May 13, 1994
Securities and Exchange Commission
450 5th Street
Washington, DC 20549
Re: Chittenden Corporation
Registration No. 0-7974
Quarterly Report (on Form 10-Q)
Gentlemen:
Pursuant to the requirements of Rule
13a-13 under the Securities Exchange Act of
1934, there is, appended to this transmittal,
an electronic file of the quarterly report
(on Form 10-Q) of Chittenden Corporation, Two
Burlington Square, Burlington, VT 05401 for
the three months ended March 31, 1994.
If you have any questions concerning
this quarterly report, please telephone the
undersigned at (802) 660-1410.
Kindly acknowledge receipt of this
letter by Compuserve Email.
Thank you.
Very truly yours,
F. Sheldon Prentice
Secretary
FSP/jbo
Enclosures
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Three Months Ended March 31, 1994
Commission File Number 0-7974
CHITTENDEN CORPORATION
(Exact Name of Registrant as Specified in its
Charter)
Vermont 03-0228404
(State of Incorporation) (IRS Employer
Identification
No.)
Two Burlington Square 05401
Burlington, Vermont (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number:(802) 658-4000
Not Applicable
Former Name, Former Address and
Formal Fiscal Year
If Changed Since Last Report
Indicate by checkmark whether the Registrant
(1) has filed all reports required to be
filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter
period that the Registrant was required to
file such reports), and (2) has been subject
to such filing requirements for the past 90
days. Yes X No____
At March 31, 1994, there were 6,473,922
shares of the Corporation's $1.00 par value
common stock issued, with 6,227,446 shares
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
<TABLE>
Chittenden Corporation
Consolidated Balance Sheets (Unaudited)
<CAPTION>
March 31, December 31,
1994 1993
------------ ------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $143,681 $195,111
Investment Securities Available For Sale 196,238 -
Investment Securities Held For Sale
(Market Value $152,205,000 in 1993) - 150,743
Investment Securities Held For Investment
(Market Value $10,629,000 in 1994;
and $2,250,000 in 1993) 10,796 2,250
Loans:
Commercial 105,520 107,722
Real Estate:
Residential 374,955 398,014
Commercial 206,559 206,601
Construction 12,237 13,747
---------- ----------
Total Real Estate 593,751 618,362
Consumer 120,171 125,226
---------- ----------
Total Loans 819,442 851,310
Less: Allowance for Possible Loan Losses (18,985) (18,917)
---------- ----------
Net Loans 800,457 832,393
Mortgage Loans Held for Sale 5,205 11,646
Premises and Equipment 16,224 16,333
Accrued Interest Receivable 7,249 6,341
Other Real Estate Owned 1,642 2,619
Net Deferred Tax Asset 10,061 9,179
Other Assets 5,777 4,388
---------- ----------
Total Assets $1,197,330 $1,231,003
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $147,914 $159,323
Savings 489,525 496,692
Time:
Certificates of Deposit
$100,000 and Over 71,038 62,640
Other Time Deposits 309,519 316,109
---------- ----------
Total Deposits 1,017,996 1,034,764
---------- ----------
Short-Term Borrowings 60,726 79,078
Accrued Expenses and Other Liabilities 19,884 19,450
---------- ----------
Total Liabilities 1,098,606 1,133,292
---------- ----------
Stockholders' Equity:
Common Stock - $1 Par Value
Authorized - 10,000,000 Shares
Issued - 6,473,922 Shares in 1994;
and 6,460,584 in 1993; 6,474 6,461
Surplus 51,418 51,228
Retained Earnings 45,818 43,056
Treasury Stock - At Cost, 246,476 Shares in 1994;
248,129 in 1993; (2,962) (2,982)
Valuation Allowance for Net Unrealized Losses on
Investment Securities Available for Sale (1,886) (21)
Unearned Portion of Employee Restricted Stock (138) (31)
---------- ----------
Total Stockholders' Equity 98,724 97,711
---------- ----------
Total Liabilities and Stockholders' Equity $1,197,330 $1,231,003
========= =========
Certain amounts for 1993 have been reclassified to conform with 1994
classifications.
</TABLE>
<PAGE>
<TABLE>
Chittenden Corporation
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
<CAPTION>
1994 1993
--------- ----------
(In Thousands)
<S> <C> <C>
Interest Income:
Loans $16,011 $17,655
Investment Securities:
Mortgage-Backed 553 732
Taxable 2,062 1,282
Tax-Favored Deb 249 280
Tax-Favored Equity 196 125
Short-Term Investments 141 50
---------- ----------
Total Interest Income 19,212 20,124
---------- ----------
Interest Expense:
Deposits:
Savings 2,965 3,135
Time:
Certificates of Deposit $100,000 and Over 607 643
Other Time Deposits 2,908
Total Interest on Deposits 6,480 7,411
Short-Term Borrowings 476 428
---------- ----------
Total Interest Expense 6,956 7,839
---------- ----------
Net Interest Income 12,256 12,285
Provision for Possible Loan Losses 1,200 1,650
---------- ----------
Net Interest Income After Provision
For Possible Loan Losses 11,056 10,635
---------- ----------
Noninterest Income:
Trust Department Revenue 1,004 998
Service Charges on Deposit Accounts 957 963
Losses on Investment Securities (18) (54)
Mortgage Servicing Income 512 189
Gains on Sales of Mortgage Loans 535 1,559
Credit Card Income 1,713 1,109
Other 983 807
---------- ----------
Total Noninterest Income 5,686 5,571
---------- ----------
Noninterest Expense:
Salaries 4,270 4,226
Employee Benefits 1,563 1,343
Net Occupancy Expense 1,442 1,465
FDIC Deposit Insurance 592 670
Losses On and Write-Downs of
Other Real Estate Owned (95) 218
Credit Card Expense 1,089 807
Other 2,829 3,452
---------- ----------
Total Noninterest Expense 11,690 12,181
---------- ----------
Income Before Income Taxes and Cumulative
Effect of Change In Accounting Principle 5,052 4,025
Provision for Income Taxes 1,667 1,172
---------- ----------
Income Before Cumulative Effect of Change in
Accounting Principle 3,385 2,853
---------- ----------
Cumulative Effect of Change in
Accounting Principle - (575)
---------- ----------
Net Income $3,385 $2,278
===== =====
Chittenden Corporation
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
(Continued)
Earnings Per Share:
Before Cumulative Effect of Change In
Accounting Principle $0.53 $0.46
Cumulative Effect of Change In Accounting
Principle - $(0.09)
---------- ----------
Net Income $0.53 $0.37
===== =====
Dividends Declared $0.10 $0.04
Book Value $15.85 $14.46
Weighted Average Common
Shares Outstanding 6,223,006 6,199,108
</TABLE>
<PAGE>
<TABLE>
Chittenden Corporation and Subsidiaries
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Three Months Ended March 31,
<CAPTION>
1994
------------------------------------
Interest Average
Average Income/ Yield/
Balance Expense(1) Rate (1)
---------- ---------- ---------
(In Thousands)
<S> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Loans (2) $824,787 $15,863 7.80%
Industrial Revenue Bonds (3) 10,244 217 8.59
Investments:
Taxable 208,670 2,615 5.08
Tax-Favored Debt Securities 28,840 361 5.08
Tax-Favored Equity Securities 28,694 266 3.76
Interest-Bearing
Deposits in Banks 2,266 18 3.22
Federal Funds Sold 15,000 123 3.33
----------- -------
Total Interest-Earning Assets 1,118,501 19,463 7.06
-------
NonInterest-Earning Assets 95,163
Allowance for Possible Loan Losses (19,331)
-----------
Total Assets $1,194,333
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 502,057 2,965 2.40
Certificates of Deposit
$100,000 and Over 70,632 607 3.49
Other Time Deposits 312,847 2,908 3.77
----------- -------
Total Interest-Bearing Deposits 885,536 6,480 2.97
Short-Term Borrowings 43,062 476 4.48
Long-Term Debt - - -
----------- -------
Total Interest-Bearing
Liabilities 928,598 6,956 3.04
-------
NonInterest-Bearing Liabilities:
Demand Deposits 153,544
Other Liabilities 13,076
-----------
Total Liabilities 1,095,218
Stockholders' Equity 99,115
-----------
Total Liabilities and
Stockholders' Equity $1,194,333
=========
Net Interest Income $12,507
======
Interest Rate Spread (4) 4.02%
Net Yield on Earning Assets (5) 4.53%
</TABLE>
[FN]
(1) On a fully taxable equivalent basis. Calculated using a U.S. Federal
Income Tax Rate of 35%.
(2) Includes nonperforming loans.
(3) Industrial revenue bonds are included in Loans in the Financial
Statements.
(4) Interest rate spread is the average rate earned on total
interest-earning assets less the average rate paid for interest-bearing
liabilities.
(5) Net yield on earning assets is net interest income divided by total
interest-earning assets.
<PAGE>
<TABLE>
Chittenden Corporation and Subsidiaries
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Three Months Ended March 31,
<CAPTION>
1993
------------------------------------
Interest Average
Average Income/ Yield/
Balance Expense(1) Rate(1)
----------- ---------- ---------
(In Thousands)
<S> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Loans (2) $860,190 $17,480 8.24%
Industrial Revenue Bonds (3) 12,439 248 8.08
Investments:
Taxable 150,246 2,014 5.44
Tax-Favored Debt Securities 39,169 396 4.10
Tax-Favored Equity Securities 12,259 170 5.63
Interest-Bearing
Deposits in Banks 1,711 14 3.38
Federal Funds Sold 5,172 36 2.82
----------- -------
Total Interest-Earning Assets 1,081,186 20,358 7.64
-------
NonInterest-Earning Assets 97,336
Allowance for Possible Loan Losses (16,761)
-----------
Total Assets $1,161,761
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 462,424 3,135 2.75
Certificates of Deposit
$100,000 and Over 68,686 643 3.80
Other Time Deposits 340,286 3,633 4.33
----------- -------
Total Interest-Bearing Deposits 871,396 7,411 3.45
Short-Term Borrowings 38,420 431 4.55
Long-Term Debt 24 - 8.00
----------- -------
Total Interest-Bearing
Liabilities 909,840 7,842 3.50
-------
NonInterest-Bearing Liabilities:
Demand Deposits 150,061
Other Liabilities 13,726
-----------
Total Liabilities 1,073,627
Stockholders' Equity 88,134
-----------
Total Liabilities and
Stockholders' Equity $1,161,761
=========
Net Interest Income $12,516
======
Interest Rate Spread (4) 4.14%
Net Yield on Earning Assets (5) 4.69%
</TABLE>
[FN]
(1) On a fully taxable equivalent basis. Calculated using a U.S. Federal
Income Tax Rate of 35%.
(2) Includes nonperforming loans.
(3) Industrial revenue bonds are included in Loans in the Financial
Statements.
(4) Interest rate spread is the average rate earned on total
interest-earning assets less the average rate paid for interest-bearing
liabilities.
(5) Net yield on earning assets is net interest income divided by total
interest-earning assets.
<PAGE>
<TABLE>
Chittenden Corporation
Consolidated Statements of Cash Flows
<CAPTION>
Three Months Ended March 31,
1994 1993
----------- ------------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,385 $2,278
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 1,200 1,650
Depreciation and amortization 490 532
Amortization of excess of cost over fair value
of net assets acquired 88
Prepaid Income taxes 131 1,708
Amortization of premiums, fees,
and discounts, net 277 234
Investment (gains) losses 18 54
Net (Increase) decrease in loans held for sale 6,441 (3,661)
(Increase) decrease in accrued interest receivable (908) (592)
(Increase) decrease in other assets (180) (533)
Increase (decrease) in accrued expenses and
other liabilities 434 (7,625)
---------- ----------
Net cash provided by operating activities 11,288 (5,867)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 63,413 2,139
Proceeds from maturing investment securities and
principal payments on mortgage-backed securities 26,439 25,809
Purchase of investment securities (147,080) (34,644)
Loans originated, net of principal repayments 30,527 24,886
Purchases of premises and equipment (381) (633)
---------- ----------
Net cash provided by (used in) investing activities (27,082) 17,557
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (16,768) (9,594)
Net increase (decrease) in short-term borrowings (18,352) (9,116)
Principal repayments of long-term debt 0 0
Proceeds from issuance of common stock 92 10
Dividends paid-common stock (623) (275)
Proceeds from issuance of treasury stock 15 12
---------- ----------
Net cash provided by (used in) financing activities (35,636) (18,963)
Net increase (decrease) in cash and cash equivalents (51,430) (7,273)
Cash and cash equivalents at beginning of year 195,111 129,303
---------- ----------
Cash and cash equivalents at March 31, $143,681 $122,030
======= =======
Supplemental disclosure of cash flow information:
Cash paid for the year for:
Interest $6,954 $7,876
Income taxes 250 850
Noncash transactions:
Loans transferred to other real estate owned 232 241
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
Note 1 - Accounting Policies
The Company's significant accounting
policies are described in Note 1 of the Notes
to Consolidated Financial Statements included
in its 1993 Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
For interim reporting purposes, the Company
follows the same basic accounting policies
and considers each interim period as an
integral part of an annual period.
The financial information included
herein is unaudited; however, such
information reflects all adjustments
(consisting of normal recurring accruals)
which are, in the opinion of management,
necessary for a fair statement of results for
the interim periods.
Note 2 - Adoption of Statement of Financial
Accounting Standards No. 115, "Accounting for
Certain Investments In Debt and Equity
Securities."
The Company adopted SFAS 115 on January
1, 1994. Under SFAS 115, Investment
Securities are now classified under three
different categories - held for sale, trading
securities, and available for sale. The
Company's Investment Portfolio at March 31,
1994 consisted primarily of the available for
sale category. The effect of adopting on
January 1, 1994 was an increase in
stockholders equity of $965,000 (net of an
income tax effect of $497,000) to reflect the
unrealized gain in the available for sale
portfolio. At March 31, 1994, the Company
recorded a decrease in stockholders' equity
of $1,886,000 (net of an income tax effect of
$1,016,000) to reflect the net unrealized
losses on the available for sale portfolio.
Note 3 - Other Real Estate Owned (OREO) - In-
Substance Foreclosure
At March 31, 1994, the Company
reclassified from its OREO portfolio to its
Loan portfolio the In-Substance Foreclosure
properties. The change in classification
resulted in a decrease of OREO and an
increase in Loans of $1,219,000 at March 31,
1994; $750,000 at December 31, 1993; and
$1,005,000 at March 31, 1993.
Note 4 - Adoption of Statement of Financial
Accounting Standards No. 112, "Employers
Accounting for Post Employment Benefits"
The Company adopted SFAS 112 on January
1, 1994. SFAS 112 requires the recognition
of certain post-employment benefits. The
adoption of SFAS 112 did not have a material
impact on the Company's consolidated
financial statements.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Chittenden Corporation's net income for
the first quarter of 1994 was $3.4 million
compared with $2.3 million a year ago. Net
income per share of common stock was $0.53
for the first three months of 1994, up from
$0.37 reported a year ago. Return on average
assets was 1.15% for the first three months
of 1994 compared with 0.80% last year.
Return on average equity was 13.85% for the
first three months of 1994 compared with
10.48% for the same period in 1993.
Net interest income on a fully taxable
equivalent basis was $12.5 million, unchanged
from the amount earned during the first
quarter of 1993. The net yield on earning
assets was 4.53% in the first quarter of
1994, down 16 basis points from the 1993
period. The impact of the lower net yield
was offset by higher average earning assets
which increased by $37.3 million, or 3.5%,
over the first quarter 1993 amount.
Provisions for and activity in the
allowance for possible loan losses are
summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
First Quarter
Ended March 31,
1994 1993
(In Thousands)
<S> <C> <C>
Beginning Allowance
for Possible
Loan Losses Balance $18,917 $16,372
Provision for Possible
Loan Losses 1,200 1,650
Loans Charged Off (1,356) (1,361)
Loan Recoveries 224 236
Ending Allowance for
Possible Loan
Losses Balance $18,985 $16,897
====== ======
</TABLE>
Noninterest income amounted to $5.7
million for the first quarter of 1994, up
2.1% from a year ago. Trust Department
revenue and service charges on deposit
accounts remained at the same levels as a
year ago. Mortgage servicing income
increased $323,000, reflecting the lack of
amortization in 1994 of deferred premiums
from mortgage sales. The deferred premiums
were fully amortized in 1993. Gains on sales
of mortgage loans were $1.0 million lower
than 1993 first quarter, reflecting a lower
volume of mortgage sales due to primarily
decreased levels of refinancing activity.
Chittenden continues to sell most of its
fixed rate residential mortgage production on
the secondary market. Credit card income
increased by $604,000, or 54.5%, reflecting
both an increased customer base and higher
volumes.
For the first quarter of 1994,
noninterest expenses were $11.7 million, down
4.0% from last year. Salary expenses were up
1.0% and employee benefits increased by
16.4%, reflecting higher medical insurance
expenses and incentive compensation accruals
related to Company performance. Occupancy
expense was about even with the prior year.
F.D.I.C. insurance premiums were down 11.6%
due to both a lower premium rate and lower
deposit levels. Expenses connected with
maintaining properties acquired by
foreclosure reflected a net credit of
$95,000, due to the recovery of previously
incurred expenses. Credit card expenses
increased by 34.9% due to the higher volumes
described above.
<PAGE>
CREDIT QUALITY
Nonperforming assets include nonaccrual
loans, restructured debt, and foreclosed real
estate (Other Real Estate Owned). As of
March 31, 1994, nonperforming assets totaled
$15.4 million, down $9.4 million from the
level one year earlier and down $339,000 from
the level reported at December 31, 1993.
The allowance for loan losses was $19.0
million at March 31, 1994, up from $18.9
million at year-end 1993 and $16.9 million at
March 31, 1993. At March 31, 1994, the
allowance measured 2.32% of loans, compared
with 2.22% at year-end 1993, and 1.99% at
March 31, 1993.
A summary of credit quality follows:
<TABLE>
<CAPTION>
03/31/94 12/31/93 03/31/93
(In Thousands)
<S> <C> <C> <C>
Nonaccrual Loans $13,571 $12,756 $18,306
Restructured Debt 190 367 52
Other Real Estate
Owned (OREO) 1,642 2,619 6,471
Total Nonperforming
Assets (NPA) $15,403 $15,742 $24,829
====== ====== ======
Loans Past Due
90 Days or More
and Still Accruing
Interest $ 1,022 $ 1,453 $ 1,889
Allowance for
Possible Loan
Losses 18,985 18,917 16,897
NPA as % of Loans
plus OREO 1.88% 1.84% 2.90%
Loss Allowance as
% of Loans 2.32 2.22 1.99
Loss Allowance as
% of Nonperforming
Loans 137.96 144.15 92.04
Loss Allowance as
% of NPA 123.26 120.17 68.05
</TABLE>
<PAGE>
CAPITAL:
Common stockholders' equity totaled
$98.7 million at March 31, 1994, up from
$97.7 million at year-end 1993. The increase
from year-end reflects first quarter net
income of $3.4 million, valuation allowance
for net unrealized losses on investment
securities available for sale of $1.9 million
(net of an income tax effect of $1.0
million), and dividends paid to stockholders
<PAGE>
of $623,000. The valuation allowance
reflects adoption of Statement of Financial
Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity
Securities."
"Tier One" capital, consisting entirely
of common equity, measured 11.72% of risk-
weighted assets at March 31, 1994. Total
capital, including the "Tier Two" allowance
for loan losses, stood at 13.10% of risk-
weighted assets. The leverage capital ratio
was 8.41%. These ratios placed Chittenden in
the "well-capitalized" category according to
regulatory standards.
LIQUIDITY:
The Company's liquidity and rate
sensitivity are monitored by the Bank's asset
and liability committee. This committee
meets regularly to review and direct the
Bank's lending and investment activities, as
well as its deposit-gathering functions.
The measure of an institution's
liquidity is its ability to meet its cash
commitments at all times with available cash
or by conversion of other assets to cash at a
reasonable price. At March 31, 1994, the
Company maintained cash balances and short-
term investments of approximately $143.7
million, compared with $195.1 million at
December 31, 1993. During the first three
months of 1994, the Company continued to be
an average daily net seller of Federal Funds.
<PAGE>
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the
Registrant has duly caused this report to be
signed on its behalf by the undersigned
thereunto duly authorized.
CHITTENDEN CORPORATION
May 13, 1994 By: ------------------------
Date Paul A. Perrault
President and Chief
Chief Executive
Officer
May 13, 1994 By: ------------------------
Date Nancy Rowden Brock
Treasurer
<PAGE>
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the
Registrant has duly caused this report to be
signed on its behalf by the undersigned
thereunto duly authorized.
CHITTENDEN CORPORATION
May 13, 1994 By: S/Paul A. Perrault
Date Paul A. Perrault
President and Chief
Chief Executive
Officer
May 13, 1994 By: S/Nancy Rowden Brock
Date Nancy Rowden Brock
Treasurer
