Chittenden Corporation Reports Increased Earnings Per Share, and AnnouncesNew Share Repurchase PlanBurlington, VT Chittenden Corporation (NYSE:CHZ) Chairman, President and Chief ExecutiveOfficer, 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 dilutedshare a year ago. For the fourth quarter of 2006, net income was $22.5 million or $0.48 perdiluted share, compared to $21.8 million or $0.46 per diluted share earned in the fourth quarter of2005.In making the announcement, Perrault said, I am pleased to report to shareholders that yourCompanys discipline and strong strategic implementation continues to deliver solid resultsdespite the challenging environment . Chittenden also announced its quarterly dividend of $0.20per 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 onJanuary 17, 2007 for one million shares of the Corporations common stock. The repurchase ofthe common stock may be done in negotiated transactions or open market purchases over thenext two years.FOURTH QUARTER 2006 FINANCIAL HIGHLIGHTSÀ‰ Commercial loans increased 7% from the end of 2005.À‰ Average deposits for 2006 increased 4% from 2005 with solid growth in CMA/moneymarket deposits of over 4%.À‰ Net interest margin held steady for 2006 at 4.24% and the fourth quarter increased 6basis points to 4.29%.À‰ Nonperforming assets declined 22% from the third quarter of 2006.À‰ The efficiency ratio improved to 54.6% for the fourth quarter of 2006.À‰ The Company repurchased 762,500 common shares in the fourth quarter and thetangible capital ratio remained over 7.00% at year end.ASSETSThe Companys securities portfolio declined from both the prior year end and on a linked quarterbasis to $1.1 billion. The decrease in securities was primarily utilized to fund loan growth andreduce borrowings. Total loans increased by $210 million from the end of last year to $4.7 billionat December 31, 2006. The Company experienced solid loan growth in 2006 throughout all of itsmarkets with particularly strong increases in its multifamily real estate, commercial real estateand construction portfolios.LIABILITIESTotal deposits decreased $20 million from September 30, 2006 reflecting the start of the normalseasonal decline in deposits, which is primarily driven by the operating cycles of the Companysmunicipal and commercial customers. Borrowings at December 31, 2006, were $210 million, adecrease of $17 million from the end of last year due to lower FHLB advances.NET INTEREST INCOMETax-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. Theincrease in net interest income from the same period a year ago was due to higher averageearning assets, which was partially offset by a slightly lower net interest margin. The Companysnet interest margin for the fourth quarter was 4.29%, an increase of 6 basis points from the thirdquarter of 2006 and a decline of 1 basis point from the same period a year ago. The increase innet interest margin from the third quarter of 2006 was attributable to higher interest recoveries onformer non-performing loans. The decline in the net interest margin from the fourth quarter of2005 was due to an increase in funding costs, which was partially offset by an increase in theyield on interest earning assets. The increase in funding costs was driven by strong competitionfor both commercial and consumer deposits as well as increases in the federal funds rate in2005 and 2006.NONINTEREST INCOMENoninterest income was $17.9 million for the fourth quarter of 2006, compared with $16.1 millionfor the third quarter and $17.4 million for the same period a year ago. The increase in noninterestincome was primarily attributable to higher investment management and trust fees and othernoninterest 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 primarily due to$1.1 million received in relation to the Companys interest in a mortgage insurance captive, whichwas partially offset by higher amortization on investments in low income housing limitedpartnerships.NONINTEREST EXPENSENoninterest expenses were $46.3 million for the fourth quarter of 2006, compared to $46.0million for the fourth quarter of 2005. The increase from the same quarter a year ago is primarilya result of higher salary expense which related to increased share-based compensation costsand new branch openings in 2006. The Company recognized $785,000 of share-basedcompensation in the fourth quarter of 2006 as compared to $4,000 in the same quarter a yearago.INCOME TAXESThe effective income tax rates for 2006 were 31.5% for the fourth quarter and 32.1% for the fullyear compared with 34.2% and 34.5%, respectively, for the same periods in 2005. The lowereffective income tax rate was attributable to higher low-income housing and historic rehabilitationtax credits.CREDIT QUALITYThe provision for credit losses was $2.0 million for the fourth quarter of 2006 compared to $1.4million for the same quarter of 2005. The increase in the provision for credit losses from thecomparable 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.hittenden Corporation of 2006, up from 2 basis points for the same quarter a year ago. The increase in net charge-offsprimarily relates to one commercial finance loan that was placed on non-accrual status in the firstquarter of 2006. The allowance for credit losses as a percentage of total loans excludingmunicipal loans was 1.39% at December 31, 2006 compared to 1.43% for the fourth quarter of2005.