Merchants Bancshares Inc. (MBVT, Financial) filed Quarterly Report for the period ended 2011-09-30.
Merchants Bancshares Inc. has a market cap of $180.2 million; its shares were traded at around $28.98 with a P/E ratio of 13.42 and P/S ratio of 2.51. The dividend yield of Merchants Bancshares Inc. stocks is 3.86%. Merchants Bancshares Inc. had an annual average earning growth of 5.3% over the past 10 years.
The average rate on interest earning assets grew through the first half of 2011, but started to decrease during the third quarter. The average yield on our investment portfolio has increased steadily throughout 2011 both because we have reduced our premium exposure during 2011 by selling many of our CMOs purchased at a premium, and because prepayment speeds on the mortgage related investments in our portfolio have slowed since the beginning of the year. These changes have helped to offset the effect of reinvesting cash flows at much lower rates. Average investments decreased to $375.07 million for the third quarter of 2011, compared to $452.31 million for the second quarter of 2011 and $483.68 million for the fourth quarter of 2010. We sold $55.00 million in securities during the third quarter of 2011; some of the securities were sold to reduce our exposure to premium write-off and some were sold to lock in gains on faster paying mortgage-backed securities. We have been very active in the investment portfolio during the third quarter of 2011 in an effort to keep our excess cash invested. Average loans have increased during the course of the year to a record $1.01 billion for the third quarter of 2011, compared to $905.05 million for the fourth quarter of 2010; however the average yield has declined steadily during 2011 to 4.79% for the third quarter, compared to 5.16% for the fourth quarter of 2010, a result of the sustained low interest rate environment. Overall interest rates continue to remain at historic lows.
Noninterest Income: Total noninterest income increased to $3.41 million for the quarter ended September 30, 2011, compared to $3.03 million for the same period in 2010 and decreased to $8.07 million for the nine months ended September 30, 2011, compared to $9.09 million for the same periods in 2010. Excluding net gains (losses) on security sales and other-than-temporary impairment losses, noninterest income increased $63 thousand to $2.49 million for the third quarter of 2011, compared to $2.43 million for the same period in 2010; and decreased $344 thousand to $7.02 million for the first nine months of 2011, compared to the first nine months of 2010. The increase for the third quarter of 2011 is primarily a result of an increase in Trust division income while the yearto-date decrease is primarily a result of reductions in overdraft fee revenue attributable to legislative changes that went into effect on August 15, 2010. Net overdraft fee revenue was $936 thousand and $2.55 million for the quarter and nine months ended September 30, 2011, compared to $1.00 million and $3.20 million for the same periods in 2010. Trust division income continued to grow during 2011 and increased to $639 thousand and $1.89 million for the quarter and nine months ended September 30, 2011, compared to $539 thousand and $1.59 million for the same periods in 2010. The portion of the Dodd-Frank Act that authorized the Board of Governors of the Federal Reserve System (FRB) to regulate debit card interchange fees went into effect during the third quarter of 2011. This legislation is aimed at banks with assets of $10 billion and greater and as a result has not had an impact on our net debit card fees. Other categories of noninterest income were generally flat for 2011, compared to 2010.
Noninterest Expense: Total noninterest expense was $11.05 million and $31.36 million for the quarter and nine months ended September 30, 2011, respectively, compared to $10.00 million and $29.09 million for the same periods in 2010. There were several factors that combined to produce the changes. We prepaid a total of $16.00 million in long-term debt during the third quarter of 2011 and incurred prepayment penalties of $861 thousand. There were no prepayment penalties incurred during the first nine months of 2010. Absent the prepayment penalty, total noninterest expense was $181 thousand higher for the third quarter of 2011, compared to the same period in 2010, and was $1.41 million higher for the first nine months of 2011, compared to the same period in 2010. Compensation and benefits were $5.25 million and $15.54 million for the quarter and nine months ended September 30, 2011, respectively, compared to $5.14 million and $15.12 million for the same periods in 2010. Normal salary increases were offset, in part, by a decreased projected incentive payment for 2011, compared to 2010. Occupancy and Equipment expenses were $1.78 million and $5.38 million for the quarter and nine months ended September 30, 2011, respectively, compared to $1.66 million and $4.89 million for the same periods in 2010. This increase is primarily a result of capital investments which we expect will provide us with additional operating efficiencies and revenue enhancement opportunities. Legal and professional fees were $721 thousand and $2.10 million for the quarter and nine months ended September 30, 2011, respectively, compared to $596 thousand and $1.85 million for the same periods in 2010. We have hired consultants to help us explore opportunities for improved operating efficiencies. We expect to recover some of these costs over time. Additionally, marketing expenses were $475 thousand and $1.26 million for the quarter and nine months ended September 30, 2011, respectively, compared to $332 thousand and $1.01 million for the same periods in 2010, a result of continued development of our Vermont Matters outreach campaign. State franchise taxes have increased slightly due to the increase in deposit balances. FDIC insurance expense for the third quarter of 2011 was $194 thousand, compared to $345 thousand for the same period in 2010; a result of the new deposit insurance assessment rules that went into effect on April 1, 2011. During the first quarter of 2010 we booked expense recoveries and gains related to the sale of OREO properties totaling $318 thousand. This gain resulted in a negative OREO expense for the nine months ended September 30, 2010 of $(299) thousand compared to expenses of $128 thousand for the nine months ended September 30, 2011.
Quarterly average loans for the third quarter of 2011 increased to $1.01 billion, compared to $944.81 million for the second quarter of 2011 and $905.05 million for the fourth quarter of 2010. Ending loan balances at September 30, 2011 were $1.01 billion, compared to $943.35 million at June 30, 2011 and $910.79 million at December 31, 2010. Linked quarter growth in municipal loans reflects seasonal increases in revenue anticipation note financings, as well as the addition of new customers. Year-to-date growth in commercial loan categories reflects new customers and expansion of existing relationships.
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Merchants Bancshares Inc. has a market cap of $180.2 million; its shares were traded at around $28.98 with a P/E ratio of 13.42 and P/S ratio of 2.51. The dividend yield of Merchants Bancshares Inc. stocks is 3.86%. Merchants Bancshares Inc. had an annual average earning growth of 5.3% over the past 10 years.
Highlight of Business Operations:
This discussion should be read in conjunction with the tables on the following three pages. Our taxable equivalent net interest income was $13.27 million and $38.38 million for the quarter and nine months ended September 30, 2011, respectively, compared to $12.82 million and $38.13 million for the same periods in 2010. Our taxable equivalent net interest margin decreased 9 basis points to 3.61% for the third quarter of 2011, compared to 3.70% for the same period in 2010, and decreased 19 basis points to 3.56% for the nine months ended September 30, 2011, compared to 3.75% for the same period in 2010. The growth in earning assets has helped to offset the decrease in average yields on interest earning assets and mitigate margin compression. We continue to look for opportunities to decrease the cost of our interest bearing liabilities, but those opportunities have been reduced.The average rate on interest earning assets grew through the first half of 2011, but started to decrease during the third quarter. The average yield on our investment portfolio has increased steadily throughout 2011 both because we have reduced our premium exposure during 2011 by selling many of our CMOs purchased at a premium, and because prepayment speeds on the mortgage related investments in our portfolio have slowed since the beginning of the year. These changes have helped to offset the effect of reinvesting cash flows at much lower rates. Average investments decreased to $375.07 million for the third quarter of 2011, compared to $452.31 million for the second quarter of 2011 and $483.68 million for the fourth quarter of 2010. We sold $55.00 million in securities during the third quarter of 2011; some of the securities were sold to reduce our exposure to premium write-off and some were sold to lock in gains on faster paying mortgage-backed securities. We have been very active in the investment portfolio during the third quarter of 2011 in an effort to keep our excess cash invested. Average loans have increased during the course of the year to a record $1.01 billion for the third quarter of 2011, compared to $905.05 million for the fourth quarter of 2010; however the average yield has declined steadily during 2011 to 4.79% for the third quarter, compared to 5.16% for the fourth quarter of 2010, a result of the sustained low interest rate environment. Overall interest rates continue to remain at historic lows.
Noninterest Income: Total noninterest income increased to $3.41 million for the quarter ended September 30, 2011, compared to $3.03 million for the same period in 2010 and decreased to $8.07 million for the nine months ended September 30, 2011, compared to $9.09 million for the same periods in 2010. Excluding net gains (losses) on security sales and other-than-temporary impairment losses, noninterest income increased $63 thousand to $2.49 million for the third quarter of 2011, compared to $2.43 million for the same period in 2010; and decreased $344 thousand to $7.02 million for the first nine months of 2011, compared to the first nine months of 2010. The increase for the third quarter of 2011 is primarily a result of an increase in Trust division income while the yearto-date decrease is primarily a result of reductions in overdraft fee revenue attributable to legislative changes that went into effect on August 15, 2010. Net overdraft fee revenue was $936 thousand and $2.55 million for the quarter and nine months ended September 30, 2011, compared to $1.00 million and $3.20 million for the same periods in 2010. Trust division income continued to grow during 2011 and increased to $639 thousand and $1.89 million for the quarter and nine months ended September 30, 2011, compared to $539 thousand and $1.59 million for the same periods in 2010. The portion of the Dodd-Frank Act that authorized the Board of Governors of the Federal Reserve System (FRB) to regulate debit card interchange fees went into effect during the third quarter of 2011. This legislation is aimed at banks with assets of $10 billion and greater and as a result has not had an impact on our net debit card fees. Other categories of noninterest income were generally flat for 2011, compared to 2010.
Noninterest Expense: Total noninterest expense was $11.05 million and $31.36 million for the quarter and nine months ended September 30, 2011, respectively, compared to $10.00 million and $29.09 million for the same periods in 2010. There were several factors that combined to produce the changes. We prepaid a total of $16.00 million in long-term debt during the third quarter of 2011 and incurred prepayment penalties of $861 thousand. There were no prepayment penalties incurred during the first nine months of 2010. Absent the prepayment penalty, total noninterest expense was $181 thousand higher for the third quarter of 2011, compared to the same period in 2010, and was $1.41 million higher for the first nine months of 2011, compared to the same period in 2010. Compensation and benefits were $5.25 million and $15.54 million for the quarter and nine months ended September 30, 2011, respectively, compared to $5.14 million and $15.12 million for the same periods in 2010. Normal salary increases were offset, in part, by a decreased projected incentive payment for 2011, compared to 2010. Occupancy and Equipment expenses were $1.78 million and $5.38 million for the quarter and nine months ended September 30, 2011, respectively, compared to $1.66 million and $4.89 million for the same periods in 2010. This increase is primarily a result of capital investments which we expect will provide us with additional operating efficiencies and revenue enhancement opportunities. Legal and professional fees were $721 thousand and $2.10 million for the quarter and nine months ended September 30, 2011, respectively, compared to $596 thousand and $1.85 million for the same periods in 2010. We have hired consultants to help us explore opportunities for improved operating efficiencies. We expect to recover some of these costs over time. Additionally, marketing expenses were $475 thousand and $1.26 million for the quarter and nine months ended September 30, 2011, respectively, compared to $332 thousand and $1.01 million for the same periods in 2010, a result of continued development of our Vermont Matters outreach campaign. State franchise taxes have increased slightly due to the increase in deposit balances. FDIC insurance expense for the third quarter of 2011 was $194 thousand, compared to $345 thousand for the same period in 2010; a result of the new deposit insurance assessment rules that went into effect on April 1, 2011. During the first quarter of 2010 we booked expense recoveries and gains related to the sale of OREO properties totaling $318 thousand. This gain resulted in a negative OREO expense for the nine months ended September 30, 2010 of $(299) thousand compared to expenses of $128 thousand for the nine months ended September 30, 2011.
Quarterly average loans for the third quarter of 2011 increased to $1.01 billion, compared to $944.81 million for the second quarter of 2011 and $905.05 million for the fourth quarter of 2010. Ending loan balances at September 30, 2011 were $1.01 billion, compared to $943.35 million at June 30, 2011 and $910.79 million at December 31, 2010. Linked quarter growth in municipal loans reflects seasonal increases in revenue anticipation note financings, as well as the addition of new customers. Year-to-date growth in commercial loan categories reflects new customers and expansion of existing relationships.
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