December 28, 1995
Securities and Exchange Commission
450 5th Street
Washington, D. C. 20549
RE: CHITTENDEN CORPORATION QUARTERLY REPORT (ON FROM 10-Q/A)
REGISTRATION NO. 0-7974
To Whom It May Concern:
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
amended quarterly report (on Form 10-Q/A) previously filed on August 9, 1995
(on Form 10-Q) of Chittenden Corporation, Two Burlington Square, Burlington,
Vermont 05401 for the six months ended June 30, 1995.
Item 4. Submission of Matters to a Vote of Security Holders has been added to
this amended Form 10-Q/A.
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.
Sincerely,
CHITTENDEN CORPORATION
S/F. SHELDON PRENTICE, SECRETARY
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Six Months Ended June 30, 1995
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________to____________
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
BURLINGTON, VERMONT 05401
(Address of Principal Executive Offices) (Zip Code)
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, 1995, there were 8,487,016 shares of the Corporations's $1.00 par
value common stock issued, with 8,193,082 shares outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHITTENDEN CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
1995 1994
--------- ---------
ASSETS (In Thousands)
Cash and Cash Equivalents $133,121 $100,973
Securities Available For Sale 243,914 196,829
Securities Held For Investment (Market Value
$9,744,000 in 1995; and $9,280,000 in 1994) 9,769 9,869
Loans:
Commercial 199,184 105,281
Real Estate:
Residential 439,209 405,618
Commercial 260,047 214,103
Construction 12,402 7,281
--------- ---------
Total Real Estate 711,658 627,002
Consumer 141,831 140,677
--------- ---------
Total Loans 1,052,673 872,960
Less: Allowance for Possible Loan Losses (23,546) (19,099)
--------- ---------
Net Loans 1,029,127 853,861
--------- ---------
Loans Held for Sale 6,768 2,870
Premises and Equipment, Net 18,041 17,864
Intangible Assets, Net 11,781 -
Accrued Interest Receivable 11,284 9,906
Other Real Estate Owned 2,312 1,288
Net Deferred Tax Asset 11,640 11,969
Other Assets 11,909 8,479
--------- ---------
Total Assets $1,489,666 $1,213,908
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $183,176 $180,481
Certificates of Deposit $100,000 and Over 63,131 69,885
Savings and Other Time 997,413 819,832
--------- ---------
Total Deposits 1,243,720 1,070,198
--------- ---------
Short-Term Borrowings 95,669 22,650
Accrued Expenses and Other Liabilities 24,532 22,750
--------- ---------
Total Liabilities 1,363,921 1,115,598
--------- ---------
Stockholders' Equity:
Common Stock - $1 Par Value
Authorized - 30,000,000 Shares
Issued - 8,487,016 Shares in 1995; and
8,099,870 in 1994 8,487 8,100
Surplus 58,333 49,863
Retained Earnings 63,440 55,755
Treasury Stock - At Cost, 293,934 Shares in 1995;
710,346 in 1994 (3,966) (9,586)
Net Unrealized Loss on Securities Available for Sale,
Net of Taxes of $169,000 in 1995; and $3,077,000
in 1994 (465) (5,718)
Unearned Portion of Employee Restricted Stock (84) (104)
--------- ---------
Total Stockholders' Equity 125,745 98,310
--------- ---------
Total Liabilities and Stockholders' Equity $1,489,666 $1,213,908
========= =========
Certain amounts for 1994 have been reclassified to conform with 1995
classifications.
The accompanying notes are an integral part of these consolidated financial
statements.
CHITTENDEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Quarter
Ended June 30,
1995 1994
Interest Income: -------- --------
(In Thousands)
Interest on Loans $24,912 $17,284
Investment Securities:
Mortgage-Backed Securities 576 657
Taxable 3,013 2,111
Tax-Favored Debt 575 264
Tax-Favored Equity 192 197
Short-Term Investments 362 159
-------- --------
Total Interest Income 29,630 20,672
-------- --------
Interest Expense:
Deposits:
Savings 5,357 3,201
Time 6,867 3,483
-------- --------
Total Interest on Deposits 12,224 6,684
Short-Term Borrowings 878 489
-------- --------
Total Interest Expense 13,102 7,173
-------- --------
Net Interest Income 16,528 13,499
Provision for Possible Loan Losses 600 1,200
-------- --------
Net Interest Income after Provision for
Possible Loan Losses 15,928 12,299
-------- --------
Noninterest Income:
Trust Department Income 1,048 1,045
Service Charges on Deposit Accounts 1,312 1,282
Losses on Sales of Securities, Net - (39)
Mortgage Servicing Income 513 496
Gains on Sales of Mortgage Loans 327 199
Credit Card Income 2,977 1,842
Other 987 950
-------- --------
Total Noninterest Income 7,164 5,775
-------- --------
Noninterest Expense:
Salaries 5,008 4,251
Employee Benefits 1,732 1,425
Net Occupancy Expense 1,750 1,351
FDIC Deposit Insurance 697 589
Other Real Estate Owned Income and Expense, Net (36) (31)
Credit Card Expense 2,070 1,291
Other 4,356 3,438
-------- --------
Total Noninterest Expense 15,577 12,314
-------- --------
Income Before Income Taxes 7,515 5,760
Provision for Income Taxes 2,473 1,917
-------- --------
Net Income $5,042 $3,843
======== ========
Earnings Per Share:
Primary $0.60 $0.49
Fully Diluted $0.60 $0.48
Dividends Declared Per Share $0.15 $0.08
Book Value $15.35 $12.87
Weighted Average Common and Common Equivalent Shares
Outstanding 8,474,835 7,954,311
The accompanying notes are an integral part of these consolidated financial
statements.
CHITTENDEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Six Months
Ended June 30,
1995 1994
Interest Income: -------- --------
(In Thousands)
Interest on Loans $45,640 $33,295
Investment Securities:
Mortgage-Backed Securities 1,138 1,210
Taxable 5,555 4,173
Tax-Favored Debt 1,055 513
Tax-Favored Equity 377 393
Short-Term Investments 1,005 300
-------- --------
Total Interest Income 54,770 39,884
-------- --------
Interest Expense:
Deposits:
Savings 10,520 6,166
Time 11,857 6,998
-------- --------
Total Interest on Deposits 22,377 13,164
Short-Term Borrowings 1,409 965
-------- --------
Total Interest Expense 23,786 14,129
-------- --------
Net Interest Income 30,984 25,755
Provision for Possible Loan Losses 1,550 2,400
-------- --------
Net Interest Income after Provision for
Possible Loan Losses 29,434 23,355
-------- --------
Noninterest Income:
Trust Department Income 2,128 2,049
Service Charges on Deposit Accounts 2,481 2,344
Losses on Sales of Securities, Net - (57)
Mortgage Servicing Income 1,007 1,008
Gains on Sales of Mortgage Loans 450 734
Credit Card Income 5,535 3,555
Other 2,150 1,828
-------- --------
Total Noninterest Income 13,751 11,461
-------- --------
Noninterest Expense:
Salaries 9,496 8,521
Employee Benefits 3,407 2,988
Net Occupancy Expense 3,320 2,793
FDIC Deposit Insurance 1,290 1,181
Other Real Estate Owned Income and Expense, Net (173) (126)
Credit Card Expense 3,822 2,380
Other 7,681 6,267
-------- --------
Total Noninterest Expense 28,843 24,004
-------- --------
Income Before Income Taxes 14,342 10,812
Provision for Income Taxes 4,659 3,584
-------- --------
Net Income $9,683 $7,228
======== ========
Earnings Per Share:
Primary $1.20 $0.91
Fully Diluted $1.19 $0.91
Dividends Declared Per Share $0.25 $0.16
Book Value $15.35 $12.87
Weighted Average Common and Common Equivalent Shares
Outstanding 8,110,800 7,951,323
The accompanying notes are an integral part of these consolidated financial
statements.
Chittenden Corporation
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Six Months Ended June 30,
1995
--------------------------------------
Interest Average
Average Income Yield/
Balance (4) Expense(1) Rate(1)
----------- ------------- ------------
(In Thousands)
ASSETS
Interest-Earning Assets:
Loans (2) $969,339 $45,366 9.44%
Industrial Revenue Bonds (3) 6,998 409 11.79
Investments:
Taxable 212,992 6,693 6.34
Tax-Favored Debt Securities 46,685 1,540 6.65
Tax-Favored Equity Securities 16,281 520 6.44
Interest-Bearing Deposits in Banks 100 1 2.02
Federal Funds Sold 34,280 1,003 5.90
------- -------
Total Interest-Earning Assets 1,286,675 55,532 8.70
-------
NonInterest-Earning Assets 110,167
Allowance for Possible Loan Losses (21,894)
-------
Total Assets $1,374,948
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts $578,005 10,520 3.67
Certificates of Deposit $100,000
and Over 113,349 2,985 5.31
Other Time Deposits 342,524 8,872 5.22
------- -------
Total Interest-Bearing Deposits 1,033,878 22,377 4.36
Short-Term Borrowings 41,574 1,409 6.83
------- -------
Total Interest-Bearing Liabilities 1,075,452 23,786 4.46
-------
NonInterest-Bearing Liabilities:
Demand Deposits 170,583
Other Liabilities 16,898
-------
Total Liabilities 1,262,933
Stockholders' Equity 112,015
-------
Total Liabilities and
Stockholders' Equity $1,374,948
===========
Net Interest Income $31,746
=======
Interest Rate Spread (5) 4.24%
Net Yield on Earning Assets (6) 4.98%
(1) On a fully taxable equivalent basis. Calculated using a Federal Income
Tax Rate of 35%.
(2) Includes nonperforming loans.
(3) Industrial revenue bonds are included in Loans in the Financial Statements.
(4) Average balances are based on historical amortized cost balances.
(5) Interest rate spread is the average rate earned on total interest-earning
assets less the average rate paid for interest-bearing liabilities.
(6) Net yield on earning assets is net interest income divided by total
interest-earning assets.
The accompanying notes are an integral part of these consolidated financial
statements.
Chittenden Corporation
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Six Months Ended June 30,
1994
--------------------------------------
Interest Average
Average Income/ Yield/
Balance (4) Expense(1) Rate(1)
----------- ------------- ----------
(In Thousands)
ASSETS
Interest-Earning Assets:
Loans (2) $826,659 $32,982 8.05%
Industrial Revenue Bonds (3) 10,155 461 9.15
Investments:
Taxable 199,645 5,383 5.44
Tax-Favored Debt Securities 29,857 742 5.01
Tax-Favored Equity Securities 26,975 533 3.98
Interest-Bearing Deposits in Banks 2,006 34 3.42
Federal Funds Sold 15,122 266 3.55
------- -------
Total Interest-Earning Assets 1,110,419 40,401 7.34
-------
NonInterest-Earning Assets 94,750
Allowance for Possible Loan Losses (19,267)
-------
Total Assets $1,185,902
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts $500,139 6,166 2.49
Certificates of Deposit $100,000
and Over 67,380 1,196 3.58
Other Time Deposits 309,549 5,802 3.78
------- -------
Total Interest-Bearing Deposits 877,068 13,164 3.03
Short-Term Borrowings 40,172 965 4.84
------- -------
Total Interest-Bearing Liabilities 917,240 14,129 3.11
-------
NonInterest-Bearing Liabilities:
Demand Deposits 157,145
Other Liabilities 11,975
-------
Total Liabilities 1,086,360
Stockholders' Equity 99,542
-------
Total Liabilities and
Stockholders' Equity $1,185,902
===========
Net Interest Income $26,272
=======
Interest Rate Spread (5) 4.23%
Net Yield on Earning Assets (6) 4.77%
(1) On a fully taxable equivalent basis. Calculated using a Federal Income
Tax Rate of 35%.
(2) Includes nonperforming loans.
(3) Industrial revenue bonds are included in Loans in the Financial Statements.
(4) Average balances are based on historical amortized cost balances.
(5) Interest rate spread is the average rate earned on total interest-earning
assets less the average rate paid for interest-bearing liabilities.
(6) Net yield on earning assets is net interest income divided by total
interest-earning assets.
The accompanying notes are an integral part of these consolidated financial
statements.
Chittenden Corporation
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months
Ended June 30,
1995 1994
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $9,683 $7,228
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 1,550 2,400
Depreciation and amortization 1,499 976
Amortization of intangible assets - -
Amortization of premiums, fees, and discounts, net 605 656
Investment securities losses - 57
Deferred (prepaid) income taxes (724) 274
Changes in assets and liabilities net of effects from
purchase of the Bank of Western Massachusetts:
Loans held for sale (3,898) 7,205
Accrued interest receivable 196 (2,179)
Other assets 4,319 1,270
Accrued expenses and other liabilities (1,008) (462)
---------- ----------
Net cash provided by operating activities 12,222 17,425
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Bank of Western Massachusetts,
net of cash acquired (3,455) -
Proceeds from sales of securities (available for sale) 16,001 32,920
Proceeds from maturing securities and principal payments
on securities (available for sale) 139,502 104,131
Purchase of securities (available for sale) (152,348) (195,405)
Proceeds from principal payments on securities
(held for investment) 100 620
Loans originated, net of principal repayments (21,719) 4,977
Purchases of premises and equipment (1,981) (576)
---------- ----------
Net cash used in investing activities (23,900) (53,333)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (3,237) (16,487)
Net increase (decrease) in short-term borrowings 48,859 (29,758)
Proceeds from issuance of treasury and common stock 202 114
Dividends on common stock (1,998) (1,245)
---------- ----------
Net cash provided by (used in) financing activities 43,826 (47,376)
---------- ----------
Net increase (decrease) in cash and cash equivalents 32,148 (83,284)
Cash and cash equivalents at beginning of year 100,973 195,163
---------- ----------
Cash and cash equivalents at June 30, $133,121 $111,879
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $23,619 $14,331
Income taxes 4,200 3,050
Noncash transactions:
Loans transferred to other real estate owned 3,513 675
Mortgage loans securitized 8,121 -
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE 1 - ACCOUNTING POLICIES
The Company's significant accounting policies, other than those described
in Note 2 below, are described in Note 1 of the Notes to Consolidated
Financial Statements included in its 1994 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
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
NOTE 2 - ACCOUNTING POLICY CHANGE - ADOPTION OF SFAS NO. 114
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of a
Loan, as amended by SFAS No. 118 (hereafter collectively referred to as SFAS
114). A loan is impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due according
to the contractual terms of the loan agreement. SFAS 114 requires that
impaired loans be measured based on the present value of the expected future
cash flows discounted at the loan's effective interest rate. In the case of
collateral dependent loans, impairment may be measured based on the fair value
of the collateral. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a
valuation allowance. This change in accounting as prescribed by SFAS 114 did
not result in a cumulative adjustment of the Company's reported financial
condition. Further, adoption of SFAS 114 did not impact the Company's
measurement of its provision for possible loan losses for the six month period
ended June 30, 1995.
The adoption of SFAS 114 had no impact on the Company's income recognition
policy for nonaccrual loans.
Allowance for Possible Loan Losses. The following table presents changes
in the allowance for possible loan losses:
Three Months Six Months
Ended June 30, Ended June 30,
--------------------------------------
1995 1994 1995 1994
--------------------------------------
(In Thousands)
Beginning Balance $23,402 $18,985 $19,099 $18,917
Allowance of Acquired Bank - - 4,135 -
Provision 600 1,200 1,550 2,400
Loans Charged Off (1,290) (1,521) (2,343) (2,877)
Loan Recoveries 834 263 1,105 487
-----------------------------------------
Ending Balance $23,546 $18,927 $23,546 $18,927
=========================================
At June 30, 1995, the recorded investment in loans that are considered to
be impaired under SFAS 114 was $7,527,000 (all such loans were on a nonaccrual
basis). Included in this amount is $4,222,000 of impaired loans for which the
related allowance for possible loan losses is $875,000, and $3,305,000 of
impaired loans for which no specific allowance for possible loan losses has
been allocated. The average recorded investment in impaired loans during the
quarter ended June 30, 1995 was approximately $8,634,000. For the quarter
ended June 30, 1995, interest income on impaired loans totaled $39,000, which
was recognized on a cash basis.
NOTE 3 - ACQUISITION
On March 17, 1995 the Company acquired all of the outstanding shares of the
common stock of Bank of Western Massachusetts. The Company issued 784,406
shares at a price of $18.20 per share; 408,594 of the shares issued were
treasury stock. The total cash outlay, including payments made with respect
to outstanding stock options and warrants issued by Bank of Western
Massachusetts, was $12.1 million. This transaction has been accounted for as
a purchase and, accordingly the consolidated statement of income includes Bank
of Western Massachusetts' results of operations from the date of acquisition.
In accordance with the purchase method of accounting, the purchase price
has been allocated to assets acquired and liabilities assumed based on
estimates of fair value at the date of acquisition. The excess of purchase
price over the fair value of assets acquired, including a core deposit
intangible asset, has been recorded as goodwill. The fair value of these
assets and liabilities is summarized as follows:
(In Thousands)
--------------
Cash and Cash Equivalents $ 8,715
Securities Available for Sale 42,123
Net Loans 158,975
Premises and Equipment 1,422
Core Deposit Intangible 5,021
Goodwill 7,123
Other Real Estate Owned 1,296
Prepaid Expenses and Other Assets 5,296
Deposits (176,395)
Short-Term Borrowings (18,980)
Accrued Expenses and Other Liabilities (8,143)
--------------
Total Acquisition Cost $ 26,453
==============
Included in the total acquisition cost are approximately $100,000 of
capitalized costs incurred in connection with the acquisition.
Future adjustments to certain preliminary estimates may result in
adjustments to these amounts. Such adjustments, in aggregate, are not expected
to be material.
Goodwill is being amortized on a straight-line basis over 15 years; the
core deposit intangible is being amortized on an accelerated basis over 10
years.
Following is supplemental information reflecting selected pro forma results
if this acquisition had been consummated at the beginning of the periods
presented:
First
Full Year Six Months
--------------------------
1994 1995
--------------------------
(In Thousands, except EPS)
Total Revenue $87,346 $46,620
Net Income 15,972 8,672
Earnings per Share (EPS)
(Split-adjusted) $ 1.84 $ 1.03
Total revenue includes net interest income and noninterest income.
NOTE 4 - STOCKHOLDERS' EQUITY
Stock Split. On April 19, 1995, the Company declared a five-for-four stock
split to be distributed on May 26, 1995 to stockholders of record May 12,
1995. This stock split has been reflected in the accompanying balance sheets
as of June 30, 1995 and December 31, 1994; all per share information shown on
the accompanying statements of income has been retroactively restated to
reflect the split. Quarterly per share figures may not total to the full year
amount due to changes in the average number of shares outstanding.
NOTE 5 - SUBSEQUENT EVENT
Dividend Declaration. On July 20, 1995, the Company declared dividends of
approximately $1.23 million or $0.15 per share. This dividend is to be paid
on August 18, 1995 to stockholders of record on August 4, 1995.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Chittenden Corporation's net income for the second quarter of 1995
increased 31% from the 1994 level to $5.0 million, or $0.60 per share. Net
income for the first six months of 1995 totaled $9.7 million, or $1.19 per
fully diluted share, up 34% from last year. Return on average assets was
1.42% for the first six months of 1995, compared with 1.23% last year.
Return on average equity was 17.43% for the first six months of 1995, up
from 14.64% for the same period in 1994.
Net interest income on a fully taxable equivalent basis for the first
half of 1995 was $31.7 million, up $5.5 million from the amount earned
during the first six months of 1994. Contributing to this increase were
both a higher net yield on earning assets, up 21 basis points from a year
ago to 4.98%, and higher average earning assets, up $176.3 million from a
year ago due primarily to the acquisition of Bank of Western Massachusetts
late in the first quarter of 1995. The acquisition was accounted for as a
purchase, therefore the numbers disclosed in the tables and narrative that
follow include the acquired bank for 1995, but not for the comparable time
periods in 1994.
Provisions for and activity in the allowance for possible loan losses
are summarized as follows:
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------
1995 1994 1995 1994
----------------------------------
(In Thousands)
Beginning Allowance for Possible
Loan Losses Balance $23,402 $18,985 $19,099 $18,917
Allowance of Bank Acquired
March 17, 1995 - - 4,135 -
Provision for Possible Loan Losses 600 1,200 1,550 2,400
Loans Charged Off (1,290) (1,521) (2,343) (2,877)
Loan Recoveries 834 263 1,105 487
-------------------------------------
Ending Allowance for Possible
Loan Losses Balance $23,546 $18,927 $23,546 $18,927
=====================================
The lower level of provision for possible loan losses reflected the effect
of significant recoveries in the second quarter.
Noninterest income amounted to $7.2 million for the second quarter and
$13.8 million for the first half of 1995, up 24% and 20%, respectively,
from the same periods a year ago. Trust revenue was up modestly from 1994
levels. Service charges on deposit accounts were up due to higher deposit
levels, primarily reflecting the acquired bank. Gains on sales of mortgage
loans were up $128,000 for the quarter due to increased activity as
interest rates declined. For the first six months of the year, gains were
down $284,000 reflecting lower levels of refinancing activity in the first
quarter. Chittenden continues to sell most of its fixed rate residential
mortgage production in the secondary market. Mortgage servicing income was
up slightly for the second quarter and even with the first half of last
year. Revenue from higher serviced mortgage balances was partially offset
by accelerated amortization of deferred premiums. Credit card income
increased $1.1 million for the second quarter and $2.0 million for the
first six months from the comparable 1994 levels, reflecting higher
transaction volumes.
For the second quarter of 1995, noninterest expenses were $15.6
million, up 26% from the comparable 1994 level. Most of the increase
reflected the inclusion of the Bank of Western Massachusetts' expenses in
the 1995 amounts. Without the effect of the acquisition, second quarter
expenses were up approximately $1.3 million or 11%. This increase was
primarily in the credit card expense category and reflected the increased
volume of activity noted previously. Other expense included $307,000 of
amortization of intangibles recorded in connection with the acquisition.
Noninterest expenses stood at $28.8 million for the first half of 1995, up
20% from the same period last year. Excluding the Bank of Western
Massachusetts, expenses were up 10% for the first half. Half of this
variance was attributable to higher credit card expenses.
CREDIT QUALITY
Nonperforming assets include nonaccrual loans, restructured debt, and
foreclosed real estate (Other Real Estate Owned). As of June 30, 1995,
nonperforming assets totaled $13.7 million, up from $12.8 million a year
earlier and down from $15.1 million at March 31, 1995. Approximately $4.3
million in payments received, charge-offs, and sales of OREO during the
quarter exceeded the addition of $2.8 million to total non-performing
assets. The allowance for loan losses stood at $23.5 million at June 30,
1995, up slightly from $23.4 million at March 31, 1995 and $19.1 million
at December 31, 1994.
A summary of credit quality follows:
06/30/95 03/31/95 12/31/94 06/30/94
--------------------------------------
(In Thousands)
Nonaccrual Loans $11,166 $12,755 $ 7,934 $11,225
Restructured Debt 187 190 185 188
Other Real Estate
Owned (OREO) 2,312 2,183 1,288 1,388
---------------------------------------
Total Nonperforming
Assets (NPA) $13,665 $15,128 $ 9,407 $12,801
=======================================
Loans Past Due 90 Days or
More and Still Accruing Interest $ 1,814 $ 3,733 $ 1,132 $ 751
Allowance for Possible Loan Losses 23,546 23,402 19,099 18,927
NPA as % of Loans plus OREO 1.30% 1.47% 1.08% 1.52%
Loss Allowance as % of Loans 2.24 2.28 2.19 2.25
Loss Allowance as % of
Nonperforming Loans 207.40 180.63 235.24 165.84
Loss Allowance as % of NPA 172.31 154.69 203.02 147.86
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of a
Loan as amended by SFAS No. 118. Please refer to NOTE 2 to the
Consolidated Financial Statements appearing elsewhere in this document.
CAPITAL
Stockholders' equity totaled $125.7 million at June 30, 1995, up from
$119.0 million at the end of March. At June 30, 1994, equity was $100.2
million. The current level reflects the net income of $5.0 million
for second quarter 1995, the improvement of $2.9 million in the
valuation allowance for net unrealized losses on investment securities
available for sale, and dividends paid to stockholders of $1.2 million.
The decrease in the valuation allowance reflects an increase in the fair
value of the available for sale investment portfolio which resulted from
lower interest rates during the quarter.
"Tier One" capital, consisting entirely of common equity, measured
10.65% of risk-weighted assets at June 30, 1995. Total capital, including
the "Tier Two" allowance for loan losses, was 12.01% of risk-weighted
assets. The leverage capital ratio was 7.84%. 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 and borrowing 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, 1995, the Company
maintained cash balances and short-term investments of approximately $133.1
million, compared with $101.0 million at December 31, 1994. During the
first six months of 1995, the Company continued to be an average daily net
seller of Federal Funds.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) MEETING DATE
April 19, 1995 - Annual Meeting
(b) N/A
(c) VOTING MATTERS
1. The election of Directors as provided by the By-Laws.
Director For Against Abstain No Vote
-----------------------------------------------------------------------
Frederic H. Bertrand 5,144,897 0 26,188 0
David M. Boardman 5,151,601 0 19,484 0
Pall D. Spera 5,152,635 0 18,450 0
Martel D. Wilson, Jr. 5,153,274 0 17,811 0
2. The approval of the appointment of Arthur Andersen LLP as independent
public accountants for 1995.
Public Accountant For Against Abstain No Vote
-----------------------------------------------------------------------
Arthur Andersen LLP 5,141,041 13,854 16,190 0
(d) N/A
PART 11 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
Press Release dated April 19, 1995 related to announcement of
five-for-four stock split, filed via Edgar on April 26, 1995.
<PAGE>
CHITTENDEN CORPORATION
SIGNATURES
Pursuant to the requirement 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
Registrant
August 9, 1995 S/PAUL A. PERRAULT
Date Paul A. Perrault, President
and Chief Executive Officer
August 9, 1995 S/NANCY ROWDEN BROCK
Date Nancy Rowden Brock
Treasurer
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