<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended MARCH 31, 1998
OR
[_] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 0-11033
MERCHANTS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Texas 76-0045946
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5005 WOODWAY, SUITE 300
HOUSTON, TEXAS 77056
(Address of principal executive offices) (zip code)
(713) 622-0042
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of May 1, 1998, Registrant had outstanding 1,951,839 shares of its $1.00 par
value per share common stock.
1
<PAGE>
MERCHANTS BANCSHARES, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The March 31,1998 and 1997 financial statements included herein are
unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are, in the
opinion of management of the registrant, necessary to a fair statement
of the results for the interim periods.
PAGE
No.
Consolidated Balance Sheets at March 31, 1998 and
at December 31,1997............................................. 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1998 and 1997................................... 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997................................... 5
Notes to Interim Consolidated Financial Statements
for the Period Ended March 31,1998.............................. 7
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results
of Operations................................................... 8
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES
About Market Risk............................................... 12
PART II - OTHER INFORMATION
Item 1 Legal Proceedings................................................. 13
ITEM 2 CHANGE IN SECURITIES AND USE OF PROCEEDS.......................... 13
ITEM 3 DEFAULTS UPON SENIOR SECURITIES................................... 13
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 13
ITEM 5 OTHER INFORMATION................................................. 13
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.................................. 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERCHANTS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
ASSETS
March 31, December 31,
1998 1997
--------- ------------
Cash and due from banks $ 26,081 $ 37,563
Interest bearing deposits with banks 471 0
Federal funds sold 40,000 16,050
Investment securities:
Available-for-Sale 127,211 130,629
Loans, net of allowance for
loan losses 334,967 338,879
Bank premises and equipment 14,637 14,733
Accrued interest receivable 3,592 3,665
Other assets 4,660 4,432
-------- --------
Total Assets $551,619 $545,951
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $149,380 $147,749
Interest bearing 339,239 336,608
-------- --------
488,619 484,357
Accrued interest, taxes and
other liabilities 3,742 3,607
-------- --------
Total Liabilities 492,361 487,964
-------- --------
Stockholders' Equity:
Common stock 1,978 1,978
Paid-in capital 25,767 25,767
Retained earnings 31,308 30,097
Unrealized securities gains 527 467
-------- --------
59,580 58,309
-------- --------
Less cost of stock held in treasury:
Common Stock (322) (322)
-------- --------
Total Stockholders' Equity 59,258 57,987
-------- --------
Total Liabilities and
Stockholders' Equity $551,619 $545,951
======== ========
See Notes to Interim Consolidated Financial Statements.
3
<PAGE>
MERCHANTS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
---- ----
Interest Income:
Interest and fees on loans $ 7,999 $ 6,904
Investment securities:
Taxable 1,641 1,819
Non-taxable 208 220
Time deposits with banks 1 13
Federal funds sold 368 249
------- -------
Total Interest Income 10,217 9,205
------- -------
Interest Expense:
Interest bearing deposits 3,139 2,933
Total Interest Expense 3,139 2,933
------- -------
Net interest income 7,078 6,272
Provision for possible loan losses 435 435
------- -------
Net interest income after provision
for loan losses 6,643 5,837
------- -------
Non-Interest Income:
Service charges and fees 1,123 1,184
Other operating income 324 291
------- -------
Total Non-Interest Income 1,447 1,475
------- -------
Non-Interest Expense:
Salaries and employee benefits 2,930 2,812
Furniture, equipment and
occupancy expense 972 960
Other operating expenses 1,444 1,432
------- -------
Total Non-Interest Expense 5,346 5,204
------- -------
Income before income taxes 2,744 2,108
Income taxes 850 645
------- -------
Net Income $ 1,894 $ 1,463
======= =======
Per Share:
Net Income $ .97 $ .75
======= =======
Dividends - Common Stock $ .35 $ .25
======= =======
See Notes to Interim Consolidated Financial Statements.
4
<PAGE>
MERCHANTS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,894 $ 1,463
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Provision for loan losses 435 435
Depreciation and amortization 352 335
Discount (accretion) amortized
to income 82 124
Origination of mortgage loans for sale (4,209) (1,455)
Proceeds from mortgage loans sold 3,386 1,639
Provision for losses on real
estate and other assets 46 5
(Increase) decrease in interest
receivable 73 (42)
(Decrease) increase in accrued
interest and other liabilities 134 360
Other - net (77) (56)
-------- --------
Total Adjustments 222 1,345
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITES 2,116 2,808
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the maturities of held-to-
maturity investment securities 0 1,835
Proceeds from the maturities of available-
for-sale investment securities 16,939 9,721
Purchase of available-for-sale
investment securities (13,513) (8,218)
Net decrease (increase) in loans 3,966 (14,236)
Purchase of bank premises and equipment (261) (369)
Proceeds from sale of real estate
and other loan related assets 235 101
Other (123) (421)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES 7,243 (11,587)
-------- --------
See Notes to Interim Consolidated Financial Statements.
5
<PAGE>
MERCHANTS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 4,263 10,503
Dividends paid (683) (489)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 3,580 10,014
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 12,939 1,235
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 53,613 36,448
-------- --------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 66,552 $ 37,683
======== ========
For the three months ended March 31:
Interest paid $ 3,141 $ 2,898
======== ========
Income taxes paid $ 0 $ 0
======== ========
Non-Cash Transactions:
Foreclosed properties transferred
to other real estate and loan
related assets $ 477 $ 322
Bank loans for other real estate
and loan related assets sold $ 46 $ 139
See Notes to Interim Consolidated Financial Statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. PRESENTATION OF FINANCIAL INFORMATION
The accompanying unaudited consolidated interim financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of Management, all adjustments (consisting of normal recurring
items) considered necessary for a fair presentation have been included. The
Results of Operations for the three months ended March 31, 1998, are not
necessarily indicative of results that may be expected for the entire year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report on Form
10-K of Merchants Bancshares, Inc. (the "Company"), for the year ended December
31, 1997.
NOTE 2. EARNINGS PER SHARE
Earnings per share amounts have been computed using the weighted average number
of common shares and common share equivalents outstanding during the period.
The number of such primary shares were 1,951,839 and 1,954,970 for the periods
ended March 31,1998 and 1997, respectively.
NOTE 3. PENDING MERGER
On January 16, 1998, a Form 8-K was filed with the Securities and Exchange
Commission to report that the Company entered into an Agreement and Plan of
Merger to be acquired by Union Planters Corporation ("UPC"), a publicly traded
bank holding company based in Memphis, Tennessee, in a tax-free reorganization
to be accounted for as a pooling of interests. Pursuant to the merger
agreement, UPC will exchange one (1) share of its common stock for each
outstanding common share of the Company. The merger is subject to satisfaction
of certain contractual conditions to closing, is subject to regulatory and
shareholder approvals, and is expected to be consummated in the second quarter
of 1998.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ANALYSIS OF STATEMENT OF INCOME
The following analysis discusses material changes in the results of operations
for the first quarter of 1998 as compared to the first quarter of 1997.
Merchants Bancshares, Inc. recorded earnings of $1,894,000 in the first quarter
of 1998. This level of earnings represented a increase of $431,000 from the
$1,463,000 earned in the first quarter of 1997.
YEAR 2000 COMPLIANCE
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue and is developing an
implementation plan to resolve the issue. The Year 2000 problem is the result
of computer programs being written using two digits rather than four to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the Year
2000. This could result in a major system failure or miscalculations.
The Company expects its Year 2000 date conversion project to be completed on a
timely basis. During the execution of this project the Company will incur
internal staff costs as well as consulting and other expenses related to
enhancements necessary to prepare the systems for the Year 2000. The expense of
the Year 2000 project as well as the related potential effect on the Company's
earnings is not expected to have a material effect on its financial position or
results of operations.
NET INTEREST INCOME
Net interest income increased 12.9% in the first quarter of 1998 when compared
to the same quarter of 1997. The increase of $806,000 resulted from a
$1,012,000 (11.0%) increase in interest income or earning assets, partially
offset by an increase of $206,000 (7.0%) in interest expense. Higher loan
volume was the principal reason for the increase in interest income.
The Company's subsidiary bank (the "Subsidiary Bank") attempts to adjust the
rates paid or earned on interest bearing liabilities and interest earning assets
to maintain a consistent net interest margin to the extent possible.
PROVISION FOR POSSIBLE LOAN LOSSES
The $435,000 provision for credit losses for the first quarter of 1998 was the
same for the first quarter of 1997. The provision for credit losses for the
first quarter of 1998 was offset by $105,000 in net losses charged to the
allowance as compared with net losses of $176,000 for the same period in 1997.
The ratio of the allowance for credit losses to outstanding loans was 1.19% on
March 31, 1998, as compared to .96% on March 31, 1997.
The Subsidiary Bank's policy is to maintain a level in the allowance for
possible loan losses that is adequate to cover the loan losses sustained plus
provide for any future possible losses on problem loans. The adequacy of the
allowance is continually monitored and management considers the current level to
be appropriate based on an evaluation of the Subsidiary Bank's loan portfolio.
The transactions in the allowance for possible loan losses were as follows:
8
<PAGE>
PROVISION FOR POSSIBLE LOAN LOSSES (CONTINUED)
FOR THE QUARTER
ENDED MARCH 31,
----------------------------
1998 1997
------------ ------------
Loans outstanding at period end $338,984,000 $308,554,000
============ ============
Allowance at beginning of period $ 3,687,000 $ 2,713,000
------------ ------------
Provision charged to expense 435,000 435,000
------------ ------------
Loans charged off:
Commercial and industrial (62,000) (13,000)
Real estate (13,000) (20,000)
Installment (202,000) (167,000)
------------ ------------
Total (277,000) (200,000)
------------ ------------
Loans recovered:
Commercial and industrial 151,000 3,000
Real estate 6,000 3,000
Installment 15,000 18,000
------------ ------------
Total 172,000 24,000
------------ ------------
Net Loans recovered (charged off) (105,000) (176,000)
------------ ------------
Allowance at end of period $ 4,017,000 $ 2,972,000
============ ============
Ratios:
Allowance as a percent of
loans outstanding 1.19% .96%
============ ============
Allowance as a percent of
nonperforming loans 181.2% 108.2%
============ ============
NON-PERFORMING ASSETS
All loans which cause management to have doubt as to the borrower's ability to
substantially comply with present loan repayment terms are included in the
schedule of non-performing loans.
Non-performing loans consist of loans on which interest is not being accrued and
loans which are 90 days or more past due as to principal and/or interest payment
and not yet in a non-accruing status. The policy of the Subsidiary Bank is to
continue to accrue interest on loans which are 90 days or more past due if
periodic payments are being made on the loans. If a loan is classified as past
due and payments then resume on the loan, it continues to be classified as past
due until all past due amounts are paid.
9
<PAGE>
NON-PERFORMING ASSETS (CONTINUED)
The following table discloses information regarding non-performing assets for
the indicated periods:
March 31,
-----------------------
1998 1997
---------- ----------
Non-accrual loans $1,684,000 $2,480,000
Past due 90 days or more 533,000 266,000
---------- ----------
Total 2,217,000 2,746,000
Other real estate owned 1,367,000 930,000
---------- ----------
Total non-performing assets $3,584,000 $3,676,000
========== ==========
NON-INTEREST INCOME
The components included in
non-interest income for the
indicated periods are as follows:
FOR THE QUARTER
ENDED MARCH 31,
-----------------------
1998 1997
---------- ----------
Service charges and fees $1,123,000 $1,184,000
Other operating income 324,000 291,000
Securities transactions 0 0
---------- ----------
Total non-interest income $1,447,000 $1,475,000
========== ==========
Noninterest income decreased $28,000 or 1.9% for the first quarter of 1998
compared to the same quarter in 1997. The decrease is primarily due to a
reduction in fees charged for non-sufficient funds.
The Subsidiary Bank maintains a policy of constantly monitoring and evaluating
service charges and fees to ensure that the fees charged reflect the cost of
service provided and remain competitive with other financial institutions
located in the Subsidiary Bank's market area.
NON-INTEREST EXPENSE
Non-interest expense increased by 2.7% for the first quarter of 1998 over the
first quarter of 1997. The totals were as follows:
FOR THE QUARTER
Ended March 31,
--------------------------
1998 1997
---------- ---------
Salaries and employee benefits $2,930,000 $2,812,000
Furniture, equipment and occupancy
expense 972,000 960,000
Other operating expenses 1,444,000 1,432,000
---------- ----------
Total non-interest expenses $5,346,000 $5,204,000
========== ==========
Salaries and employee benefits are the most significant operating expenses of
the Company. These expenses increased by 4.2% for the first quarter of 1998 as
compared to the first quarter of 1997. Other noninterest expenses increased
$24,000 or 1.0% for the first quarter ended March 31, 1998 as compared to the
same period in 1997.
10
<PAGE>
ANALYSIS OF BALANCE SHEET
EARNING ASSETS
When comparing the total of earning assets at March 31, 1998, to the total at
December 31, 1997, earning assets increased 3.5%. The increase of $17.1 million
was due primarily to an increase of $24 million in federal funds sold and a
decrease of $11.5 million in cash which was partially offset by a decrease of
$3.9 million and $3.4 million in loans and investment securities, respectively.
Included in the total of earning assets at March 31, 1998 are loans totaling
$1.7 million which are on a non-accrual status. This compares to non-accrual
loans totaling $2.5 million and $2.0 million at March 31, 1997 and December 31,
1997, respectively.
DEPOSITS
The most important funding source for earning asset growth is deposits. Total
deposits increased by .9% from December 31, 1997 to March 31, 1998, compared to
an increase of 2.4% from December 31, 1996 to March 31, 1997. Non-interest
bearing deposits increased 1.1% from December 31, 1997 to March 31, 1998, while
interest-bearing deposits increased .8% for the same period.
CAPITAL
Shareholders' equity increased $1.3 million, or 2.2% for the three months ended
March 31, 1998, as compared to an increase of 1.2% for the same period in 1997.
The ratio of shareholders' equity to total assets was 10.7% on March 31,1998, as
compared to 10.6% on December 31, 1997 and 10.7% on March 31,1997.
Bank holding companies and their bank subsidiaries are required to maintain
certain capital ratios. The Federal Reserve Board's guidelines classify capital
into two tiers, referred to as Tier 1 and Tier 2. Tier 1 capital consists of
common and qualifying preferred shareholders' equity less goodwill. Tier 2
capital consists of mandatory convertible debt, preferred stock not qualifying
as Tier 1, qualifying subordinated debt and the allowance for loan losses up to
1.25% of risk-weighted assets. The minimum ratio for the sum of Tier 1 and Tier
2 to risk weighted assets is 8.0%, at least one-half of which should be in the
form of Tier 1 capital. At March 31, 1998, core capital (Tier 1) and total
capital (Tier 1 and Tier 2) as a percentage of risk-weighted assets was 16.05%
and 17.17%, respectively. The Subsidiary Bank at March 31, 1998 had core
capital of 15.41% and total capital of 16.53% as a percentage of risk weighted
assets.
In addition to the foregoing ratios, bank holding companies are required to
maintain a minimum ratio of core capital to total assets (hereinafter referred
to as the "Leverage Ratio") of at least 3.0%. At March 31, 1998, the Company's
Leverage Ratio was 10.47%. A similar leverage ratio applicable to the
Subsidiary Bank has been adopted by the FDIC. At March 31, 1997, the Subsidiary
Bank's ratio was 10.06%.
LIQUIDITY AND CAPITAL COMMITMENTS
Liquidity is the ability of the Company and the Subsidiary Bank to meet their
short-term needs for cash arising from demands such as operating expenses,
withdrawal of deposits and demand for loans. The liquidity of the Company is
primarily provided by dividends from the Subsidiary Bank and interest on time
deposits in financial institutions.
11
<PAGE>
LIQUIDITY AND CAPITAL COMMITMENTS (CONTINUED)
The Subsidiary Bank's liquidity is primarily provided by maturing loans,
deposits, cash, short-term investments, time deposits in other banks, federal
funds sold and profits. With bank regulators critically reviewing liquidity,
the Company has adopted a policy of maintaining a minimum liquidity level of 20%
as measured by the FDIC formula, at the Subsidiary Bank. As of March 31, 1998,
the liquidity level of the Subsidiary Bank was 36.9%.
The Company believes that both it and the Subsidiary Bank have sufficient
capital and financial resources to meet its current and anticipated capital
commitments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings.
Not applicable
Item 2. Changes in securities.
Not applicable
Item 3. Defaults upon senior securities.
Not applicable
Item 4. Submission of matters to a vote of security holders.
Not applicable
Item 5. Other information.
Not applicable
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports of Form 8-K
In January, 1998, a Form 8-K was filed with the Securities and
Exchange Commission to report that on January 16, 1998, the
Company entered into an Agreement and Plan of Merger to be
acquired by Union Planters Corporation ("UPC"), a publicly traded
bank holding company based in Memphis, Tennessee, in a tax-free
reorganization to be accounted for as a pooling of interests.
Pursuant to the merger agreement, UPC will exchange one (1) share
of its common stock for each outstanding common share of the
Company. The merger is subject to satisfaction of certain
contractual conditions to closing, is subject to regulatory and
shareholder approvals, and is expected to be consummated in the
second quarter of 1998.
13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
(IF APPLICABLE)
INCORPORATED BY REFERENCE FROM
------------------------------------
EXHIBIT NUMBER AND DESCRIPTION FORM DATE FILE NO. EXHIBIT
- ------------------------------ ---- ---- -------- -------
<S> <C> <C> <C> <C>
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession
2.1 Agreement and Plan of Reorganization 8-K 01/16/98 0-11033 2.1
(3) Articles of Incorporation and Bylaws
3.1 Articles of Incorporation of the Registrant,
together with amendments thereto 8-K 07/19/96 0-11033 3.1
3.2 Bylaws of the Registrant 8-K 07/19/96 0-11033 3.2
(10) Material contracts
10.3 Merchants Bancshares, Inc.
401 (k) Plan 10-K 12/31/89 0-11033 10.3
10.4 Merchants Bancshares, Inc.
Defined Benefit Pension Plan 10-K 12/31/94 0-11033 10.4
10.5 Merchants Bancshares, Inc.
Flexible Incentive Plan 10-K 12/31/96 0-11033 10.5
10.6 Employment Agreement, effective as of
September 26, 1997 by and between the
Registrant and J. W. Lander Jr. 10-K 12/31/97 0-11033 10.6
10.7 Employment Agreement, effective as of
September 26, 1997 by and between the
Registrant and J. W. Lander, III 10-K 12/31/97 0-11033 10.7
10.8 Employment Agreement, effective as of
September 26, 1997 by and between the
Registrant and Donald R. Harding 10-K 12/31/97 0-11033 10.8
10.9 Employment Agreement, effective as of
September 26, 1997 by and between the
Registrant and Norman H. Bird 10-K 12/31/97 0-11033 10.9
10.10 Indemnification Agreement, dated as of
October 10, 1997 by and between the
Registrant and J. W. Lander, Jr. 10-K 12/31/97 0-11033 10.10
10.11 Indemnification Agreement, dated as of
October 10, 1997 by and between the
Registrant and J. W. Lander, III 10-K 12/31/97 0-11033 10.11
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
(IF APPLICABLE)
INCORPORATED BY REFERENCE FROM
------------------------------------
EXHIBIT NUMBER AND DESCRIPTION FORM DATE FILE NO. EXHIBIT
- ------------------------------ ---- ---- -------- -------
<S> <C> <C> <C> <C>
10.12 Indemnification Agreement, dated as of
October 10, 1997 by and between the
Registrant and Donald R. Harding 10-K 12/31/97 0-11033 10.12
10.13 Indemnification Agreement, dated as of
October 10, 1997 by and between the
Registrant and Norman H. Bird 10-K 12/31/97 0-11033 10.13
(27) Financial Data Schedule
27.1 Financial Data Schedule N/A N/A N/A N/A
</TABLE>
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERCHANTS BANCSHARES, INC.
Date: May 5, 1998 BY: /s/J. W. Lander, Jr.
------------------------------
J.W. Lander, Jr., Chairman
Date: May 5, 1998 BY: /s/J. W. Lander, III
------------------------------
J. W. Lander, III, President
(principal financial and chief accounting
officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 26,081,000
<INT-BEARING-DEPOSITS> 471,000
<FED-FUNDS-SOLD> 40,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 127,211,000
<INVESTMENTS-CARRYING> 126,412,000
<INVESTMENTS-MARKET> 127,211,000
<LOANS> 338,984,000
<ALLOWANCE> 4,017,000
<TOTAL-ASSETS> 551,619,000
<DEPOSITS> 488,619,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,742,000
<LONG-TERM> 0
1,978,000
0
<COMMON> 0
<OTHER-SE> 57,280,000
<TOTAL-LIABILITIES-AND-EQUITY> 551,619,000
<INTEREST-LOAN> 7,999,000
<INTEREST-INVEST> 1,849,000
<INTEREST-OTHER> 369,000
<INTEREST-TOTAL> 10,217,000
<INTEREST-DEPOSIT> 3,139,000
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 7,078,000
<LOAN-LOSSES> 435,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,346,000
<INCOME-PRETAX> 2,744,000
<INCOME-PRE-EXTRAORDINARY> 2,744,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,894,000
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
<YIELD-ACTUAL> 5.59
<LOANS-NON> 1,684,000
<LOANS-PAST> 533,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,687,000
<CHARGE-OFFS> 277,000
<RECOVERIES> 172,000
<ALLOWANCE-CLOSE> 4,017,000
<ALLOWANCE-DOMESTIC> 4,017,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
