CHZ Chittenden Corp

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

Filed by the Registrant x                             Filed by a Party other than the Registrant ¨

Check the appropriate box:

CHITTENDEN CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Filed by Chittenden Corporation

Pursuant to Rule 14a-12

Under the Securities Exchange Act of 1934

This filing relates to a press release dated October 18, 2007 issued by Chittenden Corporation. The following is a copy of the press release.

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Chittenden Corporation 2 Burlington Square P.O. Box 820 Burlington, Vermont 05402-0820 802-658-4000		Kirk W. Walters (802) 660-1561

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For Immediate Release

Chittenden Corporation Reports 11% Higher Earnings and Announces Quarterly Dividend

Burlington, VT – Chittenden Corporation (NYSE:CHZ) Chairman, President and Chief Executive Officer, Paul A. Perrault, today announced earnings for the quarter ended September 30, 2007 of $24.0 million, or $0.51 per diluted share, compared to $21.7 million or $0.47 per diluted share for the same period a year ago. For the first nine months of 2007, GAAP earnings were $53.1 million or $1.15 per diluted share. Core earnings (non-GAAP) for the first nine months of 2007 were $65.6 million or $1.42 per diluted share , compared to $62.9 million or $1.34 per diluted share for the same period of a year ago. Chittenden also announced its quarterly dividend of $0.22 per share, which will be paid on November 9, 2007 to shareholders of record on October 26, 2007.

In making the announcement, Perrault said, “I am pleased to report to shareholders that our fundamentals continue to be strong and growing, as our style of banking attracts deeper relationships with our customers and prospects in our market.”

THIRD QUARTER 2007 FINANCIAL HIGHLIGHTS

ASSETS

Total assets increased $449 million from a year ago to $6.9 billion at September 30, 2007. Total loans increased 12% or $559 million from September 30, 2006 to $5.2 billion at the end of the third quarter of 2007. Merrill Merchants Bank contributed total assets of $525 million and total loans of $360 million at June 30, 2007. Excluding Merrill Merchants, the loan increases were attributable to growth in the commercial loan portfolio, which was partially offset by lower consumer lending activities. Chittenden’s securities portfolio declined by 25% from the third quarter of 2006 to $919 million at September 30, 2007. The decrease in the securities portfolio from September 30, 2006 was primarily utilized for the common stock repurchases, and to fund loan growth.

Chittenden Corporation 2 Burlington Square P.O. Box 820 Burlington, Vermont 05402-0820 802-658-4000		Kirk W. Walters (802) 660-1561

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For Immediate Release

LIABILITIES

Total deposits were up $310 million from September 30, 2006 and $134 million from June 30, 2007. The increase on a linked quarter basis was primarily driven by normal seasonal inflows from Chittenden’s municipal and captive insurance customers. Excluding Merrill Merchants, which contributed $360 million in deposits at June 30, 2007, the year-over-year decrease was attributable to declines in savings, NOW and CMA/money market deposits which were partially offset by higher levels of CDs.

Borrowings at September 30, 2007, were $285 million, an increase of $62 million from September 30, 2006, and a decline of $120 million from June 30, 2007. The increase from a year ago related to the acquisition of Merrill Merchants. The decline on a linked quarter basis was due to the July 1, 2007 redemption of Chittenden’s $125 million of 8.0% trust preferred securities (“TPS”). The redemption of the TPS reduced interest costs and increased the net interest margin approximately 7 basis points in the third quarter of 2007.

NET INTEREST MARGIN

Net interest income on a tax equivalent basis for the three months ended September 30, 2007 was $68.1 million, which was up $4.6 million from the same period a year ago. The increase in net interest income was primarily attributable to the acquisition of Merrill Merchants. Chittenden’s net interest margin for the third quarter of 2007 was 4.33%, an increase of 19 basis points on a linked quarter basis and 10 basis points from the third quarter of 2006. The increases in the net interest margin for both periods were primarily driven by the redemption of the TPS and the securities portfolio repositioning in the second quarter of 2007.

NONINTEREST INCOME

Noninterest income was $21.4 million for the third quarter of 2007 as compared to $16.1 million for the same period a year ago. The increase was driven by higher investment management and trust revenue, other noninterest income and $1.7 million from Merrill Merchants. The higher investment management and trust revenue was a result of increased assets under management and higher sales at Chittenden Securities, LLC. Other noninterest income increased $3.9 million due to a gain on the sale of MasterCard shares of $2.4 million and the recognition in 2006 of a $372,000 loss related to the early termination of the interest rate swaps on Chittenden’s TPS and the reduction of $275,000 in accrued interest on income tax refunds.

NONINTEREST EXPENSE

Noninterest expense was $52.0 million for the third quarter of 2007, an increase of $6.0 million from the same period a year ago and a decrease of $542,000 from the second quarter of 2007. The increase in noninterest expense from the third quarter of 2006 was primarily due to the operating costs of Merrill Merchants ($3.3 million) and higher levels of incentive compensation ($2.0 million). On a linked quarter basis the decline in noninterest expense was driven by lower legal expenses and non-recurring merger costs of $4.1 million, which was partially offset by operating costs at Merrill Merchants of $2.1 million and higher incentive accruals of $2.0 million.

Chittenden Corporation 2 Burlington Square P.O. Box 820 Burlington, Vermont 05402-0820 802-658-4000		Kirk W. Walters (802) 660-1561

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For Immediate Release

INCOME TAXES

The effective income tax rate was 29.8% in the third quarter of 2007 and 29.2% for the first nine months of 2007 compared with 30.3% and 32.3% for the respective periods in 2006. The lower effective income tax rates were primarily attributable to higher low income housing credits as well as a first quarter 2007 change in the tax accounting method for a customer list intangible related to a prior acquisition.

CREDIT QUALITY

The provision for credit losses was $2.0 million, which was up from both the same period of a year ago and on a linked quarter basis. The increase was primarily due to higher net charge-offs and commercial loan growth. NPAs were $29.1 million at September 30, 2007, flat with June 30, 2007 and an increase of $3.0 million from the same period a year ago. NPAs as a percentage of total loans at the end of the third quarter of 2007 were 56 basis points, which was consistent with the third quarter of 2006 and down on a linked quarter basis. Net charge-offs as a percentage of average loans were 4 basis points compared to 3 basis points for the same quarter of 2006. The increase from the third quarter of last year was primarily due to higher consumer loan charge-offs. As a percentage of total loans, the allowance for credit losses excluding municipal loans was 1.35%, down 5 basis points from the similar period in 2006 and 2 basis points from the second quarter of 2007.

PENDING MERGERS AND ACQUISITIONS

On June 27, 2007, the Company announced that it had signed a definitive merger agreement to be acquired by People’s United Financial, Inc. (“People’s United Financial”), in a stock and cash transaction valued at approximately $1.9 billion of which approximately 55% is in cash and 45% in People’s United Financial stock. The transaction, which is expected to close in the first quarter of 2008, remains subject to approvals by regulators and the Company’s shareholders. At closing, Chittenden shareholders will have the right, subject to proration, to elect to receive cash or People’s United Financial common stock, in either case having a value equal to $20.35 plus the product of .8775 times the average closing price of People’s United Financial shares for the five day period prior to the closing. People’s United Financial currently operates 160 branches, 75 of which offer seven-day banking in Super Stop & Shop locations across Connecticut. Chittenden currently has 133 branches in New England through six bank subsidiaries.

On June 4, 2007, the Company announced that it had signed a definitive merger agreement to acquire Community Bank & Trust Company (“Community Bank”), for approximately $124.1 million in cash and stock as of announcement date. The acquisition is expected to close in the fourth quarter of 2007; however completion of the acquisition remains subject to the approval of the shareholders of Community Bank, as well as various regulatory agencies. Under the terms of the merger agreement, October 24, 2007 has been set as the deadline for shareholders of Community Bank to elect to receive $33.37 per share in cash, with total cash consideration of approximately $33.4 million (assuming all stock options are cashed out at closing), or 1.1293 shares of Chittenden common stock for each share of Community Bank stock they own, with total stock consideration of approximately 3.1 million shares of Chittenden common stock. In addition, October 24, 2007 has been set as the shareholder meeting to approve the Chittenden and Community Bank merger. As a result of the transaction, Community Bank will merge into Ocean Bank.

Chittenden Corporation 2 Burlington Square P.O. Box 820 Burlington, Vermont 05402-0820 802-658-4000		Kirk W. Walters (802) 660-1561

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For Immediate Release

Chittenden is a bank holding company headquartered in Burlington, Vermont. Through its subsidiary banks ¹ , Chittenden offers a broad range of financial products and services to customers throughout Northern New England, Massachusetts and Connecticut, including deposit accounts and services; commercial and consumer loans; insurance; and investment and trust services to businesses, individuals, and the public sector. Chittenden’s news releases, including earnings announcements, are available on its website.

This press release contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Chittenden intends for these forward-looking statements to be covered by the safe harbor provisions for forward- looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with these safe harbor provisions. These forward-looking statements are based on current plans and expectations, which are subject to a number of risk factors and uncertainties that could cause future results to differ materially from historical performance or future expectations.

These differences may be the result of various factors, including, among others: (1) changes in general, national or regional economic conditions; (2) changes in loan default and charge-off rates; (3) reductions in deposit levels necessitating increased borrowings to fund loans and investments; (4) changes in interest rates; (5) changes in levels of income and expense in noninterest income and expense-related activities; (6) competition and its effect on pricing, spending, third-party relationships and revenues; (7) failure of the parties to satisfy the closing conditions for the Chittenden/Community Bank merger or the People’s United Financial/Chittenden merger in a timely manner or at all; (8) failure to obtain governmental approvals of either merger, or imposition of adverse regulatory conditions in connection with such approvals; (9) failure of the Community Bank shareholders to approve the Chittenden/Community Bank merger or the Chittenden shareholders to approve the People’s United Financial Chittenden merger; (10) costs or difficulties related to the integration of the businesses following the completion of each merger; and (11) disruptions to Chittenden’s business as a result of the announcement and pendency of the People’s United Financial/Chittenden merger.

For further information on these risk factors and uncertainties, please see Chittenden’s filings with the Securities and Exchange Commission, including Chittenden’s Annual Report on Form 10-K for the year ended December 31, 2006. Chittenden undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or other changes.

Additional Information about the Mergers and Where to Find It

Chittenden and People’s United Financial have filed and will be filing relevant documents concerning their transaction with the Securities and Exchange Commission, including a registration statement on Form S-4. Furthermore, Chittenden and Community Bank have filed relevant documents concerning their transaction with the SEC and the Federal Deposit Insurance Corporation, including a registration statement on Form S-4. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 CONTAINING A PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER DOCUMENTS FILED WITH THE SEC AND/OR THE FDIC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN (OR WILL CONTAIN) IMPORTANT INFORMATION. Investors are able to obtain those documents filed with the SEC free of charge at the SEC’s website (http://www.sec.gov). In addition, documents can be obtained, without charge, by directing a request to Chittenden Corporation, 2 Burlington Square, Burlington, Vermont 05402-0820, Attention: General Counsel.

Chittenden and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of Chittenden in connection with the People’s United Financial/Chittenden merger. Chittenden and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of Community Bank in connection with the Chittenden/Community Bank merger. Information about the directors and executive officers of Chittenden and information about any other persons who may be deemed participants in each transaction will be included in the applicable proxy statement/prospectus. You can find information about Chittenden’s directors and executive officers in the proxy statement for Chittenden’s annual meeting of shareholders filed with the SEC on March 9, 2007.

CHITTENDEN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands)

 

		9/30/07				6/30/07				3/31/07				12/31/06				9/30/06
Assets:
Cash and Cash Equivalents		$	276,115			$	361,240			$	232,259			$	199,358			$	145,393
Securities Available For Sale			919,066				918,214				1,205,593				1,137,352				1,231,369
FRB / FHLB Stock			9,138				9,136				15,027				13,403				16,124
Loans Held For Sale			17,891				23,495				21,991				17,354				21,646
Loans:
Commercial & Industrial (C&I)			937,034				944,752				865,347				853,839				854,475
Municipal			159,076				115,972				159,459				141,522				144,152
Multi-Family			245,510				254,068				247,029				216,049				213,153
Commercial Real Estate			2,155,342				2,103,461				1,977,258				1,942,685				1,933,279
Construction			269,349				239,493				217,068				232,000				211,187
Residential Real Estate			859,048				849,557				749,018				751,450				749,106
Home Equity Credit Lines			352,747				344,210				319,235				322,124				325,814
Consumer			258,279				258,168				231,221				237,541				246,394
Total Loans			5,236,385				5,109,681				4,765,635				4,697,210				4,677,560
Less: Allowance for Loan Losses			(67,494	)			(67,400	)			(62,768	)			(62,160	)			(62,153	)
Net Loans			5,168,891				5,042,281				4,702,867				4,635,050				4,615,407
Accrued Interest Receivable			34,080				32,377				32,802				33,123				32,393
Other Assets			94,839				97,831				86,512				83,938				89,759
Premises and Equipment, net			76,066				74,151				68,541				67,036				67,952
Mortgage Servicing Rights			16,121				16,128				14,209				14,155				14,347
Identified Intangibles			20,137				20,986				14,332				14,996				15,661
Goodwill			282,448				282,448				216,038				216,038				216,038
Total Assets		$	6,914,792			$	6,878,287			$	6,610,171			$	6,431,803			$	6,466,089
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand		$	996,924			$	997,538			$	909,309			$	966,758			$	971,378
Savings			488,833				501,248				462,935				468,294				481,380
NOW			869,028				913,155				864,364				861,435				866,134
CMAs / Money Market			1,697,271				1,547,971				1,663,107				1,655,349				1,658,319
Certificates of Deposit less than $100,000			997,583				971,505				880,993				848,814				858,834
Certificates of Deposit $100,000 and Over			759,986				743,720				749,061				678,243				663,086
Total Deposits			5,809,625				5,675,137				5,529,769				5,478,893				5,499,131
Securities Sold Under Agreements to Repurchase			118,015				114,798				87,017				73,611				87,112
Other Borrowings			167,070				290,067				261,656				136,409				135,975
Accrued Expenses and Other Liabilities			73,098				75,007				67,569				71,804				63,162
Total Liabilities			6,167,808				6,155,009				5,946,011				5,760,717				5,785,380
Stockholders’ Equity:
Common Stock			52,435				52,425				50,261				50,235				50,235
Surplus			343,774				342,392				276,843				276,034				274,834
Retained Earnings			491,777				478,499				479,271				468,331				454,985
Treasury Stock, at cost			(135,931	)			(139,535	)			(126,987	)			(105,666	)			(85,613	)
Accumulated Other Comprehensive Income			(9,387	)			(14,369	)			(21,263	)			(24,008	)			(19,470	)
Directors Deferred Compensation to be Settled in Stock			6,405				6,164				6,035				6,160				5,738
Unearned Portion of Employee Restricted Stock			(2,089	)			(2,298	)			—				—				—
Total Stockholders’ Equity			746,984				723,278				664,160				671,086				680,709
Total Liabilities and Stockholders’ Equity		$	6,914,792			$	6,878,287			$	6,610,171			$	6,431,803			$	6,466,089

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CHITTENDEN CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, except for per share amounts)

 

		For the Three Months Ended						For the Nine Months Ended
		9/30/07			9/30/06			9/30/07				9/30/06
Interest Income:
Loans		$	93,816		$	82,743		$	264,405			$	234,555
Investments			12,786			13,539			38,938				42,353
Total Interest Income			106,602			96,282			303,343				276,908
Interest Expense:
Deposits			36,339			28,868			101,226				77,648
Borrowings			3,387			4,689			14,506				13,487
Total Interest Expense			39,726			33,557			115,732				91,135
Net Interest Income			66,876			62,725			187,611				185,773
Provision for Credit Losses			2,000			1,670			5,000				4,953
Net Interest Income after Provision for Credit Losses			64,876			61,055			182,611				180,820
Noninterest Income:
Investment Management and Trust			6,614			5,233			18,464				15,708
Service Charges on Deposits			4,458			4,277			13,022				12,564
Mortgage Servicing			449			382			2,151				1,702
Gains on Sales of Loans, Net			1,410			1,624			4,117				4,897
Losses on Sales of Securities			—			—			(14,137	)			—
Credit Card Income, Net			1,377			1,376			3,794				3,837
Insurance Commissions, Net			1,141			1,275			4,690				4,750
Other			5,910			1,970			12,113				8,794
Total Noninterest Income			21,359			16,137			44,214				52,252
Noninterest Expense:
Salaries			27,188			23,200			74,431				69,906
Employee Benefits			5,685			5,637			17,070				16,987
Net Occupancy			6,119			5,705			18,453				17,635
Data Processing			1,191			1,034			3,397				2,987
Amortization of Intangibles			849			665			2,240				1,994
Merger Costs			—			—			4,130				—
Other			10,977			9,777			32,126				30,545
Total Noninterest Expense			52,009			46,018			151,847				140,054
Income Before Income Taxes			34,226			31,174			74,978				93,018
Income Tax Expense			10,205			9,449			21,893				30,086
Net Income		$	24,021		$	21,725		$	53,085			$	62,932
Basic Earnings Per Share		$	0.52		$	0.47		$	1.16			$	1.36
Diluted Earnings Per Share			0.51			0.47			1.15				1.34
Dividends Per Share			0.22			0.20			0.64				0.58

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CHITTENDEN CORPORATION

SELECTED QUARTERLY FINANCIAL DATA

(Unaudited)

(In thousands, except ratios and per share amounts)

 

		9/30/07				6/30/07				3/31/07				12/31/06				9/30/06
Selected Financial Ratios
Return on Average Tangible Equity 1			22.48	%			8.92	%			18.93	%			20.25	%			20.20	%
Core Return on Average Tangible Equity 1			22.48	%			20.61	%			18.93	%			20.25	%			20.20	%
Return on Average Equity			13.04	%			5.35	%			12.21	%			13.20	%			13.00	%
Core Return on Average Equity 1			13.04	%			12.75	%			12.21	%			13.20	%			13.00	%
Return on Average Tangible Assets 1			1.49	%			0.60	%			1.34	%			1.47	%			1.41	%
Core Return on Average Tangible Assets 1			1.49	%			1.38	%			1.34	%			1.47	%			1.41	%
Return on Average Assets			1.39	%			0.55	%			1.26	%			1.39	%			1.33	%
Core Return on Average Assets 1			1.39	%			1.30	%			1.26	%			1.39	%			1.33	%
Net Yield on Earning Assets			4.33	%			4.14	%			4.06	%			4.29	%			4.23	%
Efficiency Ratio 1			57.90	%			57.16	%			58.72	%			54.56	%			55.91	%
Tangible Capital Ratio			6.72	%			6.39	%			6.80	%			7.10	%			7.20	%
Leverage Ratio			6.84	%			8.73	%			9.11	%			9.24	%			9.24	%
Tier 1 Capital Ratio			8.20	%			10.26	%			10.93	%			11.56	%			11.59	%
Total Capital Ratio			11.74	%			13.83	%			14.52	%			12.78	%			12.80	%
Common Share Data
Common Shares Outstanding			46,628				46,464				44,722				45,360				45,994
Weighted Average Shares Outstanding			46,559				45,187				45,105				45,745				45,982
Weighted Average and Common Equivalent Shares Outstanding			47,422				45,746				45,750				46,388				46,504
Book Value per Share		$	16.02			$	15.57			$	14.85			$	14.79			$	14.80
Tangible Book Value per Share 1		$	9.53			$	9.04			$	9.70			$	9.70			$	9.76
Credit Quality Data
Nonperforming Assets (NPAs)		$	29,086			$	29,539			$	23,312			$	20,358			$	26,089
90 days past due and still accruing			3,810				4,141				3,930				3,352				3,196
NPAs to Loans Plus OREO			0.56	%			0.58	%			0.49	%			0.43	%			0.56	%
Allowance for Loan Losses		$	67,494			$	67,400			$	62,768			$	62,160			$	62,153
Reserve for Unfunded Commitments 2			1,172				1,226				1,200				1,200				1,200
Allowance for Credit Losses (ACL)		$	68,666			$	68,626			$	63,968			$	63,360			$	63,353
ACL to Loans			1.31	%			1.34	%			1.34	%			1.35	%			1.35	%
ACL to Loans (excluding Municipals)			1.35	%			1.37	%			1.39	%			1.39	%			1.40	%
ACL to Nonperforming Loans			238.41	%			235.72	%			274.75	%			315.32	%			248.90	%
Charge-offs		$	2,635			$	1,663			$	1,617			$	3,070			$	2,093
Recoveries			729				741				725				1,110				506
Net Charge-offs		$	1,906			$	922			$	892			$	1,960			$	1,587
Net Charge-offs to Average Loans			0.04	%			0.02	%			0.02	%			0.04	%			0.03	%
QTD Average Balance Sheet Data
Securities		$	928,061			$	1,056,954			$	1,191,388			$	1,201,734			$	1,269,907
Loans, Net			5,149,631				4,855,054				4,663,406				4,632,538				4,626,194
Earning Assets			6,250,927				6,107,388				5,927,704				5,926,319				5,959,599
Total Assets			6,847,578				6,637,111				6,427,488				6,426,533				6,482,127
Deposits			5,764,915				5,509,524				5,365,049				5,434,889				5,442,894
Borrowings			280,709				383,029				328,039				249,344				312,430
Stockholders’ Equity			730,560				677,370				664,993				677,244				662,964

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1.	Reconciliation of non-GAAP measurements to GAAP

 

		For the nine months ended 9/30/07
Net income (GAAP)		$	53,085
Losses on sales of securities (after tax)			9,676
Non recurring charge for Merrill Merchants (after tax)			2,859
Core net income (non-GAAP) (D)		$	65,620
Fully diluted earnings per share decrease (GAAP)		$	1.15
Fully diluted core earnings per share increase (non-GAAP)		$	1.42
		9/30/07				6/30/07				3/31/07				12/31/06				9/30/06
Net Income (GAAP)		$	24,021			$	9,039			$	20,025			$	22,536			$	21,009
Amortization of core deposit intangible, net of tax			552				472				432				432				431
Tangible Net Income (A)		$	24,573			$	9,511			$	20,457			$	22,968			$	21,440
Average Equity (GAAP)		$	730,560			$	677,370			$	664,993			$	677,244			$	661,020
Average Core Deposit Intangible			20,586				16,430				14,662				15,328				16,659
Average Deferred Tax on CDI			(6,181	)			(4,669	)			(3,993	)			(4,168	)			(4,435	)
Average Goodwill			282,448				237,932				216,038				216,038				216,038
Average Tangible Equity (B)		$	433,707			$	427,677			$	438,286			$	450,046			$	432,758
Return on Average Tangible Equity (A) / (B)			22.48	%			8.92	%			18.93	%			20.25	%			19.87	%
Core Return on Average Tangible Equity (D) / (B			22.48	%			20.61	%			18.93	%			20.25	%			19.87	%
Average Assets (GAAP)		$	6,847,578			$	6,637,111			$	6,427,488			$	6,426,533			$	6,462,457
Average Core Deposit Intangible			20,586				16,430				14,662				15,328				16,659
Average Deferred Tax on CDI			(6,181	)			(4,669	)			(3,993	)			(4,168	)			(4,435	)
Average Goodwill			282,448				237,932				216,038				216,038				216,038
Average Tangible Assets (C)		$	6,550,725			$	6,387,418			$	6,200,781			$	6,199,335			$	6,234,195
Return on Average Tangible Assets (A) / (C)			1.49	%			0.60	%			1.34	%			1.47	%			1.38	%
Core Return on Average Tangible Assets (D) / (C)			1.49	%			1.38	%			1.34	%			1.47	%			1.38	%

Efficiency Ratio: is computed by dividing total noninterest expense (less oreo expense, amortization expense, franchise tax and any nonrecurring items) by the sum of net interest income on a tax equivalent basis and total noninterest income (exclusive of gains and losses from bank investment securities, and nonrecurring items). Chittenden uses this non-GAAP measure, which is used widely in the banking industry, to provide important information regarding its operational efficiency, e.g. ($52,009-$26-$849-$755) / ($68,058+$21,359-$2,412) = 57.90%.

Tangible book value per share: is computed by subtracting goodwill and identified intangibles from equity, and dividing the resultant number by common shares outstanding, e.g. ($746,984-$20,137-$282,448) / 46,628= $9.53.

While Chittenden’s management uses non-GAAP measures for operational and investment decisions and believes that these measures are among several useful measures for understanding its operating results and financial condition, these measures should not be construed as a substitute for GAAP measures. Non-GAAP measures should be read and used in conjunction with Chittenden’s reported GAAP operating results and financial information.

 

2.	The reserve for unfunded commitments is included in other liabilities on the accompanying consolidated balance sheet.

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