Chittenden Corp., the parent of Chittenden Bank and the second-largest banking outfit in Vermont, seems ripe for a takeover.

For one thing, Chittenden has a far-flung branch network in a state where just one major player, the Bank of Boston, has set foot.

Moreover, the bank, which has a strong balance sheet, already offers the services of a far larger institution.

Jeffrey Cohn, an analyst at H.C. Wainwright & Co., Boston, thinks Chittenden eventually will be part of a big bank.

|Overbanked' Market

"I think it will happen in time. But the problem in attracting a regional bank to Vermont is the market up there. It's mature and overbanked.

"But the main problem is that Vermont has something like 4% of total New England deposits," Mr. Cohn adds. "Key had a dance with Marble Bank a few years back, but their deposits just wouldn't have served as a core to start a franchise."

Another hurdle is the state's 1987 interstate banking law, which requires out-of-state players buying Vermont banks to show that their entry would be beneficial to the state.

Among many other things, says Vermont Banking Commissioner Elizabeth Y. Costle, the buyers would have to show that they would put a reasonable volume of deposits to work in the state.

"The Bank of Boston went through the process, even though several groups argued against allowing any big bank into the state."

Mr. Cohn does not think the statute would dissuade banks that were serious about expanding into Vermont--but it probably would kill a hostile bid.

While hostile takeovers of banks are rare, at Chittenden a hefty offer still would likely result in spirited debate.

"We have a fairly unusual board," says Chittenden CEO Paul A. Perrault. Ifs a pleasant mix of the |textbook' type of investor and others who watch out for the best interests of the state and their community."

Keefe, Bruyette & Woods Inc. analyst Tom Theurkauf believes New England regionals might start staking out turf in the northern states after they've filled out their franchises in the south--about 12 to 24 months, he predicts.

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