Merchants Bancshares, Inc. Announces Dividend, Fourth Quarter and Year End 2015 Results

21 Jan, 2016, 16:01 ET from Merchants Bancshares, Inc.

SOUTH BURLINGTON, Vt., Jan. 21, 2016 /PRNewswire/ -- Merchants Bancshares, Inc.  (NASDAQ:  MBVT),  the  parent  company  of Merchants Bank, today announced net income  of $2.31 million, or $0.36 per basic and diluted share for the fourth quarter of 2015. The fourth quarter of 2015 included $1.6 million of merger-related expenses, net of tax, related to the acquisition of NUVO Bank & Trust Company, which closed on December 4, 2015, and retirement costs net of tax. Excluding these items, the Company's core net income was $3.94 million or $0.61 per basic and diluted share. This compares to net income of $2.50 million, or $0.40 per basic and $0.39 per diluted share, for the fourth quarter of 2014. For the year ended December 31, 2015, net income totaled $12.62 million, or $1.98 per basic and diluted share, compared to net income of $12.13 million, or $1.92 per basic and $1.91 per diluted share for the year ended December 31, 2014.

The return on average assets was 0.49% and 0.71% for the three months and year ended December 31, 2015, respectively, compared to 0.59% and 0.73% for the same periods in 2014. The return on average equity was 6.73% and 9.69% for the three months and year ended December 31, 2015,  respectively,  compared  to  7.95%  and  9.84%  for  the  same  periods  in  2014.  The Company's Board of Directors approved a dividend of $0.28 per share, payable February 18, 2016, to stockholders of record as of February 4, 2016.

"The completion of the NUVO Bank & Trust Company acquisition on December 4, 2015 expands our New England footprint, presenting new opportunities for our lending teams. We are excited about these growth prospects and welcome our new customers in the greater Springfield and Western Massachusetts markets," commented Geoffrey Hesslink, Merchants Bancshares, Inc.'s President and Chief Executive Officer.

Hesslink added, "The Company continues to deliver solid core earnings on our Vermont business. The recent NUVO acquisition will be immediately accretive to earnings and puts us in a great position for business expansion in 2016."

As a result of the acquisition of NUVO, Merchants Bancshares added assets of $165 million, loans of $149 million and deposits of $143 million.

2015 Financial Highlights

  • Balance Sheet:
    • The investment portfolio for the fourth quarter of 2015 was $406.9 million, an increase of $60.7 million from the fourth quarter of 2014. A significant cash position was maintained in anticipation of funding requirements arising from the restructuring of NUVO's relatively higher rate deposits.
    • Total loan balances at December 31, 2015 were $1.4 billion, $156.3 million higher on a linked quarter basis and $231.9 million higher from the fourth quarter of 2014. Balances were impacted by the addition of $149 million related to the acquisition NUVO.
    • Total commercial loans, defined as commercial, commercial real estate and construction, increased $191.9 million from December 31, 2014 to $805.8 million at December 31, 2015. The growth in the loan portfolio was primarily attributable to the addition of NUVO. The standalone Merchants Bank loan portfolio experienced moderate growth on a linked quarter basis.
    • The Allowance for Loan Losses (ALL) as of December 31, 2015 was $12.1 million, or 0.86% of portfolio loans, as compared to $11.8 million, or 1.00% of portfolio loans, as of December 31, 2014. The decrease in the ALL as a percentage of portfolio loans was primarily a result of the increase in loan balances resulting from the NUVO acquisition. Loans acquired in the acquisition were marked to their fair value at acquisition, and, as such, no additional ALL was recorded for the acquired portfolio.
    • Total deposits reached $1.6 billion for the fourth quarter of 2015, an increase of $242.7 million compared to December 31, 2014, excluding NUVO deposits; standalone Merchants Bank deposits increased $99 million. The increase is primarily attributable to higher retail and trust account deposits.
    • Total stockholders' equity ended the quarter at $148.0 million, driven by 517,109 new shares issued in the NUVO deal.
    • Book value per share increased $1.68 to $21.57 per share at December 31, 2015 from $19.89 at December 31, 2014.
  • Income Statement:
    • Net interest income on a fully-taxable basis was $13.25 million for the three months ended December 31, 2015, compared to $12.60 million for the quarter ending September 30, 2015, and $12.02 million for the same period in 2014.
    • The Company recorded a zero provision for credit losses during the fourth quarters of 2015 and 2014. The year to date provision for credit losses totaled $250 thousand compared to $150 thousand for the twelve months ended December 31, 2014, reflecting the trend of solid credit quality.
    • Noninterest income for the fourth quarter of 2015 was $3.09 million, a decrease of $362 thousand on a linked quarter basis and an increase of $284 thousand from the fourth quarter of 2014. The decline on a linked quarter basis was attributable to non-recurring miscellaneous income recognized in the prior quarter. The increase from the fourth quarter of 2014 was due to higher seasonal volumes in debit card and overdraft fee income.
    • Excluding merger-related, severance and retirement costs for 2015, and conversion and severance expenses for 2014, noninterest expense was $10.9 million for the fourth quarter of 2015, an increase of $805 thousand on a linked quarter basis and an increase of $543 thousand from the fourth quarter of 2014. The primary drivers of the increases were incentive accruals.
    • The effective tax rate was 20% for the three and twelve months ended December 31, 2015, compared to 20% and 23% for the three and twelve months ended December 31, 2014. The decrease in the twelve month effective tax rate was due to higher tax credits.
  • Other Items:
    • The taxable equivalent net interest margin for the three months ended December 31, 2015 was 2.89%, a decrease of 7 basis points on a linked quarter basis, and a decrease of 4 basis points from the fourth quarter of 2014.
    • Nonperforming loans were $4.17 million, or 0.30% of total loans, at December 31, 2015, compared to 0.11% of total loans at September 30, 2015 and 0.07% of total loans at December 31, 2014. The increase in nonperforming loans from both periods was primarily attributable to $2.23 million nonperforming loans acquired from NUVO.  
    • Regulatory Capital Ratios at December 31, 2015:
  • Common Equity Tier 1 – 12.88%
  • Tier 1 Leverage – 8.71%
  • Total Risk-Based Capital – 15.80%
  • Tangible Capital – 6.94%

Geoffrey R. Hesslink, President and Chief Executive Officer, and Marie Thresher, Executive Vice President and Chief Operating Officer, will host a conference call to discuss these earnings results, business and outlook at 9:00 a.m. Eastern Time on Friday, January 22, 2016. Interested parties may participate in the conference call by dialing U.S. number (866) 218-2405, Canada number (855) 669-9657, or international number (412) 902-4124. The title of the call is Merchants Bancshares, Inc. Q4 2015 Earnings Call. Participants are asked to call a few minutes prior to register. A replay will be available until 9:00 a.m. Eastern Time on Friday, January 29, 2016. The U.S. replay dial-in telephone number is (877) 344-7529. The Canada replay telephone number is (855) 669-9658, the international replay telephone number is (412) 317-0088. The replay access code for all replay telephone numbers is 10068671. Additionally, a recording of the call will be available on Merchants website at www.mbvt.com

Non-GAAP Financial Measure. In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures, such as core net income, tangible capital ratio and fully taxable equivalent net interest income. Net interest income is presented on a fully taxable equivalent basis, specifically included in interest income was tax-exempt interest income from certain tax-exempt loans. An amount equal to the tax benefit derived from this tax exempt income is added back to the interest income total, to produce net interest income on a fully taxable equivalent basis. Merchants Bancshares believes that the supplemental non-GAAP information is utilized by regulators  and market analysts  to evaluate  a  company's  financial  condition  and  therefore  such  information  is  useful  to  investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Additionally, capital ratios as presented are preliminary and will not be finalized until the Bank completes and files it regulatory reporting.

The Merger of Merchants Bank and NUVO Bank & Trust Company
On December 4, 2015, Merchants completed the acquisition of NUVO Bank & Trust Company ("NUVO"), which was structured as a merger of NUVO with and into Merchants' wholly-owned subsidiary, Merchants Bank. NUVO's banking business will be operated as a division of Merchants Bank. Total compensation paid by Merchants for NUVO's outstanding stock was comprised of approximately 517,109 shares of common stock and $5.106 million in cash. Merchants also paid an aggregate of approximately $878,000 to cash out NUVO stock options and a portion of its common stock warrants and issued replacement warrants to purchase Merchants common stock on adjusted terms. With completion of the merger, Merchants Bancshares now has consolidated assets of approximately $2.0 billion and 32 banking locations, including the new office in Springfield, Massachusetts. These balances are unaudited and do not include any adjustments for purchase accounting. Upon completion of the merger on December 4, 2015, Merchants had 6,859,933 shares of common stock outstanding, including the 517,109 shares of common stock issued as consideration for the merger.

Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this press release that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements, which are based on certain assumptions and describe Merchants Bancshares' future plans, strategies and expectations, can generally be identified by the use of the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions. Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. Actual results could differ materially from those projected in the forward-looking statements as a result of, among others, costs or difficulties related to the integration of NUVO; weakness in general, national, regional or local economic conditions, the performance of the investment portfolio, quality of credits or the overall demand for services; changes in loan default and charge-off rates which could affect the allowance for credit losses; declines in the equity and financial markets; reductions in deposit levels which could necessitate increased and/or higher cost borrowing to fund loans and investments; declines in mortgage loan refinancing, equity loan and line of credit activity which could reduce net interest and non-interest income; changes in the domestic interest rate environment and inflation; changes in the carrying value of investment securities and other assets; misalignment of interest-bearing assets and liabilities; increases in loan repayment rates affecting interest income and the value of mortgage servicing rights; changing business, banking, or regulatory conditions or policies, or new legislation affecting the financial services industry that could lead to changes in the competitive balance among financial institutions, restrictions on bank activities, changes in costs (including deposit insurance premiums), increased regulatory scrutiny, declines in consumer confidence in depository institutions, or changes in the secondary market for bank loan and other products; and changes in accounting rules, federal and state laws, IRS regulations, and other regulations and policies governing financial holding companies and their subsidiaries which may impact Merchants Bancshares' ability to take appropriate action to protect financial interests in certain loan situations.

You should not place undue reliance on forward-looking statements, and are cautioned that forward- looking statements are inherently uncertain. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, which are included in more detail in the Annual Report on Form 10-K, as updated by Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. Merchants Bancshares' does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

 

Merchants Bancshares, Inc.



Financial Highlights (unaudited)



(Dollars in thousands except share and per share data)











December 31,

September 30,

December 31

September 30,




2015

2015

2014

2014



Balance Sheets - Period End







Total assets

$            2,021,198

$            1,818,341

$            1,723,464

$              1,647,586



Cash and due from banks

30,355

21,541

23,745

27,283



Interest earning cash and other short-term investments

104,828

89,918

130,714

92,374



Fed funds sold and other Short Term Investments

15,000

-

-

-



Investments-available for sale, taxable

283,454

282,083

203,473

186,049



Investments-held to maturity, taxable

119,674

123,929

138,421

142,110



Loans

1,414,280

1,257,932

1,182,334

1,156,663



Allowance for loan losses ("ALL")

12,113

12,210

11,833

12,019



Net loans

1,402,167

1,245,722

1,170,501

1,144,644



Federal Home Loan Bank ("FHLB") stock

3,797

4,378

4,378

4,378



Bank premises and equipment, net

15,030

15,019

15,492

15,922



Bank owned life insurance

10,551

10,492

10,311

10,237



Goodwill

6,967

-

-

-



Investment in real estate limited partnerships

5,687

5,982

5,196

5,511



Core Deposit Intangible

1,360

-

-

-



Other assets

22,329

19,277

21,233

19,078



Non-interest bearing deposits

631,244

575,492

566,366

544,425



Savings, interest bearing checking and money market accounts 

665,623

620,224

530,722

525,680



Time deposits

254,572

191,757

211,684

233,976



Total deposits

1,551,439

1,387,473

1,308,772

1,304,081



Short-term borrowings

3,001

-

-

-



Securities sold under agreement to repurchase, short-term

286,639

267,794

258,464

188,157



Other long-term debt

2,237

2,258

2,320

2,341



Junior subordinated debentures issued to unconsolidated subsidiary trust

20,619

20,619

20,619

20,619



Other liabilities

9,272

7,551

7,468

6,644



Stockholders' equity

147,992

132,646

125,821

125,744










Balance Sheets - Quarter-to-Date Averages







Total assets

$            1,891,143

$            1,759,743

$            1,692,286

$              1,642,390



Cash and due from banks

28,380

26,049

26,476

27,871



Interest earning cash and other short-term investments

106,681

52,795

124,913

72,400



Investments-available for sale, taxable

279,416

264,633

196,557

191,771



Investments-held to maturity, taxable

122,924

126,549

140,339

144,510



Loans

1,306,613

1,245,861

1,163,776

1,162,236



Allowance for loan losses

12,269

12,223

12,079

12,090



Net loans

1,294,344

1,233,638

1,151,697

1,150,146



FHLB stock

3,751

4,378

4,378

4,883



Bank owned life insurance

10,515

10,456

10,270

10,190



Other assets

45,132

41,245

37,657

40,618



Non-interest bearing deposits

610,499

586,773

558,960

475,101



Savings, interest bearing checking and money market accounts 

632,481

613,337

529,189

612,811



Time deposits

210,527

195,044

220,114

247,297



Total deposits

1,453,507

1,395,154

1,308,263

1,335,209



Short-term borrowings

1,011

9,649

-

96



Securities sold under agreement to repurchase, short-term

268,614

195,410

228,080

152,451



Other long-term debt

2,244

2,265

2,327

2,348



Junior subordinated debentures issued to unconsolidated subsidiary trust

20,619

20,619

20,619

20,619



Other liabilities

7,973

7,388

7,139

7,250



Stockholders' equity

137,176

129,258

125,858

124,417



Earning assets

1,819,385

1,694,216

1,629,963

1,575,801



Interest bearing liabilities

1,135,496

1,036,324

1,000,329

1,035,622










Ratios and Supplemental Information - Period End







Book value per share

$                    21.57

$20.93

$                   19.89

$                     19.86



Common Equity Tier 1

12.88%

13.83%

N/A

N/A



Tier I leverage ratio

8.71%

8.93%

8.76%

8.95%



Total risk-based capital ratio

15.80%

17.10%

16.95%

17.29%



Tangible capital ratio (1)

6.94%

7.29%

7.30%

7.63%



Period end common shares outstanding

6,859,933

6,338,158

6,327,226

6,329,958










Credit Quality - Period End







Nonperforming loans ("NPLs")

$                    4,173

$1,404

$                      791

$                        732



Nonperforming assets ("NPAs")

$                    4,185

$1,404

$                      791

$                        732



NPLs as a percent of total loans

0.30%

0.11%

0.07%

0.06%



NPAs as a percent of total assets

0.21%

0.08%

0.05%

0.04%



ALL as a percent of NPLs

290%

870%

1496%

1642%



ALL as a percent of total loans

0.86%

0.97%

1.00%

1.04%










(1)  The tangible capital ratio is calculated by dividing tangible equity by tangible assets.  See Non-GAAP reconciliation below.

















For the Twelve Months Ended






December 30,

December 30,






2015

2014





Balance Sheets - Year-to-Date Averages







Total assets

$            1,775,496

$            1,667,666





Cash and due from banks

25,901

27,351





Interest earning cash and other short-term investments

81,961

79,599





Investments-available for sale, taxable

252,215

208,169





Investments-held to maturity, taxable

129,416

144,322





Loans

1,240,386

1,165,586





Allowance for loan losses

12,116

12,123





Net loans

1,228,270

1,153,463





FHLB stock

4,175

5,784





Bank owned life insurance

10,426

10,150





Other assets

43,132

38,828





Non-interest bearing deposits

588,698

393,355





Savings, interest bearing checking and money market accounts 

590,988

668,815





Time deposits

203,851

258,220





Total deposits

1,383,537

1,320,390





Short-term borrowings

4,207

212





Securities sold under agreement to repurchase, short-term

226,913

192,868





Other long-term debt

2,275

2,358





Junior subordinated debentures issued to unconsolidated subsidiary trust

20,619

20,619





Other liabilities

7,725

7,936





Stockholders' equity

130,220

123,282





Earning assets

1,708,153

1,603,459





Interest bearing liabilities

1,048,853

1,143,092



















Loan Portfolios - Period End







(In thousands)

December 31,
2015

September 30,
2015

December 31,
2014

September 30,
2014



Commercial, financial and agricultural

$               237,478

$               207,067

$               177,597

$                 183,069



Municipal loans

105,421

108,423

94,366

96,258



Real estate loans - commercial

533,569

450,673

412,447

381,301



Real estate loans - residential

492,801

448,632

469,529

472,986



Real estate loans - construction

34,802

40,748

23,858

17,970



Installment Loans

10,143

2,370

4,504

4,793



All other loans

66

19

33

286



Total Loans

$            1,414,280

$            1,257,932

$            1,182,334

$              1,156,663


















For the Three Months Ended

For the Twelve Months Ended



December 31,

September 30,

December 31

December 31,

December 31,



2015

2015

2014

2015

2014


Operating Results







Interest income







Interest and fees on loans

$                  11,608

$                 11,055

$                 10,655

$                 44,087

$              42,815


Interest and dividends on investments

$                    1,995

$                   1,961

$                   1,819

$                   7,779

7,965


Interest on interest earning deposits with banks and other short-term investments

94

25

83

250

192


Total interest and dividend income

13,697

13,041

12,557

52,116

50,972


Interest expense







Savings, interest bearing checking and money market accounts

358

354

365

1,433

1,647


Time deposits $100 thousand and greater

105

120

132

467

635


Other time deposits

232

198

235

845

1,090


Total Deposits

695

672

732

2,745

3,372


Securities sold under agreement to repurchase and other short-term borrowings

108

97

111

510

353


Long-term debt

202

199

202

797

800


Total interest expense

1,005

968

1,045

4,052

4,525


Net interest income

12,693

12,073

11,512

48,064

46,447


Provision for credit losses

-

150

-

250

150


Net interest income after provision for credit losses

12,693

11,923

11,512

47,814

46,297


Noninterest income







Trust division income

858

886

856

3,525

3,393


Net, debit card income

779

796

645

3,080

2,660


Overdraft income

678

548

554

2,004

2,473


Service charges on deposits

396

390

392

1,504

1,369


Gain (losses) on investment securities, net

-

-

-

-

107


Other noninterest income

376

829

356

1,847

1,572


Total noninterest income

3,087

3,449

2,803

11,960

11,574


Noninterest expense







Compensation and benefits

6,133

5,508

5,534

21,879

20,440


Occupancy expense

1,023

1,036

996

4,251

4,292


Equipment expense

747

726

748

2,971

2,882


Telephone expense

179

206

211

789

895


Legal and professional fees

596

414

485

1,991

1,924


Mobile & internet banking

402

399

390

1,597

1,452


Core / Item processing 

476

450

521

1,765

1,876


Marketing expenses

125

148

272

561

1,177


State franchise taxes

408

404

339

1,503

1,435


FDIC insurance

233

218

207

886

857


Conversion costs

-

-

489

-

1,319


Merger costs

1,511

215

-

1,875

-


Core deposit intangible amortization

17

-

-

17

-


Other noninterest expense

1,041

867

1,014

3,886

3,665


Total noninterest expense

12,892

10,591

11,206

43,971

42,214


Income before provision for income taxes

2,888

4,781

3,109

15,803

15,657


Provision for income taxes

579

925

608

3,185

3,532


Net income

$                    2,309

$                   3,856

$                   2,501

$                 12,618

$              12,125









Ratios and Supplemental Information







Weighted average common shares outstanding

6,493,180

6,337,778

6,330,244

6,373,122

6,326,142


Weighted average diluted shares outstanding

6,498,071

6,349,086

6,347,281

6,381,222

6,343,837


Basic earnings per common share

$                      0.36

$                     0.61

$                     0.40

$                     1.98

$                  1.92


Diluted earnings per common share

$                      0.36

$                     0.61

$                     0.39

$                     1.98

$                  1.91


Return on average assets

0.49%

0.88%

0.59%

0.71%

0.73%


Return on average stockholders' equity

6.73%

11.93%

7.95%

9.69%

9.84%


Average yield on loans

3.69%

3.69%

3.81%

3.72%

3.85%


Average yield on investments

1.97%

1.98%

2.12%

2.02%

2.22%


Average yield of earning assets

3.12%

3.19%

3.18%

3.17%

3.31%


Average cost of interest bearing deposits 

0.33%

0.33%

0.39%

0.35%

0.36%


Average cost of borrowed funds

0.42%

0.52%

0.50%

0.51%

0.53%


Average cost of interest bearing liabilites

0.35%

0.37%

0.41%

0.39%

0.40%


Net interest rate spread

2.77%

2.82%

2.77%

2.79%

2.91%


Net interest margin

2.89%

2.96%

2.93%

2.94%

3.03%


Net interest income on a fully taxable equivalent basis

$                  13,247

$                 12,601

$                 12,023

$                 50,153

$              48,525


Net charge-offs (recoveries) to Average Loans

0.00%

0.00%

0.02%

0.01%

0.01%


Net charge-offs (recoveries) 

$                          43

$                        43

$                        67

$                      109

$                   163


Efficiency ratio (1)

63.70%

64.09%

65.46%

64.02%

63.94%









(1)  The efficiency ratio excludes amortization of intangibles, OREO expenses, gain/loss on sales of securities, state

  franchise taxes, and any significant nonrecurring items.

Amounts reported for prior periods are reclassified, where necessary, to be consistent with the current period presentation. 








Non-GAAP Reconciliation:








December 31,






Core Net Interest Income

2015






Merger Related Expenses and retirement costs

$                      2,039






Tax effect

408






Merger Related Expenses and retirement costs, net of tax

1,631













GAAP Net Income as Reported

2,309






Core Net Income

$                      3,941













Weighted average diluted shares outstanding

6,498













Core Diluted earnings per common share

$                        0.61




















Tangible Capital Ratio








December 31,

September 30,

December 31

September 30,



Period End

2015

2015

2014

2014



Total Assets

2,021,198

1,818,341

1,723,464

1,647,586



Core Deposit Intangible

1,360

-

-

-



Goodwill

6,967

-

-

-



Tangible Assets

2,012,871

1,818,341

1,723,464

1,647,586










Total Stockholders Equity

147,992

132,646

125,821

125,744



Core Deposit Intangible

1,360

-

-

-



Goodwill

6,967

-

-

-



Tangible Stockholders Equity

139,665

132,646

125,821

125,744










Tangible Capital Ratio

6.94%

7.29%

7.30%

7.63%










 

Contact: Jodi L. Bachand, Merchants Bank, at (802) 865-1807

Logo - http://photos.prnewswire.com/prnh/20140929/148956

SOURCE Merchants Bancshares, Inc.



RELATED LINKS

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