UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission File Number 0-20516
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MASON-DIXON BANCSHARES, INC.
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(Exact name of Registrant as specified in its charter)
Maryland 52-1764929
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 W. Main Street, Westminster, Maryland 21157
- ------------------------------------------ -------
(Address of principal executive offices) (Zip Code)
(410) 857-3401
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Registrant's telephone number including area code:
<PAGE>
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
----- -----
The number of shares outstanding of the registrant's common stock
on March 31, 1998: Common Stock, $1.00 Par Value --- 5,083,195
<PAGE>
Index
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements: Page:
----
Consolidated Balance Sheet
March 31, 1998 and December 31, 1997 3
Consolidated Income Statement
Three months ended March 31, 1998 and March 31, 1997 4
Consolidated Statement of Cash Flows
Three months ended March 31, 1998 and March 31, 1997 5
Consolidated Statement of Changes in Stockholders' Equity
Three months ended March 31, 1998 and March 31, 1997 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-10
PART II - OTHER INFORMATION
Item 4. - Submission of Matters to a Vote of Security Holders 12
Item 6. - Exhibits and Reports on Form 8K 14
Signatures 14
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
March 31, December 31,
(Dollars in thousands) 1998 1997
- ---------------------- ---- ----
ASSETS
Cash and due from banks $ 17,483 $ 20,245
Interest bearing deposits in other banks 1,234 482
Federal funds sold 33,675 17,236
Investment securities available for
sale (AFS) - at fair value 249,062 249,855
Investment securities held to maturity (HTM)
- at amortized cost 198,264 204,045
(fair value $199,564 and $206,515 respectively)
Loans held for sale 9,459 4,439
Loans (net of unearned income of $952 and $341) 504,611 460,391
Less: Allowance for credit losses (8,461) (5,231)
-------- --------
Loans, net 496,150 455,160
Bank premises and equipment 15,817 15,530
Other real estate owned 470 685
Deferred tax assets 6,286 6,089
Mortgage sub-servicing rights 3,311 3,412
Intangible assets 8,302 2,956
Accrued interest receivable and other assets 13,713 12,046
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Total Assets $1,053,226 $ 992,180
========== =========
<PAGE>
LIABILITIES
Non-interest bearing deposits $ 90,047 $ 89,692
Interest bearing deposits 578,095 561,557
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Total Deposits 668,142 651,249
Short-term borrowings 118,489 97,203
Long-term borrowings 179,011 160,889
Accrued expenses and other liabilities 10,602 7,390
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Total Liabilities 976,244 916,731
STOCKHOLDERS' EQUITY
Common stock - $1.00 par value, authorized:
10,000,000 shares, issued and outstanding;
5,083,195 shares (1998) and 5,077,468 shares (1997) 5,083 5,077
Surplus 36,142 35,948
Retained earnings 33,923 32,275
Accumulated other comprehensive income 1,834 2,149
-------- --------
Total Stockholders' Equity 76,982 75,449
Total Liabilities & Stockholders' Equity $1,053,226 $ 992,180
========== =========
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statement at that date.
See notes to the consolidated financial statements.
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<PAGE>
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED INCOME STATEMENT
Three Months Ending
March 31,
(Dollars in thousands, except per share data) 1998 1997
- --------------------------------------------- ---- ----
Interest Income:
Interest and fees on loans $ 11,959 $ 9,105
Interest on deposits in other banks 15 13
Interest on federal funds sold 284 251
Interest and dividends on investment securities:
Taxable interest on mortgage-backed securities 4,404 4,104
Other taxable interest and dividends 1,844 914
Tax exempt interest and dividends 1,172 1,108
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Total interest income 19,678 15,495
Interest Expense:
Interest on deposits:
Time certificates of deposit of $100,000 or more 424 393
Other deposits 5,768 5,363
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Total interest on deposits 6,192 5,756
Interest on short-term borrowings 1,581 720
Interest on long-term borrowings 2,673 1,284
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Total interest expense 10,446 7,760
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Net interest income 9,232 7,735
Provision for credit losses 317 57
-------- --------
Net interest income after provision for credit losses 8,915 7,678
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Other Operating Income:
Service charges on deposit accounts 537 546
Trust Division income 381 343
Gain on sale of securities 311 221
Gain on sale of mortgage loans 436 291
Other income 763 425
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Total other operating income 2,428 1,826
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Other Operating Expenses:
Salaries and employee benefits 4,905 3,718
Net occupancy expense of bank premises 692 623
Furniture and equipment expenses 483 438
Legal and professional fees 220 259
FDIC insurance expense 20 19
Outside data processing expense 341 260
Amortization of mortgage sub-servicing rights 104 104
Amortization of other intangibles assets 104 123
Other expenses 1,093 861
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<PAGE>
Total other operating expenses 7,962 6,405
-------- --------
Income before income taxes 3,381 3,099
Income tax expense 870 824
-------- --------
Net Income $ 2,511 $ 2,275
======== ========
Per Share Data:
Cash Dividend Paid $ 0.17 $ 0.15
Net Income (Basic) $ 0.49 $ 0.43
Net Income (Diluted) $ 0.49 $ 0.43
Average Shares Outstanding (Basic) 5,079,326 5,307,998
Average Shares Outstanding (Diluted) 5,084,788 5,308,123
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MASON-DIXON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the period ended March 31, 1997 and 1997
For the Period Ended
March 31,
(Dollars in thousands) 1998 1997
- ---------------------- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,511 $ 2,275
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 406 440
Amortization of mortgage sub-servicing rights 104 104
Amortization of intangibles 104 123
Net accretion of purchase accounting adjustments (96) (144)
Provision for credit losses 317 57
Proceeds from sales of investment securities - Trading 20 3,177
Purchases of investment securities - Trading 0 (3,152)
Originations of loans held for sale (16,900) (15,184)
Proceeds from sales of loans held for sale 12,316 14,913
Net gain on sale of assets (782) (512)
Net (increase) decrease in accrued interest
receivable and other (1,225) (723)
Net increase (decrease) in accrued expenses and
other liabilities 965 (1,240)
Other - net (4) 277
------ ------
Net cash provided by operating activities (2,264) 411
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities-HTM 16,322 2,890
Purchases of investment securities - HTM (10,576) (9,907)
Proceeds from maturities of investment securities-AFS 24,652 7,235
Proceeds from sales of investment securities - AFS 26,025 33,695
Purchases of investment securities - AFS (50,145) (49,684)
Net decrease (increase) in loans 585 (12,083)
Capital expenditures (521) (260)
Proceeds from sales of assets 49 0
Acquisitions of subsidiaries, net of cash acquired (14,993) 0
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Net cash used by investing activities (8,602) (28,114)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 16,893 8,864
Net increase (decrease) in short-term borrowings (9,057) 11,022
Proceeds from long-term borrowings 20,000 20,000
Repayments of long-term borrowings (1,878) (12,631)
Issuance of additional shares of common stock 200 182
Repurchase of common stock 0 (97)
Dividends paid (863) (797)
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Net cash provided by financing activities 25,295 26,543
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Net increase (decrease) in cash and cash equivalents 14,429 (1,160)
Cash and cash equivalents at beginning of year 37,963 46,346
------- -------
Cash and cash equivalents at end of period $ 52,392 $ 45,186
======== ========
See notes to the consolidated financial statements.
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<TABLE>
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<CAPTION>
Other
Common Accumulated Retained Comprehensive
(Dollars in thousands) Stock Surplus Earnings Income
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 5,303 $ 40,560 $ 26,331 $ 505
Net income (1st three months 1997) 0 0 2,275 -
Issuance of additional shares of common stock 9 173 0 -
Repurchase of shares of common stock (5) (92) 0 -
Cash dividend @ $.15 per share 0 0 (797) -
Net unrealized losses on available-for-sale
securities (net of tax) 0 0 0 (1,296)
------- ------- ------- -------
Balance at March 31, 1997 5,307 40,641 27,809 (791)
Net income (2nd, 3rd, 4th quarters 1997) 0 0 6,884 -
Issuance of additional shares of common stock 15 378 0 -
Repurchase of shares of common stock (245) (5,071) 0 -
Cash dividend @ $.47 per share 0 0 (2,418) -
Net unrealized gains on available-for-sale
securities (net of tax) 0 0 0 2,940
------- ------- ------- -------
Balance at December 31, 1997 5,077 35,948 32,275 2,149
Net income (1st quarter 1998) 0 0 2,511 -
Issuance of additional shares of common stock 6 194 0 -
Repurchase of shares of common stock 0 0 0 -
Cash dividend @ $.17 per share 0 0 (863) -
Net unrealized gains on available-for-sale
securities (net of tax) 0 0 0 (313)
Less: Reclassification adjustment for losses
realized in net income 0 0 0 (2)
------- ------- -------- --------
Balance at March 31, 1998 $ 5,083 $ 36,142 $ 33,923 $ 1,834
======= ======== ======== ========
</TABLE>
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MASON-DIXON BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The foregoing financial statements are unaudited, however, in the
opinion of Management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. Certain amounts for prior periods have been reclassified to conform to
current period presentation. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's 1997 Annual
Report on Form 10-K.
Note 3. Investment Securities
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
March 31, March 31, March 31, March 31,
(Dollars in thousands) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
agency notes $ 68,569 $ 2,998 $ 33,016 $ 45,147
Obligations of U.S. government agencies 117,399 129,010 13,536 17,507
Obligations of states and political
subdivision 0 0 86,279 81,986
Collateralized mortgage obligations 49,746 35,117 59,004 55,314
Other securities 10,359 6,189 6,429 289
Unrealized gains(losses) 2,989 (1,289) 0 0
-------- -------- -------- --------
Total Investment Securities $ 249,062 $172,025 $198,264 $ 200,243
========= ======== ======== =========
</TABLE>
Note 4. Loans (Net of Unearned Income)
March 31, March 31,
(Dollars in thousands) 1998 1997
- --------------------------------------------------------------------------------
Construction and Land Development $ 36,188 $ 23,365
Residential Real Estate - Mortgages 186,782 173,740
Commercial Real Estate - Mortgages 134,036 113,305
Commercial 87,269 78,352
Consumer 60,336 21,416
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Total Loans $ 504,611 $ 410,178
========= ==========
Note 4. Allowance for Credit Losses
(Dollars in thousands) 1998 1997
- --------------------------------------------------------------------------------
Balance at January 1 $ 5,231 $ 5,167
Provision for the year 317 57
Recoveries on loans 42 122
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Total 5,590 5,346
Less loans charged off 52 98
Allowance of purchased company 2,923 0
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Balance at March 31 $ 8,461 $ 5,248
======== =========
The appropriateness of the allowance for possible credit losses is
determined based on a quarterly detailed review of the loan portfolio,
off-balance sheet commitments, and recent economic projections.
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<PAGE>
MASON-DIXON BANCSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Per Share Amounts
On December 31, 1997, the Company adopted FASB Statement No. 128,
"Earnings Per Share." Statement 128 establishes standards for computing and
presenting earnings per share ("EPS") that simplify the standards previously
followed in Accounting Principals Board Opinion No.15. It replaces the former
presentation of primary EPS with a presentation of basic EPS and, where
applicable, requires the dual presentation of basic and diluted EPS on the face
of the income statement. Basic EPS is generally computed by dividing net income
by the weighted average number of common shares outstanding for the period,
whereas diluted EPS essentially reflects the potential dilution in basic EPS
that could occur if other contracts to issue stock were exercised. Per share
amounts are based on the weighted average number of shares outstanding during
the year.
Note 6. Comprehensive Income
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." Comprehensive
income, as defined by Statement 130, is the change in equity of a business
enterprise during a reporting period from transactions and other events and
circumstances from non-owner sources. In addition to an enterprise's net income,
change in equity components under comprehensive income reporting would also
include such items as the net change in unrealized gain or loss on
available-for-sale securities and foreign currency translation adjustments.
Statement 130 requires disclosure of comprehensive income and its components
with the same prominence as the Company's other financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MASON-DIXON BANCSHARES, INC.
FORWARD LOOKING STATEMENTS
This section of the report may contain forward looking statements
within the meaning of the Private Securities Litigation Act of 1995. Certain
statements are included which may relate to management's beliefs, expectations,
anticipation's and plans concerning, among other things, economic trends,
interest rates, and other matters. Such statements are subject to numerous
uncertainties including the effects of monetary policies, regulatory changes,
levels of inflation, unemployment, consumer confidence and the health of
commercial and residential
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<PAGE>
real estate values in Mason-Dixon's market area. There can be no assurance that
future events will develop in accordance with any forward looking statements
contained herein.
SUMMARY
Mason-Dixon Bancshares, Inc. ("Mason-Dixon") reported net income of
$2.511 million for the first quarter of 1998, an increase of 10% over the $2.275
million reported for the first quarter of 1997. On a per share basis (both basic
and diluted), net income equaled $.49 for the first quarter of 1998 compared to
$.43 for 1997, up 14%.
For the quarter, annualized return on average assets was 1.00% in 1998
compared to 1.08% for 1997, while return on average stockholders' equity
increased to 13.47% compared to 12.67% for the same period for 1997.
Results for the first quarter increased as a result of increases in net
interest income and non- interest income associated with growth in earning
assets and higher fees from mortgage banking operations, trust services and
sales of nondeposit investment products. Revenues were also increased by the
acquisition during the quarter of Rose Shanis Companies, a consumer finance
company with approximately $43 million in loans outstanding.
STATEMENT OF CONDITION
Total assets as of March 31, 1998 were $1.053 billion, up 21% from last
year and up 6% from December 31, 1997. The significant growth from last year was
due to increases in loan outstandings, as well as increased investment
securities which resulted from a leverage strategy engaged in the second quarter
of 1997. On June 6, 1997 Mason-Dixon completed the issuance of $20 million of
Preferred Securities of the Mason-Dixon Capital Trust, a Trust established by
Mason-Dixon for financing purposes. These securities are classified as long-term
borrowings for balance sheet purposes but the proceeds qualify as Tier 1 Capital
of Mason-Dixon for regulatory purposes. A portion of the proceeds (capital) was
used to engage in a leverage strategy which involves increased levels of
investments and borrowings and which earn a positive net interest margin. Loans
outstanding have increased $44 million or 10% since year end while investment
securities declined by $7 million (3%). Of the total growth in loans, $43
million is due to the acquisition of the consumer finance company. Loans have
increased $94 million (23%) from last year, again with outstandings of the
acquired consumer finance subsidiary increasing outstandings $43 million.
Deposits have increased $17 million (3%) from year end, and $39 million or 6%
compared to March 31, 1997 largely due to growth in certificates of deposits.
Borrowing increased $39 million (15%) since year
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<PAGE>
end, with short-term borrowings associated with the acquisition of loans adding
$28 million. Since March 31, 1997, borrowings increased by $140 million, which
includes the preferred securities of $20 million, higher borrowings associated
with the leverage strategy of $60 million, and $28 million assumed in the
acquisition of the consumer finance company. Stockholders' equity increased $1.5
million from year end 1997. Earnings added $2.5 million to stockholders equity,
while cash dividends have reduced equity by $863 thousand. Decreases in
accumulated comprehensive income were $200 thousand since year end.
INCOME STATEMENT - FIRST QUARTER
Net interest income increased by $1.497 million (19%) due to normal
growth in earning assets as well as the acquisition of the consumer finance
company. Additional acquisition related net interest income totaled $1.250
million. The net interest margin on earning assets decreased 8 basis points to
4.11%. Average earning assets increased $166 thousand (21%) while interest
bearing liabilities increased $218 thousand (35%).
Total other operating income increased 33% or $602 thousand. Service
charge income decreased by $9 thousand. Gains on sales of mortgage loans grew by
$145 thousand or 50% due to expansion of the Mortgage Banking Division of
Carroll County Bank and Trust Company (Mason-Dixon Bancshares Mortgage Company)
and higher levels of refinance activity. Trust Division income grew by $38
thousand or 11% due to growth in accounts under management. Securities gains
increased by $90 thousand. The increase in gains resulted due to the liquidation
of certain investment securities sold to raise cash for the purchase of the
consumer finance subsidiary. Other operating income increased by $338 thousand
or 80% which reflect increased revenue from the sales of annuities and mutual
funds, as well as fee income generated from consumer finance activities
($220,000).
Total other operating expenses increased by $1.557 million or 24% due
to the additional expenses of the consumer finance company of $927 thousand and
higher expenses of the Mortgage Banking Division of $217 thousand. Excluding the
additional expenses of the new subsidiary and expansion of mortgage banking,
expenses grew by $413 thousand (6%). All areas of noninterest expense increased
as a result of the acquisition.
CAPITAL ADEQUACY
At the end of the quarter, the Company's capital leverage ratio was
8.01%, down from 8.74% at the end of the year. Tier 1 and Total Risk-based
ratios were 12.83% and 13.78% respectively compared to 14.74% and 15.64% at
December 31, 1997. Regulatory minimums to qualify as "well capitalized" are 5%
for capital leverage, 6% for Tier 1 Risk-based, and 10% for Total Risk-based
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<PAGE>
capital. Decreases in the various capital adequacy ratios were the result of the
acquisition of the consumer finance subsidiary which added approximately $5.4
million of additional goodwill which lowers the amount of qualifying capital. In
April of 1998, Mason-Dixon completed a $20 million offering of Trust Preferred
securities. These instruments were issued to pay off a portion of the short-term
borrowings of the consumer finance company. Of the $20 million issued,
approximately $4 million will be added to Tier 1 capital, and the remaining $16
million will qualify as Tier 2 capital.
MARKET RISK DISCLOSURES - INTEREST RATE SENSITIVITY
At the end of the quarter, Mason-Dixon had an estimated one year
positive gap of $16 million on a consolidated basis, which was less than 2% of
assets. The positive one year gap at the end of the last quarter was $42 million
or 4% of total assets. This position reflects a low level of interest rate risk
and would indicate longer term earnings would decrease somewhat with higher
levels of interest rates. Management believes the overall rate sensitivity
position is appropriate for current rate conditions.
Mason-Dixon tests its interest rate sensitivity through the deployment
of simulation analysis. An earnings simulation model is used to estimate what
effects specific interest rate changes would have on one year of net interest
income. Derivative financial instruments, such as interest rate swaps, are
included in the analysis. Interest rate caps and floors on certain products are
included to the extent they become effective within one year. Changes in
prepayment assumptions have been included where changes in payment behavior
pattern is assumed to be different to the simulation. Call features on certain
securities are based on their projected call probability in view of the assumed
rate environment. At March 31, 1998 Mason-Dixon's estimated earnings profile
reflected a modest sensitivity to interest rate changes. Based on an assumed 100
basis point immediate increase in interest rates, Mason-Dixon's pretax net
interest income would increase by $3,701,000 (1%) if rates were to increase by
100 basis points, and decline by $788,000 (2%) should rates fall by 100 basis
points.
YEAR 2000 PREPAREDNESS
Mason-Dixon continued its progress in preparing for the year 2000 Issue
during the first quarter of 1998. The Year 2000 Issue is the result of computer
programs and equipment which are dependent on "embedded chip technology" using
two digits rather than four to define any particular year. Any of Mason-Dixon's
computer programs or other equipment that are date dependent may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations, a
temporary inability to
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<PAGE>
process transactions, send invoices, or engage in similar normal
business activity.
During the quarter, critical processing applications were reviewed to
identify potential problems in any customized computer code, test scripts were
developed for processing critical software, and a formal review began of any
credit relationships which may present risks due to customers inability to
remedy their own year 2000 issues.
Based on assessments made through the first quarter, Mason-Dixon has
determined that it may be required to modify or replace portions of its software
and other equipment which cannot be made year 2000 compliant. The expected cost
of modifications and replacements is currently estimated at $660,000 and is
being funded through operating cash flows. It is expected that all critical
remedies will be in place within one year or not later than December 31, 1998.
The assessment of any credit risk that may be attributable to the Year 2000
Issue is expected to be completed by the end of the second quarter of 1998.
The costs of the project and projected completion dates are based on
management's best estimates, which were derived using numerous assumptions of
future events. There can be no guarantee that these estimates will be achieved
and actual results could materially differ from the estimates.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of stockholders was held on Saturday, April 18, 1998.
The purpose of the meeting was to vote on the election of Class III directors,
vote on an omnibus share plan, vote on an increase in authorized capital stock,
vote on the elimination of stockholder's preemptive right, and vote on the
limitation of director liability and removal of residency requirements.
The omnibus share plan permits the award of stock options, stock
appreciation rights, performance shares, and stock bonuses under a plan approved
by the Board of Directors in 1997. The purpose of the plan is to assist in
attracting and retaining key personnel who are in a position to contribute
materially to the success of Mason-Dixon. The number of shares which will be
available for grant under the plan will be 248,800. The plan will be
administered by the Compensation Committee of the Board of Directors.
A proposal to authorize an increase in the number of shares of common
stock from 10,000,000 to 20,000,000 was also subject to a vote of stockholders.
This amendment ensures that a sufficient number of shares of common stock will
be available for possible future transactions, including among others,
acquisitions,
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<PAGE>
financings, stock splits, benefit and compensation plans and other general
corporate purposes.
Votes were also recorded on a proposed amendment to the articles of
incorporation which would delete article 13 pertaining to preemptive rights. The
term "preemptive rights" means that if Mason-Dixon proposes to issue additional
shares of its common stock, the new shares must first be offered to existing
stockholders at the same price and terms as it would be offered to new
stockholders.
Proposals to amend Mason-Dixon's articles of incorporation on the
limitation of director liability and removal of residency requirements were also
voted on. The focus of the amendments is to protect directors and officers and
to permit Mason-Dixon to enlist the services of exceptional people without
regard to their place of residence.
The vote pertaining to the election of the Class III directors was as
follows:
Henry S. William B. S. Ray James C.
Baker, Jr. Dulany Hollinger Snyder
For 4,376,720 4,372,861 4,414,998 4,383,599
Withheld 83,952 87,806 45,673 77,073
The following Class I and Class II directors continue to
serve as of the date of the stockholder meeting: David S.
Babylon, Jr., Miriam F. Beck, Donald H. Campbell, Thomas K.
Ferguson, R. Neal Hoffman, J. William Middelton, Edwin W. Shauck,
and Stevenson B. Yingling.
The vote pertaining to the omnibus share plan was as follows:
For 4,014,225
Against 288,238
Abstained 158,197
The vote pertaining to the increase in authorized capital stock was as
follows:
For 4,136,102
Against 239,654
Abstained 76,518
The vote pertaining to the elimination in stockholder preemptive rights
was as follows:
For 3,417,454
Against 300,432
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<PAGE>
Abstained 144,057
The vote pertaining to the limitation of director liability and removal
of residency requirements was as follows:
For 4,021,378
Against 304,742
Abstained 126,154
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Mason-Dixon Bancshares, Inc. Articles of Amendment
10.1 Mason-Dixon Bancshares, Inc. 1997 Omnibus Share Plan
(b) Reports on Form 8-K
On February 26, 1998, Mason-Dixon filed on Form 8-K an announcement
that it had completed the acquisition of Rose Shanis Companies. This event was
reported under Item 2 on Form 8-K.
On April 14, 1998, Mason-Dixon filed amendments to its previously filed
report of February 26, 1998, which included historic and proforma financial
statements. This event was reported under Item 2 on Form 8-K.
On May 8, 1998, Mason-Dixon filed on Form 8-K announcing its issuance
and sale of its 7.48% senior notes in the principal amount of $20,000,000. This
event was reported under Item 5 on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASON-DIXON BANCSHARES, INC.
May 14, 1998 /s/ Thomas K. Ferguson
----------------------
By: Thomas K. Ferguson
President/Chief Executive Officer
May 14, 1998 /s/ Mark A. Keidel
------------------
By: Mark A. Keidel
Vice President/Chief Financial Officer
C73576.636
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EXHIBIT 3.1
MASON-DIXON BANCSHARES, INC.
ARTICLES OF AMENDMENT
Mason-Dixon Bancshares, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended as follows:
(a) Article 4 is amended in its entirety to read as follows:
4. Shares Authorized. The total number of shares of
stock which the Corporation has authority to issue is
20,000,000 shares of common stock, each of which shall have a
par value of $1.00 per share, for an aggregate par value of
$20,000,000.
(b) Article 9 is amended by deleting the third paragraph
thereof in its entirety.
(c) Article 13 is amended by deleting it in its entirety.
(d) Article 14 is amended in its entirety to read as follows:
14. Director Liability. No Director or officer of the
Corporation shall be liable to the Corporation or to its
stockholders for money damages except (i) to the extent that
it is proved that such Director or officer actually received
an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or
services actually received, or (ii) to the extent that a
judgment or other final adjudication adverse to such Director
or officer is entered in a proceeding based on a finding in
the proceeding that such Director's or officer's action, or
failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated
in the proceeding. No amendment of the Articles of
Incorporation or repeal of any of its provisions shall limit
or eliminate the benefits provided to directors and officers
under this provision with respect to any act or omission which
occurred prior to such amendment.
SECOND: (a) The Board of Directors of the Corporation, by unanimous
written consent dated February 11, 1998 and at a special meeting held on March
11, 1998, adopted resolutions in which the foregoing Amendment of the Articles
of Incorporation, were set forth, declaring that said Amendment was advisable,
and directing that it be submitted to the stockholders of the Corporation for
their consideration.
<PAGE>
(b) The stockholders of the Corporation approved the Amendment
of the Articles of the Corporation as hereinabove set forth at an annual Meeting
of the stockholders held on April 18, 1998.
THIRD: The Amendment of the Articles of Incorporation as hereinabove
set forth has been duly advised by the Board of Directors and approved by the
stockholders of the Corporation.
FOURTH: (a) The total number of shares of all classes of stock of the
Corporation heretofore authorized, and the number and par value of the shares of
each class are as follows:
Ten Million (10,000,000) shares of common stock, of the par
value of $1.00 per share, having an aggregate par value of
$10,000,000.
(b) The total number of shares of all classes of stock of the
Corporation as increased, and the number and par value of the shares of each
class, are as follows:
Twenty Million (20,000,000) shares of common stock, of the par
value of $1.00 per share, having an aggregate par value of
$20,000,000.
(c) The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of each class of authorized capital stock, as
increased, are not changed by the foregoing Articles of Amendment.
IN WITNESS WHEREOF, Mason-Dixon Bancshares, Inc. has caused these
Articles of Amendment to be signed and acknowledged in its name and on its
behalf by its President and witnessed and attested by its Secretary on this 6th
day of May, 1998, and they acknowledged the same to be the act of said
Corporation, and that to the best of their knowledge, information and belief,
all matters and facts stated herein are true in all material respects and that
this statement is made under the penalties of perjury.
ATTEST: MASON-DIXON BANCSHARES, INC.
/s/ Vivan A. Davis By: /s/ Thomas K. Ferguson (SEAL)
- -------------------------- -------------------------------
Vivian A. Davis, Secretary Thomas K. Ferguson, President
C73397.636
- 2 -
EXHIBIT 10.1
MASON-DIXON BANCSHARES, INC
1997 OMNIBUS SHARE PLAN
1. PURPOSE. The purpose of the 1997 Omnibus Share Plan of Mason-Dixon
Bancshares, Inc. (the "Plan") is to promote the financial interests of
Mason-Dixon Bancshares, Inc. (the "Company"), including its growth and
performance, by encouraging the directors, officers and employees of the Company
and its subsidiaries to acquire an ownership position in the Company, enhancing
the ability of the Company and its subsidiaries to attract and retain employees
of outstanding ability, and providing employees with a way to acquire or
increase their proprietary interest in the Company's success.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Section 18, the number of common shares, par value $1.00 per share, of
beneficial interest in the Company (the "Shares") which shall be available for
the grant of awards under the Plan shall be 248,800 Shares.
Shares subject to an award that expires unexercised, that is
forfeited, terminated or canceled, in whole or in part, or is paid in cash in
lieu of Shares, shall thereafter again be available for grant under the Plan.
3. ADMINISTRATION. The Company's Compensation Committee of the Board of
Directors (the "Committee") will make all discretionary decisions involving the
Plan. A majority of the Committee shall constitute a quorum, and the acts of a
majority shall be the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall (i)
from time to time select directors, officers and employees of the Company and
its subsidiaries who will participate in the Plan (the "Participants"), (ii)
determine the type of awards to be made to Participants, (iii) determine the
Shares or share units subject to awards, and (iv) have the authority to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, determine the terms and provisions of any agreements
entered into hereunder, and make all other determinations necessary or advisable
for the administration of the Plan. The Committee may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or in any award in the
manner and to the extent it shall deem desirable to carry it into effect. The
determinations of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive.
4. ELIGIBILITY. All directors and all officers and employees of the
Company and its subsidiaries who have demonstrated significant management
potential, or who have contributed or have the capacity for contributing in a
substantial measure to the successful performance of the Company, or who have
excelled in their performance on behalf of the Company, all as determined by and
in the sole and absolute discretion of the Committee, are eligible to be
Participants in the Plan.
5. AWARDS. Awards under the Plan ("Awards") may consist of the
following: stock options (either incentive stock options within the meaning of
Section 422 of the Internal Revenue
<PAGE>
Code or non-qualified stock options), stock appreciation rights, grants of
restricted stock, performance shares, stock bonuses and other stock-based
awards. Awards of performance shares and restricted stock, stock bonuses and
other stock-based awards may provide the Participant with dividends or dividend
equivalents and voting rights prior to vesting (whether based on a period of
time or based on attainment of specified performance conditions).
6. STOCK OPTIONS. The following terms shall apply, except to the extent
varied in any Award Agreement as defined in Section 11 herein.
(a) General. The Committee shall establish the option price at
the time each stock option is granted, which price may, in the discretion of the
Committee, be less than 100% of the fair market value of the Shares on the date
of grant. Stock options shall be exercisable for such period as specified by the
Committee, but in no event may options be exercisable more than ten years after
their date of grant.
(b) Payment. The exercise price for each option shall be paid
in full at the time of such exercise. Such payment may be made (i) in cash or by
check payable to the order of the Company, (ii) with Shares of the Company, to
the extent the fair market value of the Shares on the date of exercise equals
the exercise price for the Option Shares purchased, (iii) by surrender to the
Company of options to purchase Shares, to the extent of the difference between
the exercise price of such options and the Fair Market Value (as hereinafter
defined) of the Shares subject to such options (the "spread"), (iv) by
promissory note or other payment arrangement agreed to by the Committee, or (v)
any combination of the foregoing agreed to by the Committee. The Company shall
have the right, and the Participant may require the Company, to withhold and
deduct from the number of Shares deliverable upon the exercise hereof a number
of Shares having an aggregate fair market value equal to the amount of taxes and
other charges that the Company is obligated to withhold or deduct from amounts
payable to the Participant.
(c) Incentive Stock Options. An option granted under the Plan
may be a non-qualified stock option or an "incentive stock option" ("Incentive
Stock Options") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and if not otherwise specified, shall be
deemed to be an Incentive Stock Option. An Incentive Stock Option shall not
result in income upon the receipt of the option to the extent (i) the aggregate
fair market value (determined at the time the option is granted) of the Shares
that may be purchased by the optionee during any calendar year (under the Plan
and all other plans of the Company) does not exceed $100,000; and (ii) the
optionee (other than the optionee's estate where the optionee is deceased) does
not dispose of the Shares until the later of (a) two years from and after the
date the option is granted, and (b) one year after the date the Shares are
issued to the optionee. In the event of a disposition of Shares received upon
exercise of an Incentive Stock Option where the disposition occurs within two
years from the date the option is granted or one year from the receipt of the
shares, the optionee shall notify the Corporate Secretary of the Company in
writing as to the date of such disposition, the sale price (if any), and the
number of Shares involved.
2
<PAGE>
7. STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted
in tandem with a stock option, in addition to a stock option, or may be
freestanding and unrelated to a stock option. Stock appreciation rights granted
in tandem with or in addition to a stock option may be granted either at the
same time as the stock option or at a later time. No stock appreciation right
shall be exercisable earlier than six months after grant, except in the event of
the Participant's death or disability. A stock appreciation right shall entitle
the Participant to receive from the Company an amount equal to the increase of
the fair market value of the Share on the exercise of the stock appreciation
right over the grant price. The Committee, in its sole discretion, shall
determine whether the stock appreciation right shall be settled in cash, Shares
or a combination of cash and Shares.
8. PERFORMANCE SHARES. Performance shares may be granted in the form of
actual Shares or share units having a value equal to an identical number of
Shares. In the event that a certificate is issued in respect of Shares subject
to a grant of performance shares, such certificate shall be registered in the
name of the Participant but shall be held by the Company until the time the
Shares subject to the grant of performance shares are earned. The performance
conditions and the length of the performance period shall be determined by the
Committee. The Committee, in its sole discretion, shall determine whether
performance shares are granted in the form of share units shall be paid in cash,
Shares or a combination of cash and Shares.
9. RESTRICTED STOCK. Restricted stock may be granted in the form of
actual Shares or share units having a value equal to an identical number of
Shares. In the event that a certificate is issued in respect of a grant of
restricted stock, such certificate shall be registered in the name of the
Participant subject to all restrictions, and shall bear a legend to such effect
until the end of the restricted period. The employment conditions and the length
of the period for vesting of restricted stock shall be established by the
Committee at the time of grant. The Committee, in its sole discretion, shall
determine whether restricted stock granted in the form of share units shall be
paid in cash, Shares, or a combination of cash and Shares.
10. STOCK BONUS AWARDS. Stock bonus awards may be granted in the form
of Shares or share units having a value equal to an identical number of Shares.
A stock bonus award shall entitle the Participant to receive the number of
Shares specified in the award certificate as a bonus under this Plan, without
any consideration for such Shares. In the event that a stock certificate is
issued in respect of Shares subject to a grant of a bonus award of common stock,
such certificate shall be issued in the name of the Participant and will
generally be issued to the Participant within 15 days after proper presentment
of the award certificate. The Committee, in its sole discretion, shall determine
whether bonus stock granted in the form of share units shall be paid in cash,
Shares, or a combination of cash and Shares.
11. AWARD AGREEMENTS. Each award under the Plan shall be evidenced by
an agreement ("Award Agreement") setting forth the terms and conditions, as
determined by the Committee, which shall apply to such award, in addition to the
terms and conditions specified
3
<PAGE>
in the Plan. In the event that discrepancies exist between the Plan and any
Award Agreement, the Award Agreement shall control.
12. WITHHOLDING. The Company shall have the right to deduct from any
payment to be made pursuant to the Plan, or to require prior to the issuance or
delivery of any Shares or the payment of cash under the Plan, any taxes required
by law to be withheld therefrom. The Participant may elect to satisfy such
withholding obligation by having the Company retain the number of Shares whose
fair market value equal the amount required to be withheld. Any fraction of a
Share required to satisfy such obligation shall be disregarded and the amount
due shall instead be paid in cash to the Participant.
13. LIMITED TRANSFERABILITY. No Award shall be transferred, assigned,
pledged or hypothecated, other than by will and the laws of descent and
distribution, and no right of interest of any Participant shall be subject to
execution, attachment or similar process. Notwithstanding the foregoing, the
Participant may transfer such Awards, other than Incentive Stock Options, to his
spouse, lineal ascendants, lineal descendants or to a duly established trust for
the benefit of one or more of these individuals. Awards so transferred may
thereafter be transferred only to the Participant or to an individual or trust
to whom he could have initially transferred the Awards pursuant to this Section.
Awards transferred pursuant to this Section shall be held by the transferee
according to the same terms and conditions as applied to the Participant. Upon
any attempt to transfer any Award, or to assign, pledge, hypothecate or
otherwise dispose of any Award in violation of this provision, or upon the levy
of any attachment or similar process upon any Award or any rights hereunder,
such Award shall immediately lapse and become null and void.
14. NO RIGHT TO AWARDS. No person shall have any claim or right to be
granted an award, and the grant of an award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or its
subsidiaries. Further, the Company and its subsidiaries expressly reserve the
right at any time to dismiss a Participant free from any liability, or any claim
under the Plan, except as provided herein or in any agreement entered into
hereunder.
15. CHANGE OF CONTROL
(a) Definitions.
(i) Change of Control. A "Change of Control" means
(i) the acquisition of "beneficial ownership" (as defined in Regulation 13D
under the Securities Exchange Act of 1934, as amended), by a person, entity or
group of 25% or more of the Shares, or (ii) the election, in a two-year period
or less, of directors constituting a majority of the Board who were not
nominated by the Board ("Non-Continuing Directors"), or (iii) the commencement
of a tender offer (other than by the Company) for any Shares, or (iv) a sale or
transfer, in one or a series of transactions, of assets having a fair market
value of 50% or more of the fair market value of all assets of the Company, or
(v) a merger, consolidation or share exchange pursuant to which the
4
<PAGE>
Shares of the Company are or may be exchanged for or converted into cash,
property or securities of another issuer, or (vi) any other business combination
(as defined in Title 3, Article 6 of the Maryland General Corporation Law) with
another party which results in a change in the control of the Company or the
assets or business of the Company, or (vii) the liquidation of the Company (an
"Extraordinary Event").
(ii) Event Date. The "Event Date" means (i) the date
of acquisition of beneficial ownership of 25% or more of the Shares, or (ii) the
date of the election of directors as a result of which the majority of the Board
is comprised of Non-Continuing Directors, (iii) the commencement of a tender
offer, if the Extraordinary Event is a tender offer, and (iv) in the case of any
other Extraordinary Event, the day preceding the record date in respect of such
Extraordinary Event, or if no record date is fixed, the day preceding the date
as of which stockholders of record become entitled to the consideration payable
in respect of such Extraordinary Event. Notwithstanding the foregoing, the
immediate vesting of any Award shall be conditioned upon the actual occurrence
and completion of the Extraordinary Event.
(iii) Fair Market Value. The "Fair Market Value" per
Share as of any particular date shall be the closing price per Share on the
trading day immediately preceding such date on the Nasdaq Stock Market or on
such other principal national securities exchange on which the Shares are listed
on such date.
(b) Upon the occurrence of a Change of Control, (i) any Award
carrying a right to exercise that was not exercisable and vested shall become
fully exercisable and vested, and (ii) any restrictions or forfeiture conditions
applicable to any other Awards granted under the Plan shall lapse and terminate,
any performance conditions imposed with respect to any such Awards shall be
deemed to be fully achieved on and at all times after the Event Date, and such
Awards shall be deemed fully vested without restriction from and after the Event
Date.
(c) In the event of the acceleration of the exercise date of
any option pursuant to this Section, the exercise price for which shall not have
been fixed as of the Event Date, the exercise price per Share subject to such
option shall be equal to the average Fair Market Value per Share for the thirty
(30) days preceding the announcement or other publication of the Extraordinary
Event.
(d) In case of an Extraordinary Event other than a tender
offer, the exercise of any option pursuant to this Section prior to the Event
Date shall be effective on and as of the Event Date. Upon the exercise of such
option upon the occurrence of an Extraordinary Event, the Company shall issue,
on and as of the effective date of such exercise, all Shares with respect to
which such option shall have been exercised. In the event that the Participant
fails to exercise his or her option, in whole or in part, pursuant to this
Section upon an Extraordinary Event, or if there shall be any capital
reorganization or reclassification of the Shares, the Company shall take such
action as may be necessary to enable such Participant to receive upon any
subsequent exercise of his or her options, in whole or in part, in lieu of
Shares, securities or other assets as
5
<PAGE>
were issuable or payable upon such Extraordinary Event in respect of, or in
exchange for, such Shares.
16. TERMINATION OF RIGHTS. All unexercised or unexpired options,
rights, performance shares and other such rights granted or awarded under this
Plan (collectively, "Rights") will terminate, be forfeited and will lapse
immediately if such Participant's employment or relationship with the Company is
terminated for any reason, unless and to the extent the Committee permits the
exercise of such Rights after the date of such termination. If a Participant's
employment or relationship with the Company is terminated by reason of his
death, such Participant's personal representatives, estate or heirs (as the case
may be) may exercise, subject to any restrictions imposed by the Committee at
the time of the grant, for a period of one year after the Participant's death,
any Right which was exercisable by the Participant as of the date of his death,
unless otherwise provided by the Committee.
17. REGISTRATION. If the Company shall be advised by its counsel that
any Shares deliverable upon any exercise of a Right are required to be
registered under the Securities Act of 1933, or that the consent of any other
authority is required for the issuance of such Shares, the Company may effect
registration or obtain such consent, and delivery of Shares by the Company may
be deferred until registration is effected or such consent is obtained.
18. ADJUSTMENT OF AND CHANGES IN SHARES. In the event of any change in
the outstanding Shares by reason of any share dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange of
Shares or other corporate change, or other distributions to common stockholders
other than regular cash dividends, the Committee may make such substitution or
adjustment, if any, as it deems to be equitable, as to the number or kind of
Shares or other securities issued or reserved for issuance pursuant to the Plan
and to outstanding awards.
19. AMENDMENT. The Committee may amend or terminate the Plan or any
portion thereof at any time, provided that, without such Participant's consent,
no amendment or termination shall affect adversely any of the rights of a
participant under any Award theretofore granted under the Plan.
20. EFFECTIVE DATE. The Plan shall be effective upon its adoption by
the Board of Directors, subject to ratification by the stockholders. Subject to
earlier termination pursuant to Section 19, the Plan shall have a term of ten
years from and after its effective date.
c71635.634
6
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Mason-Dixon
Bancshares, Inc. March 31, 1998 financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000879558
<NAME> MASON-DIXON BANCSHARES
<MULTIPLIER> 1
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<PERIOD-END> MAR-31-1998
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