payable and other liabilities...................................................... 2,221 4,587
Long-term debt.............................................................................. 24,000 29,000
Total liabilities......................................................................... 151,701 107,897
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 48,272,451 shares in 1995 and 48,114,014 shares in 1994 ........................... 96,545 96,228
Capital surplus............................................................................. 66,107 22,988
Retained earnings........................................................................... 620,391 606,972
Unrealized gains (losses) on securities..................................................... 10,783 (2,271)
Total stockholders' equity................................................................ 793,826 723,917
Total................................................................................... $945,527 $831,814
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
(Dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1995 1994 1993
===============================================================================================================================
<S> <C> <C> <C>
INCOME
Dividends from bank affiliates........................................................ $ 49,810 $35,809 $32,181
Dividends from bank-related affiliates................................................ 481 260 230
Interest-bearing deposit with bank affiliate.......................................... 1,154 942 346
Interest on securities purchased under resale agreements with bank affiliate.......... 4,381 2,705 2,581
Interest on loans to bank-related affiliates.......................................... 894 1,464 1,386
Other income.......................................................................... 2
Total income...................................................................... 56,720 41,180 36,726
EXPENSES
Amortization of excess cost over equity in affiliates................................. 1,276 1,131 1,130
Interest on short-term borrowings..................................................... 4,627 2,940 3,012
Interest on long-term debt............................................................ 1,693 1,958 1,285
Other expenses........................................................................ 2,452 1,965 1,648
Total expenses.................................................................... 10,048 7,994 7,075
Income before income tax benefit and equity in
undistributed net income of affiliates.............................................. 46,672 33,186 29,651
Income tax (benefit).................................................................. (94) 488 (133)
46,766 32,698 29,784
Equity in undistributed net income of:
Bank affiliates..................................................................... 55,816 55,320 51,172
Bank-related affiliates............................................................. 1,850 2,423 2,512
NET INCOME........................................................................ $104,432 $90,441 $83,468
</TABLE>
PAGE 39
17. MERCANTILE BANKSHARES CORPORATION (PARENT CORPORATION ONLY) FINANCIAL
INFORMATION (cont.)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Increase (decrease) in cash and cash equivalents (Dollars in thousands)
For the Years Ended December 31, 1995 1994 1993
==============================================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Dividends from affiliates.................................................................. $ 50,291 $ 36,069 $ 32,411
Interest on securities purchased under resale agreements with bank affiliate............... 4,381 2,705 2,581
Interest on loans to bank-related affiliates............................................... 973 1,459 1,368
Other income............................................................................... 1,513 1,244 (69)
Interest paid.............................................................................. (6,402) (4,898) (3,647)
Other expenses............................................................................. (3,854) (1,998) (1,721)
Income taxes (paid) benefit................................................................ (350) 1,183 692
Net cash provided by operating activities.............................................. 46,552 35,764 31,615
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans to affiliates............................................. 16,500 19,145 (6,395)
Net decrease in other investments.......................................................... 525 375 226
Investment in affiliates................................................................... (350) (453)
Net cash provided by (used in) investing activities.................................... 16,675 19,067 (6,169)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in commercial paper................................................ 51,170 (21,024) (10,903)
Proceeds from issuance of long-term debt................................................... 24,000
Repayment of long-term debt................................................................ (5,000) (5,000)
Proceeds from issuance of shares........................................................... 4,486 7,087 4,158
Repurchase of common shares................................................................ (45,685) (11,299) (421)
Dividends paid............................................................................. (41,013) (34,387) (29,385)
Net cash used in financing activities.................................................. (36,042) (59,623) (17,551)
Net increase (decrease) in cash and cash equivalents....................................... 27,185 (4,792) 7,895
Cash and cash equivalents at beginning of year............................................. 97,567 102,359 94,470
Adjustment for affiliation................................................................. (7) (6)
Cash and cash equivalents at end of year................................................... $124,745 $ 97,567 $102,359
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of net income to net cash provided by operating activities (Dollars in thousands)
For the Years Ended December 31, 1995 1994 1993
=============================================================================================================================
<S> <C> <C> <C>
Net income................................................................................ $104,432 $90,441 $83,468
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of affiliates........................................ (57,666) (57,743) (53,684)
Amortization of excess cost over equity in affiliates................................... 1,276 1,131 1,130
(Increase) decrease in interest receivable.............................................. 79 337 (364)
(Increase) decrease in other receivables................................................ 357 (40) (71)
Increase (decrease) in interest payable................................................. (53) 650
Decrease in accrued expenses............................................................ (1,429) (33) (73)
Increase (decrease) in taxes payable.................................................... (444) 1,671 559
Total adjustments..................................................................... (57,880) (54,677) (51,853)
Net cash provided by operating activities................................................. $ 46,552 $35,764 $31,615
</TABLE>
PAGE 40
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, 1995 and 1994, 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, 1995. 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, 1995 and
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, 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.
/s/ Coopers & Lybrand L.L.P.
Baltimore, Maryland
January 22, 1996
PAGE 41
FIVE YEAR STATISTICAL SUMMARY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(Dollars in thousands) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEET STATISTICS
Average loans:
Commercial (including time & demand) loans........... $1,351,600 $1,235,800 $1,186,600 $1,116,900 $1,086,700
Mortgage and construction loans...................... 2,244,700 2,061,900 1,970,100 1,796,300 1,644,200
Consumer loans....................................... 483,000 467,500 490,300 524,800 575,500
Total loans........................................ 4,079,300 3,765,200 3,647,000 3,438,000 3,306,400
Federal funds sold..................................... 62,700 12,200 37,600 42,400 43,600
Securities purchased under resale agreements........... 20,000 15,700 8,700 162,100
Average securities:
U.S. government obligations.......................... 1,491,900 1,675,900 1,588,700 1,436,500 1,150,700
States and political subdivisions.................... 13,500 14,100 15,600 7,300 11,800
Other investments*................................... 10,300 10,600 7,900 5,800 7,000
Total securities................................... 1,515,700 1,700,600 1,612,200 1,449,600 1,169,500
Total earning assets............................. $5,677,700 $5,478,000 $5,312,500 $4,938,700 $4,681,600
Average deposits:
Noninterest-bearing deposits......................... $ 888,900 $ 890,100 $ 845,500 $ 746,200 $ 678,100
Savings deposits..................................... 2,200,200 2,410,400 2,390,600 2,025,200 1,550,000
Time deposits........................................ 1,777,500 1,392,000 1,389,100 1,528,300 1,848,200
Total deposits..................................... $4,866,600 $4,692,500 $4,625,200 $4,299,700 $4,076,300
Average borrowed funds:
Short-term borrowings................................ $ 280,900 $ 314,400 $ 286,100 $ 308,600 $ 321,300
Long-term debt....................................... 27,900 31,900 22,000 15,500 16,900
Total borrowed funds............................... $ 308,800 $ 346,300 $ 308,100 $ 324,100 $ 338,200
AVERAGE RATES**
Loans:
Commercial (including time & demand) loans........... 9.7% 8.3% 7.6% 7.8% 9.7%
Mortgage and construction loans...................... 9.2 8.5 8.4 9.0 10.2
Consumer loans....................................... 9.6 8.7 8.7 9.5 11.0
Total loans........................................ 9.4 8.4 8.2 8.7 10.2
Federal funds sold..................................... 5.7 3.9 2.9 3.6 5.9
Securities purchased under resale agreements........... 5.6 3.2 3.9 6.0
Securities:
U.S. government obligations.......................... 5.4 5.2 5.5 6.6 7.7
States and political subdivisions.................... 7.7 7.8 8.3 10.2 10.9
Other investments*................................... 8.0 7.2 12.3 9.2 9.1
Total securities................................... 5.5 5.2 5.5 6.6 7.8
Composite rate earned............................ 8.3% 7.5% 7.3% 8.1% 9.4%
Deposits:
Savings deposits..................................... 2.9% 2.7% 2.9% 3.6% 5.1%
Time deposits........................................ 5.6 4.4 4.4 5.4 7.0
Total interest-bearing deposits.................... 4.1 3.3 3.4 4.4 6.2
Borrowed funds:
Short-term borrowings................................ 5.4 3.9 2.7 3.3 5.4
Long-term debt....................................... 6.5 6.7 7.0 7.8 7.7
Total borrowed funds............................... 5.5 4.2 3.0 3.5 5.5
Composite rate paid.............................. 4.2% 3.4% 3.4% 4.3% 6.1%
</TABLE>
[FN]
*Includes interest-bearing deposits in other banks.
**Presented on a tax equivalent basis.
PAGE 42
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RETURN ON EQUITY AND ASSETS
Average total assets................................... $6,000,400 $5,801,600 $5,638,600 $5,251,000 $4,992,500
Average stockholders' equity........................... $ 753,500 $ 704,400 $ 651,100 $ 573,700 $ 520,800
Return on average total assets......................... 1.7% 1.6% 1.5% 1.5% 1.4%
Return on average stockholders' equity................. 13.9% 12.8% 12.8% 13.3% 13.5%
Average stockholders' equity as a percentage
of average total assets.............................. 12.6% 12.1% 11.5% 10.9% 10.4%
Dividends paid per share as a percentage
of net income per share.............................. 39.3% 39.4% 37.0% 34.7% 36.8%
SOURCES OF INCOME
Commercial (including time & demand) loans............. 23.3% 20.4% 18.6% 17.2% 20.3%
Mortgage and construction loans........................ 36.7 35.0 34.8 32.0 32.4
Consumer loans......................................... 8.3 8.1 9.1 10.0 12.4
Federal funds sold..................................... .7 .1 .2 .3 .5
Securities purchased under resale agreements........... .2 .1 .1 1.9
Securities............................................. 14.9 17.8 18.9 19.1 17.6
Total interest income.............................. 84.1 81.4 81.7 78.7 85.1
Trust division services................................ 8.0 8.7 8.8 8.0 6.9
Other income........................................... 7.9 9.9 9.5 13.3 8.0
Total income....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
NET INTEREST INCOME
(Taxable Equivalent)
Interest earned:
Loans................................................ $ 383,523 $ 318,132 $ 298,612 $ 300,445 $ 338,471
Federal funds sold................................... 3,587 479 1,107 1,530 2,588
Securities purchased under resale agreements......... 1,126 499 343 9,731
Taxable securities................................... 82,094 87,200 88,185 95,398 89,359
Tax-exempt securities................................ 1,046 1,099 1,289 748 1,285
Total interest income.............................. 471,376 406,910 389,692 398,464 441,434
Interest paid:
Savings deposits..................................... 64,732 65,488 68,587 72,866 78,848
Time deposits........................................ 98,824 60,709 61,511 81,884 130,180
Total interest-bearing deposits.................... 163,556 126,197 130,098 154,750 209,028
Short-term borrowings................................ 15,123 12,111 7,824 10,150 17,236
Long-term debt....................................... 1,808 2,125 1,539 1,207 1,298
Total interest expense............................. 180,487 140,433 139,461 166,107 227,562
Net interest income.............................. $ 290,889 $ 266,477 $ 250,231 $ 232,357 $ 213,872
</TABLE>
PAGE 43
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(Dollars in thousands, except per share data) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME.................................... $ 286,788 $ 262,956 $ 246,482 $ 228,540 $ 208,609
NET INCOME............................................. $ 104,432 $ 90,441 $ 83,468 $ 76,298 $ 70,562
NET INCOME PER SHARE OF COMMON STOCK................... $2.19 $1.88 $1.73 $1.67 $1.56
TOTAL ASSETS........................................... $6,349,103 $5,938,225 $5,789,620 $5,459,577 $5,216,802
LONG-TERM DEBT......................................... $ 25,623 $ 31,470 $ 32,350 $ 15,108 $ 16,609
PROVISION FOR LOAN LOSSES.............................. $ 7,988 $ 7,056 $ 12,969 $ 45,346 $ 20,850
PER SHARE CASH DIVIDENDS
Common................................................. $.86 $.74 $.64 $.58 $.57 1/3
CASH DIVIDENDS DECLARED AND PAID
On common stock........................................ $ 41,013 $ 34,982 $ 30,173 $ 26,454 $ 25,936
YEAR END LOAN DATA
Commercial, financial and agricultural................. $1,393,145 $1,311,064 $1,240,951 $1,126,191 $1,100,212
Real estate-construction............................... 363,570 318,531 318,401 317,074 330,276
Real estate-mortgage:
Commercial........................................... 965,640 832,290 728,290 613,903 542,582
1-4 family residential............................... 969,235 866,004 831,236 814,037 745,636
Home equity lines.................................... 130,934 132,512 135,917 121,049 118,400
Consumer............................................... 478,746 477,694 466,552 497,220 537,831
Total loans........................................ 4,301,270 3,938,095 3,721,347 3,489,474 3,374,937
Less:
Allowance for loan losses............................ (91,398) (91,257) (92,567) (88,261) (65,932)
Loans, net......................................... $4,209,872 $3,846,838 $3,628,780 $3,401,213 $3,309,005
</TABLE>
PAGE 44
FIVE YEAR SUMMARY OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months
Ended
For the Years Ended December 31, December 31,
------------------------------------------------------ ----------------------
(Dollars in thousands) 1995 1994 1993 1992 1991 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................... $379,888 $315,094 $295,450 $297,006 $333,767 $ 97,751 $ 85,740
Interest and dividends on securities.......... 82,670 87,766 88,805 95,695 89,929 21,674 21,593
Other interest income......................... 4,717 529 1,688 1,946 12,475 2,439 28
Total interest income..................... 467,275 403,389 385,943 394,647 436,171 121,864 107,361
INTEREST EXPENSE
Interest on deposits.......................... 163,556 126,197 130,098 154,750 209,028 44,216 33,875
Interest on short-term borrowings............. 15,123 12,111 7,824 10,150 17,236 3,512 3,846
Interest on long-term debt.................... 1,808 2,125 1,539 1,207 1,298 408 526
Total interest expense.................... 180,487 140,433 139,461 166,107 227,562 48,136 38,247
NET INTEREST INCOME........................... 286,788 262,956 246,482 228,540 208,609 73,728 69,114
Provision for loan losses..................... 7,988 7,056 12,969 45,346 20,850 2,890 2,471
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.................. 278,800 255,900 233,513 183,194 187,759 70,838 66,643
NONINTEREST INCOME
Trust division services....................... 44,273 43,360 41,673 39,903 35,353 11,672 10,759
Service charges on deposit accounts........... 15,764 15,655 16,367 15,140 13,233 4,006 3,951
Other income.................................. 28,117 33,171 28,273 51,945 27,679 7,253 7,437
Total noninterest income.................. 88,154 92,186 86,313 106,988 76,265 22,931 22,147
NONINTEREST EXPENSES
Salaries and employee benefits................ 117,512 110,870 106,437 95,086 87,699 29,108 27,518
Occupancy and equipment expenses.............. 35,247 32,227 29,813 27,089 26,153 10,238 8,303
FDIC insurance premium expense................ 6,346 10,911 10,699 9,883 9,034 603 2,725
Other expenses................................ 41,840 47,192 36,906 35,348 29,542 12,211 13,107
Total noninterest expenses................ 200,945 201,200 183,855 167,406 152,428 52,160 51,653
Income before income taxes.................... 166,009 146,886 135,971 122,776 111,596 41,609 37,137
Applicable income taxes....................... 61,577 56,445 52,503 46,478 41,034 14,669 14,278
NET INCOME.................................... $104,432 $ 90,441 $ 83,468 $ 76,298 $ 70,562 $ 26,940 $ 22,859
</TABLE>
PAGE 45
PRINCIPAL AFFILIATES
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<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 Robert E. Henel, Jr. Bennett Crain, Jr. Cash and due Total deposits $236,220
TRUST COMPANY President and Ralph W. Crosby from banks $ 16,486
Chief Executive Officer Francis E. Gardiner, Jr. Short-term borrowings 10,180
Main Street and Carolyn D. O'Leary Robert E. Henel, Jr. Earning assets 257,335
Church Circle Executive Vice President John K. Hopkins Other liabilities and
Annapolis, Ernest R. Amadio John R. Moses Allowance for accrued expenses 1,667
Maryland 21401 Senior Vice President James O. Olfson loan losses (2,795)
410/268-3366 William A. Busik John W. Renard Long-term debt --
Senior Vice President Patricia A. Roche, Ph.D. Other assets 5,821
11 Offices Randall M. Robey Carl A. TenHoopen, Jr. Stockholders' equity 28,780
Senior Vice President and Thomas O. Tilghman, Jr.
Chief Financial Officer Total assets $276,847 Total liabilities
Lyndall R. Ward and equity $276,847
Senior Vice President
Pamela A. Bowen Net income $ 4,398
Vice President and
Corporate Secretary
- -----------------------------------------------------------------------------------------------------------------------------------
[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 $194,555
D. Brent Hurley David C. Doane from banks $ 7,237
One West Senior Vice President D. Brent Hurley Short-term borrowings 790
Church Street B. Philip Lynch, Jr. Richard I. Lewis Earning assets 223,658
Selbyville, Vice President and Cashier Jay C. Murray Other liabilities and
Delaware 19975 Janet L. McCabe William O. Murray Allowance for accrued expenses 2,491
302/436-8236 Vice President P. Coleman Townsend,Jr. loan losses (2,935)
and Secretary Long-term debt --
5 Offices Kenneth R. Graham Other assets 7,053
Vice President Stockholders' equity 37,177
Total assets $235,013 Total liabilities
and equity $235,013
Net income $ 4,631
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Wesley E. Hughes, Jr. Warren E. Barley ASSETS LIABILITIES AND EQUITY
BANK OF President and Kenneth O. Dixon ----------------------- ------------------------------
SOUTHERN Chief Executive Officer Wesley E. Hughes, Jr. Cash and due Total deposits $142,180
MARYLAND James E. Shook Evelyn Susan Hungerford from banks $ 6,265
Senior Vice President Edward L. Sanders, Jr. Short-term borrowings --
304 Charles James F. DiMisa Robert J. Schick Earning assets 157,603
Street Vice President and John L. Sprague Other liabilities and
LaPlata, Cashier J. Blacklock Wills, Jr. Allowance for accrued expenses 1,072
Maryland 20646 J. Wayne Welsh loan losses (2,012)
301/934-1000 Vice President Long-term debt --
Diane M. Kestler Other assets 4,327
6 Offices Controller Stockholders' equity 22,931
Total assets $166,183 Total liabilities
and equity $166,183
Net income $ 2,754
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Harold J. Kahl Gordon F. Bowen ASSETS LIABILITIES AND EQUITY
CALVERT BANK AND Chairman, President and Mary E. Eisenman ---------------------- ------------------------------
TRUST COMPANY Chief Executive Officer Bedford C. Glascock Cash and due Total deposits $127,012
Harry B. Zinn Allen S. Handen from banks $ 5,860
Calvert Village Executive Vice President Harold J. Kahl Short-term borrowings --
Shopping Center Kevin R. Baer Larry D. Kelley Earning assets 136,227
P.O. Box 590 Vice President Maurice T. Lusby, III Other liabilities and
Prince Frederick James B. Buie John D. Murray Allowance for accrued expenses 857
Maryland 20678 Vice President John A. Simpson, Jr. loan losses (1,692)
410/535-3535 Leonard J. Clements Guffrie M. Smith, Jr. Long-term debt --
Vice President W. David Sneade Other assets 2,535
5 Offices Patricia A. Diedrich Stockholders' equity 15,061
Vice President
R. Linda Hipsley Total assets $142,930 Total liabilities
Vice President and Treasurer and equity $142,930
Judith T. McManus
Vice President and Net income $ 2,880
Assistant Corporate
Secretary
Kimberley L. Wilson
Vice President and
Controller
Janice M. Lomax
Corporate Secretary
</TABLE>
PAGE 46
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[LOGO] R. Raymond Tarrach Edward S. Gillespie ASSETS LIABILITIES AND EQUITY
THE CHESTERTOWN President and George H. Godfrey ---------------------- ------------------------------
BANK OF MARYLAND Chief Executive Officer C. David Haacke Cash and due Total deposits $136,453
Larry L. Rash Clarence A. Hawkins from banks $ 8,972
211 High Street Senior Vice President Franklin T. Hogans Short-term borrowings 4,440
Chestertown, and Senior Loan Officer William M. Knight Earning assets 155,021
Maryland 21620 Sharon A. Usilton Charles A. Schelts Other liabilities and
410/778-2400 Vice President and R. Raymond Tarrach Allowance for accrued expenses 1,546
Senior Administrative loan losses (1,709)
8 Offices Officer Long-term debt --
Other assets 4,782
Stockholders' equity 24,627
Total assets $167,066 Total liabilities
and equity $167,066
Net income $ 3,260
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Peter W. Floeckher, Jr. William H. Carter, Jr. ASSETS LIABILITIES AND EQUITY
THE CITIZENS President and Charles E. Castle, Jr.
NATIONAL BANK Chief Executive Officer Peter W. Floeckher, Jr. Cash and due Total deposits $415,741
Charles M. Heishman Martin L. Goozman from banks $ 21,061
Fourth and Executive Vice President Thomas E. Lynch Short-term borrowings 20,040
Main Streets and Cashier Fred L. McKee Earning assets 471,993
Laurel, Hugh W. Mohler Other liabilities and
Maryland 20707 F. Allen Mothershead Allowance for accrued expenses 3,633
301/725-3100 Michele K. Ryan loan losses (6,318)
301/953-3044 Long-term debt --
410/792-7626 Other assets 14,531
Stockholders' equity 61,853
17 Offices
Total assets $501,267 Total liabilities
and equity $501,267
Net income $ 7,591
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] S. Dell Foxx Thomas F. Bradlee ASSETS LIABILITIES AND EQUITY
COUNTY BANKING President and Charles J. Foley, Jr., M.D.----------------------- ------------------------------
& TRUST Chief Executive Officer S. Dell Foxx Cash and due Total deposits $238,560
COMPANY Raymond A. Hamm, Jr. Samuel M. Gawthrop, Jr. from banks $ 12,674
Executive Vice President Harry E. Hammond Short-term borrowings 1,340
123 North Street Ralph R. Lanphar Earning assets 251,477
P.O. Box 100 Howard D. McFadden Other liabilities and
Elkton, G. Eugene Mackie Allowance for accrued expenses 1,606
Maryland 21921 F. Grove Miller loan losses (3,171)
410/398-2600 Long-term debt --
Other assets 8,602
9 Offices Stockholders' equity 28,076
Total assets $269,582 Total liabilities
and equity $269,582
Net income $ 3,663
- -----------------------------------------------------------------------------------------------------------------------------------
[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 $20,781
Charles W. Dickinson, IV Russell Kellam from banks $ 658
16485 Lankford Vice President and Katherine T. Mears Short-term borrowings 100
Highway Secretary J. Thomas Savage Earning assets 26,532
P.O. Box 7 Fay S. Webb Robert L. Simpson Other liabilities and
Eastville, Assistant Cashier C. A.Turner, III Allowance for accrued expenses 95
Virginia 23347 loan losses (513)
804/678-5187 Long-term debt --
Other assets 649
1 Office Stockholders' equity 6,350
Total assets $27,326 Total liabilities
and equity $27,326
Net income $ 588
</TABLE>
PAGE 47
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[LOGO] George N. McMath Jeffery L. Davis ASSETS LIABILITIES AND EQUITY
FARMERS & Chairman of the Board L. Franklin Davis ----------------------- ------------------------------
MERCHANTS BANK-- H. B. Rew, Jr. M. Carter Davis, Jr. Cash and due Total deposits $111,840
EASTERN SHORE President and John H. Duer, III from banks $ 4,162
Chief Executive Officer Donald Joseph Leonard Short-term borrowings --
25275 Lankford Gene H. Crockett W. Revell Lewis, III Earning assets 130,161
Highway Executive Vice President Thomas J. Mapp, Jr. Other liabilities and
P.O. Box 623 Ted D. Duer Norman James Marshall Allowance for accrued expenses 840
Onley, Senior Vice President, George N. McMath loan losses (1,840)
Virginia 23418 Cashier and Secretary H. B. Rew, Jr. Long-term debt --
804/787-4111 Elizabeth A. Kerns Thomas N. Richardson Other assets 3,716
804/824-3052 Vice President and Ralph L. Selby, Jr. Stockholders' equity 23,519
Assistant Secretary Richard W. Young
4 Offices Total assets $136,199 Total liabilities
and equity $136,199
Net income $ 2,772
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Robert L. Cunningham Francis X. Cosgrove ASSETS LIABILITIES AND EQUITY
THE FIDELITY BANK Chairman of the Board C. Joseph Cunningham, III ---------------------- ------------------------------
C. Joseph Cunningham, III Robert L. Cunningham Cash and due Total deposits $36,777
59 East Main President and James P. Kreiling from banks $ 2,749
Street Chief Executive Officer Hugh A. McMullen Short-term borrowings --
Frostburg, James P. Kreiling James A. Poland Earning assets 38,062
Maryland 21532 Senior Vice President Matthew Skidmore, Sr. Other liabilities and
301/689-1111 F. Emmett Smith Allowance for accrued expenses 169
Karen O. Sullivan loan losses (363)
3 Offices Long-term debt --
Other assets 993
Stockholders' equity 4,495
Total assets $41,441 Total liabilities
and equity $41,441
Net income $ 308
- -----------------------------------------------------------------------------------------------------------------------------------
[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 $217,153
OF ST. MARY'S President and Walter R. Blair, Jr. from banks $ 6,155
Chief Executive Officer Elmer Brown Short-term borrowings 1,073
5 East Park George A. Ferguson Edward S. Burroughs Earning assets 244,721
Avenue Vice President, Cashier, John A. Candela Other liabilities and
P.O. Box 655 Senior Operations Officer Ford L. Dean Allowance for accrued expenses 1,364
Leonardtown, and Secretary to the Board Frances P. Eagan loan losses (2,664)
Maryland 20650 Dan Kubican George A. Ferguson Long-term debt --
301/475-8081 Vice President and Joseph M. Gough, Jr. Other assets 6,330
Senior Loan Officer Joseph F. Mitchell Stockholders' equity 34,952
7 Offices Genevieve M. Hunt Edmund W. Wettengel
Vice President and Total assets $254,542 Total liabilities
Controller and equity $254,542
Net income $ 6,159
- -----------------------------------------------------------------------------------------------------------------------------------
[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 $201,198
Russell R. Cullum Ann K. Edie from banks $ 9,664
130 South Bond Executive Vice President Henry S. Holloway Short-term borrowings 13,018
Street Michael F. Allen Richard E. Kinard Earning assets 224,707
Bel Air, Senior Vice President Ralph L. Klein Other liabilities and
Maryland 21014 Donald E. Kerr, Jr. C. Ray Mann Allowance for accrued expenses 1,423
410/838-6131 Senior Vice President Paul E. Peak loan losses (2,736)
Baltimore: Barbara Lee Rudolph Long-term debt --
410/879-1475 R. Edward Schueler, Jr. Other assets 7,054
F. D. Whiteford Stockholders' equity 23,050
7 Offices
Total assets $238,689 Total liabilities
and equity $238,689
Net income $ 3,337
</TABLE>
PAGE 48
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[LOGO] J. Brian Gaeng W. Bert Anderson ASSETS LIABILITIES AND EQUITY
FREDERICKTOWN President and Marvin E. Ausherman ----------------------- ------------------------------
BANK & Chief Executive Officer George W. Bruchey Cash and due Total deposits $168,836
TRUST COMPANY Robert M. Eslinger David P. Chapin from banks $ 3,991
Senior Vice President Caleb C. Ewing, Jr. Short-term borrowings 4,159
30 North Market Elizabeth M. Grossnickle J. Brian Gaeng Earning assets 193,131
Street Vice President and Robert E. Gearinger Other liabilities and
Frederick, Treasurer Richard L. Kessler Allowance for accrued expenses 1,718
Maryland 21701 Christopher T. Kline loan losses (3,707)
301/662-8231 David C. Meadows Long-term debt --
Peter H. Plamondon Other assets 6,361
7 Offices Klare S. Sunderland Stockholders' equity 25,063
Total assets $199,776 Total liabilities
and equity $199,776
Net income $ 2,794
- -----------------------------------------------------------------------------------------------------------------------------------
[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 $1,781,067
TRUST COMPANY Edward K. Dunn, Jr. James A. Block, M.D. from banks $ 154,478
President and George L. Bunting, Jr. Short-term borrowings 238,223
2 Hopkins Plaza Chief Operating Officer Edward K. Dunn, Jr. Earning assets 2,133,265
Baltimore, Brian B. Topping Martin L. Grass Other liabilities and
Maryland 21201 Vice Chairman of B. Larry Jenkins Allowance for accrued expenses 44,442
410/237-5900 the Board Robert D. Kunisch loan losses (35,861)
Kenneth A. Bourne, Jr. William J. McCarthy Long-term debt --
18 Offices Executive Vice President Morris W. Offit Other assets 80,096
Hugh W. Mohler Christian H. Poindexter Stockholders' equity 268,246
Executive Vice President William C. Richardson
J. Marshall Reid Bishop L. Robinson Total assets $2,331,978 Total liabilities
Executive Vice President Donald J. Shepard and equity $2,331,978
Jack E. Steil Brian B. Topping
Executive Vice President Calman J. Zamoiski, Jr. Net income $ 42,136
David C. Tait
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 $212,637
FREDERICKSBURG President and Lewis W. Graves from banks $ 11,258
Chief Executive Officer John A. Jamison Short-term borrowings --
2403 Fall Hill William E. Milby Charles T. Lewis Earning assets 218,661
Avenue Executive Vice President Charles A. McCormack Other liabilities and
Fredericksburg, and Cashier William E. Milby Allowance for accrued expenses 1,530
Virginia 22401 Lloyd B. Harrison J. William Poole loan losses (2,526)
540/899-3200 Senior Vice President Frank C. Silvey Long-term debt --
William B. Young Other assets 9,894
8 Offices Stockholders' equity 23,120
Total assets $237,287 Total liabilities
and equity $237,287
Net income $ 3,108
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Jeffrey F. Turner Charles A. Bruce, Jr. ASSETS LIABILITIES AND EQUITY
PENINSULA President and Frank B. Hanna, Sr. ----------------------- ------------------------------
BANK Chief Executive Officer Henry H. Hanna, III Cash and due Total deposits $316,222
William T. Sturgis Charles R. Jenkins, Sr. from banks $ 12,881
11738 Somerset Executive Vice President, John R. Lerch Short-term borrowings 16,855
Avenue Senior Loan Officer and George A. Purnell Earning assets 359,990
P.O. Box 219 Acting Secretary E. Scott Tawes Other liabilities and
Princess Anne, Deborah S.Abbott Casey I. Todd Allowance for accrued expenses 4,317
Maryland 21853 Vice President and Jeffrey F. Turner loan losses (6,242)
410/651-2400 Regional Officer Robert B. Twilley, Jr. Long-term debt 101
John J. Simson Other assets 13,039
16 Offices Vice President and Stockholders' equity 42,173
Regional Officer
W. Thomas Mears Total assets $379,668 Total liabilities
Vice President and and equity $379,668
Regional Officer
Jerry C. Briele Net income $ 6,170
Vice President and
Treasurer
Jeffrey M. Smith
Vice President,
Business Development
Michael R. Walsh
Vice President,
Operations
</TABLE>
PAGE 49
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[LOGO] Jeffrey N. Heflebower A. Curtis Andrew ASSETS LIABILITIES AND EQUITY
THE PEOPLES President and Richard A. Edwards ---------------------- ------------------------------
BANK OF Chief Executive Officer Jeffrey N. Heflebower Cash and due Total deposits $69,222
MARYLAND Calvert C. Merriken, Jr. from banks $ 2,445
E. John Mills Short-term borrowings 2,370
205 Market Street Joseph D. Quinn Earning assets 76,438
Denton, Harry H. Rieck, Jr. Other liabilities and
Maryland 21629 A. Orrell Saulsbury, III Allowance for accrued expenses 533
410/479-2600 loan losses (853)
Long-term debt --
5 Offices Other assets 3,112
Stockholders' equity 9,017
Total assets $81,142 Total liabilities
and equity $81,142
Net income $ 1,174
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] James J. Cromwell Joseph L. Alfandre ASSETS LIABILITIES AND EQUITY
POTOMAC Chairman of the Board Kenneth A. Bourne, Jr. ----------------------- ------------------------------
VALLEY BANK Kenneth C. Cook Stephen E. Chase Cash and due Total deposits $151,900
President and Kenneth C. Cook from banks $ 9,799
702 Russell Avenue Chief Executive Officer James J. Cromwell Short-term borrowings 10,365
Gaithersburg, Francis R. Massicotte Bruce Mackey Earning assets 168,382
Maryland 20877 Senior Vice President and Edward J. Miller Other liabilities and
301/963-7600 Corporate Secretary William C. Moyer Allowance for accrued expenses 847
William W. West Rex L. Sturm loan losses (2,380)
6 Offices Senior Vice President and Long-term debt --
Chief Lending Officer Other assets 3,028
Arrel E. Godfrey Stockholders' equity 15,717
Senior Vice President
Total assets $178,829 Total liabilities
and equity $178,829
Net income $ 2,225
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] William W. Duncan, Jr. William W. Duncan, Jr. ASSETS LIABILITIES AND EQUITY
ST. MICHAELS President and Pamela P. Gardner ----------------------- ------------------------------
BANK Chief Executive Officer Norman M. Shannahan, III Cash and due Total deposits $ 99,811
R. Ivan Thamert R. Ivan Thamert from banks $ 5,310
213 Talbot Street Executive Vice President John R. Valliant Short-term borrowings 1,280
P.O. Box 70 Clifford L. Hilk Robert B. Vojvoda Earning assets 107,757
St. Michaels, Senior Vice President and David N. Weise Other liabilities and
Maryland 21663 Senior Loan Officer Donald R. Young Allowance for accrued expenses 830
410/745-5091 Anita N. Parrott loan losses (4,360)
Senior Vice President and Long-term debt --
5 Offices Chief Financial Officer Other assets 3,835
Stockholders' equity 10,621
Total assets $112,542 Total liabilities
and equity $112,542
Net income $ 1,605
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Charles E. Ensor, Sr. Linda I. Alexander ASSETS LIABILITIES AND EQUITY
THE SPARKS Chairman of the Board Charles E. Ensor, Sr. ----------------------- ------------------------------
STATE BANK Richard F. Price J. David Lawson Cash and due Total deposits $171,910
Vice Chairman Leib McDonald from banks $ 4,087
14804 York Road Bradley G. Moore Bradley G. Moore Short-term borrowings 8,475
Sparks, President and George V. Palmer Earning assets 198,365
Maryland 21152 Chief Executive Officer Richard F. Price Other liabilities and
410/771-4900 Daniel R. Wernecke Robert J. Rigger Allowance for accrued expenses 2,088
Executive Vice President Oscar M. Schapiro loan losses (2,807)
5 Offices Janet M. Miller William L. Tarbert, Sr. Long-term debt 85
Senior Vice President and Other assets 5,410
Corporate Treasurer Stockholders' equity 22,497
Felicia A. Meeks
Senior Vice President Total assets $205,055 Total liabilities
John W. Wright and equity $205,055
Senior Vice President
Amy G. Whiteley Net income* $ 675
Senior Vice President
Donna S. Ensor
Vice President and
Corporate Secretary
*Represents the two months of
earnings since affiliation.
</TABLE>
PAGE 50
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS DIRECTORS BALANCE SHEET (Dollars in thousands) December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<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 $199,378
COMPANY OF President and John E. McGinnis from banks $ 7,827
CARROLL COUNTY Chief Executive Officer G. Thomas Mullinix Short-term borrowings 4,193
Marlin L. Rittase Marlin L. Rittase Earning assets 219,609
71 East Main Executive Vice President Ferdinand A. Ruppel, Jr. Other liabilities and
Street John C. Schaeffer Allowance for accrued expenses 1,145
Westminster, Merhle B. Warfield, Jr. loan losses (2,694)
Maryland 21157 Long-term debt --
410/848-9300 Other assets 5,796
Stockholders' equity 25,822
9 Offices
Total assets $230,538 Total liabilities
and equity $230,538
Net income $ 3,397
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Paul W. Parks H. Furlong Baldwin ASSETS LIABILITIES AND EQUITY
MERCANTILE President and Richard O. Berndt ---------------------- ------------------------------
MORTGAGE Chief Executive Officer Michael S. Cordes Cash and due Total deposits $ --
CORPORATION Michael S. Cordes Edward K. Dunn, Jr. from banks $ 2,199
Executive Vice President William J. McCarthy Short-term borrowings 14,000
20 South Charles and Chief Operating Paul W. Parks Earning assets 19,107
Street, Officer Christian H. Poindexter Other liabilities and
3rd Floor William L. Wilcox, Jr. Calman J. Zamoiski, Jr. Allowance for accrued expenses 2,696
Baltimore, Executive Vice President loan losses (1,219)
Maryland 21201 for Production Long-term debt --
410/347-8940 Kevin J. Michno Other assets 3,758
Senior Vice President Stockholders' equity 7,149
12 Offices for Information Services
John M. Schwanky Total assets $23,845 Total liabilities
Senior Vice President for and equity $23,845
Servicing
Janet M. Chance Net income $ 655
Vice President for Quality
Control and Compliance
Nancy M. Hauprich
Vice President for
Construction
Kevin P. McCarthy
Vice President for
Construction
Sally M. Lynch
Vice President for
Administration
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] Kenneth A. Bourne, Jr. H. Furlong Baldwin ASSETS LIABILITIES AND EQUITY
MBC AGENCY, INC. President Kenneth A. Bourne, Jr. --------------------- ------------------------------
John A. O'Connor, Jr. Edward K. Dunn, Jr. Cash and due Total deposits $ --
2 Hopkins Plaza Secretary William J. McCarthy from banks $ 398
Baltimore, William T. Skinner, Jr. Hugh W. Mohler Short-term borrowings --
Maryland 21201 Vice President and Earning assets 2,609
410/347-8294 Treasurer Other liabilities and
Dennis W. Kreiner Allowance for accrued expenses 1,651
Assistant Secretary loan losses --
Long-term debt --
Other assets 42
Stockholders' equity 1,398
Total assets $3,049 Total liabilities
and equity $3,049
Net income $ 390
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO] David C.Tait H. Furlong Baldwin ASSETS LIABILITIES AND EQUITY
MBC REALTY, INC. President Edward K. Dunn, Jr. ---------------------- ------------------------------
Vernon D. Conway Cash and due Total deposits $ --
2 Hopkins Plaza Senior Vice President from banks $ 1,249
Baltimore, and General Manager Short-term borrowings --
Maryland 21201 John A. O'Connor, Jr. Earning assets --
410/237-5377 Secretary Other liabilities and
Perry H. Souzis Allowance for accrued expenses 2,214
Treasurer loan losses --
Larry D. Smith Long-term debt 1,437
Assistant Treasurer Other assets 16,283
Stockholders' equity 13,881
Total assets $17,532 Total liabilities
and equity $17,532
Net income $ 1,276
</TABLE>
PAGE 51
MERCANTILE BANKSHARES CORPORATION
OFFICERS
H. Furlong Baldwin
Chairman of the Board and Chief Executive Officer
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)Edward K. Dunn, Jr.
President of Mercantile Bankshares Corporation and President
and Chief Operating Officer of Mercantile-Safe Deposit & Trust
Company
*Martin L. Grass
Chairman of the Board and Chief Executive Officer of Rite Aid
Corporation, retail drug sales, and Vice Chairman of the Board
of Super Rite Corporation, food wholesaler and retailer
*B. Larry Jenkins
Chairman of the Board, President and Chief Executive Officer of
Monumental Life Insurance Company, providing individual life
insurance
(dagger)*(delta)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)(delta)Morris W. Offit
Chairman of the Board and Chief Executive Officer of OFFITBANK,
a private bank offering integrated investment services
(dagger)(delta)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 and Chief Executive Officer of W. K. Kellogg
Foundation, a private grant-making foundation
*Bishop L. Robinson
Secretary of the Department of Public Safety and Correctional
Services for the State of Maryland
(dagger)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 Vice
Chairman of the Board of Mercantile-Safe Deposit & Trust
Company
(dagger)(delta)Calman J. Zamoiski, Jr.
Chairman of the Board of Independent Distributors,
Incorporated, general wholesale distributors
(dagger)Member of Executive
Committee
*Member of Audit
Committee
(delta)Member of Compensation
Committee
Listing as of March 1996
PAGE 52
(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, 1996, its principal affiliates
were twenty-one 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 162 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.
In addition to banking services, fixed income annuities will be available
through affiliates.
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, offering various
types of deposit accounts, 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 not-for-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 and employee benefit plans are provided to
not-for-profit institutions. The Trust Division is also investment advisor to
M.S.D.&T. Funds, Inc., which provides a series of 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 24, 1996
2 Hopkins Plaza,
Baltimore, Maryland
ANNUAL REPORT TO SECURITIES & EXCHANGE COMMISSION
Form 10-K will be furnished to shareholders 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.
DIRECT DEPOSIT OF CASH DIVIDENDS
Shareholders of Mercantile Bankshares Corporation common stock may have their
cash dividends deposited automatically, on date of payment, to a checking,
savings or money market account in a financial institution which participates in
an Automated Clearing House. Shareholders will receive confirmation by mail
from the Dividend Disbursing Agent of the amount deposited. Shareholders
who wish to enroll in the direct deposit service should contact the Dividend
Disbursing Agent.
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 DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Mercantile Bankshares Corporation offers its shareholders of common stock a Plan
whereby they may automatically invest their cash dividends in Mercantile stock
at a price which is 5% less than the market price on the dividend payment date.
Plan participants may also make additional cash payments to purchase stock
through the Plan at the market price. Mercantile Bankshares Corporation absorbs
all fees and transaction costs.
Shareholders who wish to enroll in the Plan should contact the Corporation's
Transfer Agent:
The Bank of New York
Mercantile Bankshares Corporation
Dividend Reinvestment and
Stock Purchase Plan
P.O. Box 1958
Newark, New Jersey 07101-9774
800/524-4458
PAGE
(The following information appears on the back cover of the Annual Report
to Shareholders)
Baltimore, Maryland
PAGE
______________________________________________________________________________
APPENDIX A
Chart A-1 located on page 6 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, 1991 to December 31, 1995:
TOTAL ASSETS
(Dollars in millions) December 31
1991 1992 1993 1994 1995
Total Assets........$5,217 $5,460 $5,790 $5,938 $6,349
- ------------------------------------------------------------------------------
Chart A-2 located on page 6 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 1991 to 1995:
NET INCOME
(Dollars in millions)
5 Year Compound Growth Rate: 8.7%
1991 1992 1993 1994 1995
Net Income.......... $70.6 $76.3 $83.5 $90.4 $104.4
- ------------------------------------------------------------------------------
Chart A-3 located on page 6 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 1991 to 1995:
EARNINGS PER SHARE
(In dollars)
5 Year Compound Growth Rate: 7.2%
1991 1992 1993 1994 1995
Earnings per share.......... $1.56 $1.67 $1.73 $1.88 $2.19
- ------------------------------------------------------------------------------
Chart A-4 located on page 7 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a line graph
depicting the changes 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 1991 to 1995:
INTEREST YIELDS AND RATES
(Tax equivalent basis)
1991 1992 1993 1994 1995
Average yield earned on
earning assets..................... 9.4% 8.1% 7.3% 7.5% 8.3%
Average rate paid on
interest-bearing funds............. 6.1% 4.3% 3.4% 3.4% 4.2%
- ------------------------------------------------------------------------------
Chart A-5 located on page 11 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 1991 to 1995:
SOURCES OF INCOME
(Dollars in millions)
1991 1992 1993 1994 1995
Interest and fees on loans......... 65% 59% 63% 63% 68%
Other interest and dividend income. 20% 20% 19% 18% 16%
Trust division..................... 7% 8% 9% 9% 8%
Other income....................... 8% 13% 9% 10% 8%
Total.............................. 100% 100% 100% 100% 100%
Total of all sources of income..... $512.4 $501.6 $472.3 $495.6 $555.4
- ------------------------------------------------------------------------------
Chart A-6 located on page 11 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 1991 to 1995:
USES OF INCOME
(Dollars in millions)
1991 1992 1993 1994 1995
Interest expense................... 44% 33% 29% 28% 33%
Provision for loan losses.......... 4% 9% 3% 2% 1%
Salaries and employee benefits..... 17% 19% 23% 22% 21%
Other expenses..................... 13% 15% 16% 18% 15%
Applicable income taxes............ 8% 9% 11% 12% 11%
Net income......................... 14% 15% 18% 18% 19%
Total.............................. 100% 100% 100% 100% 100%
Total of all uses of income........ $512.4 $501.6 $472.3 $495.6 $555.4
- ------------------------------------------------------------------------------
Chart A-7 located on page 15 of Annual Report to Shareholders.
Presented below is the table of data points used to prepare a bar graph
depicting the composition of average total loans of Mercantile Bankshares
Corporation from 1991 to 1995:
LOAN COMPOSITION AND GROWTH
Average Loans (Dollars in millions)
5 Year Compound Growth Rate: 5.1%
1991 1992 1993 1994 1995
Commercial, financial
and agricultural.......... 33% 33% 33% 33% 33%
Real estate - construction
and mortgage.............. 50% 52% 54% 55% 55%
Consumer................... 17% 15% 13% 12% 12%
Total...................... 100% 100% 100% 100% 100%
Total average loans....... $3,306.4 $3,438.0 $3,647.0 $3,765.2 $4,079.3
- -------------------------------------------------------------------------------
Chart A-8 located on page 18 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 year end 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 1991 to 1995:
ALLOWANCE AS A % OF AVERAGE LOANS;
CHARGE-OFFS (Net of Recoveries)
AS A % OF AVERAGE LOANS
1991 1992 1993 1994 1995
Loan loss allowance as a % of
average loans..................... 1.99% 2.57% 2.54% 2.42% 2.24%
Net charge-offs as a % of
average loans..................... .28% .67% .31% .22% .26%
- ------------------------------------------------------------------------------
Chart A-9 located on page 19 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 1995:
RISK-BASED CAPITAL RATIOS*
1991 1992 1993 1994 1995
Tier two........................... 1.5% 1.4% 1.4% 1.3% 1.3%
Tier one........................... 15.5% 17.0% 18.2% 18.3% 17.9%
(Regulatory tier one minimum is 4%.)
* Tier one and tier two equity as percentages of risk-adjusted total assets
at December 31.
- ------------------------------------------------------------------------------
Exhibit 21
(21) 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
Hopkins Plaza Agency, Inc. Maryland
The National Bank of Fredericksburg United States
Peninsula Bank Maryland
The Peoples Bank of Maryland Maryland
Potomac Valley Bank Maryland
The Sparks State 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 23
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 22, 1996, on our audit
of the consolidated financial statements of Mercantile
Bankshares Corporation and Affiliates as of December 31, 1995,
and 1994 and for each of the three years in the period ended
December 31, 1995, 1994 and 1993, which report is included in
this Form 10-K.
COOPERS & LYBRAND
Baltimore, Maryland
March 28, 1996
Exhibit 24
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 1995, 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 12, 1996
/s/ William J. McCarthy Director /s/ George L. Bunting, Jr. Director
William J. McCarthy George L. Bunting, Jr.
/s/ Richard O. Berndt Director /s/ Morris W. Offit Director
Richard O. Berndt Morris W. Offit
/s/ Thomas M. Bancroft, Jr. Director /s/ William C. Richardson Director
Thomas M. Bancroft,Jr. William C. Richardson
/s/ B. Larry Jenkins Director /s/ Robert D. Kunisch Director
B. Larry Jenkins Robert D. Kunisch
/s/ Bishop L. Robinson Director /s/ Christian H. Poindexter Director
Bishop L. Robinson Christian H. Poindexter
/s/ Donald J. Shepard Director Director
Donald J. Shepard
/s/ Martin L. Grass Director Director
Martin L. Grass
/s/ Calman J. Zamoiski, Jr. Director Director
Calman J. Zamoiski, Jr.
/s/ James A. Block Director Director
James A. Block
/s/ Brian B. Topping Director Director
Brian B. Topping
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1995 AND THE INCOME STATEMENT FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1995. THIS SCHEDULE INCLUDES INFORMATION NORMALLY REQUIRED
TO BE DISCLOSED IN ANNUAL REPORTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 247,301,000
<INT-BEARING-DEPOSITS> 100,000
<FED-FUNDS-SOLD> 76,063,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,551,669,000
<INVESTMENTS-CARRYING> 20,585,000
<INVESTMENTS-MARKET> 20,712,000
<LOANS> 4,301,270,000
<ALLOWANCE> 91,398,000
<TOTAL-ASSETS> 6,349,103,000
<DEPOSITS> 5,169,381,000
<SHORT-TERM> 281,642,000
<LIABILITIES-OTHER> 78,631,000
<LONG-TERM> 25,623,000
0
0
<COMMON> 96,545,000
<OTHER-SE> 697,281,000
<TOTAL-LIABILITIES-AND-EQUITY> 6,349,103,000
<INTEREST-LOAN> 379,888,000
<INTEREST-INVEST> 82,670,000
<INTEREST-OTHER> 4,717,000
<INTEREST-TOTAL> 467,275,000
<INTEREST-DEPOSIT> 163,556,000
<INTEREST-EXPENSE> 180,487,000
<INTEREST-INCOME-NET> 286,788,000
<LOAN-LOSSES> 7,988,000
<SECURITIES-GAINS> (1,715,000)
<EXPENSE-OTHER> 200,945,000
<INCOME-PRETAX> 166,009,000
<INCOME-PRE-EXTRAORDINARY> 166,009,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,432,000
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.1
<LOANS-NON> 21,235,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,417,000
<ALLOWANCE-OPEN> 91,257,000
<CHARGE-OFFS> 12,845,000
<RECOVERIES> 2,180,000
<ALLOWANCE-CLOSE> 91,398,000
<ALLOWANCE-DOMESTIC> 91,398,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
