Chittenden Corporation Reports 10% Higher Earnings Per Share, and Announces New Share Repurchase Plan

BURLINGTON, Vt., July 20  /PRNewswire-FirstCall/ -- Chittenden Corporation (NYSE:CHZ) Chairman, President and Chief Executive Officer, Paul A. Perrault, today announced earnings for the quarter ended June 30, 2006 of $21.0 million, or $0.45 per diluted share, compared to $19.5 million or $0.41 per diluted share from the same period a year ago. For the first six months of 2006, earnings were $41.2 million or $0.87 per diluted share, compared to $38.5 million or $0.82 per diluted share for the same period of a year ago. Chittenden also announced its quarterly dividend of $0.20 per share, which will be paid on August 11, 2006, to shareholders of record on July 28, 2006.

  SECOND QUARTER 2006 FINANCIAL HIGHLIGHTS

  * Earnings per share were 10% higher than the same period in 2005 driven
    by higher revenues and lower income taxes.

  * Total loans increased 8% from June 30, 2005 with strong growth in
    several commercial categories.

  * Noninterest income increased 8% from the same period in 2005 with solid
    growth from wealth management and business services.

  * Noninterest expenses were well controlled and the efficiency ratio
    improved by 3.0% to 56.87%.



In making the announcement, Perrault said, "Despite intense competition, our banks continue to make progress, as our approach to local banking with broad capabilities continues to be attractive to our markets. I am particularly proud of how our bankers are bringing true value to our customers."  In addition, Perrault announced that the Company had completed the buyback of one million shares of common stock, which was authorized by the Board of Directors on October 19, 2005.

Perrault also announced that the Board of Directors approved a new share repurchase plan on July 19, 2006 for one million shares of the Corporation's common stock. The repurchase of the common stock may be done in negotiated transactions or open market purchases over the next two years.

ASSETS

Total loans increased $320 million from the second quarter of 2005 to $4.6 billion at June 30, 2006. The increases were attributable to solid growth in the commercial, construction and residential real estate portfolios. The growth in commercial and commercial real estate was particularly strong in Vermont and New Hampshire. Municipal loans experienced their historical seasonal trend, declining 48% from March 31, 2006, as June 30th coincides with the end of the fiscal year for most municipalities.

LIABILITIES

Total deposits increased $173 million from June 30, 2005 and decreased $66 million from March 31, 2006. On a linked quarter basis the Company experienced its normal seasonal declines in municipal deposits, which was partially offset by higher demand deposits and CDs from our commercial customers. Borrowings at June 30, 2006 were $424 million, compared with $354 million at June 30, 2005. The increase was primarily due to higher customer and wholesale repurchase agreements, which were utilized to fund loan growth.

NET INTEREST INCOME

Net interest income on a tax equivalent basis for the three months ended June 30, 2006 was $62.8 million, which was up $2.3 million from the same period a year ago.  The Company's net interest margin for the second quarter was 4.22%, an increase of 2 basis points from the first quarter of 2006 and a decrease of 7 basis points from the same period a year ago. The increase in net interest margin from the first quarter of 2006 was attributable to higher interest recoveries on former non-performing loans. The decline from the same period a year ago was due to higher funding costs, which were primarily driven by the Federal Reserve increasing short-term interest rates as well as strong competition for deposits.

NONINTEREST INCOME

Noninterest income for the second quarter of 2006 increased $1.4 million or 8% from the same period a year ago. The increase from 2005 was driven by higher investment management and trust fees, service charges on deposits, mortgage servicing, and other noninterest income.  Investment management and trust fees increased $319,000 primarily due to higher brokerage and annuity sales at Chittenden Securities, LLC. Service charges on deposits increased due to higher overdraft and cash management fees. The increase in mortgage servicing income was attributable to lower MSR amortization and increased impairment recoveries driven by higher long-term interest rates. Other noninterest income increased $379,000 due to higher gains on the sale of assets.

NONINTEREST EXPENSE

Noninterest expenses for the second quarter of 2006 were $47.6 million, an increase of $1.4 million from the same period in 2005.  The increase from the prior year was attributable to a one-time gain of $1.5 million which reduced employee benefit expense in 2005. This gain resulted from the Company's decision to change the delivery mechanism for its employees' pension benefits. The Company's efficiency ratio improved by 3% from the similar quarter in 2005 to 56.87% for the second quarter of 2006.

INCOME TAXES

The effective income tax rate was 32.7% for the second quarter and 33.4% year to date compared with 34.3% and 34.5% respectively for the same periods in 2005. The lower effective income tax rates were primarily attributable to higher levels of tax-exempt municipal loan interest and tax credits from qualified low-income housing projects.

CREDIT QUALITY

The provision for credit losses was $1.8 million for the second quarter of 2006 compared to $1.4 million for the same quarter of 2005. Higher net charge-offs and continued loan growth primarily drove the increase in the provision for credit losses from the comparable period in 2005. Non-performing assets as a percentage of total loans at June 30, 2006 were 54 basis points, which was flat with the second quarter of 2005. Net charge-offs as a percentage of average loans were 2 basis points for the second quarter of 2006, up from 1 basis point for the same quarter a year ago. The increase in net charge-offs primarily relates to one commercial finance loan that was placed on non-accrual status in the first quarter of 2006. As a percentage of total loans, the allowance for credit losses was 1.38%, flat with year-end, and down from 1.43% at June 30, 2005.

EARNINGS CONFERENCE CALL

Kirk W. Walters, Executive Vice President and Chief Financial Officer of Chittenden Corporation, will host a conference call on July 20, 2006 at 10:30 a.m. eastern time to discuss these earnings results.  The Company may answer one or more questions concerning business and financial developments, trends and other business. Some of the responses to these questions may contain information that has not been previously disclosed. Interested parties may access the conference call by calling 866-578-5801, passcode 95332695. International dial-in number is 617-213-8058.  Participants are asked to call in a few minutes prior to the call to allow time for registration. Internet access to the call is also available (listen only) by clicking "webcasts" under the Investor Resources section of the Company's website at http://www.chittendencorp.com/. A replay of the call will be available through July 27, 2006 by calling 888-286-8010 (International dial number is 617-801-6888), passcode 98460587. A replay of the call will also be available on the Company's website at the address above for an extended period of time.

Chittenden is a bank holding company headquartered in Burlington, Vermont. Through its subsidiary banks(1), the Company offers a broad range of financial products and services to customers throughout Northern New England and Massachusetts, including deposit accounts and services; commercial and consumer loans; insurance; and investment and trust services to businesses, individuals, and the public sector. Chittenden Corporation's news releases, including earnings announcements, are available on the Company's website.

This press release contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Chittenden intends for these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with these safe harbor provisions. These forward-looking statements are based on current plans and expectations, which are subject to a number of risk factors and uncertainties that could cause future results to differ materially from historical performance or future expectations.

These differences may be the result of various factors, including changes in general, national or regional economic conditions, changes in loan default and charge-off rates, reductions in deposit levels necessitating increased borrowing to fund loans and investments, changes in interest rates, changes in levels of income and expense in noninterest income and expense related activities, competition and other risk factors.

For further information on these risk factors and uncertainties, please see Chittenden's filings with the Securities and Exchange Commission, including Chittenden's Annual Report on Form 10-K for the year ended December 31, 2005. Chittenden undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or other changes.

  (1) Chittenden's subsidiaries are Chittenden Trust Company, The Bank of
      Western Massachusetts, Flagship Bank and Trust Company, Maine Bank &
      Trust Company, and Ocean National Bank. Chittenden Trust Company also
      operates under the names Chittenden Bank, CHZ Services Group,
      Mortgage Service Center, and it owns Chittenden Insurance Group, LLC,
      and Chittenden Securities, LLC.



  CHITTENDEN CORPORATION
  CONSOLIDATED BALANCE SHEETS
  (Unaudited)
  (In Thousands)

  Assets:                6/30/06     3/31/06    12/31/05     6/30/05
  Cash and Cash
   Equivalents          $172,567    $142,887    $180,707    $176,425
  Securities Available
   For Sale            1,288,390   1,344,016   1,383,909   1,363,180
  FRB / FHLB Stock        18,577      19,352      19,352      19,352
  Loans Held For Sale     18,882      19,319      19,737      22,611

  Loans:
   Commercial &
   Industrial (C&I)      851,692     836,986     848,420     831,537
   Municipal              90,206     172,443     160,357      79,070
   Multi-Family          205,443     195,809     196,590     185,920
   Commercial Real
    Estate             1,884,716   1,827,096   1,778,202   1,736,665
   Construction          218,123     212,824     192,165     124,648
   Residential Real
    Estate               750,031     731,798     737,462     733,472
   Home Equity Credit
    Lines                319,606     316,355     316,465     307,866
   Consumer              254,839     254,719     257,829     255,239
  Total Loans          4,574,656   4,548,030   4,487,490   4,254,417
   Less: Allowance for
    Loan Losses          (62,070)    (61,464)    (60,822)    (60,805)
  Net Loans            4,512,586   4,486,566   4,426,668   4,193,612

  Accrued Interest
   Receivable             31,138      32,772      32,621      29,689
  Other Assets           102,079      93,673      93,377      87,492
  Premises and
   Equipment, net         69,503      68,568      69,731      71,632
  Mortgage Servicing
   Rights                 14,529      13,966      13,741      12,073
  Identified Intangibles  16,326      16,991      17,655      18,983
  Goodwill               216,038     216,038     216,038     216,136

  Total Assets        $6,460,615  $6,454,148  $6,473,536  $6,211,185


  LIABILITIES AND STOCKHOLDERS' EQUITY

  Liabilities:
  Deposits:
   Demand               $965,794    $929,718    $973,752    $934,234
   Savings               474,883     489,944     489,734     502,525
   NOW                   895,817     906,934     861,000     908,148
   CMAs/ Money Market  1,441,573   1,584,777   1,749,878   1,418,634
   Certificates of
    Deposit less than
    $100,000             878,181     853,645     814,289     811,389
   Certificates of
    Deposit $100,000
    and Over             661,322     618,319     625,682     569,505
  Total Deposits       5,317,570   5,383,337   5,514,335   5,144,435

  Securities Sold
   Under Agreements to
   Repurchase            138,773      53,238      56,315      56,775
  Other Borrowings       285,497     288,482     171,008     296,903
  Accrued Expenses and
   Other Liabilities      63,299      59,295      60,488      64,466
  Total Liabilities    5,805,139   5,784,352   5,802,146   5,562,579


  Stockholders' Equity:
  Common Stock            50,235      50,235      50,220      50,210
  Surplus                273,723     272,696     276,278     273,533
  Retained Earnings      442,456     430,811     419,057     392,312
  Treasury Stock, at
   cost                  (85,678)    (64,189)    (60,801)    (67,657)
  Accumulated Other
   Comprehensive Income  (30,924)    (25,216)    (18,968)     (4,978)
  Directors' Deferred
  Compensation to be
   Settled in Stock        5,664       5,459       5,604       5,197
  Unearned Portion of
   Employee Restricted
   Stock                       -           -           -         (11)
  Total Stockholders'
   Equity                655,476     669,796     671,390     648,606


  Total Liabilities
   and Stockholders'
   Equity             $6,460,615  $6,454,148  $6,473,536  $6,211,185


  Prior year amounts reflect the modified retrospective application of SFAS
  123-R "Accounting for Stock-Based Compensation."



  CHITTENDEN CORPORATION
  CONSOLIDATED STATEMENTS OF INCOME
  (Unaudited)
  (In Thousands, except for per share amounts)

                          For the Three Months      For the Six Months
                             Ended June 30,            Ended June 30,
                           2006          2005        2006         2005
  Interest Income:
   Loans                 $78,547      $62,786     $151,812     $120,937
   Investments            14,120       14,829       28,814       29,890
  Total Interest Income   92,667       77,615      180,626      150,827

  Interest Expense:
  Deposits                25,715       14,193       48,780       25,461
  Borrowings               4,900        3,342        8,798        6,301
  Total Interest Expense  30,615       17,535       57,578       31,762

  Net Interest Income     62,052       60,080      123,048      119,065
  Provision for Credit
   Losses                  1,750        1,400        3,283        2,475

  Net Interest Income
   after Provision for
   Credit Losses          60,302       58,680      119,765      116,590

  Noninterest Income:
   Investment Management
    and Trust              5,322        5,003       10,475        9,974
   Service Charges on
    Deposits               4,358        4,093        8,287        8,134
   Mortgage Servicing        657          209        1,320          564
   Gains on Sales of
    Loans, Net             1,903        2,003        3,273        4,134
   Credit Card Income,
    Net                    1,269        1,131        2,461        2,106
   Insurance Commissions,
    Net                    1,429        1,526        3,475        3,890
   Other                   3,590        3,211        6,824        5,933
  Total Noninterest
   Income                 18,528       17,176       36,115       34,735

  Noninterest Expense:
   Salaries               23,789       23,911       46,706       45,587
   Employee Benefits       5,598        4,238       11,350       10,717
   Net Occupancy           5,780        6,024       11,930       12,350
   Data Processing           982          810        1,953        1,585
   Amortization of
    Intangibles              664          664        1,329        1,438
   Other                  10,823       10,583       20,768       20,765
  Total Noninterest
   Expense                47,636       46,230       94,036       92,442

  Income Before Income
   Taxes                  31,194       29,626       61,844       58,883
  Income Tax Expense      10,185       10,166       20,637       20,341

  Net Income             $21,009      $19,460      $41,207      $38,542


  Basic Earnings Per
   Share                   $0.45        $0.42        $0.88        $0.83
  Diluted Earnings Per
   Share                    0.45         0.41         0.87         0.82
  Dividends Per Share       0.20         0.18         0.38         0.36

  Prior year amounts reflect the modified retrospective application of SFAS
  123-R "Accounting for Stock-Based Compensation."



  CHITTENDEN CORPORATION
  SELECTED QUARTERLY FINANCIAL DATA
  (Unaudited)
  (In thousands, except ratios and per share amounts)
                               6/30/06     3/31/06     12/31/05     6/30/05

  Selected Financial Ratios

  Return on Average Tangible
   Equity (1)                    19.87%      18.92%       20.47%      19.58%
  Return on Average Equity       12.75%      12.21%       13.11%      12.24%

  Return on Average Tangible
   Assets (1)                     1.38%       1.35%        1.43%       1.35%
  Return on Average Assets        1.30%       1.27%        1.35%       1.27%
  Net Yield on Earning Assets     4.22%       4.20%        4.30%       4.29%
  Efficiency Ratio (1)           56.87%      56.61%       54.37%      59.87%

  Tangible Capital Ratio          6.79%       7.02%        7.01%       6.92%
  Leverage Ratio                  9.04%       9.38%        9.21%       9.10%
  Tier 1 Capital Ratio           11.29%      11.61%       11.23%      10.73%
  Total Capital Ratio            12.49%      12.82%       12.40%      11.92%


  Common Share Data

  Common Shares Outstanding     45,978      46,748       46,829      46,437

  Weighted Average Shares
   Outstanding                  46,423      46,804       46,690      46,414
  Weighted Average and Common
   Equivalent Shares
   Outstanding                  46,903      47,401       47,291      46,901


  Book Value per Share          $14.26      $14.33       $14.34      $13.97
  Tangible Book Value per
   Share (1)                     $9.20       $9.34        $9.35       $8.90


  Credit Quality Data

  Nonperforming Assets (NPAs)  $24,727     $24,844      $16,194     $23,150
  90 days Past Due and Still
   Accruing                      2,283       3,323        3,038       1,981
    Total                      $27,010     $28,167      $19,232     $25,131
  NPAs to Loans Plus OREO         0.54%       0.55%        0.36%       0.54%


  Allowance for Loan Losses    $62,070     $61,464      $60,822     $60,805
  Reserve for Unfunded
   Commitments (2)               1,200       1,200        1,200           -
  Allowance for Credit Losses
   (ACL)                       $63,270     $62,664      $62,022     $60,805

  ACL to Loans                    1.38%       1.38%        1.38%       1.43%
  ACL to Loans (excluding
   Municipals)                    1.41%       1.43%        1.43%       1.46%
  ACL to Nonperforming Loans    260.13%     257.81%      392.06%     262.71%

  Gross Charge-offs             $1,872      $1,753       $1,840      $1,313
  Gross Recoveries                 728         862        1,040         907
  Net Charge-offs               $1,144        $891         $800        $406


  Net Charge-offs to Average
   Loans                          0.02%       0.02%        0.02%      0.01%

  QTD Average Balance Sheet Data

  Securities                $1,333,444   $1,391,413   $1,378,688  $1,409,045
  Loans, Net                 4,552,727    4,455,403    4,408,205   4,174,491
  Earning Assets             5,948,463    5,915,366    5,895,121   5,644,833
  Total Assets               6,462,457    6,430,410    6,418,971   6,151,863
  Deposits                   5,372,367    5,377,674    5,454,388   5,085,064
  Borrowings                   367,521      321,073      246,660     367,617
  Stockholders' Equity         661,020      671,058      660,353     637,904

  Prior year amounts reflect the modified retrospective application of SFAS
  123-R "Accounting for Stock-Based Compensation."



  1. Reconciliation of non-GAAP measurements to GAAP

                         6/30/06      3/31/06     12/30/05      6/30/05

  Net Income (GAAP)      $21,009      $20,198      $21,813      $19,460
  Amortization of core
   deposit intangible,
   net of tax                431          432          432          431
  Tangible Net Income(A) $21,440      $20,630      $22,245      $19,891


  Average Stockholders'
   Equity (GAAP)        $661,020     $671,058     $660,353     $637,904
  Average Core Deposit
   Intangible             16,659       17,323       17,992       19,417
  Average Deferred Tax
   on CDI                 (4,435)      (4,610)      (4,785)      (5,136)
  Average Goodwill       216,038      216,038      216,103      216,136
  Average Tangible
   Equity (B)           $432,758     $442,307     $431,043     $407,487

  Return on Average
   Tangible Equity
   (A) / (B)               19.87%       18.92%       20.47%       19.58%

  Average Assets
   (GAAP)             $6,462,457   $6,430,410   $6,418,971   $6,151,864
  Average Core
   Deposit Intangible     16,659       17,323       17,992       19,417
  Average Deferred Tax
   on CDI                 (4,435)      (4,610)      (4,785)      (5,136)
  Average Goodwill       216,038      216,038      216,103      216,136
  Average Tangible
   Assets (C)         $6,234,195   $6,201,659   $6,189,661   $5,921,447


  Return on Average
   Tangible Assets
   (A) / (C)                1.38%        1.35%        1.43%        1.35%


  Efficiency Ratio: is computed by dividing total noninterest expense (less
  oreo expense, amortization expense, franchise tax and any nonrecurring
  items) by the sum of net interest income on a tax equivalent basis and
  total noninterest income (exclusive of gains and losses from securities,
  and nonrecurring items). The Company uses this non-GAAP measure, which is
  used widely in the banking industry, to provide important information
  regarding its operational efficiency, e.g. ($47,636-$3-$664-$722) /
  ($62,799+$18,528) = 56.87%.

  Tangible book value per share: is computed by subtracting goodwill and
  identified intangibles from equity, and dividing the resultant number by
  common shares outstanding, e.g. ($655,476-$16,326-$216,038) / 45,978=
  $9.20.

  While the Company's management uses non-GAAP measures for operational and
  investment decisions and believes that these measures are among several
  useful measures for understanding its operating results and financial
  condition, these measures should not be construed as a substitute for
  GAAP measures. Non-GAAP measures should be read and used in conjunction
  with the Company's reported GAAP operating results and financial
  information.

  2. The reserve for unfunded commitments is included in other liabilities
     on the accompanying consolidated balance sheet.


DATASOURCE: Chittenden Corporation



CONTACT: Kirk W. Walters of Chittenden Corporation, [phone] 



Web site:  http://www.chittendencorp.com/ 



Company News On-Call:  http://www.prnewswire.com/comp/124292.html

Copyright