Merchants Bancshares Inc. Reports Operating Results (10-K)
Merchants Bancs has a market cap of $162.8 million; its shares were traded at around $26.48 with a P/E ratio of 11.2 and P/S ratio of 2.4. The dividend yield of Merchants Bancs stocks is 4.3%. Merchants Bancs had an annual average earning growth of 5.7% over the past 10 years.
Highlight of Business Operations:We realized net income of $14.62 million, $15.46 million and $12.48 million for the years ended December 31, 2011, 2010 and 2009, respectively. Basic earnings per share and diluted earnings per shares were $2.35, $2.51 and $2.04 for the years ended December 31, 2011, 2010 and 2009, respectively. We declared and distributed total dividends of $1.12 per share each year during 2011, 2010 and 2009, respectively. On January 19, 2012, we declared a dividend of $0.28 per share, which was paid on February 16, 2012, to shareholders of record as of February 2, 2012. This quarter represents our 61st consecutive quarterly dividend payment and our 25th consecutive quarter at the current payout level. Total assets reached a record high of $1.61 billion at December 31, 2011, an increase of $124.23 million, or 8.4% over year end 2010. Total shareholders equity also reached a record high of $109.54 million at December 31, 2011.
As shown on the accompanying schedule on page 28, our taxable equivalent net interest income increased $956 thousand to $51.30 million for the year ended December 31, 2011, compared to $50.35 million for the year ended December 31, 2010. Our taxable equivalent net interest margin decreased by 14 basis points for 2011 to 3.51% from 3.65% for 2010. Our growth in net interest income in spite of margin compression was a result of a larger earning asset base. Our average earning assets increased $81.88 million, or 5.9%, during 2011; $58.64 million of that growth was in our loan portfolio, our highest yielding asset class. In spite of our success in growing the loan portfolio, the average rate on our earning assets decreased by 35 basis points to 4.10% during the year, while the average cost of our interest bearing liabilities decreased 23 basis points to 0.70% for 2011 compared to 0.93% for 2010. We experienced reduced yields on both our loan and investment portfolios. The average rate earned on loans decreased 32 basis points during 2011 to 4.86%, while the average rate earned on our investment portfolio decreased 34 basis points to 2.90% during the same period. Decreased loan yields resulted from the combined effect of the extended low interest rate environment and competitive pressure for strong credits. Decreased yields in our investment portfolio are a result of the extended low interest rate environment, flattening from the longer end of the yield curve and tight spreads for agency issued or guaranteed investments.
Our taxable equivalent net interest income decreased $33 thousand to $50.35 million for 2010 compared to $50.38 million for 2009. Our taxable equivalent net interest margin decreased to 3.65% for 2010 compared to 3.80% for 2009. Although our average earning assets for 2010 increased $53.15 million to $1.38 billion, the rate on those earning assets decreased 57 basis points to 4.45% from 5.02% for 2009. Most of the growth in average interest earning assets was in the investment portfolio, where the average annual balance increased $48.84 million to $437.06 million. The investment portfolio also accounted for much of the decrease in the average rate on interest earning assets. The average yield on investments decreased 155 basis points to 3.24% for 2010 compared to 4.79% for 2009. Annual average loans increased $10.78 million to $912.36 million during 2010, and the average yield on the loan portfolio decreased by only 13 basis points to 5.18% during 2010, in spite of the very low interest rate environment.
Total noninterest income decreased to $10.38 million for 2011 from $11.63 million for 2010. Excluding net gains (losses) on security sales and other than temporary impairment losses, noninterest income decreased to $9.39 million for 2011 from $9.72 million for 2010. Income from our Trust division increased to $2.52 million for the year ended December 31, 2011, compared to $2.16 million for 2010, a result of a combination of increased sales and improved market performance. Revenue related to service charges on deposits decreased to $4.30 million for 2011, compared to $4.93 million for 2010. The decrease is a result of legislative changes restricting overdrafts that went into effect on August 15, 2010. Net overdraft fee revenue decreased to $3.43 million for 2011, compared to $4.05 million for 2010. Other noninterest income increased slightly to $4.34 million from $4.30 million, a result of increased net debit card income of $75 thousand offset by other smaller decreases.
Our noninterest income increased to $11.63 million for 2010 compared to $10.32 million for 2009. Excluding net gains on security sales and other-than-temporary impairment losses, noninterest income increased to $9.72 million for 2010 from $9.10 million for 2009. Income from our Trust division increased to $2.16 million for 2010 compared to $1.72 million for 2009. This increase was a result of a combination of increased sales and improved market performance. Revenue related to service charges on deposits decreased to $4.93 million for 2010 compared to $5.67 million for 2009. This decrease is primarily a result of legislative changes relating to overdrafts that went into effect on August 15, 2010. Net overdraft fee revenue for 2010 decreased to $4.05 million compared to $4.73 million for 2009. Other noninterest income increased to $4.30 million for 2010 compared to $3.75 million for 2009. This increase was primarily a result of increased net debit card income. Our equity in losses of real estate limited partnerships was $1.67 million for 2010 compared to $2.05 million for 2009.
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