Chittenden Corp. of Vermont says it is not changing its ways to counter a longtime rival, Banknorth, and other New England banking companies that stress growth by acquisition.

Chittenden, of Burlington, has a 28% deposit share in Vermont, tops in the state, while fellow multibank holding company Banknorth, of Portland, Maine, ranks second, with 20%.

But Banknorth dwarfs Chittenden outside the Green Mountain State and will only get larger: It has deals for two Boston-area banks and it continues to scour southern New England and upstate New York for potential deals.

Chittenden, however, insists it will continue to emphasize organic growth, though it is open to making acquisitions. Paul A. Perrault, its chairman, president and chief executive officer, said its focus is more on establishing and strengthening ties with a higher-end clientele.

“We do not want to bank everybody, unlike a lot of the competitors who … kind of pick up the numbers game,” he said. “Our strategy is [to] get the right kind of customer, give him the right kind of products at the right price, and build that relationship.”

Banknorth was based in Burlington until 1999, when Peoples Heritage Corp. bought it — the company adopted the Banknorth name and kept its headquarters in Portland. It is now the third-largest banking company in northern New England, with $18 billion of assets.

Chittenden, with $3.9 billion of assets, looks at 20 banks a year as possible targets, Mr. Perrault said, and it does make an occasional deal. In April it bought Maine Bank Corp. of Portland, the $236 million-asset parent of Maine Bank and Trust, which has 15 branches in the Portland area. In 1999 it doubled its asset size by acquiring Vermont Financial Services Corp. of Brattleboro.

But Chittenden says it is not interested in trying to match Banknorth, FleetBoston Financial Corp., or any of New England’s large banking companies in sheer size. Its four community banks — Chittenden Bank in Vermont, the Bank of Western Massachusetts in Springfield, Flagship Bank and Trust Company in Worcester, Mass., and First Savings of New Hampshire in Exeter — pride themselves on “high-touch” service, so “size could be a bit of an enemy,” Mr. Perrault said.

He also insists that one bad acquisition can instantly make a bank a takeover target, and merging with a larger bank is not in Chittenden’s plans. “Look at the carcasses of banks that have been acquired over the years. A lot of them had been active acquirers, not necessarily the savviest acquirers.”

Chittenden’s approach seems to be working. With 85 branches, it is large enough to offer a wide range of fee-related products and services and make money doing so. Its business lines include insurance, brokerage, investment and trust services, merchant processing, and mortgage banking.

In the first quarter the company generated about 29% of its revenues from fees, and 20% of that fee income came from asset management.

Because of its solid credit quality and consistently strong earnings, Chittenden’s stock trades at 14.6 times this year’s earnings estimate, compared with the 13.7 average for its peer group of small and midcap banks in New England, said Gerard S. Cassidy, an analyst at Tucker Anthony Sutro Capital Markets in Portland.

Its stock, which hit a 52-week high of $34.09 a share late last month, was trading at $32.50 midday Friday.

Still, Mr. Perrault says, “it’s an ongoing battle convincing investors” to stick with Chittenden. He acknowledged that the investment community pays a lot more attention to larger companies, and a bank needs to have a certain amount of market capitalization to be included in mutual funds or indexes. (Chittenden’s market cap stands at about $825 million; Banknorth’s is $2.8 billion.)

There’s also the perception that Vermont, Chittenden’s primary market, is a slow-growth state. Yet while Vermont is not as fast-growing as Florida or Arizona, nor as affluent as neighboring Massachusetts or Connecticut, it is a stable market, Mr. Cassidy said.

“It does not have the peaks and valleys of fast-growing markets,” he said. “And stability for a bank is a very favorable attribute.”

For the time being, at least, Chittenden’s market-share lead in Vermont seems safe. Banknorth, which announced in May that it was buying Andover Bancorp Inc. of Massachusetts and Metro West Bank in Framingham, Mass., for a combined $478 million, is most interested in growing in southern New England.

And only two large outside banking companies — Keycorp and Charter One Financial Inc., both of Cleveland — have established themselves in Vermont. (Fleet, with $200 million of assets, has branches in the other five New England states, but none in Vermont.)

William J. Ryan, chairman, president, and CEO of Banknorth, speculates that the landscape will change at some point.

“In a few years there will be banks that want to operate nationally and be national in scope, and they’ll have to come into New England,” he said. “You’re never too big that someone can’t come in and buy you.”

Analysts agree that national banks will want to wedge their way into the region, including Vermont.

Don Kauth, an analyst at Keefe, Bruyette & Woods Inc. in New York, said he would be surprised if the big banks do not enter the area in the next couple of years because if they don’t, he said, they would “totally abandon New England to Fleet.”

A big bank that wants to enter New England will probably do so by buying one of its larger companies, like Banknorth or Chittenden, since it would be “difficult to cobble together a viable franchise of size by making a zillion acquisitions,” Mr. Kauth said.

But Mr. Perrault said he is not too worried that Chittenden will be taken over by a larger competitor. “We’re not inexpensive … so we’re not something they can just drive by and pick up on the way,” he said.

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