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

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.

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

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SOURCE Merchants Bancshares, Inc.

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