MERB Merrill Merchants Banc (MM)

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 September 30, 2006, a 13% increase over the same period last year. The Company reported diluted earnings per share of $0.46 for the third quarter of 2006, a 12% increase over 2006�s third quarter earnings per share of $0.41. The Company reported net income of $4.5 million or earnings per share of $1.26 on a fully diluted basis for the nine months ended September 30, 2006, compared to $4.1 million or earnings per share of $1.14 for the same period last year. Balance Sheet. The Company�s consolidated assets were $445.0 million at September 30, 2006, an increase of $36.9 million or 9% from the same date a year ago. Comparing September 30, 2006 and 2005, total loans grew $19.0 million or 6%. Loans to businesses increased 11% and consumer loans grew 26% from a year ago. Real estate loan activity has slowed compared to 2005; however, growth was steady with the commercial real estate portfolio increasing 4%, home equity balances growing 11% and residential mortgages up 4%. Construction balances decreased $4.0 million from a year ago. Total deposits were $358.3 million at September 30, 2006 compared to $325.0 million a year ago, representing growth of $33.3 million or 10%. Short-term interest rate increases and stock market volatility have spurred a migration of funds from core deposits as well as an influx of new funds to higher yielding certificates of deposit (CDs). CDs grew $34.9 million or 30% from a year ago. Comparing September 30, 2006 and 2005, money market balances increased $3.0 million while savings account balances decreased $4.4 million and checking accounts declined $114,000. Net Income. The Company�s net income for the nine months ended September 30, 2006 amounted to $4.5 million compared to $4.1 million for the same period in 2005, an increase of 11%. Return on assets and return on equity were 1.40% and 16.87%, respectively, for the nine months of 2006 compared to return on assets of 1.42% and return on equity of 16.95% for the same period in 2005. Net income for the third quarter of 2006 was $1.6 million compared to $1.5 million for the same period in 2005, an increase of 13%. Return on assets and return on equity were 1.48% and 17.89%, respectively, for the third quarter of 2006 compared to return on assets of 1.45% and return on equity of 17.60% for the same period in 2005. Net Interest Income. Net interest income increased $1.1 million, or 10%, for the nine months ended September 30, 2006 to $12.7 million. The increase was driven by $44.4 million of growth in average earning assets for the first nine months of 2006 compared to the same period in 2005. The Company�s net interest margin decreased to 4.12% for the nine months ended September 30, 2006, compared to 4.22% for the same period in 2005 as the cost of funds increased by 93 basis points while the yield on earning assets increased 71 basis points. Net interest income increased $341,000, or 8%, for the third quarter of 2006 to $4.4 million. The increase was driven by $40.8 million of growth in average earning assets for the third quarter of 2006 compared to the same period in 2005. The Company�s net interest margin for the third quarter of 2006 and 2005, was 4.21% and 4.29%, respectively. Non-Interest Income. Non-interest income was $4.1 million for the nine months ended September 30, 2006, an increase of $271,000 compared to the same period in 2005. The 7% increase in non-interest income was due to an increase in trust fees of $157,000, increases in service charges on deposit accounts of $69,000 and an increase in investment security gains of $49,000. Non-interest income was $1.3 million for the third quarter of 2006, an increase of 11% from the same period in 2005. The $134,000 increase in non-interest income was due to growth in trust fees of 14% and an increase in mortgage banking income of 74%. Non-Interest Expense. Non-interest expense totaled $9.5 million for the nine months ended September 30, 2006 compared to $8.9 million for the same period last year. The increase in non-interest expense of $672,000, or 8%, was due to an increase in personnel costs of 8%, increases in occupancy, equipment and data processing expenses of 5% and an increase in other expenses of 8%. Personnel costs increased $430,000 due to normal salary increases and additional staffing required as a result of asset growth, and other expenses increased $165,000 due to increases in professional fees, ATM/debit card processing expense and postage costs. Non-interest expense totaled $3.2 million for the third quarter of 2006 compared to $3.0 million for the same period last year. The increase in non-interest expense of $219,000, or 7%, was due to increases in personnel costs of $135,000 and increases in other expenses of $42,000. Shareholders� Equity. At September 30, 2006, shareholders� equity totaled $37.2 million. The net increase of $3.7 million for the nine months of 2006 was attributable to net income of $4.5 million and proceeds from stock option exercises of $176,000 less cash dividends of $1.9 million and common stock repurchases of $89,000. In the third quarter of 2006, the Company declared a cash dividend of $.18 per share on the Company�s common stock. This was an increase of 16% over last year�s third 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 September 30, 2006, 25,894 shares had been repurchased under the program. During the third quarter of 2006, the Company repurchased 3,757 shares at an average price of $23.58 per share. Repurchases will be made from time to time at the discretion of Company management. 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 Nine Months Ended September 30, September 30, (In thousands except per share data) 2006� 2005� 2006� 2005� Interest income $ 7,349� $ 5,951� $ 20,679� $ 16,513� Interest expense 2,947� 1,890� 8,027� 4,962� Net interest income 4,402� 4,061� 12,652� 11,551� Provision for loan losses 87� 106� 346� 300� Non-interest income 1,336� 1,202� 4,051� 3,780� Non-interest expense 3,169� 2,950� 9,533� 8,861� Income before income taxes 2,482� 2,207� 6,824� 6,170� Income taxes 835� 745� 2,311� 2,086� Net income $ 1,647� $ 1,462� $ 4,513� $ 4,084� � Per share data Basic earnings per common share (1) $ 0.46� $ 0.41� $ 1.27� $ 1.15� Diluted earnings per common share (1) $ 0.46� $ 0.41� $ 1.26� $ 1.14� � (1) Adjusted to reflect the 3% stock dividend in March 2006. SELECTED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, (In thousands) 2006� 2005� 2005� Total assets $ 444,952� $ 408,031� $ 417,073� Loans receivable 330,045� 311,064� 318,965� Allowance for loan losses (4,214) (4,083) (4,086) Loans held for sale 859� 1,393� 925� Investment securities 79,098� 70,168� 72,489� Deposits 358,281� 324,995� 331,414� Borrowings 44,351� 44,900� 47,008� Shareholders' equity 37,229� 33,522� 34,352� � Off-Balance Sheet Trust assets under management 381,222� 358,359� 365,950� Mortgage servicing portfolio 152,974� 132,806� 141,125� SELECTED CONSOLIDATED AVERAGE BALANCES (Unaudited) Three Month Period Nine Month Period September 30, September 30, (In thousands) 2006� 2005� 2006� 2005� Total assets $ 441,724� $ 401,259� $ 429,807� $ 383,964� Loans and loans held for sale 332,009� 304,249� 327,231� 293,960� Investment securities 80,376� 66,605� 78,524� 65,924� Deposits 354,393� 321,817� 339,260� 305,692� Borrowings 45,432� 42,293� 50,088� 42,118� Shareholders' equity 36,541� 32,947� 35,768� 32,216� OTHER SELECTED CONSOLIDATED DATA (Unaudited) � At or for the Three Months At or for the Nine Months Ended September 30, Ended September 30, 2006� 2005� 2006� 2005� Return on average assets (1) 1.48% 1.45% 1.40% 1.42% Return on average equity (1) 17.89% 17.60% 16.87% 16.95% Leverage ratio 8.32% 8.22% 8.32% 8.22% Net interest margin (1) 4.21% 4.29% 4.12% 4.22% Non-performing assets to total assets 0.22% 0.21% 0.22% 0.21% Net loan charge-offs to average net loans (1) 0.07% 0.08% 0.04% 0.04% Allowance for loan losses to total loans 1.28% 1.31% 1.28% 1.31% Number of shares outstanding (2) 3,550,010� 3,538,702� 3,550,010� 3,538,702� Weighted-average shares outstanding-diluted (2) 3,572,795� 3,570,894� 3,570,070� 3,568,953� Book value per share (2) $ 10.49� $ 9.47� $ 10.49� $ 9.47� � (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. 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 September 30, 2006, a 13% increase over the same period last year. The Company reported diluted earnings per share of $0.46 for the third quarter of 2006, a 12% increase over 2006's third quarter earnings per share of $0.41. The Company reported net income of $4.5 million or earnings per share of $1.26 on a fully diluted basis for the nine months ended September 30, 2006, compared to $4.1 million or earnings per share of $1.14 for the same period last year. Balance Sheet. The Company's consolidated assets were $445.0 million at September 30, 2006, an increase of $36.9 million or 9% from the same date a year ago. Comparing September 30, 2006 and 2005, total loans grew $19.0 million or 6%. Loans to businesses increased 11% and consumer loans grew 26% from a year ago. Real estate loan activity has slowed compared to 2005; however, growth was steady with the commercial real estate portfolio increasing 4%, home equity balances growing 11% and residential mortgages up 4%. Construction balances decreased $4.0 million from a year ago. Total deposits were $358.3 million at September 30, 2006 compared to $325.0 million a year ago, representing growth of $33.3 million or 10%. Short-term interest rate increases and stock market volatility have spurred a migration of funds from core deposits as well as an influx of new funds to higher yielding certificates of deposit (CDs). CDs grew $34.9 million or 30% from a year ago. Comparing September 30, 2006 and 2005, money market balances increased $3.0 million while savings account balances decreased $4.4 million and checking accounts declined $114,000. Net Income. The Company's net income for the nine months ended September 30, 2006 amounted to $4.5 million compared to $4.1 million for the same period in 2005, an increase of 11%. Return on assets and return on equity were 1.40% and 16.87%, respectively, for the nine months of 2006 compared to return on assets of 1.42% and return on equity of 16.95% for the same period in 2005. Net income for the third quarter of 2006 was $1.6 million compared to $1.5 million for the same period in 2005, an increase of 13%. Return on assets and return on equity were 1.48% and 17.89%, respectively, for the third quarter of 2006 compared to return on assets of 1.45% and return on equity of 17.60% for the same period in 2005. Net Interest Income. Net interest income increased $1.1 million, or 10%, for the nine months ended September 30, 2006 to $12.7 million. The increase was driven by $44.4 million of growth in average earning assets for the first nine months of 2006 compared to the same period in 2005. The Company's net interest margin decreased to 4.12% for the nine months ended September 30, 2006, compared to 4.22% for the same period in 2005 as the cost of funds increased by 93 basis points while the yield on earning assets increased 71 basis points. Net interest income increased $341,000, or 8%, for the third quarter of 2006 to $4.4 million. The increase was driven by $40.8 million of growth in average earning assets for the third quarter of 2006 compared to the same period in 2005. The Company's net interest margin for the third quarter of 2006 and 2005, was 4.21% and 4.29%, respectively. Non-Interest Income. Non-interest income was $4.1 million for the nine months ended September 30, 2006, an increase of $271,000 compared to the same period in 2005. The 7% increase in non-interest income was due to an increase in trust fees of $157,000, increases in service charges on deposit accounts of $69,000 and an increase in investment security gains of $49,000. Non-interest income was $1.3 million for the third quarter of 2006, an increase of 11% from the same period in 2005. The $134,000 increase in non-interest income was due to growth in trust fees of 14% and an increase in mortgage banking income of 74%. Non-Interest Expense. Non-interest expense totaled $9.5 million for the nine months ended September 30, 2006 compared to $8.9 million for the same period last year. The increase in non-interest expense of $672,000, or 8%, was due to an increase in personnel costs of 8%, increases in occupancy, equipment and data processing expenses of 5% and an increase in other expenses of 8%. Personnel costs increased $430,000 due to normal salary increases and additional staffing required as a result of asset growth, and other expenses increased $165,000 due to increases in professional fees, ATM/debit card processing expense and postage costs. Non-interest expense totaled $3.2 million for the third quarter of 2006 compared to $3.0 million for the same period last year. The increase in non-interest expense of $219,000, or 7%, was due to increases in personnel costs of $135,000 and increases in other expenses of $42,000. Shareholders' Equity. At September 30, 2006, shareholders' equity totaled $37.2 million. The net increase of $3.7 million for the nine months of 2006 was attributable to net income of $4.5 million and proceeds from stock option exercises of $176,000 less cash dividends of $1.9 million and common stock repurchases of $89,000. In the third quarter of 2006, the Company declared a cash dividend of $.18 per share on the Company's common stock. This was an increase of 16% over last year's third 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 September 30, 2006, 25,894 shares had been repurchased under the program. During the third quarter of 2006, the Company repurchased 3,757 shares at an average price of $23.58 per share. Repurchases will be made from time to time at the discretion of Company management. 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. -0- *T MERRILL MERCHANTS BANCSHARES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Nine Months Ended Ended September 30, September 30, (In thousands except per share data) 2006 2005 2006 2005 ------ ------ ------- ------- Interest income $7,349 $5,951 $20,679 $16,513 Interest expense 2,947 1,890 8,027 4,962 ------ ------ ------- ------- Net interest income 4,402 4,061 12,652 11,551 Provision for loan losses 87 106 346 300 Non-interest income 1,336 1,202 4,051 3,780 Non-interest expense 3,169 2,950 9,533 8,861 ------ ------ ------- ------- Income before income taxes 2,482 2,207 6,824 6,170 Income taxes 835 745 2,311 2,086 ------ ------ ------- ------- Net income $1,647 $1,462 $ 4,513 $ 4,084 ====== ====== ======= ======= Per share data Basic earnings per common share (1) $ 0.46 $ 0.41 $ 1.27 $ 1.15 ====== ====== ======= ======= Diluted earnings per common share (1) $ 0.46 $ 0.41 $ 1.26 $ 1.14 ====== ====== ======= ======= (1) Adjusted to reflect the 3% stock dividend in March 2006. *T -0- *T SELECTED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, (In thousands) 2006 2005 2005 ------------- --------- ----------- Total assets $ 444,952 $ 408,031 $ 417,073 Loans receivable 330,045 311,064 318,965 Allowance for loan losses (4,214) (4,083) (4,086) Loans held for sale 859 1,393 925 Investment securities 79,098 70,168 72,489 Deposits 358,281 324,995 331,414 Borrowings 44,351 44,900 47,008 Shareholders' equity 37,229 33,522 34,352 Off-Balance Sheet Trust assets under management 381,222 358,359 365,950 Mortgage servicing portfolio 152,974 132,806 141,125 *T -0- *T SELECTED CONSOLIDATED AVERAGE BALANCES (Unaudited) Three Month Period Nine Month Period September 30, September 30, (In thousands) 2006 2005 2006 2005 -------- -------- -------- -------- Total assets $441,724 $401,259 $429,807 $383,964 Loans and loans held for sale 332,009 304,249 327,231 293,960 Investment securities 80,376 66,605 78,524 65,924 Deposits 354,393 321,817 339,260 305,692 Borrowings 45,432 42,293 50,088 42,118 Shareholders' equity 36,541 32,947 35,768 32,216 *T -0- *T OTHER SELECTED CONSOLIDATED DATA (Unaudited) At or for the Three At or for the Nine Months Months Ended September 30, Ended September 30, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Return on average assets (1) 1.48% 1.45% 1.40% 1.42% Return on average equity (1) 17.89% 17.60% 16.87% 16.95% Leverage ratio 8.32% 8.22% 8.32% 8.22% Net interest margin (1) 4.21% 4.29% 4.12% 4.22% Non-performing assets to total assets 0.22% 0.21% 0.22% 0.21% Net loan charge-offs to average net loans (1) 0.07% 0.08% 0.04% 0.04% Allowance for loan losses to total loans 1.28% 1.31% 1.28% 1.31% Number of shares outstanding (2) 3,550,010 3,538,702 3,550,010 3,538,702 Weighted-average shares outstanding- diluted (2) 3,572,795 3,570,894 3,570,070 3,568,953 Book value per share (2) $ 10.49 $ 9.47 $ 10.49 $ 9.47 (1) Computed on an annualized basis. (2) Adjusted to reflect the 3% stock dividend in March 2006. *T 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.