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, 1999
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
- --------- ------------
(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
----------------------
Registrant's telephone number including
area code:
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,
1999: Common Stock, $1.00 Par Value --- 5,072,841
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands) March 31, 1999 Dec. 31, 1998
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ASSETS
<S> <C> <C>
Cash and due from banks $ 22,442 $ 22,642
Interest bearing deposits in other banks 2,058 638
Federal funds sold 4,948 2,363
Investment securities available for sale (AFS) - at fair value 418,606 381,512
Investment securities held to maturity (HTM) - at amortized cost
(fair value of $186,079 and $188,522 respectively) 183,267 185,366
Loans held for sale 2,185 7,645
Loans (net of unearned income of $336 and $2) 505,275 462,557
Less: Allowance for credit losses (10,019) (8,893)
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Loans, net 495,256 453,664
Premises and equipment 15,524 15,213
Other real estate owned 508 388
Deferred income taxes 8,731 5,697
Mortgage servicing and sub-servicing rights 2,134 2,213
Intangible assets 11,416 6,654
Accrued interest receivable and other assets 19,705 18,247
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Total Assets $ 1,186,780 $ 1,102,242
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LIABILITIES
Non-interest bearing deposits $ 98,399 $ 94,946
Interest bearing deposits 608,232 545,403
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Total deposits 706,631 640,349
Short-term borrowings 61,905 41,816
Long-term borrowings 326,396 328,347
Accrued expenses and other liabilities 9,924 9,591
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Total Liabilities 1,104,856 1,020,103
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STOCKHOLDERS' EQUITY
Common stock - $1.00 par value, authorized:
10,000,000 shares, issued and outstanding:
5,072,841 shares (1999) and 5,071,682 shares (1998) 5,073 5,072
Surplus 35,697 35,738
Retained earnings 41,098 39,535
Accumulated other comprehensive income 56 1,794
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Total Stockholders' Equity 81,924 82,139
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Total Liabilities and Stockholders' Equity $ 1,186,780 $ 1,102,242
============= ============
</TABLE>
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<PAGE>
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ending
(dollars in thousands) March 31, 1999 March 31, 1998
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INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $ 12,567 $ 11,959
Interest on deposits in other banks 61 15
Interest on federal funds sold 171 284
Interest and dividends on investment securities:
Taxable interest on mortgage-backed securities 4,833 4,404
Other taxable interest and dividends 3,104 1,844
Tax exempt interest and dividends 1,372 1,172
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Total interest income 22,108 19,678
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INTEREST EXPENSE Interest on deposits:
Time certificate of deposit of $100,000 or more 516 424
Other deposits 5,729 5,768
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Total interest on deposits 6,245 6,192
Interest on short-term borrowings 734 1,581
Interest on long-term borrowings 4,783 2,673
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Total interest expense 11,762 10,446
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Net interest income 10,346 9,232
Provision for credit losses 264 317
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Net interest income after provision for credit losses 10,082 8,915
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OTHER OPERATING INCOME
Service charges on deposit accounts 480 537
Trust Division income 445 381
Gain/(Loss) on sale of securities 147 311
Gain on sale of mortgage loans 542 436
Gain on sale of branches 0 0
Other income 710 763
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Total other operating income 2,324 2,428
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OTHER OPERATING EXPENSES
Salaries and employee benefits 5,428 4,905
Net occupancy expenses of bank premises 805 692
Furniture and equipment expenses 521 483
Legal and professional fees 206 220
FDIC insurance expense 19 20
Outside data processing expense 322 341
Amortization of mortgage sub-servicing rights 76 104
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Amortization of other intangible assets 218 104
Other expenses 1,630 1,093
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Total other operating expenses 9,225 7,962
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Income before income taxes 3,181 3,381
Income tax expense 654 870
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NET INCOME $ 2,527 $ 2,511
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Per Share Data:
Cash Dividend Paid $ 0.19 $ 0.17
Net Income (Basic) $ 0.50 $ 0.49
Net Income (Diluted) $ 0.50 $ 0.49
Average Shares Outstanding (Basic) 5,074,214 5,079,326
Average Shares Outstanding (Diluted) 5,090,242 5,084,788
</TABLE>
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<PAGE>
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S> <C> <C>
Net Income $ 2,527 $ 2,511
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 381 406
Amortization of mortgage sub-servicing rights 76 104
Amortization of intangibles 208 104
Net accretion of purchase accounting adjustments (234) (96)
Provision for credit losses 264 317
Provision for deferred taxes (1,941) 0
Proceeds from sales of investment securities - Trading 0 20
Originations of loans held for sale (4,654) (16,900)
Proceeds from sales of loans held for sale 10,656 12,316
Net gain on sale of assets/liabilities (649) (782)
Net (increase) decrease in accrued interest receivable and other assets (2,485) (1,225)
Net increase (decrease) in accrued expenses and other liabilities 201 965
Other - net 34 (4)
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Net cash provided by operating activities 4,384 (2,264)
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Cash Flows From Investing Activities
Proceeds from maturities of investment securities - HTM 16,945 16,322
Purchases of investment securities - HTM (14,840) (10,576)
Proceeds from maturities of investment securities - AFS 44,189 24,652
Proceeds from sales of investment securities - AFS 19,953 26,025
Purchases of investment securities - AFS (93,395) (50,145)
Net (increase) decrease in loans 2,393 585
Capital expenditures (364) (521)
Proceeds from sale of assets/liabilities 0 49
Acquisitions of subsidiaries, net of cash acquired 6,985 (14,993)
------------------ ------------------
Net cash used by investing activities (18,134) (8,602)
------------------ ------------------
Cash Flows From Financing Activities
Net increase (decrease) in deposits 433 16,893
Net increase (decrease) in short-term borrowings 20,089 (9,057)
Proceeds from long-term borrowings 2,160 20,000
Repayments of long-term borrowings (4,123) (1,878)
Issuance of additional shares of common stock 100 200
Repurchase of common stock (140) 0
Dividends paid (964) (863)
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Net cash provided by financing activities 17,555 25,295
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Net increase (decrease) in cash and cash equivalents 3,805 14,429
Cash and cash equivalents at beginning of year 25,643 37,963
------------------ ------------------
Cash and cash equivalents at end of period $ 29,448 $ 52,392
================= =================
</TABLE>
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<PAGE>
MASON-DIXON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the period ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Retained Comprehensive Stockholders'
(dollars in thousands) Stock Surplus Earnings Income Equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 5,077 $ 35,948 $ 32,275 $ 2,149 $ 75,449
Net Income (1st quarter 1998) - - 2,511 - 2,511
Other comprehensive income, net of
tax: unrealized loss on securities (315) (315)
Cash Dividend @ $.17 per share - - (863) - (863)
Issuance of additional shares of
common stock 6 194 - - 200
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Balance at March 31, 1998 5,083 36,142 33,923 1,834 76,982
Net Income (2nd,3rd,4th quarters 1998) - - 8,300 - 8,300
Other comprehensive income, net of
tax: unrealized loss on securities (40) (40)
Cash Dividend @ $.53 per share - - (2,688) - (2,688)
Issuance of additional shares of
common stock 21 583 604
Repurchase of shares of common stock (32) (987) - - (1,019)
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Balance at December 31, 1998 5,072 35,738 39,535 1,794 82,139
Net Income (1st quarter 1999) - - 2,527 - 2,527
Other comprehensive income, net of tax:
unrealized loss on securities (1,738) (1,738)
Cash Dividend @ $.19 per share - - (964) - (964)
Issuance of additional shares of stock 4 96 - - 100
Repurchase of shares of common stock (3) (137) - - (140)
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Balance at March 31, 1999 $ 5,073 $ 35,697 $ 41,098 $ 56 $ 81,924
=======================================================================================
</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 1998 Annual
Report on Form 10-K.
Note 2. Mergers and Acquisitions
On January 5, 1999, Mason-Dixon completed the acquisition of Sterling
Bancorp, a privately held commercial bank headquartered in Baltimore, Maryland.
Sterling Bancorp was the parent company of Sterling Bank & Trust Co., which
operated four branches; one in Baltimore City, two in Baltimore County
(Pikesville and Timonium) and one in Anne Arundel County (Annapolis). On
February 12, 1999, Mason-Dixon merged Sterling Bank & Trust Co. into Bank of
Maryland and simultaneously closed the branch offices in Pikesville and
Baltimore City, servicing existing customers of these branches through nearby
Bank of Maryland locations. The acquisition was paid for in cash totaling
$10,300,000 and will be accounted for as a purchase in accordance with APB 16.
At December 31, 1998, Sterling Bancorp had consolidated assets approximating
$73,800,000, liabilities of $67,200,000 and stockholders' equity of $6,600,000.
Sterling recorded a net loss for 1998 of $250,000 before merger related
expenses. Goodwill associated with the purchase will be amortized over 15 years
using the straight-line method.
On January 27, 1999, Mason-Dixon entered into an Agreement and Plan of
Reorganization with BB&T Corporation ("BB&T") of Winston-Salem, North Carolina.
The agreement allows for the acquisition of Mason-Dixon by BB&T. The terms of
the agreement call for stockholders of Mason-Dixon to receive 1.3 shares of BB&T
common stock for each common share of Mason-Dixon. The acquisition will be
structured as a tax-free exchange and accounted for as a pooling-of-interests.
The transaction is subject to various regulatory approvals and approval by
Mason-Dixon stockholders. In conjunction with the agreement, Mason Dixon entered
into a Stock Option Agreement which grants BB&T the option to purchase up to
1,006,868 common shares of Mason-Dixon at a price per share of $40.00. Under the
conditions of the Agreement and Plan of Reorganization, Mason-Dixon is not
permitted to issue any new shares of common stock other than those permitted
under Mason-Dixon's Omnibus Stock Plan without prior written consent of BB&T.
Additionally, Mason-Dixon may not issue any new debt, enter into any long-term
contracts or operate outside its normal course of business without written
consent from BB&T.
Note 3. Investment Securities
<TABLE>
<CAPTION>
(dollars in thousands)
Available-for-Sale Held-to-Maturity
March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and agency notes $ 139,777 $ 68,569 $ 19,994 $ 33,016
Obligations of U.S. government agencies 99,016 117,399 10,031 13,536
Obligations of states and political subdivisions 0 0 110,850 86,279
Collateralized mortgage obligations 157,689 49,746 35,477 59,004
Other securities 22,033 10,359 6,915 6,429
Unrealized gains (losses) 91 2,989 0 0
----------- ----------- ----------- ----------
Total Investment Securities $ 418,606 $ 249,062 $ 183,267 $ 198,264
=========== =========== ============ ===========
</TABLE>
Note 4. Loans (Net of Unearned Income)
<TABLE>
<CAPTION>
(dollars in thousands) March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Construction and Land Development $ 47,799 $ 36,188
Residential Real Estate-Mortgages 172,280 186,782
Commercial Real Estate-Mortgages 143,461 134,036
Commercial 89,354 87,269
Consumer 52,381 60,336
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Total Loans $ 505,275 $ 504,611
=========== ===========
</TABLE>
Note 4. Allowance for Credit Losses
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998
----------- -----------
<S> <C> <C>
Balance at January 1 $ 8,893 $ 5,231
Provision for the year 264 317
Recoveries on loans 210 42
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Total 9,367 5,590
Less loans charged off 1,070 52
Allowance of purchased company 1,722 2,923
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Balance at March 31 $ 10,019 $ 8,461
=========== ===========
</TABLE>
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>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, the Year 2000 issue, 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 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
$2.527 million for the first quarter of 1999, an increase over the $2.511
million reported for the first quarter of 1998. On a per share basis (both basic
and diluted), net income equaled $.50 for the first quarter of 1999 compared to
$.49 for 1998, up 2%.
For the quarter, annualized return on average assets was .86% in 1999
compared to 1.00% for 1998, while return on average stockholders' equity equaled
12.86% compared to 13.47% for the same period for 1998.
Results for the first quarter include Sterling Bancorp, which
Mason-Dixon acquired on January 5, 1999. The acquisition is being accounted for
under the purchase method of accounting therefore historical results have not
been restated to include Sterling Bancorp's Statement of Condition or Results of
Operations for periods prior to 1999. Sterling Bank and Trust Co., Sterling
Bancorp's subsidiary, operated as a separate affiliate of Mason-Dixon from the
date of acquisition through February 12, 1999, at which time it was merged into
Mason-Dixon's Bank of Maryland affiliate. Mason-Dixon recorded approximately
$4.3 million in goodwill associated with the acquisition and is amortizing this
amount over 15 years using the straight-line method.
For the quarter, net interest income increased $1,114,000 (+12%) due to
normal growth in earning assets, and from the acquisition of Sterling Bank &
Trust Co. in January of 1999 and Rose Shanis Financial Services in February of
1998. Non-interest income decreased by $104,000 (+4%) as a result of lower gains
on sales of securities, which declined by $164,000. Other operating expenses
increased $1,263,000 (+16%) due to normal expense growth and additional expenses
for Sterling Bank & Trust Co. and Rose Shanis.
STATEMENT OF CONDITION
Total assets at March 31, 1999 were $1.187 billion, up 13% over last
year. Loans totaled $505 million, equal to last year. Deposits increased by 6%
to $707 million. Excluding the changes in loans and deposits related to the sale
of 5 branches of Mason-Dixon's Bank of Maryland affiliate in June of 1998 and
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<PAGE>
the acquisition of Sterling Bank & Trust Co., loans grew approximately $15
million (+3%), while deposits grew $61 million (+9%). Stockholders' equity
totaled $82 million.
INCOME STATEMENT - FIRST QUARTER
Net interest income increased by $1.114 million (12%) due to normal
growth in earning assets and from the acquisition of Sterling Bancorp. The net
interest margin on earning assets decreased 5 basis points to 4.06%. Average
earning assets increased $153 thousand (16%) while interest bearing liabilities
increased $146 thousand (17%).
Total other operating income decreased 4% or $104 thousand. Service
charge income decreased by $57 thousand, largely due to the sale of five
branches of Mason-Dixon's Bank of Maryland affiliate in June of 1998. Gains on
sales of mortgage loans grew by $106 thousand or 24% due to higher loan
origination of the Mortgage Banking Division of Carroll County Bank and Trust
Company (Mason-Dixon Bancshares Mortgage Company). Trust Division income grew by
$64 thousand or 17% due to growth in accounts under management. Securities gains
decreased by $164 thousand. Other operating income decreased by $53 thousand
also due to the sale of branches.
Total other operating expenses increased by $1.263 million or 16% due
to the additional expenses of the Rose Shanis (acquired February 1998) and
Sterling Bancorp (acquired January 1999). Most categories of other operating
expenses increased as a result of the acquisitions.
CAPITAL ADEQUACY
At the end of the quarter, the Company's capital leverage ratio was
7.80%, down from 8.87% at the end of the year. Tier 1 and Total Risk-based
ratios were 12.91% and 15.96% respectively compared to 14.99% and 18.30% at
December 31, 1998. Regulatory minimums to qualify as "well capitalized" are 5%
for capital leverage, 6% for Tier 1 Risk-based, and 10% for Total Risk-based
capital. Decreases in the various capital adequacy ratios were largely the
result of the January 1999 purchase of Sterling Bancorp. This acquisition was an
all cash purchase accounted for under the purchase method of accounting,
therefore, no equity was issued in the acquisition, and the recorded goodwill
totaled approximately $4.3 million. As a result, qualifying levels of capital
decreased, while assets associated with the merger increased Mason-Dixon's total
assets and risk-adjusted assets. This combination resulted in lower capital
ratios.
MARKET RISK DISCLOSURES - INTEREST RATE SENSITIVITY
At the end of the quarter, Mason-Dixon had an estimated one year
negative gap of $28 million on a consolidated basis, which was less than 3% of
assets. The negative one year gap at the end of the last quarter was $45 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
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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 $249 thousand (1%) if rates were to increase by 100 basis
points, and decline by $759 thousand (2%) should rates fall by 100 basis points.
YEAR 2000 PREPAREDNESS
This is a Year 2000 Readiness Disclosure under the Year 2000 Information
and Readiness Disclosure Act of 1998. Mason-Dixon continued its progress in
preparing for the Year 2000 through the first quarter. The Year 2000 Issue is
the result of computer programs and equipment which are dependent on 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 process transactions, send invoices, or engage in similar
normal business activity.
Mason-Dixon has had in place a task force which has been preparing
information technology (IT) systems, as well as non-IT systems for two years.
Representatives of the task force regularly update Mason-Dixon's Senior
Management and Board of Directors with progress reports which outline progress
and future timetables for completion of critical phases of the Year 2000
project. Mason-Dixon adopted a Year 2000 plan developed by its task force in
accordance with guidelines set forth by the Federal Financial Institutions
Examination Council (FFIEC). Mason-Dixon expects that all phases of its Year
2000 plan will be completed by the deadlines established by the FFIEC.
The initial "assessment" phase of the Year 2000 project began in 1997 and
included an inventory of all systems (IT and non-IT) with potential Year 2000
risk. Critical IT systems, which include item processing, communications with
the Federal Reserve ("Fedline"), and core loan and deposit processing systems
were identified. Critical non-IT systems which include telephone and internal
communications systems, ATM's, and payroll were also identified. Vendors who
provide various systems were contacted to assess their Year 2000 readiness.
Mason-Dixon has completed its review of customized computer code included in the
data processing system provided by its primary supplier of data processing
services. The assessment phase is complete, although it is updated periodically
as necessary.
During the most recent quarter, the project progressed with the
renovation and/or replacement of systems to achieve Year 2000 readiness and the
testing of critical and non-critical systems.
Test scripts were completed for testing critical software as of December
31, 1998. Mason-Dixon has completed testing of a significant number (71%) of
systems as of March 31, 1999 and expects to complete testing all critical
applications by June 30, 1999. Mason-Dixon expects to complete testing all
systems (critical and non-critical) by September 30, 1999. From vendor responses
and/or certifications of Year 2000 compliance, Mason-Dixon has determined that
several critical IT and non-IT systems will have to be modified to achieve Year
2000 readiness or be replaced with Year 2000 compliant systems. Mason-Dixon does
not perform in-house programming, and thus is dependent on external vendors to
modify customized
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<PAGE>
software code. Mason-Dixon's primary supplier of data processing services had
adopted a Year 2000 plan and timetable and has provided written assurances to
Mason-Dixon of its progress and intention to achieve Year 2000 readiness of both
its standard system and customized computer code by March 31, 1999. Mason-Dixon
expects that non-compliant systems will be replaced or renovated prior to
January 1, 2000.
The contingency planning phase of Mason-Dixon's Year 2000 project began
during the third quarter of 1998 and was completed by the end of January 1999.
This process incorporates both Business Redemption Plans and Business Resumption
Plans. Business Redemption Plans identify alternative vendors with the capacity
to convert systems which are not Year 2000 compliant to compliant systems prior
to the end of 1999. Business Resumption Plans establish manual procedures
capable of processing critical systems where transactions or volumes are limited
in the event of the most reasonably likely worst case scenario. Contingency
plans will be tested by September 30, 1999.
The expected cost of modifications and replacements to non-compliant
systems is currently estimated to be between $700,000 and $1,000,000 and is
being funded through operating cash flows. Through March 31, 1999, direct
expenses related to the Year 2000 issue have been $623,000 and does not include
any internal personnel costs. In the second quarter of 1998, Mason-Dixon
recorded a charge to earnings of $700,000 for these estimated costs.
During the second quarter of 1998, Mason-Dixon completed a review of the
Year 2000 readiness of all significant borrowers. Mason-Dixon has determined
that the ability of some of Mason-Dixon's customers to repay their obligations
to Mason-Dixon may be impaired by their ability to remedy their own Year 2000
issues. Mason-Dixon does not anticipate that such impairment will be significant
enough to materially impact its financial position. Mason-Dixon's monitoring of
credit risk attributable to the Year 2000 issue continued through the remainder
of 1998, and resulted in a year-to-date increase in the allowance for credit
losses of approximately $918,000.
Mason-Dixon has distributed surveys to determine the Year 2000 readiness
of significant funds providers to Mason-Dixon. Responses have been received from
a significant number of these providers, however, since Mason-Dixon's assessment
process is not yet complete, the potential for unplanned reductions in the
availability of funds from significant funding sources that have not taken
appropriate steps to manage their own Year 2000 problems exists. Most of the
significant funds providers are banks or bankers' banks which are subject to
regulatory oversight relating to the Year 2000 issue. Follow-up and assessment
of the Year 2000 readiness of significant funds providers will continue until
determination of Year 2000 readiness is made. Contingency plans will be
developed to provide alternative funding sources should funds providers fail to
provide adequate assurance of Year 2000 readiness.
Management of Mason-Dixon believes that the potential effects on
Mason-Dixon's internal operations of the Year 2000 problem can and will be
addressed prior to the year 2000. However, if required modifications or
conversions are not made or are not completed on a timely basis prior to the
year 2000, the Year 2000 problem could disrupt normal business operations. The
most reasonably likely worst case Year 2000 scenarios foreseeable at this time
would include Mason-Dixon temporarily not being able to process, in some
combination, various types of customer transactions. This could affect the
ability of Mason-Dixon to, among other things, originate new loans, post loan
payments, accept deposits or allow immediate withdrawals, and, depending on the
amount of time such a scenario lasted, could have material adverse effects on
Mason-Dixon.
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<PAGE>
Ultimately, the success of Mason-Dixon's efforts to address the Year 2000
issue depends to a large extent not only on the corrective measures that
Mason-Dixon undertakes, but also on the efforts undertaken by businesses,
government entities, and other independent entities who provide data to, or
receive data from, Mason-Dixon, such as borrowers, vendors, or deposit
customers. In particular, Mason-Dixon's credit risk associated with its
borrowers may increase as a result of problems such borrowers may have resolving
their own Year 2000 issues. Although it is not possible to evaluate the
magnitude of any potential increased credit risk at this time, the impact of the
Year 2000 issue on borrowers could result in increases in problem loans and
credit losses in future years.
The entire cost 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. Factors that
might affect the timely and efficient completion of Mason-Dixon's Year 2000
projects include, but are not limited to, vendors' abilities to adequately
correct or convert software and the effect on Mason-Dixon's ability to test its
systems, the availability and the cost of personnel trained in the Year 2000
area, and the ability to identify and correct all relevant computer programs and
similar uncertainties.
Bank regulatory agencies have recently issued additional guidance under
which they are assessing Year 2000 readiness. The failure of a financial
institution to take appropriate action to address deficiencies in the Year 2000
project management process may result in enforcement actions which could have a
material adverse effect on Mason-Dixon, result in civil money penalties or
result in the delay of applications seeking to acquire other entities or
otherwise expand activities.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Mason-Dixon Board of Directors has scheduled Mason-Dixon's Annual
Meeting of Stockholders currently for July 12, 1999, at 10:00 a.m., at the
Wakefield Valley Golf Club, 1000 Fenby Farm Road, Westminster, Maryland 21158 to
(1) consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated January 27, 1999 (the "Merger Agreement') between
Mason-Dixon and BB&T Corporation, a North Carolina corporation ("BB&T") and
related plan of merger, pursuant to which Mason-Dixon will merge with and into
BB&T (the "Merger") and each share of common stock of Mason-Dixon then
outstanding will be converted into the right to receive 1.30 shares of common
stock of BB&T, plus cash in lieu of any fractional share interest; (2) to elect
four Class I directors of Mason-Dixon to serve until the earlier of the
effective time of the Merger, the 2002 Annual Meeting of Stockholders, or such
time as their respective successors are elected and qualified; and (3) to
transact such other business as may be properly brought before the meeting or at
any and all adjournments or postponements thereof. If a stockholder intended to
present a stockholder proposal at the Annual Meeting pursuant to SEC Rule 14a-8
(for inclusion in the Mason- Dixon proxy statement), the stockholder must have
notified Mason-Dixon of such intention by May 5, 1999. If a stockholder intends
to present a stockholder proposal at the Annual Meeting in a manner other than
the inclusion of the proposal in Mason-Dixon's proxy statement, the proxy
holders named by Mason-Dixon may exercise their discretionary voting authority
on the matter in accordance with their best judgment unless the stockholder
notified Mason-Dixon of such intention by May 5, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.2 Mason-Dixon Bancshares, Inc. Bylaws, Restated on November 27, 1996,
and Amended on October 22, 1997, January 28, 1998, April 18, 1998, January 25,
1999, and April 14, 1999, filed herewith.
27 Financial Data Schedule, filed electronically herewith.
b. Reports on Form 8-K
On January 8, 1999, Mason-Dixon filed on Form 8-K its announcement that
it had completed its acquisition of Sterling Bancorp, a privately held,
Baltimore-based bank holding company. This event was reported under Item 5 on
Form 8-K.
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On January 29, 1999, Mason-Dixon filed on Form 8-K its announcement that
it had entered into an Agreement and Plan of Reorganization with BB&T
Corporation of Winston-Salem, North Carolina. Under the terms of this agreement,
Mason-Dixon would be acquired by BB&T Corporation. 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 13, 1999 /s/ Thomas K. Ferguson
------------------------------
By: Thomas K. Ferguson
President/Chief Executive Officer
May 13, 1999 /s/ Mark A. Keidel
--------------------------------
By: Mark A. Keidel
Vice President/Chief Financial Officer
F7532.600
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Exhibit 3.2
MASON-DIXON BANCSHARES, INC.
BYLAWS
Restated on 11/27/96
(As Amended on 10/22/97, 1/28/98, 4/18/98, 1/25/99, and 4/14/99)
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
held on such date and time in the month of April in each year as may be fixed by
resolution of the Board of Directors at which the stockholders shall elect
Directors whose term of office has expired, shall consider reports of the
affairs of the Corporation, and shall transact such other business as may
properly be brought before the meeting; provided, however, that the 1999 Annual
Meeting of Stockholders shall be held on such date and time in the month of July
as may be fixed by resolution of the Board of Directors.
SECTION 2. Special Meetings. Special meetings of the stockholders may be
called at any time for any purpose or purposes by the Chairman of the Board, by
the President, or by a majority of the Board of Directors, and shall be called
by the Chairman, President or Secretary of the Corporation upon the request in
writing of the holders of at least 50% of all the shares outstanding and
entitled to vote on the business to be transacted at such meeting. Such request
shall state the purpose or purposes of the meeting. Unless requested by
stockholders entitled to cast a majority of all votes entitled to be cast at the
meeting, however, a special meeting need not be called to consider any matter
which is substantially the same as a matter voted on at any special meeting of
the stockholders held during the preceding 12 months.
SECTION 3. Place of Holding Meetings. All meetings of stockholders shall
be held at the principal office of the Corporation or elsewhere in the United
States as designated by the Board of Directors.
SECTION 4. Notice of Meetings. Written notice of each meeting of the
stockholders shall be mailed, postage pre-paid by the Secretary, to each
stockholder entitled to vote thereat at his post office address as it appears
upon the books of the Corporation at least ten (10) days, but not more than
ninety (90) days, before the meeting. Each such notice shall state the place,
day, and hour at which the meeting is to be held and, in the case of any special
meeting, shall state briefly the purpose or purposes thereof.
SECTION 5. Quorum. The presence in person or by proxy of the holders of
record of a majority of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote thereat shall constitute a quorum at
all meetings of the stockholders, except as otherwise provided by law, by the
Articles of Incorporation or by these Bylaws. If less than a quorum shall be in
attendance at the time for which the meeting shall have been called, the meeting
may be adjourned from time to time by a majority vote of the stockholders
present or represented, without any notice other than by announcement at the
meeting, until a quorum shall attend. At any adjourned meeting at which a quorum
shall attend, any business may be transacted which might have been transacted if
the meeting had been held as originally called.
SECTION 6. Conduct of Meetings. Meetings of stockholders shall be
presided over by the Chairman of the Board, or if he or she is not present, by
the Vice Chairman, or if he or she is not present, the President of
<PAGE>
the Corporation or, if he or she is not present, by a Vice President, or, if
none of said officers is present, by a chairman to be elected at the meeting.
The Secretary of the Corporation, or if he or she is not present, any Assistant
Secretary shall act as Secretary of such meetings; in the absence of the
Secretary and any Assistant Secretary, the presiding officer may appoint a
person to act as Secretary of the meeting.
SECTION 7. Voting. At all meetings of stockholders, every stockholder
entitled to vote thereat shall have one (l) vote for each share of stock
standing in his or her name on the books of the Corporation on the date for the
determination of stockholders entitled to vote at such meeting. Such vote may be
either in person or by proxy appointed by an instrument in writing subscribed by
such stockholder or his or her duly authorized attorney, bearing a date not more
than eleven (11) months prior to said meeting, unless said instrument provides
for a longer period. Such proxy shall be dated, but need not be sealed,
witnessed or acknowledged. All elections shall be held and all questions shall
be decided by a majority of the votes cast at a duly constituted meeting, except
as otherwise provided by law, in the Articles of Incorporation or by these
Bylaws.
If the chairman of the meeting shall so determine, a vote by ballot may
be taken upon any election or matter, and the vote shall be so taken upon
request of the holders of a majority of the stock entitled to vote on such
election or matter. In either of such events, the proxies and ballots shall be
received and be taken in charge and all questions touching the qualification of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the tellers. Such tellers shall be appointed by the chairman
of the meeting.
SECTION 8. Exemption from Subtitle 7 and Title 3 of the Maryland General
Corporation Law. The acquisition of shares of stock of the Corporation pursuant
to the transactions contemplated by the Agreement and Plan of Reorganization
between the Corporation and BB&T Corporation to be dated January 27, 1999, and
the Stock Option Agreement of even date therewith is exempt from Subtitle 7 of
Title 3 of the Maryland General Corporation Law.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The property and business of the Corporation
shall be managed by the Board of Directors of the Corporation.
SECTION 2. Number and Qualification of Directors. The authorized number
of Directors shall be no less than twelve (12) nor more than fourteen (14) until
changed by amendment to the Articles of Incorporation. In accordance with
Article VII of these bylaws, the exact number of Directors shall be fixed within
the limits specified above by a resolution adopted by the Board of Directors.
Directors must be stockholders of the Corporation and must
own, free and clear of all liens, pledges and other encumbrances, a minimum of
100 shares of Corporation stock (par value $1.00 per share) at the date of
election as a Director. Within a five-year period from the date of initial
election as Director, such Director must acquire and maintain, free and clear of
all liens, pledges and other such encumbrances, a minimum of 500 shares of
Corporation stock (par value $1.00 per share). Notwithstanding the foregoing,
the minimum number of shares of the Corporation's stock required to be held by
Directors shall be not less than the number required by Section 3-403 of the
Financial Institutions Article of the Annotated Code of Maryland (or any
successor provision) or otherwise required by law.
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Nomination for election of members of the Board of Directors
may be made by the Board of Directors or by any stockholder of any outstanding
class of capital stock of the Corporation entitled to vote for the election of
Directors. Notice by a stockholder of intention to make any nominations shall be
made in writing and shall be delivered or mailed to the President of the
Corporation not less than 120 days nor more than 150 days prior to any meeting
of stockholders called for the election of Directors. Such notification shall
contain the following information to the extent known by the notifying
stockholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the Corporation owned by each proposed nominee; (d) the name
and residence address of the notifying stockholder; (e) the number of shares of
capital stock of the Corporation owned by the notifying stockholder; and (f) the
consent in writing of the proposed nominee as to the proposed nominee's name
being placed in nomination for Director. Nominations not made in accordance
herewith may, in the discretion of the chairman of the meeting, be disregarded
and upon the chairman's instructions, the tellers can disregard all votes cast
for each such nominee.
An individual may not serve as a Director of the Corporation
if such individual also serves as a director or employee of any financial
institution (other than a subsidiary of the Corporation), or corporation which
maintains as a principal subsidiary one or more financial institutions, or if
such service otherwise would violate the federal Depository Institution
Management Interlocks Act. The term "financial institution" means a credit
union, savings and loan, or commercial bank. The term "principal subsidiary" is
defined to mean one or more financial institutions whose total assets constitute
twenty-five percent (25%) or more of such corporation's consolidated total
assets.
No more than three (3) Directors shall be "insiders" of the
Corporation. The term, "insiders," means an employee of the Corporation or any
financial institution subsidiary of the Corporation, and also means any
beneficial owner (as defined under Section 13(d) of the Securities Exchange Act
of 1934) of ten percent (10%) or more of the Corporation's stock. For purposes
of the ten percent (10%) beneficial ownership test, Corporation stock owned by
such individual's spouse, lineal descendants (i.e., parents and children), any
entity in which the individual owns a controlling interest (i.e., 20% or more
interest), and any group of which the owner is a member will be attributed to
such individual.
SECTION 3. Election and Term of Office. The terms of the initial Board of
Directors shall be set so as to implement staggered terms, with the terms of one
third (or as near one-third as possible) of the Directors being one year, the
terms of one-third being two years and the terms of one third being three years.
Thereafter, one-third of the Directors shall be elected by a majority of the
votes cast at each annual meeting of stockholders or by similar vote at any
special meeting called for the purpose, to serve three-year terms. Each Director
shall hold office until the expiration of the term for which he or she is
elected, except as otherwise stated in these Bylaws, and thereafter until his or
her successor has been elected and qualified. Election of Directors need not be
by written ballot, unless required by Article I of these Bylaws.
SECTION 4. Filling of Vacancies. Any and all vacancies on the Board of
Directors, including those created by increase in the number of Directors or by
removal of Directors, shall be filled by individuals who are not currently
serving as Directors of the Corporation and who are elected by the Board of
Directors to serve the remainder of the vacant Director's term of office.
SECTION 5. Removal. A Director of the Corporation may only be removed
during his or her term of office for cause, which means criminal conviction of a
felony, unsound mind, adjudication of bankruptcy, non-
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acceptance of office or conduct prejudicial to the interest of the Corporation,
by the affirmative vote of a majority of the entire Board of Directors of the
Corporation (exclusive of the Director being considered for removal) or by the
affirmative vote of not less than sixty-seven percent (67%) of the outstanding
voting stock of the Corporation. Stockholders shall not have the right to remove
Directors without such cause. Stockholders may only attempt to remove a Director
for cause after service of specific charges, adequate notice and full
opportunity to refute the charges.
SECTION 6. Place of Meeting. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation, at
such place or places as they may from time to time determine by resolution or by
written consent of all the directors, either within or outside the State of
Maryland. The Board of Directors may hold their meetings by conference telephone
or other similar electronic communications equipment in accordance with the
provisions of Maryland Corporate Law.
SECTION 7. Regular Meetings. The Board of Directors shall hold regular
quarterly meetings on such dates as shall be fixed by the Board. Following each
annual stockholder's meeting, the Board of Directors shall hold its annual
meeting of the Board to elect officers, and transact other business. Notice of
regular meetings shall not be required.
SECTION 8. Special Meetings. Special meetings of the Board of Directors
for any purpose may be called at any time by the Chairman of the Board of
Directors, the President, the Secretary, or by twenty-five (25%) percent or more
of the number of Directors then holding office.
Special meetings of the Board of Directors shall be held upon
two days notice by mail or four (4) hours notice delivered personally or by
telephone or telefax. If notice is by telephone or telefax, it shall be complete
when the person calling the meeting believes in good faith that the notified
person (or a person acting on behalf of or as agent for the notified person) has
heard and acknowledged the notice or received transmission of the facsimile. If
the notice is by mail, it shall be complete when deposited in the U.S. Mail,
charges prepaid and addressed to the notified person at such person's address
appearing on the corporate records or, if such address is not on these records
or is not readily ascertainable, at the place where the regular Board of
Directors meeting is held.
SECTION 9. Quorum. A majority of the whole number of Directors shall
constitute a quorum for the transaction of business at all meetings of the Board
of Directors, but, if at any meeting less than a quorum shall be present, a
majority of those present may adjourn the meeting from time to time, and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Corporation's Articles of Incorporation
or by these Bylaws.
SECTION 10. Compensation of Directors. Directors and members of
committees shall receive neither compensation for their services nor
reimbursement for their expenses unless these payments are fixed by resolution
of the Board of Directors.
SECTION 11. Committees. The Board of Directors, by resolution passed by a
majority of the whole Board, may designate the following standing committees:
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(1) An Investment Committee, which shall have the power to
discount, purchase and sell bills, notes and other
evidences of debt; and
(2) An Audit Committee which shall consist of at least
three members of the Board of Directors none of whom
shall be officers or employees of the Corporation or
any subdivisions of the Corporation and each of whom
shall be independent of management of the Corporation.
The duties of this committee shall be to make suitable
examinations every 12 months of the affairs of the
Corporation. The result of such examination shall be
reported, in writing, to the Board of Directors stating
whether the Corporation is in sound and solvent
condition, whether adequate internal audit controls and
procedures are being maintained, and recommending to
the Board of Directors such changes in the manner of
doing business, etc., as shall be deemed advisable. The
Audit Committee, upon its own authority, may employ a
qualified firm of Certified Public Accountants to make
a suitable examination and audit of the Corporation. If
such procedure is followed, the one annual examination
and audit of such firm of accountants and the
presentation of its report to the Board of Directors
will be deemed sufficient to comply with this section
of these Bylaws.
The Board of Directors, by resolution adopted by a majority of
the authorized number of Directors, also may designate one or more additional
standing committees, including, but not limited to, an Executive Committee
consisting of two or more Directors who shall be appointed by, and hold office
at, the pleasure of the Board of Directors. The Board of Directors may, except
as hereinafter limited, delegate the Executive Committee any of the powers and
authorities of the Board of Directors. Other additional standing committees may
include the Nominating Committee, consisting of two or more Directors and
charged with the responsibility of recommending to the Board of Directors
nominees to Board vacancies, and the Compensation Committee, consisting of two
or more Directors, neither of whom is also an officer of the Corporation, whose
responsibility it is to establish and set each year the compensation
arrangements for senior management.
The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of Directors.
The Board of Directors shall designate one or more Directors
as alternate members of any committee who may replace any absent members at any
meeting of the committee. Any such committee, to the extent provided in the
resolution of the Board of Directors creating it, shall have the authority of
the Board, except with respect to:
(1) The approval of any action for which stockholder
approval is also required,
(2) The filling of vacancies on the Board or in any
committee,
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(3) The fixing of compensation of the Directors for serving
on the Board or on any committee,
(4) The amendment or repeal of bylaws or the adoption of
new bylaws,
(5) The amendment or repeal of any resolution of the Board
which by its express terms is not so amendable or
repealable,
(6) A distribution to stockholders of the Corporation as
defined under Maryland Corporate Law, except at a rate
or in a periodic amount or within a price range
determined by the Board, and permitted by law,
(7) The appointment of members of other committees of the
Board,
(8) The authorization or approval of the reacquisition of
Corporation stock (unless pursuant to a general formula
or method specified by the Board of Directors and
permitted by law), and
(9) The authorization or approval of the issuance or sale
or contract for sale of Corporation stock.
The Board of Directors shall designate a chairman for each
committee who shall have the sole power to call any committee meeting other than
a meeting set by the Board. Except as otherwise established by the Board of
Directors, the provisions of this entire Article II shall apply to committees of
the Board and action by such committees, mutatis mutandis.
ARTICLE III
Officers
SECTION 1. Officers. The officers of the Corporation shall be a
President, a Secretary, and a Chief Financial Officer. The Corporation also may
have, at the discretion of the Board of Directors, a Chairman of the Board and
Vice-Chairman of the Board (both of whom shall be chosen from the Board of
Directors), one or more Vice Presidents, one or more Trust Officers, one or more
Assistant Secretaries, one or more Assistant Treasurers, and any other officers
who may be appointed under Section 3 of this Article III. Any two or more
offices, except those of President and Vice President, may be held by the same
person.
Any officer of the Corporation may be excluded by resolution
of the Board of Directors or by a provision of these Bylaws from participation,
other than in the capacity of a Director, in major policy-making functions of
the Corporation.
The Corporation shall provide a fidelity bond in the amount
required by law to cover each Director and officer of the Corporation who has
control over or access to cash or securities of the Corporation.
SECTION 2. Election. The officers of the Corporation, except those
appointed under Section 3 of this Article III, shall be chosen annually by the
Board of Directors, and each shall hold his or her office until he or she
resigns or is removed or otherwise disqualified to serve, or his or her
successor is elected and qualified.
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<PAGE>
SECTION 3. Subordinate Officers. The Board of Directors may appoint, and
may authorize the President to appoint, any other officers that the Business of
the Corporation may require, each of whom shall hold office for the period, have
the authority, and perform the duties specified in a resolution of the Board of
Directors.
SECTION 4. Removal and Resignation. Any officer may be removed with or
without cause either by the Board at any regular or special Directors' meeting
or, except for an officer chosen by the Board, by an officer on whom the power
of removal may be conferred by the Board.
An officer may resign at any time by giving written notice to
the Board of Directors, the President or the Secretary of the Corporation. An
officer's resignation shall take effect when it is received or at any later time
specified in the resignation. Unless the resignation specifies otherwise, its
acceptance by the Corporation shall not be necessary to make it effective.
SECTION 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to the office.
SECTION 6. Chairman and Vice Chairman of the Board. The Board of
Directors may at its discretion elect a Chairman of the Board who shall preside
at all meetings of the Board of Directors and at all stockholders' meetings at
which the Chairman is present and who shall exercise and perform any other
powers and duties assigned to the Chairman by the Board or prescribed by these
Bylaws. Except where by law the signature of the President is required, the
Chairman shall possess the same power as the President to sign all certificates,
contracts and other instruments of the Corporation which may be authorized by
the Board of Directors. The Chairman of the Board shall be ex officio a member
of all committees.
The Board of Directors in its discretion may elect a Vice
Chairman of the Board, who in the absence of the Chairman, shall preside at all
meetings of the Board of Directors and stockholders.
SECTION 7. President. Subject to any supervisory powers that may be given
by the Board of Directors or these Bylaws to the Chairman of the Board, the
President shall be the Corporation's chief executive officer and, subject to the
control of the Board of Directors, shall have general supervision, direction,
and control over the Corporation's business and officers. The President shall
preside as chairman at all stockholders' meetings and at all Directors meetings
not presided over by the Chairman or Vice Chairman of the Board. The President
shall be ex officio a member of all the standing committees, except the Audit
Committee and the Compensation Committee, shall have the general powers and
duties of management usually vested in presidents of Corporations; shall have
any other powers and duties that are prescribed by the Board of Directors or
these Bylaws; and shall be primarily responsible for carrying out all orders and
resolutions of the Board of Directors.
SECTION 8. Vice President. If the President is absent or is unable or
refuses to act, the Vice Presidents in order of their rank as fixed by the Board
of Directors or, if not ranked, the Vice President designated by the Board of
Directors, shall perform all duties of the President, and when so acting shall
have all of the powers of, and be subject to all the restrictions on, the
President. Each Vice President shall have any other powers and perform any other
duties that are prescribed for said Vice President by the Board of Directors or
these Bylaws.
SECTION 9. Secretary. The Secretary shall keep or cause to be kept and be
available at the principal office and any other place that the Board of
Directors specifies, a book of minutes of all Directors' and
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stockholders' meetings. The minutes of each meeting shall state the time and
place that it was held; whether it was regular or special; if a special meeting,
how it was authorized; the notice given; the names of those present or
represented at stockholders' meetings; and the proceedings of the meetings. A
similar minute book shall be kept for each committee of the Board.
The Secretary shall keep, or cause to be kept, at the
principal office or at the office of the Corporation's transfer agent, a share
register, or duplicate share register, showing the stockholders' names and
addresses, the number and classes of shares held by each, the number and date of
each certificate issued for these shares, and the number and date of
cancellation of each certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all
Directors' and stockholders' meetings required to be given under these Bylaws or
by law, shall keep the corporate seal in safe custody, and shall have any other
powers and perform any other duties that are prescribed by the Board of
Directors or these Bylaws.
The Secretary shall be deemed not to be an executive officer
of the Corporation and the Secretary shall be excluded from participation, other
than in the capacity of Director if the Secretary is also a Director, in major
policy-making functions of the Corporation.
SECTION 10. Chief Financial Officer. The Chief Financial Officer shall be
the Corporation's Treasurer and shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the Corporation's properties and
business transactions, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account at all reasonable times shall be opened to inspection by any
Director.
The Chief Financial Officer shall deposit all money and other
valuables in the name and to the credit of the Corporation with the depositories
designated by the Board of Directors. The Chief Financial Officer shall disburse
the Corporation's funds as ordered by the Board of Directors and shall render to
the President and Directors, whenever they request it, an account of all the
transactions as Chief Financial Officer and of the Corporation's financial
condition; and shall have any other powers and perform any other duties that are
prescribed by the Board of Directors or these Bylaws.
ARTICLE IV
Capital Stock
SECTION 1. Issue of Certificates of Stock. The certificates for shares of
the stock of the Corporation shall be of such form not inconsistent with the
Certificate of Incorporation, or its amendments, as shall be approved by the
Board of Directors. All certificates shall be signed by the President or by the
Vice-President and counter-signed by the Secretary or by an Assistant Secretary,
and sealed with the seal of the Corporation. All certificates for each class of
stock shall be consecutively numbered. The name of the person owning the shares
issued and the address of the holder shall be entered in the Corporation's
books. All certificates surrendered to the Corporation for transfer shall be
canceled and no new certificates representing the same number of shares shall be
issued until the former certificate or certificates for the same number of
shares shall have been so surrendered, and canceled, unless a certificate of
stock is lost or destroyed, in which event the Board of Directors may authorize
the issuance of a new certificate replacing the old one on any terms and
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<PAGE>
conditions, including a reasonable arrangement for indemnification of the
Corporation, that the Board may specify.
SECTION 2. Transfer of Shares. Shares of the capital stock of the
Corporation shall be transferred on the books of the Corporation only by the
holder thereof in person or by his or her attorney upon surrender and
cancellation of certificates for a like number of shares as hereinbefore
provided.
SECTION 3. Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share in the name of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the Laws of Maryland.
SECTION 4. Closing Transfer Books. The Board of Directors may fix the
period, not exceeding twenty (20) days, during which time the books of the
Corporation shall be closed against transfers of stock, or in lieu thereof, the
Board of Directors may fix a date not less than ten (10) days nor more than
ninety (90) days preceding the date of any meeting of stockholders or 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 to receive such dividends or rights. Only stockholders of record
on such date shall be entitled to notice of and to vote at such meeting or to
receive such dividends or rights.
ARTICLE V
Bank Accounts and Loans
SECTION 1. Bank Accounts. Officers or agents of the Corporation
designated by the Board of Directors shall have authority to deposit and
withdraw funds of the Corporation in financial institutions designated by the
Board of Directors. Each financial institution with which funds of the
Corporation are so deposited is authorized to accept, honor, cash and pay,
without limit as to amount, all checks, drafts or other instruments or orders
for the payment of money, when drawn, made or signed by officers or agents
designated by the Board of Directors until written notice of the revocation of
the authority of such officers or agents by the Board of Directors shall have
been received by such financial institutions. The signatures of these officers
or agents shall be certified to the financial institutions in which the funds of
the Corporation are deposited. If no such officers or agents are designated by
the Board of Directors, all of such checks, drafts and other instruments or
orders for the payment of money shall be signed by the President or a Vice
President and countersigned by the Secretary or Treasurer or an Assistant
Secretary or an Assistant Treasurer of the Corporation.
SECTION 2. Loans. Officers or agents of the Corporation designated by the
Board of Directors shall have authority to effect loans, advances or other forms
of credit for the Corporation from such financial institutions, corporations,
firms or persons as the Board of Directors shall designate. As security for the
repayment of such loans, advances, or other forms of credit, these officers or
agents may be authorized by the Board of Directors to assign, transfer, endorse,
and deliver, either originally or in addition or substitution, any or all stock,
bonds, rights, and interests of any kind in or to stocks or bonds, certificates
of such rights or interests, deposits, accounts, documents covering merchandise,
bills and accounts receivable and other commercial paper and evidences or debt
at any time held by the Corporation. These officers or agents may be authorized
by the Board of Directors to execute and deliver one or more notes, acceptances
or written obligations of the Corporation on such terms, and with such
provisions as to the security or sale or disposition thereof as
- 9 -
<PAGE>
such officers or agents shall deem proper. These officers or agents also may be
authorized by the Board of Directors to sell, discount or rediscount with such
financial institutions, corporations, firms or persons any and all commercial
paper, bills receivable, acceptances and other instruments and evidences of debt
at any time held by the Corporation, and to endorse, transfer and deliver the
same. The signatures of these officers and agents shall be certified to each
such financial institution, corporation, firm or person. Each such financial
institution, corporation, firm or person is authorized to rely upon such
certification until written notice of the revocation by the Board of Directors
of the authority of such officers or agents shall be delivered to such financial
institution, corporation, firm or person.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January of each year.
SECTION 2. Notices. Whenever, under the provisions of these Bylaws,
notice is required to be given to any Director, officer or stockholder, unless
otherwise provided in these Bylaws, such notice shall be deemed given if in
writing, and personally delivered, or sent by telefax, or telegram, or by mail,
by depositing the same in a post office or letter box, in a postpaid sealed
wrapper, addressed to each stockholder, officer or Director, as the case may be,
at such address as appears on the books of the Corporation, and such notice
shall be deemed to have been given at the time the same is so personally
delivered, telefaxed, telegraphed or so mailed. Any stockholder, director or
officer may waive any notice required to be given under these Bylaws.
SECTION 3. Voting Upon Stocks. Unless otherwise ordered by the Board of
Directors, the President and the Vice President, or either of them, shall have
full power and authority on behalf of the Corporation to attend and to vote and
to grant proxies to be used at any meetings of stockholders of any corporation
in which the Corporation may hold stock.
ARTICLE VII
Amendment of Bylaws
Upon affirmative vote of the holders of not less than sixty-seven percent
(67%) of the outstanding stock of the Corporation, the stockholders may amend,
alter or repeal these Bylaws. Subject to the right of the stockholders under the
preceding sentence, Bylaws other than a Bylaw fixing or changing the authorized
number of Directors may be adopted, amended, or repealed by the Board of
Directors. However, if the Articles of Incorporation, or a Bylaw adopted by the
stockholders, provide for an indefinite number of Directors within specified
limits, the Directors may by resolution fix the exact number of Directors within
those limits.
ARTICLE VIII
Indemnification
SECTION 1. Definitions. As used in this Article VIII, any word or words
that are defined in Section 2-418 of the Corporations and Associations Article
of the Annotated Code of Maryland (the "Indemnification Section"), as amended
from time to time, shall have the same meaning as provided in the
Indemnification Section.
- 10 -
<PAGE>
SECTION 2. Indemnification of Directors and Officers. The Corporation
shall indemnify and advance expenses to a Director or officer of the Corporation
in connection with a proceeding to the fullest extent permitted by and in
accordance with the Indemnification Section and federal law.
SECTION 3. Indemnification of Other Agents and Employees. With respect to
an employee or agent, other than a Director or officer of the Corporation, the
Corporation may, as determined by and in the discretion of the Board of
Directors of the Corporation, indemnify and advance expenses to such employees
or agents in connection with a proceeding to the extent permitted by and in
accordance with the Indemnification Section and federal law.
END OF BYLAWS
- 11 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Mason-Dixon
Bancshares, Inc. March 31, 1999 financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000879558
<NAME> MASON-DIXON
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 22,442,000
<INT-BEARING-DEPOSITS> 2,058,000
<FED-FUNDS-SOLD> 4,948,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 183,267,000
<INVESTMENTS-CARRYING> 601,873,000
<INVESTMENTS-MARKET> 604,685,000
<LOANS> 505,275,000
<ALLOWANCE> 10,019,000
<TOTAL-ASSETS> 1,186,780,000
<DEPOSITS> 706,631,000
<SHORT-TERM> 61,905,000
<LIABILITIES-OTHER> 9,924,000
<LONG-TERM> 326,396,000
0
0
<COMMON> 5,073,000
<OTHER-SE> 132,795
<TOTAL-LIABILITIES-AND-EQUITY> 1,186,780,000
<INTEREST-LOAN> 12,567,000
<INTEREST-INVEST> 1,379,937
<INTEREST-OTHER> 171,061
<INTEREST-TOTAL> 22,108,000
<INTEREST-DEPOSIT> 6,245,000
<INTEREST-EXPENSE> 11,762,000
<INTEREST-INCOME-NET> 10,346,000
<LOAN-LOSSES> 264,000
<SECURITIES-GAINS> 147,000
<EXPENSE-OTHER> 9,225,000
<INCOME-PRETAX> 2,527,000
<INCOME-PRE-EXTRAORDINARY> 2,527,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,527,000
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 4.06
<LOANS-NON> 7,157,000
<LOANS-PAST> 340,000
<LOANS-TROUBLED> 820,000
<LOANS-PROBLEM> 13,889,373
<ALLOWANCE-OPEN> 8,893,000
<CHARGE-OFFS> 1,070,000
<RECOVERIES> 210,000
<ALLOWANCE-CLOSE> 10,019,000
<ALLOWANCE-DOMESTIC> 10,019,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
