SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-11595
MERCHANTS BANCSHARES, INC.
(A DELAWARE CORPORATION)
EMPLOYER IDENTIFICATION NO. 03-0287342
123 Church Street, Burlington, VT 05401
Telephone: (802) 658-3400
Indicate by check mark whether the registrant has filed all
reports required to be filed by section 13 or 15(D) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and has been subject to such filing
requirement for the past 90 days.
YES X NO
4,290,342 Shares Common Stock $.01 Par Outstanding March 31, 1996
MERCHANTS BANCSHARES, INC.
INDEX TO FORM 10-Q
PART I
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 1
Consolidated Statements of Operations
For the three months ended March 31, 1996
and 1995 2
Consolidated Statement of Stockholders' Equity
For the year ended December 31, 1995 and
the three months ended March 31, 1996 3
Footnotes to Financial Statements as of
March 31, 1996 4-6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-13
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 14
ITEM 2 Changes in Securities NONE
ITEM 3 Defaults upon Senior Securities NONE
ITEM 4 Submission of Matters to a Vote of Security Holders NONE
ITEM 5 Other Information NONE
ITEM 6 Exhibits and Reports on Form 8-K NONE
SIGNATURES 15
MERCHANTS BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED
MARCH 31 DECEMBER 31
ASSETS 1996 1995
Cash and Due from Banks $ 33,296,732 $ 38,366,772
Trading Securities 500,000 500,000
Investments:
Debt Securities Available for Sale $ 104,690,800 $ 97,943,234
Marketable Equity Securities 310,017 309,508
------------ ------------
Total Investments $ 105,000,817 $ 98,252,742
Loans 418,595,243 449,724,017
Reserve for possible loan losses 15,415,253 16,234,481
------------ ------------
Net Loans $ 403,179,990 $ 433,489,536
Federal Home Loan Bank Stock 1,971,200 3,174,400
Bank Premises and Equipment, Net 12,771,694 12,454,708
Investments in Real Estate Limited Partnerships 3,101,704 3,141,245
Other Real Estate Owned 4,698,323 7,772,067
Other Assets 16,134,388 17,896,993
------------ ------------
Total Assets $ 580,654,848 $ 615,048,463
LIABILITIES ============ ============
Deposits:
Demand $ 75,650,005 $ 85,417,465
Savings, NOW and Money Market Accounts 244,199,951 278,241,601
Time Certificates of Deposit $100,000 and Over 20,684,454 20,473,321
Other Time 174,132,326 160,381,588
------------ ------------
Total Deposits $ 514,666,736 $ 544,513,975
Federal Funds Purchased 4,700,000 0
Demand Note Due U/S Treasury 3,019,344 5,335,422
Other Liabilities 9,254,356 9,525,446
------------ ------------
Total Liabilities $ 531,640,436 $ 559,374,843
Long-Term Debt 8,423,620 15,424,757
STOCKHOLDERS' EQUITY
Common Stock, $.01 Par Value 44,346 44,346
Shares Authorized 4,700,000
Outstanding, Current Year 4,290,342
Previous Year 4,242,927
Preferred Stock Class A Non-Voting
Authorized - 200,000, Outstanding 0 0 0
Preferred Stock Class B Voting
Authorized - 1,500,000, Outstanding 0 0 0
Treasury Stock (At Cost) - 144,278 (2,037,927) (2,037,927)
Surplus 33,154,407 33,154,407
Undivided Profits 9,990,052 8,620,881
Valuation Reserve - Marketable Equity Securities (560,086) 467,156
------------ ------------
Total Stockholders' Equity $ 40,590,792 $ 40,248,863
Total Liabilities and ----------- ------------
Stockholders' Equity $ 580,654,848 $ 615,048,463
============ ============
Book Value Per Common Share $9.46 $9.38
======= =======
Note: As of March 31, 1996, the Bank had off-balance sheet liabilities in
the form of standby letters of credit to customers in the amount of
$6,415,851.
1
THE MERCHANTS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
QUARTER ENDED MARCH 31,
Interest Income 1996 1995
Interest on Loans $ 9,838,577 $ 11,115,091
Investment Income:
Obligations of U.S. Government 1,500,704 1,005,085
Federal Funds Sold 83,517 32,872
Other 54,190 207,328
----------- -----------
$ 11,476,988 $ 12,360,376
----------- -----------
Interest Expense
Interest on Deposits $ 4,588,487 $ 4,768,130
Interest on Capital Notes
and Other Borrowings 269,900 1,103,897
----------- -----------
$ 4,858,387 $ 5,872,027
----------- -----------
Net Interest Income $ 6,618,601 $ 6,488,349
Provision for Possible Loan Losses 900,000 2,700,000
----------- -----------
Net Interest Income after
Provision for Loan Losses $ 5,718,601 $ 3,788,349
----------- -----------
Other Income
Fees on Loans $ 727,223 $ 692,617
Service Charges on Deposits 846,784 785,206
Gain (Loss) on Sale of Investments 90,026 248,647
Gain on Branch Sale 299,071 0
Refund of VT Franchise Tax 527,770 0
Other 1,148,962 1,176,463
----------- -----------
Total Other Income $ 3,639,836 $ 2,902,933
----------- -----------
Other Expenses
Salaries and Wages $ 2,318,839 $ 2,797,581
Employee Benefits 590,332 703,522
Occupancy Expense, Net 582,081 602,526
Equipment Expense 507,176 523,010
Equity in the loss of Real Estate
Limited Partnerships 206,121 186,400
Expenses - Other Real Estate Owned 1,539,184 479,226
Other 1,901,417 1,888,449
----------- -----------
Total Other Expenses $ 7,645,150 $ 7,180,714
----------- -----------
Income before Income Taxes $ 1,713,287 $ (489,432)
Provision (Benefit) for Income Taxes 344,116 (528,063)
----------- -----------
Net Income $ 1,369,171 $ 38,631
=========== ===========
Per Common Share Net Income $ 0.32 $ 0.01
=========== ===========
Weighted Average Common Shares
Outstanding 4,290,342 4,232,971
MERCHANTS BANCSHARES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE THREE MONTHS ENDED MARCH 31, 1996
UNAUDITED
Net
Unrealized
Depreciation Total
Common Undivided Treasury of Invest Equity
Stock Surplus Profits Stock Securities Capital
------ -------- -------- ------- ---------- -------
Balance - December 31, 1994 $42,429 $30,647,120 $12,462,820 $ (178,730) $ (673,669)$42,299,970
Net Loss -- -- (3,841,939) -- -- (3,841,939)
Sale of Treasury Stock -- -- -- 178,730 -- 178,730
Purchase of Treasury Stock -- (44,598) -- (2,037,927) -- (2,082,525)
Issuance of Common Stock 1,917 2,551,885 -- -- -- 2,553,802
Net Change in Unrealized
Depreciation of Investment
Securities -- -- -- -- 1,140,825 1,140,825
------ ---------- --------- --------- ------- ----------
Balance - December 31, 1995 $44,346 $33,154,407 $ 8,620,881 $(2,037,927)$ 467,156 $40,248,863
Net Income 1,369,171 1,369,171
Net Change in Unrealized
Depreciation of Investment
Securities (1,027,242) (1,027,242)
------ ---------- --------- --------- ------- ----------
Balance - March 31, 1996 $44,346 $33,154,407 $ 9,990,052 $(2,037,927)$ (560,086)$40,590,792
====== ========== ========= ========= ======= ==========
3
MERCHANTS BANCSHARES, INC
MARCH 31, 1996
NOTES TO FINANCIAL STATEMENTS:
See the Form 10-K filed as of December 31, 1995 for additional
information.
NOTE 1: CURRENT OPERATING ENVIRONMENT AND REGULATORY MATTERS
As a result of a joint field examination of the Bank by the
Federal Deposit Insurance Corporation (the FDIC) and the State of
Vermont Department of Banking, Insurance and Securities (the
Commissioner) as of March 31, 1993, the Bank entered into a
Memorandum of Understanding (MOU) with the FDIC and the
Commissioner on October 29, 1993. Under the terms of the MOU, the
Bank is required to, among other things, maintain a leverage
capital ratio of at least 5.5%, and refrain from declaring
dividends. The dividend limitation includes dividends paid by the
Bank to the Company.
In April, 1995, the FDIC and the Commissioner completed the field
work related to their most recent examination of the Bank as of
December 31, 1994. Based on this examination, the Bank is required
to continue its efforts to correct certain administrative and legal
violations and enhance certain operating policies before the MOU
will be removed. Management has revised the policies, made changes
to enhance the credit review procedures and corrected the technical
exceptions and violations, and believes the Bank is in substantial
compliance with the MOU as of March 31, 1996.
In February, 1994, the Company and the Federal Reserve entered
into an agreement. Under this agreement, among other things, the
Company may not declare or pay a dividend or incur any debt without
the approval of the Federal Reserve. On December 29, 1995, the
Federal Reserve completed the field work related to its most recent
examination of the Company as of September 30, 1995. No
substantive issues were brought up as a result of the examination.
However, it appears that the Written Agreement will remain in place
until at least the next examination.
In December, 1994, the FDIC and the Commissioner completed field
work related to their examination of the Merchants Trust Company as
of September 26, 1994. On February 17, 1995 the Trust Company
entered into a Memorandum of Understanding (MOU) with the FDIC and
the Commissioner to affect corrective actions relating to certain
operating, technical and regulatory issues. In December, 1995, the
FDIC and the Commissioner completed the field work related to their
examination of the Merchants Trust Company as of November 6, 1995.
It appears that the MOU will remain in place until at least the
next examination.
NOTE 2: RECENT ACCOUNTING DEVELOPMENTS
In March, 1995 the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be
Disposed Of." This statement requires a review for impairment of
long-lived assets and certain identifiable intangibles to be held
and used by an entity when events or changes in circumstances
indicate that the carrying amount of the assets may not be
recoverable. An impairment loss would be recognized if the sum of
the future cash flows expected to result from the use and eventual
disposition of the asset is less than the carrying amount of the
asset. The amount by which the carrying amount of the asset
exceeds the asset's fair value is the total impairment loss to be
recognized. The statement also requires that for certain long-
lived assets to be disposed of, the amount by which the carrying
amount of the asset exceeds the fair value less costs to sell, is
an impairment loss to be recognized. This statement does not apply
to financial instruments, core deposit intangibles, mortgage and
other servicing rights, or deferred tax assets. The Bank adopted
to adopt this new standard on January 1, 1996. The adoption of
this standard did not have an impact on the Bank's consolidated
financial condition and results of operations as of March 31, 1996.
On January 1, 1996, the Bank adopted SFAS No. 122, "Accounting
for Mortgage Servicing Rights." This statement requires the
recognition of a separate asset for the rights to service mortgage
loans for others regardless of how those servicing rights were
created. SFAS No. 122 will impact the Bank as fixed rate loan
originations having terms in excess of 15 years are generally sold
in the secondary mortgage market with servicing of a related loan
retained by the Bank. In such cases, the Bank is required to
allocate a portion of the cost of the loan to mortgage servicing
rights and the loan. The value of such servicing rights are to be
periodically assessed for impairment based on the fair value of
those rights. The effect of the adoption of this statement did not have
a significant impact on earnings for the first quarter of 1996.
NOTE 3: RESTRUCTURING
The Company began a restructuring project during the latter half of
1995 to reduce ongoing operating costs and increase noninterest
income. As a result, the Bank implemented a plan during the fourth
quarter of 1995 to reduce its workforce by approximately 250
employees.
In conjunction with the restructuring project the Company
engaged a consulting firm to assist in the identification of
possible workforce reductions and the implementation of the
restructure plan. The fee earned by these consultants is, in part,
contingent upon actual future operating cost reductions and the
increase in noninterest income. The company remains subject to an
agreement with these consultants whereby the Company is required to
remit additional funds to the consultants in the event actual cost
reductions and increases in noninterest income in 1996 exceed the
amounts anticipated. No additional expenses related to these
consultants' fees have been realized during the quarter ended March
31, 1996.
NOTE 4: BRANCH SALE
On January 12, 1996, the Passumpsic Savings Bank purchased
approximately $6 million in loans and assumed approximately $8
million in deposits of the Bank's branch located in Danville, VT.
The Bank received an 8% premium on deposits totalling $653,000 in
accordance with the purchase and assumption agreement.
Additionally, the Bank wrote off $301,000 of its core deposit
intangible and recognized a loss of $53,000 on the sale of fixed
assets directly related to the branch sale.
NOTE 5: REFUND OF VERMONT FRANCHISE TAXES
During the first quarter of 1996 the Bank recognized income related
to refunds of its 1993 and 1994 Vermont Franchise Taxes of $240,332 and
$287,438, respectively, in the first quarter of 1996.
MERCHANTS BANCSHARES, INC
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All adjustments necessary for a fair statement of the three
months ended March 31, 1996 and 1995 have been included in the
financial statements. The information was prepared from the books
of Merchants Bancshares, Inc. and its subsidiaries, the Merchants
Bank and Merchants Properties, Inc., without audit.
In the ordinary course of business, the Merchants Bank makes
commitments for possible future extensions of credit. On March 31,
1996, the Bank was obligated for $6,415,851 of standby letters of
credit. No losses are anticipated in connection with these
commitments.
RESULTS OF OPERATIONS
1. ANALYSIS OF QUARTERLY STATEMENTS OF OPERATIONS
The net income for the first quarter of 1996 was $1,139,171,
compared to net income for the same period a year earlier of
$38,632. On a per share basis, the 1996 net income represented
$.32 per share compared to $.01 for 1995. First quarter net
interest income before the provision for possible loan losses was
$6,618,601 in 1996 as compared to $6,488,349 for the year earlier
quarter. This increase is due to the reduction in interest expense
on capital notes and other borrowings resulting from the prepayment
of debt during the fourth quarter of 1995 and the first quarter of
1996. The provision for possible loan losses totalled $900,000 for
the first quarter of 1996 compared to $2,700,000 for the same
quarter in 1995, due to a healthier loan portfolio after
substantial writeoffs and non-performing asset sales during 1995.
Total non-interest expenses are up approximately 6% from the same
quarter a year ago due primarily to additions to the valuation
reserve for other real estate owned. The Company recognized
$216,000 and $240,000 in low income housing tax credits during each
of the quarters ended March 31, 1996 and 1995, respectively,
representing the amount of the income tax credits earned during the
those quarters. The recognition of these low income housing tax
credits has reduced the Company's effective tax rate from 34% to
20% at March 31, 1996.
The schedules on the following pages analyze interest and
overhead management in relation to total average assets and the
yield analysis for the periods reported.
LOAN QUALITY AND RESERVES FOR POSSIBLE LOAN LOSSES (RPLL)
Merchants Bancshares, Inc. reviews the adequacy of the RPLL
at least quarterly. The method used in determining the amount of
the RPLL is not based upon maintaining a specific percentage of RPLL
to total loans or total non-performing assets, but rather a
comprehensive analytical process of assessing the credit risk
inherent in the loan portfolio. This assessment incorporates a
broad range of factors which are indicative of both general and
specific credit risk, as well as a consistent methodology for
quantifying probable credit loss. As part of the Merchants
Bancshares, Inc.'s analysis of specific credit risk, a detailed
and extensive review is completed on larger credits and problematic
credits identified on the watched asset list, non-performing
asset listings, and risk rating reports.
The more significant factors considered in the evaluation of
the adequacy of the RPLL based on the analysis of general and
specific credit risk include:
Status of impaired loans as defined under SFAS No.114
Status of non-performing loans
Status of adversely-classified credits
Historic charge-off experience by major loan category
Size and composition of the loan portfolio
Concentrations of credit risk
Renewals and extensions
Current local and general economic conditions and
trends
Loan growth trends in the portfolio
Off balance sheet credit risk relative to commitments
to lend
Loans deemed impaired totaled $19.8 million. Impaired loans
have been allocated $1.9 million of the RPLL.
Overall, management maintains the RPLL at a level deemed to be
adequate, in light of historical, current and prospective factors,
to reflect the level of risk in the loan portfolio.
NON-PERFORMING ASSETS
The following tables summarize the Bank's non-performing
assets.
The first table shows balances of non-performing assets at March
31, 1996 separately stating assets covered by a loss sharing
arrangement related to the acquisition of the NFNBV On June 4,
1993. The terms of the Purchase and Assumption Agreement related
to the purchase of NFNBV require that the FDIC pay the Bank 80%
of net charge-offs up to $41,100,000 on any loans that qualify as
loss sharing loans for a period of three years from the date of
the acquisition. If net charge offs on qualifying loss sharing loans
exceed $41,100,000 during the three year period, the FDIC is
required to pay 95% of such qualifying charge offs. This
arrangement significantly reduces the exposure that the Bank
faces on NPA that are covered by loss sharing. As of March 31, 1996,
NPA covered by loss sharing totaled $4,979,000. The aggregate amount
of loans covered by the loss sharing arrangement at March 31,
1996 totaled $56,392,000.
NPA Regular Loss Sharing Total
(000's omitted) Assets Assets
Nonaccrual Loans $12,798 $4,190 $16,988
Restructured
Loans $2,642 $0 $2,642
Loans past due 90
days or more and
still accruing $192 $0 $192
Other Real Estate
Owned $3,909 $789 $4,698
Total $19,541 $4,979 $24,520
Note: Included in nonaccrual loans are certain loans whose
terms have been substantially modified in troubled debt restructuring.
The second table shows total nonperforming assets as of December
31, 1995 and March 31, 1996:
NPAs (000's ommited) December 31, 1995 March 31, 1996
Nonaccrual Loans $25,617 $16,988
Loans past due 90
days or more and
still accruing $237 $192
Restructured Loans $1,430 $2,642
Total Non-performing
Loans $27,284 $19,822
Other Real Estate
Owned $7,772 $4,698
Total Non-performing
Assets $35,056 $24,520
Note: Included in nonaccrual loans are certain loans whose
terms have been substantially modified in troubled debt
restructuring.
Ratios December 31, 1995 March 31, 1996
Percentage of Non-performing
Loans to Total Loans 6.06% 4.74%
Percentage of Non-performing
Assets to Total Loans plus
Other Real Estate Owned 7.66% 5.79%
Percentage of RPLL to Total Loans 3.61% 3.68%
Percentage of RPLL to NPL 59.50% 77.77%
Percentage of RPLL to NPA 46.31% 62.87%
Non-performing Loans (NPL) and Non-performing Assets (NPA)
decreased by $7.5 million and $10.6 million, respectively, from
December 31, 1995 to March 31, 1996. The decrease was due to
management's continuing review of the portfolio and actions taken
in an effort to diminish any loss exposure.
As previously mentioned, the loss sharing arrangement reduces
the exposure the Company faces on NPL. Adjusting the NPL total
for the 80% FDIC coverage on qualifying loss sharing loans
results in significantly larger RPLL to NPL ratios. The loss
sharing, adjusted ratios of RPLL to NPL at December 31, 1995 and March 31,
1996 were 77% and 94%, respectively. This level of coverage is considered
adequate based upon management's evaluation of known and
inherent risks in the portfolio. Approximately 85% of the NPL
are secured by real estate which significantly reduces the Company's
exposure to loss. Based upon the combination of loss sharing
coverage of some of the NPL, the secured nature of a significant
portion of the NPL, strengthening in the local real estate
market, and management's assessment of the current and prospective level
of risk in the loan portfolio, the balance of the RPLL is considered
adequate at March 31, 1996.
DISCUSSION OF EVENTS AFFECTING NPA:
Significant events affecting the categories of NPA are discussed
below:
Nonaccrual Loans:
Nonaccrual loans (NAL) decreased $8.6 million during the first quarter
of 1996. A review of the more significant NAL relationships noted
transfers to NAL for the quarter were approximately $1.0 million.
This amount was offset by approximately $1.0 million in payments and
pay-offs; $1.4 million in charge-offs; and $6.0 million in loans
returned to accrual status.
Restructured Loans:
Restructured loans increased $1.2 million, during the first
quarter. The increase was attributable to $5.6 million in
restructured loans transferred out of NAL; offset by $4.7 million
in loans transferred out of TDR status, as a result of performance
at a market rate of interest.
Other Real Estate Owned:
OREO decreased $3.1 million from December 31, 1995 to March 31,
1996. The majority of the decrease can be attributed write-downs
of OREO properties of $1.9 million. Write-downs were made to
reduce the carrying value of these properties to market value.
In addition the sale of one property for 1.7 million occurred during
the first quarter. The remainder of the change was due to
additions and sales of properties, with lower carrying values.
MERCHANTS BANCSHARES, INC
SUPPLEMENTAL INFORMATION
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
Fully Taxable Equivalent AVERAGE AVERAGE AVERAGE AVERAGE
Includes Fees on Loans BALANCE RATE BALANCE RATE
----------- ------- ----------- ------
INTEREST EARNING ASSETS
Taxable Investments $ 98,313,831 6.36% $ 93,828,565 5.18%
Loans 431,928,491 9.62% 509,306,439 9.31%
Federal Funds Sold 6,126,703 5.48% 2,212,777 5.94%
----------- ---- ----------- ----
Total Interest Earning Assets $ 536,369,025 8.98% $ 605,347,781 8.66%
=========== ==== =========== ====
INTEREST BEARING LIABILITIES
Savings, NOW & Money Market
Deposits $ 271,513,003 3.09% $ 285,104,635 3.19%
Time Deposits 177,543,618 5.72% 195,756,010 4.99%
----------- ---- ----------- ----
Total Savings and Time Deposits 449,056,621 4.14% 480,860,645 3.92%
Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase 717,777 5.44% 3,738,529 4.63%
Other Borrowed Funds 13,804,436 7.32% 56,114,461 7.96%
----------- ---- ----------- ----
Total Interest Bearing Liabilities 463,578,834 4.24% 540,713,635 4.34%
Other Liabilities & Stockholders' Equity
(Net of Non-Interest Earning Assets) 72,790,191 64,634,146
----------- -----------
Total Liabilities & Stockholders' Equity
(Net of Non-Interest Earning
Assets) $ 536,369,025 $ 605,347,781
=========== ===========
Rate Spread 4.74% 4.31%
==== ====
Net Yield on Interest Earning Asset 5.32% 4.78%
==== ====
MERCHANTS BANCSHARES, INC.
INTEREST MANAGEMENT AND OPERATING EXPENSE ANALYSIS
(TAXABLE EQUIVALENT BASIS)
QUARTER ENDED YEAR ENDED QUARTER ENDED
03/31/96 12/31/95 03/31/95
Total Average Assets $597,851,656 $642,487,000 $676,086,553
------------------------ --------------------- --------------------- ---------------------
AMOUNT % OF AMOUNT % OF AMOUNT % OF
ASSETS ASSETS ASSETS
INTEREST MANAGEMENT
Interest Income (T.E.) $11,539,319 7.72% $49,109,437 7.64% $12,430,377 7.11%
--------------------------- --------------------- --------------------- ---------------------
Interest Expense 4,858,387 3.25% 23,001,635 3.58% 5,872,027 3.36%
--------------------------- --------------------- --------------------- ---------------------
Net Int before Prov (T.E.) $6,680,932 4.47% $26,107,802 4.06% $6,558,350 3.75%
--------------------------- --------------------- --------------------- ---------------------
Prov for Loan Losses 900,000 0.60% 12,100,000 1.88% 2,700,000 1.54%
--------------------------- --------------------- --------------------- ---------------------
Net Int. Income (T.E.) $5,780,932 3.87% $14,007,802 2.18% $3,858,350 2.21%
--------------------------- --------------------- --------------------- ---------------------
NET OPERATING EXPENSE
Non-Interest Expense:
Personnel $2,909,171 1.95% $13,433,905 2.09% $3,501,103 2.00%
--------------------------- ------------------------------------------- ---------------------
Occupancy 582,081 0.39% 2,177,612 0.34% 602,526 0.34%
--------------------------- --------------------- --------------------- ---------------------
Equipment 507,176 0.34% 2,068,991 0.32% 523,010 0.30%
--------------------------- --------------------- --------------------- ---------------------
Other 3,646,722 2.44% 15,974,501 2.49% 2,554,075 1.46%
--------------------------- --------------------- --------------------- ---------------------
Total $7,645,150 5.12% $33,655,009 5.24% $7,180,714 4.10%
--------------------------- --------------------- --------------------- ---------------------
Less Non-Interest Income:
Fees on Loans $727,223 0.49% $2,491,825 0.39% $692,617 0.40%
--------------------------- --------------------- --------------------- ---------------------
Service Charges on Dep 846,784 0.57% 3,183,525 0.50% 785,206 0.45%
--------------------------- --------------------- --------------------- ---------------------
Other 2,065,829 1.38% 6,631,552 1.03% 1,425,110 0.81%
--------------------------- --------------------- --------------------- ---------------------
Total $3,639,836 2.44% $12,306,902 1.92% $2,902,933 1.66%
--------------------------- --------------------- --------------------- ---------------------
Net Operating Expense $4,005,314 2.68% $21,348,107 3.32% $4,277,781 2.45%
--------------------------- --------------------- --------------------- ---------------------
SUMMARY
Net Interest Income $5,780,932 3.87% $14,007,802 2.18% $3,858,350 2.21%
--------------------------- --------------------- --------------------- ---------------------
Less Net Operating Exp. $4,005,314 2.68% $21,348,107 3.32% $4,277,781 2.45%
--------------------------- --------------------- --------------------- ---------------------
Profit Before Taxes $1,775,618 1.19% ($7,340,305) -1.14% ($419,431) -0.24%
--------------------------- --------------------- --------------------- ---------------------
NET PROFIT (LOSS) $1,369,171 0.92% ($3,841,939) -0.60% $38,632 0.02%
--------------------------- --------------------- --------------------- ---------------------
13
MERCHANTS BANCSHARES, INC.
MARCH 31, 1996
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Reference is made to the Form 10-K filed for the year ended
December 31, 1995 for disclosure to current legal proceedings
against the Company, the Bank, the Merchants Trust Company and
certain directors and trustees of the companies. No
substantative changes in those proceedings have occured.
Item 2 - Changes in Securities - NONE
Item 3 - Defaults upon Senior Securities - NONE
Item 4 - Submission of Matters to a Vote of Security Holders -
NONE
Item 5 - Other Issues - NONE
Item 6 - Exhibits and Reports on Form 8-K - NONE
MERCHANTS BANCSHARES, INC.
FORM 10-Q
MARCH 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Merchants Bancshares, Inc.
\s\ Joseph L Boutin
Joseph L Boutin, President
\s\ Janet P Spitler
Janet P Spitler, Treasurer
May 10, 1996
Date