Merchants Bancshares announces results

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Merchants Bancshares announces results

Thu, 07/15/2004 - 8:00pm -- tim

Merchants Bancshares, Inc. Announces 2004 Second Quarter Results
SOUTH BURLINGTON, Vt., July 15 /PRNewswire-FirstCall/ -- Merchants
Bancshares, Inc. (NASDAQ:MBVT), the parent company of Merchants Bank,
today announced net income of $2.84 million, or diluted earnings of 45
cents per share, for the quarter ended June 30, 2004. This compares with
net income of $3.04 million, or diluted earnings per share of 49 cents for
the quarter ended June 30, 2003, and $2.82 million, or diluted earnings
per share of 45 cents for the first quarter of 2004. Total assets grew to
$1.03 billion from $970 million at December 31, 2003. The return on
average assets was 1.15% and the return on average equity was 12.96% for
the second quarter of 2004, compared to 1.39% and 14.38%, respectively,
for the second quarter of 2003. Merchants declared a dividend on July 15,
2004, of 27 cents per share payable August 12, 2004, to shareholders of
record as of July 29, 2004.
Merchants' quarterly average total assets increased to $991.80 million
during the quarter, a $26.55 million increase over fourth quarter 2003
average total assets. Ending loan balances increased to $589.11 million,
compared to $569.00 million at December 31, 2003. Quarterly average loans
increased to $579.98 million during the second quarter, an increase of
$15.55 million over fourth quarter 2003 average balances. The overall
growth in the loan portfolio was primarily a result of increased
commercial loan activity. The net gains came primarily in the commercial
loan and commercial real estate categories; ending balances in these
categories increased $13.32 million to $298.51 million over year end
balances of $285.19 million. Residential mortgage activity decreased
during the quarter due to the slight rise in mortgage rates; Merchants'
home equity line of credit portfolio showed the greatest increase in the
retail product category as consumers opted to hold onto previously
negotiated low fixed rates on their first mortgage. Ending balances in
this portfolio increased $4.41 million to $35.48 million at June 30, 2004
from $31.07 million at December 31, 2003.
Deposits closed the quarter at $816.76 million, an increase of $8.67
million over year end balances of $808.08 million. Quarterly average
deposits increased $9.25 million to $813.94 million. Although sales of
Merchants' marquee Free Checking for Life(R) product have moderated this
year, totals in this product category increased $7.37 million to $131.23
million.
Merchants' investment portfolio closed the quarter at $377.56 million, an
increase of $37.23 million over year end balances of $340.34 million. The
growth in the portfolio was primarily in the mortgage backed security and
collateralized mortgage obligation sectors. Merchants has funded much of
the growth in its investment portfolio with advances from the Federal Home
Loan Bank (FHLB). Average short-term FHLB borrowings for the quarter
totaled $40.26 million, at an average rate of 1.16%. Long-term debt
increased to $63.28 million, from $26.37 million for the quarter ended
March 31, 2004, and $6.62 million for the quarter ended December 31, 2003,
as Merchants locked in rates on a portion of its funding during the
quarter. The long-term debt primarily consists of amortizing FHLB
advances with maturities from two to six years; the average rate paid on
the debt during the quarter was 2.16%.
Merchants experienced some net interest margin erosion during the second
quarter, as the margin decreased from 4.23% for the fourth quarter of 2003
and the first quarter of this year to 4.20% for the current quarter. This
compares to a net interest margin of 4.55% for the second quarter of 2003.
However, balance sheet growth enabled Merchants to increase its net
interest income dollars $395 thousand or 4.2% for the second quarter and
$977 thousand or 5.3% for the first six months of the year when compared
to the same period one year ago. The recent increase in short-term rates
by the Federal Reserve Board may create opportunities for Merchants to
further increase its margin dollars.
Nonperforming assets were $893 thousand or 0.09% of total assets at June
30, 2004. This is a decrease of $3.43 million from the June 30, 2003
balance of $4.32 million, and a decrease of $1.32 million from the
December 31, 2003, balance of $2.21 million due to the resolution of
several large nonperforming loans. Asset quality measurements have shown
consistent improvement during the past fifteen months. Loan delinquency
rates, charge-offs and non-accrual loan balances are all at or near
historical lows.
At June 30, 2004, the Allowance for Loan Losses ("Allowance") stood at
$8.00 million or 1.36% of total loans and 896% of nonperforming loans,
compared to $7.89 million or 1.46% of total loans and 183% of
nonperforming loans at June 30, 2003. Merchants had very little activity
in the Allowance during the first six months of 2004; charge-offs of $56
thousand and recoveries of $101 thousand were recorded. There was no
provision for loan losses during the first six months of 2004 or 2003.
Total noninterest income decreased $537 thousand to $2.21 million for the
second quarter of 2004 from $2.75 million for the second quarter of 2003;
and decreased $467 thousand for the first six months of 2004 to $4.36
million from $4.83 million for the first six months of 2003. Merchants
realized security losses totaling $67 thousand for the second quarter of
2004 compared to gains of $626 thousand for the second quarter of last
year, and a year-to-date loss of $4 thousand for the first six months of
2004 compared to gains of $843 thousand for the first six months of the
prior year. Absent the security gains and losses, noninterest income
increased $156 thousand, or 7.3%, to $2.28 million from $2.12 million for
the second quarter of 2004 compared to 2003; and $380 thousand, or 9.5% to
$4.37 million from $3.99 million for the first six months of the current
year compared to the prior year. This increase in noninterest income is
due in large part to the increased level of overdraft activity and to
increases in electronic transactions. Year-to-date overdraft fee income
increased 27.3% or $374 thousand to $1.74 million from $1.37 million when
comparing the first six months of the current year to the same period last
year. ATM and debit card volumes for the first six months of 2004 are
17.7% higher than the same period one year ago. Year-to-date net ATM and
debit card fees have increased 30.6% during the same period.
Total noninterest expense increased $316 thousand to $8.13 million for the
second quarter of 2004 from $7.82 million for the second quarter of 2003;
total noninterest expense increased $922 thousand to $16.31 million from
$15.39 million for the first six months of the current year compared to
2003. One of Merchants' largest expense categories is Salaries and
Employee Benefits. This category is virtually flat at $3.83 million when
comparing the second quarter of the current year to last year, and
increased 1.7% to $7.76 million from $7.63 million for the first six
months of the year. Merchants' salary administration plan, an ongoing
project for the last two years, has worked its way through the entire
organization. Current expense increases are the result of normal pay
increases.
Occupancy and Equipment expenses for the second quarter increased $161
thousand or 12.1%, when comparing 2004 to 2003; year-to-date increases in
this category were $379 thousand, or 14.4%. Approximately $187 thousand
of the year-to-date increase is attributable to Merchants' two de novo
branches, $130 thousand to Merchants' service center network server
infrastructure and desktop computer upgrade completed in the fourth
quarter of 2003, and $10 thousand to the branch infrastructure and desktop
computer upgrade being implemented during 2004. The balance is a result
of increased software maintenance costs and normal increases in building
maintenance and rental expense. Legal and Professional fees increased $155
thousand or 40.2%, for the second quarter of 2004 compared to 2003; and
$267 thousand or 38.4%, for the first six months of the current year
compared to the prior year. Merchants has decided to defer any further
market expansion through de novo branching until management is satisfied
that the two de novo branches are self-supporting. As a result of this
decision Merchants expensed $48 thousand this quarter in legal and
professional fees related to the development of a third location. The
balance of the increase is primarily attributable to professional fees
associated with the infrastructure project mentioned above, and increased
investment advisory fees.
Mr. Joseph Boutin, President and Chief Executive Officer, Mr. Michael
Tuttle, Chief Operating Officer and Ms. Janet Spitler, Chief Financial
Officer, will host a conference call to discuss these earnings results at
9:00 a.m. Eastern Time on Friday July 16, 2004. Interested parties may
participate in the conference call by dialing 800-230-1085; the title of
the call is Earnings Release Conference Call for Merchants Bancshares,
Inc. Participants are asked to call in a few minutes prior to the call in
order to register. A replay will be available through July 23, 2004. The
U.S. replay dial-in number is 800-475-6701 and the replay access code is
717266.
The mission of Merchants Bank is to provide best-in-class community
banking services to Vermonters. This commitment is fulfilled through a
community, branch-based, system that includes 35 bank offices throughout
the state of Vermont, employees dedicated to quality customer service, and
innovative banking products such as Free Checking for Life(R),
MoneyLYNX(R) money market accounts, and CommerceLYNX(R) business banking
products. Merchants Bank also includes a trust and investment division,
known as Merchants Trust Company, serving individuals and institutions.
Total assets of Merchants are $1.03 billion. For more information about
Merchants Bank visit our website at http://www.mbvt.com/. Merchants'
stock is traded on the NASDAQ National Market system under the symbol
MBVT. Member FDIC.
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 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.