Published:
Merchants Bancshares, Inc. Announces Strong 2008 Third Quarter Results
SOUTH BURLINGTON, Vt., Oct. 23 /PRNewswire-FirstCall/ -- Merchants
Bancshares, Inc. (Nasdaq: MBVT), the parent company of Merchants Bank, today
announced net income of $3.31 million, or diluted earnings per share of $0.55,
for the quarter ended September 30, 2008, a $683 thousand, or 26%, increase
over net income of $2.63 million for the third quarter of 2007 and a $0.12, or
28% increase over diluted earnings per share of $0.43 for the third quarter of
2007. The return on average assets for the third quarter of 2008 and 2007 was
1.01% and 0.94%, respectively. The return on average equity for the third
quarter of 2008 and 2007 was 17.98% and 15.04%, respectively. Merchants
declared a dividend on October 16, 2008, of 28 cents per share payable
November 13, 2008, to shareholders of record as of October 30, 2008.
"In contrast to the volatility evidenced in the daily headlines, Merchants
had a very productive and successful third quarter," said Michael R. Tuttle,
Merchants' President and CEO. "For the third quarter of this year, versus the
same quarter last year, net income was up by 26%, earnings per share were up
by 28%, and net interest income was up by 20%. Loans and deposits continued to
demonstrate strong growth during the quarter. Merchants is well positioned to
serve our markets in the current environment and we provide a stable, secure,
and reliable resource for our depositors and borrowing customers."
Merchants' net interest income increased $1.92 million, or 20%, for the
third quarter of 2008 compared to 2007 and increased $936 thousand, or 9%, on
a linked quarter basis. These increases are a result of strong growth in both
loans and deposits, and a result of the leverage that Merchants has put on
over the last year to take advantage of the favorable interest rate
environment. Average interest earning assets for the quarter were $1.26
billion, compared to $1.06 billion for the third quarter of 2007. Merchants'
net interest margin for the third quarter of 2008 was 3.63%, six basis points
higher than the third quarter of 2007, and 15 basis points higher than the
second quarter of the current year. The increase in the net interest margin
from the second quarter of 2008 to the third quarter was primarily a result of
lower overall funding costs.
Merchants' quarterly average investment portfolio was $449.60 million, an
increase of $151.09 million over the same quarter of 2007; and was $4.06
million higher on a linked quarter basis. Investments purchased during the
last year have consisted exclusively of government agency mortgage backed
securities. With the exception of one AA rated security, all securities in
Merchants' investment portfolio were either Agency guaranteed or rated AAA at
September 30, 2008.
Quarterly average loans were $800.13 million, an increase of $72.97
million, or 10% over the third quarter of 2007, and were $37.37 million, or
5%, higher on a linked quarter basis. Loans ended the third quarter of 2008
at $814.60 million, an increase of $83.09 million over December 31, 2007
ending balances of $731.51 million. The increase since December 31, 2007 is
primarily comprised of residential and commercial mortgages, and commercial
loans. "The system-wide stress in credit markets has provided us with
numerous opportunities to expand market share with strong, credit worthy
borrowers. We have added personnel to take advantage of these selected
opportunities," commented Tuttle.
Non-performing assets increased to $11.59 million at September 30, 2008,
from $9.71 million at December 31, 2007, and $5.34 million at June 30, 2008.
Tuttle remarked, "The increase in non-performing assets during the third
quarter is a result of two commercial accounts that witnessed significant
deterioration in their business during the quarter. We have been monitoring
and working with these accounts closely for an extended period of time. Non-
performing assets levels are still very manageable." Merchants recorded a $575
thousand provision for loan losses during the third quarter, compared to $700
thousand for the same quarter of last year, and $50 thousand for the second
quarter of the current year. Increased loan production, as well as increased
non-performing loans and net charge-offs, resulted in a higher provision for
the third quarter of 2008, compared to the first two quarters of 2008. Net
charge-offs for the third quarter of 2008 were $647 thousand and were $582
thousand for the first nine months of 2008, compared to net charge-offs of
$158 thousand for the third quarter of 2007 and $107 thousand for the first
nine months of last year.
The allowance for loan losses at September 30, 2008 stood at $8.37
million, 1.03% of total loans at September 30, 2008, compared to $8.00
million, 1.09% of total loans at December 31, 2007; and $7.73 million, 1.05%
of total loans at September 30, 2007.
Quarterly average deposits were $947.68 million, an increase of $75.71
million, or 8% over the same quarter of 2007 and were $25.79 million, or 3%,
higher on a linked quarter basis. Deposits ended the quarter at $949.52
million, an increase of $82.08 million over year end balances of $867.44
million. Much of that increase was concentrated in time deposits which have
increased by $51.92 million during 2008. Merchants' savings, NOW and money
market accounts have grown $25.94 million during 2008, while demand deposits
have increased $4.22 million.
Total non-interest income decreased slightly to $2.29 million for the
third quarter of 2008 from $2.32 million for the third quarter of 2007. Non-
interest income excluding gains/losses on investment securities decreased
slightly to $6.75 million for the first nine months of 2008, compared to $6.81
million for the first nine months of 2007.
Total non-interest expense increased $1.06 million to $8.78 million for
the third quarter of 2008 from $7.72 million for the third quarter of 2007;
and increased $1.72 million to $25.86 million for the first nine months of
2008, compared to 2007. Salaries and Employee benefits increased $655 thousand
to $4.51 million for the third quarter of 2008 compared to 2007, and increased
$1.07 million to $12.73 million for the first nine months of 2008, compared to
2007. This increase is primarily a result of additional staff that we have
hired in the corporate banking, executive and trust areas during 2008; as well
as increases in health insurance costs. Legal and professional fees were $629
thousand for the quarter, a $106 thousand increase over last year, and were
$1.91 million for the first nine months of the year, compared to $1.76 million
for the same period in 2007. These increases are a result of a combination of
overall increased third party provider fees and professional fees related to
specific projects. Marketing expenses increased $60 thousand to $342 thousand
for the third quarter of 2008 compared to 2007, and $437 thousand to $1.34
million for the first nine months of this year, compared to last year. Other
non-interest expenses increased $197 thousand to $1.57 million for the third
quarter of 2008 compared to 2007, and decreased $42 thousand to $4.56 million
for the first nine months of 2008, compared to 2007. Merchants experienced
large increases in its FDIC insurance premiums and state assessment fees
during 2008. Additionally, most categories of operating expenses have
increased for 2008 compared to 2007.
Mr. Michael Tuttle, Merchants' President and Chief Executive Officer; and
Ms. Janet Spitler, Merchants' Chief Financial Officer, will host a conference
call to discuss these earnings results at 9:00 a.m. Eastern Time on Wednesday,
October 29, 2008. Interested parties may participate in the conference call by
dialing (888) 423-3273; the title of the call is Earnings Release Conference
Call for Merchants Bancshares, Inc. Participants are asked to call a few
minutes prior to register. A replay will be available until noon on Wednesday,
November 5, 2008. The U.S. replay dial-in telephone number is (800) 475-6701.
The international replay telephone number is (320) 365-3844. The replay access
code for both replay telephone numbers is 902418.
Vermont Matters.(R) The continuing mission of Merchants Bank is to provide
Vermonters with a statewide community bank that blends a strong technology
platform with a genuine appreciation for local markets. Merchants Bank
fulfills this commitment through a branch-based system that includes 36
community bank offices and 44 ATMs throughoutVermont, Personal Bankers
dedicated to top-quality customer service and streamlined solutions,
including: Personal Checking and Savings with Free Checking for Life(R), Cash
Rewards Checking, a low-cost Money Market Account, Free Online Banking and
Bill Pay, Overdraft Coverage, Direct Deposit, Free Debit Card, and Free
Automated Phone Banking; Business Banking with Rewards Checking for Business,
Business Online Banking and Bill Pay, Business Lines of Credit and Merchant
Card Processing; Small Business Loans; Health Savings Accounts; Credit Cards;
Flexible Certificates of Deposit; Vehicle Loans; Home Equity Credit; and Home
Mortgages. Visit mbvt.com for more information. Merchants' stock is traded on
the NASDAQ National Market system under the symbol MBVT. Member FDIC. Equal
Housing Lender.
Some of the statements contained in this press release constitute forward-
looking statements. Forward-looking statements relate to expectations,
beliefs, projections, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not historical
facts. The forward-looking statements reflect Merchants' current views about
future events and are subject to risks, uncertainties, assumptions and changes
in circumstances that may cause Merchants' actual results to differ
significantly from those expressed in any forward-looking statement. Forward-
looking statements should not be relied on since they involve known and
unknown risks, uncertainties and other factors that are, in some cases, beyond
Merchants' control and which could materially affect actual results. The
factors that could cause actual results to differ materially from current
expectations include changes in general economic conditions inVermont,
changes in interest rates, changes in competitive product and pricing
pressures among financial institutions within Merchants' markets, and changes
in the financial condition of Merchants' borrowers. The forward-looking
statements contained herein represent Merchants' judgment as of the date of
this report, and Merchants cautions readers not to place undue reliance on
such statements. For further information, please refer to Merchants' reports
filed with the Securities and Exchange Commission.
Merchants Bancshares, Inc.
Financial Highlights (unaudited)
(In thousands except share and per share data)
09/30/08 12/31/07 09/30/07 12/31/06
Balance Sheets - Period
End
Total assets $1,317,312 $1,170,743 $1,116,079 $1,136,958
Loans 814,598 731,508 739,175 689,283
Allowance for loan losses
("ALL") 8,367 8,002 7,726 6,911
Net loans 806,231 723,506 731,449 682,372
Securities available for
sale 436,021 361,512 298,338 333,958
Securities held to
maturity 3,174 4,078 4,395 5,615
Federal funds sold and
other short-term
investments 111 20,100 15,500 42,000
Other assets 71,775 61,547 66,397 73,013
Deposits 949,521 867,437 866,948 877,352
Securities sold under
agreement to repurchase
and other short-term debt 89,298 98,917 84,484 90,547
Securities sold under
agreement to
repurchase, long-term 54,000 41,500 20,000 20,000
Other long-term debt 117,758 62,117 44,586 53,863
Junior subordinated
debentures issued to
unconsolidated
subsidiary trust 20,619 20,619 20,619 20,619
Other liabilities 9,295 4,846 7,435 4,880
Shareholders' equity 76,821 75,307 72,007 69,697
Balance Sheets - Quarter-
to-Date Averages
Total assets $1,307,023 $1,169,811 $1,113,404 $1,130,370
Loans 800,126 730,688 727,159 685,284
Allowance for loan losses 8,509 7,840 7,217 6,882
Net loans 791,617 722,848 719,942 678,402
Securities available for
sale and FHLB stock 446,687 340,598 298,195 352,393
Securities held to
maturity 2,909 4,247 5,424 5,615
Federal funds sold and
other short-term
investments 5,664 38,227 26,389 26,815
Other assets 60,146 63,891 63,454 67,145
Deposits 947,674 874,406 871,969 864,966
Securities sold under
agreement to repurchase
and other short-term debt 82,794 94,785 80,579 92,779
Securities sold under
agreement to repurchase,
long-term 72,913 35,646 20,000 20,000
Other long-term debt 99,355 60,811 44,843 55,778
Junior subordinated
debentures issued to
unconsolidated
subsidiary trust 20,619 20,619 20,619 20,619
Other liabilities 9,979 10,780 5,458 6,710
Shareholders' equity 73,689 72,764 69,936 69,518
Interest earning assets 1,255,387 1,113,760 1,057,167 1,070,107
Interest bearing
liabilities 1,100,447 958,669 913,927 930,485
Ratios and Supplemental
Information - Period End
Book value per share $13.40 $13.05 $12.43 $11.87
Book value per share (1) $12.70 $12.35 $11.78 $11.25
Tier I leverage ratio 7.50% 8.14% 8.45% 8.24%
Tangible capital ratio 5.83% 6.42% 6.44% 6.11%
Period end common shares
outstanding (1) 6,049,720 6,096,737 6,113,818 6,196,328
Credit Quality - Period
End
Nonperforming loans
("NPLs") $11,594 $9,231 $9,934 $2,698
Nonperforming assets
("NPAs") $11,594 $9,706 $9,934 $2,956
NPLs as a percent of total
loans 1.42% 1.26% 1.34% 0.39%
NPAs as a percent of total
assets 0.88% 0.83% 0.89% 0.26%
ALL as a percent of NPLs 72% 87% 78% 256%
ALL as a percent of total
loans 1.03% 1.09% 1.05% 1.00%
(1) This book value and period end common shares outstanding includes
317,161; 325,789; 321,753; and 323,038 Rabbi Trust shares for the periods
noted above, respectively.
Merchants Bancshares, Inc.
Financial Highlights (unaudited)
(In thousands except share and per share data)
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
2008 2007 2008 2007
Operating Results
Interest income
Interest and fees on loans $11,875 $12,073 $34,814 $35,282
Interest and dividends on
investments 5,742 3,911 16,194 12,753
Total interest and dividend
income 17,617 15,984 51,008 48,035
Interest expense
Deposits 3,966 4,518 12,860 13,409
Short-term borrowings 356 839 1,409 2,603
Long-term debt 1,869 1,125 5,185 3,438
Total interest expense 6,191 6,482 19,454 19,450
Net interest income 11,426 9,502 31,554 28,585
Provision for credit losses 575 700 925 850
Net interest income after
provision for credit losses 10,851 8,802 30,629 27,735
Noninterest income
Trust Company income 457 492 1,435 1,451
Service charges on deposits 1,354 1,364 4,001 4,013
Gain (Loss) on investment
securities -- (60) 82 (97)
Equity in losses of real
estate limited partnerships, net (463) (423) (1,387) (1,267)
Other noninterest income 938 951 2,703 2,615
Total noninterest income 2,286 2,324 6,834 6,715
Noninterest expense
Salaries, wages and employee
benefits 4,508 3,853 12,728 11,656
Occupancy and equipment
expenses 1,482 1,467 4,525 4,495
Legal and professional fees 629 523 1,908 1,758
Marketing expenses 342 282 1,338 901
State franchise taxes 253 222 803 733
Other noninterest expense 1,569 1,372 4,555 4,597
Total noninterest expense 8,783 7,719 25,857 24,140
Income before provision for
income taxes 4,354 3,407 11,606 10,310
Provision for income taxes 1,042 778 2,753 2,368
Net income $3,312 $2,629 $8,853 $7,942
Ratios and Supplemental
Information
Weighted average common shares
outstanding 6,065,705 6,123,080 6,073,322 6,160,863
Weighted average diluted
shares outstanding 6,073,138 6,139,247 6,084,250 6,177,262
Basic earnings per common
share $0.55 $0.43 $1.46 $1.29
Diluted earnings per common
share 0.55 0.43 1.46 1.29
Return on average assets 1.01% 0.94% 0.93% 0.95%
Return on average
shareholders' equity 17.98% 15.04% 15.66% 15.14%
Net interest rate spread 3.35% 3.19% 3.20% 3.23%
Net interest margin 3.63% 3.57% 3.51% 3.60%
Efficiency ratio (1) 60.31% 61.49% 62.83% 62.50%
(1) The efficiency ratio excludes amortization of intangibles, equity in
losses of real estate limited partnerships, OREO expenses, gain/loss on sales
of securities, state franchise taxes, and any significant nonrecurring items.
Note: As of September 30, 2008, the Bank had off-balance sheet liabilities
in the form of standby letters of credit to customers in the amount of $4.74
million.
SOURCE Merchants Bancshares, Inc.
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Copyright © 2009, NewsBlaze,
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