NOTE 15: PARENT COMPANY

Merchants Bancshares, Inc.’s (the “Parent Company”) investments in its subsidiaries are recorded using the equity method of accounting. Summarized financial information relative to the Parent Company only balance sheets at December 31, 2013 and 2012, and statements of income and cash flows for each of the years in the three year period ended December 31, 2013, are shown in the following table. The statement of changes in shareholders' equity for the Parent Company are not reported because they are identical to the consolidated financial statements.



Balance Sheets as of December 31,
(In thousands)	2013		2012
Assets:
Investment in subsidiaries*	$	137,810	$	135,373
Cash*		2,797		4,116
Other assets		461		526
Total assets	$	141,068	$	140,015
Liabilities and shareholders’ equity:
Other liabilities	$	838	$	1,175
Long term debt		20,619		20,619
Shareholders’ equity		119,611		118,221
Total liabilities and shareholders’ equity	$	141,068	$	140,015



Statements of Income for the Years Ended December 31,
(In thousands)	2013		2012		2011
Dividends from Merchants Bank*	$	5,789	$	7,607	$	7,953
Equity in undistributed earnings of subsidiaries*		10,211		8,721		7,832
Other expense, net		(1,337)		(1,743)		(1,788)
Benefit from income taxes		468		609		623
Net income	$	15,131	$	15,194	$	14,620



Statement of Cash Flows for the Years Ended December 31,
(In thousands)	2013		2012		2011
Cash flow from operating activities:
Net income	$	15,131	$	15,194	$	14,620
Adjustments to reconcile net income to net cash provided by operating activities:
Net change in other assets		65		170		(84)
Net change in other liabilities		(121)		(116)		66
Equity in undistributed earnings of subsidiaries*		(10,211)		(8,721)		(7,832)
Net cash provided by operating activities		4,864		6,527		6,770
Cash flows from financing activities:
Sale of treasury stock		15		18		14
Proceeds from exercise of stock options		0		280		(1)
Tax benefit from exercises of stock options		8		20		1
Cash dividends paid		(6,432)		(6,324)		(6,233)
Other, net		226		200		206
Net cash used in financing activities		(6,183)		(5,806)		(6,013)
Increase (decrease) in cash and cash equivalents		(1,319)		721		757
Cash and cash equivalents at beginning of year		4,116		3,395		2,638
Cash and cash equivalents at end of year	$	2,797	$	4,116	$	3,395

* Account balances are partially or fully eliminated in consolidation