Chittenden Corporation Reports Increased Earnings Per Share, and Announces New Share Repurchase Plan

BURLINGTON, Vt., Jan. 18  /PRNewswire-FirstCall/ -- Chittenden Corporation (NYSE:CHZ) Chairman, President and Chief Executive Officer, Paul A. Perrault, today announced higher earnings for the year ended December 31, 2006 of $85.5 million or $1.83 per diluted share, compared to $82.0 million or $1.74 per diluted share a year ago. For the fourth quarter of 2006, net income was $22.5 million or $0.48 per diluted share, compared to $21.8 million or $0.46 per diluted share earned in the fourth quarter of 2005.

In making the announcement, Perrault said, "I am pleased to report to shareholders that your Company's discipline and strong strategic implementation continues to deliver solid results despite the challenging environment." Chittenden also announced its quarterly dividend of $0.20 per share, which will be paid on February 9, 2007, to shareholders of record on January 26, 2007.

Perrault also announced that the Board of Directors approved a new share repurchase plan on January 17, 2007 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.

  FOURTH QUARTER 2006 FINANCIAL HIGHLIGHTS

  * Commercial loans increased 7% from the end of 2005.

  * Average deposits for 2006 increased 4% from 2005 with solid growth in
    CMA/money market deposits of over 4%.

  * Net interest margin held steady for 2006 at 4.24% and the fourth quarter
    increased 6 basis points to 4.29%.

  * Nonperforming assets declined 22% from the third quarter of 2006.

  * The efficiency ratio improved to 54.6% for the fourth quarter of 2006.

  * The Company repurchased 762,500 common shares in the fourth quarter and
    the tangible capital ratio remained over 7.00% at year end.

  ASSETS


The Company's securities portfolio declined from both the prior year end and on a linked quarter basis to $1.1 billion. The decrease in securities was primarily utilized to fund loan growth and reduce borrowings. Total loans increased by $210 million from the end of last year to $4.7 billion at December 31, 2006. The Company experienced solid loan growth in 2006 throughout all of its markets with particularly strong increases in its multifamily real estate, commercial real estate and construction portfolios.

LIABILITIES

Total deposits decreased $20 million from September 30, 2006 reflecting the start of the normal seasonal decline in deposits, which is primarily driven by the operating cycles of the Company's municipal and commercial customers. Borrowings at December 31, 2006, were $210 million, a decrease of $17 million from the end of last year due to lower FHLB advances.

NET INTEREST INCOME

Tax-equivalent net interest income for the fourth quarter of 2006 was $64.0 million, compared to $63.7 million for the same quarter of 2005 and $63.5 million for the third quarter of 2006. The increase in net interest income from the same period a year ago was due to higher average earning assets, which was partially offset by a slightly lower net interest margin. The Company's net interest margin for the fourth quarter was 4.29%, an increase of 6 basis points from the third quarter of 2006 and a decline of 1 basis point from the same period a year ago. The increase in net interest margin from the third quarter of 2006 was attributable to higher interest recoveries on former non-performing loans. The decline in the net interest margin from the fourth quarter of 2005 was due to an increase in funding costs, which was partially offset by an increase in the yield on interest earning assets.  The increase in funding costs was driven by strong competition for both commercial and consumer deposits as well as increases in the federal funds rate in 2005 and 2006.

NONINTEREST INCOME

Noninterest income was $17.9 million for the fourth quarter of 2006, compared with $16.1 million for the third quarter and $17.4 million for the same period a year ago. The increase in noninterest income was primarily attributable to higher investment management and trust fees and other noninterest income, which was partially offset by lower gains on the sales of mortgage loans. The increase in other noninterest income from the fourth quarter of 2005 was due to $1.1 million received in relation to the Company's interest in a mortgage insurance captive, which was partially offset by higher amortization on investments in low income housing limited partnerships.

NONINTEREST EXPENSE

Noninterest expense was $46.3 million for the fourth quarter of 2006, compared to $46.0 million for the same quarter of 2005. The increase from the fourth quarter a year ago is primarily a result of higher salary expense which related to increased share-based compensation costs and new branch openings in 2006. The Company recognized $785,000 of share-based compensation in the fourth quarter of 2006 as compared to $4,000 in the same quarter a year ago.

INCOME TAXES

The effective income tax rates for 2006 were 31.5% for the fourth quarter and 32.1% for the full year compared with 34.2% and 34.5%, respectively, for the same periods in 2005. The lower effective income tax rate was attributable to higher low-income housing and historic rehabilitation tax credits.

CREDIT QUALITY

The provision for credit losses was $2.0 million for the fourth quarter of 2006 compared to $1.4 million for the same quarter of 2005. The increase in the provision for credit losses from the comparable period in 2005 was primarily due to higher net charge offs and nonperforming loans. Net charge- offs as a percentage of average loans were 4 basis points for the fourth quarter of 2006, up from 2 basis points 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. The allowance for credit losses as a percentage of total loans excluding municipal loans was 1.39% at December 31, 2006 compared to 1.43% for the fourth quarter of 2005.

EARNINGS CONFERENCE CALL

Kirk W. Walters, Executive Vice President and Chief Financial Officer of Chittenden Corporation, will host a conference call on January 18, 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 800-561-2718, passcode 37851780. International dial-in number is 617-614-3525.  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 January 25, 2007 by calling 888-286-8010 (International dial number is 617-801-6888), passcode 51014444.  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, Massachusetts and Connecticut, 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 borrowings 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, Chittenden Services Group, Chittenden
  Mortgage Services, and it owns Chittenden Insurance Group, LLC, and
  Chittenden Securities, LLC.


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

  Assets:          12/31/06    9/30/06    6/30/06     3/31/06   12/31/05

  Cash and Cash
   Equivalents     $199,358   $145,393   $172,567    $142,887   $180,707

  Securities
   Available
   For Sale       1,137,352  1,231,369  1,288,390   1,344,016  1,383,909
  FRB and FHLB
   Stock             13,403     16,124     18,577      19,352     19,352
  Loans Held
   For Sale          17,354     21,646     18,882      19,319     19,737

  Loans:
    Commercial &
     Industrial
     (C&I)          853,839    854,475    851,692     836,986    848,420
    Municipal       141,522    144,152     90,206     172,443    160,357
    Multi-Family    216,049    213,153    205,443     195,809    196,590
    Commercial
     Real Estate  1,942,685  1,933,279  1,884,716   1,827,096  1,778,202
    Construction    232,000    211,187    218,123     212,824    192,165
    Residential
     Real
     Estate         751,450    749,106    750,031     731,798    737,462
    Home Equity
     Credit Lines   322,124    325,814    319,606     316,355    316,465
    Consumer        237,541    246,394    254,839     254,719    257,829
  Total Loans     4,697,210  4,677,560  4,574,656   4,548,030  4,487,490
    Less:
     Allowance
     for Loan
     Losses         (62,160)   (62,153)   (62,070)    (61,464)   (60,822)
  Net Loans       4,635,050  4,615,407  4,512,586   4,486,566  4,426,668

  Accrued Interest
   Receivable        33,123     32,393     31,138      32,772     32,621
  Other Assets       83,938     89,759    102,079      93,673     93,377
  Premises and
   Equipment         67,036     67,952     69,503      68,568     69,731
  Mortgage
   Servicing
   Rights            14,155     14,347     14,529      13,966     13,741
  Identified
   Intangibles       14,996     15,661     16,326      16,991     17,655
  Goodwill          216,038    216,038    216,038     216,038    216,038

  Total Assets   $6,431,803 $6,466,089 $6,460,615  $6,454,148 $6,473,536

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Liabilities:
  Deposits:
    Demands        $966,758   $971,378   $965,794    $929,718   $973,752
    Savings         468,294    481,380    474,883     489,944    489,734
    NOWs            861,435    866,134    895,817     906,934    861,000
    CMAs / Money
     Markets      1,655,349  1,658,319  1,441,573   1,584,777  1,749,878
    Certificates
     of Deposit
     Less than
     $100,000       848,814    858,834    878,181     853,645    814,289
    Certificates
     of Deposit
     $100,000
     and Over       678,243    663,086    661,322     618,319    625,682
  Total Deposits  5,478,893  5,499,131  5,317,570   5,383,337  5,514,335

  Securities Sold
   Under Agreements
   to Repurchase     73,611     87,112    138,773      53,238     56,315
  Other Borrowings  136,409    135,975    285,497     288,482    171,008
  Accrued Expenses
   and Other
   Liabilities       71,804     63,162     63,299      59,295     60,488
  Total
   Liabilities    5,760,717  5,785,380  5,805,139   5,784,352  5,802,146

  Stockholders'
   Equity:
  Common Stock       50,235     50,235     50,235      50,235     50,220
  Surplus           276,034    274,834    273,723     272,696    276,278
  Retained
   Earnings         468,331    454,985    442,456     430,811    419,057
  Treasury Stock,
   at cost         (105,666)   (85,613)   (85,678)    (64,189)   (60,801)
  Accumulated
   Other
   Comprehensive
   Income           (24,008)   (19,470)   (30,924)    (25,216)   (18,968)
  Directors'
   Deferred
   Compensation to
   be Settled in
   Stock              6,160      5,738      5,664       5,459      5,604
  Total
   Stockholders'
   Equity           671,086    680,709    655,476     669,796    671,390

  Total Liabilities
   and
   Stockholders'
   Equity        $6,431,803 $6,466,089 $6,460,615  $6,454,148 $6,473,536



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 Twelve Months
                                 Ended December 31,   Ended December 31,
                                    2006     2005       2006     2005
  Interest Income:
    Loans                           $84,752  $71,834 $319,307 $261,359
    Investments                      13,052   14,960   55,405   58,883
  Total Interest Income              97,804   86,794  374,712  320,242

  Interest Expense:
    Deposits                         30,905   20,904  108,553   63,926
    Borrowings                        3,670    2,857   17,157   12,003
  Total Interest Expense             34,575   23,761  125,710   75,929

  Net Interest Income                63,229   63,033  249,002  244,313
  Provision for Credit Losses         1,967    1,354    6,920    5,154

  Net Interest Income after Provision
   for Credit Losses                 61,262   61,679  242,082  239,159

  Noninterest Income:
    Investment Management and Trust   5,585    5,047   21,293   20,017
    Service Charges on Deposits       4,164    3,926   16,728   16,113
    Mortgage Servicing                  404      607    2,106    1,829
    Gains on Sales of Loans           1,397    2,301    6,294    9,021
    Credit Card Income                1,270    1,193    5,107    4,536
    Insurance Commissions             1,055    1,134    5,805    6,365
    Other                             4,062    3,243   12,856   12,083
  Total Noninterest Income           17,937   17,451   70,189   69,964

  Noninterest Expense:
    Salaries                         23,311   21,659   93,217   89,496
    Employee Benefits                 5,168    5,717   22,155   22,218
    Net Occupancy                     5,789    5,900   23,424   24,094
    Data Processing                   1,092      951    4,079    3,457
    Amortization of Intangibles         665      665    2,659    2,768
    Other                            10,288   11,097   40,833   41,808
  Total Noninterest Expense          46,313   45,989  186,367  183,841

  Income Before Income Taxes         32,886   33,141  125,904  125,282
  Income Tax Expense                 10,350   11,328   40,436   43,243

  Net Income                        $22,536  $21,813  $85,468  $82,039


  Basic Earnings Per Share            $0.50    $0.46    $1.85    $1.76
  Diluted Earnings Per Share           0.48     0.46     1.83     1.74
  Dividends Per Share                  0.20     0.18     0.78     0.72



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)


                 12/31/06     9/30/06     6/30/06     3/31/06    12/31/05
  Selected Financial Ratios

  Return on
   Average
   Tangible
   Equity (1)      20.25%      20.20%      19.87%      18.92%      20.47%
  Return on
   Average
   Equity          13.20%      13.00%      12.75%      12.21%      13.11%
  Return on
   Average
   Tangible
   Assets (1)       1.47%       1.41%       1.38%       1.35%       1.43%
  Return on
   Average Assets   1.39%       1.33%       1.30%       1.27%       1.35%
  Net Yield on
   Earning Assets   4.29%       4.23%       4.22%       4.20%       4.30%
  Efficiency
   Ratio (1)       54.56%      55.91%      56.87%      56.61%      54.37%

  Tangible Capital
   Ratio            7.10%       7.20%       6.79%       7.02%       7.01%
  Leverage Ratio    9.24%       9.24%       9.04%       9.38%       9.21%
  Tier 1 Capital
   Ratio           11.56%      11.59%      11.29%      11.61%      11.23%
  Total Capital
   Ratio           12.78%      12.80%      12.49%      12.82%      12.40%

  Common Share Data

  Common Shares
   Outstanding     45,360      45,994      45,978      46,748      46,829
  Weighted Average
   Shares
   Outstanding     45,745      45,982      46,423      46,804      46,690
  Weighted Average
   and Common
   Equivalent
   Shares
   Outstanding     46,388      46,504      46,903      47,401      47,291

  Book Value
   per Share       $14.79      $14.80      $14.26      $14.33      $14.34
  Tangible Book
   Value per
   Share (1)        $9.70       $9.76       $9.20       $9.34       $9.35

  Credit Quality Data

  Nonperforming
   Assets (NPAs)  $20,358     $26,089     $24,727     $24,844     $16,194
  90 days Past
   Due and
   Still
   Accruing         3,352       3,196       2,283       3,323       3,038
  NPAs to Loans
   Plus OREO        0.43%       0.56%       0.54%       0.55%       0.36%

  Allowance for
   Loan Losses    $62,160     $62,153     $62,070     $61,464     $60,822
  Reserve for
   Unfunded
   Commitments (2)  1,200       1,200       1,200       1,200       1,200
  Allowance for
   Credit
   Losses (ACL)   $63,360     $63,353     $63,270     $62,664     $62,022

  ACL to Loans      1.35%       1.35%       1.38%       1.38%       1.38%
  ACL to Loans
   (excluding
   Municipals)      1.39%       1.40%       1.41%       1.43%       1.43%
  ACL to
   Nonperforming
   Loans          315.32%     248.90%     260.13%     257.81%     392.06%

  Charge-offs      $3,070      $2,093      $1,871      $1,753      $1,840
  Recoveries        1,110         506         728         862       1,040
  Net Charge-offs  $1,960      $1,587      $1,143        $891        $800

  Net Charge-offs
   to Average
   Loans            0.04%       0.03%       0.03%       0.02%       0.02%

  QTD Average Balance Sheet Data

  Securities   $1,201,734  $1,269,907  $1,333,444  $1,391,413  $1,378,688
  Loans, Net    4,632,538   4,626,194   4,552,727   4,455,403   4,408,205
  Earning
   Assets       5,926,319   5,959,599   5,948,463   5,915,366   5,895,121
  Total Assets  6,426,533   6,482,127   6,462,457   6,430,410   6,418,971
  Deposits      5,434,889   5,442,894   5,372,367   5,377,674   5,454,388
  Borrowings      249,344     312,430     367,521     321,073     246,660
  Stockholders'
   Equity         677,244     662,964     661,020     671,058     660,353



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

  1. Reconciliation of non-GAAP measurements

                 12/31/06     9/30/06     6/30/06     3/31/06    12/30/05
  Net
   Income
   (GAAP)         $22,536     $21,725     $21,009     $20,198     $21,813
  Amortization
   of Core
   Deposit
   Intangible,
   net of tax         432         432         431         432         432
  Tangible
   Net
   Income (A)     $22,968      22,157     $21,440     $20,630     $22,245

  Average
   Stockholders'
   Equity
   (GAAP)        $677,244    $662,964    $661,020    $671,058    $660,353
  Average
   Core
   Deposit
   Intangible
   (CDI)           15,328      15,996      16,659      17,323      17,992
  Average
   Deferred
   Tax on CDI      (4,168)     (4,345)     (4,435)     (4,610)     (4,785)
  Average
   Goodwill       216,038     216,038     216,038     216,038     216,103
  Average
   Tangible
   Equity (B)    $450,046    $435,275    $432,758    $442,307    $431,043

  Return on
   Average
   Tangible
   Equity
   (A) / (B)        20.25%      20.20%      19.87%      18.92%      20.47%

  Average
   Assets
   (GAAP)      $6,426,533  $6,482,127  $6,462,457  $6,430,410  $6,418,971
  Average CDI      15,328      15,996      16,659      17,323      17,992
  Average
   Deferred
   Tax on CDI      (4,168)     (4,345)     (4,435)     (4,610)     (4,785)
  Average
   Goodwill       216,038     216,038     216,038     216,038     216,103
  Average
   Tangible
   Assets (C)  $6,199,335  $6,254,438  $6,234,195  $6,201,659  $6,189,661

  Return on
   Average
   Tangible
   Assets
   (A) / (C)        1.47%       1.41%       1.38%       1.35%       1.43%


  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). This non-GAAP measure is used widely
  in the banking industry to provide important information regarding
  operational efficiency, e.g. ($46,313-$98-$665-$852) / ($64,001+$17,937-
  10) = 54.56%.

  Tangible book value per share: is computed by subtracting goodwill and
  identified intangibles from equity, and dividing the resulting number by
  common shares outstanding, e.g. ($671,086-$216,038-$14,996) / 45,360=
  $9.70.

  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

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