August 10, 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, Vermont 05401 for the six months ended June 30, 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 E-Mail.
Thank you.
Very truly yours,
F. Sheldon Prentice
Secretary
FSP/ejf
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 Six Months Ended June 30, 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 June 30, 1994, there were 6,474,594
shares of the Corporation's $1.00 par value
common stock issued, with 6,228,118 shares
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
<TABLE>
Chittenden Corporation
Consolidated Balance Sheets (Unaudited)
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $111,879 $195,163
Investment Securities Available For Sale 194,249 -
Investment Securities Held For Sale
(Market Value $152,205,000 in 1993) - 150,743
Investment Securities Held For Investment
(Market Value $9,934,000 in 1994;
and $2,250,000 in 1993) 10,338 2,250
Loans:
Commercial 108,768 107,722
Real Estate:
Residential 387,709 398,014
Commercial 208,039 206,601
Construction 11,474 13,747
---------- ----------
Total Real Estate 607,222 618,362
Consumer 126,327 124,412
---------- ----------
Total Loans 842,317 850,496
Less: Allowance for Possible Loan Losses (18,927) (18,917)
---------- ----------
Net Loans 823,390 831,579
Mortgage Loans Held for Sale 4,441 11,646
Premises and Equipment 15,933 16,333
Accrued Interest Receivable 8,520 6,341
Other Real Estate Owned 1,388 2,619
Net Deferred Tax Asset 10,867 9,179
Other Assets 5,784 5,150
---------- ----------
Total Assets $1,186,789 $1,231,003
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $157,461 $159,323
Savings 519,203 496,692
Time:
Certificates of Deposit
$100,000 and Over 37,709 62,640
Other Time Deposits 303,904 316,109
---------- ----------
Total Deposits 1,018,277 1,034,764
---------- ----------
Short-Term Borrowings 49,320 79,078
Accrued Expenses and Other Liabilities 18,988 19,450
---------- ----------
Total Liabilities 1,086,585 1,133,292
---------- ----------
Stockholders' Equity:
Common Stock - $1 Par Value
Authorized - 30,000,000 Shares
Issued - 6,474,594 Shares in 1994;
and 6,460,584 in 1993; 6,475 6,461
Surplus 51,425 51,228
Retained Earnings 49,038 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
(Net of Taxes) (3,645) (21)
Unearned Portion of Employee Restricted Stock (127) (31)
---------- ----------
Total Stockholders' Equity 100,204 97,711
---------- ----------
Total Liabilities and Stockholders' Equity $1,186,789 $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)
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
--------------------------- ------------------------
(In Thousands, Except Share Data))
<S> <C> <C>
Interest Income:
Loans $17,284 $17,388 $ 33,295 $ 35,043
Investment Securities:
Mortgage-Backed 657 618 1,210 1,350
Taxable 2,111 1,369 4,173 2,673
Tax-Favored Debt 264 291 513 548
Tax-Favored Equity 197 80 393 205
Short-Term Investments 159 43 300 93
---------- ---------- ---------- ----------
Total Interest Income 20,672 19,789 39,884 39,912
---------- ---------- ---------- ----------
Interest Expense:
Deposits:
Savings 3,201 3,080 6,166 6,215
Time:
Certificates of Deposit $100,000 and Over 589 550 1,196 1,193
Other Time Deposits 2,894 3,371 5,802 7,004
---------- ---------- ---------- ----------
Total Interest on Deposits 6,684 7,001 13,164 14,412
Short-Term Borrowings 489 450 965 881
---------- ---------- ---------- ----------
Total Interest Expense 7,173 7,451 14,129 15,293
---------- ---------- ---------- ----------
Net Interest Income 13,499 12,338 25,755 24,619
Provision for Possible Loan Losses 1,200 1,650 2,400 3,300
---------- ---------- ---------- ----------
Net Interest Income After Provision
For Possible Loan Losses 12,299 10,688 23,355 21,319
---------- ---------- ---------- ----------
Noninterest Income:
Trust Department Revenue 1,045 985 2,049 1,983
Service Charges on Deposit Accounts 1,282 1,198 2,344 2,243
Losses on Investment Securities (39) 38 (57) (16)
Mortgage Servicing Income 496 386 1,008 575
Gains on Sales of Mortgage Loans 199 1,441 734 3,000
Credit Card Income 1,842 1,206 3,555 2,315
Other 950 888 1,828 1,614
---------- ---------- ---------- ----------
Total Noninterest Income 5,775 6,142 11,461 11,714
---------- ---------- ---------- ----------
Noninterest Expense:
Salaries 4,251 4,257 8,521 8,483
Employee Benefits 1,425 1,372 2,988 2,715
Net Occupancy Expense 1,351 1,511 2,793 2,976
FDIC Deposit Insurance 589 671 1,181 1,341
(Gains) Losses On and Write-Downs of
Other Real Estate Owned (31) 657 (126) 875
Credit Card Expense 1,291 811 2,380 1,618
Other 3,438 3,933 6,267 7,382
---------- ---------- ---------- ----------
Total Noninterest Expense 12,314 13,212 24,004 25,390
---------- ---------- ---------- ----------
Income Before Income Taxes and Cumulative
Effect of Change In Accounting Principle 5,760 3,618 10,812 7,643
Provision for Income Taxes 1,917 1,073 3,584 2,245
---------- ---------- ---------- ----------
Income Before Cumulative Effect of Change in
Accounting Principle 3,843 2,545 7,228 5,398
---------- ---------- ---------- ----------
Cumulative Effect of Change in
Accounting Principle - - - (575)
---------- ---------- ---------- ----------
Net Income $3,843 $2,545 $7,228 $4,823
========== ========== ========== ==========
Chittenden Corporation
Consolidated Statements of Income (Unaudited)
(Continued)
Earnings Per Share:
Before Cumulative Effect of Change In
Accounting Principle $0.61 $0.41 $1.14 $0.87
Cumulative Effect of Change In Accounting
Principle - - - (0.09)
========== ========== ========== ==========
Primary $0.61 $0.41 $1.14 $0.78
Before Cumulative Effect of Change In
Accounting Principle $0.60 $0.41 $1.14 0.87
Cumulative Effect of Change in Accounting
Principle - - - $(0.09)
========== ========== ========== ==========
Fully Diluted $0.60 $0.41 $1.14 $0.78
Dividends Declared $0.10 $0.05 $0.20 $0.09
Book Value $16.09 $14.84 $16.09 $14.84
Weighted Average Common
Shares Outstanding 6,362,811 6,206,033 6,360,421 6,202,590
</TABLE>
<PAGE>
<TABLE>
Chittenden Corporation
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Six Months Ended June 30, 1994
<CAPTION>
1994 1993
------------------------------------ -------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense(1) Rate (1) Balance Expense(1) Rate(1)
---------- ---------- --------- --------- ---------- ---------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Loans (2) $826,659 $32,982 8.05% $856,805 $34,685 8.16%
Industrial Revenue Bonds (3) 10,155 461 9.15 12,354 506 8.26
Investments:
Taxable 199,645 5,383 5.44 146,950 3,778 5.18
Tax-Favored Debt Securities 29,857 742 5.01 45,117 1,142 5.10
Tax-Favored Equity Securities 26,975 533 3.98 8,383 279 6.71
Interest-Bearing
Deposits in Banks 2,006 34 3.42 1,536 24 3.15
Federal Funds Sold 15,122 266 3.55 5,496 68 2.50
---------- ---------- ---------- ----------
Total Interest-Earning Assets 1,110,419 40,401 7.34 1,076,641 40,482 7.58
---------- ----------
NonInterest-Earning Assets 94,750 99,285
Allowance for Possible Loan Losses (19,267) (16,974)
---------- ----------
Total Assets $1,185,902 $1,158,952
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 500,139 6,166 2.49 466,818 6,215 2.68
Certificates of Deposit
$100,000 and Over 67,380 1,196 3.58 65,210 1,193 3.69
Other Time Deposits 309,549 5,802 3.78 335,064 7,004 4.22
---------- ---------- ---------- ----------
Total Interest-Bearing Deposits 877,068 13,164 3.03 867,092 14,412 3.35
Short-Term Borrowings 40,172 965 4.84 39,316 881 4.52
Long-Term Debt - - - 13 - 8.00
---------- ---------- ---------- ----------
Total Interest-Bearing
Liabilities 917,240 14,129 3.11 906,421 15,293 3.40
---------- ----------
NonInterest-Bearing Liabilities:
Demand Deposits 157,145 147,240
Other Liabilities 11,975 15,430
---------- ----------
Total Liabilities 1,086,360 1,069,091
Stockholders' Equity 99,542 89,861
---------- ----------
Total Liabilities and
Stockholders' Equity $1,185,902 $1,158,952
========== ==========
Net Interest Income $26,272 $25,189
========== ==========
Interest Rate Spread (4) 4.23% 4.18% %
Net Yield on Earning Assets (5) 4.77% 4.72%
</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>
Six Months Ended June 30, 1994
1994 1993
----------- ------------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,228 $4,823
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 2,400 3,300
Depreciation and amortization 976 989
Amortization of excess of cost over fair value
of net assets acquired 177
Prepaid Income taxes 274 (475)
Amortization of premiums, fees,
and discounts, net 656 542
Investment (gains) losses 57 16
Net (Increase) decrease in loans held for sale 7,205 (9,114)
(Increase) decrease in accrued interest receivable (2,179) 189
(Increase) decrease in other assets 1,270 5,136
Increase (decrease) in accrued expenses and
other liabilities (462) (4,827)
---------- ----------
Net cash provided by operating activities 17,425 756
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 32,920 13,245
Proceeds from maturing investment securities and
principal payments on mortgage-backed securities 104,751 70,866
Purchase of investment securities (195,405) (82,686)
Loans originated, net of principal repayments 4,977 23,013
Purchases of premises and equipment (576) (2,226)
---------- ----------
Net cash provided by (used in)
investing activities (53,333) 22,212
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (16,487) (67,787)
Net increase (decrease) in short-term borrowings (29,758) 45,267
Proceeds from issuance of common stock 99 94
Dividends paid-common stock (1,245) (573)
Proceeds from issuance of treasury stock 15 12
---------- ----------
Net cash used in financing activities (47,376) (22,987)
---------- ----------
Net decrease in cash and cash equivalents (83,284) (19)
Cash and cash equivalents at beginning of period 195,163 129,303
---------- ----------
Cash and cash equivalents at June 30, 1994 $111,879 $129,284
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for the year for:
Interest $14,130 $15,526
Income taxes 3,050 3,675
Noncash transactions:
Loans transferred to other real estate owned 675 2,533
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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.
<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 second quarter of 1994
increased 51% from the 1993 level to $3.8 million, or $0.60 per share. Net
income for the first six months of 1994 totaled $7.2 million, or $1.14 per
share, up 50% from last year. Return on average assets was 1.23% for the
first six months of 1994, compared with 0.84% last year. Return on average
equity was 14.64% for the first six months of 1994, up from 10.82% for the
same period in 1993.
Net interest income on a fully taxable equivalent basis for the first
half of 1994 was $26.3 million, up $1.1 million from the amount earned
during the first six months of 1993. Contributing to this increase were
both a higher net yield on earning assets, up 5 basis points from a year
ago to 4.77%, and higher average earning assets, up $33.8 million from a
year ago.
Provisions for and activity in the allowance for possible loan losses
are summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
(In Thousands)
<S> <C> <C> <C> <C>
Beginning Allowance
for Possible
Loan Losses Balance $18,985 $16,897 $18,917 $16,372
Provision for Possible
Loan Losses 1,200 1,650 2,400 3,300
Loans Charged Off (1,521) (1,225) (2,877) (2,586)
Loan Recoveries 263 213 487 449
---------- ---------- ---------- ----------
Ending Allowance for
Possible Loan
Losses Balance $18,927 $17,535 $18,927 $17,535
========== ========== ========== ==========
</TABLE>
Noninterest income amounted to $5.8 million for the second quarter and
$11.5 million for the first half of 1994, down 6% and 2%, respectively,
from the same periods a year ago. Trust revenue was up slightly from 1993
levels, and service charges on deposit accounts increased due to higher
levels of transaction activity and selected pricing actions. Gains on
sales of mortgage loans were $1.2 million and $2.3 million lower than for
the second quarter and the first half of last year, respectively,
reflecting a lower volume of mortgage sales due to significantly decreased
levels of refinancing activity. Chittenden continues to sell most of its
fixed rate residential mortgage production on the secondary market.
Mortgage servicing income increased $110,000 from the second quarter level
and $433,000 from the first half last year, reflecting the lack of
amortization in 1994 of deferred premiums from previous loan sales, and a
13% increase in the mortgage servicing portfolio to $661.5 million at June
30, 1994. Credit card income increased $636,000 for the second quarter and
$1.2 million for the first six months from the comparable 1993 levels,
reflecting both an increased customer base and higher transaction volume.
For the second quarter of 1994, nointerest expenses were $12.3
million, down 7% from the comparable 1993 level. Noninterest expenses
stood at $24.0 million for the first half of 1994, down 5% from last year.
Salary expense for the second quarter and for the first six months was
essentially unchanged from the same periods last year. Compared with 1993
levels, employee benefits were up 4% in the second quarter and 10% in the
first half of 1994, reflecting higher medical insurance expenses and
incentive compensation accruals related to Company performance. Occupancy
expense was down 11% and 6% from the second quarter and six month periods
of 1993, respectively, reflecting nonrecurrence of write-offs taken in 1993
as part of the VerBanc acquisition. F.D.I.C. insurance premiums were down
about 12% from the second quarter and first half periods last year due to
both a lower premium rate and lower deposit levels. Expenses connected
with maintaining properties acquired by foreclosure reflected net credits
for both the second quarter and the six month period, due to recovery of
previously incurred expenses. Credit card expenses increased by 59% and
47% for the second quarter and the six month period, respectively, due to
the higher volumes described above. Other expenses declined by $495,000
and $1.1 million compared with the second quarter and the six month period
in 1993. These declines were primarily due to the nonrecurrence of one-
time expenses associated with the acquisition.
<PAGE>
CREDIT QUALITY
Nonperforming assets include nonaccrual loans, restructured debt, and
foreclosed real estate (Other Real Estate Owned). As of June 30, 1994,
nonperforming assets totaled $12.8 million, down from $22.5 million a year
earlier and $15.4 million at March 31, 1994. Approximately $3.3 million in
payments received, charge-offs, and sales of OREO during the quarter
exceeded the addition of $700,000 to total non-performing assets. The
allowance for loan losses stood at $18.9 million at June 30, 1994,
unchanged from the March 1994 and the December 1993 levels, and up from
$17.5 million at June 30, 1993. The allowance was 2.25% of loans at June
30, 1994, compared with 2.32% at March 31, and 2.06% a year earlier.
A summary of credit quality follows:
<TABLE>
<CAPTION>
06/30/94 03/31/94 12/31/93 06/30/93
-------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Nonaccrual Loans $11,225 $13,571 $12,756 $17,480
Restructured Debt 188 190 367 371
Other Real Estate
Owned (OREO) 1,388 1,642 2,619 4,680
-------- -------- -------- --------
Total Nonperforming
Assets (NPA) $12,801 $15,403 $15,742 $22,531
======== ======== ======== ========
Loans Past Due
90 Days or More
and Still Accruing
Interest $ 751 $ 1,022 $ 1,453 $ 2,208
Allowance for
Possible Loan
Losses 18,927 18,985 18,917 17,535
NPA as % of Loans
plus OREO 1.52% 1.88% 1.84% 2.63%
Loss Allowance as
% of Loans 2.25 2.32 2.22 2.06
Loss Allowance as
% of Nonperforming
Loans 165.84 137.96 144.15 98.23
Loss Allowance as
% of NPA 147.86 123.26 120.17 77.83
</TABLE>
<PAGE>
CAPITAL:
Common stockholders' equity totaled $100.2 million at June 30, 1994,
up from $98.7 million at the end of March. At June 30, 1993, equity was
$92.1 million. The current level reflects the net income of $3.8 million
posted for second quarter 1994, the increase of $1.8 million in the
valuation allowance for net unrealized losses on investment securities
available for sale, and dividends paid to stockholders of $623,000. The
increase in the valuation allowance reflects a reduction in the fair value of
the available for sale investment portfolio which resulted from
higher interest rates during the quarter. The valuation allowance reflects
adoption of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" as of January 1, 1994.
"Tier One" capital, consisting entirely of common equity, measured
12.18% of risk-weighted assets. Total capital, including the "Tier Two"
allowance for loan losses, stood at 13.56% of risk-weighted assets. The
leverage capital ratio was 8.77%. These ratios placed Chittenden in the
"well-capitalized" category according to regulatory standards.
<PAGE>
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 June 30, 1994, the Company
maintained cash balances and short-term investments of approximately $111.9
million, compared with $195.2 million at December 31, 1993. During the
first six 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
August 12, 1994 By: ------------------------
Date Paul A. Perrault
President and Chief
Executive Officer
August 12, 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
August 12, 1994 By: S/Paul A. Perrault
- -------------------- --------------------
Date Paul A. Perrault
President and Chief
Executive Officer
August 12, 1994 By: S/Nancy Rowden Brock
- -------------------- --------------------
Date Nancy Rowden Brock
Treasurer
