Merrill Merchants Bancshares, Inc. Reports First Quarter 2007 Earnings of $1.6 Million

  
    
  
  
    
      Edwin N. Clift, Chairman and Chief Executive Officer of Merrill 
      Merchants Bancshares, Inc. (the “Company”) 
      (Nasdaq: MERB), the parent company of Merrill Merchants Bank, reported 
      net income of $1.6 million for the three months ended March 31, 2007, a 
      13% increase over the same period in 2006. The Company reported diluted 
      earnings per share of $.43 for the first quarter of 2007, a 13% increase 
      over the first quarter of 2006 earnings per share of $.38.
    
    
      Balance Sheet. The Company’s 
      consolidated assets were $458.4 million at March 31, 2007, an increase 
      of $34.3 million or 8% from the same date a year ago. Comparing March 
      31, 2007 and 2006, total loans grew $27.5 million or 9%. Loan growth 
      occurred in all areas with growth in commercial business loans of $10.7 
      million, home equity balances increased $5.4 million, consumer loans 
      grew $5.3 million, construction balances increased $4.5 million, 
      commercial real estate loans grew $735,000 and residential mortgages 
      were up $300,000.
    
    
      Total deposits were $349.2 million at March 31, 2007 compared to $332.8 
      million a year ago, representing growth of $16.4 million or 5%. Checking 
      account balances increased $3.8 million or 4% while savings and money 
      market accounts declined $745,000 or 1% compared to the prior year. 
      Certificates of deposit (CDs) balances grew $13.3 million or 10% as 
      customers invested funds in higher yielding CDs.
    
    
      Net Income. The Company’s net income 
      for the three months ended March 31, 2007 amounted to $1.6 million 
      compared to $1.4 million for the same period in 2006, an increase of 
      13%. Return on assets and return on equity were 1.40% and 16.01%, 
      respectively, for the three months of 2007 compared to return on assets 
      of 1.33% and return on equity of 15.80% for the same period in 2006.
    
    
      Net Interest Income. Net interest income increased $270,000, or 
      7%, for the three months ended March 31, 2007 to $4.3 million. The 
      increase was driven by $33.4 million of growth in average earning assets 
      for 2007 compared to the same period in 2006. The Company’s 
      net interest margin decreased to 4.00% for the first quarter of 2007, 
      compared to 4.07% for the same period of 2006 as the cost of funds 
      increased by 68 basis points while the yield on earning assets increased 
      47 basis points.
    
    
      Non-Interest Income. Non-interest income was $1.4 million for the 
      three months ended March 31, 2007, an increase of $129,000 compared to 
      the same period in 2006. The 10% increase in non-interest income was due 
      to increases in service charges on deposit accounts of $114,000, or 30%, 
      resulting from increased overdraft charges and increases in trust fees 
      of $41,000, or 10%. Gains on security sales and mortgage banking income 
      totaled $125,000 for the first quarter of 2007, representing a decline 
      of $55,000 from the same period last year.
    
    
      Non-Interest Expense. Non-interest expense totaled $3.4 million 
      for the three months ended March 31, 2007 compared to $3.2 million for 
      the same period last year. The increase in non-interest expense of 
      $204,000, or 6%, was due to an increase in personnel costs of 8%, 
      increases in occupancy expenses of 14%, and an increase in equipment, 
      data processing and other expenses of 3%.
    
    
      Shareholders’ Equity. At March 31, 
      2007, shareholders’ equity totaled $40.0 
      million, compared with $38.6 million at December 31, 2006. The net 
      increase of $1.3 million for the three months of 2007 was attributable 
      to net income of $1.6 million, proceeds from stock option exercises and 
      the related tax benefit of $289,000 and changes in the unrealized gain 
      or loss on securities and derivatives of $204,000. This was offset by 
      cash dividends of $715,000. In the first quarter of 2007, the Company 
      declared a cash dividend of $.20 per share on the Company’s 
      common stock. This was an increase of 18% over last year’s 
      first quarter dividend.
    
    
      On June 17, 2004, the Board of Directors approved a fourth stock 
      repurchase program authorizing the Company to repurchase up to 169,995, 
      or 5%, of its outstanding shares of common stock. As of March 31, 2007, 
      25,894 shares had been repurchased under the program.
    
    
      The Company’s subsidiary, Merrill Merchants 
      Bank, is headquartered in Bangor, Maine. Merrill Merchants Bank provides 
      consumer, commercial, and trust and investment services through its 
      eleven locations in Central and Eastern Maine. The Bank is a “Preferred 
      Lender” of the Small Business Administration 
      (SBA) and was a leading SBA lender in the State of Maine in 2006.
    
    
      
        
          MERRILL MERCHANTS BANCSHARES, INC.
        
      
      
        
          CONDENSED CONSOLIDATED STATEMENTS OF INCOME
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          Three Months Ended
        
      
      
        
        
        
          March 31,
        
      
      
        
          (In thousands except per share data)
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Interest income
        
        
          $ 7,461 
        
        
        
        
          $ 6,421 
        
      
      
        
          Interest expense
        
        
          3,129 
        
        
        
        
          2,359 
        
      
      
        
          Net interest income
        
        
          4,332 
        
        
        
        
          4,062 
        
      
      
        
          Provision for loan losses
        
        
          41 
        
        
        
        
          128 
        
      
      
        
          Non-interest income
        
        
          1,428 
        
        
        
        
          1,299 
        
      
      
        
          Non-interest expense
        
        
          3,376 
        
        
        
        
          3,172 
        
      
      
        
          Income before income taxes
        
        
          2,343 
        
        
        
        
          2,061 
        
      
      
        
          Income taxes
        
        
          793 
        
        
        
        
          695 
        
      
      
        
          Net income
        
        
          $ 1,550 
        
        
        
        
          $ 1,366 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Per share data
        
        
        
        
        
        
        
      
      
        
          Basic earnings per common share
        
        
          $ 0.44 
        
        
        
        
          $ 0.39 
        
      
      
        
          Diluted earnings per common share
        
        
          $ 0.43 
        
        
        
        
          $ 0.38 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          SELECTED CONSOLIDATED BALANCE SHEETS
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
          March 31,
        
      
      
        
          (In thousands)
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Total assets
        
        
          $ 458,436 
        
        
        
        
          $ 424,127 
        
      
      
        
          Loans receivable
        
        
          350,002 
        
        
        
        
          322,487 
        
      
      
        
          Allowance for loan losses
        
        
          (3,998)
        
        
        
        
          (4,207)
        
      
      
        
          Loans held for sale
        
        
          1,128 
        
        
        
        
          967 
        
      
      
        
          Investment securities
        
        
          83,488 
        
        
        
        
          77,209 
        
      
      
        
          Deposits
        
        
          349,162 
        
        
        
        
          332,807 
        
      
      
        
          Borrowings
        
        
          63,975 
        
        
        
        
          52,054 
        
      
      
        
          Shareholders’ equity
        
        
          39,976 
        
        
        
        
          35,171 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Off-Balance Sheet
        
        
        
        
        
        
        
      
      
        
          Trust assets under management
        
        
          399,135 
        
        
        
        
          372,915 
        
      
      
        
          Mortgage servicing portfolio
        
        
          157,368 
        
        
        
        
          145,642 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          SELECTED CONSOLIDATED AVERAGE BALANCES
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
          Three Month Period
        
      
      
        
        
        
          March 31,
        
      
      
        
          (In thousands)
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Total assets
        
        
          $ 450,070 
        
        
        
        
          $ 416,361 
        
      
      
        
          Loans and loans held for sale
        
        
          343,500 
        
        
        
        
          321,485 
        
      
      
        
          Investment securities
        
        
          85,291 
        
        
        
        
          73,969 
        
      
      
        
          Deposits
        
        
          351,830 
        
        
        
        
          326,225 
        
      
      
        
          Borrowings
        
        
          53,775 
        
        
        
        
          51,199 
        
      
      
        
          Shareholders’ equity
        
        
          39,246 
        
        
        
        
          35,071 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          OTHER SELECTED CONSOLIDATED DATA
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          At or for the Three Months Ended March 31,
        
      
      
        
        
      
      
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Return on average assets (1)
        
        
          1.40%
        
        
        
        
          1.33%
        
      
      
        
          Return on average equity (1)
        
        
          16.01%
        
        
        
        
          15.80%
        
      
      
        
          Leverage ratio
        
        
          8.67%
        
        
        
        
          8.38%
        
      
      
        
          Net interest margin (1)
        
        
          4.00%
        
        
        
        
          4.07%
        
      
      
        
          Non-performing assets to total assets
        
        
          0.49%
        
        
        
        
          0.16%
        
      
      
        
          Net loan charge-offs to average net loans (1)
        
        
          0.13%
        
        
        
        
          0.01%
        
      
      
        
          Allowance for credit losses to total loans
        
        
          1.19%
        
        
        
        
          1.30%
        
      
      
        
          Number of shares outstanding
        
        
          3,579,380 
        
        
        
        
          3,545,686 
        
      
      
        
          Weighted-average shares outstanding-diluted
        
        
          3,570,093 
        
        
        
        
          3,569,812 
        
      
      
        
          Book value per share
        
        
          $11.17 
        
        
        
        
          $9.92 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          (1) Computed on an annualized basis.
        
        
        
        
        
        
        
      
    
    
      On January 19, 2007, Chittenden Corporation (“Chittenden”) 
      and the Company announced the execution of a definitive agreement 
      pursuant to which Chittenden will acquire the Company in an exchange of 
      cash and stock. In connection with the proposed merger of the Company 
      with and into Chittenden, Chittenden has filed a registration statement 
      on Form S-4 that contains a proxy statement/prospectus. INVESTORS ARE 
      URGED TO READ THESE MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION 
      ABOUT CHITTENDEN, THE COMPANY AND THE MERGER. The proxy 
      statement/prospectus and other relevant materials and any other 
      documents filed by Chittenden or the Company with the SEC, may be 
      obtained free of charge at the SEC’s website 
      at www.sec.gov. In addition, 
      investors may obtain free copies of the documents filed with the SEC by 
      Chittenden by directing a written request to Chittenden Corporation, 2 
      Burlington Square, Burlington, Vermont 05402-0820, Attention: General 
      Counsel, and free copies of the documents filed with the SEC by the 
      Company by directing a written request to Merrill Merchants Bancshares, 
      Inc., 201 Main Street, Bangor, Maine 04401, Attention: Diane Smith.
    
    
      This communication shall not constitute an offer to sell or the 
      solicitation of an offer to sell or the solicitation of an offer to buy 
      any securities.
    
    
      This press release and the documents incorporated by reference herein 
      contain certain forward-looking statements. These forward-looking 
      statements may be contained in this press release, quarterly and annual 
      filings with the Securities and Exchange Commission (the “SEC”), 
      the Annual Report to Shareholders, other filings with the SEC, and in 
      other communications by Merrill Merchants Bancshares, Inc. (the “Company”) 
      and its wholly-owned subsidiary, Merrill Merchants Bank (the “Bank”), 
      which are made in good faith pursuant to the “safe 
      harbor” provisions of the Private Securities 
      Litigation Reform Act of 1995. The words “may,” 
      “could,” “should,” 
      “would,” “believe,” 
      “anticipate,” “estimate,” 
      “expect,” “intend,” 
      “plan” and similar 
      expressions are intended to identify forward-looking statements. In 
      preparing these disclosures, management must make assumptions, 
      including, but not limited to, the level of future interest rates, 
      prepayments on loans and investment securities, required levels of 
      capital, needs for liquidity, and the adequacy of the allowance for loan 
      losses. These forward-looking statements may be subject to significant 
      known and unknown risks, uncertainties, and other factors, including, 
      but not limited to, those matters referred to in the preceding sentence.
    
    
      Although we believe that the expectations reflected in such 
      forward-looking statements are reasonable, actual results may differ 
      materially from the results discussed in these forward-looking 
      statements. You are cautioned not to place undue reliance on these 
      forward-looking statements, which speak only as of the date hereof. The 
      Company undertakes no obligation to republish revised forward-looking 
      statements to reflect events or circumstances after the date hereof or 
      to reflect the occurrence of unanticipated events. You are also urged to 
      carefully review and consider the various disclosures made by the 
      Company which attempt to advise interested parties of the facts which 
      affect the Company's business.