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                                                                    Exhibit 99.1


December 16, 1998
FOR IMMEDIATE RELEASE                                               87/98

CHITTENDEN CORPORATION TO ACQUIRE VERMONT FINANCIAL SERVICES CORP. IN A COMMON 
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STOCK TRANSACTION VALUED AT $454 MILLION
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Burlington, VT - Chittenden Corporation (NYSE: CHZ) and Vermont Financial
Services Corp. (NASDAQ: VFSC) jointly announced today that they have signed a
definitive merger agreement whereby Chittenden would acquire Vermont Financial
in a stock-for-stock merger valued at approximately $454 million. Vermont
Financial is the parent company of Vermont National Bank, headquartered in
Brattleboro, Vermont and United Bank, headquartered in Greenfield,
Massachusetts.

Under the terms of the agreement, each share of Vermont Financial common stock
will be converted into Chittenden common stock at a fixed exchange ratio of 1.07
shares of Chittenden common stock for each share of Vermont Financial common
stock. Approximately 14 million shares of Chittenden common stock will be issued
in the transaction, which will be a tax-free reorganization and accounted for as
a pooling-of-interests. Chittenden and Vermont Financial have rescinded their
respective share repurchase plans. The transaction is expected to close in the
second quarter of 1999, following the receipt of all regulatory approvals, as
well as approval of shareholders of each company. In connection with regulatory
approvals, it is anticipated that Chittenden will be required to divest certain
branches. In accordance with the merger agreement, Vermont Financial granted
Chittenden an option to acquire under certain terms and conditions up to 19.9%
of Vermont Financial's outstanding shares at $22.00 per share. The option was
granted as an inducement to Chittenden's willingness to enter into the merger
agreement.

Vermont Financial had total assets of $2.1 billion, deposits of $1.8 billion,
and stockholders' equity of $215 million at September 30, 1998. It presently
operates 64 banking offices in Vermont, southern New Hampshire, and western
Massachusetts. It earned $13.9 million or $1.05 per share in the nine-month
period ended September 30, 1998. Following completion of the transaction,
Chittenden would have on a pro forma basis approximately $4.2 billion in assets
(including $2.8 billion in loans), $3.6 billion in deposits, and stockholders'
equity of $388 million.

In announcing the agreement, Paul A. Perrault, Chittenden's Chairman, President,
and Chief Executive Officer said, "This transaction provides an excellent
opportunity for Chittenden to greatly enhance shareholder returns in a classic
in-market combination. We expect the transaction to provide significant cost
savings resulting from
more-
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CHITTENDEN CORPORATION TO ACQUIRE VERMONT FINANCIAL SERVICES CORP.
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economies of scale in the common product lines of Chittenden and Vermont
Financial. Customers of the combined organizations will benefit from the
expanded and proven product lines and its greater capacity. The transaction
provides for the retention of a strong Vermont-based banking company well
positioned for further initiatives throughout the Northeast. It also provides
more and better employment opportunities in Vermont as we continue adding
customers outside Vermont. In the short-run, the transition will significantly
enhance Chittenden's Vermont and western Massachusetts franchises while
providing an entree into the southern New Hampshire market."

John D. Hashagen, Jr, President and Chief Executive Officer of Vermont Financial
stated, "The combination of our two organizations will produce one of the
strongest and most diversified New England-based commercial banking companies
with the managerial and financial expertise to compete in our markets with much
larger companies. The transaction provides Vermont Financial's shareholders with
an excellent value for their holdings and allows them to continue their interest
in a premier regional banking company. Customers can expect to continue
receiving exemplary banking services and an expanded product offering."

Chittenden plans an analyst conference call for Thursday, December 17, 1998 at
11:00 A.M. EDT, to elaborate on the strategic rationale and financial
implications of the transaction. The telephone number to call in the United
States is (800) 865-4460, while the international number is (973) 633-1010. The
access code is "Chittenden Bank." For a taped rebroadcast of the call that will
be played continuously for 24 hours, the number in the United States is (888)
298-2145, or Internationally (402) 220-9158.

This press release contains certain forward looking statements with respect to
the financial condition, results of operation and business of Chittenden
Corporation following the consummation of the merger that are subject to various
factors which could cause actual results to differ materially from such
projections or estimates. Such factors include, but are not limited to, the
following possibilities: 1) expected cost savings from the merger cannot be
fully realized or realized within the expected timeframes; 2) revenues following
the merger are lower than expected or deposit attrition, required divestitures,
operating costs or customer loss and business interruption following the merger
may be greater than expected; 3) competitive pressures among financial services
companies increase significantly; 4) costs of difficulties related to the
integration of the businesses of Chittenden Corporation or Vermont Financial
Services Corp. are greater than expected; 5) changes in the interest rate
environment reduces interest margins; 6) general economic conditions, either
internationally, nationally, or in the states in which the combined company will
be doing business, are less favorable than expected; 7) changes may occur in the
securities market; 8) technological changes (including "Year 2000" data systems
compliance issues); and 9) legislation or regulatory changes adversely affect
the business in which the combined company would be engaged.

Chittenden is a bank holding company headquartered in Burlington, Vermont, with
total assets of $2.1 billion at September 30, 1998. Its subsidiary banks are
Chittenden Bank, The Bank of Western Massachusetts, and Flagship Bank and Trust
Company. The Company offers a broad range of financial products and services,
including deposit accounts and services; consumer, commercial, and public sector
loans; insurance; and investment and trust services to individuals, businesses,
and the public sector. To find out more about Chittenden and its products, visit
our web site at www.chittenden.com.