SOUTH BURLINGTON, Vt., Jan. 28 /PRNewswire-FirstCall/ -- Merchants Bancshares, Inc. , the parent company of Merchants Bank, today announced net income of $11.92 million or diluted earnings per share of $1.96 for the year ended December 31, 2008. This compares with net income of $10.86 million or diluted earnings per share of $1.76 from the previous year. Merchants earned $3.06 million or diluted earnings per share of $0.51 for the quarter ended December 31, 2008, compared to net income of $2.92 million or diluted earnings per share of $0.48 for the same quarter of the previous year. Merchants previously announced the declaration of a dividend of 28 cents per share, payable February 19, 2009, to shareholders of record as of February 5, 2009.
The return on average assets was 0.93% for both 2008 and for the quarter ended December 31, 2008, compared to 0.96% for 2007 and 1.00% for the quarter ended December 31, 2007. The return on average equity was 15.83% for the year and 16.32% for the quarter ended December 31, 2008, compared to 15.37% for the year and 16.03% for the fourth quarter of 2007.
"2008 was a strong year for us, with EPS up 11% compared to 2007, in spite of a very challenging economic climate," said Michael R. Tuttle, Merchants' President and CEO. "We experienced solid growth in both loans and deposits during the year. Merchants Bank presented a safe, stable, secure profile in contrast to the volatility evident in the daily headlines."
Merchants' net interest margin increased slightly to 3.58% for 2008, compared to 3.56% for 2007, and increased 37 basis points to 3.81% for the fourth quarter of 2008, compared to 3.44% for the fourth quarter of 2007. Merchants' net interest income increased $5.44 million to $43.65 million for 2008 compared to 2007, a 14% increase, and increased $2.47 million to $12.10 million for the fourth quarter of 2008 compared to 2007, a 26% increase. Merchants' net interest margin and net interest income were positively impacted during the fourth quarter by a $194 thousand prepayment penalty received on an investment security. This prepayment penalty benefited the margin for the fourth quarter by six basis points, and benefited the margin for 2008 by one basis point. The increased net interest income is a result of an overall higher earning asset base and a higher net interest rate spread for 2008, when compared to 2007. Merchants' average earning assets for 2008 were $1.22 billion at an average yield of 5.63%, compared to $1.08 billion at an average yield of 6.01% for 2007. Average loans for 2008 were $781.65 million, a $68.53 million, or 10%, increase over 2007 average loans, and average investments were $428.20 million, a $102.34 million, or 31%, increase over 2007 averages. Average interest bearing liabilities increased to $1.07 billion at an average interest cost of 2.33% for 2008, compared to $931.59 million at an average cost of 2.83% for 2007.
Loans ended 2008 at $847.13 million, a $115.62 million, or 16%, increase over 2007 ending balances. Quarterly average loans were $825.40 million for the fourth quarter of 2008, a $94.71 million increase over the fourth quarter of last year. Merchants experienced strong growth across all loan categories during 2008; year-end 2008 commercial loans were 39% higher than year end 2007, residential real estate loans were 11% higher and commercial real estate balances were 17% higher. "We continue to find opportunities with solid, longstanding, creditworthy businesses throughout Vermont. We have also experienced a 32% increase in home mortgage originations for 2008 compared to 2007; this is a direct result of the fact that we have not originated home mortgages for sale for more than ten years. Our customers like having their mortgages held and serviced right here in Vermont," commented Tuttle.
Year-end loan balances were as follows: (In thousands) December 31, 2008 December 31, 2007 ----------------------------------------------------------------------- Commercial, financial and agricultural $129,032 $92,740 Real estate loans - residential 395,834 356,472 Real estate loans - commercial 273,526 234,675 Real estate loans - construction 40,357 39,347 Installment loans 7,670 7,220 All other loans 708 1,054 ----------------------------------------------------------------------- Total loans $847,127 $731,508 -----------------------------------------------------------------------
Merchants' investment portfolio increased to $431.61 million at December 31, 2008 from $365.59 million at December 31, 2007, an 18% increase. 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 December 31, 2008. Merchants wrote the AA-rated security down to its estimated fair value during the fourth quarter of 2008 and recorded a pre-tax other than temporary impairment charge of $369 thousand.
Deposits ended 2008 at $930.80 million, a $63.36, or 7% increase over 2007 ending balances. Quarterly average deposits were $946.53 million, a $72.13 million, or 8%, increase over the fourth quarter of last year. Time deposits were the fastest growing category of deposits during 2008, increasing 16% during 2008 to $385.12 million from $332.77 million at year end 2007. Time deposits represented 41% of Merchants' total deposits at December 31, 2008, compared to 38% of total deposits at December 31, 2007.
Merchants recorded a $600 thousand provision for credit losses during the fourth quarter of 2008 and $1.53 million year-to-date, compared to a $300 thousand provision for credit losses during the fourth quarter of 2007, and $1.15 million for 2007. The increase in the provision for 2008 was primarily a result of strong loan growth during 2008, as well as increased nonperforming loans and net charge-offs during the year. Nonperforming loans ended the year at $11.64 million, compared to $9.23 million at December 31, 2007. Nonaccruing loan totals at December 31, 2008 were flat compared to September 30 of this year, as reductions, and transfers to Other Real Estate Owned ("OREO"), of existing accounts totaling approximately $1.7 million were matched by equal amounts of additions during the quarter. Tuttle commented, "We continue to make good progress on reducing existing non-accrual loans, but expect to see some of this offset by additions in the current economic environment." At December 31, 2008, the allowance for loan losses was $8.89 million, 1.05% of total loans and 76% of non-performing loans, compared to the December 31, 2007 balance of $8.00 million, 1.09% of total loans and 87% of non-performing loans. Net charge-offs for 2008 totaled $564 thousand, compared to net charge-offs of $81 thousand for 2007. One loan accounted for almost all of the charge-offs during 2008, this loan was fully reserved at the end of 2007. Merchants had $803 thousand in OREO at December 31, 2008, and $475 thousand at December 31, 2007. Nonperforming assets as a percentage of total assets were 0.93% at December 31, 2008, compared to 0.83% at December 31, 2007.
Merchants' noninterest income decreased by $686 thousand to $8.66 million for 2008 compared to 2007 and by $805 thousand to $1.82 million for the fourth quarter of 2008 compared to the same period in 2007. As mentioned previously, Merchants recorded a $369 thousand other than temporary impairment charge related to one of its investment securities during the fourth quarter. Additionally, Merchants sold an investment in a limited partnership during the fourth quarter of last year and recognized a reduction in equity in losses of real estate limited partnerships of approximately $260 thousand. Excluding all security transactions and the gain just mentioned, noninterest income decreased by $176 thousand to $2.19 million for the fourth quarter of 2008 compared to 2007, and by $236 thousand to $8.95 million year to date. Trust company income has suffered in the current difficult market conditions, decreasing by $110 thousand for the fourth quarter of this year compared to last, and by $126 thousand year to date.
Total noninterest expense increased $1.10 million to $9.24 million for the fourth quarter of 2008 compared to 2007, and $2.81 million to $35.10 million year to date. Salaries and employee benefits increased $899 thousand to $4.88 million for the fourth quarter of this year compared to 2007, and $1.97 million to $17.60 million year to date. 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.
Merchants also announced the extension, through January 2010, of its stock buyback program, originally adopted in January 2007. Under the program Merchants may repurchase 200,000 shares of its common stock on the open market from time to time, and had purchased 143,475 shares through December 31, 2008. Although Merchants did not repurchase any of its shares during the fourth quarter of 2008, and does not expect to repurchase shares in the near future, Merchants wanted to preserve the flexibility of an active buyback program.
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 30, 2009. 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 Friday, February 6, 2009. 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 967736.
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 34 community bank offices and 42 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), 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 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) 12/31/08 09/30/08 12/31/07 09/30/07 -------- -------- -------- -------- Balance Sheets - Period End Total assets $1,341,210 $1,317,312 $1,170,743 $1,116,079 Loans 847,127 814,598 731,508 739,175 Allowance for loan losses ("ALL") 8,894 8,367 8,002 7,726 Net loans 838,233 806,231 723,506 731,449 Securities available for sale 429,872 436,021 361,512 298,338 Securities held to maturity 1,737 3,174 4,078 4,395 Federal funds sold and other short-term investments 111 111 20,100 15,500 Other assets 71,257 71,775 61,547 66,397 Deposits 930,797 949,521 867,437 866,948 Securities sold under agreement to repurchase and other short-term debt 124,408 89,298 98,917 84,484 Securities sold under agreement to repurchase, long-term 54,000 54,000 41,500 20,000 Other long-term debt 118,643 117,758 62,117 44,586 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 20,619 20,619 Other liabilities 14,847 9,295 4,846 7,435 Shareholders' equity 77,896 76,821 75,307 72,007 Balance Sheets - Quarter-to-Date Averages Total assets $1,320,845 $1,307,023 $1,169,811 $1,113,404 Loans 825,395 800,126 730,688 727,159 Allowance for loan losses 8,596 8,509 7,840 7,217 Net loans 816,799 791,617 722,848 719,942 Securities available for sale and FHLB stock 428,307 446,688 340,598 298,195 Securities held to maturity 2,187 2,909 4,247 5,424 Federal funds sold and other short-term investments 2,420 5,664 38,227 26,389 Other assets 71,132 60,145 63,891 63,454 Deposits 946,534 947,674 874,406 871,969 Securities sold under agreement to repurchase and other short-term debt 96,736 82,794 94,785 80,579 Securities sold under agreement to repurchase, long-term 54,000 72,913 35,646 20,000 Other long-term debt 117,996 99,355 60,811 44,843 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 20,619 20,619 Other liabilities 9,845 9,979 10,780 5,458 Shareholders' equity 75,115 73,689 72,764 69,936 Interest earning assets 1,266,714 1,255,387 1,113,760 1,057,167 Interest bearing liabilities 1,110,612 1,100,447 958,669 913,927 Ratios and Supplemental Information - Period End Book value per share $13.58 $13.40 $13.05 $12.43 Book value per share (1) $12.85 $12.70 $12.35 $11.78 Tier I leverage ratio 7.28% 7.50% 8.14% 8.45% Tangible capital ratio 5.81% 5.83% 6.42% 6.44% Period end common shares outstanding (1) 6,061,182 6,049,720 6,096,737 6,113,818 Credit Quality - Period End Nonperforming loans ("NPLs") $11,643 $11,594 $9,231 $9,934 Nonperforming assets ("NPAs") $12,446 $11,594 $9,706 $9,934 NPLs as a percent of total loans 1.37% 1.42% 1.26% 1.34% NPAs as a percent of total assets 0.93% 0.88% 0.83% 0.89% ALL as a percent of NPLs 76% 72% 87% 78% ALL as a percent of total loans 1.05% 1.03% 1.09% 1.05% (1) This book value and period end common shares outstanding includes 323,754; 317,161; 325,789; and 321,753; Rabbi Trust shares for the periods noted above, respectively. Merchants Bancshares, Inc. Financial Highlights (unaudited) (In thousands except share and per share data) December 31, December 31, 2008 2007 2008 2007 ---- ---- ---- ---- Operating Results Interest income Interest and fees on loans $11,797 $11,987 $46,611 $47,269 Interest and dividends on investments 5,777 4,577 21,971 17,330 Total interest and dividend income 17,574 16,564 68,582 64,599 Interest expense Deposits 3,386 4,551 16,246 17,960 Short-term borrowings 277 900 1,686 3,503 Long-term debt 1,812 1,485 6,997 4,923 Total interest expense 5,475 6,936 24,929 26,386 Net interest income 12,099 9,628 43,653 38,213 Provision for credit losses 600 300 1,525 1,150 Net interest income after provision for credit losses 11,499 9,328 42,128 37,063 Noninterest income Trust Company income 396 506 1,831 1,957 Service charges on deposits 1,436 1,461 5,437 5,474 Loss on investment securities (369) -- (287) (97) Equity in losses of real estate limited partnerships, net (462) (217) (1,849) (1,484) Other noninterest income 823 879 3,526 3,494 Total noninterest income 1,824 2,629 8,658 9,344 Noninterest expense Salaries, wages and employee benefits 4,875 3,976 17,603 15,632 Occupancy and equipment expenses 1,557 1,518 6,082 6,013 Legal and professional fees 541 653 2,449 2,411 Marketing expenses 314 298 1,652 1,199 State franchise taxes 263 259 1,066 992 Other noninterest expense 1,694 1,444 6,249 6,041 Total noninterest expense 9,244 8,148 35,101 32,288 Income before provision for income taxes 4,079 3,809 15,685 14,119 Provision for income taxes 1,015 893 3,768 3,261 Net income $3,064 $2,916 $11,917 $10,858 Ratios and Supplemental Information Weighted average common shares outstanding 6,058,922 6,112,689 6,069,653 6,148,494 Weighted average diluted shares outstanding 6,063,815 6,127,279 6,079,274 6,164,441 Basic earnings per common share $0.51 $0.48 $1.96 $1.77 Diluted earnings per common share 0.51 0.48 1.96 1.76 Return on average assets 0.93% 1.00% 0.93% 0.96% Return on average shareholders' equity 16.32% 16.03% 15.83% 15.37% Net interest rate spread 3.56% 3.04% 3.30% 3.18% Net interest margin 3.81% 3.44% 3.58% 3.56% Efficiency ratio (1) 60.75% 62.29% 62.27% 62.45% (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, 2008, the Bank had off-balance sheet liabilities in the form of standby letters of credit to customers in the amount of $3.90 million. Merchants Bancshares, Inc. Financial Highlights (unaudited) (In thousands except share and per share data) For the Twelve Months Ended December 31, 2008 2007 ---- ---- Balance Sheets - Year to-Date Averages Total assets $1,277,242 $1,131,588 Loans 781,645 713,119 Allowance for loan losses 8,415 7,275 Net loans 773,230 705,844 Securities available for sale and FHLB stock 425,038 320,733 Securities held to maturity 3,160 5,127 Federal funds sold and other short-term investments 10,551 36,388 Other assets 65,263 63,496 Deposits 923,863 873,674 Securities sold under agreement to repurchase and other short-term debt 89,382 85,041 Securities sold under agreement to repurchase, long-term 62,046 23,944 Other long-term debt 93,753 50,719 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 Other liabilities 12,276 6,930 Shareholders' equity 75,303 70,661 Interest earning assets 1,220,394 1,075,367 Interest bearing liabilities 1,070,181 931,588
