Exhibit 99.1 |
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For Release: January 24, 2007
Contact: Lisa Razo
(802) 865-1838 |
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Merchants Bancshares, Inc. Announces 2006 Results |
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SOUTH BURLINGTON, VT -Merchants Bancshares, Inc. (NASDAQ: MBVT), the parent company of Merchants Bank, today announced net income of $10.87 million or diluted earnings per share of $1.73 for the year ended December 31, 2006. This compares with net income of $11.90 million or diluted earnings per share of $1.87 for the previous year. Merchants earned $2.83 million or diluted earnings per share of 45 cents for the quarter ended December 31, 2006, compared to net income of $2.93 million or diluted earnings per share of 46 cents for the same quarter of the previous year. The return on average assets was 0.98% for 2006 and 1.00% for the quarter ended December 31, 2006, compared to 1.13% and 1.11%, respectively, for the same periods in 2005. The return on average equity was 16.24% for the year and 16.30% for the fourth quarter of 2006, compared to 18.26% and 18.16%, respectively, for the same periods in 2005. Merchants sold $23 million in securities during 2006 resulting in a pre-tax loss of $464 thousand. The after-tax impact on net income for 2006 was a reduction of $302 thousand, or five cents per share. |
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Total assets increased $61.72 million to $1.14 billion at December 31, 2006 from $1.08 billion at December 31, 2005. Total loans increased $83.35 million to $689.28 million at December 31, 2006 from the December 31, 2005 balance of $605.93 million. Merchants was successful in acquiring new loan customers as the result of long-term sales efforts and the strength of its Corporate Banking and Community Banking lending teams. This, combined with industry consolidation, changes within certain bank competitors, and pricing requirements, produced opportunities for growth. The majority of loan growth occurred in residential real estate, commercial real estate and construction loans. |
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Deposits ended the year at $877.35 million, an increase of $22.77 million over the 2005 year-end balance of $854.58 million. Following industry-wide trends, Merchants experienced moderate growth in its transaction account base. Deposit balances have continued to migrate to time categories; time deposits made up 36% of total deposits at December 31, 2006, compared to 29% at December 31, 2005. Time deposit categories have increased $62.55 million over the course of 2006. The short-term CD special category has led the growth, with balances at the end of 2006 at $75.54 million, compared to 2005 year-end balances of $20.92 million. Additionally, Merchants' flexible CD program, offering penalty-free withdrawals, has remained popular with Merchants' customers. |
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Merchants' investment portfolio decreased $50.89 million during the course of 2006. A portion of that decrease is attributable to the $23 million investment sale mentioned above. The balance is due to Merchants' decision, beginning in the second quarter of this year, to discontinue further investments into the portfolio. Merchants has used current cash flow from the portfolio to fund loan growth and pay off short-term borrowings. |
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Merchants had great success during 2006 with its new cash management sweep product. This product is priced at a lower cost of funds than other short-term borrowing alternatives and is competitively priced in the marketplace. Balances in this product totaled $86.55 million at December 31, 2006. These funds were used to fund loan growth and pay off short-term FHLB borrowings, leading to a decrease in short-term FHLB borrowings to zero at December 31, 2006 |
from $50 million at December 31, 2005. Excess funds raised in this product category have been re-deployed into short-term investments, which have increased to $42 million at December 31, 2006 from zero at December 31, 2005. |
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Nonperforming assets increased by $592 thousand to $2.96 million at December 31, 2006 from $2.36 million at December 31, 2005. Nonperforming assets as a percentage of total assets were 26 basis points at year-end 2006, compared to 22 basis points at year-end 2005. |
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At December 31, 2006, the Allowance for Loan Losses (Allowance) stood at $6.91 million, 1.00% of total loans and 256% of nonperforming loans. At December 31, 2005, the Allowance stood at $7.08 million, 1.17% of total loans and 300% of nonperforming loans. Effective March 31, 2006, Merchants transferred the portion of the Allowance related to undisbursed lines of credit to Other Liabilities. The amount of this other liability at December 31, 2006 was $350 thousand. Merchants recorded charge-offs of $63 thousand and recoveries of $261 thousand during 2006. There was no provision for loan losses during 2006 or 2005. Merchants reviews the adequacy of the Allowance on a quarterly basis and deems it adequate under current market conditions. |
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Merchants' net interest income for the fourth quarter of 2006 was $9.76 million, a decrease of $201 thousand from the fourth quarter of 2005 when net interest income totaled $9.96 million. Net interest income for 2006 was $38.71 million, a decrease of $1.23 million from net interest income for 2005 of $39.94 million. Merchants continued to experience decreases in its net interest margin as the spread between the yield on interest earning assets and the cost of interest bearing liabilities has continued to shrink. Merchants' margin compression is reflective of the extremely competitive market for loans and deposits, as well as the sustained flat to inverted yield curve environment during the last 15-18 months. During 2006 the federal funds rate increased by 100 basis points, while the ten-year Treasury increased by only six basis points. The net interest margin for the fourth quarter was 3.62%, compared to 3.98% for the fourth quarter of 2005. The net interest margin for the full year 2006 was 3.69%, co mpared to 4.03% for 2005. The average rate paid on Merchants' interest bearing liabilities increased 93 basis points to 2.54% for 2006, compared to 1.61% for 2005. Merchants' non-deposit funding sources experienced the largest rate increase during 2006, increasing 117 basis points to 4.76% for 2006, from 3.59% for 2005. The average rate paid on interest bearing deposits increased 75 basis points to 1.99% for 2006 from 1.24% for 2005. At the same time the average rate earned on Merchants' interest earning assets increased by 47 basis points to 5.91% for 2006, compared to 5.44% for 2005. The average rate earned on the loan portfolio increased 48 basis points to 6.70% for December 31, 2006 from 6.22% for December 2005, and the average rate earned on the investment portfolio increased 32 basis points to 4.61% for December 31, 2006 from 4.29% for December 31, 2005. |
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Total noninterest income increased $107 thousand to $7.38 million for 2006 from $7.27 million for 2005; and increased $182 thousand to $1.92 million for the fourth quarter of 2006 from $1.74 million for the fourth quarter of 2005. Losses on sales of investments totaled $464 thousand for 2006, compared to $32 thousand for 2005; and losses were $12 thousand for the fourth quarter of 2006, compared to $51 thousand for the fourth quarter of 2005. Excluding losses on sales of investments, total noninterest income increased $143 thousand quarter-over-quarter, and increased $539 thousand year-over-year. |
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Total noninterest expense increased $120 thousand, or 1.53%, to $7.97 million for the fourth quarter of 2006 from $7.85 million for the fourth quarter of 2005, and increased by $361 thousand, or 1.14%, to $31.91 million from $31.55 million for 2006, compared to 2005. Salaries and benefits expense increased $156 thousand for the fourth quarter of 2006, compared to last |
year, and increased $271 thousand for the full year 2006 compared to 2005. Legal and professional fees for the fourth quarter of 2006 were $712 thousand, a $112 thousand increase over the fourth quarter of 2005; and were $2.43 million for 2006, a $320 thousand increase over 2005. Merchants transitioned its item processing function to an outside provider in mid-2005, reducing its salary and benefits, and occupancy and equipment expenses, but increasing its legal and professional fees. |
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Mr. Michael Tuttle, President and Chief Executive Officer, and Ms. Janet Spitler, Chief Financial Officer, will host a conference call to discuss these earnings results at 9:30 a.m. Eastern Time on Friday, January 26, 2007. Interested parties may participate in the conference call by dialing (800) 230-1085; the title of the call isEarnings 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 February 2, 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 859449. |
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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; AutoLYNX 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. |
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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 produc t 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. |
| | 12/31/06 | | 09/30/06 | | 12/31/05 | | 09/30/05 |
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Balance Sheets - Period End | | | | | | | |
Total assets | $1,136,958 | | $1,126,387 | | $1,075,236 | | $1,054,327 |
Loans | 689,283 | | 679,884 | | 605,926 | | 592,990 |
Allowance for loan losses ("ALL") | 6,911 | | 6,858 | | 7,083 | | 7,072 |
Net loans | 682,372 | | 673,026 | | 598,843 | | 585,918 |
Investment securities | 339,573 | | 377,577 | | 390,460 | | 384,351 |
Fed funds sold and other short term investments | 42,000 | | -- | | -- | | -- |
Other assets | 73,013 | | 75,784 | | 85,933 | | 84,058 |
Deposits | 877,352 | | 857,058 | | 854,576 | | 866,062 |
Short-term borrowings | 4,000 | | 24,757 | | 52,988 | | 23,976 |
Long-term debt | 53,863 | | 59,382 | | 55,764 | | 66,199 |
Securities sold under agreement to repurchase | 106,547 | | 89,034 | | 20,000 | | -- |
Junior subordinated debentures issued to | | | | | | | |
Unconsolidated subsidiary trust | 20,619 | | 20,619 | | 20,619 | | 20,619 |
Other liabilities | 4,880 | | 5,965 | | 4,892 | | 12,078 |
Shareholders' equity | 69,697 | | 69,572 | | 66,397 | | 65,393 |
Balance Sheets - Quarter-to-Date Averages | | | | | | | |
Total assets | $1,130,370 | | $1,114,216 | | $1,059,923 | | $1,051,742 |
Loans | 685,284 | | 660,069 | | 598,159 | | 590,263 |
Allowance for loan losses | 6,882 | | 6,703 | | 7,101 | | 7,445 |
Net loans | 678,402 | | 653,366 | | 591,058 | | 582,818 |
Investment securities, including Federal Home | | | | | | | |
Loan Bank stock | 358,008 | | 393,738 | | 396,034 | | 394,405 |
Federal funds sold, securities purchased under agreements | | | | | | | |
to resell, and interest bearing deposits with banks | 26,815 | | 123 | | 58 | | 3,025 |
Other assets | 67,145 | | 66,989 | | 72,773 | | 71,494 |
Deposits | 864,966 | | 863,099 | | 854,591 | | 853,712 |
Short-term borrowings | 4,143 | | 28,944 | | 50,741 | | 31,654 |
Long-term debt | 55,778 | | 50,353 | | 59,365 | | 69,693 |
Securities sold under agreement to repurchase | 108,636 | | 79,426 | | 851 | | - |
Junior subordinated debentures issued to | | | | | | | |
Unconsolidated subsidiary trust | 20,619 | | 20,619 | | 20,619 | | 20,619 |
Other liabilities | 6,710 | | 6,087 | | 9,249 | | 10,157 |
Shareholders' Equity | 69,518 | | 66,309 | | 64,507 | | 65,907 |
Interest earning assets | 1,070,107 | | 1,053,930 | | 994,251 | | 987,693 |
Interest bearing liabilities | 930,485 | | 920,467 | | 863,077 | | 856,333 |
Ratios and Supplemental Information - Period End | | | | | | | |
Book value per share | $11.25 | | $11.12 | | $10.55 | | $10.37 |
Tier I leverage ratio | 8.24% | | 8.37% | | 8.54% | | 8.40% |
Period end common shares outstanding | 6,196,328 | | 6,257,938 | | 6,290,889 | | 6,303,322 |
Credit Quality - Period End | | | | | | | |
Nonperforming loans ("NPLs") | $2,698 | | $2,867 | | $2,364 | | $4,062 |
Nonperforming assets ("NPAs") | 2,956 | | 3,179 | | 2,364 | | 4,062 |
NPLs as a percent of total loans | 0.39% | | 0.42% | | 0.39% | | 0.68% |
NPAs as a percent of total assets | 0.26% | | 0.28% | | 0.22% | | 0.39% |
ALL as a percent of NPLs | 256% | | 239% | | 300% | | 174% |
ALL as a percent of total loans | 1.00% | | 1.01% | | 1.17% | | 1.19% |
Merchants Bancshares, Inc. |
Financial Highlights |
(In thousands except share and per share data) |
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| | For the Three Months Ended | | For the Twelve Months Ended |
| | December 31, | | December 31, |
| | 2006 | | 2005 | | 2006 | | 2005 |
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Operating Results | | | | | | | |
Interest income | | | | | | | |
Interest and fees on loans | $11,682 | | $9,667 | | $43,446 | | $36,627 |
Interest and dividends on investments | 4,564 | | 4,438 | | 18,551 | | 17,182 |
Total interest income | 16,246 | | 14,105 | | 61,997 | | 53,809 |
Interest expense | | | | | | | |
Deposits | 4,191 | | 2,819 | | 14,669 | | 9,001 |
Short-term borrowings | 1,338 | | 541 | | 5,166 | | 1,528 |
Long-term debt | 956 | | 783 | | 3,454 | | 3,345 |
Total interest expense | 6,485 | | 4,143 | | 23,289 | | 13,874 |
Net interest income | 9,761 | | 9,962 | | 38,708 | | 39,935 |
Provision for loan losses | -- | | -- | | -- | | -- |
Net interest income after provision for loan losses | 9,761 | | 9,962 | | 38,708 | | 39,935 |
Noninterest income | | | | | | | |
Trust Company income | 443 | | 413 | | 1,763 | | 1,652 |
Service charges on deposits | 1,096 | | 1,110 | | 4,600 | | 4,456 |
Loss on sale of investments, net | (12) | | (51) | | (464) | | (32) |
Equity in losses of real estate limited partnerships | (399) | | (421) | | (1,669) | | (1,712) |
Other noninterest income | 796 | | 691 | | 3,148 | | 2,907 |
Total noninterest income | 1,924 | | 1,742 | | 7,378 | | 7,271 |
Noninterest expense | | | | | | | |
Salaries and employee benefits | 3,964 | | 3,808 | | 16,149 | | 15,878 |
Occupancy and equipment expenses | 1,561 | | 1,432 | | 6,021 | | 6,117 |
Legal and professional fees | 712 | | 600 | | 2,432 | | 2,112 |
Marketing expenses | 407 | | 452 | | 1,455 | | 1,372 |
Other noninterest expense | 1,326 | | 1,558 | | 5,857 | | 6,074 |
Total noninterest expense | 7,970 | | 7,850 | | 31,914 | | 31,553 |
Income before income taxes | 3,715 | | 3,854 | | 14,172 | | 15,653 |
Income taxes | 883 | | 925 | | 3,301 | | 3,751 |
Net income | $ 2,832 | | $2,929 | | $10,871 | | $11,902 |
Ratios and Supplemental Information | | | | | | | |
Weighted average common shares outstanding | 6,246,096 | | 6,306,330 | | 6,275,709 | | 6,318,524 |
Weighted average diluted shares outstanding | 6,267,318 | | 6,344,066 | | 6,299,763 | | 6,360,675 |
Basic earnings per common share | $ 0.45 | | $ 0.46 | | $ 1.73 | | $ 1.88 |
Diluted earnings per common share | 0.45 | | 0.46 | | 1.73 | | 1.87 |
Return on average assets | 1.00% | | 1.11% | | 0.98% | | 1.13% |
Return on average shareholders' equity | 16.30% | | 18.16% | | 16.24% | | 18.26% |
Net interest rate spread | 3.26% | | 3.73% | | 3.37% | | 3.82% |
Net interest margin | 3.62% | | 3.98% | | 3.69% | | 4.03% |
Efficiency ratio (1) | 64.78% | | 62.11% | | 64.35% | | 61.89% |
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