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, September 30, December 31, September 30,
2015 2015 2014 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
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SOURCE Merchants Bancshares, Inc.
