Merrill Merchants Bancshares, Inc. Reports Record 2006 Earnings of $6.3 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 $6.3 million for the year ended December 31, 2006, a 10% 
      increase over 2005. The Company reported diluted earnings per share of 
      $1.76 for 2006, a 9% increase over 2005’s 
      earnings per share of $1.61.
    
    
      The Company reported net income of $1.8 million or earnings per share of 
      $0.50 on a fully diluted basis for the three months ended December 31, 
      2006, compared to $1.7 million or earnings per share of $0.46 for the 
      fourth quarter of 2005.
    
    
      Balance Sheet. The Company’s 
      consolidated assets were $449.1 million at December 31, 2006, an 
      increase of $32.0 million or 8% from the same date a year ago. Comparing 
      December 31, 2006 and 2005, total loans grew $19.9 million or 6%. Loan 
      growth occurred in all areas with growth in commercial business loans of 
      $7.0 million, home equity balances increased $5.9 million, consumer 
      loans grew $5.5 million and residential/construction balances increased 
      $1.5 million.
    
    
      Total deposits were $359.9 million at December 31, 2006 compared to 
      $331.4 million a year ago, representing growth of $28.5 million or 9%. 
      Checking account balances increased $4.0 million or 4%. Savings and 
      money market accounts declined $6.2 million or 6% compared to the prior 
      year, as short-term interest rate increases and stock market volatility 
      have spurred a migration of funds to certificate of deposit accounts 
      (CDs). This movement, coupled with an influx of new funds to higher 
      yielding CDs, contributed to CD growth of $30.8 million or 25% from a 
      year ago.
    
    
      Net Income. The Company’s net income 
      for the twelve months ended December 31, 2006 amounted to $6.3 million 
      compared to $5.7 million for the same period in 2005, an increase of 
      10%. Return on assets and return on equity were 1.45% and 17.32%, 
      respectively, for the twelve months of 2006 compared to return on assets 
      of 1.47% and return on equity of 17.59% for the same period in 2005.
    
    
      Net income for the three months ended December 31, 2006 increased 
      $128,000 or 8% compared with the same period in 2005. Return on assets 
      and return on equity were 1.57% and 18.56%, respectively, for the fourth 
      quarter of 2006 compared to return on assets of 1.60% and return on 
      equity of 19.40% for the same period in 2005.
    
    
      Net Interest Income. Net interest income increased $1.3 million, 
      or 8%, for the twelve months ended December 31, 2006 to $17.1 million. 
      The increase was driven by $43.1 million of growth in average earning 
      assets for 2006 compared to the same period in 2005. The Company’s 
      net interest margin decreased to 4.13% for 2006, compared to 4.25% for 
      2005 as the cost of funds increased by 91 basis points while the yield 
      on earning assets increased 65 basis points. Net interest income for the 
      fourth quarter of 2006 increased $218,000, or 5%, to $4.4 million, 
      driven by growth in average earning assets of $39.3 million, or 10%. The 
      Company’s net interest margin for the fourth 
      quarter of 2006 and 2005 was 4.16% and 4.35%, respectively.
    
    
      Non-Interest Income. Non-interest income was $5.5 million for the 
      twelve months ended December 31, 2006, an increase of $297,000 compared 
      to the same period in 2005. The 6% increase in non-interest income was 
      primarily due to an increase in trust fees of $196,000 and increases in 
      service charges on deposit accounts of $73,000. Non-interest income was 
      $1.5 million for the fourth quarter of 2006, an increase of $26,000, or 
      2%, from the same period in 2005.
    
    
      Non-Interest Expense. Non-interest expense totaled $12.8 million 
      for the twelve months ended December 31, 2006 compared to $11.9 million 
      for the same period last year. The increase in non-interest expense of 
      $826,000, or 7%, was due to an increase in personnel costs of 9%, 
      increases in occupancy expenses of 7%, and an increase in equipment and 
      other expenses of 3%. Personnel costs increased $633,000 due to normal 
      salary increases and additional staffing required as a result of asset 
      growth and occupancy costs increased $63,000 primarily from moving into 
      the recently renovated Merrill Financial Center, a 9,000 square foot 
      historic building.
    
    
      Non-interest expense for the quarter ended December 31, 2006 totaled 
      $3.2 million, compared to $3.1 million for the same period last year. 
      The increase in non-interest expense of $154,000, or 5%, was primarily 
      due to increases in personnel costs of $203,000, offset by a decrease in 
      other expenses of $68,000.
    
    
      Shareholders’ Equity. At December 31, 
      2006, shareholders’ equity totaled $38.6 
      million. The net increase of $4.3 million for the twelve months of 2006 
      was attributable to net income of $6.3 million, proceeds from stock 
      option exercises and the related tax benefit of $224,000 and changes in 
      the unrealized gain or loss on securities and derivatives of $428,000. 
      This was offset by cash dividends of $2.6 million and common stock 
      repurchases of $89,000. In the fourth quarter of 2006, the Company 
      declared a cash dividend of $.19 per share on the Company’s 
      common stock. This was an increase of 15% over last year’s 
      fourth 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 December 31, 
      2006, 25,894 shares had been repurchased under the program. During the 
      fourth quarter of 2006, no shares were repurchased.
    
    
      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
        
        
        
        
          Twelve Months Ended
        
      
      
        
        
        
          December 31,
        
        
        
        
          December 31,
        
      
      
        
          (In thousands except per share data)
        
        
          2006 
        
        
        
        
          2005 
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
          Interest income
        
        
          $ 7,501 
        
        
        
        
          $ 6,311 
        
        
        
        
          $ 28,180 
        
        
        
        
          $ 22,824 
        
      
      
        
          Interest expense
        
        
          3,064 
        
        
        
        
          2,092 
        
        
        
        
          11,091 
        
        
        
        
          7,054 
        
      
      
        
          Net interest income
        
        
          4,437 
        
        
        
        
          4,219 
        
        
        
        
          17,089 
        
        
        
        
          15,770 
        
      
      
        
          Provision for loan losses
        
        
          12 
        
        
        
        
          97 
        
        
        
        
          358 
        
        
        
        
          397 
        
      
      
        
          Non-interest income
        
        
          1,452 
        
        
        
        
          1,426 
        
        
        
        
          5,503 
        
        
        
        
          5,206 
        
      
      
        
          Non-interest expense
        
        
          3,240 
        
        
        
        
          3,086 
        
        
        
        
          12,773 
        
        
        
        
          11,947 
        
      
      
        
          Income before income taxes
        
        
          2,637 
        
        
        
        
          2,462 
        
        
        
        
          9,461 
        
        
        
        
          8,632 
        
      
      
        
          Income taxes
        
        
          855 
        
        
        
        
          808 
        
        
        
        
          3,166 
        
        
        
        
          2,894 
        
      
      
        
          Net income
        
        
          $ 1,782 
        
        
        
        
          $ 1,654 
        
        
        
        
          $ 6,295 
        
        
        
        
          $ 5,738 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Per share data
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          
            Basic earnings per common share(1)
          
        
        
          $ 0.50 
        
        
        
        
          $ 0.47 
        
        
        
        
          $ 1.77 
        
        
        
        
          $ 1.62 
        
      
      
        
          
            Diluted earnings per common share(1)
          
        
        
          $ 0.50 
        
        
        
        
          $ 0.46 
        
        
        
        
          $ 1.76 
        
        
        
        
          $ 1.61 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          (1) Adjusted to reflect the 3% stock dividend in March 2006.
        
      
    
    
      
        
          SELECTED CONSOLIDATED BALANCE SHEETS
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
          December 31,
        
        
        
      
      
        
          (In thousands)
        
        
          2006 
        
        
        
        
          2005 
        
        
        
      
      
        
          Total assets
        
        
          $ 449,099 
        
        
        
        
          $ 417,073 
        
        
        
      
      
        
          Loans receivable
        
        
          338,880 
        
        
        
        
          318,965 
        
        
        
      
      
        
          Allowance for loan losses
        
        
          (4,109)
        
        
        
        
          (4,086)
        
        
        
      
      
        
          Loans held for sale
        
        
          925 
        
        
        
        
          925 
        
        
        
      
      
        
          Investment securities
        
        
          86,504 
        
        
        
        
          72,489 
        
        
        
      
      
        
          Deposits
        
        
          359,922 
        
        
        
        
          331,414 
        
        
        
      
      
        
          Borrowings
        
        
          45,443 
        
        
        
        
          47,008 
        
        
        
      
      
        
          Shareholders’ equity
        
        
          38,649 
        
        
        
        
          34,352 
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Off-Balance Sheet
        
        
        
        
        
        
        
        
        
      
      
        
          Trust assets under management
        
        
          388,986 
        
        
        
        
          365,950 
        
        
        
      
      
        
          Mortgage servicing portfolio
        
        
          154,817 
        
        
        
        
          141,125 
        
        
        
      
    
    
      
        
          SELECTED CONSOLIDATED AVERAGE BALANCES
        
      
      
        
          (Unaudited)
        
      
      
        
           
        
      
      
        
        
        
          Three Month Period
        
        
        
        
          Twelve Month Period
        
      
      
        
        
        
          December 31,
        
        
        
        
          December 31,
        
      
      
        
          (In thousands)
        
        
          2006 
        
        
        
        
          2005 
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
          Total assets
        
        
          $ 450,010 
        
        
        
        
          $ 410,293 
        
        
        
        
          $ 434,899 
        
        
        
        
          $ 390,600 
        
      
      
        
          Loans and loans held for sale
        
        
          335,638 
        
        
        
        
          315,291 
        
        
        
        
          329,350 
        
        
        
        
          299,353 
        
      
      
        
          Investment securities
        
        
          82,928 
        
        
        
        
          73,135 
        
        
        
        
          79,634 
        
        
        
        
          67,741 
        
      
      
        
          Deposits
        
        
          361,095 
        
        
        
        
          327,594 
        
        
        
        
          344,764 
        
        
        
        
          311,213 
        
      
      
        
          Borrowings
        
        
          44,963 
        
        
        
        
          44,284 
        
        
        
        
          48,796 
        
        
        
        
          42,664 
        
      
      
        
          Shareholders’ equity
        
        
          38,107 
        
        
        
        
          33,816 
        
        
        
        
          36,358 
        
        
        
        
          32,619 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          OTHER SELECTED CONSOLIDATED DATA
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          
            At or forthe Three Months
          
        
        
        
        
          
            At or forthe Twelve Months
          
        
      
      
        
        
        
          Ended December 31,
        
        
        
        
          Ended December 31,
        
      
      
        
        
        
          2006 
        
        
        
        
          2005 
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
          
            Return on average assets(1)
          
        
        
          1.57%
        
        
        
        
          1.60%
        
        
        
        
          1.45%
        
        
        
        
          1.47%
        
      
      
        
          
            Return on average equity(1)
          
        
        
          18.56%
        
        
        
        
          19.40%
        
        
        
        
          17.32%
        
        
        
        
          17.59%
        
      
      
        
          Leverage ratio
        
        
          8.42%
        
        
        
        
          8.30%
        
        
        
        
          8.42%
        
        
        
        
          8.30%
        
      
      
        
          
            Net interest margin(1)
          
        
        
          4.16%
        
        
        
        
          4.35%
        
        
        
        
          4.13%
        
        
        
        
          4.25%
        
      
      
        
          Non-performing assets to total assets
        
        
          0.32%
        
        
        
        
          0.10%
        
        
        
        
          0.32%
        
        
        
        
          0.10%
        
      
      
        
          
            Net loan charge-offs to average net loans(1)
          
        
        
          0.14%
        
        
        
        
          0.12%
        
        
        
        
          0.07%
        
        
        
        
          0.06%
        
      
      
        
          Allowance for loan losses to total loans
        
        
          1.21%
        
        
        
        
          1.28%
        
        
        
        
          1.21%
        
        
        
        
          1.28%
        
      
      
        
          
            Number of shares outstanding(2)
          
        
        
          3,550,410 
        
        
        
        
          3,538,927 
        
        
        
        
          3,550,410 
        
        
        
        
          3,538,927 
        
      
      
        
          
            Weighted-average shares outstanding-diluted(2)
          
        
        
          3,574,520 
        
        
        
        
          3,570,127 
        
        
        
        
          3,570,994 
        
        
        
        
          3,569,824 
        
      
      
        
          
            Book value per share(2)
          
        
        
          $10.89 
        
        
        
        
          $9.71 
        
        
        
        
          $10.89 
        
        
        
        
          $9.71 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          (1) Computed on an annualized basis.
        
      
      
        
          (2) Adjusted to reflect the 3% stock dividend in March 2006.
        
      
    
    
      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.