SOUTH BURLINGTON, Vt., Jan. 23 /PRNewswire-FirstCall/ -- Merchants Bancshares, Inc. , the parent company of Merchants Bank, today announced net income of $10.86 million or diluted earnings per share of $1.76 for the year ended December 31, 2007. This compares with net income of $10.87 million or diluted earnings per share of $1.73 from the previous year. Merchants earned $2.92 million or diluted earnings per share of 48 cents for the quarter ended December 31, 2007, compared to net income of $2.83 million or diluted earnings per share of 45 cents for the same quarter of the previous year. Merchants also announced the extension through January 2009 of its stock buyback program, originally adopted in January 2006. Merchants may repurchase 200,000 shares of its common stock on the open market from time to time, and had purchased 59,118 shares through December 31, 2007 under the program. Merchants previously announced the declaration of a dividend of 28 cents per share, payable February 14, 2008, to shareholders of record as of January 31, 2008.
The return on average assets was 0.96% for 2007 and 1.00% for the quarter ended December 31, 2007, compared to 0.98% and 1.00%, respectively, for the same periods in 2006. The return on average equity was 15.37% for the year and 16.03% for the fourth quarter of 2007, compared to 16.24% and 16.30%, respectively, for the same periods in 2006.
"Credit and interest rate market conditions during 2007 were challenging," said Michael R. Tuttle, Merchants' President and CEO. "Results for 2007 were flat compared to 2006, in spite of the addition of $1.15 million to our allowance for loan losses and further margin compression. Continued growth in loans and noninterest income, coupled with good control over noninterest expense, were important factors in our 2007 results. The year ahead will offer both significant challenges and opportunities to improve performance."
Merchants recorded a $300 thousand provision for credit losses during the fourth quarter of 2007, and $1.15 million year to date; no provision for credit losses was recorded during 2006. The increase in the provision for 2007 was primarily a result of increases in nonperforming loans and growth in the overall loan portfolio during 2007. Nonperforming loans ended the year at $9.23 million, a $6.53 million increase from December 31, 2006 balances. The net increase during the year was primarily attributable to $6.9 million in loans related to a residential construction project. At December 31, 2007, the allowance for loan losses was $8.00 million, 1.09% of total loans and 87% of non-performing loans. Net charge-offs for 2007 totaled $81 thousand, compared to net recoveries of $198 thousand for 2006. Merchants had two small properties with a combined value of $475 thousand in Other Real Estate Owned ("OREO") at December 31, 2007. Nonperforming assets as a percentage of total assets were 0.83%.
Net interest income was $38.21 million for 2007, a decrease of $498 thousand from 2006, and was $9.63 million for the fourth quarter of 2007, a decrease of $134 thousand from the same quarter of the prior year. Merchants' net interest margin has continued to come under pressure during 2007, and decreased 13 basis points during 2007. Total average earning assets have increased $25 million to $1.08 billion for 2007 compared to 2006, and the rate earned on those assets has increased 10 basis points to 6.01% for the same time period. The rate earned on Merchants' loan portfolio dropped six basis points during 2007, as a result of both an overall lower interest rate environment and increases in nonperforming loans. At the same time, the average rate earned on Merchants' investment portfolio increased by 13 basis points as Merchants was able to replace amortization in the portfolio with higher yielding assets. Merchants' cost of funds increased 29 basis points when comparing 2007 to 2006. Merchants experienced continued migration to its time categories from its transaction categories during the year. Average time deposits for the fourth quarter of 2007 were $28.61 million higher than for the fourth quarter of 2006, while average Savings, NOW and Money Market accounts were $23.12 million lower for the same time period. The cost of transaction accounts was unchanged from 2006 to 2007, while the cost of time deposits increased 63 basis points. Merchants raised rates on time deposits during the first three quarters of the year to be competitive in the local marketplace. These rates have started to moderate as short-term interest rates have moved down during the last two quarters.
Total assets increased $33.79 million to $1.17 billion at December 31, 2007 from $1.14 billion at December 31, 2006. Total loans increased to $731.51 million at December 31, 2007 from $689.28 million at December 31, 2006. Increases in average balances were driven primarily by growth in residential mortgages and commercial loans.
Merchants' investment portfolio increased to $365.59 million at December 31, 2007 from $339.57 million at December 31, 2006. Merchants took advantage of the steepening yield curve toward the end of 2007 and increased the investment portfolio by $62.86 million during the fourth quarter of 2007. These investments were funded by a mix of Federal Home Loan Bank borrowings and structured repurchase agreements. During the fourth quarter, Merchants' long term repurchase agreement position increased $21.50 million and its long term FHLB borrowing position increased $17.53 million. The average spread earned on the leveraged investment trades was approximately 130 basis points.
Average deposits for the fourth quarter of 2007 were $874.41 million, an increase of $9.44 million from quarterly average deposits for the fourth quarter of last year of $864.97 million. Merchants continued to make progress with its business banking deposits and introduced new programs during 2007. A more integrated approach to packaging deposit accounts and services has facilitated customer movement of funds to the most advantageous structures. Although growth in balances was moderate, the number of banking relationships continues to grow.
Merchants' noninterest income increased $520 thousand for the fourth quarter of 2007, compared to the same quarter in 2006; and $1.29 million for 2007, compared to 2006. Excluding losses on investment securities, noninterest income increased $508 thousand for the fourth quarter of 2007, compared to the same quarter in 2006; and $926 thousand when comparing 2007 to 2006. Merchants wound up an investment in a limited partnership during the fourth quarter of 2007 and recognized a reduction in equity in losses of real estate limited partnerships of approximately $260 thousand. The balance of the year over year increase is a result of a combination of increased Trust revenue, increased debit card revenue and increased overdraft fee income. Total noninterest expenses decreased $8 thousand for the fourth quarter of 2007, and decreased by $302 thousand, when comparing 2007 to 2006. This decrease is primarily a result of decreases in employee benefits, which decreased $58 thousand for the fourth quarter of 2007, compared to 2006 and decreased $502 thousand for 2007, compared to 2006. The primary reason for this change is a reduction in Merchants' employer match for its 401(k) plan for 2007. Merchants' expenses related to OREO increased during 2007 as OREO balances grew to $475 thousand at year end.
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 9:30 a.m. Eastern Time on Friday, January 25, 2008. Interested parties may participate in the conference call by dialing (888) 428-4480; 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 Friday, February 1, 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 902415.
The continuing mission of Merchants Bank is to provide Vermonters with a state-wide 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 throughout Vermont, Personal Bankers dedicated to top- quality customer service and streamlined solutions, including: Personal Checking and Savings with Free Checking for Life(R), 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 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 in Vermont, 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) 12/31/07 09/30/07 12/31/06 09/30/06 Balance Sheets - Period End Total assets $1,170,743 $1,116,079 $1,136,958 $1,126,197 Loans 731,508 739,175 689,283 679,884 Allowance for loan losses ("ALL") 8,002 7,726 6,911 6,858 Net loans 723,506 731,449 682,372 673,026 Securities available for sale 361,512 298,338 333,958 371,519 Securities held to maturity 4,078 4,395 5,615 6,058 Federal funds sold, securities purchased under agreements to resell, and other short-term investments 20,100 15,500 42,000 -- Other assets 61,547 66,397 73,013 75,594 Deposits 867,437 866,948 877,352 857,058 Securities sold under agreement to repurchase and other short-term borrowings 98,917 84,484 90,547 93,791 Securities sold under agreement to repurchase, long-term 41,500 20,000 20,000 20,000 Other long-term debt 62,117 44,586 53,863 59,382 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 20,619 20,619 Other liabilities 4,846 7,435 4,880 6,585 Shareholders' equity 75,307 72,007 69,697 68,762 Balance Sheets - Quarter-to-Date Averages Total assets $1,169,811 $1,113,404 $1,130,370 $1,114,026 Loans 730,688 727,159 685,284 660,069 Allowance for loan losses 7,840 7,217 6,882 6,703 Net loans 722,848 719,942 678,402 653,366 Securities available for sale 335,484 293,081 346,532 380,252 Securities held to maturity 4,247 5,424 5,615 6,313 Federal funds sold, securities purchased under agreements to resell, and other short-term investments 38,227 26,389 26,500 123 Other assets 69,005 68,568 73,321 73,972 Deposits 874,406 871,969 864,966 863,099 Securities sold under agreement to repurchase and other short-term borrowings 94,785 80,579 92,779 88,370 Securities sold under agreement to repurchase, long-term 35,646 20,000 20,000 20,000 Other long-term debt 60,811 44,843 55,778 50,353 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 20,619 20,619 Other liabilities 10,780 5,458 6,710 6,087 Shareholders' equity 72,764 69,936 69,518 65,498 Interest earning assets 1,113,760 1,057,167 1,070,107 1,053,930 Interest bearing liabilities 958,669 913,927 930,485 920,467 Ratios and Supplemental Information - Period End Book value per share $13.05 $12.43 $11.87 $11.57 Book value per share (1) $12.35 $11.78 $11.25 $10.99 Tier I leverage ratio 8.14% 8.45% 8.24% 8.29% Tangible capital ratio 6.42% 6.44% 6.11% 6.21% Period end common shares outstanding (1) 6,096,737 6,113,818 6,196,328 6,257,938 Credit Quality - Period End Nonperforming loans ("NPLs") $9,231 $9,934 $2,698 $2,867 Nonperforming assets ("NPAs") 9,706 9,934 2,956 3,179 NPLs as a percent of total loans 1.26% 1.34% 0.39% 0.42% NPAs as a percent of total assets 0.83% 0.89% 0.26% 0.28% ALL as a percent of NPLs 87% 78% 256% 239% ALL as a percent of total loans 1.09% 1.05% 1.00% 1.01% (1) This book value and period end common shares oustanding includes 325,789, 322,981, 323,038 and 316,258 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 Twelve Months Ended Ended December 31, December 31, 2007 2006 2007 2006 Operating Results Interest income Interest and fees on loans $11,987 $11,682 $47,269 $43,446 Interest and dividends on investments 4,577 4,565 17,330 18,554 Total interest and dividend income 16,564 16,247 64,599 62,000 Interest expense Deposits 4,551 4,191 17,960 14,669 Short-term borrowings 900 1,047 3,503 4,060 Long-term debt 1,485 1,247 4,923 4,560 Total interest expense 6,936 6,485 26,386 23,289 Net interest income 9,628 9,762 38,213 38,711 Provision for credit losses 300 -- 1,150 -- Net interest income after provision for credit losses 9,328 9,762 37,063 38,711 Noninterest income Trust Company income 506 443 1,957 1,763 Service charges on deposits 1,461 1,282 5,474 5,276 Loss on investment securities -- (12) (97) (464) Equity in losses of real estate limited partnerships, net (217) (399) (1,484) (1,669) Other noninterest income 879 795 3,494 3,145 Total noninterest income 2,629 2,109 9,344 8,051 Noninterest expense Salaries, wages and employee benefits 3,976 3,964 15,632 16,149 Occupancy and equipment expenses 1,518 1,561 6,013 6,021 Legal and professional fees 653 712 2,411 2,432 Marketing expenses 298 407 1,199 1,455 Other real estate owned (OREO) 58 7 383 52 Other noninterest expense 1,645 1,505 6,650 6,481 Total noninterest expense 8,148 8,156 32,288 32,590 Income before provision for income taxes 3,809 3,715 14,119 14,172 Provision for income taxes 893 883 3,261 3,301 Net income $2,916 $2,832 $10,858 $10,871 Ratios and Supplemental Information Weighted average common shares outstanding 6,112,689 6,246,096 6,148,494 6,275,709 Weighted average diluted shares outstanding 6,127,279 6,267,318 6,164,441 6,299,763 Basic earnings per common share $0.48 $0.45 $1.77 $1.73 Diluted earnings per common share 0.48 0.45 1.76 1.73 Return on average assets 1.00% 1.00% 0.96% 0.98% Return on average shareholders' equity 16.03% 16.30% 15.37% 16.24% Net interest rate spread 3.04% 3.26% 3.18% 3.37% Net interest margin 3.44% 3.62% 3.56% 3.69% Efficiency ratio (1) 62.29% 64.78% 62.45% 63.75% (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 December 31, 2007, the Bank had off-balance sheet liabilities in the form of standby letters of credit to customers in the amount of $5.22 million.
