Merchants Bancshares, Inc. Announces Strong 2012 Earnings -- Results up 4% Over 2011

Marketwired

SOUTH BURLINGTON, VT--(Marketwire - Jan 23, 2013) - Merchants Bancshares, Inc. (NASDAQ: MBVT), the parent company of Merchants Bank, today announced net income of $15.19 million, or diluted earnings per share of $2.42 for the year ended December 31, 2012, compared to $14.62 million, or diluted earnings per share of $2.35 for the year ended December 31, 2011. Net income for the fourth quarter of 2012 was $3.84 million, or diluted earnings per share of $0.61. This compares to net income of $3.71 million, or diluted earnings per share of $0.59 for the fourth quarter of 2011. The return on average assets was 0.91% and 0.92% for the quarter and year ended December 31, 2012, respectively, compared to 0.95% and 0.97% for the same periods in 2011. The return on average equity was 13.08% and 13.37% for the quarter and year ended December 31, 2012, respectively, compared to 13.77% and 14.11% for the same periods in 2011. We previously announced the declaration of a dividend of $0.28 per share, payable February 14, 2013, to shareholders of record as of January 31, 2013. This quarter represents our 65th consecutive quarterly dividend payment and our 29th consecutive quarter at the current payout level.

"We are very pleased to report our annual results for 2012 are second only to our record high year of 2010. Highlights for the year include strong organic growth in loans, deposits and trust fees. At the same time, asset quality was maintained at high levels throughout the year, nonperforming assets and delinquencies remain at very low levels," commented Michael R. Tuttle, our President and Chief Executive Officer.

Total assets reached a record high of $1.71 billion at December 31, 2012, an increase of $96.68 million, or 6.00%, from December 31, 2011. Total shareholders' equity also reached a record high of $118.22 million at December 31, 2012. Book value per share increased $1.25 per share, or 7.11%, to $18.82 at year-end 2012, compared to year-end 2011. Our capital ratios remain strong, with a Tier 1 leverage ratio of 8.08%, a total risk-based capital ratio of 16.05% and a tangible capital ratio of 6.92%.

Our loan portfolio continued to grow during the quarter, reaching a new record high of $1.08 billion. For the year ended December 31, 2012 the loan portfolio grew $55.30 million, or 5.38%.

The following table summarizes the components of our loan portfolio as of the periods indicated:

             
(In thousands)   December 31, 2012   September 30, 2012   December 31, 2011
Commercial, financial and agricultural   $ 165,023   $ 169,450   $ 146,990
Municipal loans     84,689     82,048     101,705
Real estate loans - residential     489,951     477,321     439,818
Real estate loans - commercial     327,622     327,182     313,915
Real estate loans - construction     10,561     11,285     18,993
Installment loans     4,701     5,259     5,806
All other loans     376     334     399
Total loans   $ 1,082,923   $ 1,072,879   $ 1,027,626
                   

Year-to-date growth in our commercial loan portfolio has been driven by new customer acquisition and expansion of existing relationships. Reduced loan demand by our municipal customers has led to a year-to-date reduction in municipal balances. Growth in our residential real estate loan portfolio continues to be driven by increased mortgage refinance volume due to the low interest rate environment.

We booked a $250 thousand provision for credit losses during the fourth quarter of 2012 and 2011. The 2012 provision for credit losses was $950 thousand, compared to $750 thousand for 2011. Asset quality remained strong throughout 2012; nonperforming assets totaled $2.91 million, or 0.17% of total assets, at December 31, 2012, compared to $2.87 million, or 0.18% of total assets, at December 31, 2011. Additionally, loans past due 30-89 days were zero at December 31, 2012, compared to $213 thousand at December 31, 2011. We booked net charge-offs of $18 thousand during the fourth quarter of 2012, and net recoveries of $9 thousand for the year.

Our investment portfolio totaled $509.09 million at December 31, 2012, a decrease of $3.22 million from the December 31, 2011 ending balance of $512.31 million. We sold bonds with a book value of $129.43 million during 2012 for a net pre-tax gain of $507 thousand. These trades allowed us to lock in gains on faster paying mortgage-backed securities and helped us to reduce our exposure to accelerated premium amortization in the portfolio.

Total deposits also reached a record high during 2012 and ended the year at $1.27 billion, an increase of $93.20 million, or 7.91%, from balances of $1.18 billion at December 31, 2011, and an increase of $18.12 million from balances at September 30, 2012. Growth during 2012 has been concentrated in our transaction account categories. Demand deposits have shown solid growth during 2012, increasing by $42.97 million, or 21.75%, to $240.49 million at December 31, 2012 from $197.52 million at December 31, 2011. Other transaction account categories have increased by $68.08 million, or 10.77% to $700.19 million during 2012, compared to 2011. Deposits continued to migrate away from time deposit categories during 2012. Total time deposits decreased during 2012 by $17.85 million, or 5.13%, to $330.40 million, compared to 2011. Securities sold under agreement to repurchase, which represent collateralized customer accounts, ended 2012 at $287.52 million, a $24.99 million increase from December 31, 2011.

Our taxable equivalent net interest income was $13.02 million and $51.99 million for the three months and year ended December 31, 2012, respectively, compared to $12.92 million and $51.30 million for same periods in 2011; and $13.15 million for the third quarter of 2012. Our taxable equivalent net interest margin decreased 9 basis points to 3.20% during the fourth quarter of 2012 from 3.29% for the third quarter of 2012. Compared to the same periods in 2011, our taxable equivalent net interest margin decreased 17 basis points for the fourth quarter of 2012 and 23 basis points for the year. Our continued growth in earning assets has helped to offset margin compression and allowed us to increase net interest income during 2012. Average earning assets for the three months and year ended December 31, 2012 were $1.62 billion and $1.59 billion, respectively, an increase of $98.39 million and $125.83 million over the same periods in 2011, and an increase of $30.16 million over the third quarter of 2012.

The extended low-interest rate environment continues to present a challenge as our assets reprice down at a steady rate and new assets come on at lower rates. Overall asset yields were 3.55% for the fourth quarter of 2012, compared to 3.68% for the third quarter of 2012 and 3.89% for the fourth quarter of 2011. The average rate on our loan portfolio was 4.30% for the fourth quarter of 2012, a 10 basis point decrease from the third quarter of 2012, and a 38 basis point decrease from the fourth quarter of 2011. The average rate on our investment portfolio for the fourth quarter of 2012 was 2.17%, a 13 basis point decrease from the third quarter of 2012, and a 40 basis point decrease from the fourth quarter of 2011. These decreases were offset, in part, by decreases in the cost of our interest bearing liabilities. The average cost of interest bearing liabilities for the fourth quarter of 2012 was 43 basis points, a 5 basis point decrease from the prior quarter, and a 20 basis point decrease from the fourth quarter of 2011. We have prepaid a total of $20 million in long-term FHLB advances at a rate of 2.75% during 2012, incurring total prepayment penalties of $1.36 million. These prepayments will reduce our overall cost of funds going forward.

"Similar to last year, growth in our balance sheet helped us to offset compression in the net interest margin in 2012. We are very pleased to have increased taxable equivalent net interest income during the year," commented Mr. Tuttle.

Total noninterest income increased to $2.76 million for the fourth quarter of 2012 from $2.32 million for the same period in 2011, and increased to $11.48 million for 2012 from $10.38 million for 2011. During the third quarter of 2012, we recognized a net gain on the sale of one of our branch locations of $749 thousand. Additionally, during the second quarter of 2012, we recognized a gain of $334 thousand on the sale of the mineral rights we owned on properties in Oklahoma which we acquired in a bank acquisition in 1971. We also recognized net gains (losses) on investment securities of $85 thousand and $507 thousand during the quarter and year ended December 31, 2012, respectively, compared to $(53) thousand and $994 thousand for the same periods in 2011. Excluding net gains (losses) on investment securities and the gains on the sale of the branch location and mineral rights, noninterest income increased slightly to $2.67 million for the fourth quarter of 2012 from $2.37 million for the fourth quarter of 2011, and increased to $9.89 million for 2012 from $9.39 million for 2011. The change for the quarter and year ended December 31, 2012, compared to the same periods in 2011, is primarily a result of increases in net debit card income and Trust division income, offset in part by decreased overdraft fee revenue. Additionally, the timing of investments in low income housing partnerships and their associated tax credits led to a reduction in Equity in losses of real estate limited partnerships to $(327) thousand for the fourth quarter of 2012 from $(442) thousand for the fourth quarter of last year, and $(1.52) million for 2012, compared to $(1.77) million for 2011. Trust assets under management have continued to grow in 2012 and now total $555 million.

Total noninterest expense increased $239 thousand to $10.14 million for the fourth quarter of 2012 from $9.90 million for the same period in 2011; and increased $74 thousand to $41.33 million for 2012, compared to $41.26 million for 2011. As stated above, we prepaid $20 million in FHLB long-term debt during 2012 and incurred prepayment penalties totaling $1.36 million during 2012. We also prepaid $16 million in FHLB debt during 2011, and incurred a prepayment penalty of $861 thousand. Excluding the prepayment penalties, noninterest expense decreased $428 thousand for 2012, compared to 2011. Compensation and benefits were slightly higher for the fourth quarter of 2012, compared to the third quarter of 2012, as a result of an increased incentive accrual during the fourth quarter of 2012. Compensation and benefits were $935 thousand lower for 2012, compared to 2011; normal salary increases were offset by higher than normal vacant positions during 2012, a lower incentive accrual, and credits related to loan origination fees. Additionally, a change to our health insurance plan for 2012 resulted in a $274 thousand reduction in health and group insurance expense for 2012, compared to 2011. Occupancy and equipment expenses for 2012 increased $262 thousand to $7.45 million from $7.19 million for 2011, a result of ongoing capital investments related to maintenance, increased compliance requirements and enhancement and expansion of customer service delivery channels. The effective tax rate for 2012 was 21%, compared to 18% for 2011. Taxes for 2011 were positively impacted by the purchase of large historic rehabilitation credits that were available in 2011. Absent those credits, our effective tax rate for 2011 would have been approximately 20%.

Michael R. Tuttle, our President and Chief Executive Officer, Janet P. Spitler, Executive Vice President and Chief Financial Officer and Geoffrey R. Hesslink, Executive Vice President and Senior Lender will host a conference call to discuss these earnings results, business highlights and outlook at 9:00 a.m. Eastern Time on Thursday, January 24, 2013. Interested parties may participate in the conference call by dialing U.S. number (888) 317-6016, Canadian number (855) 669-9657 or international number (412) 317-6016; the title of the call is Merchants Bancshares, Inc. 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 Thursday, January 31, 2013. The U.S. replay dial-in telephone number is (877) 344-7529. The international replay telephone number is (412) 317-0088. The replay access code for both replay telephone numbers is 10023203.

Established in 1849, Merchants Bank strives to deliver a fully integrated customer experience to its retail, commercial and investment customers, with a comprehensive array of online and mobile delivery options-and 33 community bank offices and 41 ATMs throughout Vermont. Merchants Bank and its holding company, Merchants Bancshares, Inc., employ approximately 300 full-time employees and 40 part-time employees. Merchants Trust Company, a division of Merchants Bank, provides investment management, financial planning and trustee services. Please visit www.mbvt.com for access to Merchants Bank information, programs and services. Merchants' stock is traded on the NASDAQ Global Select Market under the symbol "MBVT." Member FDIC. Equal Housing Lender.

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. In several places 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. The amount added back was $484 thousand and $2.01 million for the three months and year ended December 31, 2012, respectively, and $534 thousand and $1.93 million was added back for the three months and year ended December 31, 2011, respectively. An additional non-GAAP financial measure we use is the tangible equity ratio. Because we have no intangible assets, our tangible equity is the same as our book equity. We believe 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.

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' 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. Our actual results could differ materially from those projected in the forward-looking statements as a result of, among others, continued weakness in general, national, regional or local economic conditions, the performance of our 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 our 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 our ability to take appropriate action to protect our financial interests in certain loan situations. 

You should not place undue reliance on our 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 our Annual Report on Form 10-K, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. We do 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,  
    2012     2012     2011     2011  
Balance Sheets - Period End                                
Total assets   $ 1,708,550     $ 1,685,836     $ 1,611,869     $ 1,560,949  
Loans     1,082,923       1,072,879       1,027,626       1,008,076  
Allowance for loan losses ("ALL")     11,562       11,444       10,619       10,480  
Net loans     1,071,361       1,061,435       1,017,007       997,596  
Investments-taxable     509,088       526,700       512,309       418,543  
Federal Home Loan Bank ("FHLB") stock     8,145       8,145       8,630       8,630  
Cash and due from banks     34,547       30,097       10,392       10,945  
Interest earning cash and other short-term investments     42,681       22,935       27,420       86,438  
Other assets     42,728       36,524       36,111       38,797  
Non-interest bearing deposits     240,491       227,879       197,522       180,696  
Savings, interest bearing checking and money market accounts     700,191       687,267       632,110       630,355  
Time deposits     330,398       337,817       348,248       354,508  
Total deposits     1,271,080       1,252,963       1,177,880       1,165,559  
Short-term borrowings     --       55,600       --       3,013  
Securities sold under agreement to repurchase, short-term     287,520       227,996       262,527       222,338  
Other long-term debt     2,483       2,503       22,562       22,581  
Junior subordinated debentures issued to unconsolidated subsidiary trust     20,619       20,619       20,619       20,619  
Other liabilities     8,627       8,126       18,744       18,839  
Shareholders' equity     118,221       118,029       109,537       108,000  
                                 
Balance Sheets - Quarter-to-Date Averages                                
Total assets   $ 1,682,673     $ 1,649,457     $ 1,564,335     $ 1,503,192  
Loans     1,074,007       1,064,507       1,014,105       1,007,240  
Allowance for loan losses     11,542       11,309       10,584       10,550  
Net loans     1,062,465       1,053,198       1,003,521       996,690  
Investments-taxable     510,557       499,688       443,713       366,435  
FHLB stock     8,145       8,145       8,630       8,630  
Cash and due from banks     28,730       25,793       10,186       10,389  
Interest earning cash and other short-term investments     26,036       16,241       53,907       76,887  
Other assets     46,740       46,392       44,378       44,161  
Non-interest bearing deposits     235,007       220,646       190,864       171,648  
Savings, interest bearing checking and money market accounts     680,330       677,321       622,208       600,639  
Time deposits     332,678       341,231       349,832       355,007  
Total deposits     1,248,015       1,239,198       1,162,904       1,127,294  
Short-term borrowings     34,347       60,141       1,798       1,592  
Securities sold under agreement to repurchase, short-term     250,355       196,117       238,935       207,037  
Securities sold under agreement to repurchase, long-term     --       --       --       3,995  
Other long-term debt     2,490       9,032       22,569       27,763  
Junior subordinated debentures issued to unconsolidated subsidiary trust     20,619       20,619       20,619       20,619  
Other liabilities     9,430       9,466       9,783       9,341  
Shareholders' equity     117,417       114,884       107,727       105,551  
Earning assets     1,618,745       1,588,581       1,520,355       1,459,192  
Interest bearing liabilities     1,320,819       1,304,461       1,255,961       1,216,652  
                                 
Ratios and Supplemental Information - Period End                                
Book value per share   $ 19.84     $ 19.82     $ 18.54     $ 18.29  
Book value per share (1)   $ 18.82     $ 18.81     $ 17.57     $ 17.35  
Tier I leverage ratio     8.08 %     8.10 %     8.08 %     8.26 %
Total risk-based capital ratio     16.05 %     15.83 %     15.92 %     15.81 %
Tangible capital ratio (2)     6.92 %     7.00 %     6.80 %     6.92 %
Period end common shares outstanding (1)     6,282,385       6,274,683       6,232,783       6,224,886  
                                 
Credit Quality - Period End                                
Nonperforming loans ("NPLs")   $ 2,912     $ 2,740     $ 2,511     $ 3,192  
Nonperforming assets ("NPAs")   $ 2,912     $ 2,740     $ 2,869     $ 3,532  
NPLs as a percent of total loans     0.27 %     0.26 %     0.24 %     0.32 %
NPAs as a percent of total assets     0.17 %     0.16 %     0.18 %     0.23 %
ALL as a percent of NPLs     397 %     418 %     423 %     328 %
ALL as a percent of total loans     1.07 %     1.07 %     1.03 %     1.04 %
                                 
(1) This book value and period end common shares outstanding includes 324,515; 319,572; 325,703; and 320,845 Rabbi Trust shares for the periods noted above, respectively.  
(2) The tangible capital ratio is a non-GAAP financial measure which we believe provides investors with information that is useful inunderstanding our financial performance. Because we have no intangible assets, our tangible equity is the same as our book equity.  
         
         
    For the Twelve Months Ended
    December 31,
    2012   2011
Balance Sheets - Year to-Date Averages            
Total assets   $ 1,648,393   $ 1,507,656
Loans     1,057,446     971,003
Allowance for loan losses     11,182     10,432
Net loans     1,046,264     960,571
Investments-taxable     501,149     427,540
FHLB stock     8,235     8,630
Cash and due from banks     25,217     10,686
Federal funds sold and other short-term investments     20,360     54,186
Other assets     47,168     46,043
Non-interest bearing deposits     214,113     163,090
Savings, interest bearing checking and money market accounts     665,399     599,296
Time deposits     342,911     357,848
Total deposits     1,222,423     1,120,234
Short-term borrowings     38,290     2,153
Securities sold under agreement to repurchase, short-term     230,281     217,823
Securities sold under agreement to repurchase, long-term     --     4,726
Other long-term debt     13,667     28,117
Junior subordinated debentures issued to unconsolidated subsidiary trust     20,619     20,619
Other liabilities     9,492     10,345
Shareholders' equity     113,621     103,639
Earning assets     1,587,190     1,461,359
Interest bearing liabilities     1,311,167     1,230,582
             
                               
                               
    For the Three Months Ended     For the Twelve Months Ended  
    December 31,     September 30,     December 31,     December 31,     December 31,  
    2012     2012     2011     2012     2011  
Operating Results                                        
Interest income                                        
Interest and fees on loans   $ 11,117     $ 11,278     $ 11,441     $ 44,977     $ 45,271  
Interest and dividends on investments     2,846       2,951       2,949       11,880       12,747  
Total interest and dividend income     13,963       14,229       14,390       56,857       58,018  
Interest expense                                        
Deposits     803       860       1,030       3,551       4,474  
Securities sold under agreement to repurchase and other short-term borrowings     336       341       523       1,790       2,065  
Long-term debt     289       364       452       1,542       2,105  
Total interest expense     1,428       1,565       2,005       6,883       8,644  
Net interest income     12,535       12,664       12,385       49,974       49,374  
Provision for credit losses     250       250       250       950       750  
Net interest income after provision for credit losses     12,285       12,414       12,135       49,024       48,624  
Noninterest income                                        
Trust division income     685       670       622       2,685       2,516  
Service charges on deposits     1,077       1,033       1,103       4,078       4,298  
Gain (loss) on investment securities, net     85       (26 )     2       507       1,049  
Gain on sale of other assets     --       749       --       1,083       --  
Other-than-temporary impairment losses on securities     --       --       (55 )     --       (55 )
Equity in losses of real estate limited partnerships, net     (327 )     (370 )     (442 )     (1,516 )     (1,766 )
Other noninterest income     1,238       1,143       1,085       4,644       4,338  
Total noninterest income     2,758       3,199       2,315       11,481       10,380  
Noninterest expense                                        
Compensation and benefits     4,826       4,809       4,973       19,582       20,517  
Occupancy and equipment expenses     1,925       1,837       1,813       7,452       7,190  
Legal and professional fees     591       677       713       2,545       2,811  
Marketing expenses     577       360       474       1,841       1,733  
State franchise taxes     330       321       314       1,295       1,265  
FDIC insurance     222       217       196       866       936  
Prepayment penalty     --       677       --       1,363       861  
Other real estate owned     68       65       65       197       193  
Other noninterest expense     1,598       1,486       1,350       6,193       5,754  
Total noninterest expense     10,137       10,449       9,898       41,334       41,260  
Income before provision for income taxes     4,906       5,164       4,552       19,171       17,744  
Provision for income taxes     1,066       1,159       843       3,977       3,124  
Net income   $ 3,840     $ 4,005     $ 3,709     $ 15,194     $ 14,620  
                                         
Ratios and Supplemental Information                                        
Weighted average common shares outstanding     6,279,279       6,269,347       6,229,430       6,258,832       6,212,187  
Weighted average diluted shares outstanding     6,291,237       6,280,479       6,243,632       6,271,102       6,223,769  
Basic earnings per common share   $ 0.61     $ 0.64     $ 0.60     $ 2.43     $ 2.35  
Diluted earnings per common share   $ 0.61     $ 0.64     $ 0.59     $ 2.42     $ 2.35  
Return on average assets     0.91 %     0.97 %     0.95 %     0.92 %     0.97 %
Return on average shareholders' equity     13.08 %     13.95 %     13.77 %     13.37 %     14.11 %
Average yield on loans     4.30 %     4.40 %     4.68 %     4.44 %     4.86 %
Average yield on investments     2.17 %     2.30 %     2.57 %     2.32 %     2.90 %
Average yield of earning assets     3.55 %     3.68 %     3.89 %     3.71 %     4.10 %
Average cost of interest bearing deposits     0.32 %     0.34 %     0.42 %     0.35 %     0.47 %
Average cost of borrowed funds     0.81 %     0.98 %     1.36 %     1.10 %     1.52 %
Average cost of interest bearing liabilites     0.43 %     0.48 %     0.63 %     0.52 %     0.70 %
Net interest rate spread     3.12 %     3.20 %     3.26 %     3.19 %     3.40 %
Net interest margin     3.20 %     3.29 %     3.37 %     3.28 %     3.51 %
Net interest income on a fully taxable equivalent basis   $ 13,019     $ 13,149     $ 12,919     $ 51,989     $ 51,304  
Net (charge-offs) recoveries to Average Loans     0.00 %     0.00 %     0.00 %     0.00 %     (0.02 %)
Net (charge-offs) recoveries   $ (18 )   $ 12     $ 14     $ 9     $ (151 )
Efficiency ratio (1)     60.74 %     58.64 %     61.55 %     60.63 %     62.61 %
                                         
(1) The efficiency ratio excludes amortization of intangibles, equity in losses of real estate limited partnerships, OREO expenses, gain/loss on sales of securities, state franchise taxes, and any significant nonrecurring items.  
                           
Note: As of December 31, 2012, Merchants Bank had off-balance sheet liabilities in the form of standby letters of credit to customers in the amount of $4.48 million.  
                                         
Contact:

Lisa Razo
Merchants Bank
(802) 865-1838
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