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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): May 28, 1999
CHITTENDEN CORPORATION
(Exact name of Registrant as specified in charter)
Vermont 1-13769 03-0228404
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
Two Burlington Square, Burlington, Vermont 05401
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(Address of principal executive offices) (Zip Code)
(802) 660-1410
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name and former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
------------------------------------
Acquisition of Vermont Financial Services Corp. After the close of
business on May 28, 1999, following receipt of all required regulatory and
stockholder approvals, Chittenden Corporation, a Vermont corporation
("Chittenden"), completed the acquisition of Vermont Financial Services Corp., a
Delaware corporation ("VFSC"), pursuant to the terms and conditions of an
Agreement and Plan of Merger, dated as of December 16, 1998 (the "Merger
Agreement"), by and among Chittenden, Chittenden Acquisition Subsidiary, Inc., a
Delaware corporation and wholly-owned subsidiary of Chittenden, and VFSC. VFSC
is the parent company of Vermont National Bank and United Bank in Massachusetts.
The acquisition was effected by a series of transactions resulting in the merger
of VFSC with and into Chittenden (the "Merger"), with Chittenden as the
surviving corporation.
Pursuant to the Merger Agreement, holders of VFSC common stock, par
value $1.00 per share ("VFSC Common Stock"), are entitled to receive, for each
such share held by them on May 28, 1999 at 5:01 p.m. (the "Effective Time"),
1.07 shares of Chittenden common stock, par value $1.00 per share ("Chittenden
Common Stock"). Any holder of VFSC Common Stock who would otherwise be entitled
to receive a fraction of a share of Chittenden Common Stock will instead receive
an amount of cash equal to the product of such fraction and $29.3875, subject to
applicable withholding taxes. Approximately 14 million shares of Chittenden
common stock will be issued in the Merger, bringing the total number of
Chittenden shares outstanding to approximately 28 million.
In addition, at the Effective Time, all outstanding and unexercised
options to purchase shares of VFSC Common Stock were automatically converted
into options to purchase shares of Chittenden Common Stock. Chittenden has
assumed all of the VFSC options subject to the terms and conditions of VFSC's
stock option plans under which the assumed VFSC options were granted. The number
of shares of Chittenden Common Stock purchasable upon exercise of any VFSC
option is equal to the number of shares of VFSC Common Stock that were
purchasable prior to the Effective Time multiplied by the exchange ratio of
1.07, rounding to the nearest whole share, and the per share exercise price of
each VFSC option was adjusted by dividing the per share exercise price of each
VFSC option by the exchange ratio of 1.07, rounding to the nearest cent.
The Merger will be accounted for as a pooling of interests under
generally accepted accounting principles. A copy of the press release announcing
the effectiveness of the Merger is filed as Exhibit 99.5 hereto.
Board of Directors. As of the Effective Time, the following persons,
who were
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immediately prior to the Effective Time serving as members of the board of
directors of VFSC, became members of the board of directors of Chittenden:
Name Term Expires
---- ------------
William P. Cody 2000
Stephan A. Morse 2000
Ernest A. Pomerleau 2001
John K. Dwight 2001
Philip M. Drumheller 2002
Mark W. Richards 2002
Certain Dispositions. In order to satisfy certain commitments made by
Chittenden to the U.S. Department of Justice and the Board of Governors of the
Federal Reserve System in connection with the Merger, Charter One Bank, F.S.B.
("Charter One"), Factory Point National Bank ("Factory Point") and Merchants
Bank ("Merchants Bank," and together with Charter One and Factory Point, the
"Purchasers") entered into Purchase and Assumption Agreements, dated as of May
3, 1999; May 10, 1999 and May 26, 1999; and May 19, 1999, respectively (the
"Branch Agreements"), pursuant to which Chittenden Bank or Vermont National
Bank, as the case may be, will sell to the Purchasers eighteen (18) branch
offices formerly maintained by Vermont National Bank that are located in
Burlington (six), St. Albans (one), Berlin (one), Bennington (one), Brattleboro
(one), Bellows Falls (one), Jamaica (one), Ludlow (one), Middlebury (one),
Montpelier (one), Rutland (two) and Vergennes (one), Vermont (the "Branch
Offices") and the related assets and liabilities (collectively, the "Branch
Sales"). The Purchasers will assume the deposits at the Branch Offices, which
amounted to approximately $535 million at May 28, 1999, as well as purchase
approximately $150 million of commercial loans. The Branch Sales are subject to
the receipt of all required regulatory approvals and are expected to close in
late 1999 and early 2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Financial statements
of the business acquired are included as Exhibits 99.1 and 99.2
hereto.
(b) PRO FORMA FINANCIAL INFORMATION. Unaudited pro forma financial
information for the three years ended December 31, 1998, 1997 and
1996, and as of and for the three months ended March 31, 1999 are
included as Exhibit 99.3 and Exhibit 99.4, respectively, hereto.
3
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(c) EXHIBITS.
2.1 Agreement and Plan of Merger, dated as of December 16, 1998,
by and among Chittenden Corporation, Chittenden Acquisition
Subsidiary, Inc., and Vermont Financial Services Corp.
(Incorporated by reference to the Current Report on Form
8-K/A filed by Chittenden Corporation on January 6, 1999.)
23.1 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
99.1 Financial Statements of Vermont Financial Services Corp. at
and for the periods ended December 31, 1998. (Incorporated
by reference to the Annual Report on Form 10-K filed by
Vermont Financial Services Corp. on March 23, 1999.)
99.2 Unaudited Financial Statements of Vermont Financial Services
Corp. at and for the period ended March 31, 1999.
(Incorporated by reference to the Quarterly Report on Form
10-Q filed by Vermont Financial Services Corp. on May 10,
1999.)
99.3 Unaudited Pro Forma Financial Information as of and for the
three years ended December 31, 1998, 1997 and 1996.
(Incorporated by reference to the Registration Statement on
Form S-4 filed by Chittenden Corporation on April 6, 1999.)
99.4 Unaudited Pro Forma Financial Information as of and for the
three months ended March 31, 1999.
99.5 Press Release of Chittenden Corporation, dated May 28, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
CHITTENDEN CORPORATION
Dated: June 11, 1999 By: s/ Kirk W. Walters
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Name: Kirk W. Walters
Title: Chief Financial Officer
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Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Chittenden corporation
We consent to the incorporation by reference in the registration statement
(No. 333-75769) on Form S-4 of Chittenden Corporation of our report dated
January 22, 1999, with respect to the consolidated balance sheets of Vermont
Financial Services Corp. and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of income, changes in stockholders, equity,
comprehensive income and cash flows for the years then ended, which report is
incorporated by reference in the Form 8-K of Chittenden Corporation dated June
11, 1999.
KPMG LLP
Hartford Connecticut
June 11, 1999
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Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Form 8-K dated June 11, 1999 of
Chittenden Corporation of our report dated January 21, 1997 on our audit of the
consolidated financial statements of Vermont Financial Services Corp. for the
year ended December 31, 1996 which report is included in the 1998 Form 10-K of
Vermont Financial Services Corp.
PRICEWATERHOUSECOOPERS LLP
Hartford, Connecticut
June 11,1999
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Exhibit 99.4
<TABLE>
<CAPTION>
CHITTENDEN CORPORATION and VERMONT FINANCIAL SERVICES CORP.
UNAUDITED PRO FORMA COMBINING BALANCE SHEET
March 31, 1999 VERMONT PRO FORMA
CHITTENDEN FINANCIAL CHZ and
(CHZ) (VFSC) PRO FORMA ADJUSTMENTS VFSC
HISTORICAL HISTORICAL DR CR COMBINED
---------- ---------- -- -- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $156,294 $73,900 $2,549 (2) $232,743
Securities Available For Sale 439,406 497,898 937,304
Federal Home Loan Bank Stock 5,591 13,160 18,751
Mortgage Loans Held for Sale 9,057 15,542 24,599
Loans:
Commercial 329,396 176,015 505,411
Municipal 68,896 25,068 93,964
Real Estate:
Residential 364,107 736,702 1,100,809
Commercial 341,656 258,519 600,175
Construction 24,284 47,858 72,142
------------- ------------- -------------
Total Real Estate 730,047 1,043,079 1,773,126
Consumer 299,542 122,194 421,736
------------- ------------- -------------
Total Loans 1,427,881 1,366,356 2,794,237
Less: Allowance for Possible Loan (25,019) (17,243) (42,262)
Losses
------------- ------------- ------------
Net Loans 1,402,862 1,349,113 2,751,975
Accrued Interest Receivable 13,348 17,986 31,334
Other Real Estate Owned 316 1,038 1,354
Other Assets 22,613 32,054 54,667
Premises and Equipment, Net 29,302 40,256 69,558
Intangible Assets 12,160 55,831 67,991
------------- ------------- ------------- ------------ -------------
Total Assets $2,090,949 $2,096,778 $2,549 - $4,190,276
============= ============= ============= ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $311,072 $285,631 $596,703
Savings 1,044,376 981,758 2,026,134
Time Deposits less than $100,000 383,812 394,268 778,080
Time Deposits $100,000 and over 118,065 90,334 208,399
------------- ------------- -------------
Total Deposits 1,857,325 1,751,991 3,609,316
Short-Term Borrowings 25,872 103,924 129,796
Accrued Expenses and Other Liabilities 28,954 25,058 31,700 (1) 85,712
------------- ------------- ------------- ------------ -------------
Total Liabilities 1,912,151 1,880,973 - 31,700 3,824,824
------------- ------------- ------------- ------------ -------------
Stockholders' Equity:
Common Stock - $1 Par Value 15,930 13,293 13,293 (3) 13,755 (3) 29,780
95 (2)
Surplus 72,384 117,168 13,755 (3) 13,293 (3) 181,122
8,104 (4) 136 (2)
Retained Earnings 126,709 94,511 31,700 (1) 189,520
Treasury Stock - At Cost (37,757) (10,422) 2,318 (2) (37,757)
8,104 (4)
Accumulated Other Comprehensive Income 1,778 1,255 3,033
Unearned Portion of Employee Restricted
Stock (246) - (246)
------------- ------------- ------------- ------------ -------------
Total Stockholders' Equity 178,798 215,805 66,852 37,701 365,452
============= ============= ============= ============ =============
Total Liabilities and Stockholders'
Equity $2,090,949 $2,096,778 $66,852 $69,401 $4,190,276
============= ============= ============= ============ =============
</TABLE>
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CHITTENDEN CORPORATION and VERMONT FINANCIAL SERVICES CORP.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
VERMONT
CHITTENDEN FINANCIAL PRO FORMA
(CHZ) (VFSC) PRO FORMA ADJUSTMENTS CHZ and VFSC
HISTORICAL HISTORICAL DR CR COMBINED
---------- ---------- -- -- --------
(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Interest Income:
Interest on Loans $28,566 $28,006 $56,572
Investment Securities:
Taxable 6,977 7,523 14,500
Tax-Favored 531 110 641
Short-Term Investments 272 210 482
---------------- -------------- ---------------
Total Interest Income 36,346 35,849 72,195
Interest Expense:
Deposits:
Savings 7,568 7,591 15,159
Time 6,005 6,250 12,255
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Total interest on deposits 13,573 13,841 27,414
Short-Term Borrowings 395 1,217 1,612
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Total interest expense 13,968 15,058 29,026
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Net Interest Income 22,378 20,791 43,169
Provision for Possible Loan Losses 1,350 825 2,175
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Net Interest Income after Provision for
Possible Loan Losses 21,028 19,966 40,994
Noninterest Income:
Investment Management and Trust Income 1,802 1,740 3,542
Service Charges on Deposit Accounts 1,685 2,960 4,645
Mortgage Servicing Income 384 546 930
Gains on Sales of Mortgage Loans, Net 1,378 426 1,804
Credit Card Income, Net 893 293 1,186
Insurance Commissions, net 641 - 641
Other 1,512 1,987 3,499
---------------- -------------- ---------------
Total Noninterest Income 8,295 7,952 16,247
---------------- -------------- ---------------
Noninterest Expense:
Salaries 7,738 7,483 15,221
Employee Benefits 2,431 2,097 4,528
Net Occupancy Expense 2,454 4,186 6,640
Other Real Estate Owned, Income and
Expense, Net 3 237 240
Other 5,625 6,578 12,203
---------------- -------------- ---------------
Total Noninterest Expense 18,251 20,581 38,832
---------------- -------------- ---------------
Income Before Income Taxes 11,072 7,337 18,409
Income Tax Expense (Benefit) 3,577 2,913 6,490
---------------- -------------- ------------- ------------- ---------------
Net Income $7,495 $4,424 - - $11,919
================ ============== ============= ============= ===============
Earnings Per Share:
Basic $0.53 $0.34 $0.43
Diluted 0.52 0.34 0.42
Dividends per share 0.20 0.17 0.18
Weighted average common shares
outstanding 14,206,273 12,859,947 27,966,416
Weighted average common and common
equivalent shares outstanding 14,500,828 13,033,714 28,446,902
</TABLE>
*See accompanying notes
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NOTE 1
It is contemplated that the pending acquistion will be accounted for as a
pooling of interests. Accordingly, pro forma financial information assumes that
the merger was consummated as of the beginning of each of the periods indicated
herein. Certain reclassifications have been made to the accounts of Vermont
Financial in the accompanying Unaudited Pro Forma Combining Balance Sheet and
the Unaudited Pro Forma Combined Statements of Income to conform to Chittenden
presentation. Pro forma results from continuing operations do not reflect
nonrecurring items of income and expense resulting directly from the proposed
merger.
The effect of an estimated one-time charge of $31.7 million ($45 million
pre-tax) to be taken by Chittenden in connection with the acquisition of Vermont
Financial has been reflected in the accompanying Unaudited Pro Forma Combining
Balance Sheet as a reduction in retained earnings and an increase in accrued
expenses and other liabilities, net of a 35% tax benefit of $13.3 million, after
excluding $7 million of nondeductible expense. It is anticipated that the
one-time charge will range from $35 million to $45 million (on a pre-tax basis),
including $6 million to $7 million of nondeductible expense. For purposes of the
pro forma disclosures, the top end of the range has been used.
These charges have not been reflected in the Unaudited Pro Forma Combined
Statements of Income since they are nonrecurring. The unaudited pro forma
financial information does not give effect to any cost savings in connection
with the pending acquisition.
The unaudited pro forma financial information presented herein does not
reflect the impact of any divestitures that may be required as part of the
combination.
NOTE 2
In connection with the proposed transaction, Chittenden and Vermont
Financial will reissue approximately 95,000 shares of common stock either
through stock option exercises or through sales on the open market. This share
reissuance is required for the proposed transaction to be accounted for as a
pooling of interests in accordance with GAAP. There can be no assurances that
the estimated share reissuance will be greater than or less than this estimate.
All issuances are assumed to occur on March 31, 1999 at Chittenden's
closing price of $26.6875 per share and are assumed to be issued from Vermont
Financial treasury shares with an average book value of $24.27 per share as of
March 31, 1999.
NOTE 3
The pro forma stockholders' equity accounts of Chittenden have been
adjusted to reflect the issuance of shares of Chittenden common stock in
exchange for all of the outstanding shares of Vermont Financial common stock.
The 13,754,762 shares of Chittenden common stock to be issued pursuant to
the acquisition of Vermont Financial are based upon 12,854,918 net Vermont
Financial shares outstanding as of March 31, 1999 and the exchange ration of
1.07 shares of Chittenden common stock for each share of Vermont Financial
common stock. The excess of the par value of the Chittenden common stock to
be issued over the par value of the Vermont Financial common stock to be
acquired has been charged to surplus.
NOTE 4
To reflect the retirement of the remaining 343,000 shares of Vermont
Financial treasury stock.
10
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Exhibit 99.5
CHITTENDEN CORPORATION PRESS RELEASE MAY 28, 1999
CHITTENDEN ANNOUNCES ACQUISITION OF VERMONT FINANCIAL SERVICES CORP.
--------------------------------------------------------------------
Burlington, Vermont - Chittenden Corporation (NYSE:CHZ) Chairman, President and
Chief Executive Officer, Paul A. Perrault, announced that Chittenden has
received all necessary regulatory and shareholder approvals for its acquisition
of Vermont Financial Services Corp. (NASDAQ:VFSC), the parent company of Vermont
National Bank and United Bank in Massachusetts. The acquisition is scheduled to
become effective as of the close of business today.
Vermont Financial Services Corp. had total assets and stockholders' equity of
$2.1 billion and $216 million, respectively, at March 31, 1999. In the
transaction, Vermont Financial common stock will be converted into Chittenden
common stock at a fixed exchange ratio of 1.07. Approximately14 million shares
of Chittenden common stock will be issued in the transaction, which will bring
the total number of Chittenden shares outstanding to approximately 28 million.
The acquisition is being accounted for as a pooling of interests.
Perrault commented, "We are extremely pleased to have finalized this acquisition
within our expected timeframe." Perrault continued, "The combination of our two
companies will provide our customers with a strong, Vermont-based banking
company well positioned for further initiatives throughout the Northeast. In
addition, the acquisition will provide an entree into the southern New Hampshire
market while offering additional opportunities in our existing Vermont and
Massachusetts markets. This is a good match for both companies and we have
worked well together to set the stage to move forward as a combined entity."
John D. Hashagen, Jr., President and Chief Executive Officer of Vermont
Financial stated, "We are pleased to join forces with Chittenden to produce a
strong, diversified commercial banking company. Our combined financial expertise
and experience will provide our customers with the best financial services
available in the market."
Chittenden Corporation is a bank holding company headquartered in Burlington,
Vermont. With this acquisition, Chittenden's subsidiary banks are Chittenden
Bank, Vermont National Bank, United Bank, The Bank of Western Massachusetts, and
Flagship Bank and Trust Company. The Company offers a broad range of financial
products and services, including deposit accounts and services; consumer,
commercial, and public sector loans; insurance; brokerage; and investment and
trust services to individuals, businesses, and the public sector. To find out
more about Chittenden and its products and services, please visit our web site
at www.chittenden.com. Chittenden Corporation news releases, including earnings
announcements, are available via fax by calling 800-758-5804. The six-digit code
is 124292.
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