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Merchants Bancshares: Is This 3.4% Yielder A Buy?

Merchants Bancshares Inc (NASDAQ:MBVT) is a $208 million bank holding company that operates through its wholly owned subsidiary, Merchants Bank, in 33 branches throughout Vermont. When last reported, the bank had $1.6 billion in assets, $1.2 billion of deposits and a book value of $18.24 per share.

Merchants has been very effective at posting above average returns as its cost controls and liquidity allows the bank to leverage equity more than most. However, some concerns over asset re-pricings and loan growth has me wondering how well the bank's book value will hold up as interest rates rise (all graphs in thousands).

Second quarter earnings reported moderate improvements ($0.64 per share vs 2Q2012's EPS of $0.60) in earnings and...

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