SOUTH BURLINGTON, Vt., April 29 /PRNewswire-FirstCall/ -- Merchants Bancshares, Inc. , the parent company of Merchants Bank, today announced net income of $2.91 million or diluted earnings per share of $0.48 for the quarter ended March 31, 2009. This compares with net income of $2.66 million or diluted earnings per share of $0.44 for the first quarter of 2008. Merchants previously announced the declaration of a dividend of 28 cents per share, payable May 14, 2009, to shareholders of record as of April 30, 2009.
The return on average assets was 0.87% for the first quarter of 2009, compared to 0.88% for the first quarter of 2008. The return on average equity was 14.50% for the first quarter of this year, compared to 13.83% for the same period in 2008.
"We were able to continue our strong performance into the first quarter of 2009, with earnings per share up 9%, compared to the same period in 2008, in spite of the continued challenging economic climate," said Michael R. Tuttle, Merchants' President and CEO. "We experienced solid growth in both loans and deposits during the quarter. Asset quality remained strong and capital levels continue to be well in excess of regulatory requirements."
Merchants' net interest income increased $2.70 million, or 28.0%, for the first quarter of 2009, compared to the same period in 2008. This increase was a result of strong growth in both loans and deposits, in addition to lowered funding costs during the quarter. Average interest earning assets for the quarter were $1.30 billion, compared to $1.14 billion for the first quarter of 2008. Merchants' net interest margin for the first quarter of 2009 was 3.85%, compared to 3.40% for the first quarter of 2008.
Merchants' quarterly average loans were $865.96 million, an increase of $128.35 million, or 17% over the first quarter of 2008, and were $40.57 million, or 5% higher on a linked quarter basis. Loans ended the first quarter of 2009 at $892.58 million, an increase of $45.45 million over December 31, 2008 ending balances of $847.13 million. The increase since December 31, 2008, is comprised of residential and commercial mortgages, and commercial loans. Merchants has hired additional lenders in its corporate banking group, which has led to increased loan production. Tuttle commented, "Our status as the last independent, statewide bank continues to have appeal to business owners and has helped us attract new commercial customers. The combination of lower interest rates and reduced competition in the residential area, coupled with the fact that we do not originate loans for sale, has provided us with a substantial pipeline of new retail customers."
Quarter end loan balances were as follows: (In thousands) March 31, 2009 December 31, 2008 Commercial, financial and agricultural $ 140,866 $ 129,032 Real estate loans - residential 423,161 395,834 Real estate loans - commercial 279,041 273,526 Real estate loans - construction 40,478 40,357 Installment loans 7,545 7,670 All other loans 1,488 708 Total loans $ 892,579 $ 847,127
Merchants' investment portfolio totaled $399.06 million at March 31, 2009, a decrease of $32.55 million from December 31, 2008 ending balances of $431.61 million. Merchants sold three bonds with a book value of $12.68 million during the first quarter of 2009. One of the bonds was a non-agency CMO that was downgraded below single A during the quarter. After careful review and analysis, Merchants determined that the potential loss severities in this bond outweighed the upside potential, and decided to sell the bond. The bond was sold at a loss of $542 thousand. The other two bonds sold were an agency CMO and an agency MBS, both with a 6% coupon. Both of the bonds had very short average lives, and prepayments at this interest rate level were expected to be quite high in light of current market conditions. Merchants decided to sell these two bonds to lock in the embedded gain. These bonds were sold at a combined gain of $337 thousand.
Quarterly average deposits were $948.48 million, an increase of $69.64 million, or 8%, over the same quarter of 2008. Deposits ended the quarter at $976.89 million, an increase of $46.09 million over year end balances of $930.80 million. The majority of this increase, $25.15 million, was in time deposits. As of March 31, 2009, $33.11 million in deposits have moved off balance sheet into the Certificate of Deposit Account Registry Service ("CDARS") which has attracted some larger dollar relationships looking for full insurance coverage.
Merchants recorded a $900 thousand provision for credit losses during the first quarter of 2009, compared to $300 thousand for the first quarter of 2008. The increase in the provision is primarily a result of overall loan growth combined with increased net charge-offs and continued economic uncertainty. "We will continue," Tuttle commented, "to assess the adequacy of the reserve and related provision expense in light of changes in credit risk and the economic environment." The allowance for loan losses was $9.45 million; 1.06% of total loans and 82% of nonperforming loans at March 31, 2009, compared to $8.89 million, 1.05% of total loans and 76% of nonperforming loans at December 31, 2008; and $8.31 million, 1.10% of total loans and 116% of nonperforming loans at March 31, 2008. Nonperforming loans decreased slightly to $11.52 million at March 31, 2009, from $11.64 million at December 31, 2008. Additions to nonperforming loans during the quarter were offset by principal paydowns, scheduled amortization and charge-downs. More than 60% of the loans in nonaccrual status are either government guaranteed, or were current on all scheduled payments as of March 31, 2009. Tuttle commented, "As with last quarter, we continue to make good progress on reducing existing non-accrual loans, but most of this was offset by additions. We have plans in place to reduce existing non-performing balances, but it will take time in some instances to make significant progress." Nonperforming assets as a percentage of total assets were 0.91% as of March 31, 2009, compared to 0.93% at December 31, 2008 and 0.56% at March 31, 2008.
Total noninterest income decreased to $1.93 million for the first quarter of 2009 from $2.24 million for the first quarter of 2008. Merchants closed its branch in Windsor, VT on December 31, 2008. The building was sold during the first quarter of 2009 for a gain of $180 thousand. As mentioned previously, Merchants sold three securities during the first quarter of 2009 at a combined net loss of $205 thousand. Excluding both the gain on the sale of the building for 2009 and gains/losses on investment securities for both 2008 and 2009, noninterest income decreased $207 thousand to $1.95 million for the first quarter of 2009, compared to $2.16 million for the first quarter of 2008. Trust Company income decreased to $401 thousand from $505 thousand for the first quarter of 2009, compared to 2008. Although Merchants has experienced increases in overall trust relationships, these increases have not generated enough additional revenue to offset lost revenue due to market value declines in the current volatile environment. Additionally, Merchants has experienced slight decreases in overdraft income and net ATM/debit card income for the first quarter of this year, compared to last year's first quarter as customers react to the current economic uncertainty by spending less and by managing overdraft activity more closely.
Total noninterest expense increased $1.42 million to $9.54 million for the first quarter of 2009 from $8.12 million for the first quarter of 2008. Salaries and Wages increased $328 thousand to $3.43 million for the first quarter of 2009, compared to the same period in 2008. This increase is a result of normal pay increases combined with additional staff that Merchants hired in the corporate banking, executive and trust areas during the course of 2008. Employee benefits increased $328 thousand to $1.26 million for the first quarter of 2009, compared to 2008. This increase is a result of additional employees and substantial increases in health insurance costs and pension plan expenses for 2009 over 2008. Legal and professional fees were $689 thousand for the first quarter, a $106 thousand increase over last year. These increases are a result of a combination of overall increased third party provider fees and professional fees related to specific projects. Other noninterest expenses increased $606 thousand to $1.89 million for the first quarter of 2009, compared to the first quarter of 2008. Merchants FDIC insurance expense increased by $289 thousand for the first quarter of this year, compared to last year. Expenses related to OREO and problem loans increased to $134 thousand for the first quarter of 2009, compared to a credit balance of $10 thousand for 2008 as Merchants has more loans in various stages of workout this year compared to last year. Additionally, most categories of operating expenses have increased for 2009, compared to 2008.
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, May 1, 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, May 8, 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 967737.
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; customized Government Banking solutions; 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) 03/31/09 12/31/08 03/31/08 12/31/07 -------- -------- -------- -------- Balance Sheets - Period End Total assets $1,350,280 $1,341,210 $1,271,259 $1,170,743 Loans 892,579 847,127 752,624 731,508 Allowance for loan losses ("ALL") 9,446 8,894 8,312 8,002 Net loans 883,133 838,233 744,312 723,506 Securities available for sale 397,473 429,872 428,196 361,512 Securities held to maturity 1,586 1,737 3,759 4,078 Federal Home Loan Bank ("FHLB") stock 8,630 8,523 5,842 5,114 Federal funds sold and other short-term investments 260 111 22,100 20,100 Other assets 59,198 62,734 67,050 56,433 Deposits 976,886 930,797 904,866 867,437 Securities sold under agreement to repurchase and other short-term debt 92,705 124,408 84,083 98,917 Securities sold under agreement to repurchase, long-term 54,000 54,000 54,000 41,500 Other long-term debt 107,540 118,643 67,655 62,117 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 20,619 20,619 Other liabilities 14,046 13,046 62,794 4,846 Shareholders' equity 84,484 79,697 77,242 75,307 Balance Sheets - Quarter-to-Date Averages Total assets $1,343,670 $1,320,845 $1,202,467 $1,169,811 Loans 865,962 825,395 737,614 730,688 Allowance for loan losses 9,238 8,596 8,128 7,840 Net loans 856,724 816,799 729,486 722,848 Securities available for sale and FHLB stock 427,661 436,712 374,471 340,598 Securities held to maturity 1,668 2,187 3,938 4,247 Federal funds sold and other short-term investments 5,073 2,420 26,634 38,227 Other assets 52,544 62,727 67,938 63,891 Deposits 948,484 946,534 878,847 874,406 Securities sold under agreement to repurchase and other short-term debt 113,521 96,736 88,204 94,785 Securities sold under agreement to repurchase, long-term 54,000 54,000 50,099 35,646 Other long-term debt 114,073 117,996 74,651 60,811 Junior subordinated debentures issued to unconsolidated subsidiary trust 20,619 20,619 20,619 20,619 Other liabilities 12,819 9,845 13,238 10,780 Shareholders' equity 80,154 75,115 76,809 72,764 Interest earning assets 1,300,364 1,266,714 1,142,657 1,113,760 Interest bearing liabilities 1,140,582 1,110,612 995,419 958,669 Ratios and Supplemental Information - Period End Book value per share $14.62 $13.89 $13.41 $13.05 Book value per share (1) $13.88 $13.15 $12.73 $12.35 Tier I leverage ratio 7.42% 7.42% 7.95% 8.14% Tangible capital ratio 6.26% 5.94% 6.07% 6.42% Period end common shares outstanding (1) 6,084,600 6,061,182 6,066,367 6,096,737 Credit Quality - Period End Nonperforming loans ("NPLs") $11,519 $11,643 $7,169 $9,231 Nonperforming assets ("NPAs") $12,322 $12,446 $7,169 $9,706 NPLs as a percent of total loans 1.29% 1.37% 0.95% 1.26% NPAs as a percent of total assets 0.91% 0.93% 0.56% 0.83% ALL as a percent of NPLs 82% 76% 116% 87% ALL as a percent of total loans 1.06% 1.05% 1.10% 1.09% (1) This book value and period end common shares outstanding includes 307,809; 323,754; 307,965 and 325,789 Rabbi Trust shares for the periods noted above, respectively. For the Three Months Ended March 31, December 31, 2009 2008 2008 ---- ---- ---- Operating Results Interest income Interest and fees on loans $11,768 $11,566 $11,797 Interest and dividends on investments 5,267 4,883 5,777 Total interest and dividend income 17,035 16,449 17,574 Interest expense Deposits 2,836 4,516 3,386 Short-term borrowings 85 638 277 Long-term debt 1,773 1,657 1,812 Total interest expense 4,694 6,811 5,475 Net interest income 12,341 9,638 12,099 Provision for credit losses 900 300 600 Net interest income after provision for credit losses 11,441 9,338 11,499 Noninterest income Trust Company income 401 505 396 Service charges on deposits 1,238 1,291 1,436 (Loss) gain on investment securities (205) 82 (369) Equity in losses of real estate limited partnerships, net (463) (463) (462) Other noninterest income 958 828 823 Total noninterest income 1,929 2,243 1,824 Noninterest expense Salaries, wages and employee benefits 4,685 4,029 4,875 Occupancy and equipment expenses 1,639 1,552 1,557 Legal and professional fees 689 583 541 Marketing expenses 341 404 314 State franchise taxes 298 272 263 Other noninterest expense 1,890 1,284 1,694 Total noninterest expense 9,542 8,124 9,244 Income before provision for income taxes 3,828 3,457 4,079 Provision for income taxes 922 800 1,015 Net income $2,906 $2,657 $3,064 Ratios and Supplemental Information Weighted average common shares outstanding 6,068,082 6,084,785 6,058,922 Weighted average diluted shares outstanding 6,069,955 6,099,037 6,063,815 Basic earnings per common share $0.48 $0.44 $0.51 Diluted earnings per common share 0.48 0.44 0.51 Return on average assets 0.87% 0.88% 0.93% Return on average shareholders' equity 14.50% 13.83% 16.32% Net interest rate spread 3.65% 3.04% 3.56% Net interest margin 3.85% 3.40% 3.81% Efficiency ratio (1) 62.12% 63.64% 60.75% (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 March 31, 2009, the Bank had off-balance sheet liabilities in the form of standby letters of credit to customers in the amount of $4.24 million.
Merchants Bancshares, Inc.
CONTACT: Lisa Razo of Merchants Bank, +1-802-865-1838
Web Site: http://www.mbvt.com/
