Note 14: PARENT COMPANY

The Parent Company's 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, 2011 and 2010, and statements of income and cash flows for each of the years in the three year period ended December 31, 2011, are shown in the following table. The statement of changes in stockholders' 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)	2011		2010
Assets:
Investment in and advances to subsidiaries*	$	127,581	$	118,028
Cash*		3,395		2,638
Other assets		696		612
Total assets	$	131,672	$	121,278
Liabilities and shareholders' equity:
Other liabilities	$	1,516	$	1,328
Long term debt		20,619		20,619
Shareholder' equity		109,537		99,331
Total liabilities and shareholders' equity	$	131,672	$	121,278


Statements of Income for the Years Ended December 31,
(In thousands)	2011			2010			2009
Dividends from Merchants Bank*	$	7,953		$	6,901		$	7,727
Equity in undistributed earnings of subsidiaries		7,832			9,705			5,829
Other expense, net		(1,788	)		(1,760	)		(1,672	)
Benefit from income taxes		623			615			595
Net income	$	14,620		$	15,461		$	12,479


Statement of Cash Flows for the Years Ended December 31,
(In thousands)	2011			2010			2009
Cash flow from operating activities:
Net income	$	14,620		$	15,461		$	12,479
Adjustments to reconcile net income to net cash provided by
operating activities
Increase in other assets		(84	)		(187	)		(59	)
Increase in other liabilities		66			201			6
Equity in undistributed earnings of subsidiaries		(7,832	)		(9,705	)		(5,829	)
Net cash provided by operating activities		6,770			5,770			6,597
Cash flows from financing activities:
Sale of treasury stock		14			10			4
Proceeds from exercise of stock options		(1	)		59			532
Tax benefit from exercises of stock options		1			2			51
Cash dividends paid		(6,233	)		(6,139	)		(6,059	)
Other, net		206			208			179
Net cash used in financing activities		(6,013	)		(5,860	)		(5,293	)
Increase (decrease) in cash and cash equivalents		757			(90	)		1,304
Cash and cash equivalents at beginning of year		2,638			2,728			1,424
Cash and cash equivalents at end of year	$	3,395		$	2,638		$	2,728

* Account balances are partially or fully eliminated in consolidation