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Merchants Bancshares, Inc. Announces Second Quarter 2013 Results -- Highlighted by Steady Loan Growth and Expense Control

SOUTH BURLINGTON, VT--(Marketwired - Jul 22, 2013) - Merchants Bancshares, Inc. ( NASDAQ : MBVT ), the parent company of Merchants Bank, today announced net income of $4.03 million and $7.63 million, or diluted earnings per share of $0.64 and $1.21 for the three and six months ended June 30, 2013, respectively. This compares to net income of $3.74 million and $7.35 million, or diluted earnings per share of $0.60 and $1.17 for the three and six months ended June 30, 2012, respectively. The return on average assets was 0.96% and 0.91% for the three and six months ended June 30, 2013, respectively, compared to 0.91% and 0.90% for the same periods in 2012. The return on average equity was 13.61% and 12.96% for the three and six months ended June 30, 2013, respectively, compared to 13.31% and 13.23% for the same periods in 2012. We previously announced the declaration of a dividend of $0.28 per share, payable August 15, 2013, to shareholders of record as of August 1, 2013.

"The quarter was driven in large part by our continued growth in average loans. This growth allowed us to hold the line on net interest income and the net interest margin. We have also been able to make good progress on our expense run rate through the first six months of the year. Due to loan growth and expense control, net income increased 4% for the first six months of 2013 from the same period in 2012. The recent steepening of the yield curve should ultimately provide an opportunity for margin improvement provided loan demand is sustained," commented Michael R. Tuttle, our President and Chief Executive Officer.

Shareholders' equity ended the quarter at $115.02 million, and our book value per share was $18.24 at June 30, 2013. Shareholders' equity was negatively impacted during the first six months of 2013 by a decrease in accumulated other comprehensive income of $7.85 million. This decrease was primarily a result of a reduction in the unrealized gain in our investment portfolio, which decreased from a tax effected unrealized gain of $6.03 million at December 31, 2012 to a tax effected unrealized loss of $2.10 million at June 30, 2013. The increase in interest rates during 2013 has negatively impacted the fair value of our largely fixed rate investment portfolio. Our capital ratios remain strong at June 30, 2013. Our Tier 1 leverage ratio increased to 8.36% compared to 8.08% at December 31, 2012; total risk-based capital ratio increased to 16.42% compared to 16.00% at December 31, 2012; and our tangible capital ratio increased to 7.10% at June 30, 2013 compared to 6.92% at December 31, 2012.

Quarterly average loan balances for the second quarter were $1.12 billion, an increase of $48 million over average loan balances for the fourth quarter of 2012; this represents an average annualized growth rate of 9.0%. Ending loan balances at June 30, 2013 were impacted by seasonal fluctuations in municipal cash flows, causing municipal loan balances at June 30, 2013 to be $40 million lower than at March 31, 2013; as of July 9, 2013 municipal loan balances had increased to $85 million.

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

             
(In thousands)   June 30, 2013   March 31, 2013   December 31, 2012
Commercial, financial and agricultural   $ 169,215   $ 168,500   $ 165,023
Municipal loans     45,319     85,211     84,689
Real estate loans - residential     520,393     504,226     489,951
Real estate loans - commercial     331,064     324,208     327,622
Real estate loans - construction     31,813     14,115     10,561
Installment loans     5,667     5,192     4,701
All other loans     544     261     376
Total loans   $ 1,104,015   $ 1,101,713   $ 1,082,923
                   
                   

Growth in our commercial loan categories has been driven by new customer acquisition and expansion of existing relationships. 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 expect that refinancing activity will decrease as rates move up.

The average investment portfolio for the second quarter of 2013 was $466.91 million, a reduction of $43.65 million from average balances for the fourth quarter of 2012. The ending balance in the investment portfolio at June 30, 2013 was $428.39 million, compared to $508.36 million at March 31, 2013 and $509.09 million at December 31, 2012. We executed two bond sales during the quarter. We sold our non-agency collateralized mortgage obligations with a total par value of $4.34 million for a small gain. We also sold longer-dated callable agency bonds with a par value of $46.51 million during the quarter for a small loss. These trades reduced price volatility, and increased liquidity which helped fund loan demand.

We recorded a $150 thousand and $400 thousand provision for credit losses during the three and six months ended June 30, 2013, respectively, compared to $200 thousand and $450 thousand for the three and six months ended June 30, 2012, respectively. Credit quality improved further during the quarter, we are a top performer in this measure. Our nonperforming loans were 0.14% of total loans at June 30, 2013 compared to 0.27% of total loans at December 31, 2012 and our nonperforming assets were 0.11% of total assets at June 30, 2013, compared to 0.17% at December 31, 2012. Our continued loan growth was the primary factor for the provision to date in 2013. Loans past due 30-89 days were 0.02% of total loans at June 30, 2013. Net charge-offs during 2013 have been negligible.

Total deposits at June 30, 2013 were $1.31 billion compared to $1.27 billion at December 31, 2012, a $41.44 million, or annualized 6.5%, increase. Growth during 2013 has been concentrated in our transaction account categories, with continued reductions in time deposit balances. Securities sold under agreement to repurchase, which represent collateralized customer accounts, declined to $141.06 million at June 30, 2013 from $287.52 million at December 31, 2012 as a result of seasonal municipal cash flows combined with migration to other deposit products. Short-term wholesale borrowings increased to $21.00 million at June 30, 2013 from zero at December 31, 2012.

Our taxable equivalent net interest income was $12.80 million and $25.53 million for the three and six months ended June 30, 2013, respectively, compared to $12.85 million and $25.82 million for the same periods in 2012. Our taxable equivalent net interest margin for the second quarter of 2013 was 3.20% compared to 3.19% for the first quarter of 2013. Our taxable equivalent net interest margin was 3.18% for the first six months of 2013 compared to 3.31% for the same period in 2012. After decreasing by 17 basis points over the course of 2012, the margin for the second quarter of 2013 was unchanged from the fourth quarter of 2012 at 3.20%, and was one basis point higher than the first quarter of this year. Our continued steady loan growth has led to a shift in the mix of our earning assets during 2013 which has helped to offset margin compression. Asset yields decreased three basis points on a linked quarter basis and are down six basis points from the fourth quarter of 2012. Most of that compression is in our loan yields, which decreased seven basis points for the linked quarter and 18 basis points compared to the fourth quarter of 2012. Our average cost of interest bearing liabilities was flat for the linked quarter and down three basis points from the fourth quarter of 2012. The largest contributor to the reduction in funding costs from the fourth quarter of 2012 to the second quarter of 2013 was the expiration, on December 14, 2012, of an interest rate swap on $10 million of our $20 million in trust preferred securities. The expiration of the swap reduced our interest rate from a fixed rate of 6.50%, to a floating rate of three month LIBOR plus 1.95%.

Total noninterest income decreased $709 thousand to $2.77 million for the second quarter of 2013 compared to the second quarter of 2012 and decreased $752 thousand for the first six months of 2013 compared to the first six months of 2012. Excluding net gains on investment securities and a gain on an asset sale during 2012, total noninterest income increased $10 thousand for the second quarter of 2013 compared to the second quarter of 2012, and increased $43 thousand for the first six months of 2013 compared to the first six months of 2012. Trust division income increased $88 thousand and $189 thousand for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. Deposit service charges and cash management fees increased by $91 thousand and $173 thousand for the second quarter and first six months of 2013, respectively, compared to the same periods in 2012. This increase was offset almost entirely by a reduction in overdraft fees, resulting in a very small increase in total deposit service charges.

Total noninterest expense decreased $1.11 million to $9.85 million for the second quarter of 2013 compared to the same period in 2012 and decreased $1.52 million to $19.87 million for the first six months of 2013 compared to the same periods in 2012. Excluding a $686 thousand prepayment penalty incurred during the second quarter of 2012, noninterest expense decreased $423 thousand and $836 thousand for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. Compensation and benefits decreased $249 thousand and $642 thousand for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. Salary expense was almost flat year over year; annual salary increases were offset by increased vacancies and a lower incentive accrual. Expenses associated with our employee health insurance plan decreased by $275 thousand and $441 thousand for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. Our claims experience in our self-funded health insurance plan during 2013 has improved over 2012, allowing us to accrue less each month than in 2012, and to reverse $225 thousand of our accrual during the second quarter. Additionally, the overfunded status of our pension plan is producing income for us in 2013 instead of expense. Pension income was $76 thousand year to date compared to an expense of $126 thousand for the first half of 2012. 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 $270 thousand and $540 thousand for the three and six months ended June 30, 2013 compared to $409 thousand and $819 thousand for the same periods in 2012.

Our effective tax rate for 2013 was negatively impacted by the timing of investments in low income housing partnerships discussed above, which produced a lower level of tax credits for us in 2013 compared to 2012. Our effective tax rate was positively impacted by the donation of our branch building in North Bennington, Vermont to a non-profit organization during the second quarter of 2013. This donation provided a $98 thousand benefit to tax expense for the second quarter of 2013. The combination of these factors, along with higher pre-tax income, produced an increase in our effective tax rate to 21% for the first half of 2013 from 19% for the first half of 2012.

Michael R. Tuttle, our President and Chief Executive Officer, Janet P. Spitler, our Chief Financial Officer and Executive Vice President, and Geoffrey R. Hesslink, our Chief Operating Officer and Senior Lender, will host a conference call to discuss these earnings results at 9:00 a.m. Eastern Time on Tuesday, July 23, 2013. Interested parties may participate in the conference call by dialing U.S. number (888) 317-6016, Canada number (855) 669-9657, or international number (412) 317-6016. The title of the call is Merchants Bancshares, Inc. Q2 2013 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 August 1, 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 10023211. Additionally, a recording of the call will be available on our website at www.mbvt.com.

Established in 1849, Merchants Bank is the largest Vermont-based bank, independent and locally operated. Consumer,  business, municipal and investment customers enjoy personalized relationships, sophisticated online and mobile banking options, more than 30 community bank locations statewide, plus a nationwide network of over 55,000 surcharge-free Allpoint ATMs. Merchants Bank (Member FDIC, Equal Housing Lender) ( NASDAQ : MBVT ), and Merchants Trust Company employ approximately 300 full-time employees and 40 part-time employees statewide, and has earned several "Best Place to Work in Vermont" awards. American Banker ranks Merchants Bank #10 in America among 851 peers. 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. 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 $485 thousand and $967 thousand, respectively, for the three and six months ended June 30, 2013, and $516 thousand and $1.05 million, respectively, for the same period in 2012. 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; volatility 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)  
   
     June 30,      March 31,      December 31,      June 30,  
    2013     2013     2012     2012  
Balance Sheets - Period End                                
Total assets   $ 1,619,807     $ 1,692,596     $ 1,708,550     $ 1,601,765  
Loans     1,104,015       1,101,713       1,082,923       1,025,665  
Allowance for loan losses ("ALL")     11,890       11,796       11,562       11,203  
Net loans     1,092,125       1,089,917       1,071,361       1,014,462  
Investments-taxable     428,393       508,360       509,088       495,303  
Federal Home Loan Bank ("FHLB") stock     7,496       7,496       8,145       8,145  
Cash and due from banks     31,458       25,287       34,547       30,459  
Interest earning cash and other short-term investments     17,672       17,736       42,681       17,000  
Other assets     42,663       43,800       42,728       36,396  
Non-interest bearing deposits     242,393       225,884       240,491       211,916  
Savings, interest bearing checking and money market accounts     751,599       708,797       700,191       680,803  
Time deposits     318,527       335,096       330,398       347,427  
Total deposits     1,312,519       1,269,777       1,271,080       1,240,146  
Short-term borrowings     21,000       30,900       --       52,000  
Securities sold under agreement to repurchase, short-term     141,055       243,204       287,520       153,700  
Other long-term debt     2,443       2,463       2,483       12,522  
Junior subordinated debentures issued to unconsolidated subsidiary trust     20,619       20,619       20,619       20,619  
Other liabilities     7,152       6,479       8,627       8,719  
Shareholders' equity     115,019       119,154       118,221       114,059  
                                 
Balance Sheets - Quarter-to-Date Averages                                
Total assets   $ 1,681,747     $ 1,681,130     $ 1,682,673     $ 1,642,070  
Loans     1,122,201       1,086,289       1,074,007       1,056,735  
Allowance for loan losses     11,842       11,689       11,542       11,135  
Net loans     1,110,359       1,074,600       1,062,465       1,045,600  
Investments-taxable     466,909       503,849       510,557       497,860  
FHLB stock     7,496       7,993       8,145       8,145  
Cash and due from banks     25,533       25,469       28,730       24,968  
Interest earning cash and other short-term investments     23,371       18,442       26,036       17,461  
Other assets     48,079       50,777       46,740       48,036  
Non-interest bearing deposits     239,601       223,245       235,007       205,072  
Savings, interest bearing checking and money market accounts     711,895       696,160       680,330       662,713  
Time deposits     324,157       334,373       332,678       350,075  
Total deposits     1,275,653       1,253,778       1,248,015       1,217,860  
Short-term borrowings     28,565       13,873       34,347       35,773  
Securities sold under agreement to repurchase, short-term     228,726       264,884       250,355       225,797  
Other long-term debt     2,450       2,470       2,490       20,771  
Junior subordinated debentures issued to unconsolidated subsidiary trust     20,619       20,619       20,619       20,619  
Other liabilities     7,465       8,241       9,430       9,015  
Shareholders' equity     118,269       117,265       117,417       112,235  
Earning assets     1,619,977       1,616,573       1,618,745       1,580,201  
Interest bearing liabilities     1,316,412       1,332,379       1,320,819       1,315,748  
                                 
Ratios and Supplemental Information - Period End                                
Book value per share   $ 19.19     $  19.91     $ 19.84     $ 19.20  
Book value per share (1)   $ 18.24     $ 18.94     $ 18.82     $ 18.23  
Tier I leverage ratio     8.36 %     8.22 %     8.08 %     7.97 %
Total risk-based capital ratio     16.42 %     16.11 %     16.00 %     15.85 %
Tangible capital ratio (2)     7.10 %     7.04 %     6.92 %     7.12 %
Period end common shares outstanding (1)     6,304,649       6,289,748       6,282,385       6,256,481  
                                 
Credit Quality - Period End                                
Nonperforming loans ("NPLs")   $ 1,600     $ 3,415     $ 2,912     $ 3,130  
Nonperforming assets ("NPAs")   $ 1,740     $ 3,415     $ 2,912     $ 3,516  
NPLs as a percent of total loans     0.14 %     0.31 %     0.27 %     0.31 %
NPAs as a percent of total assets     0.11 %     0.20 %     0.17 %     0.22 %
ALL as a percent of NPLs     743 %     345 %     397 %     358 %
ALL as a percent of total loans     1.08 %     1.07 %     1.07 %     1.09 %
                                 
     
(1)   This book value and period end common shares outstanding includes 310,381; 305,231; 324,515; and 314,418 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 in understanding our financial performance. Because we have no intangible assets, our tangible equity is the same as our book equity.
     
     
 
Merchants Bancshares, Inc.
Financial Highlights (unaudited)
(Dollars in thousands except share and per share data)
 
    For the Six Months Ended
    June 30,
    2013   2012
Balance Sheets - Year to-Date Averages            
Total assets   $ 1,681,440   $ 1,630,527
Loans     1,104,344     1,045,507
Allowance for loan losses     11,766     10,936
Net loans     1,092,578     1,034,571
Investments-taxable     485,277     497,132
FHLB stock     7,743     8,326
Cash and due from banks     25,377     23,150
Interest earning cash and other short-term investments     21,044     19,573
Other assets     49,421     47,775
Non-interest bearing deposits     231,468     200,248
Savings, interest bearing checking and money market accounts     704,071     651,825
Time deposits     329,237     348,934
Total deposits     1,264,776     1,201,007
Short-term borrowings     21,260     29,238
Securities sold under agreement to repurchase, short-term     246,705     237,403
Other long-term debt     2,460     21,660
Junior subordinated debentures issued to unconsolidated subsidiary trust     20,619     20,619
Other liabilities     7,851     9,537
Shareholders' equity     117,769     111,063
Earning assets     1,618,408     1,570,538
Interest bearing liabilities     1,324,352     1,309,679
             
             
   
Merchants Bancshares, Inc.  
Financial Highlights (unaudited)  
(Dollars in thousands except share and per share data)  
   
    For the Three Months Ended     For the Six Months Ended  
    June 30,     March 31,     June 30,     June 30,     June 30,  
    2013     2013     2012     2013     2012  
Operating Results                                        
Interest income                                        
Interest and fees on loans   $ 11,044     $ 10,750     $ 11,253     $ 21,794     $ 22,582  
Interest and dividends on investments     2,576       2,797       2,993       5,373       6,083  
Total interest and dividend income     13,620       13,547       14,246       27,167       28,665  
Interest expense                                        
Deposits     728        746        928       1,474        1,888  
Securities sold under agreement to repurchase and other short-term borrowings     377       357       537       734       1,113  
Long-term debt     205       196       442       401       889  
Total interest expense     1,310       1,299       1,907       2,609       3,890  
Net interest income     12,310       12,248       12,339       24,558       24,775  
Provision for credit losses     150       250       200       400       450  
Net interest income after provision for credit losses     12,160       11,998       12,139       24,158       24,325  
Noninterest income                                        
Trust division income     761        758        673       1,519        1,330  
Service charges on deposits     992       985       991       1,977       1,968  
Debit card income, net     739       655       779       1,394       1,416  
Gain on investment securities, net     (13 )     --       372       (13 )     448  
Gain on sale of other assets     --       --       334       --       334  
Other noninterest income     286       249       325       535       668  
Total noninterest income     2,765       2,647       3,474       5,412       6,164  
Noninterest expense                                        
Compensation and benefits     4,510        4,795        4,759       9,305        9,947  
Occupancy and equipment expenses     1,933       2,010       1,812       3,943       3,690  
Legal and professional fees     619       687       666       1,306       1,277  
Marketing expenses     485       280       493       765       904  
Equity in losses of real estate limited partnerships, net     270       270       409       540       819  
State franchise taxes     362       357       316       719       644  
FDIC insurance     220       220       212       440       427  
Prepayment penalty     --       --       686       --       686  
Other real estate owned     54       13       31       67       64  
Other noninterest expense     1,394       1,387       1,572       2,781       2,930  
Total noninterest expense     9,847       10,019       10,956       19,866       21,388  
Income before provision for income taxes     5,078       4,626       4,657       9,704       9,101  
Provision for income taxes     1,053       1,017       921       2,070       1,752  
Net income   $ 4,025     $ 3,609     $ 3,736     $ 7,634     $ 7,349  
                                         
Ratios and Supplemental Information                                        
Weighted average common shares outstanding     6,298,019      
6,286,838
      6,249,130       6,292,459       6,243,181  
Weighted average diluted shares outstanding     6,309,890       6,299,561       6,259,932       6,304,756       6,256,175  
Basic earnings per common share   $ 0.64     $ 0.57     $ 0.60     $ 1.21     $ 1.18  
Diluted earnings per common share   $ 0.64     $ 0.57     $ 0.60     $ 1.21     $ 1.17  
Return on average assets     0.96 %     0.86 %     0.91 %     0.91 %     0.90 %
Return on average shareholders' equity     13.61 %     12.31 %     13.31 %     12.96 %     13.23 %
Average yield on loans     4.12 %     4.19 %     4.48 %     4.16 %     4.54 %
Average yield on investments     2.17 %     2.21 %     2.37 %     2.19 %     2.41 %
Average yield of earning assets     3.49 %     3.52 %     3.76 %     3.51 %     3.80 %
Average cost of interest bearing deposits     0.28 %     0.29 %     0.37 %     0.29 %     0.38 %
Average cost of borrowed funds     0.83 %     0.74 %     1.30 %     0.79 %     1.30 %
Average cost of interest bearing liabilites     0.40 %     0.40 %     0.58 %     0.40 %     0.60 %
Net interest rate spread     3.09 %     3.12 %     3.17 %     3.11 %     3.21 %
Net interest margin     3.20 %     3.19 %     3.27 %     3.18 %     3.31 %
Net interest income on a fully taxable equivalent basis   $ 12,795     $ 12,730     $ 12,854     $ 25,525     $ 25,819  
Net recoveries (charge-offs) to Average Loans     (0.01 )%     0.00 %     0.00 %     (0.00 )%     0.00 %
Net recoveries (charge-offs)   $ (80 )   $ 26     $ (15 )   $ (54 )   $ 14  
Efficiency ratio (1)     58.55 %     61.08 %     61.02 %     59.64 %     61.59 %
                                         
     
(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 June 30, 2013, Merchants Bank had off-balance sheet liabilities in the form of standby letters of credit to customers in the amount of $5.02 million.
Amounts reported for prior periods are reclassified, where necessary, to be consistent with the current period presentation.