EX-99 2 ex_991.htm EXHIBIT 99.1

Exhibit 99.1
 

For Release: April 30, 2007
Contact: Lisa Razo
(802) 865-1838
 

Merchants Bancshares, Inc. Announces 2007 First Quarter Results
 

SOUTH BURLINGTON, VT - Merchants Bancshares, Inc. (NASDAQ: MBVT), the parent company of Merchants Bank, today announced net income of $2.62 million or diluted earnings per share of $0.42 for the quarter ended March 31, 2007. This compares with net income of $2.72 million or diluted earnings per share of $0.43 for the first quarter of 2006. The return on average assets was 0.93% for the quarter ended March 31, 2007, compared to 1.01% for the same period in 2006. The return on average equity was 15.05% and 16.47% for the first quarters of 2007 and 2006, respectively.
 

Total assets increased $41.19 million to $1.14 billion at March 31, 2007 from $1.10 billion at March 31, 2006 and increased $4.2 million from December 31, 2006. Total loans increased $72.51 million to $694.38 million at March 31, 2007 from the March 31, 2006 balance of $621.87 million. Average loans for the first quarter of 2007 were $690.05 million, compared to $608.88 million for the first quarter of 2006 and $685.28 million for the fourth quarter of 2006. The rate of Merchants' first quarter loan growth during 2007 was slower than that of first quarter 2006. Residential real estate and commercial loans made up the bulk of the increase in loans since the fourth quarter of 2006.
 

Deposits ended the quarter at $890.71 million, an increase of $38.26 million over the March 31, 2006 balance of $852.45 million. Average deposits for the first quarter of 2007 were $874.78 million, compared to $846.62 million for the first quarter of 2006 and $864.97 million for the fourth quarter of 2006. While the numbers of Merchants' accounts and households continue to increase, the shift within deposit categories continues as depositors seek higher yields. Quarterly average savings, NOW and money market balances have decreased by $8.06 million from the fourth quarter of 2006 to the first quarter of 2007, while average time deposit balances have increased by $24.05 million during this time period.
 

Merchants' net interest income decreased $115 thousand for the first quarter of 2007, compared to 2006. Merchants' net interest margin decreased 23 basis points to 3.60% from 3.83% for the first quarter of 2007 compared to 2006, and decreased by two basis points when comparing the first quarter of 2007 to the fourth quarter of 2006. These decreases are attributable to a number of factors. Merchants' liability sensitivity has continued to increase due to changes in its balance sheet mix throughout the past year, while short-term interest rates rose higher, accompanied by a sustained flat yield curve. Merchants' average yield on interest earning assets increased by five basis points during the first quarter of 2007, and by 30 basis points during the last year, while its cost of interest bearing liabilities increased by eight basis points during the course of the first quarter of 2007, and 61 basis points throughout the last year. The shift from variable-rate to fixed-rate in Merchants' combined commercial mortgage and commercial loan portfolios has continued as customers locked in their rates in the current flat yield curve environment. At the same time, Merchants' deposits have continued to shift from lower cost savings, NOW and money market accounts to higher rate time deposits. Merchants has continued to make adjustments to its time deposit rates, rather than make even greater changes in money market account rates. Merchants' interest rate on long-term debt has increased five basis points during the first quarter of 2007 as long-term debt taken out in a lower interest rate environment runs off. The cost of short-term securities sold under agreements to repurchase has decreased by 12 basis

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points from the fourth quarter of 2006 to the first quarter of 2007 as Merchants has been able to make small downward adjustments to these rates and still remain competitive.
 

Total noninterest income decreased $24 thousand to $1.84 million for the first quarter of 2007 from $1.87 million for the first quarter of 2006. Merchants sold one security during the first quarter due to concerns about the company's exposure to the sub-prime mortgage market. A $37 thousand loss was recognized on the sale. There were no security gains or losses during the first quarter of 2006. Excluding the security losses, noninterest income increased by $13 thousand for the first quarter of 2007 compared to 2006. This increase was driven primarily by increased Trust department revenue, as well as increases in net ATM/debit card revenue.
 

Total noninterest expense was $7.97 million for the first quarter of 2007 compared to $7.94 million for the first quarter of 2006. Salaries and employee benefits decreased $132 thousand to $3.94 million from $4.07 million for the first quarter of 2007 compared to 2006. This decrease is primarily a result of a decrease in the employer match in Merchants' 401(k) plan. Legal and professional fees increased $109 thousand to $646 thousand from $537 thousand related to special projects undertaken during the first quarter of 2007. Marketing expenses decreased $56 thousand to $284 thousand from $340 thousand during the first quarter related to the timing of services and expenses. Other noninterest expenses increased $91 thousand to $1.59 million for the first quarter of 2007 from $1.50 million for the first quarter of 2006. Merchants experienced a defalcation during the quarter; insurance coverage was subject to a $100 thousand deductible.
 

Merchants declared a dividend on April 19, 2007, of 28 cents per share payable May 17, 2007, to shareholders of record as of May 3, 2007. For more information on the quarter, please refer to Merchants' quarterly Form 10-Q, which will be filed in early May and will be available on the SEC website at www.sec.gov.
 

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 4, 2007. Interested parties may participate in the conference call by dialing (800) 230-1092; 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 May 11, 2007. 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 859450.
 

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. It fulfills this commitment through a branch-based system that includes 36 community bank offices and 43 ATMs throughout Vermont, Personal Bankers dedicated to top-quality customer service, and streamlined products: FreedomLYNX® Banking, which consists of Free Checking for Life®, a low cost Money Market Account, Free Online Banking and Bill Pay, Overdraft Coverage, Direct Deposit, Free Debit Card and Free Automated Phone Banking; TimeLYNX® Flexible Certificates of Deposit; AutoLYNXSM Vehicle Loans; HomeLYNX® Home Equity Loans and Lines of Credit; RealLYNX® Residential Mortgages; CommerceLYNX® Business Banking; and Q-LYNX Quick Decision Business Loans. For more information about Merchants Bank, visit mbvt.com. Member FDIC. Equal Housing Lender. Merchants' stock is traded on the NASDAQ National Market system under the symbol MBVT.
 

Some of the statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and

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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.

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Merchants Bancshares, Inc.

Financial Highlights

(In thousands except share and per share data)
 
 

03/31/07

  

12/31/06

  

03/31/06

  

12/31/05
               

Balance Sheets - Period End

              

Total assets

$1,141,178

  

$1,136,958

  

$1,099,987

  

$1,075,236

Loans

694,379

  

689,283

  

621,874

  

605,926

Allowance for loan losses ("ALL")

7,026

  

6,911

  

6,637

  

7,083

Net loans

687,353

  

682,372

  

615,237

  

598,843

Securities available for sale

315,253

  

333,958

  

403,245

  

382,797

Securities held to maturity

5,193

  

5,615

  

7,108

  

7,663

Fed funds sold and other short term investments

66,000

  

42,000

  

--

  

--

Other assets

67,379

  

73,013

  

74,397

  

85,933

Deposits

890,706

  

877,352

  

852,447

  

854,576

Securities sold under agreement to repurchase and

              

  other short-term borrowings

84,604

  

90,547

  

76,206

  

52,988

Securities sold under agreement to repurchase-long term

20,000

  

20,000

  

20,000

  

20,000

Other long-term debt

48,782

  

53,863

  

55,188

  

55,764

Junior subordinated debentures issued to

              

  unconsolidated subsidiary trust

20,619

  

20,619

  

20,619

  

20,619

Other liabilities

5,488

  

4,880

  

10,496

  

4,892

Shareholders' equity

70,979

  

69,697

  

65,031

  

66,397

Balance Sheets - Quarter-to-Date Averages

              

Total assets

$1,127,651

  

$1,130,370

  

$1,081,803

  

$1,059,923

Loans

690,045

  

685,284

  

608,881

  

598,159

Allowance for loan losses

6,942

  

6,882

  

7,109

  

7,101

Net loans

683,103

  

678,402

  

601,772

  

591,058

Investment securities, including Federal Home

              

  Loan Bank stock

336,886

  

358,008

  

411,947

  

396,034

Federal funds sold, securities purchased under agreements

              

  to resell, and interest bearing deposits with banks

44,917

  

26,815

  

228

  

58

Other assets

62,745

  

67,145

  

67,856

  

72,773

Deposits

874,777

  

864,966

  

846,620

  

854,591

Securities sold under agreement to repurchase and

             

  other short-term borrowings

86,660

  

92,779

  

72,801

  

50,741

Securities sold under agreement to repurchase-long term

20,000

  

20,000

  

20,000

  

851

Other long-term debt

50,273

  

55,778

  

52,399

  

59,365

Junior subordinated debentures issued to

              

  unconsolidated subsidiary trust

20,619

  

20,619

  

20,619

  

20,619

Other liabilities

5,780

  

6,710

  

3,279

  

9,249

Shareholders' Equity

69,542

  

69,518

  

66,085

  

64,507

Interest earning assets

1,071,848

  

1,070,107

  

1,021,056

  

994,251

Interest bearing liabilities

934,851

  

930,485

  

892,446

  

863,077

Ratios and Supplemental Information - Period End

              

Book value per share

$12.10

  

$11.87

  

$10.85

  

$11.11

Book value per share (1)

$11.49

  

$11.25

  

$10.33

  

$10.55

Tier I leverage ratio

8.29%

  

8.24%

  

8.44%

  

8.54%

Period end common shares outstanding

6,174,980

  

6,196,328

  

6,295,286

  

6,290,889

Credit Quality - Period End

              

Nonperforming loans ("NPLs")

$2,515

  

$2,698

  

$1,876

  

$2,364

Nonperforming assets ("NPAs")

2,773

  

2,956

  

2,188

  

2,364

NPLs as a percent of total loans

0.36%

  

0.39%

  

0.30%

  

0.39%

NPAs as a percent of total assets

0.24%

  

0.26%

  

0.20%

  

0.22%

ALL as a percent of NPLs

279%

  

256%

  

354%

  

300%

ALL as a percent of total loans

1.01%

  

1.00%

  

1.07%

  

1.17%
               

(1)

This book value includes 311,403, 323,038, 303,296 and 314,602 Rabbi Trust shares for the periods noted above, respectively.

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Merchants Bancshares, Inc.

Financial Highlights

(In thousands except share and per share data)
 
 

For the Three Months Ended
 

March 31,

  

March 31,

  

December 31,
 

2007

  

2006

  

2006
       

Operating Results

            

Interest income

            

Interest and fees on loans

$11,465 

  

$  9,905 

  

$11,682 

  

Interest and dividends on investments

4,595 

  

4,630 

  

4,564 

  

Total interest income

16,060 

  

14,535 

  

16,246 

  

Interest expense

            

Deposits

4,448 

  

3,093 

  

4,191 

  

Short-term borrowings

928 

  

1,061 

  

1,338 

  

Long-term debt

1,170 

  

752 

  

956 

  

Total interest expense

6,546 

  

4,906 

  

6,485 

  

Net interest income

9,514 

  

9,629 

  

9,761 

  

Provision for loan losses

-- 

  

-- 

  

-- 

  

Net interest income after provision for loan losses

9,514 

  

9,629 

  

9,761 

  

Noninterest income

            

Trust Company income

487 

  

458 

  

443 

  

Service charges on deposits

1,091 

  

1,113 

  

1,096 

  

Gain (Loss) on sale of investments, net

(37)

  

-- 

  

(12)

  

Equity in losses of real estate limited partnerships

(451)

  

(423)

  

(399)

  

Other noninterest income

752 

  

718 

  

796 

  

Total noninterest income

1,842 

  

1,866 

  

1,924 

  

Noninterest expense

            

Salaries and employee benefits

3,936 

  

4,068 

  

3,964 

  

Occupancy and equipment expenses

1,514 

  

1,498 

  

1,561 

  

Legal and professional fees

646 

  

537 

  

712 

  

Marketing expenses

284 

  

340 

  

407 

  

Other noninterest expense

1,590 

  

1,499 

  

1,326 

  

Total noninterest expense

7,970 

  

7,942 

  

7,970 

  

Income before income taxes

3,386 

  

3,553 

  

3,715 

  

Income taxes

769 

  

831 

  

883 

  

Net income

$  2,617 

  

$  2,722 

  

$  2,832 

  

Ratios and Supplemental Information

            

Weighted average common shares outstanding

6,187,399 

  

6,302,153 

  

6,246,096 

  

Weighted average diluted shares outstanding

6,205,009 

  

6,328,067 

  

6,267,318 

  

Basic earnings per common share

$  0.42 

  

$  0.43 

  

$  0.45 

  

Diluted earnings per common share

0.42 

  

0.43 

  

0.45 

  

Return on average assets

0.93%

  

1.01%

  

1.00%

  

Return on average shareholders' equity

15.05%

  

16.47%

  

16.30%

  

Net interest rate spread

3.24%

  

3.55%

  

3.26%

  

Net interest margin

3.60%

  

3.83%

  

3.62%

  

Efficiency ratio (1)

65.22%

  

63.91%

  

64.78%

  
         

(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, 2007, the Bank had off-balance sheet liabilities in the form of standby letters of credit to customers in the amount of $6.49 million.

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