Chittenden Reports Earnings and Quarterly Dividend
(NYSE: CHZ) Chairman, President and Chief Executive Officer, Paul A.
Perrault, of Chittenden Corp in Burlington has announced earnings for the quarter ended September 30,
2004 of $19.5 million or $0.42 per diluted share, compared to $19.9
million or $0.43 per diluted share a year ago. For the first nine months
of 2004, earnings were $55.1 million or $1.18 per diluted share, compared
to $55.1 million or $1.23 per diluted share a year ago. Chittenden also
announced its quarterly dividend of $0.18 per share. The dividend will be
paid on November 12, 2004, to shareholders of record on October 29, 2004.
In making the announcement, Perrault said, "As I reported last
quarter, we
completed the most comprehensive information technology conversion in
Chittenden's history. Because we were just one month into running our
banks on the new system as the third quarter began, there was much
activity during the past quarter dealing with the post-conversion issues
that are typical in an undertaking of this magnitude. I'm happy to report
that with the extraordinary effort and customer focus that are
Chittenden's hallmarks, we are successfully meeting these challenges and
completing the transition to the systems and processes that will take us
into the future. We continue to be encouraged by certain aspects of the
quarter's financial results, particularly continued strong loan growth,
steady asset quality and net interest margins that have begun to improve
as variable rate loans adjust due to the recent prime-rate increases."
Total loans increased $155 million from June 30, 2004 and $256 million
from year-end. The increases were primarily driven by commercial,
commercial real estate and municipal loans. The Company's commercial and
commercial real estate loan portfolios have continued to achieve steady
growth throughout the year with an annualized growth rate of over 15%.
Residential real estate loans increased approximately $21 million from
June 30, 2004 driven by growth in the 1-4 family category and home equity
lines of credit, which was partially offset by slightly lower balances in
loans secured by multi-family residential properties. The increase in
municipal loans reflects a seasonal trend, as June 30th is historically
the low point with respect to borrowing needs of municipalities,
coinciding with their fiscal year-ends.
Total deposits at September 30, 2004 increased $178 million from the
prior
quarter and $123 million from December 31, 2003. The Company experienced
solid deposit growth in CMA/money market accounts and jumbo CDs. This
increase was primarily associated with the Company's municipal and
commercial customers. At September 30, 2004 borrowings declined $26
million from the second quarter due to lower levels of overnight Fed Funds
purchased as a result of higher deposit levels. Borrowings also declined
approximately $112 million from the same quarter a year ago, primarily due
to the early redemption in late 2003 and early 2004 of FHLB borrowings
that were assumed as part of the Granite Bank acquisition.
Net interest income was $56.7 million for the third quarter of 2004
compared with $54.7 million for the same period a year ago. The Company's
net interest margin for the third quarter of 2004 was 4.20%, an increase
of two basis points from the second quarter of 2004 and up 22 basis points
from the third quarter of 2003. In the third quarter of 2003, the Company
recognized accelerated purchase accounting amortization of $1.7 million
primarily due to heavy prepayments on Granite's residential mortgages. The
accelerated amortization accounted for 13 basis points of the increase
from that period.
Net charge-offs as a percentage of average loans were 1 basis point
for
the quarter ended September 30, 2004, flat with the same period in 2003.
Net charge-offs in the third quarter of 2004 totaled $396,000 compared
with $631,000 in the second quarter of 2004 and $470,000 for the third
quarter of 2003. For the first nine months of 2004, net charge-offs
totaled $1.4 million or 4 basis points, compared to $3.1 million or 9
basis points in 2003. Nonperforming assets were $21.6 million at September
30, 2004, up $941,000 from June 30, 2004. As a percentage of total loans
this represented 54 basis points, flat with the second quarter and up from
the third quarter of 2003. The provision for loan losses was $1.0 million
for the third quarter of 2004 compared to $2.0 million for the third
quarter of 2003. Continued lower levels of net charge-offs, and strong
asset quality drove the provision for the third quarter of 2004. As a
percentage of total loans, the allowance for loan losses was 1.47%, down
from 1.52% at June 30, 2004, as a result of continued strong loan growth.
Noninterest income for the third quarter 2004 declined $2.8 million on
a
linked-quarter basis and $7.2 million from the same period a year ago.
Lower mortgage banking revenues and insurance commissions were the primary
factors in the declines. Gains on sales of loans declined from $7.0
million in the third quarter of 2003 to $2.3 million in the third quarter
of 2004 due to lower originations of mortgage loans caused by higher
market interest rates. Mortgage servicing income declined from both the
third quarter in 2003 and the second quarter of 2004 due to lower
impairment recoveries. Recoveries in the third quarter of 2003 were $3.3
million compared to $1.7 million in the second quarter of 2004 and an
impairment of $15,000 in the third quarter of 2004. Insurance commissions
declined from the third quarter of 2003 as a result of lower levels of
performance-based income. Net gains on sales of securities were $186,000
in the third quarter of 2004, compared with $3.3 million in 2003. The
prior quarter amount was substantially offset by $2.2 million in losses on
the prepayment of borrowings. The current quarter amount reflects
securities gains of $1.4 million, net of a $1.2 million impairment loss
recognized on the Company's only significant venture capital investment.
Partially offsetting these declines were increases in investment
management and trust income, due to stronger sales and improved equity
markets, and other non interest income, from the $757,000 gain on the sale
of a branch in the third quarter of 2004.
Noninterest income for the first nine months was $56.5 million in 2004
compared to $74.0 million for 2003. Mortgage-banking revenues declined
$9.7 million primarily due to lower mortgage originations, which resulted
from the increase in mortgage rates. Gains on sales of securities, net of
losses on prepayment of borrowings, declined $11.2 million from 2003. The
higher level of gains in the prior year were substantially offset by $6.8
million in non- recurring charges related to the Company's decision to
convert its core data processing systems. The remaining gains on sales of
securities in 2003 were the result of rebalancing the investment portfolio
due to heavy prepayments on mortgage backed securities and callable
agencies. The declines in mortgage banking and gains on securities sales
were partially offset by higher levels of investment management and trust
income, which was $2.1 million higher than a year ago, and higher levels
of other noninterest income driven by a $1.3 million gain on the sale of
two branches.
Noninterest expenses were $42.8 million for the third quarter of 2004
compared to $46.9 million for the same period a year ago. The decline from
the third quarter of 2003 is primarily attributable to lower salary and
benefit expenses, as well as lower data processing expense. Salaries
declined $2.6 million primarily due to lower sales based commissions of
$1.6 million and incentive accruals of $856,000. Benefits expense declined
due to lower medical and dental expenses of $342,000. Data processing
expense declined $1.3 million from the same period a year ago due to the
data processing system conversion in the second quarter of this year.
Noninterest expenses for the first nine months of 2004 were $133.4
million
compared to $143.3 million for 2003. The decline from the same period a
year ago is primarily attributable to lower salaries, data processing and
conversion and restructuring expenses. Salaries declined $3.9 million from
the first nine months of 2003 primarily due to lower incentive accruals.
In addition, lower levels of sales based commissions for the nine months
of 2004 were offset by higher salaries due to the inclusion of the former
Granite Bank branches for the entire nine-month period in 2004 versus only
seven months in 2003. Employee Benefits expenses were $1.3 million higher
in 2004 due to an increase in medical and dental benefits expenses.
Conversion and restructuring expense declined from 2003 due to the
non-recurring charges accrued in the second quarter of 2003 related to the
Company's decision to convert its core data processing system.
The effective income tax rate for the first nine months of 2004 was
36.5%,
compared with 36.2% in 2003. For the third quarter, the effective tax rate
was 36.5% in 2004 compared with 35.4% in 2003. The higher effective income
tax rate was primarily attributable to increased taxable income in New
Hampshire, which has a higher statutory tax rate than other states in
which the Company has operations.
The return on average equity was 13.11% for the third quarter of 2004,
compared with 12.40% for the second quarter of 2004 and 14.19% for the
third quarter a year ago. The decrease from the same period in 2003
primarily resulted from higher average equity. The return on average
assets for the quarter ended September 30, 2004 was 1.31%, an increase of
5 basis points from the second quarter and a decline of 1 basis point from
the third quarter of last year. The return on average tangible equity was
22.13% in the third quarter of 2004, compared to 21.01% in the prior
quarter and 25.07% in the same quarter a year ago. A reconciliation
regarding the measures included in these ratios is provided in the
attachments to this news release.
Kirk W. Walters, Executive Vice President and Chief Financial Officer
of
Chittenden Corporation, will host a conference call on October 21, 2004 at
10:30 am eastern time to discuss these earnings results. Interested
parties may access the conference call by calling 800-299-7635, passcode
75416688. International dial-in number is 617-801-9715. Participants are
asked to call in a few minutes prior to the call in order to register.
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 October 28, 2004 by calling 888-286-8010 (International dial
number is 617- 801-6888), passcode 10611230. A replay of the call will
also be available on the Company's website at the address above for an
extended period of time. The Company may answer one or more questions
concerning business and financial developments and trends and other
business. Some of the responses to these questions may contain information
that has not been previously disclosed.
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.
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 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/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.
(1) 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 Securities, Inc.