Chittenden Reports Earnings; Increases Quarterly Dividend

first_imgChittenden Corporation(NYSE: CHZ) Chairman, President and Chief Executive Officer, Paul A. Perrault,announced earnings for the quarter ended March 31, 2004 of $17.5 millionor $0.47 per diluted share, compared to $16.6 million or $0.49 a year ago.Chittenden also announced a 10% increase in its quarterly dividend to $0.22per share. The dividend will be paid on May 14, 2004, to shareholders ofrecord on April 30, 2004.In making the announcement, Perrault said, “By and large, most corebusinesses are doing well. However, the volatility of market interest ratesand the timing of their movements during the quarter adversely impacted themortgage banking business. On the whole, we consider the quarter’s results alittle disappointing, though there is cause for optimism. Commercial loangrowth was particularly good during the quarter and accelerated in the monthof March. In mortgage banking, the interest rate dip in March led tosignificant mortgage application activity late in the quarter, which shouldbode well for better mortgage gains as we move forward into the comingmonths.”Total loans increased $55.5 million from December 31, 2003 and $151.6million from March 31, 2003. The Company’s banks continued their strong growthin commercial lending by increasing their commercial and commercial realestate portfolios at an annualized rate of 16% on a linked-quarter basis.Partially offsetting the growth in commercial loans was the continued declinein the residential real estate loan portfolio, which experienced faster thanexpected prepayments. The increase in the loan portfolio from March 31, 2003was entirely attributable to double-digit growth in the Company’s commercialand commercial real estate loan portfolios.Total deposits increased $20.3 million from March 31, 2003 and decreased$135.5 million from the prior year-end. The decline from December 31, 2003 isprimarily attributable to normal seasonal trends relating to the Company’smunicipal, commercial, and captive insurance customers. Borrowings at March31, 2004 were $312.5 million, a decrease of $241.1 million from the sameperiod a year ago. The decline was due to maturities and the early redemptionof $214 million of FHLB borrowings assumed in the Granite acquisition.The Company’s net interest margin for the first quarter of 2004 was 4.17%,an increase from the fourth quarter of last year and a decrease from the firstquarter of 2003. On a linked quarter basis, the increase in the net interestmargin was due to a better asset mix with a higher proportion of loans inaverage earning assets, and a lower cost of funds driven primarily by reducedcosts of borrowings. The decline in net interest margin from the first quarterof 2003 was primarily attributable to lower earning asset yields and theinclusion of Granite for the full quarter of 2004 as compared to just onemonth in 2003.Net charge-offs as a percentage of average loans were 1 basis point forthe first quarter of 2004, compared to 8 basis points for the fourth quarterof last year and 4 basis points for the first quarter in 2003. Net charge-offsin 2004 totaled $391,000, compared with $2.7 million in the fourth quarter of2003 and $1.5 million for the first quarter of 2003. Nonperforming assetsincreased $6.3 million from December 31, 2003 to $20.7 million at March 31,2004 and as a percentage of total loans increased to 55 basis points comparedto 39 basis points in the fourth quarter of 2003. The increase innonperforming assets primarily resulted from two commercial relationships andthe Company believes that the loans are well secured. The level ofnonperforming assets in 2004 is consistent with the Company’s historicalexperience which has averaged approximately 50 basis points over the last sixyears.The provision for loan losses was $427,000 for the first quarter of 2004compared to $1.0 million for the fourth quarter of last year, and $2.1 millionin the first quarter of 2003. The provision for the first quarter of 2004 wasdriven by significantly lower net charge-offs, continued strong asset quality,and minimal growth in the total loan portfolio. As a percentage of totalloans, the allowance for loan losses was 1.52%, down slightly from 1.54% atDecember 31, 2003.Noninterest income declined $5.0 million from the prior quarter and $1.2million from the same period a year ago. The decline from the fourth quarterof 2003 was attributable to reduced gains on sales of mortgages, lowermortgage servicing income, and a decline in gains on sales of securities.Gains on sales of mortgage loans decreased $2.4 million from the fourthquarter of 2003 due to lower volumes of loan sales caused by higher mortgageinterest rates. Mortgage servicing income declined $1.4 million in the firstquarter of 2004 due to higher forward-looking prepayment speeds which weredriven by the dip in interest rates in early March, continued heavy paydownson adjustable rate mortgages, and the decision by one of the Company’s creditunion customers to service its portfolio in house. Gains on sales ofsecurities, net of losses on prepayments of borrowings, were $608,000 in thefirst quarter of 2004, compared to $2.1 million in the fourth quarter of lastyear and $1.4 million in the first quarter of 2003. Partially offsettingthese declines, on a linked quarter and year-over-year basis, weresignificantly higher insurance commissions and increased investment managementincome. Insurance commissions increased $1.1 million from the prior quarterprimarily due to the timing of policy renewals and increased performance-basedincome. The increase from the same quarter a year ago was due to the inclusionof Granite’s insurance operations for the full quarter in 2004 versus only onemonth in 2003. In addition, on a year-over-year basis, the Companyexperienced higher investment management income, which was attributable tostronger equity markets and better penetration in the non-Vermont banks.Noninterest expenses were $44.6 million for the quarter ending March 31,2004, a decrease of $3.5 million from the prior quarter and an increase of$2.4 million from a year ago. The decline from the fourth quarter of 2003 isprimarily attributable to lower conversion and restructuring expenses,decreased incentives and commissions costs, and lower levels of other expense.The higher conversion and restructuring expenses in the fourth quarter of 2003were due to the accrual of certain costs in relation to the Company’s plan toconsolidate branches, close offsite ATMs and to recognize severance forrelated staff reductions. The increase from a year ago is attributable to theacquisition of Granite Bank, which in 2004 contributed three months ofexpenses compared to one month in 2003.The effective income tax rate for first quarter 2004 was 36.9%, comparedwith 36.1% for the comparable quarter in 2003. The higher effective income taxrate was primarily attributable to increased taxable income in New Hampshire,which has a higher statutory tax rate than other states in which the Companyhas operations.The return on average tangible equity was 20.38% in the first quarter of2004, compared to 23.63% in the prior quarter and 19.95% in the same quarter ayear ago. The return on average equity was 11.97% for the first quarter of2004, compared with 13.66% for the fourth quarter of 2003 and 14.53% for thefirst quarter a year ago. The decrease in ROE from the first quarter of 2003is primarily due to the issuance of additional equity of $116 million in theGranite acquisition, which was included for only one month in the 2003calculation. The return on average assets for the quarter ended March 31, 2004was 1.21%, down from 1.31% for the quarter ended December 31, 2003 and 1.29%for the first quarter of last year. The decline from a year ago was due tohigher levels of average assets caused by the acquisition of Granite Bank andthe reduction from the fourth quarter of 2004 was due to lower net income.Chittenden is a bank holding company headquartered in Burlington, Vermont.Through its subsidiary banks(1), the Company offers a broad range of financialproducts and services to customers throughout Northern New England andMassachusetts, including deposit accounts and services; commercial andconsumer 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.last_img

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