[ARTICLE] 9
[CURRENCY]
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] JUN-30-1998
[EXCHANGE-RATE] 1
[CASH] 85,909
[INT-BEARING-DEPOSITS] 2,929
[FED-FUNDS-SOLD] 8,184
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 0
[INVESTMENTS-CARRYING] 515,179
[INVESTMENTS-MARKET] 0
[LOANS] 1,323,089
[ALLOWANCE] 18,609
[TOTAL-ASSETS] 2,076,018
[DEPOSITS] 1,724,617
[SHORT-TERM] 31,971
[LIABILITIES-OTHER] 22,144
[LONG-TERM] 20,040
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 13,290
[OTHER-SE] 203,277
[TOTAL-LIABILITIES-AND-EQUITY] 2,076,018
[INTEREST-LOAN] 56,664
[INTEREST-INVEST] 16,414
[INTEREST-OTHER] 746
[INTEREST-TOTAL] 73,824
[INTEREST-DEPOSIT] 29,566
[INTEREST-EXPENSE] 33,200
[INTEREST-INCOME-NET] 40,624
[LOAN-LOSSES] 2,160
[SECURITIES-GAINS] 342
[EXPENSE-OTHER] 41,699
[INCOME-PRETAX] 15,135
[INCOME-PRE-EXTRAORDINARY] 15,135
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 9,089
[EPS-PRIMARY] 0.69
[EPS-DILUTED] 0.68
[YIELD-ACTUAL] 4.52
[LOANS-NON] 15,719
[LOANS-PAST] 5,400
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 18,943
[CHARGE-OFFS] 3,730
[RECOVERIES] 1,236
[ALLOWANCE-CLOSE] 18,609
[ALLOWANCE-DOMESTIC] 18,609
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
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 the Quarterly Period Ended June 30, 1998, Commission Files
Number 0-11012
VERMONT FINANCIAL SERVICES CORP.
A DELAWARE CORPORATION
IRS EMPLOYER IDENTIFICATION NO. 03-0284445
100 Main Street, Brattleboro, Vermont 05301
Telephone: (802) 257-7151
__________________________
Indicate by check mark 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 requirement for the past 90 days.
Yes X No___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of July 31, 1998 13,166,560
VEREMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
INDEX
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about
About Market Risk 9
Part II Other Information 10
Signatures 10
<TABLE>
VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
Consolidated Balance Sheets(unaudited)
June 30, 1998 and December 31, 1997
(in thousands,except per share data) <C> <C>
June 30, December 31,
ASSETS 1998 1997
Cash and Due from Banks $ 85,909 $ 95,495
Interest Bearing Balances with Banks 2,929 44
Federal Funds Sold 8,184 2,470
Total Cash & Cash Equivalents 97,022 98,009
Securities Available for Sale
U.S. Treasury and U.S. Government Agencies 210,207 295,775
Mortgage Backed Securities 202,447 199,122
State and Municipal 10,246 9,987
Other 92,279 22,765
Total Securities Available for Sale 515,179 527,649
Loans:
Commercial 183,536 166,418
Commercial Real Estate 263,232 273,089
Residential Real Estate 766,521 765,634
Consumer 109,800 109,360
Total Loans 1,323,089 1,314,501
Less: Allowance for Loan Losses 18,609 18,943
Net Loans 1,304,480 1,295,558
Premises and Equipment 43,165 46,620
Real Estate Held for Investment 1,277 1,298
Other Real Estate Owned (OREO) - net of
reserve of $0 in 1998 and $0 in 1997 2,639 2,794
Goodwill & Other Intangibles 59,404 61,729
Other Assets 52,852 63,795
Total Assets $2,076,018 $2,097,452
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 270,973 $ 228,935
Savings, NOW & Money Market Accounts 938,628 915,937
Other Time: Under $100,000 436,627 472,437
Over $100,000 78,389 68,863
Total Deposits 1,724,617 1,686,172
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 60,679 87,818
Liabilities for Borrowed Money 52,011 86,899
Other Liabilities 22,144 22,967
Total Liabilities 1,859,451 1,883,856
Stockholders' Equity
Common Stock - $1 Par Value
Authorized 20,000,000 shares
Issued : 1998 - 13,289,710
1997 - 13,243,357 13,290 13,243
Preferred Stock - $1 Par Value
Authorized 5,000,000 shares
Capital Surplus 117,106 116,640
Undivided Profits 86,672 81,562
Security Valuation Allowance 2,164 2,152
Treasury Stock,at cost - 1998 - 94,095
1997 - 52 (2,665) (1)
Total Stockholders' Equity 216,567 213,596
Total Liabilities and
Stockholders' Equity $2,076,018 $2,097,452
Diluted Tangible Book Value per
share of Common Stock $11.92 $11.48
</TABLE>
<TABLE>
VERMONT FINANCIAL SERVICES CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except share data)
(unaudited)
<C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Interest Income:
Interest and Fees on Loans $28,189 $20,129 $56,664 $39,550
Interest on Securities
Available for Sale:
Taxable Interest Income 8,060 4,808 16,116 9,240
Tax Exempt Income 189 28 298 179
Interest on Fed Funds Sold and
Other Short Term Investments 311 158 746 224
Total Interest Income 36,749 25,123 73,824 49,193
Interest Expense:
Interst on Deposits 14,880 9,350 29,566 18,318
Interest on Fed Funds Purchased,
Borrowed Money and Securities
Sold under Agreements to
Repurchase 1,626 1,337 3,634 2,460
Total Interest Expense 16,506 10,687 33,200 20,778
Net Interest Income 20,243 14,436 40,624 28,415
Less: Provision for Loan Losses 1,035 700 2,160 1,450
Net Interest Income After
Provision for Loan Losses 19,208 13,736 38,464 26,965
Other Operating Income
Securities Gains 195 0 342 6
Trust Department Income 1,527 1,381 3,152 2,771
Service Charges on Deposit
Accounts 3,689 1,623 7,089 3,131
Credit Card Merchant Income 924 822 1,802 1,672
Other Loan Related Fee Income 510 114 562 243
Other Noninterest Income 2,633 1,698 5,423 3,349
Other Loan Related Fee Income
Total Other Operating Income 9,478 5,638 18,370 11,172
Other Operating Expense
Salaries and Wages 7,716 5,023 15,198 9,806
Pension and Other Employee
Benefits 1,698 1,384 3,491 2,861
Occupancy of Bank Premises, net 1,830 914 3,722 1,906
Furniture and Equipment 2,270 1,165 4,384 2,274
Goodwill Amortization 1,130 173 2,259 344
FDIC Assessment 128 35 260 67
Credit Card Merchant Expense 484 549 1,164 1,106
OREO & Collection Expense/Losses,
net 461 244 890 534
Other Noninterest Expense 4,996 3,184 10,331 6,086
Total Other Operating Expense 20,713 12,671 41,699 24,984
Net Overhead (11,235) (7,033) (23, 329) (13,812)
Income Before Income Taxes 7,973 6,703 15,135 13,153
Applicable Income Tax Expense 3,163 2,193 6,046 4,243
Net Income $4,810 $4,510 $9,089 $8,910
Average Shares Outstanding
Basic 13,250,521 9,683,173 13,254,546 9,593,958
Diluted 13,344,812 9,793,318 13,352,517 9,711,926
Earnings Per Common Share (Based on
Average Number of Common Shares
Outstanding for the Respective
Period) Net Income -- Basic $0.36 $0.47 $0.69 $0.93
Net Income -- Diluted $0.36 $0.46 $0.68 $0.92
</TABLE>
<TABLE>
VERMONT FINANCIAL SERVICES CORP.
Condensed Statement of Cash Flows
(unaudited)
<C> <C>
6 months ended June 30,
1998 1997
OPERATING ACTIVITIES (in thousands)
Net Income $ 9,089 $ 8,910
Adjustments to reconcile net income
to net cash provided
by operating activities:
Provision for loan losses 2,160 1,450
Provision for depreciation 3,615 2,002
Amortization and accretion on
securities 227 278
Deferred income taxes 117 1,160
Security (gains) (342) (6)
Proceeds from sale of loans 120,432 32,184
Loans originated for sale (126,631) (31,727)
Losses on OREO 87 44
Decrease (Increase) in interest
receivable and other assets 16,011 (3,061)
Decrease in real estate held for
investment 21 25
(Decrease) Increase in interest
payable and other liabilities (823) 253
NET CASH PROVIDED BY
OPERATING ACTIVITIES 23,963 11,512
INVESTING ACTIVITIES
Proceeds from the sale of the
securities 4,799 14,092
Proceeds from the maturity of
the securities 139,022 34,564
Purchases of securities (131,225) (49,127)
Proceeds from sales of OREO 1,399 877
Net cash and cash equivalents
from Eastern Bancorp. - 41,054
Net decrease (increase) in loans (6,214) 19,958
Purchase of premises and equipment (3,019) (3,511)
NET CASH PROVIDED BY INVESTING
ACTIVITIES 4,762 57,907
FINANCING ACTIVITIES
Net (decrease) increase in deposits 38,445 (15,615)
Net (decrease) in short-term
borrowings (62,027) (11,220)
Issuance of common stock 513 1,129
Purchase of treasury stock (2,664) -
Cash dividends (3,979) (2,772)
NET CASH (USED BY) FINANCING
ACTIVITIES (29,712) (28,478)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (987) 40,941
Cash and cash equivalents at beginning
of period 98,009 63,797
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $97,022 $104,738
Non-monetary Transactions:
Transfer of loans to OREO for the periods ended June
30, 1998 and 1997 totaled $1,331 and $513.
VERMONT FINANCIAL SERVICES CORP.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements should
be read with the audited financial statements and notes thereto included in
the annual report on Form 10-K and Form 10-K/A. In the opinion of
Management, all adjustments which are necessary for the fair presentation
of the statement of the consolidated financial position of Vermont Financial
Services Corp., (VFSC or the Company), and the consolidated results of the
Company's operations and cash flow for the interim periods presented herein
are reflected and all such adjustments are of a normal recurring nature.
Certain items from interest income have been reclassified to noninterest
income and noninterest expense in accordance with Statement of Financial
Accounting Standards (SFAS) No. 91, Accounting for Nonrefundable Fees and
Costs Associated With Originating or Acquiring Loans and Initial Direct Cost
of Leases. There is no impact on net income associated with these
reclassifications.
Operating results for any interim period are not necessarily indicators of
results for any other interim period or the entire year.
2. New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Financial
Accounting Standard (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which establishes standards for the way
public enterprises are to report information about operating segments in
annual financial statements and requires those enterprises to report selected
financial information about operating segments in its interim financial
reports issued to shareholders. Under this statement, operating segments
are defined as components of a company for which separate financial
information is available and is used by management to allocate resources
and assess performance (management approach). This statement is effective
for the Company's December 31, 1998 financial statements and is effective
for interim financial statements beginning in 1999. The company anticipates
providing segment information for its Trust Department and United Bank.
The FASB has also issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which provides for matching the timing
of gain or loss recognition on the hedging instrument with the recognition
of (a) the changes in fair value of the hedged asset or liability that are
attributable to the hedged risk or (b) the earnings effect of the hedged
forecasted transaction. The standard is effective for fiscal quarters
beginning after June 15, 1999. The Company expects adoption of this standard
to have an immaterial impact on its financial statements.
3. Acquisition
On June 26, 1997, the Company acquired all of the outstanding common stock
of Eastern Bancorp, Inc. ("Eastern"), a thrift holding company with total
assets of approximately $800 million headquartered in Dover, NH, for
approximately $26.9 million in cash and $72.7 million in VFSC common stock
(1,784,774 shares at $41.5625 per share).
This acquisition was accounted for by the purchase method and, accordingly,
the results of operations of Eastern have been included in VFSC's
consolidated financial statements from June 27, 1997. The excess of the
purchase price over the fair value of the net identifiable assets acquired
of approximately $57 million has been recorded as goodwill and is being
amortized on a straight-line basis over 15 years.
Eastern's primary subsidiary, Vermont Federal Bank, was merged into VFSC's
primary subsidiary, Vermont National Bank, on September 22,1997.
4. Stock Split
On October 14, 1997 the Company paid a two-for-one stock split which was
effected as astock dividend. All per share and outstanding share amounts have
been retroactively restated for the effects of this stock split.
5. Comprehensive Income
The Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income as of January 1, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components (such as
changes in unrealized investment gains and losses). Comprehensive income
includes net income and any changes in equity from non-owner sources that
bypass the income statement. The purpose of reporting comprehensive income
is to report a measure of all changes in equity of an enterprise that result
from recognized transactions and other economic events of the period other
than transactions with owners in their capacity as owners. Application of
SFAS No. 130 has not impacted the amounts previously reported for net income
or effected the comparability of previously issued financial statements.
</TABLE>
<TABLE>
The following table summarizes comprehensive income for the six months ended
June 30, 1998 and 1997:
<C> <C>
1998 1997
Net Income $9,089 $8,910
Other comprehensive income, net of tax:
Unrealized gains (losses) on
investments
Unrealized holding gain (loss)
arising during the period net of
income tax expense (benefit) of
$126 and $159 for 1998 and 1997,
respectively. 234 296
Less reclassification adjustment for
gains included in net income net of
income tax expense of $(120) and
$(2) for 1998 and 1997, respectively.(222) (4)
Other comprehensive income 12 292
Comprehensive income $9,101 $9,202
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
For the Six-Month Periods Ended June 30, 1998 and 1997
Overview
The first half of 1998 resulted in net income of $9,089,000, or a 2% increase
over $8,910,000 in earnings for the same period of 1997. Diluted earnings
per share for the six months ended June 30, were $0.68 and $0.92 for the first
half of 1998 and 1997, respectively. Diluted cash earnings per share (earnings
before the effects of the amortization of goodwill) were $0.85 and $0.96 for
the six months ended June 30, 1998 and 1997, respectively. The reduction in
earnings per share reflects the additional shares issued in conjunction with
last year's acquisition of Eastern Bancorp,Inc. and $850,000 of pre-tax
expenses associated with the integration of Eastern's subsidiary, Vermont
Federal Bank(VFB), into Vermont Financial Services Corp.'s main banking
subsidiary, Vermont National Bank(VNB).
The accompanying unaudited condensed consolidated financial statements should
be read with the audited financial statements and notes thereto included in
the Company's annual report on Form 10-K. In the opinion of Management, all
adjustments which are necessary to the fair statement of the consolidated
financial position of Vermont Financial Services Corp., the (Company), and
the consolidated results of the Company's operations and cash flow for the
interim periods presented herein are reflected and all such adjustments are of
a normal recurring nature.
Except for historical information contained herein, the matters discussed in
this filing, may express "forward-looking" statements. Those "forward-
looking" statements may involve risk and uncertainties, including statements
concerning future events or performances and assumptions and other statements
that are other than statements of historical facts. The Company wishes to
caution readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made. Readers are advised that various factors
- - including, but not limited to, changes in laws, regulations or Generally
Accepted Accounting Principles; the Company's competitive position within
the markets served or increasing consolidation within the banking industry;
certain customers and vendors of critical systems or services failing to
comply with Year 2000 programming issues; unforeseen changes interest rates;
any unforeseen downturns in the local, regional or national economies -
could cause the Company's actual results or circumstances for
future periods to differ materially from those anticipated or projected.
Vermont Financial Services Corp. does not undertake, and specifically
disclaims any obligation, to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect the occurrence of
unanticipated events or circumstances after the date of such statements.
Results of Operations
Net interest income of $40.6 million for the first half of 1998 represented a
$12.2 million increase from the same period in 1997. The increase was
primarily a result of the acquisition of earning assets and financial resources
from Eastern Bancorp, Inc. Net interest margin was 4.52% and net interest
spread was 4.47% during the first six months of 1998, compared to 4.91% and
4.67%, respectively, during the same period in 1997. A $614.6 million increase
in largely lower yielding average earning assets caused the lower margin and
spread.
Noninterest income, before securities gains, increased $6,862,000 primarily due
to a $3,958,000 increase in service charges on deposits, a $381,000 increase
in trust department income and a $910,000 increase in mortgage related fee
income.
Noninterest expense increased $16,685,000 largely due to a $6,022,000, or 48%,
increase in salaries and benefits. This increase was due to the additional
staff associated with the purchase of Eastern and normal salary adjustments for
existing staff. Primarily attributable to the Eastern merger were increases in
occupancy/equipment expenses and goodwill amortization of $3,926,000 and
$1,915,000. Other noninterest expense increased $4,438,000, or 72%, primarily
due to the following:
</TABLE>
<TABLE>
<C> <C> <C>
Expense Item Increase(000) Increase (%)
Marketing Expense $527 99%
Professional Services(*) 688 106
Printing & Supplies 499 73
Deposit Related Franchise Taxes(**) 631 311
Telephone Expense 638 105
Postage 537 89
------------ ----------
(total) $3,520 108%
(*) does not include increase related to integration of VFB into VNB
(**) reflects 100% increase in statutory rate effective August 1,1998
Also included in this increase were $237,000 in expenses related to the "Year
2000" issue. In the Company's December 31, 1997 form 10-K, the Company
estimated that incur between $1.5 million and $2.5 million of nonrecurring
expenses over the course of 1998 and 1999 to protect against the potential
problems from "Year 2000". Management's current projection is for an
additional $1.2 million of Year 2000 expenses in 1998 and $1.5 million in 1999,
primarily in the first half of that year. In addition, management is
projecting approximately $1.0 million of capital expenditures for "Year 2000"
during the course of 1998 and 1999. These will be depreciated over 3 to 5 years
depending on useful life.
Asset Quality
Nonperforming assets totaled $18.4 million as of June 30, 1998, a $3.2 million
decrease from $21.6 million on June 30, 1997 and a $1.4 million decrease
from $19.8 million at December 31, 1997. As of June 30, 1997 nonperforming
assets were 0.88% of total assets, down from 1.00% a year ago and 0.94% at
December 31, 1997.
The allowance for loan losses was $18.6 million at June 30, 1998, down from
$21.4 million a year ago and $18.9 million at December 31,1997, reflecting
the lower levels of nonperforming assets. The allowance for loan losses
was 118% of nonperforming loans and 101% of nonperforming assets as of
June 30, 1998.
The following table provides information with respect to the Company's past
due loans, the Components of nonperforming assets and the allowance for
loan losses at the dates indicated:
</TABLE>
<TABLE>
<C> <C>
June 30,1998 December 31, 1997
Loans 90 days past due and still
accruing interest $5,400 $6,055
Nonperforming assets:
Nonaccrual loans $15,719 $17,006
Other real estate owned 2,639 2,794
Total nonperforming assets $18,358 $19,800
Nonperforming assets to period end
loans net of unearned income, plus
other real estate owned 1.19% 1.50%
Allowance for loan losses $18,609 $18,943
The following table details the Company's impaired loans
as of June 30, 1998:
Total impaired loans $27,487
Impaired loans with a specific
valuation reserve 5,560
Impaired loans without a specific
valuation reserve 21,927
Valuation reserve for impaired
loans 2,319
Average impaired loans $30,703
Financial Condition
Total assets of $2.1 billion, decreased $0.1 billion while total deposits of
$1.7 billion and total loans of $1.3 billion, remained essentially the same
as their June 30, 1997 balances. Compared to their yearend balances, assets,
loans and deposits largely remained unchanged. As of June 30, 1998 goodwill had
decreased to approximately $59.4 million from $60.8 million at June 30, 1997
and $61.7 million at December 31, 1997 as a result of finalization of the
purchase accounting adjustments associated with the Eastern merger and normal
amortization of approximately $1.1 million per quarter.
Capital Resources
Stockholders' equity increased from $213.6 million at year end to $216.6
million at June 30, 1998. Equity as a percent of total assets increased from
10.18% at year end 1997 to 10.43% at June 30, 1998. This increase was
primarily the result of the earnings retained by the Company. Also, Tier I
and Total Risk Based Capital ratios rose to 12.35% and 13.60% from their
year end levels of 11.98% and 13.24%, respectively. The above ratios are in
excess of all regulatory requirements and place the Company in the "well
capitalized" regulatory classification.
Recent Developments
The Company has retained the services of a national consulting firm to
review each business line and support area within its organization,
including the mortgage banking, consumer lending, commercial loan, trust and
the operations and technology area. The consultant's cost is $0.5 million
and will be expensed in the third quarter. The Company expects that
immediately realizable profit opportunities will offset most of the third
quarter expense, but expects the most significant revenue enhancements and
cost savings will not be seen until early 1999.
The Company also plans a major renovation to its branch operations in
Chittenden County, Vermont at a total cost of approximately $2-3 million.
In addition, the company plans to purchase new remittance processing
equipment, upgrade VNB's credit card software and purchase a new system for
originating mortgage loans, each costing approximately $0.5 million. All
additions will be funded through operations of the Company.
Effective June 11, 1998, James E. Griffin retired from the Company's Board
of Directors after 26 years of service. Mr. Griffin is President of
J. R. Resources, Inc. of Rutland, Vermont.
The company announced on July 2, 1998 the election of Susan V. Duprey to a
three year term on its Board of Directors effective July 16, 1998. Ms.
Duprey is currently President and shareholder in the law firm of Devine,
Millimet and Branch, P.A. headquartered in Manchester, NH where she
practices in the areas of real estate law, municipal law and health care law.
On May 21, 1998, the Company announced that its Board of Directors has
authorized the repurchase of up to 500,000 shares of it's outstanding
common stock, approximately 3.8% of the 13,275,970 shares outstanding as of
March 31, 1998. Shares purchased under this program will be held in treasury
stock to cover unexcercised stock options that are expected to be exercised
in the future. The repurchase program will be accomplished through transactions
on the open market. Through June 30, 1998. 106,000 shares had been
repurchased at an average price of $28.42.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity and Liquidity
See discussion and analysis of interest rate sensitivity and liquidity provided
in the Company's Annual Report filed on Form 10-K and Form 10-K/A for the
year ended December 31, 1997. There have been no material changes in reported
market risks faced by the Company since the filing of the Company's Annual
Report Form 10-K and Form 10-K/A.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On June 11, 1998 the Company held its annual meeting of stockholders. The
first of the two items of business was the election of four directors,
Allyn W. Coombs, Phillip M. Drumheller, John K. Dwight and Stephen A. Morse.
Each director was elected with over 96% of the votes cast in favor. The
second of the two items was to ratify and approve the Vermont Financial
Services Corp. 1994 Amended and Restated Stock Option Plan. Over 94% of
the votes cast were in favor.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
VERMONT FINANCIAL SERVICES CORP.
Dated August 11, 1998 /s/_____________________________________
John D. Hashagen, Jr.
Dated August 11, 1998 /s/_____________________________________
Richard O. Madden
</TABLE>
