Mercantile Bankshares Corp.'s 147th consecutive quarterly dividend - announced by management yesterday - will likely be its last as it prepares for shareholders to vote on a $6 billion merger with Pittsburgh-based PNC Financial Services Group this month.
The bank declared a dividend of 28 cents per share payable on Feb. 28 - the day after shareholders are scheduled to vote on the PNC deal. PNC officials said they remain on track to obtain regulatory approval in late March, with Mercantile signs coming down and customers being transferred sometime in August or September.
"We're really working with Mercantile management business by business to define the appropriate strategies once we come together and how that will work moving forward," said Brian Goerke, a PNC spokesman.
The shareholder meeting date was spelled out in a regulatory filing last month, which also provided details of employment contracts that will pay a handful of Mercantile executives millions of dollars as part of a transition plan that seeks to retain the bank's top talent.
A PNC spokesman said the bank wants to retain Mercantile employees who come face-to-face with customers, as well as the managers who have run the bank as it has grown through acquisitions in recent years. Some of the cost savings from the deal will come through job cuts, but PNC has said it does not expect to close branches because there is little overlap between the two banks.
Edward J. Kelly III, the bank's chief executive, will become a PNC vice chairman and receive an annual base salary of $600,000, along with a bonus of $1.4 million at the end of the year, a Securities and Exchange Commission filing shows. He also will get 16,000 PNC restricted shares and an award of restricted stock with a combined value of $5 million when the deal closes, according to last month's SEC filing.
Both awards will vest upon the second anniversary of the deal's closing. Kelly also will be entitled to the usual trappings of executive life, such as use of PNC's corporate jet for certain business purposes, secretarial services and - less common for executives - a dollar-for-dollar match on charitable donations he makes this year up to an aggregate of $150,000.
The employment deal calls for Kelly to be reimbursed for moving expenses if he is required to relocate to Washington, where PNC has a sizable presence as a result of its 2005 purchase of Riggs Bank.
It was unclear yesterday whether Kelly's plans include moving. A Mercantile spokeswoman referred questions to Goerke, who said details of Kelly's role at the bank have not been announced. He added that it is not the bank's policy to comment on individual employment matters.
Months before the deal was announced, Kelly agreed to forgo his "golden parachute" should the bank be sold, saying he was "sick" of the big payouts executives were getting in such deals. The agreement would have given him a $9 million payout. His new base salary at PNC will be about 35 percent less than the base he earned with Mercantile in 2006. In all, Kelly made about $3 million in salary, restricted stock and bonus in 2006.
Other executives with PNC employment agreements include Alexander Mason, Mercantile's chief operating officer; Peter W. Floeckher, who heads Mercantile's affiliate banks; and J. Marshall Reid, president of Mercantile-Safe Deposit & Trust; and Jay M. Wilson, who headed the bank's wealth management division.
Gary B. Townsend, an analyst with Friedman Billings Ramsey in Arlington, Va., said hanging on to Mercantile's top talent makes sense for PNC as it strives for a smooth transition.
"I think [Kelly] is probably holding on to a coterie of individuals that he wants to have working with him going forward and I think that's probably how they were selected," Townsend said.
Reid's employment agreement calls for a cash payment of $850,000 the day after the deal closes and a "stay" bonus of $836,986 in each of the next two years. He will also receive restricted stock valued at $378,596 that will vest on the second anniversary of the deal's conclusion.
Wilson's agreement will pay him $3.9 million when the deal closes and a $1 million bonus if he stays through the first year. Mason will receive a cash payment of $4.2 million the day after the deal closes.
"We're certainly interested in retaining as many of the ... employees that deal with customers every day, and Mercantile also has a strong management team, and we're looking to retain the appropriate individuals to move the company forward as successfully as they have been in the past," Goerke said.
Townsend, the Friedman Billings analyst, said it wouldn't be surprising to see Kelly make a move in the near future.
"I think [Kelly] is a talented guy ... and he has long-standing ties both in Washington and Maryland, so there could be opportunities in Maryland and outside of banking for him that would make themselves apparent in a couple of years," Townsend said.