WORCESTER, Mass. - Vermont's Chittenden Corp. extended its reach into Massachusetts with a deal to acquire $260 million-asset Flagship Bank in Worcester for about $35 million in stock.

Chittenden, the $1.5 billion-asset owner of Chittenden Trust Co. of Burlington, will pay almost two times Flagship's book value of $16.22 a share, based on current trading values. Chittenden will exchange 1.2 shares of its stock, now trading at $25.75, for each share of Flagship.

Flagship will remain a stand-alone bank after the acquisition.

This is Chittenden's second move in Massachusetts. In March, it acquired $250 million-asset Bank of Western Massachusetts in Springfield, about 50 miles from Worcester.

Flagship, started eight years ago, has concentrated on small-business lending and has an "outstanding" rating under the Community Reinvestment Act.

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