Chittenden Reports Earnings and Quarterly Dividend; Announces Stock Split
Chittenden Corporation (NYSE: CHZ) Chairman, President and Chief Executive Officer, Paul A. Perrault, announced July 22 earnings for the quarter ended June 30, 2004, of $18.2 million or $0.49 per diluted share, compared to $18.6 million or $0.51 per diluted share a year ago. Included in the current quarter results were conversion and restructuring charges of $1.3 million (pre-tax), or approximately $0.02 per share on an after-tax basis. For the first six months of 2004, earnings were $35.6 million or $0.96 per diluted share, compared to $35.2 million or $1.00 per diluted share a year ago. Chittenden also announced its quarterly dividend of $0.22 per share. The dividend will be paid on August 13, 2004, to shareholders of record on July 30, 2004.
In addition, Chittenden's Board of Directors declared a 5-for-4 common stock split. The effect will be an increase in outstanding shares of Chittenden's common stock from 36.9 million to 46.1 million based on shares outstanding on June 30, 2004. The record date for the stock split is as of the close of business on August 27, 2004. The additional shares will be distributed on or about September 10, 2004.
In making the announcement, Perrault said, "I'm pleased to report that we successfully completed the most comprehensive information technology conversion in Chittenden's history, as expected, during the second quarter. The completion of this important project well positions us to more effectively serve our customers, and enhance efficiencies in providing Chittenden's hallmark high-quality service. At the same time, we merged the former Granite Bank into Ocean National Bank, and consolidated Granite's insurance operation into Chittenden Insurance Group. We're encouraged that, in spite of all this internal activity, loan growth during the quarter was solid, including double- digit annualized growth in C&I loans, and strong growth in deposits outpaced the same period of a year ago."
Total loans at June 30, 2004 increased $45.7 million from March 31, 2004 and $101.2 million from year-end. The increase, consistent throughout the franchise, from the first quarter of 2004 was predominately in the commercial and commercial real estate loan portfolios; combined, these two portfolios increased $74.3 million from March 31, 2004 and $156.1 million from year-end.
Municipal loans experienced their historical seasonal trend, declining $25.8 million from March 31, 2004, as June 30th coincides with the end of the fiscal year for most municipalities. Total deposits increased $80.0 million from the first quarter and declined $55.6 million from year-end. Chittenden's municipal deposit balances typically peak at year-end and decline steadily to their lows at mid-year. Declines in this sector were approximately $60 million and $45 million in the first and second quarters of 2004, respectively. Meanwhile, the non-municipal book grew approximately $125 million from March 31, 2004, after declining approximately $75 million in the first quarter.
At June 30, 2004 borrowings declined $32.3 million from the first quarter. This decline was associated with lower levels of overnight Fed Funds purchased as a result of higher deposit levels. The Company's net interest margin for the second quarter of 2004 was 4.18%, a slight increase from the first quarter of 2004 and up four basis points from the second quarter of 2003. Net interest income was $54.9 million for the second quarter of 2004 compared with $56.1 million for the same period a year ago. The decline in net interest income is primarily due to lower interest income earned on investments.
Investments declined from the second quarter of 2003 due to the sales of securities throughout 2003 to fund the prepayment of borrowings totaling $164 million. Net charge-offs as a percentage of average loans were 2 basis points for the quarter ended June 30, 2004, down from 3 in the same period in 2003. Net charge-offs in the second quarter of 2004 totaled $631,000 compared with $391,000 in the first quarter of 2004 and $1.2 million for the second quarter of 2003.
Nonperforming assets were flat from March 31, 2004 at $20.6 million and as a percentage of total loans decreased to 54 basis points compared to 55 basis points in the first quarter of 2004. The provision for loan losses was $1.1 million for the second quarter of 2004 compared to $2.1 million for the second quarter of 2003. The lower provision for the second quarter of 2004 was driven by the lower net charge-offs, and continued strong asset quality. As a percentage of total loans, the allowance for loan losses was 1.50%, down slightly from 1.52% at March 31, 2004.
Noninterest income at June 30, 2004 declined $9.1 million from the same period a year ago. The primary driver was lower gains on sales of securities of $8.8 million. The securities gains generated in the second quarter of 2003 resulted from the rebalancing of the Company's investment portfolio; these gains were largely offset by conversion charges related to the Company's decision to change its data processing system. Increases from the same quarter in the prior year in investment management and trust, credit card income, and insurance commissions offset declines in mortgage banking and retail investment services. Noninterest expenses were $46.0 million for the second quarter of 2004, a decline of $8.3 million from the same period a year ago. Decreases were recorded in salaries, net occupancy, and conversion expense.
Salaries declined $1.9 million, which was entirely due to lower levels of incentive accruals and sales-based commissions. Sales-based commissions were down as a result of lower volumes of mortgage loan sales and retail investments. The Company incurred conversion and restructuring charges of $1.3 million in the second quarter of 2004, down from $6.8 million in the same period of 2003. Personnel costs totaled $600,000, due primarily to stay bonuses and vacation payouts for employees who had previously been notified that they would not be retained after the IT conversion and the consolidation of Granite's GSBI insurance into Chittenden Insurance Group. Other costs consisted of $335,000 related to printing and postage, outsourcing costs of $192,000, and approximately $132,000 of employees meals and travel costs. The return on average equity was 12.40% for the second quarter of 2004, compared with 11.97% for the first quarter of 2004 and 13.34% for the second quarter a year ago. The return on average assets for the quarter ended June 30, 2004 was 1.26%, an increase from the first quarter of 1.21% and flat with the second quarter of last year. The return on average tangible equity was 21.01% in the second quarter of 2004, compared to 20.38% in the prior quarter and 23.13% in the same quarter a year ago.
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 individuals,
businesses, 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 from
historical performance or future expectations. 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/A for the year ended December 31, 2003. 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.
Chittenden's subsidiaries are Chittenden Bank, The Bank of Western
Massachusetts, Flagship Bank and Trust Company, Maine Bank & Trust Company,
and Ocean National Bank. Chittenden Bank also operates under the name Mortgage
Service Center, and it owns Chittenden Insurance Group, and Chittenden