Merchants Bancshares Inc. in South Burlington, Vt., plans to return $28.1 million of capital to its investors in the form of a $4.50 a share special dividend payable Dec. 17.
To offset the financial drain, the $1.05 billion-asset company said Wednesday that it would issue $20 million of trust-preferred securities.
Merchants, which reported net income of $8.8 million for the first nine months of this year and $11.7 million for last year, said the special dividend and trust-preferred issuance would reduce its profits next year by $1.06 million, or 17 cents a share.
In a press release, Merchants said it decided to make the special payment because of the current low tax rate on dividends. The special dividend payment was the "optimal capital management alternative" available, Merchants said.
At the end of the third quarter, Merchants' Tier 1 capital ratio was 8.41%. The company said it would remain well-capitalized after the special dividend and the trust-preferred issuance.
