August 13, 1996
Securities and Exchange Commission
450 5th Street
Washington, D. C. 20549
RE: CHITTENDEN CORPORATION QUARTERLY REPORT (ON FROM 10-Q)
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 quarterly
report for the six months ended June 30, 1996 (on Form 10-Q) of Chittenden
Corporation, Two Burlington Square, Burlington, Vermont 05401.
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
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Six Months Ended June 30, 1996
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, 1996 there were 12,624,197 shares of the Corporations's $1.00 par
value common stock issued, with 12,221,784 shares outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHITTENDEN CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
1996 1995
--------- ---------
ASSETS (In Thousands)
(RESTATED,
See Note 3)
Cash and Cash Equivalents $175,552 $197,141
Securities Available For Sale 320,289 278,321
Securities Held For Investment (Market Value $42,054,000
in 1996; and $42,633,000 in 1995) 42,222 43,164
Stock in Federal Home Loan Bank of Boston 5,591 5,591
Loans Held for Sale 9,381 14,691
Loans:
Commercial 269,984 248,169
Real Estate:
Residential 481,921 468,008
Commercial 306,671 305,961
Construction 27,498 25,796
--------- ---------
Total Real Estate 816,090 799,765
Consumer 181,365 159,499
--------- ---------
Total Loans 1,267,439 1,207,433
Less: Allowance for Possible Loan Losses (28,107) (27,817)
--------- ---------
Net Loans 1,239,332 1,179,616
--------- ---------
Accrued Interest Receivable 13,610 12,880
Other Real Estate Owned 1,875 2,651
Net Deferred Tax Asset 11,972 10,333
Other Assets 15,290 13,768
Premises and Equipment 24,790 25,034
Intangible Assets 10,888 11,514
--------- ---------
Total Assets $1,870,792 $1,794,704
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $250,132 $252,421
Certificates of Deposit $100,000 and Over 87,614 103,924
Savings and Other Time 1,280,588 1,203,512
--------- ---------
Total Deposits 1,618,334 1,559,857
--------- ---------
Short-Term Borrowings 60,177 52,893
Accrued Expenses and Other Liabilities 27,660 25,521
Long-Term Debt 2,512 2,484
--------- ---------
Total Liabilities 1,708,683 1,640,755
--------- ---------
Stockholders' Equity:
Common Stock - $1 Par Value
Authorized - 30,000,000 Shares
Issued - 12,624,197 Shares in 1996; and 12,345,3 12,624 12,345
Surplus 72,764 70,537
Retained Earnings 83,197 74,335
Treasury Stock - At Cost, 402,413 Shares in 1996;
367,417 in 1995 (4,770) (3,967)
Net Unrealized Gain (Loss) on Securities
Available for Sale, Net of Taxes (Benefit) of
($861,000) in 1996; and $535,000 in 1995 (1,649) 768
Unearned Portion of Employee Restricted Stock (57) (69)
--------- ---------
Total Stockholders' Equity 162,109 153,949
--------- ---------
Total Liabilities and Stockholders' Equity $1,870,792 $1,794,704
========= =========
Certain amounts for 1995 have been reclassified to conform with 1996
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,
1996 1995
Interest Income: -------- --------
(In Thousands, Except Share Data)
(RESTATED,
See Note 3)
Interest on Loans $28,854 $28,466
Investment Securities:
Mortgage-Backed Securities 1,416 1,448
Taxable 3,533 3,501
Tax-Favored Debt 712 610
Tax-Favored Equity 232 192
Short-Term Investments 293 349
-------- --------
Total Interest Income 35,040 34,566
-------- --------
Interest Expense:
Deposits:
Savings 6,484 6,453
Time 7,332 7,336
-------- --------
Total Interest on Deposits 13,816 13,789
Short-Term Borrowings 531 1,021
Long-Term Debt 50 25
-------- --------
Total Interest Expense 14,397 14,835
-------- --------
Net Interest Income 20,643 19,731
Provision for Possible Loan Losses 1,025 800
-------- --------
Net Interest Income after Provision for
Possible Loan Losses 19,618 18,931
-------- --------
Noninterest Income:
Trust Department Income 1,271 1,048
Service Charges on Deposit Accounts 1,638 1,489
Gains (Losses) on Sales of Securities, Net - -
Mortgage Servicing Income 613 572
Gains on Sales of Mortgage Loans 659 347
Credit Card Income 4,486 3,007
Other 1,277 1,027
-------- --------
Total Noninterest Income 9,944 7,490
-------- --------
Noninterest Expense:
Salaries 6,258 5,788
Employee Benefits 1,897 1,947
Net Occupancy Expense 2,345 2,120
FDIC Deposit Insurance 6 810
Other Real Estate Owned Income and Expense, Net 106 (42)
Credit Card Expense 3,629 2,113
Other 5,441 5,118
-------- --------
Total Noninterest Expense 19,682 17,854
-------- --------
Income Before Income Taxes 9,880 8,567
Provision for Income Taxes 3,183 2,861
-------- --------
Net Income $6,697 $5,706
======== ========
Earnings Per Share:
Primary $0.54 $0.47
Fully Diluted $0.54 $0.47
Dividends Declared Per Share $0.20 $0.10
Book Value $13.26 $12.04
Weighted Average Common and Common Equivalent
Shares Outstanding 12,470,416 12,222,130
Quarterly per share figures may not total to the full year amount due to
changes in the average number of shares outstanding.
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,
1996 1995
Interest Income: -------- --------
(In Thousands, Except Share Data)
(RESTATED,
See Note 3)
Interest on Loans $57,288 $52,537
Investment Securities:
Mortgage-Backed Securities 2,886 2,850
Taxable 6,693 6,443
Tax-Favored Debt 1,422 1,127
Tax-Favored Equity 670 377
Short-Term Investments 739 1,052
-------- --------
Total Interest Income 69,698 64,386
-------- --------
Interest Expense:
Deposits:
Savings 13,072 12,655
Time 14,813 12,692
-------- --------
Total Interest on Deposits 27,885 25,347
Short-Term Borrowings 1,005 1,612
Long-Term Debt 100 67
-------- --------
Total Interest Expense 28,990 27,026
-------- --------
Net Interest Income 40,708 37,360
Provision for Possible Loan Losses 2,008 1,950
-------- --------
Net Interest Income after Provision for
Possible Loan Losses 38,700 35,410
-------- --------
Noninterest Income:
Trust Department Income 2,450 2,128
Service Charges on Deposit Accounts 3,123 2,855
Gains (Losses) on Sales of Securities, Net - (6)
Mortgage Servicing Income 1,238 1,125
Gains on Sales of Mortgage Loans 1,438 489
Credit Card Income 8,113 5,608
Other 2,405 2,277
-------- --------
Total Noninterest Income 18,767 14,476
-------- --------
Noninterest Expense:
Salaries 12,438 10,989
Employee Benefits 3,936 3,840
Net Occupancy Expense 4,705 4,067
FDIC Deposit Insurance 15 1,518
Other Real Estate Owned Income and Expense, Net 174 (166)
Credit Card Expense 6,338 3,918
Other 11,000 9,209
-------- --------
Total Noninterest Expense 38,606 33,375
-------- --------
Income Before Income Taxes 18,861 16,511
Provision for Income Taxes 6,151 5,463
-------- --------
Net Income $12,710 $11,048
======== ========
Earnings Per Share:
Primary $1.02 $0.93
Fully Diluted $1.02 $0.93
Dividends Declared Per Share $0.31 $0.18
Book Value $13.26 $12.04
Weighted Average Common and Common Equivalent
Shares Outstanding 12,433,649 11,849,891
Quarterly per share figures may not total to the full year amount due to
changes in the average number of shares outstanding.
The accompanying notes are an integral part of these consolidated financial
statements.
CHITTENDEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For Six Months Ended June 30
1996 1995
-----------------------
(RESTATED, See Note 3)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,710 $11,048
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 2,008 1,950
Depreciation 1,781 1,415
Amortization of intangible assets 626 357
Amortization of premiums, fees, and discounts,
net 1,144 605
Investment securities losses - 6
Prepaid income taxes (244) (926)
Loans originated and purchased for sale (103,614) (46,651)
Proceeds from sales of loans 110,362 43,832
Gain on sales of loans (1,438) (489)
Gain on sales of premises and equipment - (212)
Changes in assets and liabilities, net of effect from
purchase of the Bank of Western Massachusetts:
Accrued interest receivable (730) 196
Other assets (1,056) 3,557
Accrued expenses and other liabilities 2,244 (235)
-------- --------
Net cash provided by operating activities 23,793 14,453
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of the Bank of Western Massachusetts - (3,455)
Proceeds from sales of securities available for - 18,234
Proceeds from maturing securities and principal
payments on securities available for sale 301,220 141,156
Purchase of securities available for sale (346,643) (154,890)
Proceeds from principal payments on securities
held for investment 546 2,499
Purchases of securities held for investment 0 (1,663)
Loans originated, net of principal repayments (62,479) (30,373)
Purchases of premises and equipment (1,537) (3,737)
Proceeds from sales of premises and equipment - 327
-------- --------
Net cash used by investing activities (108,893) (31,902)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 58,344 5,484
Net increase in short-term borrowings 7,284 47,859
Net increase in long-term debt 28 27
Proceeds from issuance of treasury and common
stock 1,704 202
Dividends on common stock (3,849) (2,164)
-------- --------
Net cash provided by financing activities 63,511 51,408
-------- --------
Net increase (decrease) in cash and cash equivalents (21,589) 33,959
Cash and cash equivalents at beginning of year 197,141 114,652
-------- --------
Cash and cash equivalents at June 30, $175,552 $148,611
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $28,635 $26,708
Income taxes 4,620 5,120
Noncash investing and financing activities:
Loans transferred to other real estate owned 1,408 3,668
Common stock issued in conjunction with the acquisition
of The Bank of Western Massachusetts - 14,276
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
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 1995 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.
1995 data reflects minor reclassifications to be consistent with 1996
presentation.
NOTE 2 - ACCOUNTING POLICY CHANGE - ADOPTION OF SFAS 122
As of January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122, ACCOUNTING FOR MORTGAGE SERVICING RIGHTS("SFAS
122"). SFAS 122 requires the recognition, as separate assets, rights to service
mortgage loans for others, when the related loans are sold and the servicing
rights are retained. The amount capitalized is based on an allocation of the
total cost of the mortgage loans to the mortgage servicing rights and the loans
(without the mortgage servicing rights) based on their relative fair values.
SFAS 122 also requires capitalized mortgage servicing rights to be assessed for
impairment based on the fair value of those rights. This change in accounting
was adopted prospectively for mortgage loans sold after January 1, 1996.
Mortgage servicing rights capitalized during the six months ended June 30, 1996,
net of amortization, totaled $724,000.
NOTE 3 - ACQUISITION OF FLAGSHIP BANK AND TRUST COMPANY
On February 29, 1996, the Company acquired Flagship Bank and Trust Company
("Flagship") of Worcester, Massachusetts for stock. The Company issued
1,628,400 shares of common stock in exchange for all outstanding Flagship
shares. This transaction has been accounted for as a pooling of interests and,
accordingly, the consolidated financial statements for all periods presented
have been restated to include the acquired bank.
Total revenue, income before income taxes, net income, and earnings per
share data of the separate companies for the periods preceding the acquisition
were:
Six months ended June 30, 1995
(In Thousands, Except Share Data)
Chittenden Flagship Combined
---------- -------- -------
Total Revenue $44,735 $7,101 $51,836
Income Before Income Taxes 14,343 2,168 16,511
Net Income 9,683 1,365 11,048
Earnings Per Share $0.96 $0.80 $0.93
Total revenue includes net interest income and non interest income.
NOTE 4 - STOCKHOLDERS' EQUITY
Stock Split. On April 17, 1996, the Company declared a five-for-four stock
split which was distributed on May 24, 1996 to stockholders of record May 10,
1996. This stock split has been reflected in the accompanying balance sheets as
of June 30, 1996 and December 31, 1995; all per share information shown on
the accompanying statements of income has been retroactively restated to reflect
the split.
Dividend Declaration. On July 18, 1996, the Company declared dividends of
approximately $2.44 million or $0.20 per share. This dividend is to be paid on
August 16, 1996 to stockholders of record on August 2, 1996.
(page)
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Chittenden Corporation
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Six Months Ended June 30,
1996
-----------------------------------
Interest Average
Average Income/ Yield/
Balance Expense(1) Rate(1)
-----------------------------------
(In Thousands)
ASSETS
Interest-Earning Assets:
Loans $1,233,503 $57,086 9.31%
Industrial Revenue Bonds (2) 5,110 292 11.49
Investments:
Taxable 311,131 9,579 6.19
Tax-Favored Debt Securities 63,755 2,085 6.58
Tax-Favored Equity Securities 31,684 922 5.85
Interest-Bearing Deposits in Banks 100 - 3.00
Federal Funds Sold 27,365 739 5.43
------- -------
Total Interest-Earning Assets 1,672,648 70,703 8.50
-------
NonInterest-Earning Assets 150,814
Allowance for Possible Loan Losses (28,377)
-------
Total Assets $1,795,085
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 803,944 13,072 3.27
Certificates of Deposit $100,000
and Over 105,874 2,981 5.66
Other Time Deposits 435,432 11,832 5.46
------- -------
Total Interest-Bearing Deposits 1,345,250 27,885 4.17
Short-Term Borrowings 29,840 1,005 6.77
Long-Term Debt 2,500 100 8.04
------- -------
Total Interest-Bearing Liabilities 1,377,590 28,990 4.23
-------
NonInterest-Bearing Liabilities:
Demand Deposits 237,229
Other Liabilities 22,722
-------
Total Liabilities 1,637,541
Stockholders' Equity 157,544
-------
Total Liabilities and
Stockholders' Equity $1,795,085
===========
Net Interest Income $41,713
=======
Interest Rate Spread (3) 4.27%
Net Yield on Earning Assets (4) 5.02%
(1) On a fully taxable equivalent basis. Calculated using a Federal Income
Tax Rate of 35%. Loan income includes fees.
(2) Industrial revenue bonds are included in Loans in the Financial Statements.
(3) Interest rate spread is the average rate earned on total interest-earning
assets less the average rate paid on interest-bearing liabilities.
(4) Net yield on earning assets is net interest income divided by total
interest-earning assets.
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 Expense(1) Rate(1)
-----------------------------------
(In Thousands)
ASSETS
Interest-Earning Assets:
Loans $1,115,007 $52,263 9.45%
Industrial Revenue Bonds (2) 6,998 409 11.79
Investments:
Taxable 295,956 9,294 6.33
Tax-Favored Debt Securities 49,919 1,646 6.65
Tax-Favored Equity Securities 16,281 520 6.44
Interest-Bearing Deposits in Banks 100 - 3.00
Federal Funds Sold 35,870 1,050 5.90
------- -------
Total Interest-Earning Assets 1,520,131 65,182 8.65
-------
NonInterest-Earning Assets 128,328
Allowance for Possible Loan Losses (25,016)
-------
Total Assets $1,623,443
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 725,578 12,653 3.52
Certificates of Deposit $100,000
and Over 123,712 3,257 5.31
Other Time Deposits 366,672 9,438 5.19
------- -------
Total Interest-Bearing Deposits 1,215,962 25,348 4.20
Short-Term Borrowings 48,511 1,614 6.71
Long-Term Debt 1,445 64 8.93
------- -------
Total Interest-Bearing Liabilities 1,265,918 27,026 4.31
-------
NonInterest-Bearing Liabilities:
Demand Deposits 211,883
Other Liabilities 17,622
-------
Total Liabilities 1,495,423
Stockholders' Equity 128,020
-------
Total Liabilities and
Stockholders' Equity $1,623,443
===========
Net Interest Income $38,156
=======
Interest Rate Spread (3) 4.34%
Net Yield on Earning Assets (4) 5.06%
(1) On a fully taxable equivalent basis. Calculated using a Federal Income
Tax Rate of 35%. Loan income includes fees.
(2) Industrial revenue bonds are included in Loans in the Financial Statements.
(3) Interest rate spread is the average rate earned on total interest-earning
assets less the average rate paid on interest-bearing liabilities.
(4) Net yield on earning assets is net interest income divided by total
interest-earning assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Chittenden Corporation completed the acquisition of Flagship Bank and Trust
Company, of Worcester, Massachusetts, on February 29, 1996. A total of 1.6
million shares of Chittenden stock were exchanged in the transaction, which is
being accounted for as a pooling of interests. All historical financial
information has been restated to reflect the acquired bank.
Chittenden Corporation's net income for the second quarter of 1996 was $6.7
million compared with $5.7 million a year ago. Net income per share of common
stock was $0.54 for the three months ended June 30, 1996, up from $0.47 reported
a year ago. Return on average assets was 1.49% for the second quarter of 1996,
compared with 1.33% last year. Return on average equity was 16.83% for the
quarter ended June 30, 1996, compared with 16.44% for the same period in 1995.
For the first six months of 1996, net income was $12.7 million, or $1.02
per share, compared with $11.0 million and $0.93 per share for the same period a
year ago. Return on average assets and return on average equity were 1.43% and
16.22%, respectively, compared with 1.37% and 17.40% for the first half of 1995.
Net interest income on a fully taxable equivalent basis for the three
months ended June 30, 1996 was $21.1 million, up $1.0 million from the amount
earned during the same period in 1995. This increase was a result of higher
average earning assets, up $86 million from a year ago. The increase was due to
growth in loans and investments funded by higher deposit levels. Net yield on
average earning assets was 5.03% for the three month periods ended June 30, 1996
and 1995.
For the six months ended June 30, 1996, net interest income on a fully
taxable equivalent basis was $41.7 million, up $3.6 million from a year ago.
Net yield on earning assets was 5.02% and 5.06%, respectively, for the first six
months of 1996 and 1995. The decline in net yield was more than offset by
higher average earning assets, up $153 million from 1995.
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
-------------- --------------
1996 1995 1996 1995
(In Thousands)
Beginning Allowance for Possible
Loan Losses Balance $27,997 $26,610 $27,817 $22,163
Allowance of Bank Acquired
March 17, 1995 - - - 4,135
Provision for Possible Loan Losses 1,025 800 2,008 1,950
Loans Charged Off (1,323) (1,736) (2,740) (2,853)
Loan Recoveries 408 843 1,022 1,122
-------------------- -----------------
Ending Allowance for Possible
Loan Losses Balance $28,107 $26,517 $28,107 $26,517
===================== =================
Noninterest income amounted to $9.9 million for the second quarter and $18.8
million for the first half of 1996, up $2.4 million and $4.3 million,
respectively, from the same periods a year ago. Credit card income increased
$1.5 million for the second quarter and $2.5 million for the first six months,
reflecting continued growth in merchant services transaction volumes. Service
charges on deposit accounts were up $149,000 in the second quarter and $268,000
for the first six months from the respective periods in the previous year,
reflecting growth in deposit levels. Trust Department revenue of $1.3 million
for the quarter and $2.5 million for the first six months, increased 21% and
15%, respectively, from the year ago levels. This increase is attributable
primarily to higher levels of assets under management and custody. Gains on
sales of mortgage loans were up $312,000 for the quarter and $949,000 for the
first six months. The adoption of Statement of Financial Accounting Standards
No. 122, ACCOUNTING FOR MORTGAGE SERVICING RIGHTS, which requires the
capitalization of mortgage servicing rights retained, accounted for $366,000 of
the second quarter gain and $724,000 of the gain for the first six months.
For the second quarter of 1996, noninterest expenses were $19.7 million, up
$1.8 million from the comparable 1995 level. Higher processing fees related to
credit card activities accounted for $1.5 million of the increase. Noninterest
expenses for the first half of 1996 were $38.6 million, up $5.2 million from
1995. Increased credit card processing fees represented $2.4 million of the
increase. Chittenden acquired The Bank of Western Massachusetts late in the
first quarter of 1995. Because that transaction was accounted for as a
purchase, only $2.1 million of BWM noninterest expenses were included in 1995,
compared with $3.8 million in 1996. Excluding the impact of credit card
activities and the 1995 acquisition, noninterest expenses were up 4% for the
first half of 1996 compared with a year ago.
CREDIT QUALITY
Nonperforming assets include nonaccrual loans, restructured debt, and
foreclosed real estate (Other Real Estate Owned). As of June 30, 1996,
nonperforming assets totaled $13.9 million down from $15.5 million a year ago
and about the same as March 31, 1996. The allowance for loan losses was $28.1
million at June 30, 1996, up from $26.5 million at June 30, 1995 and up slightly
from the end of the first quarter of 1996. The provision for possible loan
losses charged against earnings in the second quarter was $1.0 million, the same
as the first quarter 1996 level, and up $225,000 from the amount provided during
the second quarter of 1995.
A summary of credit quality follows:
6/30/96 3/31/96 12/31/95 6/30/95
------------------------------------------
(In Thousands)
Nonaccrual Loans $ 9,112 $ 8,386 $ 9,939 $11,799
Restructured Debt 2,892 2,854 2,502 558
Other Real Estate
Owned (OREO) 1,875 2,623 2,651 3,141
-----------------------------------------
Total Nonperforming
Assets (NPA) $13,879 $13,863 $15,092 $15,498
=========================================
Loans Past due 90 Days or
More and Still Accruing
Interest $ 2,420 $ 2,026 $ 1,054 $ 1,817
Allowance for Possible
Loan Losses 28,107 27,997 27,817 26,517
NPA as % of Loans Plus
OREO 1.09% 1.15% 1.25% 1.28%
Loss Allowance as % of
Loans 2.22 2.32 2.30 2.20
Loss Allowance as % of
Nonperforming Loans 234.15 249.08 223.59 214.59
Loss Allowance as % of
NPA 202.51 201.95 184.32 171.10
At June 30, 1996, the recorded investment in loans that are considered to be
impaired under SFAS 114 was $5,888,000 (all such loans, except troubled debt
restructurings, were on a nonaccrual basis). Included in this amount is
$2,278,000 of impaired loans for which the related allowance for possible loan
losses is $560,000, and $3,610,000 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, 1996 was
approximately $5,909,000. For the quarter ended June 30, 1996, interest income
on impaired loans totaled $95,000, of which $12,000 was recognized on a cash
basis.
CAPITAL
Stockholders' equity totaled $162.1 million at June 30, 1996, up from $153.9
million at December 31, 1995. The current level reflects year to date net
income of $12.7 million, stock issued of $1.7 million under an incentive stock
option plan, an increase of $2.4 million in the valuation allowance for net
unrealized losses on investment securities available for sale, and dividends
paid to stockholders of $3.8 million.
"Tier One" capital, consisting entirely of common equity, measured 11.39% of
risk-weighted assets at June 30, 1996. Total capital, including the "Tier Two"
allowance for loan losses, was 12.75% of risk-weighted assets. The leverage
capital ratio was 8.44%. 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, 1996, the Company maintained cash
balances and short-term investments of approximately $175.5 million, compared
with $197.1 million at December 31, 1995. During the first six months of 1996,
the Company continued to be an average daily net seller of Federal Funds.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) MEETING DATE
April 17, 1996
(b) ELECTION OF DIRECTORS AND CONTINUING DIRECTORS
Paul J. Carrara 3 Year Term
Philip A. Kolvoord 3 Year Term
James C. Pizzagalli 3 Year Term
Barbara W. Snelling 3 Year Term
Lyn Hutton 1 Year Term
Frederic H. Bertrand Continuing
David M. Boardman Continuing
Paul A. Perrault Continuing
Pall D. Spera Continuing
Martel D. Wilson, Jr. Continuing
(c) VOTING MATTERS
1. The election of Directors as provided by the By-Laws.
Director Total Vote Total Vote Withheld
For Each Director From Each Director
----------------------------------------------------------
Paul J. Carrara 7,936,232 29,172
Philip A. Kolvoord 7,935,572 29,832
James C. Pizzagalli 7,916,551 48,853
Barbara W. Snelling 7,942,932 22,472
Lyn Hutton 7,931,546 33,858
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
Press Release related to consummation of the
acquisition of Flagship Bank and Trust Company, dated
March 6, 1996 and accompanying financial statements
filed as an Amendment to such 8-K on May 3, 1996.
<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 13, 1996 S/PAUL A. PERRAULT
- --------------- ---------------------------------
Date Paul A. Perrault, President
and Chief Executive Officer
August 13, 1996 S/NANCY ROWDEN BROCK
- ---------------- -----------------------------------
Date Nancy Rowden Brock, Senior Vice
President, Chief Financial Officer
and Treasurer
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