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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-6451
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UJB FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
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<S> <C>
NEW JERSEY 22-1903313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 CARNEGIE CENTER
P.O. BOX 2066
PRINCETON, NEW JERSEY 08543-2066
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 987-3200
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Securities registered pursuant to Section 12(b) of the Act:
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<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock $1.20 par value New York Stock Exchange
7.75% Sinking Fund Debentures due November 1, 1997 New York Stock Exchange
Adjustable-Rate Cumulative Preferred Stock -- Series B New York Stock Exchange
8.625% Subordinated Notes Due December 10, 2002 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
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AS OF FEBRUARY 28, 1994, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT WAS $1,284,664,657.
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AS OF FEBRUARY 28, 1994, THERE WERE 51,796,087 SHARES OF COMMON STOCK,
$1.20 PAR VALUE OUTSTANDING.
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DOCUMENTS INCORPORATED BY REFERENCE
UJB Financial Corp. 1993 Annual Report to Shareholders (portion) (Parts I, II
and IV).
Proxy Statement dated March 11, 1994 (portion) (Parts I and III).
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UJB FINANCIAL CORP.
INDEX TO FORM 10-K
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PART I
Item 1. Business PAGE
a) General development of business....................................... 3
b) Financial information about industry segments......................... 3
c) Narrative description of business..................................... 4
d) Financial information about foreign and domestic operations
and export sales................................................. 12
e) Statistical information............................................... 12
Item 2. Properties............................................................... 20
Item 3. Legal Proceedings........................................................ 21
Item 4. Submission of Matters to a Vote of Security Holders...................... 25
Executive Officers of the Registrant..................................... 25
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.... 26
Item 6. Selected Financial Data.................................................. 26
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................ 26
Item 8. Financial Statements and Supplementary Data.............................. 26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................... 26
PART III
Item 10. Directors and Executive Officers of the Registrant....................... 27
Item 11. Executive Compensation................................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and Management........... 27
Item 13. Certain Relationships and Related Transactions........................... 27
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......... 28
Signatures............................................................... 35
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PART I
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS.
UJB Financial Corp. ("UJB" or the "company"), registrant, commenced
operations on October 1, 1970 as a New Jersey corporation and as a bank holding
company registered under the Bank Holding Company Act of 1956. The company owns
four banks (bank subsidiaries) and nine active non-bank subsidiaries. At
December 31, 1993 the company had total consolidated deposits of $11,456,354,000
on the basis of which it ranked as the fourth largest New Jersey based bank
holding company. The bank subsidiaries engage in a general banking business.
United Jersey Bank is UJB's largest bank subsidiary, accounting for
approximately 46% of UJB's total consolidated assets of $13,410,549,000 at
December 31, 1993. The non-bank subsidiaries engage primarily in securities
brokerage, venture capital investment, commercial finance lending, lease
financing, and reinsuring credit life and disability insurance policies related
to consumer loans made by the bank subsidiaries.
UJB Financial Corp. has its corporate office at 301 Carnegie Center, P.O.
Box 2066, Princeton, New Jersey 08543-2066.
On December 16, 1993, the company announced a definitive agreement to
acquire VSB Bancorp, Inc., headquartered in Closter, New Jersey, with total
assets of approximately $379,000,000. The merger is expected to occur in the
second or third quarter of 1994.
On September 22, 1993, the company announced a comprehensive restructuring
program. The restructuring will focus on four fronts: 1.) a new management
structure centered on four primary lines of business, 2.) New Jersey and
Pennsylvania statewide consolidations of existing member banks, 3.) enhanced
customer service, and 4.) establishment of new financial goals. The Pennsylvania
banks were consolidated into First Valley Bank on March 18, 1994, and the New
Jersey banks are expected to be consolidated into United Jersey Bank in third
quarter of 1994.
The following table lists as of December 31, 1993 each bank subsidiary, the
location in New Jersey or Pennsylvania of its principal office, the number of
its banking offices and, in thousands of dollars, its total assets and deposits:
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<CAPTION>
LOCATION NO. OF
OF PRINCIPAL BANKING TOTAL TOTAL
OFFICE OFFICES ASSETS(1) DEPOSITS(1)
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United Jersey Bank(2)................... Hackensack, NJ 75 $ 6,164,317 $ 5,206,265
United Jersey Bank/Central, N.A.(4)..... Princeton, NJ 76 3,499,097 3,155,037
First Valley Bank(3)(5)................. Bethlehem, PA 72 2,666,808 2,141,599
United Jersey Bank/South, N.A.(4)....... Cherry Hill, NJ 35 1,233,095 1,062,598
</TABLE>
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(1) Not adjusted to exclude interbank deposits or other transactions among the
subsidiaries.
(2) State bank, a member of the Federal Reserve System.
(3) State bank, not a member of the Federal Reserve System.
(4) National bank.
(5) Restated to reflect the merger of The Hazleton National Bank and Hanover
Bank on March 18, 1994, accounted for as a pooling-of-interests.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
UJB is engaged in the business of managing or controlling banks and such
other businesses related to banking as may be authorized under the Bank Holding
Company Act of 1956, as amended. The registrant is also engaged in furnishing
services to, or performing services for its present operating subsidiaries.
The major line of business is banking. UJB owns and operates four bank
subsidiaries.
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UJB also owns and operates nine active non-bank subsidiaries -- two stock
brokerage firms, a venture capital company, a commercial finance company, two
leasing companies, two credit life reinsurance companies and a data processing
company. Total revenues (excluding intercompany revenues) for the non-bank
subsidiaries as a group during the last three years did not account for 10% or
more of consolidated revenues of UJB and subsidiaries.
(C)(1) NARRATIVE DESCRIPTION OF BUSINESS.
Bank Subsidiaries
United Jersey Bank was organized in 1903 and is the company's largest bank
subsidiary. The bank had total assets of $6,164,317,000 at December 31, 1993.
Based on the latest available data, it ranked as the fourth largest commercial
bank in New Jersey. United Jersey Bank operates 37 offices to serve most of the
70 communities in Bergen County, the second most populous county in New Jersey.
It also operates 38 banking offices in nearby counties.
The company's bank subsidiaries are engaged in a general banking business.
They accept demand deposits and various types of interest bearing transaction
accounts and time deposits, make business, real estate, personal and instalment
loans and provide lease financing for businesses. Most of the company's bank
subsidiaries serve only the general area in which they are located. The smaller
bank subsidiaries are engaged primarily in retail and community commercial
banking. Certain banks may also administer individual estates and trusts,
corporate trusts, employee benefit trusts, and provide investment services,
mutual funds, and insurance and annuity products. Some also provide cash
management, international, and correspondent banking services. Through
participations with other bank subsidiaries, each bank subsidiary has the means
of satisfying the credit needs of its customers beyond its own legal lending
limit.
Non-Bank Subsidiaries
The company, through its wholly-owned subsidiary, UJB Credit Corporation,
owns and operates Gibraltar Corporation of America. The company directly owns
and operates UJB Investor Services Company (formerly known as Richard Blackman &
Co., Inc.), Trico Mortgage Company, Inc., United Jersey Credit Life Insurance
Company and United Jersey Venture Capital, Inc. The company indirectly owns UJB
Leasing Corporation, Lehigh Securities Corporation, First Valley Leasing, Inc.,
First Valley Life Insurance Company and UJB Financial Service Corporation.
Gibraltar Corporation of America is a commercial finance company operating
in the New York and New Jersey metropolitan areas, which specializes in making
loans secured by accounts receivable, inventory, and equipment, as well as
financing sales and leases of equipment. UJB Investor Services Company and
Lehigh Securities Corporation are engaged in the stock brokerage business.
United Jersey Credit Life Insurance Company and First Valley Life Insurance
Company reinsure credit life and disability insurance policies related to the
bank subsidiaries' consumer loans. United Jersey Venture Capital, Inc. makes
venture capital investments. UJB Leasing Corporation and First Valley Leasing,
Inc. were established for the purpose of making equipment leases. UJB Financial
Service Corporation provides data processing services to banking subsidiaries.
Trico Mortgage Company, Inc. services existing mortgage and home improvement
loans on residential property. Trico Mortgage Company, Inc. is currently in the
process of winding down operations, as resolved by the Trico Board of Directors
during 1991.
Supervision and Regulation
The banking industry is highly regulated. Statutory and regulatory controls
increase a bank holding company's cost of doing business and limit the options
of its management to deploy assets and maximize income. Areas subject to
regulation and supervision by the bank regulatory agencies include: nature of
business activities; minimum capital levels; dividends; affiliate transactions;
expansion of locations; acquisitions and mergers; interest rates paid on certain
types of deposits; reserves against deposits; terms, amounts and interest rates
charged to various types of borrowers; and investments.
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BANK HOLDING COMPANY REGULATION
UJB is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"). As a bank holding
company, UJB is supervised by the Board of Governors of the Federal Reserve
System (the "FRB") and is required to file reports with the FRB and provide such
additional information as the FRB may require. UJB is also regulated by the New
Jersey and Pennsylvania Departments of Banking.
The Holding Company Act prohibits UJB, with certain exceptions, from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to subsidiary banks, except that it may, upon application,
engage in, and may own shares of companies engaged in, certain businesses found
by the FRB to be so closely related to banking "as to be a proper incident
thereto" if the FRB determines that such acquisitions will be, on balance,
beneficial to the public. The Holding Company Act requires prior approval by the
FRB of the acquisition by UJB of more than five percent of the voting stock of
any additional bank and in effect permits only the acquisition of banks located
in New Jersey and in states (including Pennsylvania) where laws specifically
permit acquisitions of banks by out-of-state bank holding companies having the
largest proportion of their deposits in New Jersey. In recent years the number
of states permitting out-of-state bank holding companies to make acquisitions
within their borders has grown rapidly and now includes New Jersey and
Pennsylvania, which have in effect laws which permit interstate banking with any
state in the United States which enacts reciprocal interstate banking
legislation. Satisfactory financial condition, particularly with regard to
capital adequacy, and satisfactory Community Reinvestment Act ratings are
generally prerequisites to obtaining federal regulatory approval to make
acquisitions. All of UJB's subsidiary banks are currently rated "satisfactory"
or better.
In addition, UJB is subject to various requirements under both New Jersey
and Pennsylvania laws concerning future acquisitions. Such laws require the
prior approval of the relevant Department of Banking to acquire any bank
chartered by that State. Acquisitions through federally chartered subsidiaries
require approval of the Comptroller of the Currency of the United States
("OCC"). Statewide branching is permitted in New Jersey and Pennsylvania. Branch
approvals are subject to statutory standards relating to safety and soundness,
competition, and public convenience. The Holding Company Act does not place
territorial restrictions on the activities of non-bank subsidiaries of bank
holding companies.
The policy of the FRB provides that UJB is expected to act as a source of
financial strength to each of its subsidiary banks and to commit resources to
support such subsidiary banks in circumstances in which it might not do so
absent such policy. In addition, any capital loans by UJB to any subsidiary bank
would be subordinate in right of payment to deposits and certain other
indebtedness of such subsidiary bank.
UJB is required by the Holding Company Act to file annual reports of its
operations with the FRB and is subject to examination by the FRB. Under Section
106 of the 1970 amendments to the Holding Company Act and the regulations of the
FRB, bank holding companies and their subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit or
provision of any property or services. Regulations of the FRB under the Federal
Reserve Act require that reserves be maintained by a UJB bank subsidiary to the
extent that the proceeds of any UJB promissory note, acknowledgement of advance,
due bill or similar obligation, with a maturity of less than four years, are
used to supply or to maintain the availability of funds (other than capital) to
the bank subsidiary, except any such obligation that, had it been issued
directly by the bank subsidiary, would not constitute a deposit. They also place
limits upon the amount of UJB's equity securities which may be repurchased or
redeemed by UJB.
Bank regulatory authorities in the United States have issued risk-based
capital standards by which all bank holding companies and banks are evaluated in
terms of capital adequacy. These guidelines relate a company's capital to the
risk profile of its assets. The standards require all banks to have Tier I
capital of at least 4 percent and total capital, including Tier I capital, of at
least 8 percent of risk-adjusted assets. Tier I capital includes common
shareholders' equity and qualifying perpetual preferred stock together with
related surpluses and retained earnings less certain disallowed intangible and
tax assets. Total capital is comprised of
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Tier I capital and limited life preferred stock, qualifying debt instruments,
and a portion of the allowance for loan losses. As of December 31, 1993, UJB's
Tier I capital was 9.37% and total risk-based capital was 12.43%.
Bank regulators have also issued leverage ratio requirements. The leverage
ratio requirement is measured as the ratio of Tier I capital to adjusted average
assets. The risk-based capital and leverage ratio requirements replaced the
primary capital and total capital guidelines used previously.
FRB guidelines provide that all bank holding companies (other than those
that meet certain criteria) maintain a minimum leverage ratio of 3 percent, plus
an additional cushion of 100 to 200 basis points. The guidelines also state that
banking organizations experiencing internal growth or making acquisitions will
be expected to maintain "strong capital positions" substantially above the
minimum supervisory levels without significant reliance on intangible assets. As
of December 31, 1993, UJB's ratio of Tier I capital to adjusted average assets
(leverage ratio) was 7.07%.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), which became law in December 1991, in addition to authorizing
increased funding for the Bank Insurance Fund ("BIF") by raising the FDIC's
borrowing limits and eliminating the cap on deposit insurance premiums, imposes
extensive additional statutory requirements regarding the roles,
responsibilities, and liabilities of a bank's senior management, directors,
independent auditors, and regulators in compliance, management and financial
affairs of a bank. This Act has required additional time, effort and resources
to be devoted to compliance and internal controls.
FDICIA requires each insured depository institution with $500 million or
more in total assets to have an annual audit of its financial statements by an
independent public accountant and to have an audit committee consisting of
independent outside directors. There are more stringent criteria for audit
committees of institutions with $3 billion or more in total assets. It also
requires that management report on and assess their responsibility for internal
controls over financial reporting and compliance with designated laws and
regulations. Independent public accountants must attest to management's report
on internal controls over financial reporting. They must also report on
management's compliance with designated laws and regulations.
FDICIA requires each federal banking agency to ensure that its risk-based
capital standards take adequate account of interest rate risk, concentration of
credit risk and the risks of non-traditional activities, as well as reflect the
actual performance and expected risk of loss on multi-family mortgages. In
addition, pursuant to FDICIA, each federal banking agency has promulgated
regulations specifying the levels at which a financial institution would be
considered "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized," and to take
certain mandatory and discretionary supervisory actions based on the capital
level of the institution.
The FDIC's regulations implementing these provisions of FDICIA provide that
an institution will be classified as "well capitalized" if it (i) has a total
risk-based capital ratio of at least 10.0 percent, (ii) has a Tier I risk-based
capital ratio of at least 6.0 percent, (iii) has a Tier I leverage ratio of at
least 5.0 percent, and (iv) meets certain other requirements. An institution
will be classified as "adequately capitalized" if it (i) has a total risk-based
capital ratio of at least 8.0 percent, (ii) has a Tier I risk-based capital
ratio of at least 4.0 percent, (iii) has a Tier I leverage ratio of (a) at least
4.0 percent or (b) at least 3.0 percent if the institution was rated 1 in its
most recent examination, and (iv) does not meet the definition of "well
capitalized." An institution will be classified as "undercapitalized" if it (i)
has a total risk-based capital ratio of less than 8.0 percent, (ii) has a Tier I
risk-based capital ratio of less than 4.0 percent, or (iii) has a Tier I
leverage ratio of (a) less than 4.0 percent or (b) less than 3.0 percent if the
institution was rated 1 in its most recent examination. An institution will be
classified as "significantly undercapitalized" if it (i) has a total risk-based
capital ratio of less than 6.0 percent, (ii) has a Tier I risk-based capital
ratio of less than 3.0 percent, or (iii) has a Tier I leverage ratio of less
than 3.0 percent. An institution will be classified as "critically
undercapitalized" if it has a tangible equity to total assets ratio that is
equal to or less than 2.0 percent. An insured depository institution may be
deemed to be in a lower capitalization category if it receives an unsatisfactory
examination.
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Insured institutions are generally prohibited from paying dividends or
management fees if after making such payments, the institution would be
"undercapitalized." An "undercapitalized" institution also is required to
develop and submit to the appropriate federal banking agency a capital
restoration plan, and each company controlling such institution must guarantee
the institution's compliance with such plan. The liability of a holding company
under any such guarantee is limited to the lesser of five percent of the
institution's total assets at the time it became undercapitalized or the amount
needed to comply with all applicable capital standards. The FDIC is accorded a
priority over the claims of unsecured creditors in any bankruptcy proceeding of
a holding company that has guaranteed an institution's compliance with a capital
restoration plan. Further, "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized" institutions are subject to increasingly
extensive requirements and limitations, including mandatory sale of stock,
forced mergers, and ultimately receivership or conservatorship. A "critically
undercapitalized" institution, beginning 60 days after it becomes "critically
undercapitalized," generally is prohibited from making any payment of principal
or interest on the institution's subordinated debt.
Under FDICIA, only "well capitalized" banks, and those "adequately
capitalized" banks which have obtained a waiver from the FDIC, may accept
brokered deposits. Those "adequately capitalized" banks that are permitted to
accept brokered deposits may not pay rates that significantly exceed the rates
paid on deposits of similar maturity from the bank's normal market area or, for
deposits from outside the bank's normal market area, the national rate on
deposits of comparable maturity, as determined by the FDIC. In addition, the
FDIC will not insure accounts established under certain qualified employee
benefit plans, if, at the time such deposits are accepted, the institution could
not accept brokered deposits. FDICIA also provides that the FDIC insurance
assessments are to move from flat-rate premiums to a new system of risk-based
premium assessments, which must take effect by January 1, 1994, in order to
recapitalize the BIF at a reserve ratio specified in FDICIA. The risk-based
insurance assessment will evaluate an institution's potential for causing a loss
to the insurance fund and base deposit insurance premiums upon individual bank
profiles. A transitional risk-based assessment system is currently in place
pursuant to which BIF members pay an annual assessment rate of between 23 and 31
cents per $100 of domestic deposits, depending on the risk classification
assigned by the FDIC to the BIF member. Currently the annual assessment rates
for the company's bank subsidiaries range from 23 to 26 cents per $100 of
domestic deposits. These rates are applicable through June 30, 1994 at which
time they will be reevaluated based upon more current risk classifications. The
FDIC was also granted authority under FDICIA to impose special assessments on
insured depositary institutions to repay FDIC borrowings from the United States
Treasury or other sources should such borrowings occur.
FDICIA also contains the Truth in Savings Act, which requires certain
disclosures to be made in connection with deposit accounts offered to consumers.
The FRB has adopted regulations implementing the provisions of the Truth in
Savings Act.
In addition, significant provisions of FDICIA require federal banking
regulators to draft standards in a number of other areas to assure bank safety
and soundness, including internal controls, information systems and internal
audit systems, credit underwriting, asset growth, compensation, loan
documentation and interest rate exposure. The bank regulators have proposed
substantially similar regulations that impose on banks which fail to meet the
safety and soundness standards of FDICIA substantially the same requirements
respecting the formulation and implementation of a corrective plan of action as
apply in the case of banks failing to meet the capital adequacy standards.
FDICIA require the regulators to establish maximum ratios of classified assets
to capital, and minimum earnings sufficient to absorb losses without impairing
capital. The legislation also contains provisions which tighten independent
auditing requirements, restrict the activities and investments of
state-chartered banks to those permitted for national banks, amend various
consumer banking laws, limit the ability of "undercapitalized" banks to borrow
from the FRB discount window, and require federal banking regulators to perform
annual on-site bank examinations and set standards for real estate lending.
FDICIA has significantly increased costs for the banking industry due to higher
FDIC assessments, additional layers of reporting and compliance requirements and
more limitations on the activities of all but the most well capitalized banks.
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FIRREA
Although the most significant purpose of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA") was to restructure the savings
and loan industry, many of its provisions have importance for the commercial
banking industry, including the provision which authorized bank holding
companies to acquire healthy as well as troubled thrift institutions, generally
without limitations on interstate acquisitions, while retaining thrift branching
powers.
Under FIRREA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution in danger of default. "Default"
is defined generally as the appointment of a conservator or receiver and "in
danger of default" is defined generally as the existence of certain conditions,
including a failure to meet minimum capital requirements, indicating that a
"default" is likely to occur in the absence of regulatory assistance. These
provisions have commonly been referred to as FIRREA's "cross guarantee"
provisions. Liability under the "cross guarantee" provisions is subordinate to
claims (other than claims by shareholders, including bank holding companies, in
their capacity as shareholders, and affiliates of the institution) of
depositors, secured creditors, other general or senior creditors, and holders of
obligations subordinated to depositors or other creditors. The FDIC may waive
its rights under limited circumstances generally applicable to acquisitions of
troubled institutions.
FIRREA gives the FDIC as conservator or receiver of a failed depository
institution express authority to repudiate contracts with such institution which
it determines to be burdensome or if such repudiation will promote the orderly
administration of the institution's affairs. Certain "qualified financial
contracts", defined to include securities contracts, commodity contracts,
forward contracts, repurchase agreements, and swap agreements, are generally
excluded from the repudiation powers of the FDIC. The FDIC is also given
authority to enforce contracts made by a depository institution, notwithstanding
any contractual provision providing for termination, default, acceleration, or
exercise of rights upon, or solely by reason of, insolvency or the appointment
of a conservator or receiver. Insured depository institutions are also
prohibited from entering into contracts for goods, products or services which
would adversely affect the safety and soundness of the institution.
The bank regulatory agencies have broad discretion to issue cease and
desist orders if they determine that the company or its subsidiaries are
engaging in "unsafe or unsound banking practices." In addition, the federal bank
regulatory authorities are empowered to impose substantial civil money penalties
for violations of certain federal banking statutes and regulations. Financial
institutions, and directors, officers, employees, controlling shareholders,
agents, consultants, attorneys, accountants, appraisers and others associated
with a financial institution could now be subject to increased fines, penalties,
and other enforcement actions as a result of provisions of FIRREA. Further,
under FIRREA the failure to meet capital guidelines could subject a banking
institution to a variety of enforcement remedies available to federal regulatory
authorities, including the termination of deposit insurance by the FDIC.
REGULATION OF SUBSIDIARIES
Various laws and the regulations thereunder applicable to the company and
its bank subsidiaries impose restrictions and requirements in many areas,
including capital requirements, the maintenance of reserves, establishment of
new offices, the making of loans and investments, consumer protection,
employment practices and other matters. There are various legal limitations,
including Sections 23A and 23B of the Federal Reserve Act, on the extent to
which a bank subsidiary may finance or otherwise supply funds to UJB or its
non-bank subsidiaries. Under federal law, no bank subsidiary may, subject to
certain limited exceptions, make loans or extensions of credit to, or
investments in the securities of, its parent or non-bank subsidiaries of its
parent or take their securities as collateral for loans to any borrower. Each
bank subsidiary is also subject to collateral security requirements for any
loans or extensions of credit permitted by such exceptions. Further, a
subsidiary bank may only engage in most transactions with other subsidiaries if
terms and conditions are at least as favorable to the bank as those prevailing
for transactions with unaffiliated companies. UJB and its
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banking and other subsidiaries are also subject to certain restrictions with
respect to engaging in the business of issuing, underwriting, public sale,
flotation or distribution of securities.
The two state-chartered subsidiary banks are subject to the supervision of,
and to regular examination by, the New Jersey or Pennsylvania Department of
Banking. The two subsidiary banks which are national banks are subject to the
supervision of, and to regular examination by, the OCC. In addition, the
subsidiary banks are subject to examination by the FDIC, and by the U.S
Department of Education with respect to student loan activity. United Jersey
Bank is also subject to examination by the FRB. The Municipal Bond Department of
United Jersey Bank, as a registered municipal securities dealer, is subject to
the supervision of the Municipal Securities Rulemaking Board.
None of the stocks of the subsidiary banks or other subsidiaries owned or
controlled by UJB carry statutory double liability. However, Section 55 of Title
12 of the United States Code and Article XIV, Section 11 of the Constitution of
the State of Arizona provide that the stock of, respectively, UJB's national
bank subsidiaries and UJB's credit life insurance subsidiaries, may be subject
to assessment to restore impaired capital under certain circumstances as and to
the extent provided therein. There is no such provision in New Jersey or
Pennsylvania law governing UJB's state-chartered banks.
Certain statutory restrictions may affect the declaration and payment of
dividends by the subsidiary banks to UJB. For additional information see Note 14
on page 47 of the 1993 Annual Report incorporated herein by reference as Exhibit
13.
UJB and its non-bank subsidiaries are subject to examination by the New
Jersey and Pennsylvania state and the three federal bank regulatory agencies at
their discretion. As a mortgagee approved by Department of Housing and Urban
Development and a seller-servicer of mortgages approved by the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, and the New
Jersey Housing and Mortgage Finance Agency, United Jersey Bank is subject to
regulation or supervision by these government agencies. First Valley Bank is a
participant in the mortgage program conducted by the Pennsylvania Housing
Finance Agency and is subject to the supervision of that agency. UJB Investor
Services Company and Lehigh Securities Corporation are subject to regulation and
examination by the Securities and Exchange Commission, the National Association
of Securities Dealers, Inc. and the New Jersey Bureau of Securities. UJB
Investor Services Company is also subject to regulation and examination by the
New York Bureau of Investor Protection and Securities and the Florida Department
of Banking and Finance. Lehigh Securities Corporation is also subject to
regulation and examination by the Pennsylvania Securities Commission and, as a
registered municipal securities dealer, is subject to the supervision of the
Municipal Securities Rulemaking Board. Trico Mortgage Company, Inc. is subject
to regulation and supervision as a mortgage banking company by the New Jersey
Department of Banking. United Jersey Credit Life Insurance Company and First
Valley Life Insurance Company are subject to regulation and examination by the
Department of Insurance of the State of Arizona.
UJB and its subsidiaries are also subject to various reporting requirements
of Federal and state securities laws and regulations of the Securities and
Exchange Commission and the New York Stock Exchange.
From time to time, various bills are introduced in the United States
Congress and the New Jersey or Pennsylvania Legislature which could result in
additional regulation of the business of UJB and its subsidiaries, or further
increase competition.
There is a continuing trend toward regulating every aspect of retail
banking through consumer protection laws, at significant expense to financial
institutions. At the same time, securities brokers, insurance companies,
retailers and other non-bank entities are being allowed to offer a variety of
traditional bank services without being subject to the same degree of regulation
as banks and bank holding companies. If these trends continue without providing
parity to the commercial banks in matters such as permissible services, taxation
and interest rates chargeable on loans, adverse effects on commercial banks
could ensue.
In its operations in other countries, United Jersey Bank is also subject to
restrictions imposed by the laws and banking authorities of such countries.
9
<PAGE> 10
References under this caption, Supervision and Regulation, to applicable
statutes are brief summaries of portions thereof which do not purport to be
complete and which are qualified in their entirety by reference to such
statutes.
Monetary Policy and Economic Conditions
The earnings and business of UJB and its subsidiaries are affected by the
policies of regulatory authorities, including the FRB. The monetary policies of
the FRB have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future. Because
of the changing conditions in the national and international economy and in the
money markets, as a result of actions by monetary and fiscal authorities,
interest rates, credit availability and deposit levels may change due to
circumstances beyond the control of UJB or its subsidiaries.
Effects of Inflation
A bank's asset and liability structure differs from that of an industrial
company, since its assets and liabilities fluctuate over time based upon
monetary policies and changes in interest rates. The growth in the bank's
earning assets, regardless of the effects of inflation, will increase net
interest income if the bank is able to maintain a consistent interest spread
between earning assets and supporting liabilities.
A purchasing power gain or loss from holding net monetary assets during the
year represents the effect of general inflation on monetary assets and
liabilities. Almost all of the assets and liabilities of UJB are considered
monetary because they are fixed in terms of dollars and therefore, are not
materially affected by inflation.
(C)(1)(I) PRINCIPAL PRODUCTS AND SERVICES RENDERED BY INDUSTRY SEGMENTS.
Not applicable. See response to Item 1(b) contained elsewhere in this
report.
(C)(1)(II) DESCRIPTION OF NEW PRODUCTS OR SEGMENTS.
Not applicable.
(C)(1)(III) SOURCES AND AVAILABILITY OF RAW MATERIALS.
Not applicable.
(C)(1)(IV) IMPORTANCE OF PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND
CONCESSIONS HELD.
Patents and licenses, as such, are not of importance to UJB or its
subsidiaries, but operating charters (similar to licenses) -- approved banking
location authorizations granted by the New Jersey and Pennsylvania Departments
of Banking, for state-chartered bank subsidiaries, and by the OCC, for
nationally-chartered bank subsidiaries -- are vital to the operation and
expansion of the bank subsidiaries. Such charters are perpetual unless revoked
by the granting authorities. Various licenses and approvals to do business are
also required by the other regulatory agencies referred to under Supervision and
Regulation above. Most of these licenses and approvals require periodic renewal.
UJB has several registered service marks, none of which is considered
material to its business. The duration of each registration is perpetual so long
as the registrant continues to use the mark.
(C)(1)(V) SEASONALITY OF BUSINESS.
Not applicable.
(C)(1)(VI) WORKING CAPITAL REQUIREMENTS RELATED TO INVENTORY.
Not applicable.
(C)(1)(VII) CONCENTRATION OF CUSTOMERS.
The business of the registrant and its subsidiaries is not dependent on a
single customer, nor on a small group of customers.
10
<PAGE> 11
(C)(1)(VIII) BACKLOG OF ORDERS.
Not applicable.
(C)(1)(IX) GOVERNMENT CONTRACTS.
No material portion of the business of UJB and its subsidiaries is subject
to renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
(C)(1)(X) COMPETITION.
Each bank subsidiary faces strong competition for local business in the
communities it serves from other banking institutions as well as from other
financial institutions. United Jersey Bank and First Valley Bank compete in the
national market with other major banking and financial institutions in the New
York and Philadelphia areas, many of which are substantially larger and may have
greater financial resources. A number of these institutions offer their services
throughout New Jersey and Pennsylvania through bank and non-bank subsidiaries,
loan production offices and solicitations through broadcast and print media and
direct mail. For international business, United Jersey Bank competes not only
with a substantial number of United States banks having foreign departments, but
also with agencies and branches of foreign banks located in the United States
and with other major banks throughout the world. The effect of liberalized
branching and acquisition laws, especially after FIRREA, has been to lower
barriers to entry into the banking business and to increase competition for
banking business, as well as to increase both competition for and opportunities
to acquire other financial institutions. Present proposals in Congress for
nationwide interstate banking would accelerate these trends.
For most of the services which the subsidiaries perform, there is
increasing competition from financial institutions other than commercial banks
due to the relaxation of regulatory restrictions. Money market funds actively
compete with banks for deposits. Savings banks, savings and loan associations
and credit unions also actively compete for deposits and for various types of
loans; such institutions, as well as securities brokers, consumer finance
companies, mortgage companies, factors, insurance companies and pension trusts,
are important competitors. Financial institutions such as these, as well as
retailers and other non-bank entities, have acquired so-called "non-bank banks"
permitting them to offer traditional banking services without being subject to
the same degree of regulation. Insurance companies, mutual fund investment
counseling firms and other business firms and individuals offer competition for
personal and corporate trust services and investment advisory services.
Each of UJB's non-bank subsidiaries competes with a very large number of
competitors, many of which are substantially larger and have greater financial
resources.
Competition for banking and permitted non-bank services is based on price,
nature of product, quality of service, and in the case of retail activities,
convenience of location.
(C)(1)(XI) RESEARCH AND DEVELOPMENT.
UJB and its subsidiaries conduct research activities, from time to time,
relating to the development of new services. Expenditures for these activities
are not considered material to the financial condition of UJB and its
subsidiaries. Research expenditures during 1993 were charged directly to expense
as incurred.
(C)(1)(XII) COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS.
It is not expected that compliance with Federal, State and local provisions
relating to the protection of the environment will have any material effect on
UJB or its subsidiaries.
(C)(1)(XIII) NUMBER OF PERSONS EMPLOYED.
At December 31, 1993, there were 6,219 persons, on a full-time equivalent
basis, employed by UJB and its subsidiaries.
11
<PAGE> 12
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
United Jersey Bank operates an International Banking Department principally
for the benefit of its domestic customers and, in January 1974, opened its first
offshore banking facility on the island of Grand Cayman in the British West
Indies. Business at the offshore facility constituted less than one-half of one
percent of the total assets and income of United Jersey Bank in 1993.
(E) STATISTICAL INFORMATION.
The following tables set forth, on a consolidated basis, certain
statistical information concerning UJB and its subsidiaries. The tables should
be read in conjunction with the consolidated financial statements contained in
the 1993 Annual Report to Shareholders, included herein as Exhibit 13. Average
data have been derived from daily balances except in the case of certain smaller
subsidiaries where month-end balances were used.
Distribution of Assets, Liabilities and Shareholders' Equity; Interest
Rates and Interest Differential.
For information on average balances, interest and average rates earned and
paid see "Comparative Average Balance Sheets With Resultant Interest and Rates"
on pages 36 and 37 in the 1993 Annual Report to Shareholders incorporated herein
by reference as Exhibit 13.
The amount by which interest income exceeds interest expense is called net
interest income. The amount of net interest income in any given period is
affected by the average volume of earning assets and the yield earned on such
assets, the average volume of interest bearing sources of funds and the average
rate paid on such liabilities, and the average volume of interest-free sources
of funds.
12
<PAGE> 13
The following table shows the approximate effect on the effective interest
differential of volume and rate changes for the years 1993 and 1992 on a
tax-equivalent basis. For purposes of this table, the change in interest due to
both volume and rate has been allocated to change due to volume and change due
to rate in proportion to the relationship of the absolute dollar amounts of the
change in each.
<TABLE>
<CAPTION>
1993 OVER 1992 1992 OVER 1991
-------------------------------- ------------------------------
INCREASE/(DECREASE) INCREASE/(DECREASE)
DUE TO CHANGE IN: DUE TO CHANGE IN:
-------------------------------- ------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
-------- --------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Interest bearing deposits
with banks................... $ 114 $ (131) $ (17) $ (794) $ (775) $ (1,569)
Investment securities:
U.S. Government and Federal
agencies................... (40,513) (14,422) (54,935) 35,255 (35,936) (681)
States and political
subdivisions............... (7,401) 603 (6,798) (9,113) 436 (8,677)
Other securities............. 17,886 (2,430) 15,456 (12,350) (6,567) (18,917)
-------- --------- --------- -------- -------- --------
Total investment
securities............ (30,028) (16,249) (46,277) 13,792 (42,067) (28,275)
Investment securities available
for sale..................... 28,409 (8,168) 20,241 7,862 (589) 7,273
Trading account securities...... 456 (500) (44) 672 (509) 163
Money market investments........ (2,514) (933) (3,447) (11,877) (5,021) (16,898)
Loans:
Commercial................... (13,864) (9,388) (23,252) (11,450) (76,669) (88,119)
Mortgage..................... 11,344 (16,448) (5,104) 19,601 (21,443) (1,842)
Instalment................... (973) (12,689) (13,662) 4,804 (31,827) (27,023)
-------- --------- --------- -------- -------- --------
Total loans............. (3,493) (38,525) (42,018) 12,955 (129,939) (116,984)
-------- --------- --------- -------- -------- --------
Total interest earnings
assets................ (7,056) (64,506) (71,562) 22,610 (178,900) (156,290)
-------- --------- --------- -------- -------- --------
INTEREST BEARING LIABILITIES
Time deposits:
Savings deposits............. 11,263 (43,371) (32,108) 34,974 (85,152) (50,178)
Other time deposits.......... (23,889) (34,308) (58,197) (12,471) (64,847) (77,318)
Commercial certificates of
deposit $100,000 and
over....................... (5,312) (3,689) (9,001) (16,773) (13,433) (30,206)
-------- --------- --------- -------- -------- --------
Total time deposits..... (17,938) (81,368) (99,306) 5,730 (163,432) (157,702)
Commercial paper................ (1,124) (547) (1,671) (3,519) (3,289) (6,808)
Other borrowed funds............ (4,730) 356 (4,374) (15,092) (18,784) (33,876)
Long-term debt and capital
notes........................ 12,699 (1,414) 11,285 (482) (363) (845)
-------- --------- --------- -------- -------- --------
Total interest bearing
liabilities........... (11,093) (82,973) (94,066) (13,363) (185,868) (199,231)
-------- --------- --------- -------- -------- --------
Change in net interest income... $ 4,037 $ 18,467 $ 22,504 $ 35,973 $ 6,968 $ 42,941
-------- --------- --------- -------- -------- --------
-------- --------- --------- -------- -------- --------
</TABLE>
13
<PAGE> 14
Investment Securities Available for Sale
The following table shows the carrying value of investment securities
available for sale at December 31 for each of the following years:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------
1993 1992 1991
---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Investment securities available for sale:
Federal agencies.............................. $ 669,841 $741,428 $358,973
Other securities.............................. 492,247 139,850 --
---------- -------- --------
Total investment securities available for
sale..................................... $1,162,088 $881,278 $358,973
---------- -------- --------
---------- -------- --------
</TABLE>
The following table shows the maturity distribution and weighted average
yields to maturity on a tax-equivalent basis for investment securities available
for sale, by type and in total, of Federal agencies, and other securities at
December 31, 1993. The carrying value and market value of securities at December
31, 1993 are distributed by contractual maturity. However, mortgage-backed
securities and other securities which may have prepayment provisions are
distributed to a maturity category based on estimated average lives. These
principal prepayments are not scheduled over the life of the investment, but are
reflected as adjustments to the final maturity distribution. The distribution
follows:
<TABLE>
<CAPTION>
WEIGHTED
CARRYING MARKET AVERAGE
VALUE VALUE YIELD(2)
----------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Investment securities available for sale (by type):
Federal agencies:
Within 1 year....................................... $ -- $ -- --%
After 1 but within 5 years.......................... 356,457 362,881 6.05
After 5 but within 10 years......................... 93,011 93,629 6.50
After 10 years...................................... 220,373 221,208 4.44
----------- ----------- --------
Total.......................................... 669,841 677,718 5.58
----------- ----------- --------
Other securities(1):
Within 1 year....................................... 563 566 4.13
After 1 but within 5 years.......................... 185,780 185,679 4.76
After 5 but within 10 years......................... 201,476 203,452 5.35
After 10 years...................................... 90,235 91,425 4.08
----------- ----------- --------
Total.......................................... 478,054 481,122 4.88
----------- ----------- --------
Total investment securities available for
sale......................................... $ 1,147,895 $ 1,158,840 5.29%
----------- ----------- --------
----------- ----------- --------
Investment securities available for sale (in total)(1):
Total within 1 year................................. $ 563 $ 566 4.13%
Total after 1 but within 5 years.................... 542,237 548,560 5.61
Total after 5 but within 10 years................... 294,487 297,081 5.71
Total after 10 years................................ 310,608 312,633 4.34
----------- ----------- --------
Total investment securities available for
sale......................................... $ 1,147,895 $ 1,158,840 5.29%
----------- ----------- --------
----------- ----------- --------
</TABLE>
- ---------------
(1) Excludes corporate stock with a carrying value of $14,193,000 and a market
value of $18,745,000.
(2) Weighted average yields have been computed on a tax-equivalent basis using
the statutory federal income tax rate of 35%.
14
<PAGE> 15
Investment Securities
The following table shows the carrying value of investment securities at
December 31 for each of the past three years:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Investment securities:
U.S. Government...................................... $ 186,563 $ 176,988 $ 165,817
Federal agencies..................................... 1,081,050 2,022,518 2,199,258
States and political subdivisions.................... 308,004 378,198 430,859
Other securities..................................... 881,096 55,839 221,945
----------- ----------- -----------
Total investment securities.................. $ 2,456,713 $ 2,633,543 $ 3,017,879
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The following table shows the maturity distribution and weighted average
yields to maturity on a tax-equivalent basis for investment securities, by type
and in total, of U.S. Government, Federal agencies, states and political
subdivisions and other securities at December 31, 1993. The carrying value and
market value of securities at December 31, 1993 are distributed by contractual
maturity. However, mortgage-backed securities and other securities which may
have prepayment provisions are distributed to a maturity category based on
estimated average lives. These principal prepayments are not scheduled over the
life of the investment, but are reflected as adjustments to the final maturity
distribution. the distribution follows:
<TABLE>
<CAPTION>
WEIGHTED
CARRYING MARKET AVERAGE
VALUE VALUE YIELD(2)
---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Investment securities (by type):
U.S. Government:
Within 1 year........................................ $ 60,569 $ 62,022 6.79%
After 1 but within 5 years........................... 125,994 130,749 6.34
After 5 but within 10 years.......................... -- -- --
After 10 years....................................... -- -- --
---------- ---------- --------
Total.............................................. 186,563 192,771 6.49
---------- ---------- --------
Federal agencies:
Within 1 year........................................ 7,994 8,083 7.44
After 1 but within 5 years........................... 130,185 129,796 8.25
After 5 but within 10 years.......................... 681,033 686,586 5.45
After 10 years....................................... 261,838 261,917 6.17
---------- ---------- --------
Total.............................................. 1,081,050 1,086,382 5.98
---------- ---------- --------
States and political subdivisions:
Within 1 year........................................ 40,453 41,674 11.41
After 1 but within 5 years........................... 148,046 160,206 11.40
After 5 but within 10 years.......................... 67,361 76,783 10.97
After 10 years....................................... 52,144 57,095 11.25
---------- ---------- --------
Total.............................................. 308,004 335,758 11.28
---------- ---------- --------
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
WEIGHTED
CARRYING MARKET AVERAGE
VALUE VALUE YIELD(2)
---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Other securities(1):
Within 1 year........................................ 2,418 2,458 3.42
After 1 but within 5 years........................... 489,251 489,160 4.44
After 5 but within 10 years.......................... 219,926 219,630 4.18
After 10 years....................................... 160,931 161,120 5.09
---------- ---------- --------
Total.............................................. 872,526 872,368 4.49
---------- ---------- --------
Total investment securities........................ $2,448,143 $2,487,279 6.15%
---------- ---------- --------
---------- ---------- --------
Investment securities (in total)(1):
Total within 1 year.................................. $ 111,434 $ 114,237 8.44%
Total after 1 but within 5 years..................... 893,476 909,911 6.42
Total after 5 but within 10 years.................... 968,320 982,999 5.55
Total after 10 years................................. 474,913 480,132 6.36
---------- ---------- --------
Total investment securities........................ $2,448,143 $2,487,279 6.15%
---------- ---------- --------
---------- ---------- --------
</TABLE>
- ---------------
(1) Excludes Federal Reserve Bank stock with a carrying value and a market value
of $8,570,000.
(2) Weighted average yields have been computed on a tax-equivalent basis using
the statutory Federal income tax rate of 35%.
Loan Portfolio
The following table shows the classification of consolidated loans (before
deduction of unearned discount and the allowance for loan losses) by major
category at December 31 for each of the past five years:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural........................ $ 3,174,961 $ 3,269,759 $ 3,328,078 $ 3,414,185 $ 3,506,064
Real estate-construction.............. 867,063 1,002,859 1,114,631 1,255,118 1,207,006
Real estate-mortgage.................. 2,377,440 2,327,363 2,202,328 1,890,342 1,763,620
Instalment loans to individuals....... 1,994,023 2,042,368 1,961,698 1,978,831 1,743,083
Lease financing....................... 204,583 153,221 179,603 145,343 127,803
Foreign loans......................... -- -- -- -- 9,209
----------- ----------- ----------- ----------- -----------
Total loans...................... $ 8,618,070 $ 8,795,570 $ 8,786,338 $ 8,683,819 $ 8,356,785
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
At December 31, 1993 commercial mortgage loans represented 17.9% of total
loans. Home equity loans represented 16.0% of the total loan portfolio at year
end. As of December 31, 1993 there are no other concentrations of loans which
exceed 10% of total loans.
16
<PAGE> 17
The following table shows the approximate maturities of selected loans at
December 31, 1993. The loans are segregated between those which are at
predetermined interest rates and those at floating or adjustable interest rates.
The table includes non-performing loans which are discussed on pages 17 and 18
of this report:
<TABLE>
<CAPTION>
OVER ONE OVER
ONE YEAR YEAR THROUGH FIVE
OR LESS FIVE YEARS YEARS TOTAL
---------- ------------ -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan categories:
Commercial, financial and agricultural.......... $1,697,593 $ 996,018 $481,350 $3,174,961
Real estate-construction........................ 628,704 221,390 16,969 867,063
---------- ------------ -------- ----------
Total................................... $2,326,297 $1,217,408 $498,319 $4,042,024
---------- ------------ -------- ----------
---------- ------------ -------- ----------
Amounts of loans based upon:
Predetermined interest rates.................... $ 540,336 $ 475,619 $326,222 $1,342,177
Floating or adjustable interest rates........... 1,785,961 741,789 172,097 2,699,847
---------- ------------ -------- ----------
Total................................... $2,326,297 $1,217,408 $498,319 $4,042,024
---------- ------------ -------- ----------
---------- ------------ -------- ----------
</TABLE>
The loan portfolio is reviewed regularly to determine whether specific
loans should be placed in a non-performing status. Non-performing loans consist
of commercial non-accrual and renegotiated loans. Non-accrual loans include
loans that are past due 90 days or more as to principal or interest, or where
reasonable doubt exists as to timely collectibility. At the time a loan is
placed on non-accrual status, previously accrued and uncollected interest is
reversed against interest income. Interest collections on non-accrual loans are
generally credited to interest income when received. However, if ultimate
collectibility of principal is in doubt, interest collections are applied as
principal reductions. After principal and interest payments are brought current
and future collectibility is reasonably assured, loans are returned to accrual
status. Renegotiated loans are loans whose contractual interest rates have been
reduced to below market rates or other significant concessions made due to a
borrower's financial difficulties. Interest income on renegotiated loans is
generally credited to interest income as received. Non-performing loans do not
include past due retail loans 90 days or more as to principal or interest, but
which are well collateralized and in the process of collection. At December 31,
1993 and 1992 these loans amounted to $29,513,000 and $37,917,000, respectively.
The following table shows, in thousands of dollars, the principal amount of
commercial non-accruing loans, renegotiated loans, and loans 90-days or more
past due and accruing at December 31 for each of the past five years, and their
resultant impact on earnings before taxes for the years then ended. All loans in
the following table represent domestic loans. There are no foreign loans
included in any of the categories.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accruing loans........................... $ 248,144 $ 339,980 $ 415,897 $ 429,745 $ 185,513
Renegotiated loans........................... 3,582 21,836 28,831 2,284 402
90-days or more past due and accruing........ 2,941 5,977 8,069 20,995 12,284
Impact on interest income:
Interest income that would have been
recorded on non-accruing and
renegotiated loans outstanding at
December 31 in accordance with their
original terms.......................... 21,382 27,538 43,405 33,410 17,353
Interest income actually received and
recorded on non-accruing and
renegotiated loans outstanding at
December 31............................. 3,787 3,843 8,463 4,651 2,483
</TABLE>
17
<PAGE> 18
Potential problem loans are those which management believes conditions
indicate that the collection of principal and interest may be doubtful in
accordance with the original contract terms. They are not included in
non-performing loans as these loans are still performing. Potential problem
loans were $39,187,000 and $48,062,000 at December 31, 1993 and 1992
respectively. Potential problem loans at December 31, 1993 comprised commercial
and industrial loans of $19,774,000, construction and development loans of
$7,872,000, and real estate related loans of $11,541,000. Such risk associated
with these loans have been factored into the company's allowance for loan
losses.
Summary of Loan Loss Experience
The relationship for the past five years among loans, loans charged off and
loan recoveries, the provision for loan losses and the allowance for loan losses
is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans:
Average for the period............. $8,718,376 $8,792,964 $8,669,864 $8,548,289 $7,791,184
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Allowance for loan losses:
Balance, beginning of period....... $ 275,296 $ 288,770 $ 258,691 $ 121,909 $ 107,795
Provision charged to operating
expenses........................ 95,500 139,000 167,350 246,000 52,500
Loans charged off:
Commercial...................... 68,102 75,402 69,008 62,952 35,560
Mortgage........................ 69,672 81,500 69,607 25,989 160
Instalment...................... 5,213 8,306 10,710 31,430 14,565
---------- ---------- ---------- ---------- ----------
Total loans charged off.... 142,987 165,208 149,325 120,371 50,285
---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial...................... 9,255 7,177 4,961 5,629 7,810
Mortgage........................ 1,803 1,904 2,208 92 154
Instalment...................... 3,237 3,653 4,885 5,432 3,935
---------- ---------- ---------- ---------- ----------
Total recoveries........... 14,295 12,734 12,054 11,153 11,899
---------- ---------- ---------- ---------- ----------
Net loans charged off.............. 128,692 152,474 137,271 109,218 38,386
---------- ---------- ---------- ---------- ----------
Balance, end of period............. $ 242,104 $ 275,296 $ 288,770 $ 258,691 $ 121,909
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of:
Net charge offs to average loans
outstanding..................... 1.48% 1.73% 1.58% 1.28% .49%
Allowance to year-end loans........ 2.81 3.13 3.29 2.99 1.46
</TABLE>
For additional information, see Financial Review on pages 25 through 35 of
the 1993 Annual Report incorporated herein by reference as Exhibit 13.
Implicit in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan being
made, the credit worthiness of the borrower and prevailing economic conditions.
A standardized process has been established throughout the company to provide
for loan losses through a reasonable and prudent methodology. This methodology
includes a review to assess the risks inherent in the loan portfolio. It
incorporates a credit review and gives consideration to areas of exposure such
as concentrations of credit, economic and industry conditions, and negative
trends in delinquencies and collections. Consideration is also given to
collateral levels and the composition of the portfolio.
18
<PAGE> 19
Specific allocations as well as a need for general reserves are identified
by loan type and allocated according to the following categories of loans at
December 31 for each of the past five years. The percentage of loans to total
loans is based upon the classification of loans shown as follows:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------------------- -------------------- -------------------- -------------------- --------------------
(DOLLARS IN THOUSANDS)
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF OF OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
--------- ---------- --------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
industrial........ $ 53,557 36.7% $ 64,085 37.2% $ 96,177 37.9% $ 81,524 39.3% $ 47,976 42.0%
Real estate
related(1)........ 82,666 37.7 96,911 37.9 95,609 37.8 62,255 36.2 40,517 35.5
Loans to
individuals....... 10,817 23.2 13,407 23.2 12,094 22.3 9,171 22.8 11,501 20.9
All other loans..... 1,226 2.4 1,696 1.7 1,266 2.0 1,889 1.7 137 1.6
Unallocated......... 93,838 N/A 99,197 N/A 83,624 N/A 103,852 N/A 21,778 N/A
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Total........... $ 242,104 100.0% $ 275,296 100.0% $ 288,770 100.0% $ 258,691 100.0% $ 121,909 100.0%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
</TABLE>
- ---------------
(1) Includes mortgage and construction and development loans.
Deposits
For information on classification of average balances for deposits, see
"Comparative Average Balance Sheets With Resultant Interest and Rates" on pages
36 and 37 in the 1993 Annual Report to Shareholders incorporated herein by
reference as Exhibit 13.
The following table shows, by time remaining to maturity, all commercial
certificates of deposit $100,000 and over at December 31, 1993 (in thousands):
<TABLE>
<S> <C>
Less than three months.................................... $ 145,826
Three to six months....................................... 64,373
Six to twelve months...................................... 16,387
More than twelve months................................... --
---------
Total........................................... $ 226,586
---------
---------
</TABLE>
Return on Equity and Assets
For information on consolidated ratios, see "Summary of Selected Financial
Data" on page 2 in the 1993 Annual Report to Shareholders incorporated herein by
reference as Exhibit 13.
19
<PAGE> 20
Short-Term Borrowings
The following table summarizes information relating to certain short-term
borrowings for each of the past three years:
<TABLE>
<CAPTION>
MAXIMUM
DAILY AVERAGE FOR YEAR AMOUNT
AMOUNT ---------------------------- OUTSTANDING
OUTSTANDING AT AVERAGE RATE AT AMOUNT INTEREST AT ANY
DECEMBER 31 DECEMBER 31 OUTSTANDING RATE MONTH END
-------------- --------------- ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Securities sold under agreements to repurchase:
1993 $274,255 2.70% $ 358,141 2.90% $ 620,829
1992 357,734 2.80 464,395 3.31 568,786
1991 620,365 4.11 457,349 5.52 867,138
Federal funds purchased:
1993 $160,554 3.00% $ 280,429 3.04% $ 340,289
1992 198,275 3.02 267,555 3.53 349,599
1991 195,000 3.89 390,843 5.68 492,164
</TABLE>
ITEM 2. PROPERTIES.
UJB owns the building, constructed in 1984, in West Windsor Township, New
Jersey where it maintains its corporate headquarters. Additionally, UJB occupies
offices in Hackensack, New Jersey in space provided by United Jersey Bank and
also occupies offices in Hackensack as well as at other locations in New Jersey,
including an office and warehouse facility in Fair Lawn, which it leases from
third-party lessors. During 1978, UJB sold a six-story office building that it
owned in Hackensack, adjacent to the administrative and principal banking office
of United Jersey Bank. United Jersey Bank leases space in the building.
The principal banking office and administrative offices of United Jersey
Bank are located in Hackensack in a nine-story building owned by the bank which
was constructed in 1927. The bank occupies substantially the entire building. In
addition to its principal office, United Jersey Bank owns 36 of its branch
offices buildings; office space in certain of these buildings is leased to
others. United Jersey Bank leases the buildings and property for 39 of its
branch offices. It leases a multi-level parking garage accommodating 250 cars
located near the principal office. UJB leases real property located in
Ridgefield Park, New Jersey and a multi-story building containing approximately
300,000 square feet of space for use by UJB Financial Service Corporation as a
data processing facility which was completed in 1991. The tenant improvements
and furniture, fixtures and equipment for the new facility was initially funded
by UJB. On August 31, 1992, the Company consummated the sale of certain assets
and simultaneously negotiated the leaseback of these assets. The previous
computer center in Hackensack, owned by United Jersey Bank, has been utilized to
centralize certain banking activities. Of the 183 banking buildings of the other
bank subsidiaries, 87 are owned in fee and 96 are leased. The principal banking
and administrative offices of First Valley Bank are located in an eleven-story
building built in 1974 in Bethlehem, Pennsylvania. First Valley leases the
building for an initial term ending in the year 2000, with renewal options
extending for an additional 38 years. First Valley occupies approximately
three-quarters of the building. All properties owned by the various bank
subsidiaries are unencumbered by mortgages or similar liens.
The bank subsidiaries at December 31, 1993 operated banking offices in 17
of the 21 counties in New Jersey (Atlantic, Bergen, Burlington, Camden,
Cumberland, Essex, Gloucester, Hudson, Mercer, Middlesex, Monmouth, Morris,
Ocean, Passaic, Somerset, Union and Warren), and 12 of the 67 counties in
Pennsylvania (Berks, Bucks, Carbon, Chester, Delaware, Lancaster, Lehigh,
Luzerne, Montgomery, Northampton, Philadelphia and Schuylkill). Gibraltar
Corporation of America occupies leased offices in New York City, New York. UJB
Investor Services Company occupies leased offices in Fort Lee, Matawan,
Morristown, Paramus, Princeton and West Caldwell, New Jersey. Trico Mortgage
Company, Inc. occupies leased offices in Somerset, New Jersey. First Valley
Leasing, Inc. occupies leased offices in Bethlehem, Pennsylvania. Lehigh
Securities Corporation occupies leased offices in Whitehall, Pennsylvania.
20
<PAGE> 21
ITEM 3. LEGAL PROCEEDINGS.
Management does not believe that the ultimate disposition of the litigation
discussed below will have a material adverse effect on the financial position
and results of operation of the company and its subsidiaries, taken as a whole.
POSEIDON POOLS, INC. SUITS
Poseidon Pools, Inc., a dissolved subsidiary of Gibraltar Corporation of
America (Gibraltar) (a subsidiary of UJB Credit Corporation which, in turn, is a
subsidiary of UJB Financial Corp.), was incorporated to take over certain assets
of Atreo Manufacturing Co. on April 19, 1975 when Atreo defaulted on a
substantial indebtedness to Gibraltar. A substantial portion of the assets and
certain liabilities of Poseidon Pools, Inc. along with the right to the name
Poseidon Pools were sold to S & V Pools, Inc., an unaffiliated entity, on
September 5, 1978. Poseidon Pools, Inc. was subsequently dissolved and the
Certificate of Dissolution was filed with the Secretary of State of the State of
New York on January 10, 1983. The cases below involve claims of negligence, tort
liability, product liability or successor product liability. No opinion has been
reached as to liability in any of these cases which have not been concluded.
UJB and its subsidiaries maintained insurance coverage against the claims
related to its ownership of Poseidon Pools, Inc. which are discussed below, and
counsel has been assigned by the insurance carriers. However, if any of the
plaintiffs prevail and damages are awarded in excess of the applicable insurance
coverages, such excess would be payable by subsidiaries of UJB.
Richard Fleck and Diane Fleck v. KDI Sylvan Pools, Inc. a/k/a Sylvan Pools,
Nichols Swim Pools, Inc. and James Hubert v. Atreo Manufacturing Co., Inc.,
Poseidon Pools, Inc., Poseidon Pools of America, Inc., Gibraltar Factors Corp.,
The Gibraltar Corporation, S & V Pools, Inc., Esther Williams Swimming Pool
Company, Esther Williams Pools, Inc. and Esther Williams All Aluminum Swimming
Pool Company, United States District Court, Eastern District of Pennsylvania,
Civil Action No. 89-1348, Third Party Complaint filed October 23, 1989.
The Plaintiffs allege that Richard Fleck suffered injuries resulting in
quadriplegia when he dove into an above-ground swimming pool in August 1987. The
Plaintiffs claim that the injuries were the result of a defect in the
above-ground swimming pool sold by the defendant KDI Sylvan Pools, Inc. ("KDI
Sylvan") (a retailer) and a defect in the liner installed in the pool by the
defendant James Hubert (the homeowner). In turn, KDI Sylvan filed a Third Party
Complaint against Gibraltar and its dissolved subsidiary Poseidon Pools, Inc.
and other alleged manufacturers of the pool seeking to impose liability on a
variety of negligence and product liability theories. The pool was purchased in
1971.
The trial commenced on October 2, 1990 with the court dismissing the claims
against Poseidon Pools, Inc. prior to the start of the trial. At the conclusion
of the Plaintiffs' case, Gibraltar successfully moved for a directed verdict in
its favor. The trial continued and the jury awarded $10.2 million in favor of
the Plaintiffs as against the remaining Defendants.
The Plaintiffs and another party (the replacement pool liner manufacturer)
filed various post-trial motions which were all denied by the trial court. These
parties then filed appeals from the directed verdict in favor of Gibraltar with
the United States Circuit Court of Appeals for the Third Circuit. In addition,
the replacement pool liner manufacturer also appealed from the trial court's
pre-trial dismissal of the claims against Poseidon Pool, Inc. The appeals
resulted in an order affirming the judgments with respect to the claims against
Gibraltar and Poseidon Pools, Inc. The replacement pool liner manufacturer then
filed a petition for a re-hearing en banc which was denied on December 31, 1992.
The petition for a writ of certiorari filed by the replacement pool liner
manufacturer was denied by the Supreme Court of the United States on March 29,
1993. All subsequent motions were denied and the matter is now concluded.
A companion suit. Richard Fleck and Diane Fleck v. Atreo Manufacturing Co.,
Inc., Poseidon Pools, Inc., Poseidon Pools of America, Inc., Gibraltor Factors
Corp., The Gibraltar Corporation and S & V Pools, Inc., Commonwealth of
Pennsylvania, Court of Common Pleas, Civil Division, July Term, 1989, No. 6755,
Summons filed August 4, 1989, is pending in the state court of Pennsylvania.
Gibraltar received informal
21
<PAGE> 22
notice of the state court action on August 18, 1989. Based on informal inquiry,
the state court action remains dormant.
SHAREHOLDER SUIT
In Re UJB Financial Corp. Shareholder Litigation, United States District
Court for the District of New Jersey, Trenton, Civil Action No. 90-1569. Suit
filed April 5, 1990.
Three suits, UJB Financial Corporation, derivatively by Chappaqua Family
Trust and Robert Bassman v. UJB Financial Corporation et al; Irwin Shapiro v.
UJB Financial Corp. et al; Lester Associates and Jerome Katz v. UJB Financial
Corp, et al were filed in April and May of 1990. These suits were consolidated
and a Consolidated Amended Complaint and Derivative Complaint was filed on
September 4, 1990.
This purported derivative and class action securities law suit against UJB
Financial Corp. ("UJB") and certain officers and directors is brought by
Plaintiffs who are alleged to have owned or purchased securities of UJB from
approximately February 1, 1988 through July 1990. Violations are alleged of
Sections 10(b), 14(a) and 20 of the Exchange Act, Sections 11, 12 and 15 of the
Securities Act of 1933 and New Jersey common law. The suit alleges that UJB's
reserves for loan losses were inadequate, resulting in inaccurate financial
statements, and that the defendants made misleading positive statements about
UJB's financial condition and failed to disclose negative information about
UJB's lending policies, operations and finances, thus artificially inflating
UJB's earnings and the prices of UJB's securities. The suit further alleges that
UJB's internal credit review and controls were inadequate.
In addition, plaintiffs assert that the 1990 Proxy Statement was false and
misleading because it did not disclose that defendants had engaged in the
conduct described in the preceding paragraph or that entrenchment allegedly was
defendants' true motive behind the adoption of a shareholder rights plan and a
provision amending UJB's certificate of incorporation to require 80% approval by
the shareholders to increase the authorized number of directors (and 80%
approval to amend or repeal any provision of the proposed amendments). The
plaintiffs demand judgment including unspecified money damages, a declaration
that all action taken at the 1990 Annual Meeting is null and void, a declaration
that the shareholder rights plan is void, and attorneys' fees.
Discovery and determination of class issues were stayed by District Court
order. UJB and the defendant directors and officers moved to dismiss the
complaint and each claim for relief on various grounds, including, among others:
failure to state a claim; failure to plead with particularity; and failure to
make the required demand. The District Court granted the motion in part and
allowed plaintiffs thirty days to replead or amend their complaint with respect
to other alleged wrongdoing. The plaintiffs determined not to replead or amend
and appealed the District Court ruling to the U.S. Circuit Court of Appeals.
Plaintiffs did not appeal dismissal of the derivative claims and voluntarily
withdrew, with prejudice, the claim challenging UJB's 1990 Proxy Statement. On
May 22, 1992 the Court of Appeals reversed in part the District Court's decision
insofar as it dismissed certain claims in the complaint and remanded same to the
District Court for further proceedings, including repleading by the plaintiffs.
By orders dated July 7, 1992, the Court of Appeals denied the defendants'
petition for rehearing en banc but stayed entry of its mandate until August 13,
1992 to permit defendants to seek review by the United States Supreme Court. All
proceedings in the District Court were stayed pending entry of the mandate; the
mandate issued upon denial of review by the Supreme Court. On October 13, 1992,
the Supreme Court declined to accept the case for review. On March 22, 1993, the
Plaintiffs served the Second Consolidated Amended Class Action Complaint which
contained substantially the same claims (except for those that had been
dismissed) as set forth in the prior Amended Complaint. UJB and the defendant
directors and officers then moved to dismiss the Second Consolidated Amended
Class Action Complaint and each claim for relief contained therein on various
grounds. On September 13, 1993, the District Court denied the defendants' motion
to dismiss the plaintiffs' claims under the Securities Exchange Act of 1934 and
New Jersey common law and reserved decision on the motion with regard to
plaintiffs' claims under the Securities Act of 1933. The plaintiffs subsequently
stipulated to the dismissal with prejudice of their claims under the Securities
Act of 1933 on October 14, 1993. The defendants filed a motion requesting
certification of an appeal from the District Court order to the United States
Court of Appeals for the Third
22
<PAGE> 23
Circuit pursuant to 12 U.S.C. 1292(b) on October 29, 1993. The defendants also
filed an Answer denying the allegations of the Second Consolidated Amended Class
Action Complaint on October 28, 1993. The District Court by order dated December
3, 1993 denied the defendants' motion requesting certification of an appeal.
Discovery commenced in January 1994. As permitted by New Jersey law, the
expenses of the individual defendants are being advanced by UJB. The Board and
management of UJB believe the allegations contained in the lawsuit to be lacking
in merit and intend to defend this lawsuit vigorously.
OTHER LITIGATION
1. McAdoo CERCLA Matter. First Valley Bank ("FVB") foreclosed on property
in McAdoo, Pennsylvania, taking title by a sheriff's deed in 1980. The property
was later designated by the United States Environmental Protection Agency
("EPA") as a part of a site (the "McAdoo Site") listed on the National
Priorities List of sites to be remediated pursuant to the federal Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA").
On June 3, 1988, the United States District Court for the Eastern District
of Pennsylvania entered a Consent Decree in United States v. Air Products and
Chemicals, Inc., Civil Action No. 87-7352 (the "Air Products litigation"), in
which sixty-five potentially responsible parties ("PRPs"), not including FVB,
agreed to undertake remediation of the McAdoo Site and the United States agreed
to pay 25% of the settling PRPs (the "Initial PRPs") cost of remediation.
On June 11, 1988, after having made a demand upon FVB and a number of other
non-settling PRPs, the United States sued a number of the PRPs other than FVB
who did not enter into the Consent Decree in a matter entitled United States of
America v. Alcan Aluminum et al, United States District Court, Eastern District
of Pennsylvania, Civil Action No. 88-4970 (the "Alcan litigation"). Although the
United States did not sue FVB, on April 16, 1990, one defendant in the Alcan
Litigation, Kalama Chemical, Inc., filed a motion for leave to file a third
party complaint against FVB seeking contribution. The motion was denied without
prejudice.
FVB then participated in settlement discussions in the Alcan litigation.
Pursuant to those negotiations, FVB and certain defendants, third-party
defendants and other potential third-party defendants deposited, in a Court
registry, a sum which the United States agreed will satisfy all of its claims
against FVB. The parties also executed a Consent Decree which was approved by
the District Court by Order dated June 24, 1993. The Consent Decree gives FVB a
broad covenant not to sue and contribution protection to the extent available
under 42 U.S.C. sec. 9622(d)(2). The Consent Decree was the subject of public
notice and comment, pursuant to 42 U.S.C. sec. 9622(d)(2). The Initial PRPs
submitted comments to the United States objecting to the Consent Decree,
including inter alia, the broad release provided to FVB. The Initial PRPs also
filed a motion to intervene in the Alcan litigation, which was denied by the
District Court. The Initial PRPs then appealed that denial to the United States
Court of Appeals for the Third Circuit in a matter captioned United States v.
Alcan Aluminum, Inc., et al., Action No. 93-1099 (3rd Cir.). Briefs have been
submitted in the appeal, the Court heard oral argument on December 2, 1993, and
the parties are awaiting the decision.
2. In re Payroll Express Corporation of New York and Payroll Express
Corporation, United States Bankruptcy Court for the Southern District of New
York, Case Nos. 92-B-43149 (CB) and 92-B-43150 (CB).
United Jersey Bank (the "Bank") is involved in six Chapter 11 cases venued
in the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Cases") involving a former customer of the Bank, Payroll Express
Corp. ("Payroll"), and several related entities. Payroll was primarily in the
business of providing on-site check cashing services.
Customers of Payroll deposited funds into a general deposit account
("Account") at the Bank to cover their payrolls. The Account was given credit
for deposits received by Payroll and cash was obtained by debiting the Account.
Payroll perpetrated a substantial check kiting scheme using the Account and
another account at National Westminster Bank, NJ ("NatWest"). NatWest apparently
discovered this scheme in late May of 1992. Due
23
<PAGE> 24
to this discovery, NatWest ceased honoring checks drawn by Payroll on its
account. UJB was ultimately left with a loan of approximately $4 million in the
Account.
On June 5, 1992, Robert Falzenberg, the President of Payroll, was charged
in a federal court located in Manhattan with embezzlement and wire fraud. He has
pled guilty to among other things, wire and tax fraud, and was sentenced to
6 1/2 years imprisonment in March 1994.
A trustee (the "Trustee") has been appointed by the Bankruptcy Court, and
he is currently conducting an investigation of Payroll. The Trustee has also
retained special counsel to pursue potential claims against the fidelity
insurers of Payroll Express Corp. and possibly Payroll's insurance agent.
Several parties concerned with the Bankruptcy Cases have undertaken an extensive
discovery process pursuant to a Discovery Order under Bankruptcy Rule 2004.
Several depositions have been taken and numerous documents exchanged.
Payroll customers deposited a total of $11.8 million dollars into the
Account during this period of time. Several of these customers have asserted
claims against the Bank, although only two lawsuits by sixteen customers, are
currently pending against the Bank: Beth Israel Medical Center, et al. v. United
Jersey Bank and National Westminster Bank NJ, United States District Court for
the District of New Jersey, Civ. No. CV-93-4348 (WGB), and Towers Financial
Corp. v. United Jersey Bank, United States District for the Court District of
New Jersey, Civ. No. CV-92-2175 (WGB). The two lawsuits allege various causes of
action, including unjust enrichment, restitution, conversion, fraud, negligence
and/or breach of fiduciary duty. The two lawsuits allege a total of
approximately $7.2 million in damages. Towers has filed for protection under the
bankruptcy laws and the above case has been inactive for several months. The
bank has recently filed a motion in the Beth Israel case to stay that litigation
pending future developments in the Bankruptcy Cases. Other customers may also
claim that money credited to the Account should be returned by the Bank.
The Trustee appointed in the Bankruptcy Cases described above has filed an
adversary proceeding entitled John E. Pereira, as Chapter 11 Trustee v. UJB,
Adversary Proceeding No. 93-1086A in the bankruptcy court for the Southern
District of New York, which claims that these deposits should be recovered by
the Payroll Express estate as an avoidable preference.
The Bank believes it has acted within its rights and that it possesses
substantial meritorious defenses with regard to all of the cases described
above.
24
<PAGE> 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following data is supplied as of March 11, 1994:
<TABLE>
<CAPTION>
TITLE (ALL POSITIONS AND OFFICES PRESENTLY HELD
NAME AGE WITH REGISTRANT) AND YEAR APPOINTED TO OFFICE(S)
- --------------------------------- --- ------------------------------------------------------
<S> <C> <C>
T. Joseph Semrod................. 57 Chairman of the Board and President (1981)
John G. Collins.................. 57 Vice Chairman (1986)
John R. Howell................... 60 Vice Chairman (1987)
John R. Haggerty................. 58 Senior Executive Vice President/Finance (1987) and
Treasurer (1981)
Sabry J. Mackoul................. 53 Senior Executive Vice President/Retail Banking (1993),
President (1993) and Chief Executive Officer (1993) of
United Jersey Bank
Stephen H. Paneyko............... 51 Senior Executive Vice President/Commercial Banking
(1987)
Larry L. Betsinger............... 56 Executive Vice President/Corporate Information
Services (1990)
Alfred M. D'Augusta.............. 52 Executive Vice President/Human Resources (1988)
William F. Flyge................. 56 Executive Vice President/Investment Management (1991)
William J. Healy................. 49 Executive Vice President (1988) and Comptroller (1979)
and Assistant Secretary (1980)
James J. Holzinger............... 58 Executive Vice President/Commercial Banking (1987)
Richard F. Ober, Jr. ............ 50 Executive Vice President (1988), General Counsel
(1975) and Secretary (1978)
Dennis Porterfield............... 57 Executive Vice President/Bank Investments (1991) and
Assistant Secretary (1975)
Alan N. Posencheg................ 51 Executive Vice President/Corporate Operations (1984)
Edmund C. Weiss, Jr. ............ 51 Executive Vice President (1990) and Auditor (1977)
</TABLE>
The term of each of the above officers is until the next organization
meeting of the Board of Directors, which occurs immediately following the annual
meeting of shareholders, and until a successor is appointed by the Board of
Directors. Each officer may be removed at any time by the Board of Directors
without cause. Management of UJB is not aware of any family relationship between
any director or executive officer or person nominated or chosen to become a
director or executive officer.
All of the executive officers named above have been employed in executive
positions by UJB, a subsidiary of UJB or a bank holding company merged into UJB
for more than the last five years, except Mr. Betsinger. Mr. Betsinger was
previously employed by Meritor Financial Corp. (diversified financial services
holding company), Philadelphia, PA, as senior vice president and chief
information officer (1986-1989).
25
<PAGE> 26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
This item has been omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference. See the Shareholders' Equity
and Dividends section in the Financial Review on pages 32 and 33, Notes 12 and
13 to the Consolidated Financial Statements on pages 46 and 47 and Unaudited
Quarterly Financial Data on page 53 of the 1993 Annual Report incorporated
herein by reference as Exhibit 13. At February 28 , 1994 there were 20,636
record holders of UJB Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
This item is omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference. See Summary of Selected
Financial Data on Page 2 of the 1993 Annual Report incorporated herein by
reference as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This item is omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference. See Financial Review on
pages 25 through 35 of the 1993 Annual Report incorporated herein by reference
as Exhibit 13. Reference is made to page 10 of this report for a discussion of
the effects of inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This item is omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference.
See Consolidated Financial Statements and Notes to Consolidated Financial
Statements on pages 38 through 51 of the 1993 Annual Report incorporated herein
by reference as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
26
<PAGE> 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
This item is omitted pursuant to paragraph (3) of General Instruction
"G" -- Information to be Incorporated by Reference, except that certain
information on Executive Officers of the Registrant is included in Part I of
this report. A definitive proxy statement, dated March 11, 1994 (the "Proxy
Statement"), was filed with the Securities and Exchange Commission. Information
required by Item 401 of Regulation S-K is provided at page 25 of this Annual
Report on Form 10-K and at pages 2-5 of the Proxy Statement under the caption
"Election of Directors", which is hereby incorporated herein by reference.
Information required by Item 405 of Regulation S-K is provided at pages 17-18 of
the Proxy Statement in the material appearing under the caption "Additional
Information Regarding Directors and Officers" and is hereby incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
This item is omitted pursuant to paragraph (3) of General Instruction
"G" -- Information to be Incorporated by Reference. Information required by Item
402 of Regulation S-K is provided at page 9 of the Proxy Statement under the
caption "Corporate Governance of UJB -- Remuneration of Directors", at pages
9-10 and 12-15 of the Proxy Statement under the caption "Compensation Committee
Report on Executive Compensation", at pages 11 and 14 of the Proxy Statement
under the captions "Summary Compensation Table", "Options/SAR Grants in Last
Fiscal Year" and "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values", at page 16 of the Proxy Statement under the caption
"Stock Performance Graph" and at pages 18-21 of the Proxy Statement under the
caption "Certain Information As To Executive Officers", all of which information
is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This item has been omitted pursuant to paragraph (3) of General Instruction
"G" -- "Information to be Incorporated by Reference". Information required by
Item 403 of Regulation S-K is provided at page 1 of the Proxy Statement in the
introductory information to the Proxy Statement and at pages 6-7 of the Proxy
Statement under the caption "Beneficial Ownership of UJB Equity Securities by
Directors and Executive Officers", all of which is hereby incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item is omitted pursuant to paragraph (3) of Instruction
"G" -- "Information to be Incorporated by Reference". Information required by
Item 404 of Regulation S-K is provided at pages 17-18 of the Proxy Statement in
the material appearing under the caption "Additional Information Regarding
Directors and Officers", which is hereby incorporated herein by reference.
27
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
a)(1) Financial statements, UJB Financial Corp. and Subsidiaries:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Management's and Independent Auditors' Report.......................... 52*
Consolidated Balance Sheets -- December 31, 1993 and 1992.............. 38*
Consolidated Statements of Income -- Three Years Ended December 31,
1993................................................................. 39*
Consolidated Statements of Shareholders' Equity -- Three Years Ended
December 31, 1993.................................................... 40*
Consolidated Statements of Cash Flows -- Three Years Ended December 31,
1993................................................................. 41*
Notes to Consolidated Financial Statements............................. 42*
Unaudited Quarterly Financial Data..................................... 53*
</TABLE>
Financial statement schedules are omitted as the required information is
not applicable or the information is presented in the financial statements or
related notes thereto.
(3) Other Exhibits (all references to Forms 8-K, 10-K and 10-Q refer to
Securities and Exchange Commission File No. 1-6451. Other Exhibits are
numbered in accordance with Item 601 of Regulation S-K):
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
A. Agreement and Plan of Merger, dated December 16, 1993,
between UJB Financial Corp. and VSB Bancorp, Inc., as
amended (incorporated by reference without exhibits to
Exhibits 2(a) and 2(b) to Registration Statement No.
33-52769 on Form S-4, filed March 21, 1994).
(3) Articles of incorporation; By-laws.
(8) A. Restated Certificate of Incorporation of UJB Financial
Corp., as restated July 1, 1988, as amended through
August 20, 1993 (incorporated by reference to Exhibit
(3)A.(i) on Form 10-Q for the quarter ended September
30, 1993).
B. By-Laws of UJB Financial Corp. as amended through
December 16, 1992 (incorporated by reference to
Exhibit (3)B.(i) on Form 8-K, dated December 16,
1992).
(4) Instruments defining the rights of security holders, including
indentures.
A. Rights Agreement, dated as of August 16, 1989, by and
between UJB Financial Corp. and First Chicago Trust
Company of New York, as Rights Agent (incorporated by
reference to Exhibit 2 to the Registration Statement on
Form 8-A, filed August 28, 1989).
B. Indenture, dated as of November 1, 1972, between UJB
Financial Corp. (under former name of United Jersey
Banks) and The Bank of New York, as Trustee, for
$20,000,000 of 7 3/4% Sinking Fund Debentures due
November 1, 1997 (incorporated by reference to Exhibit
4(a) to Amendment No. 2 to Registration Statement No.
2-45397 on Form S-1, filed October 25, 1972).
C. Purchase Agreement, dated October 25, 1972, between
UJB Financial Corp. (under former name of United
Jersey Banks) and Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Brothers, for 7 3/4%
Sinking Fund Debentures (incor-
- ---------------
*Refers to the respective page numbers of UJB Financial Corp. 1993 Annual Report
to Shareholders included as Exhibit 13. Such pages are incorporated herein by
reference.
28
<PAGE> 29
porated by reference to Exhibit 1(b) to Amendment No. 2 to Registration
Statement No. 2-45397 on Form S-1, filed October 25, 1972).
D. Note Agreement, dated as of August 19, 1993, between
UJB Financial Corp. and The Northwestern Mutual Life
Insurance Company relating to $20,000,000 of 7.95%
Senior Notes Due August 25, 2003 (incorporated by
reference to Exhibit (4)D. on Form 10-Q for the quarter
ended September 30, 1993).
E. (deleted)
F. (deleted)
G. (i) Subordinated Indenture, dated as of December 1,
1992, between UJB Financial Corp. and Citibank, N.A.,
Trustee, relating to $175,000,000 of 8 5/8%
Subordinated Notes Due December 10, 2002 of UJB
Financial Corp. (incorporated by reference to Exhibit
(4)G. on Form 10-K for the year ended December 31,
1992), and (ii) Specimen of UJB Financial Corp.'s
8 5/8% Subordinated Notes Due December 10, 2002
(incorporated by reference to Exhibit 4 on Form 8-K,
dated December 10, 1992).
H. (deleted)
I. (deleted)
J. (deleted)
K. (i) Indenture, dated as of August 1, 1983, between
Commercial Bancshares, Inc. and Midlantic National
Bank, Trustee, relating to the 13% Subordinated
Debentures of UJB Financial Corp. (incorporated by
reference to Exhibit (4)K.(i) to Registration Statement
No. 33-10170 on Form S-3, filed November 14, 1986).
(ii) First Supplemental Indenture, dated as of December
1, 1986, between Commercial Bancshares, Inc., UJB
Financial Corp. (under former name of United Jersey
Banks) and Midlantic National Bank, Trustee, relating
to the 13% Subordinated Debentures of UJB Financial
Corp. (incorporated by reference to Exhibit (4)K.(ii)
on Form 10-K for the year ended December 31, 1992).
L. (deleted)
M. (deleted)
N. (deleted)
O. (deleted)
P. (deleted)
Q. (deleted)
R. (i) Note Agreement, dated as of November 10, 1985,
between First Valley Corporation and the Northwestern
Mutual Life Insurance Company relating to $20,000,000
of 11 1/2% Senior Notes Due December 15, 1995 of First
Valley Corporation (incorporated by reference to
Exhibit (4)R.(i) on Form 10-K for the year ended
December 31, 1992), (ii) Guarantee, dated February 28,
1989, of UJB Financial Corp. (under former name of
United Jersey Banks) guaranteeing full and timely
payment of principal and interest due from First
Valley Corporation under the Note Agreement, (iii)
Letter Amendment, dated April 6, 1989, to the Note
Agreement (incorporated by reference to Exhibit
(4)R.(iii) on Form 10-Q for the quarter ended March
31, 1989), (iv) Second Amendment, dated August 18,
1989, to the Note Agreement (incorporated by reference
to Exhibit (4)R.(iv) on Form 10-Q for the quarter
ended June 30, 1993), and (v) Third Amendment, dated
29
<PAGE> 30
September 1, 1993, to the Note Agreement (incorporated
by referenced to Exhibit (4)R.(v) on Form 10-Q for the
quarter ended September 30, 1993).
(10) Material Contracts
A. Ten year real estate lease executed and dated July 27,
1989 from Polevoy Associates for real property and
improvements located thereon in Fair Lawn, New Jersey
for use as purchasing department offices and warehouse
facility (incorporated by reference to Exhibit (10)A.
on Form 10-K for the year ended December 31, 1989).
B. (i) Master Agreement of Lease, dated January 26, 1982,
between United Jersey Banks (former name of UJB
Financial Corp.) and Sha-Li Leasing Associates, Inc.
relating to equipment leases in excess of $10,000,000
in aggregate lease obligations, including form of
Equipment Schedule (incorporated by referenced to
Exhibit (10)B.(i) on Form 10-Q for the quarter ended
September 30, 1993), (ii) Assignment and Assumption of
Equipment Lease, effective December 31, 1991, between
UJB Financial Corp. and UJB Financial Service
Corporation (relating to assignment of Master
Agreement of Lease) (incorporated by reference to
Exhibit (10)B.(ii) on Form 10-Q for the quarter ended
September 30, 1993), and (iii) Form of Guaranty
Agreement between UJB Financial Corp. and various
lenders under the Master Agreement of Lease relating
to certain equipment leases in excess of $10,000,000
in aggregate lease obligations (incorporated by
reference to Exhibit (10)B.(iii) on Form 10-Q for the
quarter ended September 30, 1993).
*C. (i) UJB Financial Corp. 1993 Incentive Stock and Option
Plan (incorporated by reference to Exhibit 10(C) to
Registration Statement No. 33-62972 on Form S-8, filed
May 19, 1993), and (ii) Compensation Committee
Regulations for the Grant and Exercise of Stock Options
and Restricted Stock (adopted July 19, 1993)
(incorporated by reference to Exhibit (10)C.(ii) on
Form 10-Q for the quarter ended June 30, 1993).
*D. (i) UJB Financial Corp. 1990 Stock Option Plan
(incorporated by reference to Exhibit (10)D. on Form
10-Q for the quarter ended June 30, 1990), and (ii)
Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted
July 19, 1993) (incorporated by reference to Exhibit
(10)C.(ii) on Form 10-Q for the Quarter ended June 30,
1993).
*E. (i) UJB Financial Corp. 1989 Long-Term Performance
Stock Plan (incorporated by reference to Exhibit (10)E.
on Form 10-K for the year ended December 31, 1990), and
(ii) Compensation Committee Regulations for the Grant
and Exercise of Stock Options and Restricted Stock
(adopted July 19, 1993) (incorporated by reference to
Exhibit (10)C.(ii) on Form 10-Q for the Quarter ended
June 30, 1993).
*F. Description of Incentive Plan approved January 20,
1982 (incorporated by reference to Exhibit (10)F. on
Form 10-K for the year ended December 31, 1989).
G. Deferred Compensation Plan for Directors, as revised
October 17, 1979 (incorporated by reference to Exhibit
(10)G. on Form 10-K for the year ended December 31,
1989).
*H. (i) Agreement dated April 2, 1981 between UJB Financial
Corp. (under former name of United Jersey Banks) and T.
Joseph Semrod (incorporated by reference to Exhibit
(10)H.(i) on Form 10-K for the year ended December 31,
1989), with (ii) Amendment No. 1 dated May 5, 1981
(incorporated by reference to Ex-
- ---------------
* Management contract or compensatory plan or arrangement.
30
<PAGE> 31
hibit (10)H.(ii) on Form 10-K for the year ended December 31, 1989), (iii)
Amendment No. 2 dated December 15, 1982 (incorporated by reference to Exhibit
(10)H.(iii) on Form 10-K for the year ended December 31, 1989), and (iv)
Amendment No. 3 dated August 20, 1986 (incorporated by reference to Exhibit
(10)H.(iv) on Form 10-K for the year ended December 31, 1989).
I. (deleted)
J. (deleted)
K. (i) Guaranty Agreement, dated August 7, 1991, by and
between UJB Financial Corp. and Security Pacific
National Bank, as Trustee (incorporated by reference to
Exhibit (10)K.(i) on Form 10-Q for the quarter ended
June 30, 1991), (ii) Warranty Bill of Sale, dated
August 7, 1991, of Trico Mortgage Company (incorporated
by reference to Exhibit (10)K.(ii) on Form 10-Q for the
quarter ended June 30, 1991), and (iii) Pooling and
Servicing Agreement, dated as of June 30, 1991, by and
among Trico Mortgage Company, Inc., Securitization
Subsidiary I, Inc. and Security Pacific National Bank,
as Trustee (incorporated by reference to Exhibit
(10)K.(iii) on Form 10-Q for the quarter ended June 30,
1991).
*L. (i) United Jersey Banks (former name of UJB Financial
Corp.) 1982 Stock Option Plan (incorporated by
reference to Exhibit 4 to Registration Statement No.
2-78500 on Form S-8, filed July 21, 1982) with (ii)
Amendment No. 1, dated June 16, 1984 (incorporated by
reference to Exhibit (10)L.(ii) on Form 10-K for the
year ended December 31, 1989), (iii) Amendment No. 2,
dated December 19, 1990 (incorporated by reference to
Exhibit (10)L.(iii) on Form 10-K for the year ended
December 31, 1990.), and (iv) Compensation Committee
Regulations for the Grant and Exercise of Stock Options
and Restricted Stock (adopted July 19, 1993)
(incorporated by reference to Exhibit (10)C.(ii) on
Form 10-Q for the Quarter ended June 30, 1993).
.
*M. (i) Retirement Restoration Plan, adopted April 19, 1993
(incorporated by reference to Exhibit (10)M.(i) on Form
10-K for the year ended December 31, 1989), (ii)
Supplemental Retirement Plan, adopted August 16, 1989
(incorporated by reference to Exhibit (10)M.(ii) on
Form 10-Q for the quarter ended September 30, 1989),
and (iii) Written Consent of UJB Financial Corp.
Benefits Committee interpreting the Retirement
Restoration Plan, adopted August 30, 1989 (incorporated
by reference to Exhibit (10)M.(iii) on Form 10-Q for
the quarter ended September 30, 1989).
N. (i) Equipment Lease Guaranty dated as of August 31,
1992 by UJB Financial Corp. to Sanwa General Equipment
Leasing, Inc. (incorporated by reference to Exhibit
(10)N.(i) on Form 10-Q for the quarter ended March 31,
1993), and (ii) Equipment Lease Agreement dated as of
August 31, 1992 and Equipment Schedule Nos. A-1 and A-2
dated as of August 31, 1992 between Sanwa General
Equipment Leasing, Inc. and UJB Financial Service
Corporation, United Jersey Bank, United Jersey
Bank/Central, N.A. and United Jersey Bank/South, N.A.,
pursuant to Equipment Lease Agreement dated as of
August 31, 1992, for five year lease of furniture,
fixtures and equipment (incorporated by reference to
Exhibit (10)N.(ii) on Form 10-Q for the quarter ended
March 31, 1993).
- ---------------
* Management contract or compensatory plan or arrangement.
31
<PAGE> 32
O. (i) Equipment Lease Guaranty dated as of August 31,
1992 by UJB Financial Corp. to MetLife Capital
Corporation (incorporated by reference to Exhibit
(10)O.(i) on Form 10-Q for the quarter ended March 31,
1993), and (ii) Equipment Schedule Nos. B-1 and B-2
dated as of August 31, 1992 between MetLife Capital
Corporation and UJB Financial Service Corporation,
United Jersey Bank, United Jersey Bank/Central, N.A.
and United Jersey Bank/South, N.A. pursuant to
Equipment Lease Agreement dated as of August 31, 1992
between Sanwa General Equipment Leasing, Inc. and
United Jersey Bank, United Jersey Bank/Central, N.A.
and United Jersey Bank/South, N.A., for five year lease
of furniture, fixtures and equipment (incorporated by
reference to Exhibit (10)O.(ii) on Form 10-Q for the
quarter ended March 31, 1993).
P. Twenty-year real estate lease executed and dated
December 12, 1988 from Hartz Mountain Industries, Inc.
for real property located in Ridgefield Park, New
Jersey and improvements to be constructed by Hartz
thereon for use as new data processing facility for
the company.
Q. (deleted)
R. (i) UJB Financial Corp. Savings Incentive Plan,
amended and restated as of July 1, 1993 (incorporated
by reference to Exhibit (10)R. on Form 10-Q for the
quarter ended June 30, 1993), with (ii) amendments
adopted November 29, 1993, and (iii) amendments
adopted January 24, 1994.
S. (i) Trust Agreement for the United Jersey Banks Profit
Sharing Plan (now UJB Financial Corp. Savings
Incentive Plan) made as of January 1976 (incorporated
by reference to Exhibit (10)M. to Registration
Statement No. 1-82789 on Form S-8, filed March 31,
1988), with (ii) Amendment No. 1, dated June 21, 1983
(incorporated by reference to Exhibit (10)S.(ii) on
Form 10-K for the year ended December 31, 1989), and
(iii) Amendment No. 2, dated August 15, 1984
(incorporated by reference to Exhibit (10)S.(iii) to
Post-Effective Amendment No. 1 to Registration
Statement No. 2-82789 on Form S-8, filed August 1,
1984).
T. (deleted)
U. (deleted)
V. (deleted)
W. (i) Retirement Plan for Outside Directors of UJB
Financial Corp., as amended and restated February 20,
1990 (incorporated by reference to Exhibit (10)W. on
Form 10-K for the year ended December 31, 1990), and
(ii) Interpretation, dated March 15, 1993, of the
Retirement Plan for Outside Directors of UJB Financial
Corp. (incorporated by reference to Exhibit (10)W.(ii)
on Form 10-K for the year ended December 31, 1992).
X. (deleted)
Y. (deleted)
Z. Stock Option Agreement, dated December 16, 1993,
issued by VSB Bancorp, Inc. to UJB Financial Corp.
(incorporated by reference to Exhibit (10)Z. on Form
8-K, dated December 15, 1993).
AA. (deleted)
BB. (deleted)
CC. (deleted)
32
<PAGE> 33
DD. (deleted)
*EE. (i) Form of Termination Agreement between UJB
Financial Corp. and each of T. Joseph Semrod, John G.
Collins, John R. Howell, John R. Haggerty, Stephen H.
Paneyko, Larry L. Betsinger, Alfred M. D'Augusta,
William J. Healy, James J. Holzinger, William F.
Flyge, Sabry J. Mackoul, Richard F. Ober, Jr., Dennis
Porterfield, Alan N. Posencheg and Edmund C. Weiss,
Jr. (incorporated by reference to Exhibit (10)EE.(i)
on Form 10-K for the year ended December 31, 1991)
with (ii) Amendment No. 1, dated December 20, 1989
(incorporated by reference to Exhibit (10)EE.(ii) on
Form 10-K for the year ended December 31, 1991), (iii)
Amendment No. 2, dated October 16, 1991 (incorporated
by reference to Exhibit (10)EE.(iii) on Form 10-K for
the year ended December 31, 1991), and (iv) Amendment
No. 3, dated December 16, 1992 (incorporated by
reference to Exhibit (10)EE.(iv) on Form 8-K, dated
January 19, 1993).
*FF. UJB Financial Corp. Executive Severance Plan, as
amended through December 16, 1992 (incorporated by
reference to Exhibit (10)FF. on Form 8-K, dated
January 19, 1993).
GG. (deleted)
HH. Retirement Program for Outside Directors of Franklin
State Bank (incorporated by reference to Exhibit
(10)HH. on Form 10-K for the year ended December 31,
1991).
II. Franklin State Bank Deferred Compensation Plan adopted
January 10, 1984 (incorporated by reference to Exhibit
(10)II. on Form 10-K for the year ended December 31,
1991).
JJ. (i) Retirement Plan for Outside Directors of
Commercial Bancshares, Inc. adopted May 1, 1986
(incorporated by reference to Exhibit (10)JJ. on Form
10-K for the year ended December 31, 1991), and (ii)
Compensation Committee Interpretation, dated July 19,
1993 (incorporated by reference to Exhibit (10)JJ.(ii)
on Form 10-Q for the quarter ended June 30, 1993).
KK. (i) Commercial Bancshares, Inc. Directors Deferred
Compensation Plan adopted May 20, 1986 (substantially
identical plans were adopted by former subsidiaries of
Commercial Bancshares, Inc.) (incorporated by reference
to Exhibit (10)KK.(i) on Form 10-K for the year ended
December 31, 1991) and (ii) related Master Trust
Agreement (incorporated by reference to Exhibit
(10)KK.(ii) on Form 10-K for the year ended December
31, 1991).
*LL. (i) United Jersey Banks (former name of UJB Financial
Corp.) 1987 Stock Option Plan (incorporated by
reference to Exhibit (10)LL.(i) on Form 10-K for the
year ended December 31, 1991) with (ii) Amendment
dated April 25, 1989 (incorporated by reference to
Exhibit (10)LL.(ii) on Form 10-Q for the quarter ended
March 31, 1989), (iii) amendment dated June 30, 1990
(incorporated by reference to Exhibit (10)LL.(ii) on
Form 10-Q for the quarter ended June 30, 1990), and
(iv) Compensation Committee Regulations for the Grant
and Exercise of Stock Options and Restricted Stock
(adopted July 19, 1993) (incorporated by reference to
Exhibit (10)C.(ii) on Form 10-Q for the Quarter ended
June 30, 1993).
MM. (deleted)
- ---------------
* Management contract or compensatory plan or arrangement.
33
<PAGE> 34
*NN. First Valley Bank Executive Management Incentive Bonus
Plan (incorporated by reference to Exhibit (10)NN. on
Form 10-K for the year ended December 31, 1992).
(13) UJB Financial Corp. 1993 Annual Report to Shareholders
(21) Subsidiaries of the registrant.
(23) Consents of Experts and Counsel
A. Independent Auditor's Consent -- KPMG Peat Marwick
- ---------------
* Management contract or compensatory plan or arrangement.
None of the Exhibits listed above other than the UJB Financial Corp. 1993 Annual
Report to Shareholders are furnished herewith (other than certain copies filed
with the Securities and Exchange Commission). Any of such Exhibits will be
furnished to any requesting securityholder upon payment of a fee of 15c per
page. Contact Lori A. Wierzbinsky, Assistant Corporate Secretary, UJB Financial
Corp., P.O. Box 2066, Princeton, NJ 08543-2066 for a determination of the fee
necessary to fulfill any request.
b) Reports on Form 8-K.
In a Current Report on Form 8-K, dated December 15, 1993, the Company,
under Item 5 -- Other Events and Item 7 -- Financial Statements and Exhibits,
reported the following:
On December 15, 1993, the Board of Directors of the Company approved a
31.3% increase in the Company's quarterly Common Stock dividend to $.21 per
share, up from the previous rate of $.16 per share. This represented an
increase in the annual dividend rate on the Company's Common Stock to $.84
from $.64.
On December 16, 1993, the Company and VSB Bancorp Inc., a Delaware
business corporation and bank holding company registered under the federal
Bank Holding Company Act of 1956 ("VSB"), entered into an Agreement and
Plan of Merger (the "Agreement") providing for the merger of VSB with and
into the Company and the issuance, in accordance with the exchange ratio
provided for in the Agreement, of shares of the Common Stock of Registrant
to shareholders of VSB in exchange for outstanding shares of the Common
Stock of VSB held by such shareholders, all upon the satisfaction of the
terms and conditions set forth in the Agreement, including the receipt of
approval from the Board of Governors of the Federal Reserve System (the
"Merger"). Simultaneously with the execution of the Agreement, the Company
and VSB entered into a stock option agreement, dated December 16, 1993 (the
"Stock Option Agreement"), pursuant to which Registrant acquired from VSB
and VSB granted to the Company the option to purchase 841,704 shares of the
Common Stock of VSB at $18.125 per share (the "Option"). The Option is
exercisable upon the occurrence of a Purchase Event (as defined in the
Stock Option Agreement). The Option terminates upon the occurrence of an
Exercise Termination Event (as defined in the Stock Option Agreement).
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UJB FINANCIAL CORP.
Dated: March 18, 1994 By: /s/ J. R. HAGGERTY
John R. Haggerty
Senior Executive Vice
President/Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ------------------------------- ----------------
<S> <C> <C>
/s/ T. JOSEPH SEMROD Chairman of the Board, March 23, 1994
T. Joseph Semrod President and Director (Chief
Executive Officer)
/s/ JOHN G. COLLINS Vice Chairman and Director March 18, 1994
John G. Collins
/s/ JOHN R. HOWELL Vice Chairman and Director March 25, 1994
John R. Howell
/s/ J. R. HAGGERTY Senior Executive Vice March 18, 1994
John R. Haggerty President/Finance (Principal
Financial Officer)
/s/ WILLIAM J. HEALY Executive Vice President and March 18, 1994
William J. Healy Comptroller (Principal
Accounting Officer)
/s/ ROBERT L. BOYLE Director March 18, 1994
Robert L. Boyle
/s/ T.J. DERMOT DUNPHY Director March 24, 1994
T.J. Dermot Dunphy
/s/ ELINOR J. FERDON Director March 23, 1994
Elinor J. Ferdon
/s/ FRED G. HARVEY Director March 22, 1994
Fred G. Harvey
</TABLE>
35
<PAGE> 36
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ------------------------------- ----------------
<S> <C> <C>
/s/ FRANCIS J. MERTZ Director March 21, 1994
Francis J. Mertz
/s/ Director March , 1994
George L. Miles, Jr.
/s/ HENRY S. PATTERSON II Director March 22, 1994
Henry S. Patterson II
/s/ RAYMOND SILVERSTEIN Director March 23, 1994
Raymond Silverstein
/s/ JOSEPH M. TABAK Director March 23, 1994
Joseph M. Tabak
</TABLE>
36
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------------------------------------------------
<S> <C> <C> <C>
(4)R.(ii) Guarantee, dated February 28, 1989, of UJB Financial Corp.
guaranteeing full and timely payment of principal and interest
due from First Valley Corporation under the Note Agreement
dated as of November 10, 1985, between First Valley
Corporation and the Northwestern Mutual Life Insurance Company
relating to $20,000,000 of 11 1/2% Senior Notes Due December
15, 1995 of First Valley Corporation.
(10)P. Twenty-year real estate lease executed and dated December 12,
1988 from Hartz Mountain Industries, Inc. for real property
located in Ridgefield Park, New Jersey and improvements to be
constructed by Hartz thereon for use as new data processing
facility for the company.
(10)R.(ii) Amendments adopted November 29, 1993 to the UJB Financial
Corp. Savings Incentive Plan.
(iii) Amendments adopted January 24, 1994 to the UJB Financial Corp.
Savings Incentive Plan.
(13) UJB Financial Corp. 1993 Annual Report to Shareholders.
(21) Subsidiaries of the registrant.
(23) Independent Auditors Consent -- KPMG Peat Marwick
</TABLE>
<PAGE> 1
EXHIBIT (4)R(ii)
United Jersey Banks
GUARANTEE
United Jersey Banks, a New Jersey Business Corporation and bank
holding company located at 301 Carnegie Center, P.O. Box 2066, Princeton, New
Jersey 08543-2066, hereby guarantees full and timely payment of principal and
interest due from First Valley Corporation, a Pennsylvania Business Corporation
and bank holding company which is a wholly owned subsidiary of United Jersey
Banks and is located at One Bethlehem Plaza, Bethlehem, Pennsylvania 18018,
under a Note Agreement dated as of November 10, 1985 Re: $20,000,000 11 1/2%
Senior Notes Due December 15, 1995, to the purchasers of Notes under the Note
Agreement or their duly registered successors and assigns.
Any notices given to United Jersey Banks pursuant to the Note
Agreement shall be sent to:
Chief Financial Officer
United Jersey Banks
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
with a copy to:
General Counsel
United Jersey Banks
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
IN WITNESS WHEREOF, United Jersey Banks has caused this Guarantee to
be executed by its duly authorized officers and its corporate seal affixed
thereto this 28th day of February, 1989.
UNITED JERSEY BANKS
/S/ WILLIAM J. HEALY
-----------------------------
William J. Healy
Executive Vice President
CORPORATE
SEAL
Attest: /S/ RICHARD F. OBER, JR.
---------------------------
Richard F. Ober, Jr.
Secretary
<PAGE> 1
EXHIBIT (10.)P.
================================================================================
HARTZ MOUNTAIN INDUSTRIES, INC
and
UNITED JERSEY BANKS
LEASE AGREEMENT
---------------
Premises:
Ridgefield Park
New Jersey
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Demise and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Preparation of Demised Premises . . . . . . . . . . . . . . . . . . . . . . 10
4. Use of Demised Premises and Common Areas . . . . . . . . . . . . . . . . . . 12
5. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Tax and Operating Expense Payments . . . . . . . . . . . . . . . . . . . . . 14
7. Common Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. Assignment, Subletting and Mortgaging . . . . . . . . . . . . . . . . . . . 19
12. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15. Alterations and Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16. Landlord's and Tenant's Property . . . . . . . . . . . . . . . . . . . . . . 26
17. Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18. Public Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
19. Mechanics' Liens and Other Liens . . . . . . . . . . . . . . . . . . . . . . 30
20. Access and Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
21. Non-Liability of Landlord . . . . . . . . . . . . . . . . . . . . . . . . . 31
22. Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
23. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
24. Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C> <C>
25. Conditions of Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . 37
26. Re-Entry by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
27. Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
28. Affirmative Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
29. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
30. Curing Tenant's Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 42
31. Additional Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
32. Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
33. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
34. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
35. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
36. Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
37. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
38. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 50
39. Restriction on Adjacent Uses . . . . . . . . . . . . . . . . . . . . . . . . 51
40. Purchase of Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
EXHIBITS
EXHIBIT A - DESCRIPTION OF LAND
EXHIBIT B - SITE PLAN OF LAND, BUILDING AND PARKING GARAGE
EXHIBIT C - LANDLORD'S WORK
EXHIBIT D - PROJECT
EXHIBIT E - PERMITTED EXCEPTIONS
EXHIBIT F - PLANS FOR LANDLORD'S WORK AND CONSTRUCTION DISPUTE
RESOLUTION RIDER
EXHIBIT G - FORM OF NON-DISTURBANCE AGREEMENT
EXHIBIT H - INTENTIONALLY DELETED
EXHIBIT I - ADDITIONAL FACILITY
EXHIBIT J - HATCHMARKED AREAS
<PAGE> 4
LEASE, dated December 12, 1988, between HARTZ MOUNTAIN INDUSTRIES,
INC., a New York Corporation, having an office at 400 Plaza Drive, Secaucus,
New Jersey (P.O. Box 1411) 07094 ("Landlord"), and United Jersey Banks, a New
Jersey Corporation, having an office at 301 Carnegie Center, Princeton, New
Jersey 08540 ("Tenant").
ARTICLE 1 - DEFINITIONS
1.01. As used in this Lease (including in all Exhibits and any Riders
attached hereto, all of which shall be deemed to be part of this Lease) the
following words and phrases shall have the meanings indicated:
A. Advance Rent: None.
B. Additional Charges: All amounts that become payable by Tenant to
Landlord hereunder other than the Fixed Rent.
C. Affiliate: Shall mean (i) any Person directly or indirectly owning,
controlling, or holding with power to vote, five percent (5%) or more of the
outstanding voting securities of such Person, (ii) any Person five percent (5%)
or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other Person, (iii) any
Person directly or indirectly controlling, controlled by, or under common
control with, such other Person, (iv) any officer, director, partner, copartner
or employee of such other Person.
D. Approval Date: The date Landlord obtains site plan approval from
all applicable governmental authorities with respect to the Land, the Building
and the Parking Garage.
E. Broker: Alexander Summer Co., 3 ADP Boulevard, Roseland, New Jersey
07068.
F. Building: The building (including Landlord's Work and Tenant's
Work) now or hereafter located at the Land shown on Exhibit A, located in Jew
Jersey, consisting of approximately 300,000 square feet of Floor Space, the
exact square footage of which shall be certified by Landlord's Architect within
sixty (60) days following Substantial Completion of Landlord's Work (as
hereinafter defined). Upon such remeasurement, the amount of Fixed Rent payable
hereunder shall be computed based upon the actual Floor Space of the Building,
subject to the provisions of Section 1.01.N hereof.
<PAGE> 5
G. Calendar Year: Any twelve-month period commencing on a January 1.
H. Commencement Date: The date upon which (a) Landlord's Work shall be
Substantially Completed (as hereinafter defined), or (b) if Landlord performs
Tenant's Work as provided in Article 3 hereof, the date upon which Landlord's
Work and Tenant's Work are Substantially Completed. Notwithstanding the
foregoing, in the event Tenant occupies or uses (a material portion of) the
Building for the conduct of its business prior to the Commencement Date, the
Commencement Date shall be accelerated to the date of the commencement of such
use by Tenant. Entry upon the Demised Premises by Tenant for performing
Tenant's Work shall not be considered the "conduct of its business" for
purposes of this paragraph.
I. Common Areas: All areas, spaces and improvements in the Project
which Landlord makes available from time to time for the common use and benefit
of the tenants and occupants of the Project and which are not exclusively
available for use by a single tenant or occupant, including, without
limitation, parking areas, roads, walkways, sidewalks, landscaped and planted
areas, community rooms, if any, the managing agent's office, if any, and public
rest rooms, if any. There shall be no Common Areas located within the Demised
Premises.
J. Demised Premises: The Land, the Building and the Parking Garage as
shown on the site plan annexed hereto as Exhibit B.
K. Expiration Date: The date that is the day before the twentieth
(20th) anniversary of the Fixed Rent Commencement Date if the Fixed Rent
Commencement Date is the first day of a month, or the twentieth (20th)
anniversary of the last day of the month in which the Fixed Rent Commencement
Date occurs if the Fixed Rent Commencement Date is not the first day of a
month. However, if the Term is extended by Tenant's effective exercise of
Tenant's right, if any, to extend the Term, the "Expiration Date" shall be
changed to the last day of the latest extended period as to which Tenant shall
have effectively exercised its right to extend the Term. For the purposes of
this definition, the earlier termination of this Lease shall not affect the
"Expiration Date."
L. Fixed Rent: From the Fixed Rent Commencement Date until one day
prior to the fifth anniversary thereof, an amount at the annual rate of $12.75
per square foot multiplied by the Floor Space of the Building; from the fifth
anniversary thereof until one day prior to the tenth anniversary thereof, an
amount at the annual rate of $14.50 per square foot multiplied by the Floor
Space of the Building; from the tenth anniversary thereof until one day prior
to the fifteenth
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<PAGE> 6
anniversary thereof, an amount at the annual rate of $16.50 per square foot
multiplied by the Floor Space of the Building; and from the fifteenth
anniversary thereof until the Expiration Date of the original Term hereof, not
including any Extended Periods (as hereinafter defined), an amount at the
annual rate of $18.75 per square foot multiplied by the Floor Space of the
Building.
M. Fixed Rent Commencement Date: The Fixed Rent Commencement Date
shall be the date which is either of the following dates, as applicable: (a) If
someone other than Landlord is selected to perform Tenant's Work, the date
which is nine (9) months after Substantial Completion of Landlord's Work, or
(b) if Landlord is selected to do Tenant's Work, the date which is the later to
occur of (i) nineteen (19) months after the Approval Date or (ii) two (2)
months after Substantial Completion of Landlord's Work and Tenant's Work. If
Landlord is selected to perform Tenant's Work and if Tenant does not furnish
Landlord with final drawings for Tenant's Work by the date which is six (6)
months after the Approval Date, the Fixed Rent Commencement Date shall be the
date upon which same would have occurred pursuant to Subsections (b)(i) or
(b)(ii) above, as applicable, if Tenant had furnished Landlord with final
drawings for Tenant's Work by the date which is six (6) months after the
Approval Date, unless Landlord Substantially Completes Tenant's Work by the
date which is seventeen (17) months from the Approval Date without the use of
overtime labor or extra expense as the result of Tenant's delay in furnishing
such final drawings.
N. Floor Space: The sum of the floor area stated in square feet
bounded by the exterior faces of the exterior walls of the Building; and any
reference to Floor Space of the Building shall mean the floor area of all
levels or stories of the Building, but excluding the roof and parking areas,
and excluding penthouses and up to 7,500 square feet of balconies.
Notwithstanding anything contained herein to the contrary, (a) if the Floor
Space measured as above provided (including the penthouses and balconies),
exceeds 313,800 square feet of Floor Space for purposes of calculating the
Fixed Rent pursuant to this Lease, the Floor Space shall be the number of
square feet of Floor Space so measured less 13,800 square feet, or (b) if the
Floor Space measured as above provided (including penthouses and balconies),
equals 300,000 to 313,800 square feet, the Floor Space for purposes of
calculating Fixed Rent pursuant to this Lease (exclusive of any additions later
constructed), shall be 300,000 square feet, or (c) if the Floor Space measured
as above provided (including penthouses and balconies) is less than 300,000
square feet, then the Floor Space for purposes of calculating the Fixed Rent
pursuant to this Lease shall be the number of square feet of Floor Space so
measured less the Floor Space attributable to the penthouses and up to 7,500
square feet of balconies. Notwithstanding anything herein to the contrary, if
the number of square feet of the Building exceeds the number of square
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<PAGE> 7
feet of Floor Space provided for in the Final Plans as the result of Landlord's
error in constructing the Building or Landlord's inability to construct the
Building in accordance with the Final Plans, such excess shall not be included
within the definition of Floor Space. Any reference to the Floor Space is
intended to refer to the Floor Space of the entire area in question
irrespective of the Person(s) who may be the owner(s) of all or any part
thereof.
O. Guarantor: None.
P. Insurance Requirements: Rules, regulations, orders and other
requirements of the applicable board of underwriters and/or the applicable fire
insurance rating organization.
Q. Land: The parcels of land described on Exhibit A.
R. Landlord's Architect: Kenneth Carl Bonte, or as Landlord may
designate.
S. Landlord's Work: The materials and work to be furnished, installed
and performed by Landlord at its expense in accordance with the provisions of
Exhibit C, and subject to the provisions of this Lease. All references to
Landlord's Work shall include the Parking Garage, unless the context otherwise
indicates, excluding, however, any addition or annex thereto constructed by
Tenant.
T. Legal Requirements: Laws and ordinances of all federal, state,
city, town, county, borough and village governments, and rules, regulations,
orders and directives of all departments, subdivisions, bureaus, agencies or
offices thereof, and of any other governmental, public or quasi-public
authorities having jurisdiction over the Land and the Building, whether now or
hereafter in force, including, but not limited to, those pertaining to
environmental matters.
U. Mortgage: A mortgage and/or a deed of trust.
V. Mortgagee: A holder of a mortgage or a beneficiary of a deed of
trust.
W. Operating Expenses: Operating Expenses shall mean the sum of (a)
the Building's share of the cost and expense (whether or not within the
contemplation of the parties) for the repair, replacement, maintenance,
policing and operation of the Common Areas and the peripheral roads that, from
time to time, service the Building (excluding (i) any repairs or replacements
to cure original construction defects, (ii) Operating Expenses with respect to
road maintenance incurred as the result of construction work in connection with
development of the Project, and (iii) expenses incurred to cleanup
environmental contamination), (b) the Land and the Building's
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<PAGE> 8
share of the real estate taxes attributable to said Common Areas and (c) 15% of
the resulting total of (a) and (b) above (excluding from such total, however,
real estate taxes) for Landlord's home office administration and overhead cost
and expense. In the event there is made a repair or replacement with respect to
the Common Areas which would be a capitalized expenditure pursuant to generally
accepted accounting principles and the Building's share of such expenditures is
equal to or greater than $10,000.00 and such item has a useful life greater
than the remaining number of years of the Term of this Lease (herein referred
to as a "Major Capitalized Expenditure"), the portion of such items includable
as an Operating Expense shall be an amount equal to the Building's share of
such expenditure multiplied by a fraction and the numerator of which is the
number of years remaining in the Term and the denominator of which is the
useful life of such item. Tenant shall have the right to pay for such Major
Capitalized Expenditure in a lump sum or in equal annual installments over the
remaining Term of the Lease, together with interest on the unpaid portion of
same at a rate per annum equal to the prime of Chemical Bank, New York, New
York, plus one percent (1%). If Tenant extends the Term, such amount shall be
recalculated and adjusted based upon the Term as extended. All such expenses
shall be net of any reimbursements or credits received by Landlord. All items
will be accounted for on a cash basis and stated in accordance with generally
accepted accounting principles.
X. Parking Garage: The parking facility which shall contain
approximately 475 spaces, 230 of which shall be located above grade, in a two
(2) story structure and the balance of which shall be on-grade to be
constructed by Landlord, located on the portion of the Land described on
Exhibit A-1.
Y. Permitted Uses: General office use and any lawful use which is not
hazardous.
Z. Person: A natural person or persons, a partnership, a corporation,
or any other form of business or legal association or entity.
AA. Project: The existing and proposed shown on the site plan Exhibit
D, annexed hereto as same may be amended from time to time, provided, however,
that no such amendment shall increase Tenant's obligations under this Lease.
BB. Real Estate Taxes: The real estate taxes, assessments and special
assessments, sewer rents and water charges imposed upon the Building and Land
and the Parking Garage by any federal, state, municipal or other governments or
governmental bodies or authorities, and any reasonable expenses incurred by
Landlord in contesting such taxes or assessments and/or the assessed value of
the Building and
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<PAGE> 9
Land and the Parking Garage, which expenses shall be allocated to the period of
time to which such expenses relate. Any added or omitted assessments levied
against the Demised Premises with respect to any period prior to the Fixed Rent
Commencement Date shall not be included in the definition of Real Estate Taxes.
If at any time during the Term the methods of taxation prevailing on the date
hereof shall be altered so that in lieu of, or as an addition to or as a
substitute for, the whole or any part of such real estate taxes, assessments
and special assessments now imposed on real estate there shall be levied,
assessed or imposed (a) a tax, assessment, levy, imposition, license fee or
charge wholly or partially as a capital levy or otherwise on the rents received
therefrom, or (b) any other such additional or substitute tax, assessment,
levy, imposition or charge, then all such taxes, assessments, levies,
impositions, fees or charges or the part thereof so measured or based shall be
deemed to be included within the term "Real Estate Taxes" for the purposes
hereof, but shall be calculated as if the Land and the Building and the Parking
Garage were the only property of Landlord subject to such tax.
CC. Rent: The Fixed Rent and the Additional Charges.
DD. Security Deposit: None.
EE. Substantially Completed or Substantial Completion: (a) with
respect to Landlord's Work, the completion of Landlord's Work and the issuance
of a temporary or permanent certificate of completion therefor, or its
equivalent, except for (i) minor details designated on punchlists delivered by
or on behalf of Tenant to Landlord, of construction, decoration or mechanical
adjustment, the non-completion of which will not materially interfere with the
performance of Tenant's Work and (ii) specified items of Landlord's Work which
Landlord's Architect has certified cannot be performed in keeping with sound
construction practices until Tenant's Work has been substantially completed, as
the case may be (provided, with respect to subsection (ii) hereof, that
Landlord notifies Tenant in writing of such items requiring delay and provided
that the date of Substantial Completion includes a time period equal to the
time period which would have been required for completion of the delayed items,
had there been no such delay); and (b) with respect to Tenant's Work, the
completion of Tenant's Work and the issuance of a temporary or permanent
certificate of occupancy permitting lawful occupancy of the Building or its
equivalent, except for minor details designated on punchlists delivered by or
on behalf of Tenant to Landlord (if Landlord performs Tenant's Work), of
construction, decoration or mechanical adjustment, the non- completion of which
will not materially interfere with Tenant's use and occupancy for Tenant's
normal business purposes. Any such incomplete items shall, however, be
diligently completed in a workmanlike manner.
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<PAGE> 10
FF. Successor Landlord: As defined in Section 9.03.
GG. Superior Mortgage: Any Mortgage to which this Lease is, at the
time referred to, subject and subordinate.
HH. Superior Mortgagee: The Mortgagee of a Superior Mortgage at the
time referred to.
II. Tenant's Fraction: The fraction, the numerator of which shall be
the Floor Space of the Building and the denominator of which shall be the Floor
Space of the buildings located within the Project from time to time. As used
herein, a building shall be deemed to be located within the Project when the
core and shell of such building has been substantially completed and a
Certificate of Occupancy has been issued for occupancy of at least one-third
(1/3) of the Floor Space thereof.
JJ. Tenant's Property: As defined in Section 16.02.
KK. Tenant's Work: The facilities, materials and work which may be
undertaken by or for the account of Tenant (other than the Landlord's Work) to
complete, equip, decorate and furnish the Demised Premises for Tenant's
occupancy.
LL. Term: The period commencing on the Commencement Date and ending at
11:59 p.m. of the Expiration Date, but in any event the Term shall end on the
date when this Lease is earlier terminated.
MM. Unavoidable Delays: A delay arising from or as a result of (i) a
strike, lockout, or labor difficulty, explosion, sabotage, accident, riot or
civil commotion, act of war, fire or other catastrophe, or an act of the other
party (or with respect to the performance by Landlord of Landlord's Work or
Tenant's Work, any delay caused by Tenant, or its contractors, including but
not limited to failure to provide approved plans or drawings and changes in
such work requested or made by Tenant) or any other cause beyond the reasonable
control of that party, (ii) any unforeseeable subsurface condition at the
Demised Premises which shall prevent or require a redesign or change in the
construction of, or affect the completion schedule thereof, or (iii) the
failure of any subcontractor or supplier to furnish labor, services, materials
or equipment on the dates agreed to if such failure is caused by an Unavoidable
Delay and Landlord is not reasonably able to obtain substitute labor, services,
materials or equipment on the agreed upon dates, provided that the party
asserting any such Unavoidable Delay has exercised its best efforts to minimize
such delay.
-7-
<PAGE> 11
ARTICLE 2 - DEMISE AND TERM
2.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises, for the Term. Subject to (a) easements
hereafter created by Landlord under and along all lot lines of the Land for
sewer, water, electric, gas and other utility lines and services hereafter
installed, provided such easements do not materially interfere with the
construction or operation of the Building, Parking Garage or other improvements
shown on the site plan attached hereto as Exhibit B, and (b) such items as are
shown on Exhibit E (herein referred to as the "Permitted Exceptions");
provided, however, Landlord represents covenants and warrants to Tenant that
the Demised Premises may be used and occupied for the purposes set forth
herein; and that the foregoing shall not materially interfere with Tenant's use
and quiet enjoyment of the Demised Premises. Promptly following the
Commencement Date, the parties hereto shall enter into an agreement in form and
substance satisfactory to Landlord and Tenant setting forth the Commencement
Date.
2.02. Tenant shall have an option to extend the Term from the date
upon which this Lease would otherwise expire for a period of five (5) years
(the "First Extended Period") and thereafter for two successive periods of five
(5) years each (the "Second Extended Period" and the "Third Extended Period")
respectively, each such period being referred to as an "Extended Period". If
Tenant elects to exercise its option to extend the Term it shall give notice
(the "Option Notice") of such election to Landlord on or before the date which,
with respect to the First Extended Period, is twelve (12) months before the
beginning of the First Extended Period and with respect to the Second Extended
Period and the Third Extended Period is eighteen (18) months before the
beginning of such Extended Period. Tenant agrees that it shall have forever
waived its right to exercise any such option if it shall fail for any reason
whatsoever to give the Option Notice to Landlord by the time provided for the
giving of such notice, whether such failure is inadvertent or intentional, time
being of the essence as to the exercise of such option. If Tenant gives the
Option Notice as above provided and (with respect to the Second Extended Period
and Third Extended Period) the Tenant also gives the Extension Notice
(provided, however, that no Extension Notice will be required for the First
Extended Period) as hereinafter provided, the Term shall be automatically
extended for the Extended Period covered by the option so exercised without
execution of an extension or renewal lease. Within ten (10) days after request
of either party after the effective exercise of any such option, Landlord and
Tenant shall execute, acknowledge and deliver to each other duplicate originals
of an instrument in recordable form confirming that such option was effectively
exercised. The Extended Period shall be upon the same terms and conditions as
are in effect immediately preceding the commencement of such Extended Period,
except that Tenant shall have no
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<PAGE> 12
right or option to extend the Term for any period of time beyond the expiration
of the Third Extended Period, and except that in the First, Second and Third
Extended Periods the Fixed Rent shall be adjusted as provided in this
paragraph. Any termination, expiration, cancellation or surrender of this Lease
shall terminate any right or option for the Extended Period not yet exercised.
Landlord shall have the right, by notice to Tenant within thirty (30) days
after receipt of notice of Tenant's election to exercise any option to extend
the Term, to reject Tenant's election if Tenant gave such notice during the
continuance of an event of default beyond any applicable grace or cure period
and such rejection shall automatically render Tenant's election to exercise
such option null and void and of no effect. Such options to extend the Term may
not be severed from this Lease or separately sold, assigned or otherwise
transferred. The Fixed Rent during the First Extended Period shall be at $25.00
per square foot of Floor Space. The Fixed Rent during the Second Extended
Period and the Third Extended Period each shall be at 95% of then current Fair
Market Rental Value as of the commencement of each Extended Period, determined
without inclusion of Tenant's Work performed at Tenant's expense. Fair Market
Rental Value shall be determined by mutual agreement of the parties. If the
parties are unable to agree on the Fair Market Rental Value within sixty (60)
days of exercise of the option, the parties shall, within seventy five (75)
days of the date of giving of the Option Notice, choose a licensed Real Estate
Appraiser who shall determine the Fair Market Rental Value. The cost of said
Real Estate Appraiser shall be borne equally by the parties. If the parties are
unable to agree on a licensed Real Estate Appraiser within seventy five (75)
days of the giving of the Option Notice, each party shall, within ninety (90)
days of giving of the Option Notice, select one Appraiser to appraise the Fair
Market Rental Value. Said appraisals shall be rendered within thirty (30) days
of selection. If the difference between the two appraisals is 20% or less of
the lower appraisal then the Fair Market Rental Value shall be the average of
the two appraisals. If the difference between the two appraisals is greater
than 20% of the lower appraisal, the two Appraisers shall select a third
licensed Real Estate Appraiser to appraise the Fair Market Rental Value. The
third appraisal shall be rendered within twenty (20) days. The Fair Market
Rental Value shall in such case be the average of the two closest appraisals.
Except as hereinafter provided, the cost of the third appraisal shall be borne
equally by the parties. Fair Market Rental Value shall be the appraised Fair
Market Rent Value of the Demised Premises for general office use (being the
initial use of the Demised Premises by Tenant), or if Tenant uses same for a
higher and better use, at such higher and better use. With respect to the
Second Extended Period and Third Extended Period, Tenant shall give Landlord
written notice of its election to extend the Term (the "Extension Notice")
within thirty (30) days of determination of Fair Market Rental Value as herein
provided. If Tenant fails to give the Extension Notice within said
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<PAGE> 13
thirty (30) day period, time being of the essence as to the exercise of the
option to extend and the giving of said notice, Tenant agrees that it shall
have forever waived its right to extend the Term. Anything to the contrary
contained herein notwithstanding, the Fixed Rent for any Extended Period shall
in no event be less than the Fixed Rent during the preceding period. If after
determination of Fair Market Rental Value, Tenant elects not to extend the Term
or if Tenant fails to give the Extension Notice within the time provided,
Tenant shall pay the cost of all appraisals.
ARTICLE 3 - PREPARATION OF DEMISED PREMISES
3.01. Landlord shall construct the Building, the Parking Garage and
appurtenant on and off site improvements, including landscaping, consisting of
approximately 300,000 square feet, with parking for a total of not less than
850 cars, on the Land in accordance with the Plans (as hereinafter defined) and
in a good and workmanlike manner. The plans and the final plans for Landlord's
Work shall be prepared as more particularly provided on the Schedule attached
hereto as Exhibit F (the "Plans" and the "Final Plans"). Once the Final Plans
sufficient for commencement and construction of Landlord's Work have been
approved by Tenant, if Landlord prepares same, or by Landlord, if Tenant
prepares same, Landlord shall then make the submission to the governmental
authority which is necessary to obtain a Building Permit (as hereinafter
defined). If after approval of the Plans the Landlord and Tenant are unable to
agree upon the Final Plans, or if there is a dispute as to the method or manner
of constructing Landlord's Work, such dispute shall be resolved in accordance
with the dispute resolution procedure included within Exhibit F. The standard
for such dispute resolution shall be (i) whether such Final Plans are
consistent with fulfillment of the Plans, or (ii) contemplate work which is not
in accordance with sound architectural or engineering practices. Landlord shall
proceed to obtain any and all approvals, authorizations and permits required by
law for issuance of a permit to commence construction (the "Building Permit").
Landlord shall diligently prosecute the construction of Landlord's Work in
accordance with this paragraph.
3.02. If the Substantial Completion of the Landlord's Work shall be
delayed due to Unavoidable Delays to Landlord caused by Tenant then the Demised
Premises shall be deemed Substantially Complete on the date when they would
have been ready but for such delay(s). Landlord shall promptly notify Tenant in
writing of any Unavoidable Delay pursuant to the preceding sentence. In the
event Landlord fails to notify Tenant in writing of an Unavoidable Delay as
herein provided by the date which is ten (10) business days after the Landlord
becomes aware of such Unavoidable Delay, Landlord shall be deemed to have
waived forever the right to claim an excuse from late performance for such
Unavoidable Delay for the period of time between the occurrence of such
Unavoidable Delay and the date of giving notice thereof to
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<PAGE> 14
Tenant. The Demised Premises shall be presumed to be in satisfactory condition
on the Commencement Date except for the items of which Tenant gives Landlord
notice within one (1) year after the Commencement Date specifying such details
with reasonable particularity. In the event Tenant does not select Landlord to
perform Tenant's Work and Landlord does not Substantially Complete Landlord's
Work by the date which is twelve (12) months from the Approval Date subject,
however, to extension for Unavoidable Delays, the Fixed Rent Commencement Date
shall be postponed by one day for each day by which Substantial Completion of
Landlord's Work exceeds said twelve (12) months. In the event Landlord performs
Tenant's Work and Landlord does not Substantially Complete Landlord's Work and
Tenant's Work by the date which is seventeen (17) months from the Approval
Date, the Fixed Rent Commencement Date shall be postponed by one day for each
day by which Substantial Completion of Landlord's Work and Tenant's Work
exceeds said seventeen (17) months. If (a) Landlord is not selected to perform
Tenant's Work and Landlord does not Substantially Complete Landlord's Work by
July 1, 1990, inclusive of extensions for Unavoidable Delays, or (b) Landlord
is selected to perform Tenant's Work and Landlord does not Substantially
Complete Landlord's Work and Tenant's Work by December 1, 1990, inclusive of
extensions for Unavoidable Delays, Tenant shall have the right to terminate
this Lease upon ten (10) days prior written notice given no sooner than the end
of the applicable period, unless Landlord Substantially Completes such work
within ten (10) days after receipt of such notice from Tenant. If Tenant does
not elect to terminate this Lease for failure of Landlord to Substantially
Complete the work Landlord is required to perform by the date required for such
performance, Landlord shall have the right to terminate this Lease upon written
notice to Tenant if Landlord, other than as the result of willful default, does
not Substantially Complete the work which Landlord is required to perform
hereunder by the date which is twelve (12) months after the last day for
performance by Landlord without postponement of the Fixed Rent Commencement
Date as provided above. Termination of this Lease by Tenant or Landlord
pursuant to this Section 3.02 shall not relieve Landlord from any liability for
failure to perform and Tenant may pursue all remedies provided by law.
3.03. Landlord shall provide Tenant with written notice of the
occurrence of the Approval Date within ten (10) days of the date that Landlord
learns that the Approval Date has occurred. Tenant shall submit to Landlord
final plans and specifications for Tenant's Work, by the date which is six (6)
months after the Approval Date. Tenant may, either request bids for Tenant's
Work from third party contractors or agree with Landlord to have Landlord
perform Tenant's Work at Tenant's sole cost and expense, upon terms to be
mutually agreed upon by Landlord and Tenant. Landlord shall notify Tenant of
the amount it would charge for Tenant's Work within thirty (30) days of receipt
of final plans and specifications for Tenant's Work. If
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Landlord is selected to perform Tenant's Work, Landlord shall diligently
prosecute the construction of Tenant's Work in accordance with this Article and
pursuant to a separate construction contract with Tenant. Tenant shall notify
Landlord of its election within thirty (30) days of the date Landlord notifies
Tenant of the amount for which Landlord would agree to perform Tenant's Work.
3.04. Tenant shall have the right, at its sole cost and expense, to
have a construction consultant on site to witness the performance of Landlord's
Work and Tenant's Work, if performed by Landlord, provided, however, that such
consultant shall not unreasonably interfere with or delay the performance of
Landlord's Work or Tenant's Work. Tenant shall have the right to attend or have
its consultant attend weekly job meetings during construction. Landlord will
prepare and furnish Tenant with minutes of said job meetings.
3.05. In the event that the Approval Date does not occur by the date
which is six (6) months from the date of this Lease, Tenant shall have the
right upon thirty (30) days prior written notice given no earlier than the date
which is six (6) months from the date of this Lease to terminate this Lease,
unless the Approval Date occurs within said thirty (30) days. Landlord and
Tenant agree that the site plan annexed hereto as Exhibit B shall be the basic
concept plan for Landlord's application for site plan approval required for the
Approval Date.
3.06. Landlord shall, based upon the plan annexed hereto as Exhibit B,
promptly apply for and diligently pursue the obtaining of site plan approval
required for the Approval Date to occur.
ARTICLE 4 - USE OF DEMISED PREMISES
4.01. Tenant shall use and occupy the Demised Premises for the
Permitted Uses, and Tenant shall not use or permit or suffer the use of the
Demised Premises or any part thereof for any other purpose.
4.02. If any governmental license or permit, other than a Certificate
of Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the Demised Premises and the use of the Parking Garage or any part
thereof, Tenant, at its expense, shall duly procure and thereafter maintain
such license or permit and submit the same to Landlord for inspection. Tenant
shall at all times comply with the terms and conditions of each such license or
permit. Tenant shall not at any time use or occupy, or suffer or permit anyone
to use or occupy the Demised Premises, or do or permit anything to be done in
the Demised Premises, in any manner which (a) violates the Certificate of
Occupancy for the Demised Premises; (b) causes or is liable to
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cause injury to the Demised Premises or any equipment, facilities or systems
therein; or (c) constitutes a violation of the Legal Requirements or Insurance
requirements.
ARTICLE 5 - RENT
5.01. Tenant shall pay the Fixed Rent in equal monthly installments in
advance on the first day of each and every calendar month during the Term from
and after the Fixed Rent Commencement Date. If the Fixed Rent Commencement Date
occurs on a day other than the first day of a calendar month, the Fixed Rent
for the partial calendar month at the commencement (or if the Lease is
terminated other than on the last day of the month, except as the result of a
default by Tenant) of the Term shall be prorated.
5.02. The Rent shall be paid in lawful money of the United States to
Landlord at its office, or such other place, or Landlord's agent, as Landlord
shall designate by notice to Tenant. Tenant shall pay the Rent promptly when
due, and in the case of Fixed Rent, without notice or demand therefor and
without any abatement, deduction or setoff for any reason whatsoever, except as
may be expressly provided in this Lease. If Tenant makes any payment to
Landlord by check, same shall be by check of Tenant and Landlord shall not be
required to accept the check of any other Person, and any check received by
Landlord shall be deemed received subject to collection. If any check is mailed
by Tenant, Tenant shall post such check in sufficient time prior to the date
when payment is due so that such check will be received by Landlord on or
before the date when payment is due. Tenant shall assume the risk of lateness
or failure of delivery of the mails, and no lateness or failure of the mails
will excuse Tenant from its obligation to have made the payment in question
when required under this Lease.
5.03. No payment by Tenant or receipt or acceptance by Landlord of a
lesser amount than the correct Rent shall be deemed to be other than a payment
on account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance or pursue any other remedy in this Lease or at law
provided.
5.04. If Tenant is in arrears in payment of Fixed Rent, Tenant waives
Tenant's right, if any, to designate the times to which any payments made by
Tenant are to be credited and, in such event, Landlord may apply any payments
made by Tenant to such items as Landlord sees fit, irrespective of and
notwithstanding any designation or request by Tenant as to the items to which
any such payments shall be credited.
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5.05. Any payment of Fixed Rent due Landlord under this Lease which is
not paid on or before the date such payment is due and any payment of any
Additional Charge due to Landlord which is not paid within twenty (20) days
after the date such payment is due, shall, from the due date, until such
payment is received by Landlord, bear interest at the prime rate of Chemical
Bank of New York plus one percent (1%) per annum (the "Late Payment Rate"), but
in no event, in excess of the maximum permissible interest rate then in effect
in the State of New Jersey. No failure by Landlord to insist upon the strict
performance by Tenant to pay the Late Payment Rate shall constitute a waiver by
Landlord of its right to enforce the provisions of this subsection.
5.06. It is intended that the Fixed Rent provided for in Section 5.01.
above shall be an absolutely net return to Landlord throughout the Term, free
of any expense, charge or other deduction whatsoever, with respect to the
Demised Premises and/or the ownership, leasing, operation, management,
maintenance, repair, rebuilding, use or occupation thereof, or any portion
thereof, with respect to any interest of Landlord therein, except only as
otherwise expressly provided in this Lease.
ARTICLE 6 - TAX AND OPERATING EXPENSE PAYMENTS
6.01. Commencing on the Fixed Rent Commencement Date, and continuing
throughout the Term, Tenant shall pay the Real Estate Taxes in respect of the
Building and the Land and the Parking Garage. If a separate tax bill is
obtained for the Demised Premises, Tenant shall pay the amount of the Real
Estate Taxes directly to the taxing authorities when due. Tenant shall provide
Landlord with a certified, true copy of its receipt for payment of such taxes
promptly following receipt thereof from the taxing authorities. If, however,
the tax bill covering the Demised Premises covers real property other than the
Demised Premises, Tenant's proportionate share of the Real Estate Taxes shall
be determined by apportioning the Real Estate Taxes attributable to buildings
and improvements, pursuant to such bill, by multiplying said Taxes by a
fraction, the numerator of which shall be the Floor Space of the Building, and
the denominator of which shall be the Floor Space of all buildings (excluding
parking structures) covered by said bill (provided, however, that the Real
Estate Taxes apportioned among such buildings and the Building and the Parking
Garage shall be equitably apportioned based upon the assessed value of such
buildings and the Building and the Parking Garage and if the assessed value is
not stated, based upon equitable considerations which shall include the
assessor's notes, if available), and by calculating Tenant's proportionate
share of the Land portion of such tax bill by multiplying the Land portion of
said bill by a fraction, the numerator of which shall be the acreage of the
Land included within the Demised Premises, and the denominator of which shall
be the
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acreage of all land covered by such bill. In such case, Landlord shall estimate
the amount of the Real Estate Taxes (which estimate may be reasonably changed
by Landlord at any time and from time to time), and Tenant shall pay to
Landlord 1/12th of the amount so estimated on the first day of each month in
advance. Tenant shall also pay to Landlord on demand, from time to time, the
amount which, together with said monthly installments, would be sufficient to
pay any Real Estate Taxes fifteen (15) days prior to the date when such Real
Estate Taxes shall first become due. Tenant shall have the right (but not the
obligation), in good faith, to institute and prosecute legal proceedings with
respect to the taxing authorities, to contest the Real Estate Taxes with
respect to the Land and the Building and the Parking Garage. In the event of
the institution of such proceedings, such proceedings shall be at Tenant's sole
cost and expense and Tenant shall indemnify and hold Landlord harmless with
respect thereto. Landlord shall cooperate fully with Tenant in connection with
any such proceedings. If the Real Estate Taxes with respect to the Demised
Premises are paid by Tenant through payments to Landlord as above provided,
Landlord shall cause such Real Estate Taxes to be paid on or before the last
date that same may be paid without interest or penalty and Landlord shall
provide Tenant with evidence of such payment within thirty (30) days of the
making of such payment by Landlord. When the amount of any item comprising Real
Estate Taxes is finally determined, Land lord shall submit to Tenant a
statement in reasonable detail of the same, and the figures used for computing
the same, and if such is more or less than the amount theretofore paid by
Tenant for such item based on Landlord's estimate, Tenant shall pay to the
Landlord the deficiency, or Landlord shall refund to Tenant the excess, within
twenty (20) days of submission of such statement. The above computations shall
be made by Landlord in accordance with generally accepted accounting
principles, and the Floor Space referred to will be based upon the average of
the Floor Space subject to the assessment on the first day of each month during
the period in question. In the event any special assessment may be lawfully
paid in installments, Tenant shall have the right to pay for same over the
longest period of installments permitted and in such event, Tenant shall not be
required to pay any installments coming due after the Expiration Date of this
Lease.
6.02. Real Estate Taxes, whether or not a lien upon the Demised
Premises shall be apportioned between Landlord and Tenant at the beginning and
end of the Term; it being intended that Tenant shall pay only that portion of
the Real Estate Taxes as is allocable to the Demised Premises for the Term.
6.03. Commencing on the Fixed Rent Commencement Date and continuing
throughout the Term, Tenant shall pay to Landlord, as hereinafter provided,
Tenant's proportionate share of the Operating Expenses. Tenant's proportionate
share shall be the Operating
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Expenses for the period in question, multiplied by Tenant's Fraction. Landlord
shall estimate Tenant's Fraction (which estimate may be reasonably changed by
Landlord, from time to time), and Tenant shall pay to Landlord 1/12th of the
amount so estimated on the first day of each month in advance. If, at any time,
Landlord changes its estimate of the Operating Expenses for the then current
Calendar Year or partial Calendar Year, Landlord shall give notice to Tenant of
such change and within thirty (30) days after receipt of such notice, Landlord
and Tenant shall adjust for any overpayment or underpayment during the prior
months of the then current Calendar Year or partial Calendar Year. After the
end of each Calendar Year, including any partial Calendar Year, at the
beginning of the Term, and after the end of the Term, Landlord shall submit to
Tenant a statement in reasonable detail of the Operating Expenses for such
Calendar Year, or partial Calendar Year, in the event the Term shall begin on a
date other than a January 1st and/or end on the date other than (a) December
31st, as the case may be, and stating the Operating Expenses for the period in
question and the figures used for computing such, and if such so stated for
such period, is more or less than the amount paid for such period, Tenant shall
pay to Landlord the deficiency, or Landlord shall refund to Tenant the excess,
within twenty (20) days after submission of such statement. Tenant shall have
the right, but not more than once annually or in the event of a good faith
material dispute by Tenant with regard to the correctness of statements issued
by Landlord pursuant to Section 6.01 or 6.03 hereof, upon reasonable written
notice, during business hours, to inspect Landlord's records kept with respect
to the calculation of Operating Expenses or Real Estate Taxes. All computations
shall be made in accordance with generally accepted accounting principles, and
the Floor Space referred to will be based upon the average of the Floor Space
in existence on the first day of each month during the period in question.
6.04. Each such statement given by Landlord pursuant to Section 6.01
or Section 6.03 shall be conclusive and binding upon Tenant unless within sixty
(60) days after the receipt of such statement Tenant shall notify Landlord that
it disputes the correctness of the statement, specifying the particular
respects in which the statement is claimed to be incorrect. If such dispute is
not settled by agreement, either party may submit the dispute to arbitration as
provided in Article 35. Pending the determination of such dispute by agreement
or arbitration as aforesaid, Tenant shall, within twenty (20) days after
receipt of such statement, pay the Additional Charges in accordance with
Landlord's statement, without prejudice to Tenant's position. If the dispute
shall be determined in Tenant's favor, Landlord shall forthwith pay to Tenant
the amount of Tenant's overpayment resulting from compliance with Landlord's
statement.
6.05. Tenant shall pay and discharge all expenses of operating the
Demised Premises.
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ARTICLE 7 - COMMON AREAS
7.01. Landlord will operate, manage, equip, light, repair and maintain
(including, but not limited to snow plowing and ice removal), or cause to be
operated, managed, equipped, lighted, repaired and maintained, the Common Areas
for their intended purposes in good order and condition. Landlord reserves the
right, at any time and from time to time, to construct within the Common Areas
kiosks, fountains, aquariums, planters, pools and sculptures, and to install
vending machines, telephone booths, benches and the like, provided same shall
not unreasonably block or interfere with Tenant's means of ingress or egress to
and from the Demised Premises.
7.02. Tenant and its subtenants and concessionaires, and their
respective officers, employees, agents, customers and invitees, shall have the
non-exclusive right, in common with Landlord and all others to whom Landlord
has granted or may hereafter grant such right, to use the Common Areas.
Landlord reserves the right, at any time and from time to time, to close
temporarily all or any portions of the Common Areas when in Landlord's
reasonable judgment any such closing is necessary or desirable (a) to make
repairs or changes or to effect construction within the Project, (b) to prevent
the acquisition of public rights in such areas, (c) to discourage unauthorized
parking, or (d) to protect or preserve natural persons or property, provided,
however, that Landlord shall not deprive Tenant of access to the Demised
Premises over roadways within the Common Areas necessary for access to the
Demised Premises, except for temporary closings in bona fide cases of
emergency. Landlord may do such other acts in and to the Common Areas as in its
judgment may be desirable to improve or maintain same.
ARTICLE 8 - INTENTIONALLY DELETED
ARTICLE 9 - SUBORDINATION
9.01. Provided that a Superior Mortgagee shall execute and deliver to
Tenant an agreement, in recordable form, substantially in the form attached
hereto and made a part hereof as Exhibit "G", to the effect that, provided no
event of default has occurred and is continuing hereunder beyond any applicable
grace or cure period, such Superior Mortgagee will not name or join Tenant as a
party defendant or otherwise in any suit, action or proceeding to enforce any
rights granted to such Superior Mortgagee under its Superior Mortgage, and to
the further effect that if there shall be a foreclosure of its Superior
Mortgage, that the Superior Mortgagee will not make Tenant a party defendant to
such foreclosure, evict Tenant, disturb Tenant's
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possession under this Lease, or terminate or disturb Tenant's leasehold estate
or rights hereunder (such agreement being hereinafter called a "Non-Disturbance
Agreement"), this Lease shall be subject and subordinate to such Superior
Mortgage in respect of which a Non-Disturbance Agreement shall have been
delivered, and to all renewals, extensions, supplements, amendments,
modifications, consolidations and replacements of such Superior Mortgage or any
substitutions therefor, and advances made thereunder. Tenant shall, within
thirty (30) days of Landlord's request, execute and deliver to Landlord, a
Non-Disturbance Agreement substantially in the form annexed hereto as Exhibit G
or its substantial equivalent.
9.02. If any act or omission of Landlord would give Tenant the right,
immediately or after lapse of a period of time, to cancel or terminate this
Lease, or to claim a partial or total eviction, Tenant shall not exercise such
right until and unless (a) it has given written notice of such act or omission
to Landlord and each Superior Mortgagee whose name and address shall previously
have been furnished to Tenant, and (b) such act or omission shall not have been
remedied within thirty (30) days following the giving of such notice and
following the time when such Superior Mortgagee shall have become entitled
under such Superior Mortgage to remedy the same (or such longer period as may
be reasonably required if such condition is not susceptible to remedy within
such thirty (30) day period provided such Superior Mortgagee within a
reasonable time commences and diligently pursues such remedy to completion,
which reasonable period shall in no event be less tan the period to which the
Landlord would be entitled under this Lease or otherwise, after similar notice,
to effect such remedy).
9.03. If any Superior Mortgagee shall succeed to the rights of
Landlord under this Lease, whether through possession or foreclosure action or
delivery of a new lease or deed ("Successor Landlord"), Tenant shall attorn to
and recognize such Successor Landlord as Tenant's landlord under this Lease and
Tenant shall promptly execute and deliver any instrument that such Successor
Landlord may reasonably request to evidence such attornment. This Lease shall
continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in this Lease except that the Successor Landlord shall not (a) be liable
for any previous act or omission of Landlord under this Lease; (b) be subject
to any offset, not expressly provided for in this Lease, which theretofore
shall have accrued to Tenant against Landlord; or (c) be bound by any previous
modifications of this Lease or by any previous prepayment or more than one
month's Fixed Rent or Additional Charges, unless such modifications or
prepayment shall have been expressly approved in writing by the Mortgagee of
the Superior Mortgage through or by reason of which the Successor Landlord
shall have succeeded to the rights of Landlord under this Lease.
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ARTICLE 10 - QUIET ENJOYMENT
10.01. So long as Tenant pays all of the Rent and performs all of
Tenant's other obligations hereunder, Tenant shall peaceably and quietly have,
hold and enjoy the Demised Premises without hindrance, ejection or molestation
by Landlord or any person lawfully claiming through or under Landlord, subject,
nevertheless, to the provisions of this Lease.
ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGING
11.01. Provided Tenant is not in default of this Lease beyond any
applicable grace or cure periods, Tenant shall have the right, upon prior
written notice to Landlord, to assign this Lease or sublet this Demised
Premises, provided any such default is cured within such applicable grace or
cure period. Such notice shall contain the name of the proposed assignee or
subtenant and the terms of the proposed assignment or sublease. With respect to
any such assignment or subletting other than to an Affiliate of Tenant,
Landlord shall have the right of first refusal to take such assignment or
sublease on the same terms and conditions as the proposed sublease or
assignment. Landlord shall notify Tenant of Landlord's election to enter into
such assignment or sublease within fifteen (15) business days of receipt of
Tenant's notice. If Landlord does not respond within said time period, Landlord
shall be deemed to have waived its right of first refusal with respect to the
proposed assignment or sublease. Any such election or waiver shall not be
deemed to be an election or waiver with respect to further assignments or
subleases.
11.02. Intentionally deleted.
11.03. If this Lease is assigned, whether or not in violation of this
Lease, Landlord may collect rent from the assignee. If the Demised Premises or
any part thereof are sublet or used or occupied by anybody other than Tenant,
whether or not in violation of this Lease, Landlord may, after default by
Tenant, and expiration of Tenant's time to cure such default, collect rent from
the subtenant or occupant. In either event, Landlord may apply the net amount
collected to the Rent, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of any of the provisions of Section 11.01,
or the acceptance of the assignee, subtenant or occupant as tenant, or a
release of Tenant from the performance by Tenant of Tenant's obligations under
this Lease. References in this Lease to use or occupancy by others (that is,
anyone other than Tenant) shall not be construed as limited to subtenants and
those claiming under or through subtenants but shall be construed as including
also licensees and others claiming under or through Tenant, immediately or
remotely.
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11.04. Any permitted assignment shall be made only if, and shall not
be effective until, the assignee shall execute, acknowledge and deliver to
Landlord an agreement in a form and substance reasonably satisfactory to
Landlord whereby the assignee shall assume Tenant's obligations under this
Lease and whereby the assignee shall agree that all of the provisions in this
Article 11 shall, notwithstanding such assignment, continue to be binding upon
it in respect to all future assignments. Notwithstanding any assignment or
subletting, whether or not in violation of the provisions of this Lease, and
notwithstanding the acceptance of Rent by Landlord from an assignee or any
other party, the original Tenant and any other person(s) who at any time was or
were Tenant shall remain fully liable for the payment of the Rent and for
Tenant's other obligations under this Lease.
11.05. The liability of the original Tenant and any other Person who
was responsible for Tenant's obligations under this Lease shall not be
discharged, by any agreement made by Landlord extending the time of performance
of, or any waiver or failure of Landlord to enforce, any of this Lease.
11.06. Without limiting any of the provisions of Article 25, if
pursuant to the Federal Bankruptcy Code (or any similar law hereafter enacted
having the same general purpose), Tenant assigns this Lease, such assignee
shall deposit with Landlord, for adequate assurance of future performance by an
assignee expressly permitted under such Code, cash security in an amount equal
to the sum of one (1) year's Fixed Rent plus an amount equal to the Additional
Charges for the Calendar Year preceding the year in which such assignment is
intended to become effective, which deposit shall be held by Landlord for the
balance of the Term, without interest, as security for the full performance of
all of Tenant's obligations under this Lease.
ARTICLE 12 - COMPLIANCE WITH LAWS
12.01. From and after the date of Substantial Completion, Tenant shall
comply with all Legal Requirements in respect of the use and occupation of the
Demised Premises, or the abatement of any nuisance in or on the Demised
Premises caused or suffered by Tenant and Tenant shall pay all the cost,
expenses, fines, penalties and damages which may be imposed upon Landlord by
reason of or arising out of Tenant's failure to fully and promptly comply with
and observe the provisions of this Section 12.01. Tenant shall also comply with
all Legal Requirements with respect to its activities at or in connection with
the Demised Premises, if any, prior to the date of Substantial Completion.
However, Tenant need not comply with any such Legal Requirement so long as
Tenant shall be contesting the validity thereof, or the applicability thereof
to the Demised Premises, in
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accordance with Section 12.02. Landlord shall comply with all Legal
Requirements in connection with the performance by Landlord of Landlord's Work
and (if Landlord performs Tenant's Work) Tenant's Work.
12.02. Tenant may contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any Legal Requirement, provided that (a) Landlord shall not be
subject to civil or criminal penalty or to prosecution for a crime, and neither
the Demised Premises nor any part thereof shall be subject to being condemned
by reason of non-compliance or otherwise by reason of such contest; (b) before
the commencement of such contest, Tenant shall furnish to Landlord either (i)
the bond of a surety company satisfactory to Landlord, which bond shall be, as
to its provisions and form, satisfactory to Landlord, and shall be in an amount
at least equal to 125% of the cost of such compliance (as estimated by a
reputable contractor designated by Landlord) and shall indemnify Landlord
against the cost thereof and against all liability for damages, interest,
penalties and expenses (including reasonable attorneys' fees and expenses),
resulting from or incurred in connection with such contest or non-compliance,
or (ii) other security in place of such bond satisfactory to Landlord; (c) such
non-compliance or contest shall not constitute or result in any violation of
any Superior Mortgage, or if any such Superior Mortgage shall permit such
non-compliance or contest on condition of the taking of action or furnishing of
security by Landlord, such action shall be taken an Tenant shall keep Landlord
advised as to the status of such proceedings. The provision of subsection (b)
of the preceding sentence shall not apply during such time as United Jersey
Banks remains liable for Tenant's obligations under this Lease. Without
limiting the application of the above, Landlord shall be deemed subject to
prosecution for a crime if Landlord, or its managing agent, or any officer,
director, partner, shareholder or employee of Landlord or its managing agent,
as an individual, is charged with a crime of any kind or degree whatsoever,
whether by service of a summons or otherwise, unless such charge is withdrawn
before Landlord or its managing agent, or such officer, director, partner,
shareholder or employee of Landlord or its managing agent (as the case may be)
is required to plead or answer thereto.
ARTICLE 13 - INSURANCE
13.01. From and after the Commencement Date, Tenant shall maintain or
cause to be maintained All Risk insurance in respect of the Building, the
Parking Garage and other improvements on the Land normally covered by such
insurance for the benefit of Landlord and Tenant and any Superior Mortgagees as
their interests may appear. The
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All Risk insurance will be in the amounts not less than the full insurable
value of the Building (including Tenant's Work) and the Parking Garage and
sufficient to avoid the effect of the co-insurance provisions of the applicable
policy or policies. Tenant may insure under a blanket policy with stated
amounts applicable to the Demised Premises or providing for insurance per
occurrence at least equal to the full insurable value of the Building
(including Tenant's Work). Tenant shall also maintain any other forms and types
of insurance which Landlord shall deem reasonable in respect to the Building,
the Parking Garage and Land and which are customarily maintained for buildings
of the character and location of the Demised Premises. Said policies may
provide for reasonable deductibles. Tenant shall self insure, defend, indemnify
and hold Landlord harmless with respect to any loss covered by or within such
deductibles.
13.02. Tenant shall maintain the following insurance: (a)
comprehensive general public liability insurance in respect of the Demised
Premises and the conduct and operation of business therein, with Landlord as an
additional named insured, and at Landlord's request with any Superior
Mortgagees as additional named insured(s), with limits of not less than Ten
Million and 00/100 Dollars ($10,000,000) for bodily injury or death to any one
person and Ten Million and 00/100 Dollars ($10,000,000) for bodily injury or
death to any number of persons in any one occurrence, and Five Hundred Thousand
and 00/100 Dollars ($500,000) for property damage, including water damage and
sprinkler leakage legal liability, and (b) rent insurance including a rent
insurance endorsement with proceeds payable to Landlord and any Superior
Mortgagee, written on "All Risk" forms naming Landlord as an additional insured
in an amount sufficient to cover the effect of the co-insurance provisions of
the applicable policy or policies, but in no event less than an amount
sufficient to cover in full Tenant's obligations for Fixed Rent then payable
for a period of one (1) year, and the estimated amount, in the reasonable
judgment of Landlord, of Additional Charges to be paid by Tenant hereunder for
a period of one year; and (d) any other insurance reasonably required for
compliance with the Insurance Requirements. Tenant shall deliver to Landlord
and any additional named insured(s) certificates for fully paid-for policies
required pursuant to this Article 13 at least ten (10) days before the
Commencement Date. Tenant shall procure and pay for renewals of such insurance
from time to time before the expiration thereof, and Tenant shall deliver to
Landlord and any additional insured(s) certificates therefor before the
expiration of any existing policy. All policies required pursuant to this
Article 13 shall be issued by companies of recognized responsibility licensed
to do business in New Jersey, and all such policies shall contain a provision
whereby the same cannot be cancelled unless Landlord and any additional
insured(s) are given at least twenty (20) days' prior written notice of such
cancellation. Tenant shall be responsible and shall indemnify Landlord for all
loss,
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damage, cost, liability or expense incurred as the result of the cancellation,
termination or lapse of any policy of insurance required to be maintained by
Tenant pursuant to this Lease.
13.03. Tenant shall not do, permit or suffer to be done any act,
matter, thing or failure to act in respect of the Demised Premises or use or
occupy the Demised Premises or conduct or operate Tenant's business in any
manner objectionable to any insurance company or companies whereby the fire
insurance or any other insurance then in effect in respect to the Land and
Building and the Parking Garage or any part thereof shall become void or
suspended. In case of a breach of the provisions of this Section 13.03, in
addition to all other rights and remedies of Landlord hereunder, Tenant shall
indemnify Landlord and hold Landlord harmless from and against any loss which
would have been covered by insurance which shall have become void or suspended
because of such breach by Tenant.
ARTICLE 14 - INDEMNITY
14.01. From and after the Commencement Date, except as provided in
Article 38 hereof, Tenant shall indemnify and hold harmless Landlord and its
partners, joint venturers, directors, officers, agents, servants and employees
from and against any and all claims arising from or in connection with (a) any
act, omission or negligence of Tenant or any of its subtenants or licensees or
its or their partners, joint venturers, directors, officers, agents, employees
or contractors; and (b) any accident, injury or damage whatever (unless caused
solely by Landlord's negligence) occurring in the Demised Premises together
with all costs, expenses and liabilities incurred or in connection with each
such claim or action or proceeding brought thereon, including, without
limitation, reasonably attorneys' fees and expenses. In case any action or
proceeding is brought against Landlord and/or its or their partners, joint
venturers, directors, officers, agents and/or employees by reason of any such
claim, Tenant, upon notice from Landlord, shall resist and defend such action
or proceedings.
14.02. Landlord shall indemnify and hold harmless Tenant and its
partners, joint venturers, directors, officers, agents, servants and employees
from and against any and all claims arising from or in connection with (a) any
act, omission or negligence of Landlord or any of its tenants, subtenants or
licensees or its or their partners, joint venturers, directors, officers,
agents, employees or contractors, in connection with the conduct or management
of the Common Areas or of any business or activity therein, or any work or
thing whatsoever done, or any condition created or existing, and (b) any
accident, injury or damage whatsoever (unless caused solely by
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Tenant's negligence) occurring in the Common Areas together with all costs,
expenses and liabilities incurred or in connection with each such claim or
action or proceeding brought thereon, including, without limitation, reasonable
attorneys' fees and expenses. In case any action or proceeding is brought
against Tenant and/or its or their partners, joint ventures, directors,
officers, agents and/or employees by reason of any such claim, Landlord, upon
notice from Tenant, shall resist and defend such action or proceeding.
14.03. Neither Landlord nor Tenant shall be liable to the other or
responsible for, and Landlord and Tenant hereby release each other from, all
liability and responsibility to any person claiming by, through or under Tenant
or Landlord, by way of subrogation, for any injury, loss or damage to any
person or property (including, but not limited to fire or other casualty) in or
around the Demised Premises or to each party's business irrespective of the
cause of such injury, loss or damage, and each party shall require its insurers
to include in all insurance policies which could give rise to a right of
subrogation against each party a clause or endorsement whereby the insurer
waives any rights of subrogation or permits the insured, prior to any loss, to
agree with a third party to waive any claim it may have against said third
party without invalidating the coverage under the insurance policy.
ARTICLE 15 - ALTERATIONS AND SIGNS
15.01. Except as expressly provided in Article 34 hereof, Tenant shall
not make any structural alterations or additions to the Demised Premises which
would affect the structural integrity of the Building or the Parking Garage or
change the exterior color or architectural treatment of the Building or the
Parking Garage or which would otherwise impair the value of the Building or the
Parking Garage without on each occasion first obtaining the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed, it being acknowledged that Landlord's consent shall not be required
for any other alterations or additions. Tenant shall submit to Landlord plans
and specifications for such work at the time Landlord's consent is sought.
Tenant shall pay to Landlord upon demand the reasonable cost and expense of
Landlord for any action of Landlord in (a) reviewing said plans and
specifications and (b) inspecting the alterations to determine whether the same
are being performed in accordance with the approved plans and specifications
and all Legal Requirements and Insurance Requirements including without
limitation, the fees of any architect or engineer employed by Landlord for such
purpose. Before proceeding with any permitted alteration which will cost more
than $750,000 (exclusive of the costs of decorating work and items constituting
Tenant's Property), as estimated by a reputable contractor designated by
Landlord, Tenant shall obtain and deliver to
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Landlord either (i) a performance bond and a labor and materials payment bond
(issued by a corporate surety licensed to do business in New Jersey), each in
an amount equal to 125% of such estimated cost and in form satisfactory to
Landlord, or (ii) such other security as shall be reasonably satisfactory to
Landlord. Notwithstanding anything herein to the contrary, the provisions of
the immediately preceding sentence shall not apply during such time as United
Jersey Banks remains liable for Tenant's obligations under this Lease. Any
review or approval by Landlord of any plans and/or specifications with respect
to any such alterations is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant in respect to the adequacy,
correctness or efficiency thereof or otherwise.
15.02. Tenant shall obtain all necessary governmental permits and
certificates for the commencement and prosecution of permitted alterations and
for final approval thereof upon completion, and shall cause alterations to be
performed in compliance therewith all applicable Legal Requirements and
Insurance Requirements. Alterations shall be diligently performed in a good and
workmanlike manner, using new materials and equipment at least equal in quality
and class to the original installations of the Building and the Parking Garage
as the case may be. Alterations shall be performed by contractors first
approved by Landlord, which approval shall not be unreasonably withheld or
delayed. Alterations shall be made in such manner as not to unreasonably
interfere with or delay and as not to impose any additional expense upon
Landlord in the construction, maintenance, repair or operation of the Common
Areas; and if any such additional expense shall be incurred by Landlord as a
result of Tenant's making of any alterations, Tenant shall pay any such
additional expense upon demand. If Alterations are performed by Tenant's
contractor and throughout the making of alterations by Tenant, Tenant shall
carry, or cause to be carried, worker's compensation insurance in statutory
limits and general liability insurance, with completed operation endorsement,
for any occurrence in or about the Building, or the Parking Garage, as the case
may be, under which Landlord and its managing agent whose name and address
shall previously have been furnished to Tenant shall be named as parties
uninsured, in such limits as landlord may reasonably require, with insurers
reasonably satisfactory to Landlord. Tenant shall furnish Landlord with
reasonably satisfactory evidence that such insurance is in effect at or before
the commencement of alterations and, on request, at reasonable intervals
thereafter during the making of alterations. If Landlord performs Alterations
for Tenant, Landlord shall carry or cause its subcontractors to carry such
insurance, however, the cost and expense of such insurance coverage may be
charged to Tenant.
15.03. Tenant shall not place any signs on the roof, exterior walls or
grounds of the Demised Premises without first obtaining Landlord's written
consent thereto. Subject to compliance by Tenant
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with all applicable Legal Requirements, Landlord shall not unreasonably
withhold or delay its consent to the installation by Tenant of one or more
signs identifying Tenant on the exterior face of the top of the Building and/or
on the grounds of the Demised Premises.
ARTICLE 16 - LANDLORD'S AND TENANT'S PROPERTY
16.01. All fixtures, equipment, improvements and appurtenances
attached to or built into the Demised Premises at the commencement of or during
the Term, whether or not by or at the expense of Tenant, shall be and remain a
part of the Demised Premises, shall be deemed to be the property of Landlord
and shall not be removed by Tenant, except as provided in Section 16.02.
16.02. All movable partitions, business and trade fixtures, machinery
and equipment, data processing equipment, item processing equipment,
communications equipment and office equipment, whether or not attached to or
built into the Demised Premises, which are installed in the Demised Premises by
or for the account of Tenant without expense to Landlord and can be removed
without structural damage to the Demised Premises and all furniture,
furnishings, and other movable personal property owned by Tenant and located in
the Demised Premises (collectively, "Tenant's Property") shall be and shall
remain the property of Tenant and may be removed by Tenant at any time during
the Term; provided that if any of the Tenant's Property is removed, Tenant
shall repair or pay the cost of repairing any damage to the Demised Premises or
the Common Areas resulting from the installation and/or removal thereof. Any
equipment or other property for which Landlord shall have granted any allowance
or credit to Tenant shall not be deemed to have been installed by or for the
account of Tenant without expense to Landlord, shall not be considered as the
Tenant's Property and shall be deemed the property of Landlord.
16.03. At or before the Expiration Date or the date of any earlier
termination of this Lease, or within thirty (30) days after such an earlier
termination date, Tenant shall remove from the Demised Premises all of the
Tenant's Property (except such items thereof as Landlord shall have expressly
permitted to remain, which property shall become the property of Landlord if
not removed), and Tenant shall repair any damage to the Demised Premises and
the Common Areas resulting from any installation and/or removal of the Tenant's
Property. Any items of the Tenant's Property which shall remain in the Demised
Premises after the Expiration Date or after a period of thirty (30) days
following an earlier termination date, may, at the option of Landlord, be
deemed to have been abandoned, and in such case such items may be retained by
Landlord as its property or disposed of by
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Landlord, without accountability, in such manner as Landlord shall determine at
Tenant's expense.
ARTICLE 17 - REPAIRS AND MAINTENANCE
17.01. Tenant shall, throughout the Term, take good care of the
Demised Premises, the fixtures and appurtenances therein, and shall not do,
suffer, or permit any waste with respect thereto. Tenant shall keep and
maintain all interior and exterior portions of the Demised Premises including
without limitation all building equipment, windows, doors, loading bay doors
and shelters, plumbing and electrical systems, heating, ventilating and air
conditioning ("HVAC") systems in a clean and orderly condition. The phrase
"keep and maintain" as used herein includes repairs, replacement and/or
restoration as appropriate. Tenant shall not permit or suffer any over loading
of the floors of the Demised Premises beyond the loads specified on the plans
prepared pursuant to Exhibit F. Except as provided in Section 17.03, Tenant
shall be responsible for all repairs, interior and exterior, structural and
nonstructural, ordinary and extraordinary, in and to the Demised Premises
(including the facilities and systems thereof). Tenant shall promptly replace
all damaged or broken doors and glass in and about the Demised Premises and
shall be responsible for all repairs, maintenance and replacement of wall and
floor coverings in the Demised Premises and for the repair and maintenance of
all sanitary and electrical fixtures and equipment therein. Tenant shall
promptly make all repairs in or to the Demised Premises for which Tenant is
responsible, and any repairs required to be made by Tenant to the mechanical,
electrical, sanitary, heating, ventilating, air-conditioning or other systems
of the Demised Premises shall be performed only by contractor(s) approved by
Landlord, which approval shall not be unreasonably withheld or delayed.
17.02. Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant under this Lease, nor shall Tenant's
covenants and obligations under this Lease be reduced or abated in any manner
whatsoever, by reason of any inconvenience, annoyance, interruption or injury
to business arising from Landlord's doing any repairs, maintenance, or changes
which Landlord is required or permitted by this Lease, or required by law, to
make in or to any portion of the Demised Premises, provided Landlord shall
exercise due diligence not to interfere with Tenant's use and enjoyment of the
Demised Premises.
17.03. Landlord shall make repairs required to cure defects in
workmanship and materials furnished by Landlord with respect to the Demised
Premises for the items and time periods hereinafter set forth: (a) during the
first fifteen (15) years following the date of
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Substantial Completion, Landlord shall make all repairs required to cure
defects in workmanship or materials in the roof and roof deck, other than
normal maintenance, which shall be Tenant's responsibility, of which Tenant
gives written notice to Landlord within fifteen (15) years of the date of
Substantial Completion, (b) during the first five (5) years following the date
of Substantial Completion, Landlord shall make all repairs required to cure
defects in the workmanship or materials of the mechanical systems of the
Building installed by Landlord and any defects in the workmanship or materials
of the alucobond panel exterior dry joint wall system, of which Tenant gives
written notice to Landlord within five (5) years of the date of Substantial
Completion; (c) during the first five (5) years following the date of
Substantial Completion, Landlord shall make all repairs required to cure
defects in workmanship or materials of the paving and underpaving located on
the Demised Premises (including the paving on elevated levels of the Parking
Garage), of which Tenant gives written notice to Landlord within five (5) years
of the date of Substantial Completion; (d) during the Term of this Lease,
Landlord shall make all repairs required to cure defects in workmanship or
materials of the curtain wall of the Building, Building structure, Parking
Garage structure, footings and foundations, of which Tenant gives written
notice to Landlord within the Term of this Lease; (e) during the first year
following the date of Substantial Completion, Landlord shall make all repairs
required to cure defects in workmanship and materials for items other than
enumerated in Sections (a) through (d) above, furnished by Landlord as part of
Landlord's Work or Tenant's Work or otherwise, of which defects Tenant gives
Landlord notice, in writing, within one (1) year of the date of Substantial
Completion. Time shall be of the essence with respect to such notices. Landlord
shall not be responsible for any repair or restoration of the aforementioned
items after the time periods indicated nor for any items not specifically set
forth in this section. If any of the repairs or restorations referred to in
subsections (a) through (e) above are necessitated by any willful act or
negligence of Tenant or its agents, licensees, employees, servants,
representatives or contractors, Tenant agrees to make such repairs at its cost
and expense. If any of the aforementioned repairs or restoration are
necessitated by casualty or condemnation, such repairs or restoration shall be
governed by the sections of this Lease regarding casualty and condemnation. Any
replacement or restoration made pursuant to this section shall be of equivalent
quality to the items replaced or restored. Landlord shall, upon request of
Tenant on or subsequent to the date of Substantial Completion, assign to Tenant
all assignable or transferable guarantees and warranties received by Landlord
from its subcontractors or suppliers in connection with the performance of
Landlord's Work or any Tenant's Work performed by Landlord. Landlord shall not
be responsible nor shall it be obligated to make any repair of any work done in
the Demised Premises or item installed in the Demised Premises by Tenant,
subtenant, or their agents, licensees, employees, servants, representatives or
contractors. Landlord shall not be responsible
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for, nor shall anything in this Lease be construed as obligating Landlord to
repair, any design defect in the Building or the systems thereof or any
installation to the extent that the design defect was included at the direction
of Tenant. The obligations of Landlord pursuant to this Section 17.03 are
personal obligations of Landlord and shall not be binding upon or obligations
of any Mortgagee of the Demised Premises.
17.04(a). In the event Tenant makes any capital improvements, repairs
or replacements which are treated as capital items pursuant to generally
accepted accounting principles to the roof, roof deck, mechanical systems of
the Building, or paving on the Demised Premises including the paving on
elevated levels of the Parking Garage (but not including the initial
installation of Tenant's Work or any capital improvement, repair or replacement
required as the result of Tenant's willful acts or negligence) (a "Capital
Repair") which has a useful life longer than the remaining portion of the Term
of the Lease, Tenant shall, subject to the provisions of Paragraph 17.04(b)
hereof, be entitled to a credit from Landlord equal to the cost of such Capital
Repair multiplied by a fraction the numerator of which is the number of years
of useful life of such repair determined consistent with generally accepted
accounting principles consistently applied less the number of years remaining
in the Term and the denominator of which is the number of years of useful life
of such repair. If Tenant exercises its option to extend the Term, said credit
shall be recalculated based upon the number of years remaining in the Term, as
extended. Landlord shall have the option of either paying Tenant for such
credit upon completion of such Capital Repair by Tenant or paying same in equal
annual installments over the remaining Term of the Lease, together with
interest thereon at the prime rate of Chemical Bank, New York, New York, plus
one percent (1%) per annum.
17.04(b). Any Capital Repair which Tenant intends to make pursuant to
Section 17.04(a) hereof shall be subject to the prior written approval of
Landlord with respect to the cost and necessity thereof for purposes of
qualifying for the credit hereunder, which approval shall be granted if the
Capital Repair is required to maintain the Demised Premises in the condition
required by this Lease and the Capital Repair is of equivalent, but not better
quality to the work originally done. In the event Tenant requests Landlord's
approval of a Capital Repair for purposes of qualifying for a credit with
respect to same, and Landlord does not approve same, or if the amount of the
credit cannot be agreed upon by Landlord and Tenant, Tenant shall have the
right to submit the dispute to arbitration in accordance with Article 35 of
this Lease and proceed with the making of the Capital Repair at its own risk as
to whether such credit will be received.
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ARTICLE 18 - PUBLIC UTILITY CHARGES
18.01. Tenant shall pay all charges for gas, water, sewer,
electricity, heat or other utility or service supplied to the Demised Premises
as measured by meters relating to Tenant's use, and the cost of repair,
maintenance, replacement, and reading of any meters measuring Tenant's
consumption thereof. Tenant expressly agrees that Landlord shall not be
responsible for the failure of supply to Tenant of any of the aforesaid, or any
other utility service. Landlord shall not be responsible for any public or
private telephone service to be installed in the space, particularly conduit,
if required.
18.02. Tenant's use of electric energy in the Demised Premises shall
not at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Demised Premises.
ARTICLE 19 - MECHANICS' LIENS AND OTHER LIENS
19.01. Nothing contained in this Lease shall be deemed, construed or
interpreted to imply any consent or agreement on the part of Landlord to
subject Landlord's interest or estate to any liability under any mechanic's or
other lien law. If any mechanic's or other lien or any notice of intention to
file a lien is filed against the Land, or any part thereof, or the Demised
Premises, or any part thereof, for any work, labor, service or materials
claimed to have been performed or furnished for or on behalf of Tenant or
anyone holding any part of the Demised Premises through or under Tenant, Tenant
shall cause the same to be cancelled and discharged of record by payment, bond
or order of a court of competent jurisdiction within fifteen (15) days after
notice by Landlord to Tenant. If any mechanic's or other lien or any notice of
intention to file a lien is filed against the Land, or any part thereof, or the
Demised Premises, or any part thereof, for any work, labor, service or
materials claimed to have been performed or furnished for or on behalf of
Landlord, Landlord shall cause the same to be cancelled and discharged of
record by payment, bond or order of a court of competent jurisdiction within
fifteen (15) days after notice by Tenant to Landlord.
ARTICLE 20 - ACCESS, CHANGES AND NAME
20.01. Landlord and its agents shall have the right, at reasonable
times and upon reasonable notice, to enter and/or pass through the Demised
Premises at any time or times (a) to examine the Demised Premises and to show
then to actual and prospective Superior Mortgagees, or prospective purchasers
of the Building, and (b) to make such repairs, alterations, additions and
improvements in or to the
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Demised Premises and/or in or to the Building or its facilities and equipment
as Landlord is required to make. Landlord shall, in making such inspection or
repairs, cooperate with Tenant in adhering to Tenant's reasonable security
requirements. Tenant shall have the right to have a representative of Tenant
accompany Landlord during such examination. Landlord shall be allowed to take
all materials into and upon the Demised Premises that may be required in
connection therewith, without any liability to Tenant and without any reduction
of Tenant's obligations hereunder. All such inspections or repairs shall be
conducted in such a manner to cause as little interference with Tenant's use
and enjoyment of the Demised Premises as is reasonably practicable. During the
period of eighteen (18) months prior to the Expiration Date, Landlord and its
agents may exhibit the Demised Premises to prospective tenants.
20.02. If at any time any windows of the Demised Premises are
temporarily darkened or obstructed by reason of any repairs, improvements,
maintenance and/or cleaning in or about the Building, or if any part of the
Common Areas, other than the Demised Premises, is temporarily or permanently
closed or inoperable, the same shall not be deemed a constructive eviction and
shall not result in any reduction or diminution of Tenant's obligations under
this Lease.
20.03. Tenant shall, subject to Landlord's approval, which shall not
be unreasonably withheld or delayed, have the right to select the name of the
Building.
ARTICLE 21 - NON-LIABILITY OF LANDLORD
21.01. Subject to the provisions of the last sentence of Section 3.02
and to the provisions of Article 38 hereof, Tenant shall look solely to the
estate and property of Landlord in and to the Demised Premises (or the proceeds
received by Landlord on a sale or condemnation of such estate and property but
not the proceeds of any permitted financing or refinancing) in the event of any
claim against Landlord arising out of or in connection with this Lease, the
relationship of Landlord and Tenant or Tenant's use of the Demised Premises or
the Common Areas, and Tenant agrees that the liability of Landlord to Tenant
arising out of or in connection with this Lease, the relationship of Landlord
and Tenant or Tenant's use of the Demised Premises or the Common areas shall be
limited to such estate and property of Landlord (or sale or refinancing
proceeds) to the extent set forth above. Landlord shall not obtain mortgage
financing or refinancing of the Demised Premises with an aggregate principal
amount exceeding eighty percent (80%) of the fair market value of the Building
(inclusive of Tenant's Work). No other properties or assets of Landlord or any
partner, joint venturer, director, officer, agent, servant or employee of
Landlord shall be subject to levy, execution or other enforcement procedures
for the satisfaction of any judgment (or
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other judicial process) or for the satisfaction of any other remedy of Tenant
arising out of, or in connection with, this Lease, the relationship of Landlord
and Tenant or Tenant's use of the Demised Premises or the Common Areas and if
Tenant shall acquire a lien on or interest in any other properties or assets by
judgment or otherwise in connection with this Lease, Tenant shall promptly
release such lien on or interest in such other properties and assets by
executing, acknowledging and delivering to Landlord an instrument to that
effect prepared by Landlord's attorneys subject to the provisions of the last
sentence of Section 3.02. and Article 38. Tenant hereby waives the right of
specific performance and any other remedy allowed in equity if specific
performance or such other remedy could result in any personal liability of
Landlord for the payment of money to Tenant, or to any court or governmental
authority (by way of fines or otherwise) for Landlord's failure or refusal to
observe a judicial decree or determination, or to any third party beyond
Landlord's estate in and to the Demised Premises as above provided (subject to
the provisions of Article 38 hereof or in the last sentence of Section 3.02
(Landlord's willful default in completing the Building)).
ARTICLE 22 - DAMAGE OR DESTRUCTION
22.01. If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other casualty (and if this Lease shall
not be terminated as in this Article 22 hereinafter provided), Landlord shall,
at its cost and expense, repair the damage and restore and rebuild the Building
and/or the Demised Premises to substantially the same conditions as existed
prior to such damage or destruction. In the event that the insurance proceeds
paid with respect to such repair, rebuilding or restoration are insufficient,
as the result of the failure of Tenant to obtain or maintain such insurance as
provided in this Lease, or as the result of any act or negligence of Tenant
which makes such proceeds uncollectible by Landlord, Tenant shall, upon notice
from Landlord, deposit with Landlord a sum sufficient to pay for the cost of
same.
22.02. [a] If (i) the Building shall be totally damaged or destroyed
by fire or other casualty, or if the cost of repair or restoration thereof
requires the expenditure, as estimated by a reputable independent contractor or
architect designated by Landlord (the "Independent Contractor"), in its
reasonable and good faith judgment, of more than fifty percent (50%) of the
full insurable value of the Building immediately prior to the casualty, and
(ii) such damage or destruction cannot, in the reasonable and good faith
judgment of the Independent Contractor, be restored within twelve (12) months
from the date of such occurrence, this Lease may be terminated by Tenant under
the provision set forth below. Landlord shall notify Tenant in writing of such
determination within ten (10) days of the
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date of receipt of the Independent Contractor's determination and Tenant may,
upon written notice given to the Landlord within forty-five (45) days of the
date of Landlord's notice of the Independent Contractor's determination, elect
to terminate this Lease. Landlord shall request in writing such determination
from an Independent Contractor within ten (10) business days of the fire or
other casualty, which determination shall be made by such Independent
Contractor, in writing, within ten (10) days of the request for same. [b] If,
during the last three (3) years of the Term, (i) the Building shall be totally
damaged or destroyed by fire or other casualty, or (ii) the Building shall be
so damaged or destroyed by fire or other casualty that its repair or
restoration requires the expenditure, as estimated by a reputable Independent
Contractor in its reasonable and good faith judgment, determined in the manner
and within the period set forth above, of more than fifty percent [50%] of the
full insurable value of the Building immediately prior to the casualty, then in
either such case, either Landlord or Tenant may terminate this Lease by giving
the other notice to such effect within the later of forty-five (45) days of
receipt by Tenant of the Independent Contractor's determination, as provided
above, or ninety (90) days after the date of the fire or other casualty. [c] If
the Parking Garage is partially or totally damaged or destroyed by fire or
other casualty and same cannot be restored to provide Tenant with a total of
Seven Hundred (700) parking spaces on Demised Premises, Tenant may, upon
written notice given to the Landlord within forty-five (45) days of such damage
or destruction, terminate this Lease, provided, however, that Landlord shall
have the right to nullify such termination by providing Tenant with alternate
parking facilities reasonably acceptable to Tenant and in sufficient number to
replace as many of the spaces lost pursuant to such damage or destruction so as
to provide Tenant with 700 spaces in the aggregate. If the Parking Garage is
damaged or destroyed, Landlord will use its best efforts to provide Tenant, at
Landlord's sole expense, with restored or alternate parking which together with
remaining parking on the Demised Premises totals 850 parking spaces. [d] In the
event of any termination by Landlord or Tenant, under this Section 22.02.
Landlord shall retain all insurance proceeds, except as provided in Section
22.07 hereof. [e] In the event Landlord elects to terminate the Lease pursuant
to subsection 22.02.[b] hereof, Tenant shall have the right, within ten (10)
days of receipt of Landlord's notice, to exercise one or more of any then
remaining extension options pursuant to section 2.02 hereof, whereupon the Term
shall be extended and Landlord's termination notice shall be null and void.
22.03. Except as provided in Section 22.02., Tenant shall not be
entitled to terminate this Lease as a result of damage or destruction, and no
damages, compensation or claim shall be payable by Landlord for inconvenience,
loss of business or annoyance arising from, any repair or restoration of any
portion of the Demised Premises or of the Building pursuant to this Article 22.
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22.04. Landlord will not carry insurance of any kind on the Tenant's
Property, and, except as provided by law or by reason of Landlord's breach of
any of its obligations hereunder, shall not be obligated to repair any damage
or to replace the Tenant's Property.
22.05. The provisions of this Article 22 shall be deemed an express
agreement governing any case of damage or destruction of the Demised Premises
and/or Building by fire or other casualty, and any law providing for such a
contingency in the absence of an express agreement, now or hereafter in force,
shall have no application in such case.
22.06. If all or part of the Building shall be damaged or destroyed or
rendered completely or partially untenantable on account of fire or other
casualty, the Rent shall be abated or reduced, as the case may be, in the
proportion that the untenantable Floor Space of the Building bears to the Floor
Space of the Building for a period from the casualty date to the date the
Building shall be substantially repaired (nothing contained herein shall be
construed as relieving any insurer of its obligation to pay rent insurance
during the period covered under the applicable rent insurance coverage;
provided, however, should Tenant reoccupy such portion of the Building during
the period repair is taking place and prior to the date the Building is
substantially repaired, Rent allocable to such reoccupied portion shall be
payable by Tenant from the date of such occupancy.
22.07. In the event this Lease is terminated pursuant to Section 22.02
hereof during the first fifteen (15) years of the initial Term, Tenant shall,
subject to the rights of any Superior Mortgagee, be entitled to a share of the
insurance proceeds payable with respect to the damage or destruction causing
such termination equal to the unamortized value of Tenant's Work, performed at
Tenant's expense.
ARTICLE 23 - EMINENT DOMAIN
23.01. If the whole of the Building shall be taken by any public or
quasi-public authority under the power of condemnation, eminent domain or
expropriation, or in the event of conveyance of the whole of the Building in
lieu thereof, this Lease shall terminate as of the day possession shall be so
taken by such authority. If twenty [20%] or less of the Floor Space of the
Building shall be so taken or conveyed, this Lease shall terminate only in
respect of the part so taken or conveyed as of the day possession shall be
taken by such authority. If more than twenty [20%] of the Floor Space of the
Building but less than the entire Building shall be so taken or conveyed, this
Lease shall terminate only in respect of the part so taken or conveyed as of
the
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day possession shall be taken by such authority, but Tenant shall have the
right to terminate this Lease upon notice given to Landlord within 30 days
after such taking possession. If so much of the parking facilities shall be so
taken or conveyed that the number of parking spaces remaining on the Demised
Premises shall be less than 700, Tenant may, by notice to Landlord, terminate
this Lease as of the day possession shall be taken. Landlord shall have the
right, but not the obligation, to nullify such termination by providing Tenant
with alternate parking facilities reasonably acceptable to Tenant and in
sufficient number to replace as many of the spaces lost pursuant to such taking
so as to provide Tenant with 700 spaces in the aggregate. If this Lease shall
continue in effect as to any portion of the Building not so taken or conveyed,
the Rent shall be computed as of the day possession shall be taken on the basis
of the remaining Floor Space of the Building. Except as specifically provided
herein, in the event of any such taking or conveyance there shall be no
reduction in Rent. If this Lease shall continue in effect, Landlord shall, at
its expense, but shall be obligated only to the extent the net award or other
compensation (after deducting all expenses in connection with obtaining same)
paid to Landlord for the improvements taken or conveyed is made available to
Landlord, make all necessary alterations so as to constitute the remaining
Building a complete architectural and tenantable unit. Tenant shall make all
alterations or replacements to the Tenant's Property and decorations in the
Demised Premises. All awards and compensation for any taking or conveyance,
whether for the whole or a part of the Land or Building, the Demised Premised
or otherwise, shall be divided between any Superior Mortgagee, Landlord and
Tenant as hereinafter provided. All such awards and compensation, including,
without limitation, any award or compensation for the value of the unexpired
portion of the Term shall be the property of and paid to Landlord, except that
in the event of such taking during the first fifteen (15) years of the Term,
Tenant shall, subject to the rights of any Superior Mortgagee, be entitled to a
share of such award equal to the unamortized value of Tenant's Work, performed
at Tenant's expense. Tenant shall be entitled to claim, prove and receive in
the condemnation proceeding such award or compensation as may be allowed for
the Tenant's Property and for loss of business, good will, and depreciation or
injury to and cost of removal of the Tenant's Property, but only if such award
or compensation shall be made by the condemning authority in addition to, and
shall not result in a reduction of, the award or compensation made by it to
Landlord.
23.02. If the temporary use or occupancy of all or any part of the
Demised Premises shall be taken during the Term, Tenant shall be entitled,
except as hereinafter set forth, to receive that portion of the award or
payment for such taking which represents compensation for the use and occupancy
of the Demised Premises, for the taking of the
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Tenant's Property and for moving expenses, and Landlord shall be entitled to
receive that portion which represents reimbursement for the cost of restoration
of the Demised Premises. This Lease shall be and remain unaffected by such
taking and Tenant shall continue responsible for all of its obligations
hereunder insofar as such obligations are not affected by such taking and shall
continue to pay the Rent in full when due. If the period of temporary use or
occupancy shall extend beyond the Expiration Date, that part of the award or
payment which represents compensation for the use and occupancy of the Demised
Premises (or a part thereof) shall be divided between Landlord and Tenant so
that Tenant shall receive (except as otherwise provided below) so much thereof
as represents compensation for the period up to and including the Expiration
Date and Landlord shall receive so much thereof as represents compensation for
the period after the Expiration Date. All monies to be paid to Tenant as, or as
part of, an award or payment for temporary use and occupancy for a period
beyond the date to which the Rent has been paid shall be received, held and
applied by the first Superior Mortgagee (or if there is no Superior Mortgagee,
by Landlord as a trust fund) for payment of the Rent becoming due hereunder.
ARTICLE 24 - SURRENDER
24.01. On the Expiration Date, or upon an earlier termination of this
Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall
quit and surrender the Demised Premises to Landlord "broom-clean" and in good
order, condition and repair, except for ordinary wear and tear and such damage
or destruction as Landlord is required to repair or restore under this Lease,
and Tenant shall remove all of Tenant's Property therefrom except as otherwise
expressly provided in this Lease.
24.02. If Tenant remains in possession of the Demised Premises after
the expiration of the Term, Tenant shall be deemed to be occupying the Demised
Premises as a tenant from month to month at the sufferance of Landlord subject
to all of the provisions of this Lease, except that the monthly Fixed Rent
shall be 1.25 times the Fixed Rent in effect during the last month of the Term.
24.03. No act or thing done by Landlord or its agents shall be deemed
an acceptance of a surrender of the Demised Premises, and no agreement to
accept such surrender shall be valid unless in writing and signed by Landlord.
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ARTICLE 25 - CONDITIONS OF LIMITATION
25.01. This Lease is subject to the limitation that whenever Tenant
(a) shall make an assignment for the benefit of creditors, or (b) shall
commence a voluntary case or have entered against it an order for relief under
any chapter of the Federal Bankruptcy Code (Title 11 of the United States Code)
or any similar order or decree under any federal or state law, now in
existence, or hereafter enacted having the same general purpose, and such order
or decree shall have not been stayed or vacated within 45 days after entry, or
(c) shall cause, suffer, permit or consent to the appointment of a receiver,
trustee, administrator, conservator, sequestrator, liquidator or similar
official in any federal, state or foreign judicial or nonjudicial proceeding,
to hold, administer and/or liquidate all or substantially all of its assets,
and such appointment shall not have been revoked, terminated, stayed or vacated
and such official discharge of his duties within 45 days of his appointment
then Landlord, at any time after the occurrence of any such event, may give
Tenant a notice of intention to end the Term at the expiration of five (5) days
from the date of service of such notice of intention, and upon the expiration
of said five (5) day period, whether or not the Term shall theretofore have
commenced, this Lease shall terminate with the same effect as if that day were
the expiration date of this Lease, but Tenant shall remain liable for damages
as provided in Article 27.
25.02. This Lease is subject to the further limitations that: (a) if
Tenant shall default in the payment of Fixed Rent and such default shall
continue for five (5) days after notice or written invoice, or (b) if Tenant
shall fail to pay any Additional Charges and such failure shall continue for
twenty (20) days after notice or written invoice or (c) if Tenant shall,
whether by action or inaction, fail to perform or discharge any of its
obligations under this Lease (other than a default in the payment of Rent) and
such failure shall continue and not be remedied within thirty (30) days after
Landlord shall have given to Tenant a notice specifying the same, or, in the
case of a failure which cannot with due diligence be cured within a period of
thirty (30) days and the continuance of which for the period required for cure
will not subject Landlord to prosecution for a crime or foreclosure of any
Superior Mortgage, if Tenant shall not, (i) within said thirty (30) day period
advise Landlord of Tenant's intention to take all steps necessary to remedy
such default, (ii) duly commence within said thirty (30) day period, and
thereafter diligently prosecute to completion all steps necessary to remedy the
default, and (iii) complete such remedy within a reasonable time after the date
of said notice by Landlord, or (d) if any event shall occur or any contingency
shall arise whereby this Lease would, by operation of law or otherwise, devolve
upon or pass to any person, firm or corporation other than Tenant, except as
expressly permitted by Article 11, then Tenant shall be in default of this
Lease and in any of said cases Landlord may give to Tenant a notice of
intention to end the Term at the expiration of five (5) days from the date of
the
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service of such notice of intention, and upon the expiration of said five (5)
days, whether or not the Term shall theretofore have commenced, this Lease
shall terminate with the same effect as if that day were the expiration date of
this Lease, but Tenant shall remain liable for damages as provided in Article
27.
ARTICLE 26 - RE-ENTRY BY LANDLORD
26.01. If Tenant shall fail to pay the Fixed Rent, and such failure
shall continue for five (5) days after notice or written invoice, or if Tenant
shall fail to pay any Additional Charges and such default shall continue for
thirty (30) days after notice or written invoice, or if this Lease shall
terminate as provided in Article 25, Landlord or Landlord's agents and
employees may immediately or at any time thereafter re-enter the Demised
Premises, or any part thereof, either by summary dispossess proceedings or by
any suitable action or proceeding at law without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may remove any
Person therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises. The word "re-enter," as used herein, is not restricted to its
technical legal meaning. If this Lease is terminated under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article 26, or in the event of the termination of this
Lease, or of re-entry, by or under any summary dispossess or other proceedings
or action or any provision of law by reason of default hereunder on the part of
Tenant, Tenant shall thereupon pay to Landlord the Rent payable up to the time
of such termination of this Lease, or of such recovery of possession of the
Demised Premises by Landlord, as the case may be, and shall also pay to
Landlord damages as provided in Article 27.
26.02. In the event of a breach or threatened breach by Tenant of any
of its obligations under this Lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time and Landlord may invoke any
remedy allowed at law or in equity as if specific remedies were not provided
for herein.
26.03. If this Lease shall terminate under the provisions of Article
25, or if Landlord shall re-enter the Demised Premises under the provisions of
this Article 26, or in the event of the termination of this Lease, or of
re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of default hereunder on the part of Tenant,
Landlord shall be entitled to retain all monies, if any, paid by Tenant to
Landlord, whether as security or otherwise, but such monies shall be credited
by Landlord
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against any Rent due from Tenant at the time of such termination or re-entry
or, at Landlord's option, against any damages payable by Tenant under Article
27 or pursuant to law.
ARTICLE 27 - DAMAGES
27.01. If this Lease is terminated under the provisions of Article 25,
or if Landlord shall re-enter the Demised Premises under the provisions of
Article 26, or in the event of the termination of this Lease, or of re-entry,
by or under any summary dispossess or other proceeding or action or any
provision of law by reason of default hereunder on the part of Tenant, Tenant
shall pay as Additional Charges to Landlord at the election of Landlord,
either:
(a) a sum which at the time of such termination of this Lease
or at the time of any such re-entry by Landlord, as the case may be,
represents the then value (discounted at the prime rate of Chemical
Bank, New York, New York) of the excess, if any, of (i) the aggregate
amount of the Rent which would have been payable by Tenant
(conclusively presuming the average monthly Additional Charges to be
the same as were the average monthly Additional Charges payable for
the year, or if less than 365 days have then elapsed since the
Commencement Date, the partial year, immediately preceding such
termination or re-entry) for the period commencing with such earlier
termination of this Lease or the date of any such re- entry, as the
case may be, and ending with the Expiration Date, over (ii) the
aggregate fair market rental value of the Demised Premises for the
same period; or
(b) sums equal to the Fixed Rent and the Additional
Charges which would have been payable by Tenant had this Lease not so
terminated, or had Landlord not so re-entered the Demised Premises,
payable upon the due dates therefor specified herein following such
termination or such re-entry and until the Expiration Date, provided,
however, that if Landlord shall relet the Demised Premises during said
period, Landlord shall credit Tenant with the net rents received by
Landlord from such reletting, such net rents to be determined by first
deducting from the gross rents as and when received by Landlord from
such reletting the expenses incurred or paid by Landlord in
terminating this Lease or in re-entering the Demised Premises and in
securing possession thereof, as well as the expenses of reletting,
including, without limitation, altering and preparing the Demised
Premises for new tenants, brokers' commissions, legal fees, and all
other expenses properly chargeable against the Demised Premises and
the rental therefrom, it being understood that any such reletting may
be for
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a period shorter or longer than the period ending on the Expiration
Date; but in no event shall Tenant be entitled to receive any excess
of such net rents over the sums payable by Tenant to Landlord
hereunder, nor shall Tenant be entitled in any suit for the collection
of damages pursuant to this subdivision (b) to a credit in respect of
any rents from a reletting, except to the extent that such net rents
are actually received by Landlord. If the Demised Premises or any part
thereof should be relet in combination with other space, then proper
apportionment on a square foot basis shall be made of the rent
received from such reletting and of the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting. Landlord shall not be liable in any way
whatsoever for its failure or refusal to relet the Demised Premises or any part
thereof, or if the Demised Premises or any part thereof are relet, for its
failure to collect the rent under such reletting, and no such refusal or
failure to relet or failure to collect rent shall release or affect Tenant's
liability for damages or otherwise under this Lease, provided, however that
Landlord shall use commercially reasonable efforts to relet the Demised
Premises as provided in Section 27.05 hereof, and Landlord shall use
commercially reasonable efforts to collect any Rent payable pursuant to such
reletting.
27.02. Suit or suits for the recovery of such damages or, any
installments thereof, may be brought by Landlord at any time and from time to
time at its election, and nothing contained herein shall be deemed to require
Landlord to postpone suit until the date when the Term would have expired if it
has not been so terminated under the provisions of Article 25, or under any
provision of law, or had Landlord not re-entered the Demised Premises. Nothing
herein contained shall be construed to limit or prejudice the right of Landlord
to prove for and obtain as damages by reason of the termination of this Lease
or re-entry on the Demised Premises for the default of Tenant under this Lease
an amount equal to the maximum allowed by any statute or rule of law in effect
at the time when, the governing the proceedings in which, such damages are to
be proved whether or not such amount be greater than, equal to, or less than
any of the sums referred to in Section 27.01.
27.03. In addition, if this Lease is terminated under the provisions
of Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of Article 26, Tenant covenants that: (a) the Demised Premises then
shall be in the same condition as that in which Tenant has agreed to surrender
the same to Landlord at the
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Expiration Date; (b) Tenant shall have performed prior to any such termination
any obligation of Tenant contained in this Lease for the making of any
alteration or for restoring or rebuilding the Demised Premises or the Building,
or any part thereof; and (c) for the breach of any covenant of Tenant set forth
above in this Section 27.03, Landlord shall be entitled immediately, without
notice or other action by Landlord, to recover, and Tenant shall pay, as and
for liquidated damages therefor, the cost of performing such covenant (as
estimated by an independent contractor selected by Landlord).
27.04. In addition to any other remedies Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies under this Article 27, if any Fixed Rent is not paid within five (5)
days after the due date, or if any other Rent or damages payable hereunder by
Tenant to Landlord are not paid within ten (10) days after demand therefor, the
same shall bear interest at the rate set forth in Section 5.5. hereof, from the
due date thereof until paid, and the amounts of such interest shall be
Additional Charges hereunder.
27.05. In the event of Tenant's default under this Lease and
Landlord's re-entry and recovery of possession of the Demised Premises,
Landlord shall use commercially reasonable efforts to mitigate Landlord's
damages by reletting of the Demised Premises. The net proceeds of any such
reletting received by Landlord shall be credited against Tenant's
then-outstanding obligations under this Lease. As used herein, "net proceeds"
shall mean the full amount of rent and other similar charges paid to Landlord
by all succeeding tenants of all or any portion of the Demised Premises less
the Landlord's actual expenses of reletting the Demised Premises (including,
but not limited to expenses of work done to the Demised Premises in connection
with such reletting, broker's fees and attorneys' fees). Nothing contained
herein shall require Landlord to relet the Demised Premises prior to or with
any preference over the leasing of any other premises of Landlord or any
affiliate of Landlord.
ARTICLE 28 - AFFIRMATIVE WAIVERS
28.01. Tenant, on behalf of itself and any and all persons claiming
through or under Tenant, does hereby waive and surrender all right and
privilege which it, they or any of them might have under or by reason of any
present or future law, to redeem the Demised Premises or to have a continuance
of this Lease after being dispossessed or ejected from the Demised Premises by
process of law or under the terms of this Lease or after the termination of
this Lease as provided in this Lease.
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28.02. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Demised Premises and use of the Common Area, including, without limitation, any
claim of injury or damage, and any emergency and other statutory remedy with
respect thereto.
ARTICLE 29 - NO WAIVERS
29.01. The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any election herein contained, shall not be
construed as a waiver or relinquishment for the future of the performance of
such one or more obligations of this Lease or of the right to exercise such
election, but the same shall continue and remain in full force and effect with
respect to any subsequent breach, act or omission. The receipt by Landlord of
Fixed Rent or Additional Charges with knowledge of breach by Tenant of any
obligation of this Lease shall not be deemed a waiver of such breach.
ARTICLE 30 - CURING TENANT'S DEFAULTS
30.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, Landlord, without thereby waiving such default,
may (but shall not be obligated to) perform the same for the account and at the
expense of Tenant, without notice in a case of emergency, and in any other case
only if such default continues after the expiration of fifteen (15) days from
the date Landlord gives Tenant notice of the default. Bills for any expenses
incurred by Landlord in connection with any such performance by it for the
account of Tenant, and bills for all costs, expenses and disbursements of every
kind and nature whatsoever, including reasonable attorneys' fees and expenses,
involved in collecting or endeavoring to collect the Rent or any part thereof
or enforcing or endeavoring to enforce any rights against Tenant or Tenant's
obligations hereunder, under or in connection with this Lease or pursuant to
law, including any such cost, expense and disbursement involved in instituting
and prosecuting summary proceedings or in recovering possession of the Demised
Premises after default by Tenant or upon the expiration of the Term or sooner
termination of this Lease, and interest on all sums advanced by Landlord under
this Article at the rate set forth in Section 5.5 hereof, may be sent by
Landlord to Tenant monthly, or immediately, at
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Landlord's option, and such amounts shall be due and payable in accordance with
the terms of such bills.
30.02. If Landlord shall fail to perform any of its obligations under
Articles 7, 12, 13, 19, 22, 31, 32, 38 or Section 17.03 of this Lease, Tenant,
without hereby waiving any claimed default, may (but shall not be obligated
to), upon written notice to Landlord, perform the same for the account and at
the expense of Landlord, if Landlord does not commence and diligently proceed
to perform such obligation within forty-five (45) days from the date Tenant
gives such written notice to Landlord of such failure.
ARTICLE 31 - ADDITIONAL FACILITY
31.01. Tenant shall have the option of requiring that Landlord
construct an addition to the Building (as more particularly provided on the
plan annexed hereto as Exhibit I) presently contemplated by the Lease
(hereinafter referred to as the "Additional Facility") at any time during the
Term of the Lease provided that at least eight (8) years remain in the
unexpired portion of the Term including options to extend the Term exercised by
Tenant. Tenant shall exercise any remaining extension of Term required to
permit Tenant to comply with the provisions of the preceding sentence at the
time of exercising Tenant's option to cause Landlord to construct the
Additional Facility hereunder. Such Additional Facility shall be comprised of
approximately 37,600 square feet of Floor Space and shall be constructed, by
Landlord, substantially in accordance with the specifications for Landlord's
Work set forth in Exhibit C, as such specifications would reasonably be applied
and adapted to the plans for the Additional Facility. Such option of requesting
that Landlord construct the Additional Facility as provided above may be
exercised by Tenant notifying Landlord of its election in writing during the
Term of the Lease, but in no event later than the date which, together with any
options to extend the Term exercised by Tenant would be eight (8) years prior
to the Expiration Date and if not so exercised, such option (to request that
Landlord construct the Additional Facility) shall terminate on such date. The
plans and specifications for Landlord's Work for the Building shall include
work and materials, which shall be performed at the time of the initial
construction of the Building, required to support the construction of the
Additional Facility.
31.02. In the event the Additional Facility is constructed, same shall
become part of the Demised Premises pursuant to the Lease, or at Landlord's
option, the parties shall execute a separate lease with respect to the
Additional Facility on the same terms as the Lease except for rent. The fixed
rent payable with respect to the
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Additional Facility, commencing on the date upon which the Additional Facility
is substantially completed, shall be an annual amount equal to the product of
(x) the Cost (as hereinafter defined) divided by 100.00, (y) the Constant (as
hereinafter defined) divided by the debt service constant on financing with
respect to the initial Building and (z) the Rate (as hereinafter defined)
applicable during the portions of the Term commencing on the date of
substantial completion of the Additional Facility, multiplied by the Floor
Space of the Additional Facility. "Cost" shall mean 125.00 as escalated by
increases in the Dodge Construction Index for United States and Canadian
Cities, Eastern United States, District I, Metropolitan New York/New Jersey,
Jersey City, using 1987 as the base year. "Constant" shall mean the annual debt
service constant (including principal and interest) for non-recourse financing
obtained by Landlord with respect to the Additional Facility. For purposes of
this paragraph, "Rate" shall be defined as: Twelve and 75/100 Dollars ($12.75)
per square foot from the Fixed Rent Commencement Date until one day prior to
the fifth (5th) anniversary thereof, Fourteen and 50/100 Dollars ($14.50) per
square foot from the fifth (5th) anniversary thereof until one day prior to the
tenth (10th) anniversary thereof, Sixteen and 50/100 Dollars ($16.50) per
square foot from the tenth (10th) anniversary thereof until one day prior to
the fifteenth (15th) anniversary, Eighteen and 75/100 Dollars ($18.75) per
square foot from the fifteenth (15th) anniversary thereof until the Expiration
Date of the original Term hereof, Twenty Five and 00/100 Dollars ($25.00) per
square foot during the First Extended Period hereof, and at Fair Market Rental
Value for the remainder of the Term.
31.03. The right of Tenant to require that Landlord construct the
Additional Facility shall be subject to the ability of Landlord to obtain
required governmental approvals, and financing, in connection with such
construction, which Landlord shall use its best efforts to obtain as promptly
as possible following exercise by Tenant. Notwithstanding anything contained in
this Lease to the contrary, Tenant's right to request Landlord to construction
an Additional Facility pursuant to this Lease shall not be binding upon any
Superior Mortgagee, or Mortgagee in possession of the Demised Premises, or
their successors or assigns. In the event any Superior Mortgagee or its
successors or assigns succeeds to the obligation of Landlord under this Lease
and such entity refuses to construct the Additional Facility pursuant to this
Article 31, Tenant shall have the right to construct the Additional Facility at
Tenant's sole cost and expense. In the event Tenant constructs the Additional
Facility pursuant to the preceding sentence, Tenant shall not be obligated to
pay any Fixed Rent with respect to such Additional Facility.
31.04. In the event Tenant elects, pursuant to Paragraph 31.01 to have
Landlord construct the Additional Facility, Landlord shall also construct an
addition to the Parking Garage to provide for up to
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a maximum, at Tenant's option, of 265 parking spaces (less the number of
parking spaces constructed pursuant to Paragraph 31.05 hereof) in the
aggregate, consisting of up to 115 additional parking spaces located in an
additional level of the Parking Garage, plus up to 150 additional parking
spaces (100 of which shall be at Landlord's expense and 50 of which shall be at
Tenant's expense) located in a joined and contiguous annex to the Parking
Garage. In the event Tenant elects, pursuant to Paragraph 31.03 to construct
the Additional Facility, Tenant shall also have the right to construct such
additional parking, at its sole cost and expense.
31.05. In the event Tenant determines, at any time during the Term of
the Lease, that it requires parking in addition to the 850 parking spaces
originally provided Tenant pursuant to this Lease, Tenant shall have the right
to construct an addition or annex to the Parking Garage, at Tenant's sole cost
and expense, to provide for up to 265 additional parking spaces (less the
number of parking spaces constructed pursuant to Paragraph 31.04. hereof, if
any). In the event Tenant elects to construct an addition to the Parking Garage
pursuant to Paragraph 31.04 or 31.05 hereof, Landlord shall have the right to
review and approve Tenant's plans and specifications with respect thereto,
which approval shall not be unreasonably withheld or delayed. Any disputes with
respect to such construction shall be resolved pursuant to the dispute
resolution procedures provided for on Exhibit F.
ARTICLE 32 - BROKER
32.01. Landlord and Tenant hereby acknowledge that the Broker was the
broker and sole procuring cause with respect to this Lease.
ARTICLE 33 - NOTICES
33.01. Any notice, invoice, statement, demand, consent, approval or
other communication required or permitted to be given, rendered or made by
either party to the other, pursuant to this Lease or pursuant to any applicable
Legal Requirement, shall be in writing and shall be deemed to have been
properly given, rendered or made only if hand delivered or sent by United
States registered or certified mail, return receipt requested, addressed to the
other party at the address hereinabove set forth herein, as to Tenant, to Alan
N. Posencheg, Executive Vice President, United Jersey Banks, 301 Carnegie
Center, Post Office Box 2066, Princeton, New Jersey 08543-2066, with a
concurrent notice to the attention of Tenant's General Counsel at the same
address, as to Landlord, to the attention of General Counsel with a concurrent
notice to the attention of Vice President-Administration and shall be effective
upon receipt. Either party may, by notice as aforesaid, designate a different
address or addresses for notices, invoices, statements, demands, consents,
approvals or other communications intended for it.
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ARTICLE 34 - ESTOPPEL CERTIFICATES
34.01. Each party shall, at any time and from time to time, as
requested by the other party, upon not less than ten (10) days' prior notice,
execute and deliver to the requesting party a statement certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and
stating the modifications), certifying the dates to which the Fixed Rent and
Additional Charges have been paid, stating whether or not, to the best
knowledge of the party giving the statement, the requesting party is in default
in performance of any of its obligations under this Lease, and, if so,
specifying each such default of which the party giving the statement shall have
knowledge, and stating whether or not, to the best knowledge of the party
giving the statement, any event has occurred which with the giving of notice or
passage of time, or both, would constitute such a default of the requesting
party, and, if so, specifying each such event; any such statement delivered
pursuant hereto shall be deemed a representation and warranty to be relied upon
by the party requesting the certificate and by others identified in such
requested certificate as being entitled to rely thereon. Each party also shall
include in any such statement such other information concerning this Lease as
the other party may reasonably request.
ARTICLE 35 - ARBITRATION
35.01. Where arbitration is specifically provided for in this Lease,
the party requesting arbitration shall do so by giving notice to that effect to
the other party, specifying in said notice the nature of the dispute, and said
dispute shall be determined in Newark, New Jersey, by a single arbitrator, in
accordance with the rules then obtaining of the American Arbitration
Association (or any organization which is the successor thereto). The award in
such arbitration may be enforced on the application of either party by the
order or judgment of a court of competent jurisdiction. The fees and expenses
of any arbitration shall be borne by the parties equally, but each party shall
bear the expense of its own attorneys and experts and the additional expenses
of presenting its own proof. If Tenant gives notice requesting arbitration as
provided in this Article, Tenant shall simultaneously serve a duplicate of the
notice on each Superior Mortgagee whose name and address shall previously have
been furnished to Tenant, and such Superior Mortgagees shall have the right to
participate in such arbitration. The arbitrators shall have no power to change
any of the provisions of this Lease in any respect.
ARTICLE 36 - MEMORANDUM OF LEASE
36.01. Tenant shall not record this Lease. However, at the request of
either party, the other party shall promptly execute, acknowledge and deliver a
memorandum of lease in respect of this Lease sufficient for recording. Such
memorandum shall not be deemed to
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<PAGE> 50
change or otherwise affect any of the obligations or provisions of this Lease.
Whichever party records such memorandum of Lease shall pay all recording costs
and expenses, including any taxes that are due upon such recording.
ARTICLE 37 - MISCELLANEOUS
37.01. Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease, is
not relying upon, any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in this Lease or in
any other written agreement(s) which may be made between the parties
concurrently with the execution and delivery of this Lease. All understandings
and agreements heretofore had between the parties are merged in this Lease and
any other written agreement(s) made concurrently herewith, which alone fully
and completely express the agreement of the parties and which are entered into
after full investigation. Neither party has relied upon any statement or
representation not embodied in this Lease or in any other written agreement(s)
made concurrently herewith.
37.02. No agreement shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such agreement is in writing, refers expressly to this Lease
and is signed by the party against whom enforcement of the change,
modification, waiver, release, discharge, termination or effectuation of
abandonment is sought.
37.03. If Tenant shall at any time request Landlord to sublet or let
the Demised Premises for Tenant's account, Landlord or its agent is authorized
to receive keys for such purposes without releasing Tenant from any of its
obligations under this Lease, and Tenant hereby releases Landlord of any
liability for loss or damage to any of the Tenant's Property in connection with
such subletting or letting.
37.04. Except as otherwise expressly provided in this Lease, the
obligations under this Lease shall bind and benefit the successors and assigns
of the parties hereto with the same effect as if mentioned in each instance
where a party is named or referred to; provided, however, that (a) no violation
of the provisions of Article 11 shall operate to vest any rights in any
successor or assignee of Tenant and (b) the provisions of this Section 37.04
shall not be construed as modifying the conditions of limitation contained in
Article 25.
37.05. Except for Tenant's obligations to pay Rent, the time for
Landlord or Tenant, as the case may be, to perform any of their respective
obligations hereunder shall be extended if and to the extent that the
performance thereof shall be prevented due to any Unavoidable Delay. Except as
expressly provided to the contrary
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<PAGE> 51
(including Tenant's right to terminate this Lease pursuant to Section 3.02.
hereof), the obligations of Tenant hereunder shall not be affected, impaired or
excused, nor shall Landlord have any liability whatsoever to Tenant because
Landlord is unable to fulfill, or is delayed in fulfilling any of its
obligations under this Lease due to any of the matters set forth in the first
sentence of this Section 37.05.
37.06. Any liability for payments hereunder (including, without
limitation, Additional Charges) shall survive the expiration of the Term or
earlier termination of this Lease.
37.07. If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any
damages for any withholding by Landlord of its consent; Tenant's sole remedy
shall be an action for specific performance or injunction, and such remedy
shall be available only in those cases where Landlord has expressly agreed in
writing not to unreasonably withhold or delay its consent or where as a matter
of law Landlord may not unreasonably withhold its consent.
37.08. If an excavation shall be made upon land adjacent to or under
the Building, or shall be authorized to be made, Tenant shall afford to the
Person causing or authorized to cause such excavation, license to enter the
Demised Premises for the purpose of performing such work as said Person shall
reasonably deem necessary or desirable to preserve and protect the Building
from injury or damage and to support the same by proper foundations, without
any claim for damages or liability against Landlord and without reducing or
otherwise affecting Tenant's obligations under this Lease.
37.09. Prior to the date that Landlord receives a certificate of
occupancy for Landlord's Work and Tenant's Work, if Landlord performs Tenant's
Work, Tenant shall engage only contractors who use only union labor in and
about the Demised Premises. Nothing contained herein shall prohibit Tenant
during such period from hiring as employees non-union maintenance personnel,
provided, however, that all non-employee maintenance, including without
limitation contract cleaning services and window cleaning services during such
period, shall be done by businesses employing union labor.
37.10. Tenant shall give prompt notice to Landlord of (a) any
occurrence in or about the Demised Premises for which Landlord might be liable,
(b) any fire or other casualty in the Demised Premises, (c) any damage to or
defect in the Demised Premises, including the fixtures and equipment thereof,
for the repair of which Landlord might be responsible, and (d) any damage to or
defect in any part of the Building's sanitary, electrical, heating,
ventilating,
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air-conditioning, elevator or other systems located in passing through the
Demised Premises or any part thereof.
37.11. This Lease shall be governed by and construed in accordance
with the laws of the State of New Jersey. If any provision of this Lease shall,
be invalid or unenforceable, the remainder of this Lease shall not be affected
and shall be enforced to the extent permitted by law. The table of contents,
captions, headings and titles in this Lease are solely for convenience of
reference and shall not affect its interpretation. This Lease shall be
construed without regard to any presumption or other rule requiring
construction against the party causing this Lease to be drafted. If any words
or phrases in this Lease shall have been stricken out or otherwise eliminated,
whether or not any other words or phrases have been added, this Lease shall be
construed as if the words or phrases so stricken out or words used in this
Lease, regardless of the number or gender in which otherwise eliminated were
never included in this Lease and no implication or inference shall be drawn
from the fact that said words or phrases were so stricken out or otherwise
eliminated. All terms and they are used, shall be deemed to include any other
number and any other gender as the context may require.
37.12. As soon as practicably available but not less than thirty (30)
days after distribution to shareholders, Tenant shall annually furnish to
Landlord a copy of its then current audited financial statement which may be
employed by Landlord for purposes of financing the Premises. If Tenant assigns
or sublets this Lease other than to an affiliate, the current audited financial
statements of such assignee and/or subtenant shall be furnished to Landlord
within thirty (30) days of each anniversary date of this Lease. Any material
adverse change of Tenant's financial condition shall be furnished to Landlord
in writing forthwith and without request by Landlord for same.
37.13. Anything in this Lease to the contrary notwithstanding, all
furniture, inventory, trade fixtures and equipment (collectively, "Equipment")
except to the extent same are or become part of the Demised Premises or
building systems, which are owned or leased by Tenant or are being purchased by
Tenant pursuant to an installment sales contract shall remain personal property
and Landlord hereby waives any and all right of distraint, levy or execution
against any such furniture, inventory or equipment for Rent or other sums due
or to become due Landlord under this Lease and all claims and demands against
the Equipment, but only to the extent such Equipment is pledged as security or
collateral to any Equipment lessor or lender or other secured party.
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<PAGE> 53
ARTICLE 38 - ENVIRONMENTAL COMPLIANCE
38.01. Except to the extent same is caused by the acts, or wrongful
omission, or negligence of Landlord its partners, joint venturers, directors,
officers, agents, servants, invitees, employees, contractors or subcontractors
or by conditions existing prior to the date of Substantial Completion, from and
after the date of Substantial Completion, Tenant shall at Tenant's own cost and
expense, timely comply with the Environmental Laws as defined in Section 38.02,
hereof, and regulations as the same shall be in force and shall relate to all
or part of the Demised Premises, and Tenant shall indemnify, defend, save and
hold harmless Landlord, its directors, officers, agents and employees from and
against any and all claims, demands, losses and liabilities (including
reasonable attorneys' fees) but not loss of business, loss of profits nor, to
the extent Landlord or the injured party is actually reimbursed by insurance,
for personal injury, resulting from or with respect to any violation of any
Environmental Laws created during the Term of this Lease, and Tenant shall, at
its own expense, complete the cure of such violation of any Environmental Laws.
The Tenant represents that its Standard Industrial Classification Code Number
with respect to the Demised Premises is 6712-1. Tenant has not and shall not
refine, produce, store, handle, transfer, process or transport any Hazardous
Substances as defined in the New Jersey Environmental Cleanup Responsibility
Act, other than in quantities associated with maintenance and cleaning in the
ordinary course of business of the Demised Premises or fuel oil. In the event
Tenant installs fuel oil tanks on the Demised Premises, Tenant shall indemnify
and hold Landlord harmless with respect to any environmental damage caused by
such tanks and fuel oil and shall comply with all present and future Legal
Requirements applicable to such tanks, their installation, and removal. At the
expiration of the Term, Tenant shall, at Landlord's option, remove said tanks
at Tenant's sole cost and expense and restore the land to its conditions prior
to such installation. Tenant shall maintain and register all fuel oil tanks.
38.02. Landlord, to the best of its knowledge, warrants and represents
to Tenant that the Demised Premises are in full compliance with all applicable
environmental laws, rules, requirements, orders, directives, ordinances and
regulations of the United States of America or any state, city or municipal
government or lawful authority having jurisdiction, affecting the Demised
Premises including but not limited to the New Jersey Spill Compensation and
Control Act and the Environmental Cleanup Responsibility Act (collectively the
"Environmental Laws"). In the event it is determined that hazardous wastes or
hazardous substances existed on the Demised Premises or on other property owned
by Landlord or any Affiliate of Landlord ("Landlord's Adjacent Property") prior
to the date of Substantial Completion and that same or the effects of same
continue to exist on the Demised Premises on or after the Commencement Date in
violation of applicable Environmental Laws as determined by any applicable
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<PAGE> 54
governmental authority or migrates onto the Demised Premises from Landlord's
Adjacent Property, Landlord shall (a) to the extent required to cause the
Demised Premises to be in compliance with such Environmental Laws, take all
measures required to cleanup or remediate such environmental contamination as
determined by such applicable governmental authority (except to the extent
caused by Tenant, its agents, invitees, employees or subcontractors), and (b)
indemnify and hold tenant harmless for all claims, demands, losses and
liabilities (including reasonable attorneys fees) (but not for loss of
business, loss of profits nor, to the extent Tenant or the injured party is
actually reimbursed by insurance, for personal injury) incurred by Tenant as
the result of such contamination, notwithstanding whether or not Landlord had
knowledge of such non-compliance and Landlord shall indemnify, defend, save and
hold Tenant harmless (but not for loss of business, loss of profits nor, to the
extent the Tenant or the injured party is actually reimbursed by insurance, for
personal injury) for loss, damage, liability or expenses incurred with respect
to such cleanup and environmental contamination. Without limiting the
generality of the foregoing, with respect to any environmental contamination
requiring cleanup occurring prior to Substantial Completion and which delays
Tenant's initial occupancy of the Demised Premises, Tenant shall also be
indemnified from the amount by which holdover rents or substitute rental
arrangements exceed the rent which would have been payable for such period
under the Lease, lease cancellation fees and additional moving or storage fees,
or equipment rescheduling or cancellation fees incurred as the result of such
delay. The obligation of Landlord to indemnify Tenant pursuant to this Article
or perform any environmental cleanup shall be a personal obligation of Landlord
to Tenant and shall not be binding upon any Mortgagee of the Demised Premises.
In the event Landlord is required to perform an environmental cleanup pursuant
to this paragraph and the Demised Premises cannot be safely and lawfully
occupied during such cleanup as the result of the environmental contamination
requiring the cleanup, Tenant shall have the right to terminate the Lease if
such cleanup is not completed to the extent required to permit the safe and
lawful occupancy thereof by Tenant within one (1) year of the date Landlord
receives notice from such governmental authority of the environmental
contamination requiring cleanup.
ARTICLE 39 - RESTRICTION ON ADJACENT USES
39.01. Landlord agrees that, provided Tenant is not in default under
the terms of this Lease beyond any applicable grace or cure period, Landlord
shall not, during the Term of this Lease, enter into any future lease for
premises within the hatchmarked area shown on Exhibit J annexed hereto, for use
by the Tenant or occupant thereof as a bowling alley, fast food restaurant
(i.e. McDonald's, Burger King, etc.) or gas station, welfare office, parole or
other criminal justice
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<PAGE> 55
office, state or local police facility, or x-rated movie houses, without the
prior written consent of Tenant, provided, however, that the theatre premises
shown on Exhibit "J" shall be included in the above restriction with respect to
x-rated movie house use only and further provided that Landlord's obligation
hereunder with respect to such theatre, shall be limited to use of its best
efforts subject to the provisions of permitted uses contained in the Lease of
said premises between Landlord and Loew's Ridgefield Park Cinema Associates
dated December 18, 1986.
ARTICLE 40 - PURCHASE OF FEE
40.01. Other than as provided in Section 40.2, in the event Landlord
shall desire to offer for sale the Demised Premises or any part thereof, or in
the event that Landlord receives an unsolicited bona fide offer (the
"Unsolicited Offer") to purchase the Demised Premises or any part thereof
(subject to the provisions of Paragraph 40.03 hereof), which offer Landlord
wishes to accept, Landlord shall deliver a notice (hereinafter referred to as
the "Notice") to Tenant setting forth the terms of said offer. Tenant shall
thereafter have the right, exercisable by written notice to Landlord within
thirty (30) days after the date of the Notice, to elect to purchase the Demised
Premises or the applicable part thereof, upon the same terms and conditions set
forth in the Notice and, if Tenant so elects, within one-hundred twenty (120)
days of the date of such Notice, Tenant shall close the purchase of the Demised
Premises or the applicable part thereof and shall pay the purchase price set
forth in the Notice thereof by wire transfer of United States funds to the
account designated by Landlord. In the event that Tenant shall not notify
Landlord in writing within thirty (30) days of the date of receipt of the
Notice, that it desires to purchase the Demised Premises or the applicable part
thereof (subject to the provisions of Paragraph 40.3 hereof) in accordance with
the terms contained in the Notice, then Landlord shall have the right to sell,
transfer, convey or assign the Land and the Building or the applicable part
thereof to the person, firm or corporation specified in the Notice in the event
of an Unsolicited Offer and otherwise to any third party upon materially the
same terms and conditions as are set forth in the Notice. Any purchaser
pursuant to this Section 40.01 shall agree in writing to assume Landlord's
obligations under this Lease. Any such transfer shall not release Landlord from
any liability hereunder and such liability shall continue as that of a
principal and not as a surety or guarantor. In the event tenant or its nominee
purchases the Demised Premises, this Lease and Landlord's obligation hereunder
shall terminate from and after the effective date of such transfer, except for
occurrences prior to such effective date and except with respect to Landlord's
obligations pursuant to Section 17.03 and Article 38 hereof.
40.2. Notwithstanding anything herein to the contrary, Landlord shall
have the absolute right, at any time, without same being considered a transfer
pursuant to Section 40.01 hereof, to
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transfer the Demised Premises or any portion thereof to (a) a partnership in
which all of the general partners are, or (b) a corporation (which includes for
this purpose a trust having transferable shares) of which more than twenty five
percent (25%) of the outstanding voting stock is beneficially owned by, any one
or more of the following: (i) The Hartz Group, Inc., (ii) Hartz Mountain
Industries, Inc., ("HMI") or a subsidiary of HMI, (iii) Hartz Mountain
Development Corp. ("HMDC"), (iv) Leonard Stern, (v) members of Leonard Stern's
immediate family, (vi) trusts for the benefit of members of Leonard Stern's
immediate family, (vii) The Leonard N. Stern Foundation or any other foundation
created by Leonard Stern, (viii) Leonard Stern's personal representative or
estate in the event of Leonard Stern's death, or (ix) a corporation of which
more than twenty five percent (25%) of the issued and outstanding voting stock
is beneficially owned by any of the persons or entities identified in any one
or more of the foregoing clauses (i) through (viii), or any subsidiary of such
corporation. In the event of such transfer, the transferee shall assume
Landlord's obligations hereunder.
40.03. Notwithstanding anything contained in Paragraph 40.01 hereof to
the contrary, Landlord shall not, during the Term of this Lease, sell the
portion of the Demised Premises containing the Parking Garage separately from
the portion of the Demised Premises containing the Building.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
<TABLE>
<S> <C>
Landlord:
ATTEST: HARTZ MOUNTAIN INDUSTRIES, INC.
By:/s/ VINCENT J. RUBINO, JR. By:/s/ GENE HELLER
--------------------------- ------------------------
Vincent J. Rubino, Jr. Gene Heller
Assistant Secretary President
[Corporate Seal]
Tenant:
ATTEST: UNITED JERSEY BANKS
By:/s/ ROBERT A. GUNTHER By:/s/ ALAN N. POSENCHEG
---------------------------- -----------------------
Robert A. Gunther Alan N. Posencheg
Assistant Secretary Executive Vice President
[Corporate Seal]
</TABLE>
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<PAGE> 1
EXHIBIT (10)R.(ii)
BENEFITS COMMITTEE
UJB Financial Corp.
UNANIMOUS WRITTEN CONSENT
* * * * * * *
Pursuant to the powers conferred on the Benefits Committee by Section 14.1
of the UJB Financial Corp. ("UJB") Savings Incentive Plan, as amended and
restated July 1, 1993 (the "Plan"), the undersigned, being all of the members
of the Benefits Committee, hereby consent and agree that the following actions
be taken, and that resolutions be, and they hereby are, adopted by the Benefits
Committee as follows:
WHEREAS, the Benefits Committee desires to include commissions paid to
mortgage sales representatives in the definition of Earnings set forth in
Section 1.15 of the Plan; and
WHEREAS, the Benefits Department has determined that the projected annual
cost to the Plan of the amendment to include commissions earned for the closing
of mortgage loans in the definition of Earnings will be $12,577, based on
commissions in 1992; and
WHEREAS, the Benefits Department has determined that the projected annual
cost to the Plan of the amendment to include commissions earned for the sale of
annuities in the definition of Earnings (as previously incorporated into the
Plan and approved by the Unanimous Written Consent of the Benefits Committee,
dated as of July 6, 1993 (the "Consent")), will be $16,478, based on
commissions in 1992; and
WHEREAS, the Benefits Committee desires to clarify that the definition of
Earnings includes only the salary reduction portion of contributions made on
behalf of Participants to a "cafeteria plan"; and
WHEREAS, the cumulative projected annual cost to the Plan of all amendments
to the Plan from January 1, 1993 to the date hereof is $29,055, which amount
does not exceed the $250,000 limitation set forth in Section 14.1 of the Plan.
NOW, THEREFORE, BE IT:
RESOLVED, that Section 1.15 of the Plan is hereby amended to read in its
entirety as follows, effective as of August 1, 1993:
"1.15 Earnings shall mean the regular monthly base salary of an
Employee, excluding overtime pay, bonuses, contributions by a Company to any
plan of benefits instituted and maintained by such Company, and other special
pay, but including any amount (i) deferred by a Participant under an
Enrollment
<PAGE> 2
Agreement and contributed by a Company to the Plan as a before-tax
contribution pursuant to Article 3, (ii) contributed on behalf of a
Participant by a Company to a "cafeteria plan" (as that term is defined at
Section 125 of the Code) through a reduction to base salary, or (iii) paid
as a commission for the sale of annuities or the closing of mortgage loans.
Earnings for each calendar year shall not exceed the maximum permissible
amount of earnings as determined in accordance with Section 415(d) of the
Code."
RESOLVED, that the third "whereas" clause set forth in the Consent is hereby
amended to read in its entirety as follows, effective as of the date of said
Consent:
"WHEREAS, the Benefits Department has determined that (1) the
projected annual cost to the Plan as a result of the amendment to the
definition of Earnings incorporated in the Revised Plan will be $16,478,
based on commissions in 1992, which amount does not exceed the $250,000
limitation set forth in Section 14.1 of the Revised Plan, and (2) there will
be no increase in costs to the Plan as a result of all other changes
effected above."
All signatures need not appear on the same copy of this Consent.
/s/ Alfred M. D'Augusta 11/29/93 /s/ John R. Haggerty 11/29/93
- -------------------------------- ---------------------------------
Alfred M. D'Augusta Date John R. Haggerty Date
/s/ William F. Flyge 11/29/93 /s/ Richard F. Ober, Jr. 11/29/93
- -------------------------------- ---------------------------------
William F. Flyge Date Richard F. Ober, Jr. Date
<PAGE> 1
EXHIBIT (10)R.(iii)
BENEFITS COMMITTEE
UJB FINANCIAL CORP.
UNANIMOUS WRITTEN CONSENT
* * * * * * *
Pursuant to the powers conferred on the Benefits Committee by Section 14.1
of the UJB Financial Corp. ("UJB") Savings Incentive Plan, as amended and
restated July 1, 1993 (the "Plan"), the undersigned, being all of the members
of the Benefits Committee, hereby consent and agree that the following actions
be taken, and that resolutions be and they hereby are adopted by the Benefits
Committee as follows:
WHEREAS, the Benefits Committee desires to amend certain terms and
provisions in the Plan in order to incorporate new Plan enhancements, including
the provision for SIPAssist, an interactive telephone "voice response" system,
and to reflect current administrative practices, as more fully described in the
memorandum attached hereto as Attachment A and incorporated herein by
reference; and
WHEREAS, new direct rollover and tax withholding rules are applicable under
the Unemployment Compensation Amendments of 1992 to the Internal Revenue Code
as of January 1, 1993 and are required to be stated in the Plan; and
WHEREAS, the Benefits Department has determined that there is no additional
annual cost to the Plan as a result of the changes set forth below; and
WHEREAS, the cumulative projected annual cost to the Plan of all amendments
to the Plan from January 1, 1993 to the date hereof is $29,055, which amount
does not exceed the $250,000 limitation set forth in Section 14.1 of the Plan.
NOW, THEREFORE, BE IT:
SIPAssist and Other Plan Enhancements
A. SIPAssist
RESOLVED, that a new Section 2.4 is hereby added to the Plan, effective as
of October 1, 1993, to read in its entirety as follows:
"2.4 Interactive Telephone System.
(a) The Committee may in its discretion institute a toll-free
interactive telephone "voice response" system (an "ITS") for use in
administering the Plan. In the event the
<PAGE> 2
Committee institutes an ITS, it may specify that the ITS is to be a
supplemental or the exclusive means for Participants to effect the following
transactions:
(1) enrollment (to the extent otherwise permitted by Section
2.1), including initial contribution percentage elections made in accordance
with Sections 3.1 and 3.2 and initial investment directions given in
accordance with Section 4.1, all of which shall be effective as provided in
Section 2.1. Authorizations of before-tax contributions over the ITS by a
Participant shall function as and constitute such Participant's salary
deferral authorization and authorizations of after-tax contributions over
the ITS by a Participant shall function as and constitute such Participant's
payroll deduction authorization;
(2) changes in percentage of contributions, in accordance with,
and effective as provided in, Section 3.4;
(3) suspensions and resumptions in contributions, in accordance
with, and effective as provided in, Section 3.5;
(4) changes in investment directions, in accordance with, and
effective as provided in, Section 4.1;
(5) changes in sub-fund allocations and transfers between
sub-funds, in accordance with, and effective as provided in, Section 4.3;
(6) withdrawals not requiring Committee approval, in accordance
with, and effective as provided in, Section 8.5;
(7) loans, in accordance with Section 9.1;
(8) voluntary distributions, in accordance with Section 7.2 and
effective as provided in Section 7.11.
(b) Notwithstanding the references to forms or other written
documentation in the Sections referred to in subsection (a) above, no forms
or written documentation shall be required of a Participant using the ITS to
authorize any transaction described in subsection (a) above; provided,
however, that Participants authorizing transactions through the ITS shall be
obligated to complete any and all forms or written documentation delivered
to them by the Committee to effectuate the transactions so authorized,
including without limitation beneficiary and change of beneficiary forms,
direct rollover election forms, notes evidencing loans and forms that may be
required by state or federal governmental authorities. In the event the
Committee receives conflicting instructions with respect to any of the
transactions described above, the last instruction received in the
applicable time period shall be the instruction the Committee is authorized
to act upon. In the event the Committee institutes the ITS and specifies
that the ITS shall be the exclusive means of authorizing a transaction
described above, no forms or written documentation shall be permitted or
accepted by the Committee to authorize such transactions.
-2-
<PAGE> 3
(c) In addition to the authorizations of transactions described
in subsection (a) above, the Committee may authorize individuals
administering the Plan on its behalf to use the ITS in any manner which the
Committee in its discretion deems beneficial to the administration of the
Plan or beneficial to Participants or Employees.
(d) The use of the ITS by an Employee for initial enrollment in
the Plan or by a Participant for subsequent transactions under the Plan
shall function as and constitute an authorization with the same force and
effect as if such action was authorized pursuant to a writing signed by the
Employee or Participant.
(e) Participants shall receive written confirmation of each ITS
transaction as soon as practicable after the telephone call requesting the
relevant transaction."
RESOLVED, that the Committee hereby approves the institution of an ITS under
Section 2.4 of the Plan to be called "SIPAssist" and hereby specifies that
SIPAssist shall be the exclusive means for Employees and Participants to
authorize the transactions described in Sections 2.4(a)(1) through (8) of the
Plan; provided, however, that in the event SIPAssist shall be rendered
inoperative in whole or in part for any reason, forms and written documents, to
the extent the Plan Administrator shall deem appropriate (including as a
supplement to SIPAssist), shall be accepted and, if the Plan Administrator so
determines, required for authorization of the transactions described in
Sections 2.4(a)(1) through (8) of the Plan until such time as exclusive
reliance on SIPAssist for such transactions is deemed appropriate by the Plan
Administrator."
B. Effectiveness of Elections
RESOLVED, that Sections 2.1, 4.2 and 4.3 of the Plan are hereby amended,
effective as of October 1, 1993, by changing "20th" to "25th" therein.
RESOLVED, that Section 3.4 of the Plan is hereby amended, effective as of
October 1, 1993, by deleting the second and third sentences thereof and adding
the following sentences in substitution therefor, to read in their entirety as
follows:
"Such change in the applicable percentages shall become effective as of the
paydate next following the 6th day of a calendar month, if the request is
made by the 6th day of such calendar month, or the paydate next following
the 21st day of a calendar month, if the request is made by the 21st day of
such calendar month. Requests made after the 21st day of a given calendar
month shall be deemed made by the 6th day of the following calendar month."
RESOLVED, that Section 3.5 of the Plan is hereby amended, effective as of
October 1, 1993, by deleting the second, third and fourth sentences thereof and
adding the following sentences in substitution therefor, to read in their
entirety as follows:
-3-
<PAGE> 4
"Such suspension shall become effective as of the paydate next following the
6th day of a calendar month, if the request is made by the 6th day of such
calendar month, or the paydate next following the 21st day of a calendar
month, if the request is made by the 21st day of such calendar month.
Requests made after the 21st day of a given calendar month shall be deemed
made by the 6th day of the following calendar month."
RESOLVED, that Section 8.5 of the Plan is hereby amended, effective as of
October 1, 1993, by deleting the second and third sentences thereof, and adding
the following sentences in substitution therefor, to read in their entirety as
follows:
"Requests for withdrawals which do not require Committee approval will be
effective as of the last business day of the calendar month, if the request
is made by the 25th day of such calendar month, and such requests made after
the 25th day of a given calendar month shall be deemed made by the 25th day
of the following calendar month. With respect to requests for withdrawals
which require the approval of the Committee: (i) if the properly completed
withdrawal request form and supporting documents are received by the
Committee by the 20th day of a given calendar month the withdrawal will be
effective as of the last business day of such calendar month, and (ii) if
the properly completed withdrawal request form and supporting documents are
received by the Committee after the 20th day of a given calendar month they
shall be deemed received by the Committee by the 20th day of the following
calendar month."
C. Investment of Contributions
RESOLVED, that the last paragraph of Section 4.1 of the Plan is hereby
amended, effective as of October 1, 1993, by changing "multiples of 5% (5%,
10%, 15%, 20%, 25%, 30%... etcetera)" to "multiples of 1% (1%, 2%, 3%...
etcetera)" in the first sentence thereof.
D. Investment Directions
RESOLVED, that Section 4.3 of the Plan is hereby amended, effective as of
October 1, 1993, by changing the heading thereof to "Sub-Fund Reallocations and
Sub-Fund Transfers", adding "or transferred" after the word "reallocated" in
the last sentence thereof and deleting the first and second sentences thereof
and adding the following sentences in substitution therefor, to read in their
entirety as follows:
"A Participant may change the way that the current values of past
contributions to the Discretionary Account are invested by making a sub-
fund reallocation or a sub-fund transfer. A Participant shall effect a
sub-fund reallocation by specifying on the appropriate form designated by
the Committee percentages of the current
-4-
<PAGE> 5
value of the Discretionary Account which are to be invested in each sub-fund
of the Plan. A Participant shall effect a sub-fund transfer by specifying
(i) one or more sub-funds from which past contributions are to be removed
and the percentages, in multiples of 1%, of the current value of past
contributions in each such sub-fund to be so removed, and (ii) one or more
sub-funds into which the past contributions so removed are to be reinvested
and the percentages, in multiples of 1%, of the past contributions so
removed that are to be reinvested in each such sub-fund."
RESOLVED, that Section 4.3 of the Plan is hereby further amended, effective
as of October 1, 1993, by adding the following sentences at the end thereof, to
read in their entirety as follows:
"Participants may not authorize both a sub-fund reallocation and a sub-fund
transfer to become effective at the same time. In the event the Committee
receives conflicting instructions with respect to sub-fund reallocations and
sub-fund transfers, the last instruction received in the applicable time
period shall be the instructions the Committee is authorized to act upon."
E. Voluntary Distributions
RESOLVED, that Section 7.2 of the Plan is hereby amended, effective as of
October 1, 1993, by deleting the first sentence thereof and adding the
following sentence in substitution therefor, to read in its entirety as
follows:
"If a Participant's Severance from Service Date is for any reason other than
the Participant's death, the Participant may elect, by properly completing
the appropriate form specified by the Committee, to have the entire vested
value of the Participant's Accounts, as determined in accordance with
Article 6, distributed to the Participant pursuant to the method of payment
chosen in accordance with Section 7.5."
RESOLVED, that a new Section 7.11 is hereby added to the Plan, effective as
of October 1, 1993, to read in its entirety as follows:
"7.11 Effectiveness of Voluntary Distributions. Requests for distributions
made pursuant to Section 7.2 shall become effective as of the last business
day of the calendar month, if the request is made by the 20th day of such
calendar month, and such requests made after the 20th day of a given
calendar month shall be deemed made by the 20th day of the following
calendar month. Upon the effectiveness of a distribution request, the
current value of the Participant's Accounts for purposes of the distribution
shall be determined in accordance with Section 7.7."
-5-
<PAGE> 6
F. Withdrawn Amounts
RESOLVED, that Section 8.2 of the Plan is hereby amended, effective as of
October 1, 1993, by deleting (ii) thereof and adding the following phrase in
substitution therefor, to read as follows:
"(ii) the maximum amount available for withdrawal in the Participant's
Accounts."
G. Restrictions on Withdrawals
RESOLVED, that Section 8.3(b) of the Plan is hereby amended, effective as of
October 1, 1993, to read in its entirety as follows:
"(b) Following a withdrawal no suspension or other waiting period is
required by a Participant prior to requesting another withdrawal."
RESOLVED, that Section 8.5 of the Plan is hereby amended, effective as of
October 1, 1993, by deleting the fifth sentence thereof.
Amendments to Conform to Current Administrative Practices
H. "Beneficiary" Definition
RESOLVED, that Section 1.9 of the Plan is hereby amended, effective as of
July 1, 1993, by changing "so designated by the Participant under" to "if
applicable, determined as the beneficiary under the terms of" in the last
sentence thereof.
I. "Earnings" Definition
RESOLVED, that the first sentence of Section 1.15 of the Plan is hereby
amended, effective as of July 1, 1993, by deleting the word "or" preceding the
phrase which begins "(iii)" and adding the following phrase at the end thereof,
to read in its entirety as follows:
", or (iv) paid as incentive pay to proof operators."
J. "Employee" Definition
RESOLVED, that Section 1.17 of the Plan is hereby amended, effective as of
July 1, 1993, by deleting the first sentence thereof and adding the following
sentence in substitution therefor, to read in its entirety as follows:
"Employee shall mean any employee of a Company who is compensated on a
weekly, monthly, or annual salary basis, regardless of the number of the
Participant's Hours of Service (including zero), including a Participant who
receives payments during an internal search period or external search and
outplacement period in accordance with the Company's policy on work force
adjustment."
-6-
<PAGE> 7
K. Internal Revenue Code Reference
RESOLVED, that Section 1.33 of the Plan is hereby amended, effective as of
January 1, 1993, by changing "402(a)(5)" to "402(c)," and deleting the words
"lump sum" therefrom.
L. Plan Cross-References
RESOLVED, that Section 1.36 of the Plan is hereby amended, effective as of
July 1, 1993, by changing "(a), (c), (d), and (e)" to "(a) and (b)".
RESOLVED, that Section 2.2(b) of the Plan is hereby amended, effective as of
July 1, 1993, by changing "Articles 7 and 9" to "Articles 7 and 10".
RESOLVED, that Section 3.8 of the Plan is hereby amended, effective as of
July 1, 1993, by changing "Section 5.1(c)(i)" to "Section 5.1(b)(i)".
RESOLVED, that Section 17.2 of the Plan is hereby amended, effective as of
July 1, 1993, by changing "Section 1.37" to "Section 1.36".
M. Reemployment After Severance
RESOLVED, that Section 2.3 of the Plan is hereby amended, effective as of
July 1, 1993, by deleting the phrase "of more than 12 months" from the first
sentence thereof.
N. Contribution Resumptions
RESOLVED, that Section 3.5 of the Plan is hereby amended, effective as of
July 1, 1993, by changing the heading thereof to "Suspensions and Contribution
Resumptions", adding "or resume Basic Contributions and Additional
Contributions following a suspension" at the end of the first sentence thereof
and adding "or contribution resumption" after the words "Such suspension" in
the second sentence thereof.
O. Contribution Restrictions
RESOLVED, that Section 3.12 of the Plan is hereby amended, effective as of
July 1, 1993, by deleting the word "Pre-Tax" from the heading thereof.
P. Loan Requirements
RESOLVED, that Section 9.2(g) of the Plan is hereby amended, effective as of
July 1, 1993, by changing "loan agreement to be executed by the Participant and
the Trustee" to "promissory note to be executed by the Participant".
Q. "Key Employee" Definition
RESOLVED, that Section 17.5(c)(i) of the Plan is hereby amended, effective
as of July 1, 1993, to read as follows:
"(i) one of the 50 highest paid Employees and also an officer of the
Company whose compensation from the Company
-7-
<PAGE> 8
for the Plan Year exceeds $45,000 (or such other amount as shall be 50
percent of the amount determined under Section 415(b)(1)(A) of the Code),"
New Direct Rollover and Tax Withholding Rules
R. Direct Rollovers
RESOLVED, that whereas new direct rollover and tax withholding rules are
applicable under the Unemployment Compensation Amendments of 1992 to the
Internal Revenue Code as of January 1, 1993, a new Section 7.12 is hereby added
to the Plan, effective as of January 1, 1993, to read in its entirety as
follows:
"7.12 Direct Rollovers. This Section 7.12 applies to all distributions
made on or after January 1, 1993.
(a) Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Section 7.12, a
distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a
direct rollover.
(b) The following definitions shall apply to this Section 7.12:
(i) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
Account of the distributee under the Plan, except that an eligible rollover
distribution does not include (i) any distribution that is one of a series
of substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the distributee's
Beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (iii) the portion of a distribution that is not
includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
(ii) Eligible retirement plan: An eligible retirement plan is
an individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement annuity.
(iii) Distributee: A distributee includes a Participant or
former Participant. In addition, the Participant's or former Participant's
surviving spouse and the Participant's or former Participant's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are distributees
with regard to the interest of the spouse or former spouse.
-8-
<PAGE> 9
(iv) Direct rollover: A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee."
All signatures need not appear on the same copy of this Consent.
/s/ Alfred M. D'Augusta 1/6/94 /s/ John R. Haggerty 1/6/94
- --------------------------------- ---------------------------------
Alfred M. D'Augusta Date John R. Haggerty Date
/s/ William F. Flyge 1/24/94 /s/ Richard F. Ober, Jr. 1/12/94
- --------------------------------- ---------------------------------
William F. Flyge Date Richard F. Ober, Jr. Date
-9-
<PAGE> 1
EXHIBIT 13
1993 ANNUAL REPORT
------------------
[LOGO] UJB
FINANCIAL
[PHOTO -- SEE EDGAR APPENDIX]
<PAGE> 2
ABOUT THE COVER Changes in the galaxies generate positive
energy. At UJB Financial, we envision our
restructuring and consolidation as a positive
force which will enhance our ability to
generate revenues, reduce costs, and provide
consistent, quality customer service.
<TABLE>
<S> <C> <C>
CONTENTS Financial Highlights 1
Summary of Selected Financial Data 2
UJB Financial At A Glance 3
Chairman's Message 4
Restructuring and Consolidating UJB Financial 9
Wholesale Lending 10
Retail Banking 14
Mortgage Banking 18
Investment Management 20
Community Reinvestment 22
Board of Directors 23
1993 Financial Review 24
Financial Statements and Notes 36
Management's and Independent Auditors' Reports 52
Unaudited Quarterly Financial Data 53
Corporate Directory 54
Corporate Information 57
</TABLE>
<PAGE> 3
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Increase
Dollars in thousands, except per share data 1993 1992 (Decrease)
==============================================================================================================
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 78,055 $ 53,824 45.0 %
Per common share:
Net income . . . . . . . . . . . . . . . . . . . . . . . 1.49 1.09 36.7
Cash dividends declared . . . . . . . . . . . . . . . . . .69 .60 15.0
Book value at year end . . . . . . . . . . . . . . . . . 18.32 17.50 4.7
==============================================================================================================
BALANCE SHEET DATA AT DECEMBER 31
Total assets . . . . . . . . . . . . . . . . . . . . . . . $13,410,549 $13,770,871 (2.6)%
Total deposits . . . . . . . . . . . . . . . . . . . . . . 11,456,354 11,786,661 (2.8)
Demand deposits . . . . . . . . . . . . . . . . . . . . . 2,802,496 2,586,997 8.3
Savings and time deposits . . . . . . . . . . . . . . . . 8,427,272 8,954,921 (5.9)
Total loans . . . . . . . . . . . . . . . . . . . . . . . . 8,607,094 8,782,409 (2.0)
Commercial loans . . . . . . . . . . . . . . . . . . . . 4,235,631 4,412,678 (4.0)
Mortgage loans . . . . . . . . . . . . . . . . . . . . . 2,377,440 2,327,363 2.2
Instalment loans . . . . . . . . . . . . . . . . . . . . 1,994,023 2,042,368 (2.4)
Shareholders' equity . . . . . . . . . . . . . . . . . . . 976,074 920,270 6.1
Allowance for loan losses . . . . . . . . . . . . . . . . . 242,104 275,296 (12.1)
==============================================================================================================
CONSOLIDATED RATIOS
Return on average assets . . . . . . . . . . . . . . . . . .57% .40%
Return on average common equity . . . . . . . . . . . . . . 8.22 6.31
Total equity to total assets . . . . . . . . . . . . . . . 7.28 6.68
Tier I capital to average assets (leverage) . . . . . . . . 7.07 6.67
Tier I capital to risk-adjusted assets . . . . . . . . . . 9.37 8.94
Total capital to risk-adjusted assets . . . . . . . . . . . 12.43 12.05
Non-performing loans to total assets . . . . . . . . . . . 1.88 2.63
Non-performing loans to period-end loans . . . . . . . . . 2.92 4.12
==============================================================================================================
</TABLE>
1
<PAGE> 4
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Not covered by independent auditors' report 1993 1992 1991
=================================================================================================================
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income . . . . . . . . . . . . . . . . . . . . . . . $ 884,175 $ 953,331 $ 1,105,668
Interest expense . . . . . . . . . . . . . . . . . . . . . . 321,040 415,106 614,337
- -----------------------------------------------------------------------------------------------------------------
Net interest income . . . . . . . . . . . . . . . . . . . . 563,135 538,225 491,331
Provision for loan losses . . . . . . . . . . . . . . . . . . 95,500 139,000 167,350
- -----------------------------------------------------------------------------------------------------------------
Income from earning assets . . . . . . . . . . . . . . . . 467,635 399,225 323,981
Non-interest income . . . . . . . . . . . . . . . . . . . . . 178,275 176,219 149,551
Non-interest expenses . . . . . . . . . . . . . . . . . . . . 546,864 503,564 448,356
- -----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes . . . . . . . . . . . . . 99,046 71,880 25,176
Federal and state income taxes (benefit) . . . . . . . . . . 20,991 18,056 2,741
- -----------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 78,055 $ 53,824 $ 22,435
=================================================================================================================
COMMON SHARE DATA
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 1.49 $ 1.09 $ .45
Cash dividends declared . . . . . . . . . . . . . . . . . . . .69 .60 .60
Book value . . . . . . . . . . . . . . . . . . . . . . . . . 18.32 17.50 17.04
Market value . . . . . . . . . . . . . . . . . . . . . . . . 24.00 24.25 14.63
Number of registered common shareholders . . . . . . . . . . 20,652 21,595 22,090
Average shares outstanding (in thousands) . . . . . . . . . . 51,288 47,769 45,650
Common shares outstanding (in thousands) . . . . . . . . . . 51,632 50,864 45,886
Common stock dividend payout . . . . . . . . . . . . . . . . 46.31% 55.05% 133.33%
=================================================================================================================
BALANCE SHEET DATA (AT YEAR END, IN THOUSANDS)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $13,410,549 $13,770,871 $13,377,719
Total deposits . . . . . . . . . . . . . . . . . . . . . . . 11,456,354 11,786,661 11,313,547
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . 8,607,094 8,782,409 8,768,973
Shareholders' equity . . . . . . . . . . . . . . . . . . . . 976,074 920,270 811,799
Allowance for loan losses . . . . . . . . . . . . . . . . . . 242,104 275,296 288,770
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 208,459 216,570 64,597
=================================================================================================================
OPERATING RATIOS
Return on average assets . . . . . . . . . . . . . . . . . . .57% .40% .17%
Return on average common equity . . . . . . . . . . . . . . . 8.22 6.31 2.60
Return on average total equity . . . . . . . . . . . . . . . 8.15 6.30 2.76
=================================================================================================================
LOAN QUALITY RATIOS
Allowance for loan losses to year-end loans . . . . . . . . . 2.81% 3.13% 3.29%
Net charge offs to average loans . . . . . . . . . . . . . . 1.48 1.73 1.58
Non-performing loans to year-end loans . . . . . . . . . . . 2.92 4.12 5.07
=================================================================================================================
CAPITAL RATIOS
Average total equity to average total assets . . . . . . . . 7.00% 6.36% 6.16%
Tier I capital to average assets (leverage) . . . . . . . . . 7.07 6.67 5.96
Tier I capital to risk-adjusted assets . . . . . . . . . . . 9.37 8.94 8.03
Total capital to risk-adjusted assets . . . . . . . . . . . . 12.43 12.05 9.53
=================================================================================================================
OTHER DATA (AT YEAR END)
Number of banking offices . . . . . . . . . . . . . . . . . . 258 259 261
Number of employees (full-time equivalent) . . . . . . . . . 6,219 6,326 6,504
Number of employees (full-time) . . . . . . . . . . . . . . . 5,488 5,686 5,841
Number of employees (part-time) . . . . . . . . . . . . . . . 916 801 859
=================================================================================================================
</TABLE>
NA - Not applicable NM - Not meaningful
See accompanying consolidated financial statements and notes.
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Not covered by independent auditors' report 1990 1989 1988 [GRAPH]
================================================================================================== NET INCOME
- -------------------------------------------------------------------------------------------------- ($ in millions)
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income . . . . . . . . . . . . . . . $ 1,186,446 $ 1,102,747 $ 917,875
Interest expense . . . . . . . . . . . . . . 701,306 632,568 486,834
- --------------------------------------------------------------------------------------------------
Net interest income . . . . . . . . . . . . 485,140 470,179 431,041
Provision for loan losses . . . . . . . . . . 246,000 52,500 40,000
- --------------------------------------------------------------------------------------------------
Income from earning assets . . . . . . . . 239,140 417,679 391,041
Non-interest income . . . . . . . . . . . . . 168,895 121,677 114,156
Non-interest expenses . . . . . . . . . . . . 429,618 379,470 350,981
- --------------------------------------------------------------------------------------------------
Income (loss) before income taxes . . . . . (21,583) 159,886 154,216
Federal and state income taxes (benefit) . . (16,007) 41,346 38,141
- --------------------------------------------------------------------------------------------------
Net Income (loss) $ (5,576) $ 118,540 $ 116,075
==================================================================================================
ANNUAL INDICATED DIVIDEND
(dollars)
COMMON SHARE DATA [GRAPH]
Net income (loss) . . . . . . . . . . . . . . $ (.17) $ 2.62 $ 2.58
Cash dividends declared . . . . . . . . . . . 1.02 1.11 1.01
Book value . . . . . . . . . . . . . . . . . 17.24 18.67 17.02
Market value . . . . . . . . . . . . . . . . 7.13 18.88 20.75
Number of registered common shareholders . . 22,554 21,766 22,042
Average shares outstanding (in thousands) . . 44,601 43,785 43,113
Common shares outstanding (in thousands) . . 45,097 44,077 43,474
Common stock dividend payout . . . . . . . . NM 42.37% 39.15%
==================================================================================================
BALANCE SHEET DATA (AT YEAR END, IN THOUSANDS)
Total assets . . . . . . . . . . . . . . . . $12,817,877 $12,172,290 $10,887,871
Total deposits . . . . . . . . . . . . . . . 10,628,244 9,336,000 8,893,771
Total loans . . . . . . . . . . . . . . . . . 8,665,064 8,334,646 7,317,219
Shareholders' equity . . . . . . . . . . . . 807,303 852,757 800,017
Allowance for loan losses . . . . . . . . . . 258,691 121,909 107,795
Long-term debt . . . . . . . . . . . . . . . 72,225 81,125 87,937
==================================================================================================
OPERATING RATIOS
Return on average assets . . . . . . . . . . (.04)% 1.05% 1.13%
Return on average common equity . . . . . . . (.91) 14.52 15.80
Return on average total equity . . . . . . . (.64) 14.04 15.01
==================================================================================================
LOAN QUALITY RATIOS
Allowance for loan losses to year-end loans . 2.99 % 1.46% 1.47%
Net charge offs to average loans . . . . . . 1.28 .49 .40
Non-performing loans to year-end loans . . . 4.99 2.23 1.44
==================================================================================================
CAPITAL RATIOS
Average total equity to average total assets 6.79 % 7.49% 7.50%
Tier I capital to average assets (leverage) . 5.93 7.17 7.40 CAPITAL RATIOS
Tier I capital to risk-adjusted assets . . . 7.99 NA NA [GRAPH]
Total capital to risk-adjusted assets . . . . 9.60 NA NA Leverage Ratio Total Capital
================================================================================================== Tier I Ratio
OTHER DATA (AT YEAR END)
Number of banking offices . . . . . . . . . . 266 251 243
Number of employees (full-time equivalent) . 6,484 6,364 6,446
Number of employees (full-time) . . . . . . . 5,790 5,689 5,712
Number of employees (part-time) . . . . . . . 869 827 826
==================================================================================================
</TABLE>
NA - Not applicable NM - Not meaningful
See accompanying consolidated financial statements and notes.
2
<PAGE> 5
ABOUT THE COMPANY
UJB Financial Corp. (NYSE: UJB) is among the nation's largest bank holding
companies with $13.4 billion in assets and 258 banking offices in New Jersey
and eastern Pennsylvania. Headquartered in Princeton, New Jersey, UJB
Financial offers a wide range of financial services to individuals, businesses,
not-for-profit organizations, government entities and other financial
institutions.
<PAGE> 6
UJB FINANCIAL CORP. AND SUBSIDIARIES
------------------------------------
UJB FINANCIAL AT A GLANCE
FINANCIAL GOALS
------------------------------------
o Maximize long-term shareholder value
o Achieve by 4th quarter 1995 -
o Return on assets - 1.20%
o Return on equity - over 15%
o Efficiency ratio - 59%
STRATEGY
------------------------------------
o Improve efficiency and profitability
o Increase market share
o Provide outstanding customer service
o Build relationships
o Achieve strategic acquisitions
MARKET
------------------------------------
o New Jersey - 186 branch offices
o 2nd highest per capita income in nation
o 9th largest banking market
o More than half of Fortune 500 companies have headquarters or
operations here
o 9,000 middle market companies and 1,100 foreign firms
o Diverse economy
o Pennsylvania - 72 branch offices
o 4th largest banking market
o 6,000 middle market companies in eastern Pennsylvania
o Our market of 12 counties in eastern Pennsylvania extends from
Philadelphia north to Wilkes-Barre and west to Lancaster
MARKET SHARE
------------------------------------
o Second in New Jersey for commercial and industrial loans
o Second in New Jersey for consumer loans
o Second in New Jersey for deposits
o Number one in market share of deposits in Bergen County - 13th highest county
nationally for per capita income
PERFORMANCE
------------------------------------
o Upward earnings trends for 3 years
o 2 1/2 years of successive reductions in non-performing loans
o Earnings for 1993 were $1.49 per common share, up 45%, compared to $1.09
for 1992
o Dividend increases in 1993 of 40%
o Demand deposits grew 8.3% during 1993
o Total equity to total assets ratio of 7.28%
o Shareholders' equity of $976 million
3
<PAGE> 7
CHAIRMAN'S MESSAGE
Continued improvement of our earnings performance is essential. UJB Financial
bankers realize that like scaling mountains this is a challenge, and they are
dedicated to the task.
[PHOTO]
T. JOSEPH SEMROD
Chairman and Chief Executive Officer
UJB Financial Corp. is preparing itself for a future characterized by increased
operating efficiencies, devotion to customer service and continued expansion in
our regional marketplace. In 1993, we continued to build our earnings and
credit quality momentum, and began a major initiative to ensure our future
profitability and growth.
The company launched a major organizational restructuring program
centering on our core lines of business, and announced the consolidation of our
member banks into one bank in New Jersey and one in Pennsylvania. We believe
that these actions will enable us to better serve our customers and make us a
more competitive organization.
The common stock dividend was increased twice during 1993, for a total
of 40 percent, after three years of sustained earnings growth. UJB Financial's
quarterly common stock dividend is now $.21 per share, with an annual dividend
rate of $.84 per share. This action is a reflection of the Board's confidence
in our earnings momentum.
FINANCIAL PERFORMANCE
Net income for 1993 was $78.1 million, or $1.49 per share, a 45.0 percent
increase over 1992 despite the one-time restructuring charge taken in the third
quarter of 1993 of $12.7 million after tax, or $.25 per common share. This
charge represents costs recorded in connection with restructuring the company
along core business lines and the consolidation of our member banks - actions
that are expected to produce annualized savings and incremental revenues of $40
million when the program is completed.
Encouraging signs during 1993 included growth in net interest income and
an expanded net interest margin. The lower rate environment together with the
increase in demand deposits and declining non-performing loans contributed to
the margin improvement.
LOAN QUALITY The earnings performance was favorably impacted by a $110.1
million, or 30.4 percent, reduction in non-performing loans from year-end
1992. UJB Financial has now experienced ten consecutive quarters of declining
non-performing loans. In addition, other real estate owned declined $49.5
million at year end to $72.3 million. As a result, the company should continue
to benefit from reduced credit related costs.
4
<PAGE> 8
[PHOTO OF MOUNTAIN RANGE]
<PAGE> 9
Under the new structure, our core business lines will form a synergy to produce
additional business opportunities for the company.
LOANS AND DEPOSITS During 1993, we continued to have a strong overall market
share in commercial and industrial loans and consumer lending. However, total
loan growth continued to be elusive due to a generally static economy within
our New Jersey and Pennsylvania markets.
Residential mortgage activity continued extremely strong, especially in
refinancings which were very active throughout the year. We continue to sell
the bulk of our fixed rate residential mortgages into the secondary market.
Savings and time deposits, primarily retail certificates of deposit,
declined in 1993 because of the lower interest rate environment. In contrast,
demand deposits exhibited strong growth in 1993, increasing $215.5 million from
a year ago, primarily commercial and municipal accounts. We attribute this
increase to our expanding number of commercial relationships, and when
businesses are again willing to borrow and activate their credit lines, these
relationships should prove beneficial.
CAPITAL RATIOS UJB Financial's capital ratios were strengthened in 1993 by
improved earnings and ongoing balance sheet management. At December 31, 1993,
Tier I capital was 9.37 percent, more than double the 4.0 percent minimum
regulatory guideline. Total risk-based capital was 12.43 percent, also
significantly above the 8.0 percent minimum guideline.
GROWTH INITIATIVES The restructuring program is the most comprehensive
organizational change in our history, and is the final phase of a two year
initiative which included branch automation and back office consolidations.
This restructuring will enhance our ability to maximize revenues generated by
our core businesses, reduce our costs of delivering products, and allow us to
provide a more consistent level of quality service to our customers.
Our overall strategy is to build on our strengths, and our new structure
concentrates on our most profitable core businesses: wholesale lending, retail
banking, mortgage banking and investment management. You will find a detailed
explanation of how we will position each business line in order to better serve
our customers starting on page 9 of this annual report.
6
<PAGE> 10
We believe that the restructuring and consolidations will increase our future
profitability and make us more competitive.
NEW GOALS Our improved earnings performance combined with the efficiencies and
revenue growth provided by the restructuring program have allowed new financial
goals to be set for the company. Our goal is to achieve a return on assets of
1.20 percent, a return on equity of over 15 percent, and a 59 percent efficiency
ratio by the fourth quarter of 1995.
As part of the restructuring and line of business focus, we have also
made a commitment to our customers to provide the best quality service of any
financial institution in our trade area.
Serving customers takes many forms. For example, the consolidation of
our banks in New Jersey and Pennsylvania will enable us to create one bank in
each state. This action will be both cost effective for the company and
beneficial to our customers. The consolidations will take place in stages and
be completed by the third quarter of 1994. Under the new structure, United
Jersey Bank will be an $11 billion entity with 186 branches to serve customers
throughout New Jersey. First Valley Bank in Pennsylvania will have nearly $3
billion in assets and 72 offices.
VSB BANCORP As part of UJB Financial's ongoing program to maximize the value
of our franchise, we entered into a definitive agreement in December 1993 to
acquire VSB Bancorp, Inc. VSB, a holding company with $379 million in assets,
operates the Valley Savings Bank with six retail offices in Bergen County, all
in towns where we do not presently have branches. UJB Financial has long been
the leading commercial bank in Bergen County. With the completion of this
acquisition in the second or third quarter of 1994, we will have 45 branches in
this very prosperous county.
REVENUE ENHANCEMENT Our revenue enhancement program continues to be popular
with employees, as they are rewarded for suggesting ideas which contribute to
the company's bottom line. During the past year, employee submitted ideas have
added another $6 million in annualized savings. Since the program's inception
in 1989, over $26 million in employee suggestions have been implemented. When
combined with other revenue enhancement activity the total earnings improvement
increased to over $55 million during this five year period.
7
<PAGE> 11
After three successive years of sustained earnings growth, in 1993 the common
stock dividend was increased twice for a total of 40 percent.
BOARD CHANGES James A. Skidmore, Jr., who served our member banks since
1977 and was a director of UJB Financial since 1986, retired from the Board of
Directors during 1993. Mr. Skidmore's leadership as chairman of the Capital and
Dividend Committee was especially valuable in helping this corporation through
both prosperous and difficult times, and we are grateful for the guidance he
provided.
We welcome to the Board of Directors George L. Miles, Jr., a certified
public accountant and executive vice president and chief operating officer of
WNET-TV in New York, public television's flagship station. Mr. Miles was
elected to the Board last month, and we look forward to his fresh insight and
perspective.
The restructuring and consolidation of our banks, combined with our
focus on efficiency and profitability, have set us on the right course. We face
the future with enthusiasm and confidence. We are becoming a stronger, better
focused company with the strategies and team in place to deliver on our pledge
to enhance shareholder value. In all our efforts, the ongoing support of our
shareholders is recognized and appreciated.
/s/ T. Joseph Semrod
T. Joseph Semrod
Chairman and
Chief Executive Officer
March 11, 1994
8
<PAGE> 12
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
RESTRUCTURING AND CONSOLIDATING UJB FINANCIAL
=============================================
INCREASING PROFITABILITY
- ------------------------
To streamline the company for increased profitability, we have announced a
comprehensive restructuring along four major lines of business: wholesale
lending, retail banking, mortgage banking and investment management. We are
taking a focused approach, with even stronger concentration on maximizing solid
customer relationships.
This is the final phase of a strategic initiative to create greater
efficiency and improve profitability. By concentrating on core business lines
where we have proven expertise and state-of-the-art systems either in place or
coming on line, we have positioned ourselves for carefully orchestrated growth.
IMPROVING EFFICIENCY
- --------------------
More efficient operations will enable us to provide higher levels of service to
customers. A tighter organization means that fewer resources will be required
to develop new financial products, and that we can offer even more competitive
pricing.
By consolidating our six member banks into one in New Jersey and one in
Pennsylvania, we will maximize efficiency. In New Jersey, United Jersey Bank
will have nearly $11 billion in assets and 186 branches to serve customers.
First Valley Bank in Pennsylvania will have almost $3 billion in assets and 72
offices. Customers will reap the benefits of greater convenience and expanded
services.
The consolidations will take place in stages during 1994 in order to
avoid disruptions in service, and will be completed by the third quarter.
AGGRESSIVE MARKETING
- --------------------
To give new emphasis to the small business segment of our customer base,
companies with annual sales under $2 million, we have assigned this sector to
retail banking. Our extensive retail branch network provides an ideal framework
for delivering quality banking services to this attractive market.
UJB Financial will also be expanding our mortgage business by increasing
both mortgage servicing and originations. We will be placing our investment
management group, private banking and discount brokerages under one umbrella to
better position us to cross-sell investment, fiduciary and credit services to
customers.
The pages in this section of the annual report focus on the specific
actions we are undertaking in each of the four core business lines to increase
profitability.
9
<PAGE> 13
WHOLESALE LENDING
[PICTURE]
RATHER THAN FOCUSING ON A SINGLE TRANSACTION, UJB FINANCIAL REMAINS A
RELATIONSHIP DRIVEN ORGANIZATION.
COMMERCIAL & INDUSTRIAL LOANS
AND NEW JERSEY MARKET SHARE
[GRAPH]
C & I loans at NJ commercial banks ($ in billions)
UJB Financial market share (%)
The impact of UJB Financial's restructuring may be most evident in the
wholesale lending side of the company. Until now, we have served our commercial
customers through our six member banks in New Jersey and eastern Pennsylvania.
Following the restructuring and consolidations, our lending units will be
aligned by business specialty and market segmentation.
The wholesale banking lines of business will be divided into traditional
commercial and industrial lending, specialized lending and real estate lending.
Market share has always been key to a bank's success, and UJB Financial
holds the number two market share position in New Jersey for both commercial and
industrial loans and for demand deposits. We achieved this position by
maintaining a consistent commitment to our customers through the ups and downs
of the economic cycles. Unlike many of our competitors, we've never been out of
the market. This has led to a 2 percent increase in commercial and industrial
loan market share over the past 24 months.
MIDDLE MARKET Middle market lending continues to be an integral component of
our total lending focus. Our products and lending officers are recognized as
among the finest in the marketplace.
In the new structure, added emphasis will be placed on specialty niches.
Servicing these markets requires recognized industry expertise, time proven
processes and dedicated relationship managers. The rewards for this commitment
are increased market share and a greater contribution to the bottom line.
Among New Jersey banks, our organization is the largest asset-based
lender. We are expanding our geographic penetration in the eastern Pennsylvania
market, including Philadelphia, with an equal focus on customer retention and
new business development.
GROWTH OPPORTUNITIES
Gibraltar, our commercial finance company headquartered in New York City, will
continue to offer its specialized financial services in our tri-state market.
Another area where we see good growth potential is our leasing division, which
provides equipment financing and allows customers to take advantage of improved
cash flows and flexible financing.
Our company continues to be very active in working with government
guaranteed programs for small businesses and minorities. In 1993, we
introduced a program targeted at lending to minority-owned businesses. We
expect to expand this program in 1994.
10
<PAGE> 14
[PHOTO OF LIONS]
<PAGE> 15
Continued
WHOLESALE LENDING
[PICTURE]
DOLPHINS ARE SKILLED COMMUNICATORS. OUR LENDERS ROUTINELY STAY IN TOUCH WITH
CUSTOMERS TO PROVIDE TECHNICAL EXPERTISE AND ASSISTANCE.
AVERAGE COMMERCIAL LOANS
($ in billions)
[GRAPH]
Today's corporate customers demand ever greater control over their cash
flow. To attack this opportunity, our new remote computer banking products
allow business owners to move money, reconcile accounts, and receive bank
information without ever leaving their offices. In addition, we're refining
our corporate cash management products so that they continue to provide the
highest standards of quality and value.
TRADE SERVICES We have increased our capabilities in the international
sector including foreign exchange, import/export financing and our overseas
correspondent banking network. Our volume of transactions in trade services has
more than doubled in the last three years, and is targeted for further
expansion.
The international sector continues to offer growing opportunities for
new business. Some of the leading importers and exporters in the country are
located within our geographic area.
One example of our services is the automated letter of credit, whereby
companies can initiate letters of credit from their own offices. We have
invested in advanced technology in order to serve the needs of our customers
and are recognized as an industry leader in this product.
In the new structure, UJB Financial's policies and practices throughout
the entire organization will be standardized to reflect our common business
culture. In real estate lending, for example, we have sharpened our marketing
focus to better serve the professional real estate investor and developer.
We have put more of our senior officers into the marketplace. Our goal
is to have our relationship managers spend the majority of their time with
customers.
INCREASED EFFICIENCY
Advanced technology continues to contribute to our success. Work stations at
our lending officers' desks now provide immediate online access to customer
information including commercial loan and deposit information, relationship
management and tracking, loan documents, the bank's credit policy and
procedures manual and the latest funding rates.
Above all, UJB Financial remains a relationship driven organization.
This is evident in our delivery of a full array of products, the caliber of our
lending officers, and the reputation and presence that we enjoy in the
marketplace. While many banks are focused on the single transaction at hand, we
seek a full, mutually beneficial relationship.
12
<PAGE> 16
[PHOTO OF DOLPHIN]
<PAGE> 17
RETAIL BANKING
[PICTURE]
JUST AS A GAZELLE REACTS QUICKLY TO CHANGES IN THE ENVIRONMENT, OUR RETAIL
BANKERS MOVE SWIFTLY TO SEIZE OPPORTUNITIES IN THE CHANGING CONSUMER
MARKETPLACE.
CUSTOMER CALL CENTER
(number of calls, in millions)
[GRAPH]
In the new structure, retail banking will place an added emphasis on
consumer loans, small business banking, the Merchant BankCard operation and
relationship banking. There will be a portfolio manager for each key line of
consumer lending -- home equity, auto finance and personal loans -- with each
manager fully responsible for products, loan approvals and profitability.
Again in 1993, UJB Financial ranked second in market share of total
consumer loans among New Jersey banks. To further strengthen our competitive
edge, we are now reengineering and streamlining the loan approval process.
These steps, plus improved automation, should significantly reduce the time it
takes to approve a loan.
Savings in 1994 in the consumer loan area will come from consolidating
and fully automating originations and also from adopting the latest
state-of-the-art technology to rate loan risk.
CALL CENTER A high percentage of New Jersey consumer loans originate at our
Customer Call Center where operators processed 3.2 million calls last year, a
29 percent increase over 1992. When customer questions are handled at the
Center, branch personnel can concentrate on selling bank services in the
branches.
The Center now also services our telephone home banking customers. To
accomplish this, we've introduced the latest automated voice response
technology so that customers can call one 800 number to pay bills, transfer
funds between accounts, receive account and product information or handle other
banking activities.
SMALL BUSINESS One important change in the restructuring is the creation of
a separate unit in the retail banking division to serve small businesses with
sales of $2 million and under. This way, small business customers will receive
closer attention with specialized service and products tailored for their
unique needs. Our goal is to significantly increase our small business customer
base in the next three years.
Our existing network of 258 branches is a magnet for small businesses
and affords us the opportunity to establish personal relationships between
business owners and our branch managers. To serve this niche, we will be
simplifying credit products, streamlining the credit approval process and
creating packages of compatible products.
14
<PAGE> 18
[PHOTO OF GAZELLE]
<PAGE> 19
Continued
RETAIL BANKING
[PICTURE]
OUR ROOTS RUN DEEP IN OUR LOCAL COMMUNITIES, AND WE HAVE AN EXTENSIVE BRANCH
NETWORK TO SERVE CUSTOMERS.
[GRAPH]
MERCHANT BANKCARD SALES VOLUME
($ in billions)
TAILORED PRODUCTS Over the past year, we have introduced two important
products specifically for this market. The first is the small business line of
credit which features a three year revolving line of credit that doesn't have
to be renewed yearly.
UJB Financial was the first major bank in both New Jersey and
Pennsylvania to offer the second product, Business Express/PC. An electronic
banking service, Business Express/PC links our bank to small businesses and
allows the owners to better manage their funds from the convenience of their
own offices. Using personal computers, small business owners can review daily
account balances, transfer funds between internal accounts, initiate stop
payments and automate account reconcilement. This product has been very well
received by customers.
MERCHANT BANKCARD Many small businesses in our market area are long-term
customers of our Merchant BankCard operation. We have the largest merchant
services operation in New Jersey, and are the 39th largest processor in the
United States with over $1 billion in annual merchant sales. In 1993, we
substantially improved profits in this area using a new pricing matrix and by
expense reductions.
UJB Financial continues to excel at generating products for consumers in
the '90s. The United Jersey Global Access card is one example of a highly
successful offering which is contributing substantial fee income after only one
year of operation. Customers can use the card at an automated teller machine
(ATM), and also have the convenience of accessing their checking accounts for
purchases at any VISA merchant worldwide.
ATM NETWORK Serving customers also means ongoing improvement of our ATM
network. With our machines accessible 98 percent of the time, we continue to
rank among the top service providers in the country. In 1993, we replaced 30
percent of our existing ATMs with technologically advanced machines which will
carry us into the next decade. This replacement program will continue
throughout 1994.
Branch automation has produced significant cost savings for the company.
During the fourth quarter of 1993, we completed the conversion of all New
Jersey branches, and by second quarter 1994 we expect all Pennsylvania branches
to be automated. The new system is improving our sales force's performance and
producing meaningful expense reductions.
16
<PAGE> 20
[PHOTO OF FOREST]
<PAGE> 21
MORTGAGE BANKING
[PICTURE]
CUSTOMERS' MORTGAGE NEEDS VARY, AND WE ARE FOCUSED ON PROVIDING QUALITY
PRODUCTS THAT ARE INNOVATIVE AND AFFORDABLE.
[GRAPH]
RESIDENTIAL MORTGAGE SERVICING PORTFOLIO
($ in billions)
UJB Financial is a major force in the origination of home mortgages and in
mortgage loan servicing. Origination activity continues to be very brisk, and
should remain so as long as interest rates are favorable. The number of loans
serviced is also expected to grow through increased origination activity and
the purchase of servicing rights.
In 1993, we combined our origination and servicing units under one
umbrella. This allows us to operate as a full service mortgage banker and
better serve customers from the mortgage application process through final
payoff.
Under this new line of business structure, our focus in New Jersey and
Pennsylvania will be unified. In Pennsylvania, we have substantially increased
our sales force, opened a new regional mortgage office, and reorganized the
existing offices to aggressively tap into the eastern Pennsylvania market with
our expanded product lines.
With the new structure, our ability to cross-sell products with other
business units has also been intensified.
PRODUCTION STREAMLINED
Going forward, we will increase the use of automation to streamline mortgage
production which will allow us to provide faster customer service as well as
increased productivity in both states.
We continue to explore opportunities to acquire residential mortgage
servicing portfolios, as they provide sources of additional service fee income.
Likewise, we remain competitive in our pricing of mortgage products which
stimulates the flow of new originations and also feeds the servicing income
stream. We have an ongoing program to assess the needs of our customers, so
that we can deliver products that are both innovative and affordable.
CRA LENDING UJB Financial has always been aggressive in originating
mortgages in accordance with the Community Reinvestment Act (CRA). In 1993, we
provided approximately $30 million in CRA-related residential first mortgage
loans, more than double four years ago. We have further stepped up activity to
bring an increased awareness of our products to the low-and-moderate-income
segment of our region's population.
In the mortgage area, as in our other core business lines, a senior
management team will be working to capitalize on every possible relationship
stemming from contact with the customer. We see the profitability of each line
of business as everyone's responsibility. This strategy is in line with our
commitment to sell more products, to better serve our customers and to be more
profitable.
18
<PAGE> 22
[PHOTO OF BIRD IN NEST]
<PAGE> 23
INVESTMENT MANAGEMENT
[PICTURE]
OUR INDIVIDUAL CLIENT RELATIONSHIPS ARE HIGHLY DIVERSIFIED, AS OUR SUCCESSFUL
INVESTMENT MANAGEMENT PROGRAM SERVES ALL INCOME LEVELS.
[GRAPH]
TOTAL TRUST ASSETS UNDER MANAGEMENT
($ in billions)
Changing market conditions and UJB Financial's determination to secure its
competitive place in the banking arena have led to the formation of a
consolidated private banking/investment management group.
That group will be positioned to meet any client's investment or
fiduciary needs, as well as provide traditional deposit and credit services.
This new integrated approach will be built around a sales team and headed by a
relationship manager. Relationship is the key word, and the relationship
manager will be the primary contact for the client.
These managers will make all our banking services accessible to clients
including trust and investment services, deposit and other branch banking
activities, credit facilities including personal credit, jumbo mortgages,
estate planning, financial and retirement planning, tax preparation and
brokerage services.
TRUST ASSETS At the client's request, the relationship manager will bring in
specialists, and they will work as a team to provide whatever services the
customer needs. This one-stop shopping approach is ideally suited for today's
busy customers.
Trust assets under administration by our Investment Management Division
grew to $17.5 billion at year-end 1993, a 16 percent increase over a year ago.
As we continue to aggressively penetrate the market, our new business line
structure should provide opportunities for accelerated growth.
One reason for the success of our investment management program is that
we serve all levels of wealth. Individual client relationships range from
totally managing a portfolio of equities and bonds, to providing tax-exempt
opportunities, to offering investor services to fee-conscious clients. We are
similarly positioned to meet the needs of the corporate marketplace with
complete employee benefit services.
PILLAR FUNDS During 1993, our Pillar Mutual Funds surpassed $1 billion in
assets, and these funds continue to generate significant fee income for the
company. The Pillar Funds are popular because they provide alternative
investment products and offer other options for retail consumers as well as
institutions.
UJB Investor Services, formerly Richard Blackman & Co., Inc., is the
largest discount brokerage in New Jersey. During 1994, we anticipate that this
entity will be able to offer full brokerage services including the ability to
recommend mutual funds. The existing discount operation would continue to offer
its traditional low fees.
20
<PAGE> 24
[PHOTO OF SEA SHELLS]
<PAGE> 25
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
COMMUNITY REINVESTMENT--AN INTEGRAL PART OF OUR BUSINESS STRATEGY
=================================================================
OUTREACH PROGRAMS
- -----------------
UJB Financial views community reinvestment as an integral part of its overall
business strategy and has designed a program of community outreach and response
that touches all corners of the organization.
In 1993, in keeping with the goals of the Community Reinvestment Act (CRA),
the company committed nearly $350 million to New Jersey and Pennsylvania
communities through construction and mortgage loans for low-and-moderate-income
housing, loans to community-based and minority-owned businesses, home
improvement loans, grants and contributions.
BUILDING PARTNERSHIPS
- ---------------------
Programs that stress cooperative endeavors make community reinvestment work for
both the company and our communities. At United Jersey Bank, the Community
Commercial Lending Group pledged $10 million in loans to minority-owned
businesses to help fulfill economic development goals in urban areas. At the
same time, the bank's association with JP Affordable Housing, Inc. has resulted
in $16.5 million in construction financing for low-and-moderate-income housing
in Newark and Jersey City.
It was the ongoing relationship between United Jersey Bank/South's vice
president for community affairs and the Latin American Economic Development
Association that contributed to the creation of the Camden Community Credit
Union, which serves the financial needs of that city's low-income population.
Technical assistance from a bilingual commercial loan officer has been
instrumental in the credit union's successful operation, and UJB Financial's
Investment Management Division is providing advice on how to maximize return on
working capital free of charge.
HELPING COMMUNITIES
- -------------------
In both New Jersey and Pennsylvania, the member banks' small business and
economic development programs complement their significant affordable housing
efforts. In 1993, First Valley Bank extended approximately $30 million in
construction loans for low-and-moderate-income housing, and provided another
$47.5 million in non-construction commercial loans for business growth and
development in low-and-moderate-income areas.
UJB Financial views the integration of affordable housing with job growth as
essential to financial health and economic stability in our communities. The
company participates in the New Jersey Community Home Buyer's Counseling
Coalition, the New Jersey Mortgage Finance Agency Community Home Buyer's
Program and Welcome Home, all of which provide special mortgage assistance to
low-and-moderate-income buyers. In 1993, our member banks received certified
lender status from the United States Small Business Administration,
traditionally a source of funds for minority-owned businesses.
SHARING GOALS
- -------------
Restructuring will help us to more closely align CRA resources with the
company's key business objectives. We anticipate that consolidation of the
member banks will enable us to deliver community-focused products and services
even more effectively than before.
22
<PAGE> 26
UJB FINANCIAL CORP. AND SUBISIDIARIES
-------------------------------------
BOARD OF DIRECTORS
[PHOTO OF BOARD OF DIRECTORS]
<PAGE> 27
1993 FINANCIAL REVIEW/FINANCIAL STATEMENTS AND NOTES
24
<PAGE> 28
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
1993 FINANCIAL REVIEW
=====================
INTRODUCTION
Continued earnings growth, improved asset quality and strengthened capital
ratios highlighted the performance of UJB Financial during 1993. UJB Financial
recorded its third year of improved earnings. As a result of these
improvements, the common stock dividend was increased twice during the year.
Earnings amounted to $1.49 per share, a 36.7% increase over the $1.09
earned in 1992 and a 231.1% increase over the $.45 earned in 1991. Earnings in
1993 included a third quarter restructuring charge of $21.5 million, which
reduced after tax earnings by $12.7 million, or $.25 per share. In addition, a
benefit of $3.8 million, or $.07 per share, was recorded from the cumulative
effect of a change in accounting principle recorded on January 1, 1993 with the
adoption of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109).
[GRAPH]
EARNINGS PER SHARE
(dollars)
Asset quality improved significantly as a result of concentrated efforts
towards reducing problem assets. During 1993, non-performing loans and other
real estate owned (OREO) declined 33.0%, or $159.6 million. Non-performing
loans have now decreased for ten consecutive quarters since peaking in the
second quarter of 1991.
Capital ratios continued to improve during 1993 due to increased earnings.
At December 31, 1993, Tier I capital was 9.37% and total capital was 12.43%,
compared to 8.94% and 12.05%, respectively, at December 31, 1992. The leverage
ratio at year end was 7.07%, compared to 6.67% the prior year.
The increase in earnings and improved asset quality enabled the quarterly
common stock dividend to be increased twice during 1993 to an annual dividend
rate of $.84 per share, a 40% increase over the $.60 dividend rate at year-end
1992.
RESULTS OF OPERATIONS
Net income for the year ended December 31, 1993 was $78.1 million compared to
$53.8 million the prior year, an increase of $24.2 million, or 45.0%. On a per
share basis, earnings were $1.49, compared with $1.09 reported in 1992.
Excluding the effect of the 1993 third quarter restructuring charge, quarterly
earnings have shown continued improvement.
Improved earnings in 1993 were primarily the result of growth in net
interest income and a reduction in the provision for loan losses. Net interest
income rose 4.6% over the prior year as a result of an increase in non-interest
bearing demand deposits, the lower interest rate environment, and the favorable
impact of lower non-performing loans on earning assets. The loan loss provision
decreased $43.5 million as a result of the declining levels of non-performing
loans. These factors were partially offset by a $43.3 million increase in
non-interest expenses, including the restructuring charge of $21.5 million.
INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES
Average interest earning assets totaled $12.5 billion in 1993, an increase of
$154.1 million, or 1.2%, compared to 1992. Most of this increase was in the
investment portfolio, including investment securities available for sale, and
was partially offset by decreases in the loan portfolio and Federal funds sold
and securities purchased under agreements to resell. The investment portfolio,
including securities available for sale, increased $288.6 million, or 8.5%,
during 1993. The loan portfolio declined $74.6 million, or.8%, to $8.7 billion
during 1993. In addition, Federal funds sold and securities purchased under
agreements to resell declined $72.1 million, or 71.1%, to average $29.3
million in 1993.
Average interest bearing liabilities totaled $10.0 billion in 1993, a
decrease of $289.2 million, or 2.8%, compared to 1992. This decrease was
primarily due to declines in interest bearing deposits and other borrowed funds
of $277.3 million and $117.3 million, respectively. These decreases were
partially offset by a $140.8 million increase in long-term debt resulting from
the $175.0 million subordinated note offering in December 1992.
The tax-equivalent yield on total interest earning assets amounted to
7.21%, a decline of 67 basis points from 7.88% in 1992. The cost of interest
bearing liabilities decreased 82 basis points to 3.22% from 4.04% for 1992. Net
interest spread increased by 15 basis points during 1993 to 3.99% from 3.84% in
1992.
25
<PAGE> 29
1993 FINANCIAL REVIEW (continued)
- ---------------------------------
INVESTMENT SECURITIES AVAILABLE FOR SALE
Investment securities available for sale are held for an indefinite period of
time and may be sold in response to changing market and interest rate
conditions as part of the asset/liability management strategy. These securities
averaged $754.2 million during 1993, compared with an average balance of $126.8
million in 1992, an increase of $627.4 million. The average balance for 1993
differs significantly from the year-end balance of $1.2 billion as a result of
$666.7 million of transfers from the investment securities portfolio in
anticipation of the January 1, 1994 adoption of SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." These transfers consisted
primarily of collateralized mortgage obligations (CMOs) which have the
potential to extend beyond the interest rate risk limits established by
regulatory guidelines. As a result, these securities are required to be
classified as investment securities available for sale. This portfolio is
currently carried at the lower of aggregate cost or market. However, upon the
adoption of SFAS 115 on January 1, 1994, the available-for-sale portfolio will
be carried at market value. Adjustments to the carrying value of the portfolio
will be recorded as an adjustment, net of tax, to retained earnings. Gains or
losses will be recorded on the securities as the investments are sold or when a
loss is considered other than temporary.
During the year there were $509.6 million of investments sold for a net
gain of $8.3 million. These sales were primarily taken to reduce the prepayment
risk associated with higher coupon CMOs in a declining rate environment and to
take advantage of current market conditions.
The year-end available-for-sale portfolio of $1.2 billion was primarily
comprised of $474.6 million of CMOs and $669.8 million of U.S. Government and
Federal agency securities. The market value of the available-for-sale portfolio
was greater than the carrying value by $15.5 million at December 31, 1993.
INVESTMENT SECURITIES
The investment portfolio averaged $2.9 billion during 1993, a decrease of
$338.8 million, or 10.4%, from 1992. This decrease was primarily attributed to
the high amount of prepayments on corporate and agency CMOs and the transfer of
securities to the available-for-sale category. Investment securities are
carried at historical cost and are held until maturity. Upon adoption of SFAS
115 on January 1, 1994, investment securities will continue to be valued at
historical cost. The average estimated life of investment securities, adjusted
for prepayments, at December 31, 1993 was 4 years, 9 months.
U. S. Government and Federal agency securities averaged $2.0 billion
during 1993, a decrease of $594.5 million, or 22.5%. During the year, cash
flows and maturities were reinvested in corporate CMOs. Transfers to investment
securities available for sale, principally agency CMOs, amounted to $486.4
million at December 31, 1993. The yield on this portfolio declined 58 basis
points to 6.65% in 1993, compared to 7.23% in 1992.
State and municipal securities declined $66.7 million, or 16.4%, to
average $340.1 million during the year. The tax-equivalent yield on this
portfolio was 11.12% in 1993 compared to 10.97% in 1992, an increase of 15
basis points.
Other securities averaged $550.5 million during 1993, an increase of
$322.4 million, or 141.4%, compared to 1992. Transfers to investment securities
available for sale, principally corporate CMOs, amounted to $180.3 million at
December 31, 1993. The yield on this portfolio declined 94 basis points to
5.46% in 1993 compared to 6.40% in 1992.
OTHER INVESTMENTS
Trading account securities are purchased primarily with the intent of selling
them in the near future. These securities are reported at market value with
unrealized gains and losses included in earnings. Trading account securities
averaged $31.4 million for the year, an increase of $8.7 million, or 38.3%,
from the prior year average of $22.7 million. Trading account sales resulted in
net gains of $1.9 million for the year, relatively unchanged from the prior
year.
Federal funds sold and securities purchased under agreements to resell
averaged $29.3 million during 1993 compared to $101.4 million in 1992, a
decrease of $72.1 million, or 71.1%. The yield on Federal funds sold and
securities purchased under agreements to resell declined 114 basis points to
3.18% during 1993, reflecting the lower interest rate environment.
LOANS
Total loans averaged $8.7 billion during 1993, a decrease of $74.6 million, or
.8%, compared to 1992. The slight decline in total loans was principally the
result of a 4.3% decline in commercial loans, partially offset by 6.0% growth
in mortgage loans. The yield on the total portfolio declined 41 basis points to
7.61% in 1993 from 8.02% in 1992. This decline resulted primarily from the
lower interest rate environment in 1993 and its impact on new business and loan
repricings.
The following chart shows the composition and trends in each of the loan
categories for the past six years.
[GRAPH]
AVERAGE LOANS
($ in billions)
Commercial Loans
Mortgage Loans
Instalment Loans
During 1993, the commercial loan portfolio declined 4.3%, or $195.7
million, to average $4.4 billion. Weak commercial loan demand, commercial loan
charge offs of $115.6 million, and transfers to OREO accounted for the decline.
At December 31, 1993, the commercial loan portfolio totaled $4.2 billion and
26
<PAGE> 30
represented 49.9% of the total loan portfolio, relatively unchanged from the
prior year. The yield on the commercial loan portfolio declined 21 basis points
to 7.00% in 1993 from 7.21% the prior year. The commercial loan portfolio
consists primarily of commercial and industrial loans, construction and
development loans, and commercial loans secured by real estate.
The commercial and industrial portfolio (C&I) was $3.4 billion at year-end
1993, relatively unchanged from the prior year. This portfolio continued to
mirror the business diversification in the region with no concentrations
greater than 5% of total C&I loans made to any one industry. At December 31,
1993, there were no significant exposures in such industries as airlines,
casinos, agriculture, highly leveraged or oil and gas-related companies.
Construction and development loans amounted to $867.1 million at December
31, 1993, a decline of $135.8 million, or 13.5%, compared to 1992. The decline
in the portfolio was the result of completed projects going to permanent
financing. Also contributing to the decline were loans charged off and
transfers to other real estate owned.
The accompanying table illustrates the composition of the construction
portfolio.
<TABLE>
<CAPTION>
December 31
--------------------
In thousands 1993 1992
=================================================================================
<S> <C> <C>
Commercial:
Office . . . . . . . . . . . . . . . . . . . . . . . $186,294 $ 245,403
Warehouse . . . . . . . . . . . . . . . . . . . . . 96,729 81,337
Shopping center . . . . . . . . . . . . . . . . . . 89,033 121,495
Other . . . . . . . . . . . . . . . . . . . . . . . 46,049 53,645
- ---------------------------------------------------------------------------------
418,105 501,880
Residential:
Single family . . . . . . . . . . . . . . . . . . . 109,625 139,737
Condominium . . . . . . . . . . . . . . . . . . . . 68,225 59,012
Apartment . . . . . . . . . . . . . . . . . . . . . 27,030 14,128
- ---------------------------------------------------------------------------------
204,880 212,877
Land:
Residential . . . . . . . . . . . . . . . . . . . . 76,974 102,259
Commercial . . . . . . . . . . . . . . . . . . . . . 62,381 76,260
- ---------------------------------------------------------------------------------
139,355 178,519
Lines of credit:
Secured . . . . . . . . . . . . . . . . . . . . . . 93,201 93,969
Unsecured . . . . . . . . . . . . . . . . . . . . . 11,522 15,614
- ---------------------------------------------------------------------------------
104,723 109,583
- ---------------------------------------------------------------------------------
$867,063 $1,002,859
=================================================================================
</TABLE>
Total mortgage loans averaged $2.3 billion in 1993, an increase of $132.0
million, or 6.0%, from 1992. Total year-end mortgage loans were $2.4 billion,
an increase of 2.2% over the prior year. The yield on the portfolio decreased
72 basis points to 8.18%, primarily from new business and the repricing of
adjustable rate loans in the lower rate environment.
At December 31, 1993, residential mortgage loans were $832.5 million, down
$7.4 million, or .9%, from 1992. This decrease was the result of a $40.8
million sale of long-term, fixed-rate loans that were held for investment.
During the year $462.0 million of residential mortgage loans were closed,
of which $274.8 million have been or will be sold in the secondary market.
Adjustable rate loans are generally retained for long-term investment, while
fixed-rate loans are sold in the secondary market. The majority of the loans
are sold with servicing retained to provide an ongoing source of fee income.
At December 31, 1993, $33.8 million of mortgage loans were held for sale in the
secondary market and were carried at the lower of aggregate cost or market
value. Also included in mortgage loans were $1.5 billion of commercial
mortgages, which increased $57.5 million over 1992. These loans are generally
for owner occupied properties and complement a broader commercial lending
relationship.
Total instalment loans averaged $2.0 billion for the year, a decrease of
$10.9 million, or .5%, from 1992. Although new volume for the year remained
relatively strong, a significant portion of the home equity portfolio was
prepaid as customers refinanced instalment loans with lower rate first mortgage
loans.
During the year, UJB Financial featured an automobile loan promotion,
"Refi Your Auto Loan," which increased the automobile loan portfolio by
25.9% to $422.7 million at year-end 1993. The home equity portfolio declined
$113.0 million, or 7.6%, to $1.4 billion at December 31, 1993. The yield on the
instalment loan portfolio was 8.24%, a decline of 62 basis points from 8.86%
earned in 1992.
DEPOSITS
During 1993 investors continued to search for higher yielding investment
alternatives, such as the stock market or mutual funds. As a result, the
banking industry experienced an outflow of core deposits. Nonetheless, UJB
Financial sustained only a modest 2.8% decline in total deposits at year-end
1993. Total year-end deposits for 1993 and 1992 were $11.5 and $11.8 billion,
respectively. Total savings, retail time and demand deposits averaged $11.2
billion during 1993, an increase of $287.5 million, or 2.6%, compared to the
prior year. Growth occurred in both savings and demand deposits. This growth
was partially offset by a decline in retail time deposits. In this current
lower interest rate environment, customers have shifted their funds into more
liquid, interest-sensitive deposit accounts rather than longer term time
deposits.
The following chart shows average demand deposits for the past six years.
[GRAPH]
AVERAGE DEMAND DEPOSITS
($ in billions)
27
<PAGE> 31
1993 FINANCIAL REVIEW (continued)
- ---------------------------------
Demand deposits continued to experience strong growth in both business and
municipal accounts. Demand deposits increased 18.5%, or $403.4 million, over
1992 to average $2.6 billion for the year. At December 31, 1993, these deposits
totaled $2.8 billion, an increase of 8.3%, or $215.5 million, over 1992. The
increase in demand deposits was a contributing factor in the growth of net
interest margin.
Total savings deposits, including preferred money market and savings
accounts, increased $386.1 million, or 7.8%, to average $5.3 billion during
1993. These deposits amounted to $5.4 billion at year end, up $143.4 million,
or 2.7%, compared to the prior year. During 1993, the preferred money market
account, a tiered-rate product, increased $185.6 million, or 26.9%, to average
$875.6 million. The increase in savings was $189.3 million for 1993. The cost
of total savings deposits declined 83 basis points to 2.27% in 1993 compared to
3.10% in 1992.
Other time deposits, which consists primarily of retail certificates of
deposit, declined $502.0 million, or 13.1%, during 1993 to average $3.3
billion. The cost of other time deposits declined to 4.20% in 1993 from 5.17%
in 1992, or 97 basis points.
Commercial certificates of deposit $100,000 and over averaged $256.0
million during 1993, a decrease of $161.4 million, or 38.7%, compared to 1992.
At December 31, 1993, these funds totaled $226.6 million, a decrease of $18.2
million, or 7.4%, compared to the prior year. These funds are primarily used as
an additional funding source. Due to excess liquidity and modest earning asset
growth, the level of commercial certificates of deposit was reduced during the
year. The cost of commercial certificates of deposit declined 105 basis points
to 2.86% during the year compared with 3.91% in 1992. The cost of all interest
bearing liabilities declined 82 basis points during the year to 3.22%, compared
with 4.04% in 1992, reflecting the lower interest rate environment.
BORROWED FUNDS
Borrowed funds consist of Federal funds purchased, repurchase agreements,
treasury tax and loan deposits and other forms of short-term borrowings.
Borrowed funds are normally used as an additional source of funding for the
loan and investment portfolios. With a modest increase in earning assets,
excess average deposit growth was used to reduce the level of borrowed funds.
During 1993, these funds declined $117.3 million, or 12.9%, to average $789.8
million.
Commercial paper averaged $58.9 million during the year, a decrease of
$35.4 million, or 37.5%, from 1992, and amounted to $33.4 million at year end.
Commercial paper is used as a primary funding source for the non-bank
subsidiaries. The decrease was directly attributable to the decline in the
funding needs of the second mortgage subsidiary. The cost of commercial paper
decreased 66 basis points to 2.95% in 1993 from 3.61% in 1992.
LONG-TERM DEBT
Long-term debt averaged $216.8 million for 1993, an increase of 185.3%, or
$140.8 million, over 1992. The increase in average long-term debt was
primarily due to a December 1992 public offering of $175.0 million of 8.625%
capital-qualifying subordinated debt. During 1993, the 12.95% mortgage note of
$18.3 million was prepaid, and a $20.0 million private placement note was
issued at 7.95%. As of December 31, 1993, total long-term debt declined $8.1
million, or 3.7%, to $208.5 million compared to December 31, 1992. Of the
$208.5 million, $184.3 million qualified as risk-based Tier II capital. For
additional information, see Note 12 of the Notes to Consolidated Financial
Statements.
NET INTEREST INCOME
Interest income on a tax-equivalent basis was $900.8 million, a decrease of
$71.6 million, or 7.4%, compared to 1992. The decline in interest income was
primarily due to the reinvestment of cash flows and the repricing of variable
rate loans in a lower rate environment, which accounted for a decrease of $83.7
million. This decline was offset by a $12.1 million benefit resulting from
higher levels of interest earning assets. The yield on interest earning assets
declined 67 basis points to 7.21% in 1993 from 7.88% in 1992.
Interest expense was $321.0 million for 1993, a decrease of $94.1 million,
or 22.7%, from $415.1 million a year ago. The lower rates incurred on deposits
and other funding sources accounted for $82.4 million of the decrease, while
$11.7 million of the decrease was attributable to a decline in average interest
bearing liabilities. The cost of all interest bearing deposits declined 99
basis points to 3.01% in 1993 from 4.00% in 1992.
The following chart illustrates interest spread and interest margin for
the past six years.
[GRAPH]
INTEREST SPREAD & INTEREST MARGIN
SPREAD MARGIN
Net interest income on a tax-equivalent basis amounted to $579.8 million,
an increase of $22.5 million, or 4.0%, from $557.3 million earned in 1992. The
net interest spread percentage on a tax-equivalent basis, the difference
between the rate earned on interest earning assets and the rate paid on
interest bearing liabilities, increased to 3.99% for the year ended December
31, 1993, compared to 3.84% earned in 1992. Net interest margin (tax-equivalent
net interest income as a percentage of average interest earning assets)
increased to 4.64% during 1993 compared to 4.52% in 1992. The increase in the
net interest spread percentage and net interest margin reflected wider interest
spreads resulting from the growth in demand deposits, repricing of interest
bearing liabilities in a declining rate environment, and the benefit of reduced
levels of non-performing loans.
28
<PAGE> 32
NON-INTEREST INCOME
Total non-interest income, including securities gains, amounted to $178.3
million in 1993 compared to $176.2 million in 1992, an increase of $2.1
million, or 1.2%. Excluding investment securities gains, non-interest income
was up 7.2% over 1992.
Non-interest income categories compared to the same period in 1992 are
shown in the accompanying table.
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------
In thousands 1993 1992 Amount Percent
=======================================================================================
<S> <C> <C> <C> <C>
Service charges on deposit
accounts . . . . . . . . . . . $ 60,126 $ 54,031 $ 6,095 11.3%
Service and loan fee income . . . 34,437 32,711 1,726 5.3
Trust income . . . . . . . . . . 21,852 19,837 2,015 10.2
Trading account gains . . . . . . 1,884 1,804 80 4.4
Other . . . . . . . . . . . . . . 51,099 49,641 1,458 2.9
- ---------------------------------------------------------------------------------------
169,398 158,024 11,374 7.2
Investment securities gains . . . 8,877 18,195 (9,318) (51.2)
- ---------------------------------------------------------------------------------------
$178,275 $176,219 $ 2,056 1.2%
=======================================================================================
</TABLE>
Service charges on deposit accounts increased $6.1 million, or 11.3%, to
$60.1 million in 1993. Service charges on business demand deposit accounts
increased 14.1%, or $3.3 million, while service charges on personal accounts
increased 8.1%, or $1.9 million, due to higher fee schedules.
Service and loan fee income increased $1.7 million, or 5.3%, to $34.4
million in 1993. Merchant card fees increased 2.7% to $19.5 million while loan
fees increased 8.8% to $14.9 million.
Trust income rose $2.0 million, or 10.2%, to $21.9 million in 1993.
Assets under trust administration, including corporate trust debt issue
trusteeships, grew from $15.1 billion at December 31, 1992 to $17.5 billion
as of December 31, 1993. Included in these figures are assets under
discretionary management, which have grown from $3.3 billion to $3.9 billion
during the same period. Additionally, in April 1992 UJB Financial established
a family of mutual funds, The Pillar Funds, to give investors a broad range of
investment options. These funds grew to $1.1 billion by year-end 1993. Total
fee income generated from the Pillar Funds for 1993 and 1992 amounted to $4.8
million and $2.0 million, respectively.
Other income amounted to $51.1 million, an increase of $1.5 million, or
2.9%, compared to the prior year. This increase was primarily due to the
following: $2.8 million increase in discount brokerage fees; $1.7 million
increase in international fees; and $1.1 million increase in insurance service
fees. Additionally, a $1.8 million gain on sale of loans was recorded on the
sale of $40.8 million of long-term, fixed-rate residential mortgage loans held
in portfolio. These increases were offset by a gain in 1992 of $4.7 million
from the sale of the former headquarters of a bank subsidiary in Jersey City,
New Jersey.
For the year ended December 31, 1993, securities gains were $8.9 million
compared to $18.2 million in 1992. These gains were realized as securities
available for sale were sold to reduce prepayment risk in the CMO portfolio
resulting from the declining interest rate environment.
NON-INTEREST EXPENSES
Non-interest expenses totaled $546.9 million in 1993, an increase of $43.3
million, or 8.6%, compared to 1992. Excluding the restructuring charges of
$21.5 million, non-interest expenses would have been $525.4 million, an
increase of $21.8 million, or 4.3%, over 1992.
Non-interest expense categories compared to the prior year are shown in
the accompanying table.
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------
In thousands 1993 1992 Amount Percent
=======================================================================================
<S> <C> <C> <C> <C>
Salaries . . . . . . . . . . . . $182,892 $176,576 $ 6,316 3.6%
Pension and other employee
benefits . . . . . . . . . . . 57,940 50,733 7,207 14.2
Occupancy, net . . . . . . . . . 47,775 47,122 653 1.4
Furniture and equipment . . . . . 45,570 42,373 3,197 7.5
Other real estate owned . . . . . 40,154 37,640 2,514 6.7
FDIC insurance assessment . . . . 28,617 25,262 3,355 13.3
Advertising and public
relations . . . . . . . . . . 10,241 10,282 (41) (.4)
Other . . . . . . . . . . . . . . 112,175 113,576 (1,401) (1.2)
- ---------------------------------------------------------------------------------------
525,364 503,564 21,800 4.3
Restructuring charges . . . . . . 21,500 -- 21,500 --
- ---------------------------------------------------------------------------------------
$546,864 $503,564 $ 43,300 8.6%
=======================================================================================
</TABLE>
Salaries expense totaled $182.9 million in 1993, an increase of $6.3
million, or 3.6%, compared to 1992. Approximately $3.7 million of the increase
was due to annual merit increases. The balance was due to commissions and
awards for the sale of various products, and temporary help related to
consolidation projects.
Pension and other employee benefits of $57.9 million for the year ended
December 31, 1993 were $7.2 million, or 14.2%, above 1992. The incremental
expenses related to the adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," amounted to $2.9 million in 1993.
Medical insurance and dental costs rose $2.1 million for the year. The
remaining increase was attributable to higher pension costs, unemployment taxes
and other employee benefits.
Furniture and equipment expense amounted to $45.6 million, an increase of
$3.2 million, or 7.5%, over the $42.4 million in 1992. This increase was
attributable to lease costs associated with new equipment and computers to
support the branch automation project.
Other real estate owned expenses totaled $40.2 million for 1993 and were
up $2.5 million, or 6.7%, over 1992. Included in this total was a provision of
$31.6 million for valuation adjustments to maintain the carrying value of the
OREO portfolio at the lower of cost or fair value less costs to sell on an
individual property by property basis. Also included in this total were
expenses related to holding and operating foreclosed properties. These costs
declined by 13.3%, or $1.3 million, in 1993 to $8.6 million for the year.
The FDIC insurance assessment of $28.6 million reflected an increase of
$3.4 million, or 13.3%, above 1992. The amount paid is based upon assessed
rates charged on the level of outstanding deposits. The FDIC changed their
assessment methodology effective January 1, 1993. Banks are no longer charged
a flat rate but are now assessed based on the bank's regulatory rating.
29
<PAGE> 33
1993 FINANCIAL REVIEW (continued)
- ---------------------------------
Other expenses were $112.2 million in 1993, a decrease of $1.4 million, or
1.2%, from 1992. Increases were as follows: $1.9 million in merchant
interchange charges, $1.1 million in communications costs to support expansion
of on-line systems, $1.0 million in messenger services, and $.9 million in
legal fees related to continuing litigation. These increases were offset by
lower expenses on non-performing loans and charge offs on check losses.
In the third quarter of 1993, a charge of $21.5 million was recorded to
reflect the costs associated with consolidation of the bank subsidiaries and
reorganizing the company along business lines. The three New Jersey banks and
three Pennsylvania banks will be consolidated into one New Jersey bank and one
Pennsylvania bank. In addition, the company will be aligned along lines of
business, and will concentrate on core businesses: wholesale lending, retail
banking, mortgage banking, and investment management. The restructuring will
result in a more efficient company that encompasses automated and standardized
processes and a streamlined management structure. In addition, back office and
data processing department consolidations will continue throughout 1994. It is
anticipated that as a result of these actions there will be a net 7% reduction
in the work force.
The $21.5 million charge generally represented those incremental costs
incurred as a result of the restructuring plan. Included in the restructuring
charge was a $12.3 million accrual for outplacement fees, relocation costs,
and severance pay. The remaining charge provides for costs associated with
closing operational facilities, including the writeoff of leasehold
improvements, affected by the reorganization and consolidation of the banks.
The restructuring is expected to provide annualized savings and incremental
revenues of approximately $40.0 million by the end of 1995.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). This Statement changed the method of accounting for income
taxes from the deferred method, required under Accounting Principles Board No.
11, to the asset and liability method. This Statement was adopted with a
cumulative catch-up adjustment on January 1, 1993, and resulted in additional
earnings of $3.8 million, or $.07 per share. As permitted by generally
accepted accounting principles, prior financial statements have not been
restated to apply the provisions of this Statement.
Exclusive of the effect of the SFAS 109 adjustment, Federal and state
income tax expense for 1993 was $24.8 million, compared to $18.1 million in
1992. The combined effective Federal and state tax rate for both 1993 and 1992
was 25%. The increase in the statutory Federal tax rate from 34% to 35%
effective January 1, 1993 provided approximately $2.0 million of net deferred
tax benefit to UJB Financial under SFAS 109 by revaluing the temporary
differences. The difference between the statutory and effective tax rates was
primarily due to permanent differences resulting from tax-free income on state
and municipal investments and tax-exempt loans.
UJB Financial had a net deferred tax asset of $117.8 million as of
year-end 1993. Temporary differences between the amounts recorded in the
financial statements and the tax bases of liabilities and assets result in
deferred taxes. For additional information, see Note 18 of the Notes to
Consolidated Financial Statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This Statement establishes the required accounting
for benefits provided to former and inactive employees, as well as their
beneficiaries and any covered dependents, after employment but before
retirement. Upon the adoption of SFAS 112, UJB Financial will be required to
record the cost of postemployment benefits that are probable and estimable
either over the periods in which benefits accumulate or vest or when the event
occurs.
SFAS 112 is effective for fiscal years starting after December 15, 1993
and will be adopted in 1994. The expected liability and expense to be recorded
upon adoption is not estimated to be material.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." This Statement addresses the accounting by creditors for
impairment of certain loans. It is applicable to all loans, except large groups
of smaller-balance homogeneous loans that are collectively evaluated for
impairment, loans that are measured at fair value, or lease loans. It applies
to all loans that are restructured in a troubled-debt restructuring involving a
modification of terms. The Statement requires that impaired loans be measured
by the present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent.
This Statement applies to financial statements for fiscal years beginning
after December 15, 1994 and is expected to be adopted in 1995. Management is
currently unable to quantify the impact of the newly issued SFAS 114 on the
consolidated financial position and results of operations of UJB Financial.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This Statement addresses the
accounting and reporting for investments in debt and equity securities that
have a readily determinable fair value. Those investments are to be classified
into three categories: held to maturity securities, trading securities, and
available-for-sale securities. Upon purchase, debt and equity securities
should be classified into one of the three categories and at each reporting
period, the appropriateness of the classification is to be reassessed.
SFAS 115 is effective for fiscal years beginning after December 15, 1993.
The provisions of this Statement will be adopted as of January 1, 1994 and will
not be retroactively applied to prior years. The adoption of SFAS 115 is not
expected to have a material impact on the consolidated financial operations of
UJB Financial.
NON-PERFORMING LOANS
Significant progress was made again in 1993 in reducing the level of
non-performing loans as they declined 30.4%, or $110.1 million. At December
31, 1993, non-performing loans totaled
30
<PAGE> 34
$251.7 million, and represented 2.9% of total loans, compared to $361.8
million, or 4.1%, the prior year. These loans reached their highest level of
$483.0 million, or 5.6% of loans, at June 30, 1991 and have declined in each
subsequent quarter through year-end 1993.
[GRAPH]
NON-PERFORMING LOANS
($ in millions)
Non-performing loans include non-accrual loans and renegotiated loans.
Non-accrual loans include all commercial and commercial mortgage loans that are
more than 90 days past due as well as loans that are less than 90 days past due
and the collectibility of principal or interest is in doubt. Total non-accrual
loans amounted to $248.1 million, a decline of $91.9 million, or 27.0%,
compared to $340.0 million at December 31, 1992. Renegotiated loans are those
whose contractual interest rates have been reduced to below market rates or
other concessions made due to the borrowers' financial difficulties. These loans
declined to $3.6 million at year-end 1993 from $21.8 million the prior year
end.
During the year, lost interest on non-accrual loans amounted to $24.8
million, compared with $33.6 million in 1992. Cash payments received on
non-accrual loans were $7.9 million for 1993 and $7.7 million in 1992. Total
lost interest on non-accrual loans after deducting interest payments received
amounted to $21.2 million.
The accompanying table depicts the composition of non-performing loans by
type.
<TABLE>
<CAPTION>
Decrease
---------------------
In thousands 1993 1992 Amount Percent
======================================================================================
<S> <C> <C> <C> <C>
Commercial and industrial . $ 57,325 $ 82,072 $ (24,747) (30.2)%
Construction and
development . . . . . . 87,402 130,651 (43,249) (33.1)
Real estate related . . . . 106,999 149,093 (42,094) (28.2)
- --------------------------------------------------------------------------------------
$251,726 $361,816 $(110,090) (30.4)%
======================================================================================
</TABLE>
There has been a significant decrease in the amount of non-performing
loans. Commercial and construction and development loans have declined as the
economy has stabilized and the residential real estate market has improved. As
a result, loans moving into non-performing have declined from prior years. The
reduction in real estate related non-performing loans reflects the 1993 bulk
loan sale, which was part of the wind-down of Trico Mortgage Company's
operations.
The accompanying table illustrates the activity in non-performing loans for
the past two years.
<TABLE>
<CAPTION>
In thousands 1993 1992
==============================================================================
<S> <C> <C>
Balance, beginning of year . . . . . . . . . . . . . . $361,816 $444,728
Additions:
From loan portfolio . . . . . . . . . . . . . . . 199,159 339,698
Deductions:
To full performing . . . . . . . . . . . . . . . . 49,036 83,276
Payments received . . . . . . . . . . . . . . . . 108,489 102,702
Loans charged off . . . . . . . . . . . . . . . . 115,324 123,322
To other real estate owned . . . . . . . . . . . . 36,400 113,310
- ------------------------------------------------------------------------------
Total deductions 309,249 422,610
- ------------------------------------------------------------------------------
Balance, end of year $251,726 $361,816
==============================================================================
</TABLE>
As the above table illustrates, there has been a significant decline in
loans moving into non-performing and other real estate owned due to a stable
economic environment and an improved real estate market. New non-accrual loans
of $199.2 million represented a 41.4% drop in 1993 compared to 1992.
Non-accrual loans transferred to other real estate owned during 1993 declined
67.9% compared with 1992.
OTHER REAL ESTATE OWNED
Other real estate owned, net of an allowance, amounted to $72.3 million at year
end compared to $121.8 million the prior year, a decline of $49.5 million, or
40.6%. Other real estate owned, which includes foreclosed assets and
in-substance foreclosures, is carried net of a valuation allowance to maintain
the portfolio at the lower of cost or fair value less costs to sell. At
December 31, 1993 the allowance totaled $30.9 million compared with $13.1
million the prior year end. As of December 31, 1993, other real estate owned
had been written down by approximately 63.2% of its original value. At December
31, 1993, there were $69.1 million of foreclosed properties and $34.1 million
of in-substance foreclosures included in other real estate owned.
The accompanying table illustrates the activity in other real estate owned
for the past two years.
<TABLE>
<CAPTION>
In thousands 1993 1992
==============================================================================
<S> <C> <C>
Balance, beginning of year . . . . . . . . . . . . . . $134,901 $134,903
Additions:
From non-performing loans . . . . . . . . . . . . 36,400 113,310
From loan portfolio . . . . . . . . . . . . . . . 14,692 21,752
- ------------------------------------------------------------------------------
Total additions 51,092 135,062
- ------------------------------------------------------------------------------
Deductions:
Sales and other reductions . . . . . . . . . . . . 63,988 89,401
Losses realized upon sale . . . . . . . . . . . . 18,837 45,663
- ------------------------------------------------------------------------------
Total deductions 82,825 135,064
- ------------------------------------------------------------------------------
103,168 134,901
Less allowance for other real estate owned . . . . . 30,893 13,127
- ------------------------------------------------------------------------------
Balance, end of year $ 72,275 $121,774
==============================================================================
</TABLE>
As shown in the table, total additions to other real estate owned declined
62.2% in 1993 from 1992. As a result of fewer properties held in the portfolio
during 1993, sales were down from the prior year.
31
<PAGE> 35
1993 FINANCIAL REVIEW (continued)
ALLOWANCE FOR LOAN LOSSES AND RELATED PROVISION
The allowance for loan losses at December 31, 1993 was $242.1 million compared
to $275.3 million at the prior year end, a decrease of $33.2 million, or 12.1%.
The allowance for loan losses as a percent of the non-performing loans was
96.2% at year-end 1993 compared to 76.1% at the end of 1992. The ratio of the
allowance for loan losses to total loans was 2.81% at year-end 1993 and 3.13%
at year-end 1992.
Implicit in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan being
made, the creditworthiness of the borrower and prevailing economic conditions.
A standardized process has been established throughout UJB Financial to assess
the adequacy of the allowance for loan losses. This process includes a review
to assess the risks inherent in the loan portfolio. It incorporates a credit
review and gives consideration to areas of exposure such as concentration of
credit, economic and industry conditions, and negative trends in delinquencies
and collections. Consideration is also given to collateral coverage and the
composition of the loan portfolio. Specific allocations are identified by loan
while general reserve percentages are identified by loan category or grade and
allocated accordingly. The allowance is maintained at a level determined to be
adequate to provide for potential losses on loans. As of year end, of the total
$242.1 million loan loss allowance, approximately $32.4 million was
specifically identified for problem credits; $115.9 million was allocated to
specific categories or grades of loans as deemed necessary under the assessment
process; and $93.8 million was considered a general unallocated reserve for the
remaining inherent risk in the portfolio.
Loans classified by regulators, which are not included in the
non-performing loan totals, are graded and incorporated in the standardized
process of assessing the adequacy of the allowance for loan losses. Therefore,
such loans, if any, would not have a material impact on future operating
results beyond what was allocated in the allowance for loan losses.
The provision for loan losses was $95.5 million for the year ended
December 31, 1993, down $43.5 million, or 31.3%, from $139.0 million recorded
in 1992. This reduction was due principally to the decline in non-performing
loans. Net charge offs declined $23.8 million to $128.7 million, or 1.48% of
average loans in 1993, compared to $152.5 million, or 1.73%, in 1992. The 1993
charge offs included a one time charge of $16.5 million taken on the bulk sale
of performing and non-performing loans at the second mortgage subsidiary.
SHAREHOLDERS' EQUITY AND DIVIDENDS
Shareholders' equity averaged $958.1 million during 1993, an increase of $103.8
million, or 12.2%, compared to 1992. The average balance was affected by the
full year impact of the August 1992 common stock offering of four million
shares which increased capital by $68.3 million. At December 31, 1993,
shareholders' equity totaled $976.1 million, up $55.8 million, or 6.1%, over
the prior year.
[GRAPH]
AVERAGE TOTAL EQUITY
($ in millions)
The equity to assets ratio rose to 7.28% at year-end 1993 from 6.68% in
1992. UJB Financial strives to maintain a balance of capital that will give
protection to depositors, support planned business growth and provide the
highest level of return to the shareholders.
UJB Financial's capital was strengthened by internal capital generation
provided by core earnings and the dividend reinvestment and stock purchase
plans. The dividend reinvestment and other stock purchase plans provided $14.8
million of additional capital during 1993. Book value per common share rose to
$18.32 at year-end 1993 from $17.50 the prior year.
Risk-based capital ratios are expressed as a percentage of risk-adjusted
assets whereby various percentages are applied to assets on the balance sheet
as well as off-balance sheet financial instruments. Tier I and total risk-based
capital ratios amounted to 9.37% and 12.43%, respectively, at December 31,
1993, compared to 8.94% and 12.05%, respectively, at December 31, 1992. At
December 31, 1993, total Tier I and Tier II capital amounted to $962.3 million
and $314.1 million, respectively, compared to $905.5 million and $315.2 million
in 1992. Total risk-adjusted assets for purposes of calculating regulatory
ratios amounted to $10.3 billion and $10.1 billion at year-end 1993 and 1992,
respectively. The current minimum regulatory guidelines for Tier I and total
risk-based capital ratios are 4.0% and 8.0%, respectively. The leverage
ratio, a measure of Tier I capital to adjusted average assets, was 7.07% at
year-end 1993 compared to 6.67% the prior year. UJB Financial and its six
subsidiary banks all exceed the well capitalized ratios.
The common stock dividend was raised twice in 1993. The first quarter
dividend was increased to $.16 per common share from the $.15 declared in the
last quarter of 1992. The dividend continued at the $.16 per share rate until
the fourth quarter when it was increased 31.3% to $.21 per share. The common
stock dividend payout rate for the year was 46.3% compared with 55.1% the prior
year. The dividends declared on the Series B $50 stated value,
adjustable-rate cumulative preferred stock are determined based on prevailing
interest rates, subject to a 6.0% floor and a 11.0% ceiling. During 1993 the
dividend was declared based upon the 6.0% floor and amounted to $3.00 per
share.
32
<PAGE> 36
The market price of the common stock was $24.00 at December 31, 1993
compared with $24.25 the prior year end. The common stock of UJB Financial is
traded on the New York Stock Exchange under the symbol UJB. The quarterly
market price ranges per common share for each of the last two years are shown
in the accompanying chart.
[GRAPH]
UJB FINANCIAL COMMON STOCK PRICE RANGE
(dollars)
LIQUIDITY
UJB Financial has an Asset/Liability Committee (ALCO) whose function is to
monitor and coordinate all activities relating to the maintenance of liquidity
and protection of net interest income from fluctuations in market interest
rates.
Bank liquidity is the ability to meet the borrowing needs and deposit
withdrawal requirements of customers and to support asset growth. Principal
sources of liquidity are deposit generation, access to purchased funds,
maturities and repayments of loans and investment securities, net interest
income, and fee income. In addition, UJB Financial's banking subsidiaries have
established lines of credit with the Federal Reserve Bank, correspondent banks
and other funding sources which further support and enhance liquidity.
Throughout 1993, careful balance sheet management was maintained by ALCO.
With the decline in the loan portfolio, savings and time deposit rates were
aggressively priced and excess deposit growth was used to reduce reliance on
borrowed funds. As a result, average earning assets for the year increased by
only 1.2%.
The consolidated statements of cash flows present the change in cash and
cash equivalents from operating, investing and financing activities. During
1993, net cash provided by operating activities totaled $736.0 million, and was
primarily attributable to results of operations adjusted for the provisions for
loan losses and other real estate owned, and proceeds from the sales of
securities available for sale. Net cash used in investing activities totaled
$553.7 million and was the result of investment and loan activity. Net cash
used in financing activities totaled $482.0 million in 1993.
Through an extensive branch network, UJB Financial has been able to
attract and retain low-cost demand and retail deposits. This deposit base has
enabled UJB Financial to reduce its reliance on short-term money market
borrowings and maintain a strong net interest margin. Total demand and retail
time deposits averaged $11.2 billion during 1993, an increase of $287.5
million, or 2.6%, compared to 1992.
The total investment portfolio including investment securities available
for sale, is also a source of liquidity as portfolio assets provide cash flows
through maturities and periodic repayments of principal. During the year ended
December 31, 1993, proceeds from maturities were $1.4 billion, and proceeds
from the sales of investment securities available for sale were $517.9 million.
Investment portfolio cash flows were reinvested in the investment portfolio,
principally in agency and corporate CMOs. As a result of these investment
strategies, total scheduled maturities of interest bearing deposits with banks
and maturities and anticipated principal repayments of the investment portfolio
will be approximately $1.3 billion during 1994. In addition, all or part of the
investment securities available for sale of $1.2 billion could be sold to
provide liquidity. The average maturity of these investment portfolios,
adjusted for historical prepayment patterns on mortgage-backed securities, was
estimated to be approximately 4 years, 3 months, at December 31, 1993.
Liquidity is also available through lines of credit and the ability to
incur additional debt. There were $48.0 million of short-term lines of credit
available for general corporate purposes, with no outstandings, at year-end
1993.
At December 31, 1993, long-term debt outstanding was $208.5 million,
compared to long-term debt of $216.6 million at December 31, 1992. At year end,
under the most restrictive limitations on various debt agreements, the
unrestricted consolidated retained earnings available for dividends amounted to
$208.5 million. The amount of additional funded debt that could have been
created as of year-end 1993 was $249.8 million. For additional information on
limitations on retained earnings available for the payment of dividends and the
creation of additional funded debt, see Notes 12 and 14 of the Notes to
Consolidated Financial Statements.
During 1993, commercial paper issued by the parent company of UJB
Financial was primarily a funding source for the second mortgage subsidiary and
asset-based lending subsidiary. These funds averaged $58.9 million during the
year, a decrease of $35.4 million, or 37.5%, from 1992, and amounted to $33.4
million at year end. The primary factor for the decrease in commercial paper
was the sale of $44.8 million of loans from the second mortgage subsidiary.
33
<PAGE> 37
1993 FINANCIAL REVIEW (continued)
- ---------------------------------
OFF-BALANCE-SHEET
UJB Financial's activities involving derivatives are primarily attributable to
its asset and liability management efforts. These instruments have proven to be
effective tools that enable our institution to control our exposure to interest
rate risk.
The accompanying table illustrates the aggregate notional amount of
off-balance-sheet financial instruments at December 31.
<TABLE>
<CAPTION>
In millions 1993 1992
==============================================================================
<S> <C> <C>
Interest rate swaps . . . . . . . . . . . . . . . . . . $1,019.0 $161.3
Caps/floors . . . . . . . . . . . . . . . . . . . . . . -- 200.0
- ------------------------------------------------------------------------------
$1,019.0 $361.3
==============================================================================
</TABLE>
All derivatives entered into as part of asset and liability management
activities are accounted for as hedges. Income is accrued monthly and
recognized as an adjustment to interest income or interest expense, depending
on the hedged product. The net impact of hedge transactions is viewed as an
offset to the spread changes occurring on those balance sheet instruments being
hedged.
The notional amount of derivatives represents the volume of outstanding
transactions and does not represent the potential for gain or loss associated
with the market risk or credit risk of such transactions. The market risk of
derivative transactions arises principally from the potential for changes in
value due to fluctuations in interest rates. In order to manage market risk,
exposure limits have been established, monitored and reviewed periodically as
part of the ALCO function.
The credit risk of derivatives arises from contractual obligations. UJB
Financial attempts to limit credit risk by dealing only with counterparties
that have been previously approved through the credit process. At year-end
1993, counterparties to derivative transactions were all well established
securities firms.
Credit exposure exists at a particular point in time when a derivative has
a positive market value. Derivatives may be in an unrealized gain or loss
position depending on market rates and the terms of the contract.
At year-end 1993, the portfolio of swap agreements had an average
remaining maturity ranging from a minimum of 24 months to a maximum of 41
months. This range incorporated potential amortization speeds specified in
Indexed Amortizing Swaps (IAS) transactions which are structured to contain an
initial principal lockout period followed by scheduled principal amortization.
The amortization speed is determined by a sliding percentage scale which uses
different amortization percentages for varying levels of the reference index
(libor). As a result, the actual lives of these agreements move with the level
of rates, but cannot exceed the predetermined "maximum" life also contained in
each agreement.
INTEREST SENSITIVITY
UJB Financial manages the interest rate sensitivity or repricing
characteristics of its assets and liabilities through the ALCO. Net interest
income, the primary source of earnings, fluctuates with interest rate
movements. To mitigate the impact of changes in rates, the balance sheet must
be structured so that repricing opportunities exist for both assets and
liabilities in roughly equivalent amounts at approximately the same time
intervals. Imbalances in these repricing opportunities at any point in time
constitute interest-sensitivity gaps, which represent the difference between
interest-sensitive assets and interest-sensitive liabilities. These static
measurements do not reflect the results of any projected activity and are best
used as early indicators of potential interest rate exposures.
INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
Interest Sensitivity Period
------------------------------
In thousands 30 Day 90 Day 180 Day 365 Day
===================================================================================
<S> <C> <C> <C> <C>
Earning Assets
Total investments . . . . . . . $ 907,140 $ 537,473 $617,921 $577,406
Loans, net . . . . . . . . . . . 4,618,687 356,870 269,553 370,416
Money market investments . . . . 99,500 -- -- --
- -----------------------------------------------------------------------------------
Total 5,625,327 894,343 887,474 947,822
- -----------------------------------------------------------------------------------
Sources of Funds
Savings and time deposits . . . 4,673,492 455,820 529,114 401,533
Commercial CDs . . . . . . . . . 145,826 64,373 8,872 7,515
Borrowed funds . . . . . . . . . 567,446 8,811 1,298 2,581
Non-interest bearing sources . . -- -- -- --
- -----------------------------------------------------------------------------------
Total 5,386,764 529,004 539,284 411,629
- -----------------------------------------------------------------------------------
Asset/Liability Interval Gap . . . 238,563 365,339 348,190 536,193
Net effect of off-balance-sheet
instruments . . . . . . . . . . 88,035 (855,000) -- --
- -----------------------------------------------------------------------------------
Asset/Liability Sensitivity Gap
Period gap . . . . . . . . . . . 326,598 (489,661) 348,190 536,193
Cumulative gap . . . . . . . . . $ 326,598 $(163,063) $185,127 $721,320
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Total One Year Non-interest
Within to Sensitive &
In thousands One Year Five Years Over Five Years Total
============================================================================================
<S> <C> <C> <C> <C>
Earning Assets
Total investments . . . . . . . $2,639,940 $ 878,716 $ 149,842 $ 3,668,498
Loans, net . . . . . . . . . . . 5,615,526 1,851,438 898,026 8,364,990
Money market investments . . . . 99,500 -- -- 99,500
- --------------------------------------------------------------------------------------------
Total 8,354,966 2,730,154 1,047,868 12,132,988
- --------------------------------------------------------------------------------------------
Sources of Funds
Savings and time deposits . . . 6,059,959 1,439,099 928,214 8,427,272
Commercial CDs . . . . . . . . . 226,586 -- -- 226,586
Borrowed funds . . . . . . . . . 580,136 15,337 195,794 791,267
Non-interest bearing sources . . -- -- 2,687,863 2,687,863
- --------------------------------------------------------------------------------------------
Total 6,866,681 1,454,436 3,811,871 12,132,988
- --------------------------------------------------------------------------------------------
Asset/Liability Interval Gap . . . 1,488,285 1,275,718
Net effect of off-balance-sheet
instruments . . . . . . . . . . (766,965) --
- --------------------------------------------------------------------------------------------
Asset/Liability Sensitivity Gap
Period gap . . . . . . . . . . . 721,320 1,275,718
Cumulative gap . . . . . . . . . $721,320 $1,997,038
============================================================================================
</TABLE>
34
<PAGE> 38
As depicted in the preceding table, sensitivity to interest rate
fluctuations is measured in a number of time frames. ALCO monitors the gap
position on an adjusted basis allowing for the impact of off-balance-sheet
transactions. As a result of these repricing adjustments, the adjusted position
at December 31, 1993 showed a positive 30-day gap of $326.6 million. The
cumulative one-year gap was a positive $721.3 million. Management has
identified numerous strategies, including the use of off-balance-sheet
transactions, administration of liability costs, and a redeployment of asset
maturities and cash flows to insulate net interest income from the effects of
changes in interest rates. The use of interest rate swaps increased 1993 net
interest income by $6.8 million. The additional earnings from the swaps
effectively offset changes in on-balance sheet yields and costs and should be
viewed in the context of the total interest rate risk management.
These gap positions are monitored as part of the ALCO process. This
activity includes periodic forecasts of future business activity which are
applied to various interest rate environments in a simulation process. The use
of these financial modeling techniques assists management in its continuing
efforts to achieve stable earnings growth in an everchanging interest rate
environment.
RESULTS OF OPERATIONS - 1992 COMPARED WITH 1991
Total earnings in 1992 amounted to $53.8 million, or $1.09 per share, compared
to $22.4 million for 1991, or $.45 per share. Improved earnings each
successive quarter during 1991 and 1992 were enhanced by increases in net
interest income and non-interest income, and declining levels of non-performing
loans.
Net interest income on a tax-equivalent basis amounted to $557.3 million,
an increase of $42.9 million, or 8.3%, compared to 1991. Interest income on a
tax-equivalent basis was $972.4 million, a decrease of $156.3 million, or
13.8%, compared to 1991. The decline in interest income was primarily due to
the lower interest rate environment. Partially offsetting this decline were
volume increases in investments and loans, and the benefit of reduced levels of
nonperforming loans. Interest expense decreased $199.2 million, or 32.4%, and
amounted to $415.1 million during 1992. The lower interest rate environment was
the primary cause of the decline in addition to aggressive pricing on deposit
products. The benefit of the decline in interest rates was partially offset by
the growth experienced in savings deposits.
The provision for loan losses was $139.0 million for the year ended
December 31, 1992, down from $167.4 million recorded in 1991, principally as a
result of the decline in non-performing loans.
Non-interest income amounted to $176.2 million in 1992, an increase of
$26.7 million, or 17.8%, compared to the prior year. Service charges on
deposit accounts increased $12.1 million, or 28.7%, to $54.0 million in 1992.
Specifically, service charges on business demand deposit accounts increased
$7.2 million, with an additional $4.4 million attributable to increased fees
associated with personal demand deposit accounts. Service fee income on loans
increased $2.8 million, or 9.5%, to $32.7 million in 1992. The increase was
related to increased fee income on merchant credit cards and commercial loans.
Trust income rose $3.0 million, or 17.6%, to $19.8 million in 1992. A
significant portion of the increase was due to fee-based activity from mutual
funds UJB Financial established in 1992. The remaining increase was generated
from corporate and investment advisory trust fees. Other income rose $9.9
million, or 24.9%, from 1991 to $49.6 million in 1992. The increase was
principally due to the $4.7 million gain on the sale of the former headquarters
of a bank subsidiary in Jersey City, New Jersey. Additionally, brokerage fees
rose $1.5 million and international fee income was up $1.0 million for 1992.
Securities gains were $18.2 million in 1992 compared to $13.9 million in
1991. These gains were realized as securities were sold to reduce prepayment
risk in the CMO portfolio, resulting from the declining interest rate
environment, and to take advantage of current market conditions. Also included
in securities transactions were net gains on the sale of equity securities of
$.4 million compared to write downs of $1.8 million in 1991.
Non-interest expenses totaled $503.6 million, an increase of $55.2 million,
or 12.3%, compared to 1991. Approximately $23.1 million of the increase was
attributable to higher costs associated with holding and operating other real
estate owned and legal and professional fees related to non-performing loans.
Salaries expense in 1992 amounted to $176.6 million, an increase of $6.7
million, or 3.9% over 1991. Salary expense was up in 1992 primarily due to
annual merit increases. Pension and other employee benefits expense of $50.7
million were $6.6 million, or 15.1 %, above the prior year. The increase
occurred principally in the area of medical insurance expense, which was up
$3.9 million, or 21.3%, to $22.4 million. The remaining increase was
attributable to higher unemployment taxes and pension costs. Occupancy expenses
of $47.1 million rose $3.8 million, or 8.7%, over 1991, primarily reflecting
the new operations facility occupied in April 1991.
Furniture and equipment expense increased $3.5 million, or 8.9%, compared
to 1991, principally in the areas of computer and equipment rentals and
maintenance. The FDIC insurance assessment in 1992 was $25.3 million, an
increase of $3.1 million, or 14.2%, compared to 1991. This assessment is based
upon the level of outstanding deposits and increased from 19.5 cents per $100
of deposits at January 1, 1991 to 23 cents as of July 31, 1991, and remained at
that rate throughout 1992. Other real estate owned expenses of $37.6 million
included a provision for other real estate owned and expenses related to
holding and operating foreclosed properties. Provisions of $27.7 million in
1992 and $10.4 million in 1991 were added to the allowance for other real
estate owned. Operating expenses for other real estate owned amounted to $9.9
million in 1992, compared with $7.2 million in 1991, an increase of $2.7
million, or 37.9%. These expenses include costs to maintain other real estate
owned, real estate taxes, insurance and legal fees. Other expenses totaled
$113.6 million in 1992, an increase of $10.8 million, or 10.6%, compared to
1991. The costs related to the proxy contest, an increased provision for check
losses and fraudulent activities, and higher legal and professional fees on
non-performing loans accounted for the majority of the increase.
35
<PAGE> 39
UJB FINANCIAL CORP. AND SUBSIDIARIES
COMPARATIVE AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES
<TABLE>
<CAPTION>
1993 1992
-------------------------------- -----------------------------
Tax-equivalent basis, in thousands Average Average Average Average
Not covered by independent auditors' report Balance Interest Rate Balance Interest Rate
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . $ 29,337 $ 932 3.18% $ 101,431 $ 4,379 4.32%
Interest bearing deposits with banks . . . . . . . . 21,933 651 2.97 18,441 668 3.62
Trading account securities . . . . . . . . . . . . . 31,447 1,385 4.40 22,741 1,429 6.28
Investment securities available for sale . . . . . . 754,213 31,023 4.11 126,820 10,782 8.50
Investment securities:
U.S. Government and Federal agencies . . . . . . . 2,043,656 135,860 6.65 2,638,144 190,795 7.23
States and political subdivisions . . . . . . . . . 340,141 37,827 11.12 406,889 44,625 10.97
Other securities . . . . . . . . . . . . . . . . . 550,508 30,054 5.46 228,090 14,598 6.40
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,934,305 203,741 6.94 3,273,123 250,018 7.64
- ----------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . 4,353,817 304,869 7.00 4,549,514 328,121 7.21
Mortgage . . . . . . . . . . . . . . . . . . . . . 2,340,135 191,480 8.18 2,208,104 196,584 8.90
Instalment . . . . . . . . . . . . . . . . . . . . 2,024,424 166,751 8.24 2,035,346 180,413 8.86
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans 8,718,376 663,100 7.61 8,792,964 705,118 8.02
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 12,489,611 900,832 7.21 12,335,520 972,394 7.88
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks . . . . . . . . . . . . . . . 849,212 761,189
Allowance for loan losses . . . . . . . . . . . . . . (260,568) (298,926)
Other assets . . . . . . . . . . . . . . . . . . . . 600,427 628,723
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest earning assets 1,189,071 1,090,986
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $13,678,682 $13,426,506
==================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits . . . . . . . . . . . . . . . . . . $ 5,320,750 120,872 2.27 $ 4,934,670 152,980 3.10
Other time deposits . . . . . . . . . . . . . . . . . 3,340,419 140,273 4.20 3,842,398 198,470 5.17
Commercial certificates of deposits
$100,000 and over . . . . . . . . . . . . . . . . . 256,018 7,319 2.86 417,458 16,320 3.91
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 8,917,187 268,464 3.01 9,194,526 367,770 4.00
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial paper . . . . . . . . . . . . . . . . . . 58,920 1,737 2.95 94,297 3,408 3.61
Other borrowed funds . . . . . . . . . . . . . . . . 789,830 31,565 4.00 907,100 35,939 3.96
Long-term debt . . . . . . . . . . . . . . . . . . . 216,757 19,274 8.89 75,973 7,989 10.52
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 9,982,694 321,040 3.22 10,271,896 415,106 4.04
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits . . . . . . . . . . . . . . . . . . . 2,579,134 2,175,752
Other liabilities . . . . . . . . . . . . . . . . . . 158,716 124,563
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest bearing liabilities 2,737,850 2,300,315
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 958,138 854,295
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $13,678,682 $13,426,506
==================================================================================================================================
Net Interest Income (tax-equivalent basis) . . . . . . . 579,792 3.99% 557,288 3.84%
Tax-equivalent basis adjustment . . . . . . . . . . . . . (16,657) (19,063)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $563,135 $538,225
==================================================================================================================================
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.64% 4.52%
==================================================================================================================================
</TABLE>
Notes: - Average balances and rates include non-accruing and renegotiated
loans.
- The tax-equivalent adjustment was computed based on a Federal income
tax rate of 35% for 1993 and 34% for 1992 through 1988.
36
<PAGE> 40
<TABLE>
<CAPTION>
1991 1990
-------------------------------- --------------------------------
Tax-equivalent basis, in thousands Average Average Average Average
Not covered by independent auditors' report Balance Interest Rate Balance Interest Rate
================================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . $ 345,615 $ 21,277 6.16% $ 338,084 $ 27,365 8.09%
Interest bearing deposits with banks . . . . . . . . 34,099 2,237 6.56 65,521 5,726 8.74
Trading account securities . . . . . . . . . . . . . 13,524 1,266 9.36 5,511 405 7.35
Investment securities available for sale . . . . . . 35,199 3,509 9.97 -- -- --
Investment securities:
U.S. Government and Federal agencies . . . . . . . 2,193,202 191,476 8.73 1,592,331 145,102 9.11
States and political subdivisions . . . . . . . . . 489,731 53,302 10.88 588,545 63,919 10.86
Other securities . . . . . . . . . . . . . . . . . 402,933 33,515 8.32 691,909 59,145 8.55
- --------------------------------------------------------------------------------------------------------------------------------
Total investment securities 3,085,866 278,293 9.02 2,872,785 268,166 9.33
- --------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . 4,681,642 416,240 8.89 4,863,223 504,349 10.37
Mortgage . . . . . . . . . . . . . . . . . . . . . 1,999,858 198,426 9.92 1,819,138 187,762 10.32
Instalment . . . . . . . . . . . . . . . . . . . . 1,988,364 207,436 10.43 1,865,928 220,139 11.80
- --------------------------------------------------------------------------------------------------------------------------------
Total loans 8,669,864 822,102 9.48 8,548,289 912,250 10.67
- --------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 12,184,167 1,128,684 9.26 11,830,190 1,213,912 10.26
- --------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks . . . . . . . . . . . . . . . 677,766 638,931
Allowance for loan losses . . . . . . . . . . . . . . (293,935) (161,411)
Other assets . . . . . . . . . . . . . . . . . . . . 610,475 463,763
- --------------------------------------------------------------------------------------------------------------------------------
Total non-interest earning assets 994,306 941,283
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $13,178,473 $12,771,473
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits . . . . . . . . . . . . . . . . . . $ 4,119,753 203,158 4.93 $ 3,643,786 198,727 5.45
Other time deposits . . . . . . . . . . . . . . . . . 4,031,717 275,788 6.84 3,531,611 279,150 7.90
Commercial certificates of deposits
$100,000 and over . . . . . . . . . . . . . . . . . 760,264 46,526 6.12 880,857 70,404 7.99
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 8,911,734 525,472 5.90 8,056,254 548,281 6.81
- --------------------------------------------------------------------------------------------------------------------------------
Commercial paper . . . . . . . . . . . . . . . . . . 167,396 10,216 6.10 234,069 18,975 8.11
Other borrowed funds . . . . . . . . . . . . . . . . 1,211,176 69,815 5.76 1,553,594 124,626 8.02
Long-term debt . . . . . . . . . . . . . . . . . . . 80,441 8,834 10.98 85,780 9,424 10.99
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 10,370,747 614,337 5.92 9,929,697 701,306 7.06
- --------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits . . . . . . . . . . . . . . . . . . . 1,853,442 1,834,137
Other liabilities . . . . . . . . . . . . . . . . . . 141,903 140,474
- --------------------------------------------------------------------------------------------------------------------------------
Total non-interest bearing liabilities 1,995,345 1,974,611
- --------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 812,381 867,165
- --------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $13,178,473 $12,771,473
================================================================================================================================
Net Interest Income (tax-equivalent basis) . . . . . . . 514,347 3.34% 512,606 3.20%
Tax-equivalent basis adjustment . . . . . . . . . . . . . (23,016) (27,466)
- --------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 491,331 $ 485,140
================================================================================================================================
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.22% 4.33%
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1989 1988
-------------------------------- -------------------------------
Tax-equivalent basis, in thousands Average Average Average Average
Not covered by independent auditors' report Balance Interest Rate Balance Interest Rate
================================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . $ 28,080 $ 2,684 9.56% $ 68,207 $ 5,479 8.03%
Interest bearing deposits with banks . . . . . . . . 131,445 12,285 9.35 140,165 11,908 8.50
Trading account securities . . . . . . . . . . . . . 54,206 5,012 9.25 75,815 5,686 7.50
Investment securities available for sale . . . . . . -- -- -- -- -- --
Investment securities:
U.S. Government and Federal agencies . . . . . . . 858,696 76,277 8.88 605,752 47,988 7.92
States and political subdivisions . . . . . . . . . 622,435 67,862 10.90 612,370 67,105 10.96
Other securities . . . . . . . . . . . . . . . . . 875,811 75,554 8.63 996,177 80,938 8.12
- --------------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,356,942 219,693 9.32 2,214,299 196,031 8.85
- --------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . 4,452,224 515,633 11.58 3,869,111 405,252 10.47
Mortgage . . . . . . . . . . . . . . . . . . . . . 1,705,938 178,719 10.48 1,519,097 150,683 9.92
Instalment . . . . . . . . . . . . . . . . . . . . 1,633,022 199,858 12.24 1,517,210 175,006 11.53
- --------------------------------------------------------------------------------------------------------------------------------
Total loans 7,791,184 894,210 11.48 6,905,418 730,941 10.59
- --------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 10,361,857 1,133,884 10.94 9,403,904 950,045 10.10
- --------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks . . . . . . . . . . . . . . . 647,685 663,347
Allowance for loan losses . . . . . . . . . . . . . . (117,275) (107,305)
Other assets . . . . . . . . . . . . . . . . . . . . 378,731 350,854
- --------------------------------------------------------------------------------------------------------------------------------
Total non-interest earning assets 909,141 906,896
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $11,270,998 $10,310,800
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits . . . . . . . . . . . . . . . . . . $ 3,277,789 185,314 5.65 $ 3,437,675 184,329 5.36
Other time deposits . . . . . . . . . . . . . . . . . 2,992,186 251,898 8.42 2,217,149 163,030 7.35
Commercial certificates of deposits
$100,000 and over . . . . . . . . . . . . . . . . . 791,441 69,586 8.79 784,718 57,467 7.32
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 7,061,416 506,798 7.18 6,439,542 404,826 6.29
- --------------------------------------------------------------------------------------------------------------------------------
Commercial paper . . . . . . . . . . . . . . . . . . 194,175 17,482 9.00 173,624 12,962 7.47
Other borrowed funds . . . . . . . . . . . . . . . . 1,109,902 98,525 8.88 828,976 59,372 7.16
Long-term debt . . . . . . . . . . . . . . . . . . . 87,652 9,763 11.14 88,935 9,674 10.88
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 8,453,145 632,568 7.48 7,531,077 486,834 6.46
- --------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits . . . . . . . . . . . . . . . . . . . 1,840,309 1,900,362
Other liabilities . . . . . . . . . . . . . . . . . . 133,540 105,910
- --------------------------------------------------------------------------------------------------------------------------------
Total non-interest bearing liabilities 1,973,849 2,006,272
- --------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 844,004 773,451
- --------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $11,270,998 $10,310,800
================================================================================================================================
Net Interest Income (tax-equivalent basis) . . . . . . . 501,316 3.46% 463,211 3.64%
Tax-equivalent basis adjustment . . . . . . . . . . . . . (31,137) (32,170)
- --------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $470,179 $431,041
================================================================================================================================
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.84% 4.93%
================================================================================================================================
</TABLE>
37
<PAGE> 41
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-----------------------------
Dollars in thousands 1993 1992
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 720,404 $ 885,047
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . 99,500 234,500
- --------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 819,904 1,119,547
- --------------------------------------------------------------------------------------------------------------------------------
Interest bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,962 13,819
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,735 21,961
Investment securities available for sale (Note 4) (Market value of $1,177,585 in 1993 and
$886,577 in 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,162,088 881,278
Investment securities (Note 5) (Market value of $2,495,849 in 1993 and $2,677,274 in 1992) . . . . 2,456,713 2,633,543
Loans (Notes 6 and 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,607,094 8,782,409
Less: Allowance for loan losses (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,104 275,296
- --------------------------------------------------------------------------------------------------------------------------------
Net loans 8,364,990 8,507,113
- --------------------------------------------------------------------------------------------------------------------------------
Premises and equipment (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,477 173,160
Other real estate owned, net (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,275 121,774
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,728 79,496
Due from customers on acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,126 21,378
Other assets (Notes 1 and 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,551 197,802
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $13,410,549 $13,770,871
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,802,496 $ 2,586,997
Interest bearing deposits:
Savings and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,427,272 8,954,921
Commercial certificates of deposit $100,000 and over . . . . . . . . . . . . . . . . . . . . . 226,586 244,743
- --------------------------------------------------------------------------------------------------------------------------------
Total deposits 11,456,354 11,786,661
- --------------------------------------------------------------------------------------------------------------------------------
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,359 62,861
Other borrowed funds (Notes 5 and 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,449 641,004
Long-term debt (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208,459 216,570
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,786 36,704
Bank acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,126 21,378
Accrued expenses and other liabilities (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . 143,942 85,423
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 12,434,475 12,850,601
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities (Notes 19, 20 and 21)
Shareholders' equity (Notes 12, 13, 15 and 16):
Preferred stock: Authorized 4,000,000 shares without par value:
Series B: Authorized 1,200,000 shares; issued and outstanding 600,166 in 1993 and 1992,
adjustable-rate cumulative, $50 stated value . . . . . . . . . . . . . . . . . . . . . . . . 30,008 30,008
Common stock par value $1.20:
Authorized 65,000,000 shares; issued and outstanding 51,631,856 in 1993 and
50,864,031 in 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,958 61,037
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384,229 370,345
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499,879 458,880
- --------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 976,074 920,270
- --------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $13,410,549 $13,770,871
================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 42
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
Dollars in thousands, except per share data 1993 1992 1991
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $659,433 $700,478 $ 816,420
Interest on investment securities (Note 5):
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,391 205,451 223,999
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,448 30,206 37,272
Interest on investment securities available for sale (Note 4) . . . . . . . . . . . . . . . 31,023 10,782 3,244
Interest on Federal funds sold and securities purchased under agreements to resell . . . . 932 4,379 21,277
Trading account interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,297 1,367 1,219
Interest on bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 668 2,237
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest income 884,175 953,331 1,105,668
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on savings and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 261,145 351,450 478,946
Interest on commercial certificates of deposit $100,000 and over . . . . . . . . . . . . . 7,319 16,320 46,526
Interest on borrowed funds (Notes 11 and 12) . . . . . . . . . . . . . . . . . . . . . . . 52,576 47,336 88,865
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 321,040 415,106 614,337
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563,135 538,225 491,331
Provision for loan losses (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,500 139,000 167,350
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 467,635 399,225 323,981
- ----------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,126 54,031 41,972
Service and loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,437 32,711 29,873
Trust income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,852 19,837 16,875
Investment securities gains (Notes 4 and 5) . . . . . . . . . . . . . . . . . . . . . . . . 8,877 18,195 13,874
Trading account gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,884 1,804 1,620
Gain on securitized loan sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 5,601
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,099 49,641 39,736
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 178,275 176,219 149,551
- ----------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,892 176,576 169,881
Pension and other employee benefits (Note 15) . . . . . . . . . . . . . . . . . . . . . . . 57,940 50,733 44,087
Occupancy, net (Notes 9 and 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,775 47,122 43,339
Furniture and equipment (Notes 9 and 19) . . . . . . . . . . . . . . . . . . . . . . . . . 45,570 42,373 38,895
Other real estate owned expenses (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . 40,154 37,640 17,588
FDIC insurance assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,617 25,262 22,119
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,500 -- --
Advertising and public relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,241 10,282 9,712
Other (Note 17) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,175 113,576 102,735
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expenses 546,864 503,564 448,356
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,046 71,880 25,176
Federal and state income taxes (Note 18) . . . . . . . . . . . . . . . . . . . . . . . . . 24,807 18,056 2,741
- ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change in accounting principle . . . . . . . . . . . . 74,239 53,824 22,435
Cumulative effect of a change in accounting principle . . . . . . . . . . . . . . . . . 3,816 -- --
==================================================================================================================================
Net Income $ 78,055 $ 53,824 $ 22,435
==================================================================================================================================
Net Income Per Common Share:
Income before cumulative effect of a change in accounting principle . . . . . . . . . . . . $ 1.42 $ 1.09 $ .45
Cumulative effect of a change in accounting principle . . . . . . . . . . . . . . . . . .07 -- --
==================================================================================================================================
Net Income Per Common Share $ 1.49 $ 1.09 $ .45
==================================================================================================================================
Average Common Shares Outstanding (in thousands) 51,288 47,769 45,650
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE> 43
UJB FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Preferred Common Retained Shareholders'
Dollars in thousands Stock Stock Surplus Earnings Equity
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990 $30,008 $54,117 $284,904 $438,274 $807,303
Net income, 1991 . . . . . . . . . . . . . . . . . . . . . . -- -- -- 22,435 22,435
Cash dividends declared:
Preferred stock--Series B . . . . . . . . . . . . . . . . . -- -- -- (2,055) (2,055)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- (27,448) (27,448)
Common stock issued:
Dividend reinvestment and other stock plans (782,568 shares) -- 940 7,262 -- 8,202
Exercise of stock options, net (6,480 shares) . . . . . . . -- 7 79 -- 86
Change in valuation allowance for marketable equity securities -- -- -- 3,276 3,276
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 30,008 55,064 292,245 434,482 811,799
- ----------------------------------------------------------------------------------------------------------------------------------
Net income, 1992 . . . . . . . . . . . . . . . . . . . . . . -- -- -- 53,824 53,824
Proceeds from issuance of common stock, net of related expense
(4,000,000 shares) . . . . . . . . . . . . . . . . . . . . . -- 4,800 63,545 -- 68,345
Cash dividends declared:
Preferred stock--Series B . . . . . . . . . . . . . . . . . -- -- -- (1,847) (1,847)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- (29,091) (29,091)
Common stock issued:
Dividend reinvestment and other stock plans (779,140 shares) -- 935 12,984 -- 13,919
Exercise of stock options, net (198,396 shares) . . . . . . -- 238 1,571 -- 1,809
Change in valuation allowance for marketable equity securities -- -- -- 1,512 1,512
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 30,008 61,037 370,345 458,880 920,270
- ----------------------------------------------------------------------------------------------------------------------------------
Net income, 1993 . . . . . . . . . . . . . . . . . . . . . . -- -- -- 78,055 78,055
Cash dividends declared:
Preferred stock--Series B . . . . . . . . . . . . . . . . . -- -- -- (1,801) (1,801)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- (35,515) (35,515)
Common stock issued:
Dividend reinvestment and other stock plans (459,430 shares) -- 551 9,537 -- 10,088
Exercise of stock options, net (308,395 shares) . . . . . . -- 370 4,347 -- 4,717
Change in valuation allowance for marketable equity securities -- -- -- 260 260
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $30,008 $61,958 $384,229 $499,879 $976,074
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE> 44
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
Dollars in thousands 1993 1992 1991
===============================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,055 $ 53,824 $ 22,435
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for loan losses and other real estate owned . . . . . . . . . . . . . . . . 127,063 166,728 177,750
Depreciation, amortization and accretion, net . . . . . . . . . . . . . . . . . . . . 27,008 22,181 18,555
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,500 -- --
Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,782) (4,929) (14,027)
Gains on sales of investment and trading account securities . . . . . . . . . . . . . (10,761) (19,999) (15,494)
Gain on sale of securitized loans . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (5,601)
Gains on sales of mortgages held for sale . . . . . . . . . . . . . . . . . . . . . . (2,922) (3,340) (1,294)
Proceeds from sales of other real estate owned . . . . . . . . . . . . . . . . . . . 56,791 77,939 45,767
Proceeds from sales of mortgages held for sale . . . . . . . . . . . . . . . . . . . 276,659 296,124 143,925
Originations of mortgages held for sale . . . . . . . . . . . . . . . . . . . . . . . (224,065) (309,317) (155,159)
Purchases of investment securities available for sale . . . . . . . . . . . . . . . . (316,303) -- --
Proceeds from maturities of investment securities available for sale . . . . . . . . . 192,605 178,961 --
Proceeds from sales of investment securities available for sale . . . . . . . . . . . 517,906 1,051,453 219,587
Net (increase) decrease in trading account securities . . . . . . . . . . . . . . . . (5,890) (16,902) 5,465
(Increase) decrease in accrued interest receivable and other assets . . . . . . . . . (26,505) 16,850 13,958
Increase (decrease) in accrued interest payable, accrued expenses and
other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,684 (6,090) 8,301
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 736,043 1,503,483 464,168
- ------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities . . . . . . . . . . . . . . . . . . . . . . -- 183,819 638,224
Proceeds from maturities of investment securities . . . . . . . . . . . . . . . . . . . . 1,215,293 895,861 773,488
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,712,194) (2,428,917) (2,045,036)
Net (increase) decrease in interest bearing deposits with banks . . . . . . . . . . . . . (6,143) 12,087 23,024
Proceeds from sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,836 -- 50,061
Net increase in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (120,992) (213,687) (373,939)
Purchases of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (26,905) --
Sale of building and sale-leaseback of equipment . . . . . . . . . . . . . . . . . . . . -- 17,732 --
Purchases of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,500) (25,764) (27,495)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (553,700) (1,585,774) (961,673)
- ------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in demand and savings deposits . . . . . . . . . . . . . . . . . . . . . . . 358,886 1,181,149 693,166
Demand and savings deposits acquired . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 91,437
Net decrease in time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (689,193) (708,035) (270,107)
Time deposits acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 170,807
Net decrease in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . (121,273) (330,574) (131,361)
Principal payments on long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . (27,895) (26,769) (6,897)
Proceeds from issuance of debt, net of related expenses . . . . . . . . . . . . . . . . . 20,000 172,489 --
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,059) (30,223) (29,438)
Proceeds from issuance of common stock, net of related expense . . . . . . . . . . . . . -- 68,345 --
Proceeds from issuance of common stock under dividend reinvestment and
other stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,805 15,728 8,288
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,257) (715) (65)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (481,986) 341,395 525,830
- -------------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . (299,643) 259,104 28,325
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . 1,119,547 860,443 832,118
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 819,904 $1,119,547 $ 860,443
===============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid:
Interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 334,958 $ 436,715 $ 625,536
Income tax payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,094 21,669 19,619
Noncash investing activities:
Transfer of investments to investment securities available for sale . . . . . . . . . 666,687 1,737,999 573,601
Transfer of loans to other real estate owned . . . . . . . . . . . . . . . . . . . . 51,092 135,062 124,360
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
41
<PAGE> 45
UJB FINANCIAL CORP. AND SUBSIDIARIES
- ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS:
UJB Financial Corp. (UJB Financial) commenced operations on October 1, 1970 as
a New Jersey Corporation and as a bank holding company registered under the
Bank Holding Company Act of 1956. Through its subsidiaries UJB Financial
provides a full range of banking services and certain non-bank services in a
competitive environment to individual and corporate customers. UJB Financial is
regulated by various state and Federal agencies and is subject to periodic
examinations by those regulatory authorities.
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of UJB
Financial and all of its subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior period
amounts have been reclassified to conform to the financial statement
presentation for 1993. The reclassifications have no effect on shareholders'
equity or net income or loss as previously reported.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
significantly differ from these estimates.
CASH AND CASH EQUIVALENTS:
For the purposes of cash flow, cash and cash equivalents include cash on hand,
amounts due from banks, Federal funds sold, and securities purchased under
agreements to resell. Generally, Federal funds are sold for one day periods and
securities purchased under agreements to resell are short-term, highly liquid
assets.
SECURITIES:
Securities are classified into one of three investment categories: trading
account securities, investment securities available for sale and investment
securities. Securities that are purchased and held principally with the intent
of selling in the near future are classified as trading account securities.
Securities which are intended to be held to maturity are classified as
investment securities. All other securities, including equity securities, are
classified as investment securities available for sale.
Trading account securities are reported at market value on a specific
identification basis, with gains and losses included in non-interest income.
This category includes securities purchased specifically for short-term
appreciation.
Investment securities available for sale are reported at the lower of the
aggregate cost or market.
Investments classified as available for sale may be sold in response to
changing market and interest rate conditions or as part of an overall
asset/liability management strategy. Included in investment securities
available for sale are marketable equity securities.
Investment securities are held for long-term investment and are recorded
at amortized cost. UJB Financial has both the intent and ability to hold all
securities in this category until maturity.
LOANS:
Loans are stated at principal amounts outstanding, net of unearned discount and
net deferred loan origination fees and costs. Interest income on loans is
accrued and credited to interest income as earned. Loan origination fees and
certain direct loan origination costs are deferred and recognized over the
estimated life of the loan as an adjustment to the loan's yield. Other loan
fees are recorded as earned and included in non-interest income.
NON-PERFORMING LOANS:
Non-performing loans consist of commercial non-accrual and renegotiated loans.
Non-accrual loans include loans that are past due 90 days or more as to
principal or interest, or where reasonable doubt exists as to timely
collectibility. At the time a loan is placed on non-accrual status, previously
accrued and uncollected interest is reversed against interest income. Interest
collections on non-accrual loans are generally credited to interest income
when received. However, if ultimate collectibility of principal is in doubt,
interest collections are applied as principal reductions. After principal and
interest payments are brought current and future collectibility is reasonably
assured, loans are returned to accrual status.
Renegotiated loans are loans whose contractual interest rates have been
reduced to below market rates or other significant concessions made due to a
borrower's financial difficulties. Interest income on renegotiated loans is
generally credited to interest income as received.
Consumer loans are charged off when they are 120 days past due. For home
equity loans, accruals cease at 180 days and uncollected interest is reversed
against interest income. Past due residential mortgage loans and home equity
loans are monitored and charged off when deemed uncollectible.
ALLOWANCE FOR LOAN LOSSES:
The loan portfolio and other extensions of credit are regularly reviewed to
determine the adequacy of the allowance for loan losses. The impact of
economic conditions on the credit worthiness of the borrowers is given
consideration, as well as loan loss experience, changes in the composition and
volume of the loan
42
<PAGE> 46
portfolio, and management's assessment of the risk inherent in the loan
portfolio. These and other factors are used in assessing the overall adequacy
of the allowance for loan losses and the resulting provision for loan losses.
The allowance for loan losses is established through charges to earnings
in the form of a provision for loan losses. Losses on loans and loans which are
determined to be uncollectible are deducted from the allowance and subsequent
recoveries, if any, are added back to the allowance.
PREMISES AND EQUIPMENT:
Premises, furniture and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization charges are
computed using the straight-line method. Premises, furniture and equipment are
depreciated over the estimated useful life of the assets, except for leasehold
improvements, which are amortized over the term of the lease or the estimated
useful life of the asset, if shorter. Estimated useful lives are ten to forty
years for premises, and three to ten years for furniture and equipment.
Expenditures for maintenance and repairs are expensed as incurred. The
costs of major renewals and improvements are capitalized. Premises and major
items of furniture and equipment are removed from the property accounts upon
disposition at their carrying amount, and gains or losses on such transactions
are included in other non-interest income or expense.
OTHER REAL ESTATE OWNED:
Other real estate owned includes both formally foreclosed and in-substance
foreclosed property. In-substance foreclosed property includes properties for
which borrowers have little or no equity or prospects for building equity in
the collateral and for which the loan repayment can only be expected from the
operation or sale of the collateral. In-substance foreclosed properties are
generally in the process of formal foreclosure. When a property is acquired
through foreclosure or in-substance foreclosure, the excess of the carrying
amount over fair value, if any, is charged to the allowance for loan losses.
An allowance for other real estate owned has been established to maintain
these properties at the lower of cost or fair value less estimated cost to
sell. Other real estate owned is shown net of the allowance.
The allowance is established through charges to other real estate owned
expenses. Operating results of other real estate owned, including rental
income, operating expenses, and gains and losses realized from the sales of
properties owned, are recorded in other real estate owned expense.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Interest rate swap and cap agreements are periodically used to manage interest
rate risk. The income or expense associated with these transactions is
recognized over the lives of the agreements as an adjustment to interest income
or interest expense.
INCOME TAXES:
The amount provided for income taxes is based on income reported for
consolidated financial statement purposes after elimination of income which is
exempt for Federal tax purposes. Such tax-exempt income is derived primarily
from investment securities of states and political subdivisions and certain
commercial and mortgage loans.
Prior to January 1, 1993, deferred income taxes were provided for timing
differences in the recognition of revenues and expenses for tax reporting and
financial statement purposes, pursuant to Accounting Principles Board Opinion
No. 11. Effective January 1, 1993, Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109), was adopted. SFAS 109
requires a change from the deferred method to the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and tax bases of
existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date, whereas under the deferred method, deferred taxes were not adjusted for
subsequent changes in tax rates. The cumulative effect at January 1, 1993 of
this change in the method of accounting for income taxes has been included in
the Consolidated Statement of Income, for the year ended December 31, 1993.
UJB Financial and its subsidiaries file a consolidated Federal income tax
return and the amount of income tax expense or benefit is computed and
allocated to its subsidiaries within the consolidated group on a separate
return basis.
INTANGIBLE ASSETS:
Excess of cost over fair value of net assets acquired (goodwill) relating to
subsidiaries purchased is included in other assets and is amortized on a
straight-line basis over periods ranging from ten to forty years. Goodwill
amounted to $13,561,000 and $14,775,000 at December 31, 1993 and 1992,
respectively.
Other intangible assets are amortized on an accelerated basis over periods
ranging from five to ten years. Other intangibles amounted to $15,003,000 and
$16,781,000 at December 31, 1993 and 1992, respectively.
RETIREMENT PLANS:
UJB Financial and its subsidiaries have several formal non-contributory
retirement plans which cover substantially all employees. Annual contributions
are made to the plans in amounts not less than the minimum regulatory
requirements. In 1993 UJB Financial adopted, on a prospective basis, Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106). The costs associated
with these benefits are accrued based on actuarial assumptions and included in
non-interest expenses.
43
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------
INCOME PER SHARE:
Income per common share is calculated by dividing net income, less the dividend
requirement on the adjustable-rate cumulative preferred stock, by the average
daily number of common shares outstanding during the period. Common stock
equivalents are not included in the calculation as they are not material.
NOTE 2 ACQUISITIONS
On December 16, 1993, UJB Financial announced a definitive agreement to acquire
VSB Bancorp, Inc., headquartered in Closter, N.J. with total assets of
approximately $379,000,000. The merger is expected to occur in the second or
third quarter of 1994.
NOTE 3 RESTRICTIONS ON CASH AND DUE FROM BANKS
The subsidiary banks are required to maintain reserve balances with a Federal
Reserve Bank based principally upon deposits. These reserve balances averaged
$332,881,000 in 1993 and $262,577,000 in 1992.
NOTE 4 INVESTMENT SECURITIES AVAILABLE FOR SALE
The following is a comparative summary of investment securities available for
sale at December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
In thousands Cost Gains Losses Value
======================================================================================
<S> <C> <C> <C> <C>
1993
U.S. Government and
Federal agencies . . . . . $ 669,841 $ 8,051 $ 174 $ 677,718
Other securities:
Mortgage-backed . . . . . . 474,554 3,914 816 477,652
Other debt . . . . . . . . 3,500 -- 30 3,470
Equities, net . . . . . . . 14,193 4,552 -- 18,745
- --------------------------------------------------------------------------------------
Total other . . . . . . . 492,247 8,466 846 499,867
- --------------------------------------------------------------------------------------
$1,162,088 $16,517 $1,020 $1,177,585
======================================================================================
1992
U.S. Government and
Federal agencies. . . . . . $741,428 $5,567 $ 854 $746,141
Other securities:
Mortgage-backed . . . . . . 125,982 44 1 126,025
Other debt . . . . . . . . 3,985 -- 17 3,968
Equities, net . . . . . . . 9,883 1,256 696 10,443
- --------------------------------------------------------------------------------------
Total other . . . . . . 139,850 1,300 714 140,436
- --------------------------------------------------------------------------------------
$881,278 $6,867 $1,568 $886,577
======================================================================================
</TABLE>
The amortized cost and market value of investment securities available for
sale at December 31, 1993 are distributed by contractual maturity. However,
mortgage-backed securities and other securities which may have prepayment
provisions are distributed to a maturity category based on the estimated
average life. These principal prepayments are not scheduled over the life of
the investment, but are reflected as adjustments to the final maturity
distribution. The distribution follows:
<TABLE>
<CAPTION>
Amortized Market
In thousands Cost Value
======================================================================================
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . . . $ 563 $ 566
Due after one year through five years . . . . . . . . . . 542,237 548,560
Due after five years through ten years . . . . . . . . . 294,487 297,081
Due after ten years . . . . . . . . . . . . . . . . . 310,608 312,633
- --------------------------------------------------------------------------------------
Marketable equity securities, net . . . . . . . . . . . . 14,193 18,745
- --------------------------------------------------------------------------------------
$1,162,088 $1,177,585
======================================================================================
</TABLE>
Gains and losses were realized on sales of investment securities available
for sale as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
======================================================================================
<S> <C> <C> <C>
Investments in debt securities:
Gross gains . . . . . . . . . . . . . . . . . . . . . $11,147 $14,783 $4,965
Gross losses . . . . . . . . . . . . . . . . . . . . . (2,816) (63) (6)
- --------------------------------------------------------------------------------------
Net gains $ 8,331 $14,720 $4,959
======================================================================================
</TABLE>
Interest income on investment securities available for sale was as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
======================================================================================
<S> <C> <C> <C>
U.S. Government and Federal agencies . . . . . . . . . . $17,082 $10,290 $2,085
States and political subdivisions . . . . . . . . . . . . -- -- 515
Other securities . . . . . . . . . . . . . . . . . . . . 13,941 492 644
- --------------------------------------------------------------------------------------
$31,023 $10,782 $3,244
======================================================================================
</TABLE>
NOTE 5 INVESTMENT SECURITIES
The following is a comparative summary of investment securities at December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
In thousands Cost Gains Losses Value
======================================================================================
<S> <C> <C> <C> <C>
1993
U.S. Government and
Federal agencies . . . . . $1,267,613 $18,930 $7,390 $1,279,153
States and political
subdivisions . . . . . . . 308,004 28,274 520 335,758
Other securities:
Mortgage-backed . . . . . 852,133 1,751 1,866 852,018
Other debt . . . . . . . . 28,963 2 45 28,920
- --------------------------------------------------------------------------------------
Total other . . . . . . 881,096 1,753 1,911 880,938
- --------------------------------------------------------------------------------------
$2,456,713 $48,957 $9,821 $2,495,849
======================================================================================
1992
U.S. Government and
Federal agencies . . . . . $2,199,506 $32,864 $15,867 $2,216,503
States and political
subdivisions . . . . . . . 378,198 26,836 754 404,280
Other securities:
Mortgage-backed . . . . . 25,664 661 17 26,308
Other debt . . . . . . . . 30,175 172 164 30,183
- --------------------------------------------------------------------------------------
Total other . . . . . . 55,839 833 181 56,491
- --------------------------------------------------------------------------------------
$2,633,543 $60,533 $16,802 $2,677,274
======================================================================================
</TABLE>
44
<PAGE> 48
The amortized cost and the market value of investment securities at
December 31, 1993 are distributed by contractual maturity. However,
mortgage-backed securities and other securities which may have prepayment
provisions are distributed to a maturity category based on the estimated
average life. These principal prepayments are not scheduled over the life of
the investment, but are reflected as adjustments to the final maturity
distribution. The distribution follows:
<TABLE>
<CAPTION>
Amortized Market
In thousands Cost Value
======================================================================================
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . $ 111,434 $ 114,237
Due after one year through five years . . . . . . . 893,476 909,911
Due after five years through ten years . . . . . . 968,320 982,999
Due after ten years . . . . . . . . . . . . . . . . 483,483 488,702
- --------------------------------------------------------------------------------------
$2,456,713 $2,495,849
======================================================================================
</TABLE>
Gains and losses were realized on sales and early redemptions of
investment securities as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=================================================================================================
<S> <C> <C> <C>
Investments in debt securities:
Gross gains . . . . . . . . . . . . . . . . . . . . . . $ 732 $3,899 $ 11,542
Gross losses . . . . . . . . . . . . . . . . . . . . . (186) (850) (94)
- -------------------------------------------------------------------------------------------------
Net gains . . . . . . . . . . . . . . . . . . . . . . 546 3,049 11,448
Net gains (losses) on marketable equity
securities . . . . . . . . . . . . . . . . . . . . . -- 426 (2,533)
- -------------------------------------------------------------------------------------------------
Net securities gains $ 546 $3,475 $ 8,915
=================================================================================================
</TABLE>
Interest income on investment securities was as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=================================================================================================
<S> <C> <C> <C>
U.S. Government and Federal agencies . . . . . . . . . . $135,860 $190,795 $191,476
States and political subdivisions . . . . . . . . . . . . 25,204 30,514 36,635
Other securities . . . . . . . . . . . . . . . . . . . . 29,775 14,348 33,160
- -------------------------------------------------------------------------------------------------
$190,839 $235,657 $261,271
=================================================================================================
</TABLE>
The carrying value of securities pledged to secure public funds,
securities sold under agreements to repurchase, and for other purposes required
by law was $1,091,951,000 at December 31, 1993.
NOTE 6 LOANS
The composition of the loan portfolio, net of unearned discount and net
deferred loan origination fees and costs, at December 31, was as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
Commercial and industrial . . . . . . . . . . . . . . . . $3,368,568 $3,409,819
Construction and development . . . . . . . . . . . . . . 867,063 1,002,859
- ----------------------------------------------------------------------------------
Total commercial loans . . . . . . . . . . . . . . . . 4,235,631 4,412,678
Commercial mortgages . . . . . . . . . . . . . . . . . . 1,544,921 1,487,420
Residential mortgages . . . . . . . . . . . . . . . . . . 832,519 839,943
- ----------------------------------------------------------------------------------
Total mortgage loans . . . . . . . . . . . . . . . . . 2,377,440 2,327,363
Home equity . . . . . . . . . . . . . . . . . . . . . . . 1,373,672 1,486,681
Auto loans . . . . . . . . . . . . . . . . . . . . . . . 422,747 335,911
Other instalment . . . . . . . . . . . . . . . . . . . . 197,604 219,776
- ----------------------------------------------------------------------------------
Total instalment . . . . . . . . . . . . . . . . . . . 1,994,023 2,042,368
- ----------------------------------------------------------------------------------
$8,607,094 $8,782,409
==================================================================================
</TABLE>
Most of UJB Financial's business is with customers located within New
Jersey and eastern Pennsylvania. A portion of the total loan portfolio is
secured by real estate. The principal areas of exposure are construction and
development, which are primarily commercial and residential projects and
commercial mortgage loans. Commercial mortgage loans are completed projects
and are generally owner-occupied, creating cash flow.
The ultimate collectibility of the loan portfolio and realization of the
carrying value of real estate are subject to changes in the region's real
estate market and future economic conditions.
Residential mortgage loans held for sale amounted to $33,788,000 at
December 31, 1993 and $44,731,000 at December 31, 1992. These loans are
accounted for at the lower of aggregate cost or market.
Subsidiaries of UJB Financial have granted loans to officers and
directors of the company and its significant subsidiaries and to their
associates. Related party loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than
normal risk of collectibility. The aggregate dollar amount of these loans was
$80,046,000 and $98,043,000 at December 31, 1993 and 1992, respectively.
During 1993, there were $64,801,000 of new loans made and repayments totaled
$82,798,000.
NOTE 7 NON-PERFORMING LOANS
Non-performing loans consist of commercial non-accrual and renegotiated loans.
Non-accrual loans are those on which income under the accrual method has been
discontinued with subsequent interest payments credited to interest income when
received, or if ultimate collectibility of principal is in doubt, applied as
principal reductions. Renegotiated loans are loans whose contractual interest
rates have been reduced to below market rates, or other significant concessions
made, due to a borrower's financial difficulties. Interest on these loans is
either accrued or credited directly to interest income as received.
At December 31, non-performing loans were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
Non-accrual loans . . . . . . . . . . . . . . . . . . . . $248,144 $339,980
Renegotiated loans . . . . . . . . . . . . . . . . . . . 3,582 21,836
- ----------------------------------------------------------------------------------
$251,726 $361,816
==================================================================================
</TABLE>
The following information is presented for those loans classified as
non-performing at December 31:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=================================================================================================
<S> <C> <C> <C>
Income that would have been recorded
under original contract terms . . . . . . . . . . . . . $21,382 $27,538 $43,405
Interest income received and recorded . . . . . . . . . . 3,787 3,843 8,463
- -------------------------------------------------------------------------------------------------
Lost income on non-performing loans
at year end $17,595 $23,695 $34,942
=================================================================================================
</TABLE>
45
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------
NOTE 8 ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=================================================================================================
<S> <C> <C> <C>
Balance, January 1 . . . . . . . . . . . . . . . . . . . $275,296 $288,770 $258,691
Add provision charged to expense . . . . . . . . . . . 95,500 139,000 167,350
- -------------------------------------------------------------------------------------------------
370,796 427,770 426,041
- -------------------------------------------------------------------------------------------------
Less net charge offs:
Loans charged off . . . . . . . . . . . . . . . . . . 142,987 165,208 149,325
Less recoveries . . . . . . . . . . . . . . . . . . . 14,295 12,734 12,054
- -------------------------------------------------------------------------------------------------
Net loans charged off . . . . . . . . . . . . . . . . . 128,692 152,474 137,271
- -------------------------------------------------------------------------------------------------
Balance, December 31 $242,104 $275,296 $288,770
=================================================================================================
</TABLE>
NOTE 9 PREMISES AND EQUIPMENT
The major components of premises, furniture and equipment at December 31, were
as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,005 $ 17,828
Premises and leasehold improvements . . . . . . . . . . . 185,546 179,921
Furniture and equipment . . . . . . . . . . . . . . . . . 127,636 121,408
- ----------------------------------------------------------------------------------
330,187 319,157
Less accumulated depreciation and amortization . . . . . 162,710 145,997
- ----------------------------------------------------------------------------------
$167,477 $173,160
==================================================================================
</TABLE>
Amounts charged to non-interest expenses for depreciation and
amortization amounted to $20,183,000 in 1993, $20,311,000 in 1992 and
$18,380,000 in 1991.
NOTE 10 OTHER REAL ESTATE OWNED
At December 31, other real estate owned consisted of the following:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
Other real estate owned . . . . . . . . . . . . . . . . . $ 69,075 $ 86,643
In-substance foreclosures . . . . . . . . . . . . . . . . 34,093 48,258
- ----------------------------------------------------------------------------------
103,168 134,901
Less allowance for other real estate owned . . . . . . . 30,893 13,127
- ----------------------------------------------------------------------------------
$ 72,275 $121,774
==================================================================================
</TABLE>
Transactions in the allowance for other real estate owned were as
follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
Balance, January 1 . . . . . . . . . . . . . . . . . . . $13,127 $ 2,388
Add provision charged to expense . . . . . . . . . . . 31,563 27,728
- ----------------------------------------------------------------------------------
44,690 30,116
Less losses on sales . . . . . . . . . . . . . . . . . 13,797 16,989
- ----------------------------------------------------------------------------------
Balance, December 31 $30,893 $13,127
==================================================================================
</TABLE>
NOTE 11 OTHER BORROWED FUNDS
Other borrowed funds at December 31, consisted of the following:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
Securities sold under agreements to repurchase . . . . . $274,255 $357,734
Federal funds purchased . . . . . . . . . . . . . . . . . 160,554 198,275
Treasury tax and loan deposits . . . . . . . . . . . . . 85,322 55,095
Bank borrowings . . . . . . . . . . . . . . . . . . . . . -- 5,250
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 29,318 24,650
- ----------------------------------------------------------------------------------
$549,449 $641,004
==================================================================================
</TABLE>
Lines of credit are available to support commercial paper borrowings and
for general corporate purposes, on which interest approximates the prime
lending rate at the time of borrowing. Unused lines amounted to $48,000,000 at
December 31, 1993.
Commitment fees on the credit facilities and the lines of credit
amounted to $161,000 in 1993, $236,000 in 1992 and $782,000 in 1991.
NOTE 12 LONG-TERM DEBT
Long-term debt at December 31, consisted of the following:
<TABLE>
<CAPTION>
In thousands 1993 1992
==================================================================================
<S> <C> <C>
8.625% Subordinated notes due December 10, 2002 . . . . . $175,000 $175,000
7.95% Senior notes due August 25, 2003 . . . . . . . . . 20,000 --
7.75% Sinking fund debentures . . . . . . . . . . . . . . 10,715 11,600
12.95% Mortgage note . . . . . . . . . . . . . . . . . . -- 18,270
11.50% Senior notes . . . . . . . . . . . . . . . . . . . -- 3,000
13% Subordinated debentures . . . . . . . . . . . . . . . -- 2,387
Private placement notes . . . . . . . . . . . . . . . . . -- 2,080
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,744 4,233
- ----------------------------------------------------------------------------------
$208,459 $216,570
==================================================================================
</TABLE>
The 8.625% subordinated notes were issued in 1992 and are unsecured.
Interest is payable semi-annually on June 10 and December 10 of each year. The
notes are not subject to redemption prior to maturity. No sinking fund is
provided for the notes.
On August 19,1993 the Company issued $20,000,000 of 7.95% ten year
maturity, private placement notes with interest payable quarterly on the
twenty-fifth day of each February, May, August and November. The notes are to
mature on August 25, 2003. The Company shall have the option, on any interest
payment date, to prepay the notes in whole or in part, but in no event shall
the prepayment be less than $1,000,000 subject to certain contractual
prepayment options.
The 7.75% sinking fund debentures are currently redeemable at the option
of UJB Financial at 100% of the principal amount, plus accrued interest. An
annual sinking fund of $700,000 is calculated to retire 52.5% of this issue
prior to maturity on November 1, 1997. UJB Financial may, at its option,
increase its sinking fund payment in any year by making an additional payment
not in excess of the mandatory sinking fund payment. The debentures are
redeemable, through the sinking fund, at the principal amount thereof plus
accrued interest.
The 12.95% mortgage note was prepaid in whole on June 28, 1993, as
permitted by the original agreement, at a premium of $913,500. The private
placement notes were paid in full in 1993.
46
<PAGE> 50
The 11.50% senior notes and the 13% subordinated debentures are included
in other borrowed funds as they are expected to be paid in full in 1994.
Certain of the above long-term debt agreements include restrictions upon
the creation of liens by UJB Financial, the disposition of stock of
subsidiaries, the payment of cash dividends and the creation of funded debt, as
defined. At December 31, 1993, under the most restrictive limitations,
consolidated retained earnings of $208,483,000 were unrestricted and available
for dividends and the amount of additional funded debt, as defined, that could
be created was $249,808,000.
The principal amount of long-term debt due in the following year is
included in other borrowed funds. Principal amounts due, including sinking fund
payments, for the years 1994 through 1998 are $6,867,000, $1,225,000, $831,000,
$832,000 and $833,000, respectively.
NOTE 13 COMMON AND PREFERRED STOCK
At December 31, 1993, approximately 8,241,000 common shares were reserved for
issuance under the Dividend Reinvestment Plan, Incentive Stock and Option Plan,
Stock Option Plans, Savings Incentive Plan, Long-Term Performance Stock Plan
and the 1983 Equity Contracts.
At December 31, 1993, UJB Financial had 4,000,000 shares of preferred
stock authorized of which 600,166 shares of Series B Preferred Stock were
outstanding. Each outstanding share of Series B $50 stated value preferred
stock is non-convertible and has no voting rights. Dividends are cumulative and
are payable quarterly on February 1, May 1, August 1, and November 1 of each
year. For each quarterly period, the dividend rate will be determined in
advance of such period, and the dividend rate will be 1.5% less than the
highest of the Three Month Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate. The dividend rate for any
dividend period will not be less than 6% per annum or greater than 11% per
annum.
The preferred stock is redeemable at the option of UJB Financial, in
whole or in part, plus accrued and unpaid dividends. The preferred stock may be
redeemed prior to May 1, 1995 at a redemption price of $51.50 per share and,
thereafter, at $50 per share. Dividends in the amounts of $3.00 per share were
declared on the Series B Preferred Stock during 1993.
A Shareholder Rights Plan exists which is designed to ensure fair and
equal treatment for all UJB Financial shareholders in the event of any proposal
to acquire UJB Financial. The terms of the plan provide that, effective August
28, 1989, each share of common stock also represents one "right." Each right
will entitle the holder to buy one one-hundredth of a share of a new series of
preferred stock upon the occurrence of certain events. In addition, upon the
occurrence of certain other events, holders of the rights will be entitled to
purchase either shares of this new preferred stock or shares in an "acquiring
person" at half their fair market value, as determined under the plan.
NOTE 14 RESTRICTIONS ON SUBSIDIARY BANK DIVIDENDS
Certain bank regulatory limitations exist on the availability of subsidiary
bank undistributed net assets for the payment of dividends to UJB Financial
Parent Corporation without the prior approval of the bank regulatory
authorities.
The National Bank Act which affects the three nationally-chartered banks
and the Federal Reserve Act which affects one state-member bank, restrict the
payment of dividends in any calendar year to the net profit of the current year
combined with retained net profits of the preceding two years. Each of the
three state-chartered banks may declare a dividend only if, after payment
thereof, its capital would be unimpaired and its remaining surplus would equal
50 percent of its capital (New Jersey) or 100 percent of its capital
(Pennsylvania). At December 31, 1993, the total undistributed net assets of the
subsidiary banks were $858,299,000 of which $96,920,000 was available under the
most restrictive limitations for the payment of dividends to UJB Financial
Parent Corporation.
NOTE 15 BENEFIT PLANS
UJB Financial has several trusteed non-contributory defined benefit retirement
plans covering substantially all of its employees. The benefits are based on
years of service and the employees' final average compensation. The funding
policy of UJB Financial is to contribute annually an amount that can be
deducted for Federal income tax purposes. Contributions are intended to provide
not only for benefits attributed to service to date, but also for those
expected to be earned in the future.
The following table sets forth the plans' funding status and amounts
recognized in the consolidated financial statements of UJB Financial at
December 31:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=================================================================================================
<S> <C> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$107,481 in 1993, $90,202 in 1992
and $75,301 in 1991 . . . . . . . . . . . . . . . . . . $(114,972) $ (97,108) $ (80,535)
=================================================================================================
Projected benefit obligation for
service rendered to date . . . . . . . . . . . . . . . $(145,285) $ (125,198) $ (107,336)
Plan assets at fair value . . . . . . . . . . . . . . . . 142,903 132,918 124,405
- -------------------------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation . . . . . . . . . . . . . . . . . . (2,382) 7,720 17,069
Unrecognized net asset at January 1 . . . . . . . . . . . (10,931) (13,297) (15,663)
Unrecognized net (gain) loss from
past experience which is different
from that assumed, and effect of
changes in assumptions . . . . . . . . . . . . . . . . 6,043 2,310 (2,728)
- --------------------------------------------------------------------------------------------------
Accrued pension cost $ (7,270) $ (3,267) $ (1,322)
=================================================================================================
Net pension expense consisted
of the following components:
Service cost . . . . . . . . . . . . . . . . . . . . . $ 6,716 $ 5,965 $ 5,428
Interest cost . . . . . . . . . . . . . . . . . . . . . 10,424 9,534 8,554
Actual return on plan assets . . . . . . . . . . . . . (14,879) (11,599) (27,979)
Net amortization and deferral . . . . . . . . . . . . . 2,057 (376) 16,723
- -------------------------------------------------------------------------------------------------
Net pension expense $ 4,318 $ 3,524 $ 2,726
=================================================================================================
</TABLE>
The plans' assets were principally invested in units of mutual funds.
The weighted average discount rate was 7.5% in 1993, 8.0% in 1992, and 8.5% in
1991. The rate of increase in future compensation levels used in determining
the actuarial present value of the projected benefit obligation was 5.5% in
1993, 6.0% in 1992, and 6.5% in 1991. The expected long-term rate of return on
plan assets was 9.0% in 1993, 1992 and 1991.
47
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------
Management incentive plans have been established with the intention of
providing added incentive to key executives to increase the profits of the
company. The executives and the amount of the awards are subject to limits as
set forth in the plans. Accruals for the plans amounted to $1,640,000,
$1,420,000 and $958,000 in 1993, 1992 and 1991, respectively.
There is a Savings Incentive Plan which covers substantially all employees
with one or more years of service. The Plan permits eligible employees to make
basic contributions to the Plan up to 3% of base compensation in 1993, 1992 and
1991, and additional contributions up to 12% of base compensation. Under the
Plan, the employer provides a matching contribution equal to 65% in 1993 and
1992 and 55% in 1991 of the basic contributions. Matching contributions to the
Plan amounted to $2,084,000, $1,863,000, and $1,651,000, in 1993, 1992 and
1991, respectively.
Certain subsidiaries have other incentive plans and profit sharing
agreements. Accruals under these plans amounted to $1,622,000, $1,402,000, and
$949,000, in 1993, 1992 and 1991, respectively.
The Incentive Stock and Option Plan and previous Long-Term Performance
Stock Plans provide for the grant of shares of common stock in the form of
Restricted Stock Awards. Shares issued as stock awards were 68,702 in 1993,
83,210 in 1992 and 134,160 in 1991. The shares awarded are subject to certain
forfeiture restrictions as set forth in the Plan.
In addition to pension benefits, certain health care and life insurance
benefits are made available to retired employees. In 1993 UJB Financial
adopted, on a prospective basis, Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). Under SFAS 106 the costs of such benefits are accrued
based on actuarial assumptions from the date of hire to the date the employee
is fully eligible to receive the benefits. Prior to the adoption of SFAS 106,
the costs of these benefits were expensed as paid and amounted to $1,039,000 in
1992 and $847,000 in 1991.
The following table sets forth the net periodic postretirement benefit
cost and accumulated postretirement benefit obligation (APBO) at December 31,
1993:
<TABLE>
<CAPTION>
In thousands
====================================================================
<S> <C>
Accumulated postretiremcnt benefit obligation (APBO) . . . $(35,009)
Fair value of assets . . . . . . . . . . . . . . . . . . --
- --------------------------------------------------------------------
Projected benefit obligation funded status . . . . . . . . (35,009)
Unrecognized transition obligation . . . . . . . . . . . 26,414
Unrecognized loss . . . . . . . . . . . . . . . . . . . . 5,731
- --------------------------------------------------------------------
Accrued APBO $ (2,864)
====================================================================
Net postretirement benefit cost consisted of the
following components:
Service cost . . . . . . . . . . . . . . . . . . . . . . $ 305
Interest cost . . . . . . . . . . . . . . . . . . . . . . 2,303
Amortization of transition obligation . . . . . . . . . . 1,390
- --------------------------------------------------------------------
Net postretirement benefit cost $ 3,998
====================================================================
</TABLE>
For measurement purposes, the cost of medical benefits was projected to
increase at a rate of 15.0% in 1993, thereafter decreasing linearly to 6.0%
over 9 years. Increasing the assumed health care cost trend by one percent in
each year would increase the accumulated postretirement benefit obligation as
of January 1, 1993 by $1,464,000 and the aggregate of the service and interest
components of net periodic postretirement benefit cost for the year ended
December 31, 1993 by $100,000. The present value of the accumulated benefit
obligation assumed a 7.5% discount rate. The rate of increase used in future
compensation levels was 5.5% in 1993.
NOTE 16 STOCK OPTION PLANS
The Stock Option Plans permit UJB Financial common stock to be issued to key
employees of the company and its subsidiaries. The options granted under the
Plans are intended to be either Incentive Stock Options or Non-Qualified
Options.
Options have been granted to purchase common stock principally at the fair
market value of the stock at the date of grant. Options are exercisable
starting one year after the date of grant and generally expire ten years from
the date of grant. Upon the exercise of options, proceeds received in excess of
par value of the shares are credited to surplus.
Changes in options outstanding during the past three years
were as follows:
<TABLE>
<CAPTION>
Price Range
Shares Per Share
==========================================================================
<S> <C> <C>
Outstanding, December 31, 1990
(1,114,369 shares exercisable) . . . 1,706,527 $11.027 to $29.438
Granted during 1991 . . . . . . . . . 956,300 7.875 to 14.688
Exercised during 1991 . . . . . . . . 6,480 8.807 to 14.313
Expired or cancelled during 1991 . . 64,070 7.875 to 29.438
- --------------------------------------------------------------------------
Outstanding, December 31, 1991
(1,635,977 shares exercisable) . . . 2,592,277 7.875 to 29.438
Granted during 1992 . . . . . . . . . 539,560 16.500 to 17.000
Exercised during 1992 . . . . . . . . 242,975 7.875 to 20.375
Expired or cancelled during 1992 . . 30,997 7.875 to 29.438
- --------------------------------------------------------------------------
Outstanding, December 31, 1992
(2,318,305 shares exercisable) . . . 2,857,865 7.875 to 29.438
Granted during 1993 . . . . . . . . . 474,500 24.000 to 25.063
Exercised during 1993 . . . . . . . . 348,164 7.875 to 29.438
Expired or cancelled during 1993 . . 24,957 7.875 to 29.438
- --------------------------------------------------------------------------
Outstanding, December 31, 1993
(2,484,744 shares exercisable) . . . 2,959,244 $ 7.875 to $29.438
==========================================================================
</TABLE>
NOTE 17 OTHER EXPENSES
Other expenses consisted of the following:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=======================================================================
<S> <C> <C> <C>
Professional and other fees . . . . . . $ 39,799 $ 44,399 $ 32,089
Communications (postage and
telephone) . . . . . . . . . . . . . 18,389 17,222 16,639
Merchant card processing fees . . . . . 14,464 12,534 11,247
Other . . . . . . . . . . . . . . . . . 39,523 39,421 42,760
- -----------------------------------------------------------------------
$112,175 $113,576 $102,735
=======================================================================
</TABLE>
NOTE 18 INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). This Statement
48
<PAGE> 52
changes the method of accounting for income taxes from the deferred method,
required under Accounting Principles Board Opinion No. 11, to the asset and
liability method. The Statement addresses temporary differences and the basis
of certain assets and liabilities for tax and financial statement reporting
purposes. A deferred tax liability is recognized for all taxable temporary
differences and a deferred tax asset is recognized for all deductible temporary
differences.
Effective January 1, 1993, SFAS 109 was adopted on a prospective basis.
The cumulative effect of the adoption resulted in a positive effect to earnings
of $3.8 million or $.07 per share.
The provision (benefit) for income taxes in the consolidated statement of
income consists of the following:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
=======================================================================
<S> <C> <C> <C>
Current
Federal . . . . . . . . . . . . . . . $21,293 $19,156 $ 6,070
State . . . . . . . . . . . . . . . . 9,296 3,829 10,698
- -----------------------------------------------------------------------
30,589 22,985 16,768
Deferred
Federal . . . . . . . . . . . . . . . (739) (4,929) (14,027)
State . . . . . . . . . . . . . . . . (5,043) -- --
- -----------------------------------------------------------------------
(5,782) (4,929) (14,027)
- -----------------------------------------------------------------------
Total income tax provision $24,807 $18,056 $ 2,741
=======================================================================
</TABLE>
A summary of the differences between the actual income tax provision
(benefit) and the amounts computed by applying the statutory Federal income tax
rate to income is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
==============================================================================
<S> <C> <C> <C>
Federal tax at statutory rate . . . . . . . . . $ 34,666 $ 24,439 $ 8,560
Increase (decrease) in taxes resulting from:
Tax-exempt interest income . . . . . . . . . (10,492) (12,373) (14,773)
State taxes, net of Federal tax effect . . . 2,764 2,527 7,061
Other, net . . . . . . . . . . . . . . . . . (2,131) 3,463 1,893
- ------------------------------------------------------------------------------
Total income tax provision $ 24,807 $ 18,056 $ 2,741
==============================================================================
</TABLE>
The significant temporary differences of the income tax provision which
affected the net deferred tax asset were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
==================================================================================
<S> <C> <C> <C>
Provision for loan losses and other real
estate on tax return in excess of (less than)
provision charged to operating expense . . . . . $ 2,875 $ 383 $(13,647)
Loan interest income recognized on tax
return less than (in excess of) amount
included in operating income . . . . . . . . . . 1,829 33 (2,726)
Depreciation expense on tax return less than
amount charged to operating expense . . . . . . . (1,625) (584) (1,684)
Income from loan securitization included in
operating income, but not reflected on
tax return . . . . . . . . . . . . . . . . . . . -- (2,532) 2,532
Adjustment of securities to market value not
reflected on tax return . . . . . . . . . . . . . (261) 134 1,113
Restructuring charges . . . . . . . . . . . . . . . (8,773) -- --
Utilization of the alternative minimum tax
credit carryforward . . . . . . . . . . . . . . . 5,090 -- --
Other, net . . . . . . . . . . . . . . . . . . . . (4,917) (2,363) 385
- ----------------------------------------------------------------------------------
$(5,782) $(4,929) $(14,027)
==================================================================================
</TABLE>
The significant Federal and state temporary differences which comprise UJB
Financial's deferred tax assets and liabilities are presented at December 31,
1993 as follows:
<TABLE>
<CAPTION>
In thousands
=============================================================
<S> <C>
Deferred tax assets:
Provision for loan losses . . . . . . . . . . . . $ 98,295
Provision for other real estate owned . . . . . 12,662
Restructuring charges . . . . . . . . . . . . . . 8,773
Alternative minimum tax credit carryforwards . . 3,055
Other . . . . . . . . . . . . . . . . . . . . . . 12,049
- -------------------------------------------------------------
134,834
Deferred tax liabilities:
Leasing operations . . . . . . . . . . . . . . . (10,601)
Other . . . . . . . . . . . . . . . . . . . . . . (6,458)
- -------------------------------------------------------------
(17,059)
- -------------------------------------------------------------
Net deferred tax asset $117,775
=============================================================
</TABLE>
Included in deferred tax assets "Other" is a valuation allowance which has
been established against certain Federal and state temporary differences. The
valuation allowance was $7,346,000 at December 31, 1993 compared with
$7,150,000 at January 1, 1993. At December 31, 1993, there was a deferred state
tax asset of $3,975,000 resulting from operating loss carryforwards. This
asset was reserved by the valuation allowance.
UJB Financial is not aware of any factors which would generate significant
differences between taxable income and pretax book income in future years
except for the effects of the reversal of current or future net deductible
temporary differences. However, there can be no assurances that there will not
be any significant differences in the future, if circumstances change.
Management believes, based upon current facts, that more likely than not
there will be sufficient taxable income in future years to realize the net
deferred tax asset. However, there can be no assurance about the level of
future earnings.
NOTE 19 LEASE COMMITMENTS
Non-interest expenses include rentals for premises and equipment of $34,435,000
in 1993, $31,969,000 in 1992 and $28,955,000 in 1991, after reduction for
sublease rentals of $2,894,000, $3,164,000, and $2,873,000 in each of the
respective years. At December 31, 1993, UJB Financial and its subsidiaries were
obligated under a number of non-cancellable leases for premises and equipment,
many of which provide for increased rentals based upon increases in real estate
taxes and the cost of living index. These leases, most of which have renewal
provisions, are principally non-financing leases. Minimum rentals under the
terms of these leases for years 1994 through 1998 are $33,014,000, $28,382,000,
$23,287,000, $16,167,000, and $10,275,000, respectively. Minimum rentals due
after 1998 are $26,143,000.
NOTE 20 CONTINGENT LIABILITIES
UJB Financial and its subsidiaries may, from time to time, be defendants in
legal proceedings relating to the conduct of their business. UJB Financial is a
defendant in a purported class action lawsuit brought by plaintiffs alleged to
have owned or purchased securities of UJB Financial. Violations of Federal
securities laws and New Jersey common law are alleged. Discovery by both
parties is in process.
49
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------
The Board and management of UJB Financial believe the allegations
contained in the lawsuit to be lacking in merit and intend to defend this
lawsuit vigorously. Management believes the consolidated financial position of
UJB Financial and subsidiaries will not be affected materially by the final
outcome of any pending legal proceedings.
NOTE 21 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
UJB Financial and its subsidiaries enter into a variety of financial
instruments with off-balance-sheet risk in the normal course of business.
These financial instruments include interest rate swaps, commitments to extend
credit and standby letters of credit, each of which involve, to varying
degrees, elements of risk in excess of the amounts recognized in the financial
statements.
Included in financial instruments with off-balance-sheet risk are
derivatives which are primarily attributable to asset and liability management
efforts. The notional amount of interest rate swaps at December 31, 1993 and
1992 was $1,019,000,000 and $161,300,000 respectively.
Credit risk, the risk that a counterparty of a particular financial
instrument will fail to perform, is the contract amount of commitments to
extend credit and standby letters of credit. The credit risk associated with
these financial instruments is essentially the same as that involved in
extending loans to customers. Credit risk is managed by limiting the total
amount of arrangements outstanding and by applying normal credit policies to
all activities with credit risk. Collateral may be obtained based on
management's credit assessment of the customer.
The contract amounts of off-balance-sheet financial instruments at
December 31, 1993 and 1992 for commitments to extend credit were
$3,656,141,000 and $3,431,459,000, respectively, and for standby letters of
credit were $224,291,000 and $258,302,000, respectively.
Many of the commitments to extend credit are expected to expire without
being drawn upon and, therefore, the total commitment amounts do not
necessarily represent future cash flow requirements.
NOTE 22 FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Fair value estimates are made at a
specific point in time based on relevant market information and information
about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the entire
holdings of a particular financial instrument. Because no market value exists
for a significant portion of the financial instruments, fair value estimates
are based on judgments regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instruments,
and other factors. These estimates are subjective in nature, involve
uncertainties and matters of judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are determined for on and off-balance-sheet financial
instruments, without attempting to estimate the value of anticipated future
business, and the value of assets and liabilities that are not considered
financial instruments. Additionally, tax consequences related to the
realization of the unrealized gains and losses can have a potential effect on
fair value estimates and have not been considered in many of the estimates.
The following methods and assumptions were used to estimate the fair value
of significant financial instruments.
FINANCIAL ASSETS:
The carrying amounts of cash, short-term investments, due from customers on
acceptances, and bank acceptances outstanding are considered to approximate
fair value. Short-term investments include Federal funds sold, securities
purchased under agreements to resell, and interest bearing deposits with banks.
The fair values of investment securities, including available for sale, are
generally based on quoted market prices. The fair value of loans are estimated
using a combination of techniques, including discounting estimated future cash
flows and quoted market prices of similar instruments, where available.
FINANCIAL LIABILITIES:
The carrying amounts of deposit liabilities payable on demand, commercial paper
and other borrowed funds are considered to approximate fair value. For fixed
maturity deposits, fair value is estimated by discounting estimated future cash
flows using currently offered rates for deposits of similar remaining
maturities. The fair value of long-term debt is based on rates currently
available to UJB Financial for debt with similar terms and remaining
maturities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
The fair value of commitments to extend credit and standby letters of credit is
estimated using the fees currently charged to enter into similar agreements.
The fair value of interest rate swaps and caps, entered into in order to manage
interest rate risk, are based on dealer quotes. At December 31, 1993 the fair
value of these instruments was ($1,233,000).
The estimated fair value of financial instruments at December 31, is
summarized as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
=============================================================================
<S> <C> <C>
Financial Assets:
Cash and short-term investments . . . . . . . . . $ 839,866 $ 1,133,366
Trading account securities . . . . . . . . . . . 29,735 21,961
Investment securities available for sale . . . . 1,177,585 886,577
Investment securities . . . . . . . . . . . . . . 2,495,849 2,677,274
Loans . . . . . . . . . . . . . . . . . . . . . . 8,898,788 8,870,187
Due from customers on acceptances . . . . . . . . 20,126 21,378
Financial Liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . $11,480,996 $11,819,544
Other borrowed funds and commercial
paper . . . . . . . . . . . . . . . . . . . . . 582,808 703,842
Bank acceptances outstanding . . . . . . . . . . 20,126 21,378
Long-term debt . . . . . . . . . . . . . . . . . 225,513 224,975
=============================================================================
</TABLE>
50
<PAGE> 54
NOTE 23 PARENT CORPORATION INFORMATION
UJB Financial Parent Corporation formed UJB Financial Service Corporation, a
bank service corporation, and transferred $28,300,000 of assets to the new
company as of December 31, 1991. This company is wholly owned by the subsidiary
banks. UJB Financial Service Corporation provides data processing and other
back office services to these subsidiaries. Beginning in 1992, the Condensed
Statements of Income include UJB Financial Parent Corporation only, and not the
operating results of UJB Financial Service Corporation.
UJB Financial Parent Corporation information is as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-----------------------
In thousands 1993 1992
=============================================================================
ASSETS
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . $ 152,024 $ 216,674
Interest bearing deposits with banks . . . . . . . 5,000 --
Investment securities . . . . . . . . . . . . . . . 3,738 3,380
Investment in subsidiaries . . . . . . . . . . . . 920,228 812,501
Due from subsidiaries . . . . . . . . . . . . . . . 149,410 173,171
Premises and equipment . . . . . . . . . . . . . . 20,665 23,110
Other assets . . . . . . . . . . . . . . . . . . . 24,467 13,777
- -----------------------------------------------------------------------------
Total Assets $1,275,532 $1,242,613
=============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper . . . . . . . . . . . . . . . . . $ 33,359 $ 62,861
Borrowed funds . . . . . . . . . . . . . . . . . . -- 5,250
Accrued expenses and other liabilities . . . . . . 57,927 44,230
Long-term debt . . . . . . . . . . . . . . . . . . 208,172 210,002
- -----------------------------------------------------------------------------
Total liabilities . . . . . . . . . . . . . . . . 299,458 322,343
Total shareholders' equity . . . . . . . . . . . . 976,074 920,270
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,275,532 $1,242,613
=============================================================================
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
In thousands 1993 1992 1991
=================================================================================
<S> <C> <C> <C>
OPERATING INCOME
Management and service charges to
subsidiaries . . . . . . . . . . . . . . . . . $38,994 $40,177 $96,562
Dividends from subsidiaries . . . . . . . . . . . 40,311 33,266 33,310
Interest from subsidiaries . . . . . . . . . . . 16,356 10,763 23,696
Investment securities gains (losses) . . . . . . -- 422 (2,419)
Other interest . . . . . . . . . . . . . . . . . 120 390 896
Other . . . . . . . . . . . . . . . . . . . . . . 12 (204) 54
- ---------------------------------------------------------------------------------
Total operating income 95,793 84,814 152,099
- ---------------------------------------------------------------------------------
OPERATING EXPENSES
Salaries and employee benefits . . . . . . . . . 32,887 28,924 55,022
Interest . . . . . . . . . . . . . . . . . . . . 20,044 11,247 23,402
Occupancy and equipment . . . . . . . . . . . . . 5,768 5,776 29,681
Other . . . . . . . . . . . . . . . . . . . . . . 11,797 14,098 22,278
- ---------------------------------------------------------------------------------
Total operating expenses 70,496 60,045 130,383
- ---------------------------------------------------------------------------------
Income before income taxes and equity
in undistributed net income of
subsidiaries . . . . . . . . . . . . . . . . . 25,297 24,769 21,716
Federal and state income taxes
(benefit) . . . . . . . . . . . . . . . . . . (701) 450 (2,079)
- ---------------------------------------------------------------------------------
25,998 24,319 23,795
Equity in undistributed net income (loss)
of subsidiaries . . . . . . . . . . . . . . . 52,057 29,505 (1,360)
- ---------------------------------------------------------------------------------
Net Income $78,055 $53,824 $22,435
=================================================================================
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
In thousands 1993 1992 1991
=================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . $ 78,055 $ 53,824 $ 22,435
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . 2,481 3,070 5,447
(Gains) losses on sales of investment
securities . . . . . . . . . . . . . . . . . -- (422) 2,419
Loss on sale of assets . . . . . . . . . . . . -- 209 --
(Increase) decrease in other assets . . . . . . (10,677) (478) 3,892
Increase (decrease) in accrued
expenses and other liabilities . . . . . . . 13,697 7,759 (982)
Equity in undistributed net (income)
loss of subsidiaries . . . . . . . . . . . . (52,057) (29,505) 1,360
- ---------------------------------------------------------------------------------
Net cash provided by operating
activities 31,499 34,457 34,571
- ---------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment
securities . . . . . . . . . . . . . . . . . . -- 9,354 7,261
Net (increase) decrease in short-term
investments . . . . . . . . . . . . . . . . . . (5,000) 10 --
Payments received on advances to
subsidiaries . . . . . . . . . . . . . . . . . 191,761 128,300 210,265
Advances to subsidiaries . . . . . . . . . . . . (168,000) (216,709) (119,950)
Proceeds from sale of assets . . . . . . . . . . -- 17,732 --
Purchases of premises and equipment,
net . . . . . . . . . . . . . . . . . . . . . . (817) (1,242) (17,148)
Capital contributions to subsidiaries . . . . . . (55,000) (35,000) --
- ---------------------------------------------------------------------------------
Net cash (used in) provided by
investing activities (37,056) (97,555) 80,428
- ---------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net decrease in commercial paper . . . . . . . . (29,502) (17,950) (124,420)
Net decrease in borrowed funds . . . . . . . . . (5,250) (74,750) (30,000)
Proceeds from issuance of long-term
debt, net of related expenses . . . . . . . . . 20,000 172,489 --
Principal payments on long-term debt . . . . . . (21,830) (18,047) (4,431)
Dividends paid . . . . . . . . . . . . . . . . . (34,059) (30,223) (29,438)
Proceeds from issuance of common
stock, net . . . . . . . . . . . . . . . . . . -- 68,345 --
Proceeds from issuance of common
stock under dividend reinvestment
and other stock plans . . . . . . . . . . . . . 14,805 15,728 8,288
Other, net . . . . . . . . . . . . . . . . . . . (3,257) (715) (65)
- ----------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (59,093) 114,877 (180,066)
- ----------------------------------------------------------------------------------
(Decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . (64,650) 51,779 (65,067)
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . . . . 216,674 164,895 229,962
- ---------------------------------------------------------------------------------
Cash and cash equivalents at end
of year $152,024 $216,674 $164,895
=================================================================================
</TABLE>
51
<PAGE> 55
MANAGEMENT'S REPORT
The management of UJB Financial Corp. and its subsidiaries has the
responsibility for preparing the accompanying financial statements and for
their integrity and objectivity. The statements were prepared in conformity
with generally accepted accounting principles appropriate in the circumstances
and include amounts that are based on management's best estimates and
judgments. Other financial information presented throughout this annual report
is prepared on a basis consistent with these financial statements.
The financial statements of UJB Financial Corp. have been audited by KPMG
Peat Marwick, independent auditors, whose selection has been ratified by the
shareholders. Their audit was made in accordance with generally accepted
auditing standards and considered the internal control structure to the extent
deemed necessary to support their independent auditors' report appearing
herein.
Management has the responsibility for establishing and maintaining an
internal control structure designed to provide reasonable assurance that assets
are safeguarded and protected and financial reporting is reliable. Judgments
are required to assess and balance the relative cost and the expected benefits
of these controls. To monitor compliance, UJB Financial Corp. maintains an
internal auditing program. This program includes a review for compliance with
written policies and procedures and a review of the adequacy and effectiveness
of internal controls.
The Audit Committee of the Board of Directors of UJB Financial Corp.,
composed exclusively of outside directors, meets periodically with the
independent auditors, management, and internal auditors to review the work of
each and ensure that each is properly discharging its responsibilities. The
internal auditors and independent auditors have full and free access to the
Committee to discuss the results of their audit work and their evaluation of
internal controls and the quality of financial reporting.
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
UJB Financial Corp,:
We have audited the accompanying consolidated balance sheets of UJB Financial
Corp. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of UJB
Financial Corp. and subsidiaries at December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 18 to the consolidated financial statements, the
Corporation adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" in 1993.
/s/ KPMG Peat Marwick
Short Hills, New Jersey
January 17, 1994
52
<PAGE> 56
UNAUDITED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1993
----------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
========================================================================================
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income . . . . . . . . . . $ 213,905 $ 221,307 $ 225,455 $ 223,508
Interest expense . . . . . . . . . 72,296 78,722 83,138 86,884
- ----------------------------------------------------------------------------------------
Net interest income . . . . . . . 141,609 142,585 142,317 136,624
Provision for loan losses . . . . . 21,500 24,000 25,000 25,000
- ----------------------------------------------------------------------------------------
Income from earning assets . . . 120,109 118,585 117,317 111,624
Non-interest income . . . . . . . . 45,651 44,294 41,168 47,162
Non-interest expense . . . . . . . 131,765 150,451 127,892 136,756
- ----------------------------------------------------------------------------------------
Income before income taxes . . . 33,995 12,428 30,593 22,030
Federal and state income taxes . . 10,551 585 8,168 5,503
- ----------------------------------------------------------------------------------------
Income before cumulative effect
of a change in accounting
principle . . . . . . . . . . . 23,444 11,843 22,425 16,527
Cumulative effect of a change in
accounting principle . . . . . . -- -- -- 3,816
- ----------------------------------------------------------------------------------------
Net income . . . . . . . . . . . $ 23,444 $ 11,843 $ 22,425 $ 20,343
========================================================================================
COMMON SHARE DATA
Net income . . . . . . . . . . . . $ .45 $ .22 $ .43 $ .39
Cash dividends declared . . . . . . .21 .16 .16 .16
Book value . . . . . . . . . . . . 18.32 18.07 18.02 17.75
Market value . . . . . . . . . . . 24.00 30.00 24.50 27.13
Common stock dividend payout . . . 46.31% 46.15% 39.02% 41.03%
Number of registered common
shareholders . . . . . . . . . . 20,652 20,813 21,040 21,302
Average shares outstanding
(in thousands) . . . . . . . . . 51,579 51,361 51,186 51,019
Common shares outstanding
(in thousands) . . . . . . . . . 51,632 51,517 51,231 51,115
========================================================================================
BALANCE SHEET DATA (AT QUARTER END,
IN THOUSANDS)
Total assets . . . . . . . . . . . $13,410,549 $13,597,403 $13,537,672 $13,755,398
Total deposits . . . . . . . . . . 11,456,354 11,400,504 11,465,417 11,375,376
Total loans . . . . . . . . . . . . 8,607,094 8,705,889 8,700,460 8,748,892
Shareholders' equity . . . . . . . 976,074 960,686 953,019 937,383
Allowance for loan losses . . . . . 242,104 246,836 248,727 253,086
Long-term debt . . . . . . . . . . 208,459 212,696 195,151 216,121
========================================================================================
OPERATING RATIOS
Return on average assets . . . . . .68% .34% .65% .61%
Return on average common equity . . 9.65 4.81 9.58 8.90
Return on average total equity . . 9.54 4.84 9.47 8.81
========================================================================================
LOAN QUALITY RATIOS
Allowance for loan losses to quarter-
end loans . . . . . . . . . . . . 2.81% 2.84% 2.86% 2.89%
Net charge offs to quarterly average
loans . . . . . . . . . . . . . . 1.20 1.18 1.35 2.19
Non-performing loans to quarter-
end loans . . . . . . . . . . . . 2.92 3.14 3.40 3.65
========================================================================================
CAPITAL RATIOS
Tier I capital to average assets
(leverage) . . . . . . . . . . . 7.07% 6.90% 6.80% 6.82%
Tier I capital to risk-adjusted
assets . . . . . . . . . . . . . 9.37 9.14 9.07 8.88
Total capital to risk-adjusted assets 12.43 12.20 12.14 11.94
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
1992
----------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
========================================================================================
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income . . . . . . . . . . $ 229,584 $ 238,475 $ 242,439 $ 242,833
Interest expense . . . . . . . . . 91,332 99,670 107,666 116,438
- ----------------------------------------------------------------------------------------
Net interest income . . . . . . . 138,252 138,805 134,773 126,395
Provision for loan losses . . . . . 26,000 32,000 41,000 40,000
- ----------------------------------------------------------------------------------------
Income from earning assets . . . 112,252 106,805 93,773 86,395
Non-interest income . . . . . . . . 47,887 39,448 43,842 45,042
Non-interest expense . . . . . . . 134,852 123,349 125,062 120,301
- ----------------------------------------------------------------------------------------
Income before income taxes . . . 25,287 22,904 12,553 11,136
Federal and state income taxes . . 7,569 6,589 2,309 1,589
- ----------------------------------------------------------------------------------------
Income before cumulative effect
of a change in accounting
principle . . . . . . . . . . . 17,718 16,315 10,244 9,547
Cumulative effect of a change in
accounting principle . . . . . . -- -- -- --
- ----------------------------------------------------------------------------------------
Net income . . . . . . . . . . . $ 17,718 $ 16,315 $ 10,244 $ 9,547
========================================================================================
COMMON SHARE DATA
Net income . . . . . . . . . . . . $ .35 $ .33 $ .21 $ .20
Cash dividends declared . . . . . . .15 .15 .15 .15
Book value . . . . . . . . . . . . 17.50 17.31 17.15 17.09
Market value . . . . . . . . . . . 24.25 17.50 19.63 18.38
Common stock dividend payout . . . 55.05% 60.81% 73.17% 75.00%
Number of registered common
shareholders . . . . . . . . . . 21,595 21,677 21,704 21,836
Average shares outstanding
(in thousands) . . . . . . . . . 50,717 48,017 46,246 46,060
Common shares outstanding
(in thousands) . . . . . . . . . 50,864 50,503 46,292 46,164
========================================================================================
BALANCE SHEET DATA (AT QUARTER END,
IN THOUSANDS)
Total assets . . . . . . . . . . . $13,770,871 $13,516,194 $13,643,040 $13,302,473
Total deposits . . . . . . . . . . 11,786,661 11,412,934 11,534,688 11,253,391
Total loans . . . . . . . . . . . . 8,782,409 8,890,120 8,882,298 8,710,586
Shareholders' equity. . . . . . . . 920,270 903,974 823,699 818,763
Allowance for loan losses . . . . . 275,296 291,458 294,300 289,755
Long-term debt . . . . . . . . . . 216,570 61,240 61,805 62,461
========================================================================================
OPERATING RATIOS
Return on average assets . . . . . .52% .48% .31% .29%
Return on average common equity . . 7.76 7.61 4.94 4.64
Return on average total equity . . 7.71 7.56 4.99 4.70
========================================================================================
LOAN QUALITY RATIOS
Allowance for loan losses to quarter-
end loans . . . . . . . . . . . . 3.13% 3.28% 3.31% 3.33%
Net charge offs to quarterly average
loans . . . . . . . . . . . . . . 1.90 1.56 1.67 1.80
Non-performing loans to quarter-
end loans . . . . . . . . . . . . 4.12 4.34 4.55 4.83
========================================================================================
CAPITAL RATIOS
Tier I capital to average assets
(leverage) . . . . . . . . . . . 6.67% 6.58% 6.05% 6.07%
Tier I capital to risk-adjusted
assets . . . . . . . . . . . . . 8.94 8.72 7.93 8.12
Total capital to risk-adjusted assets 12.05 10.19 9.41 9.62
========================================================================================
</TABLE>
53
<PAGE> 57
UJB FINANCIAL CORP AND SUBSIDIARIES
CORPORATE DIRECTORY
- -------------------
<TABLE>
<S> <C>
UJB FINANCIAL CORP. John R. Wichelman, Jr.
301 Carnegie Center Dennis A. Williams
P.O. Box 2066
Princeton, New Jersey BOARD OF DIRECTORS
08543-2066
609-987-3200 Robert L. Boyle
Representative
CORPORATE MANAGEMENT William H. Hintelmann Firm
Chairman, President and John G. Collins
Chief Executive Officer Vice Chairman
T. Joseph Semrod UJB Financial Corp.
Vice Chairmen T.J. Dermot Dunphy
John G. Collins President and
John R. Howell Chief Executive Officer
Sealed Air Corporation
Senior Executive Vice Presidents
John R. Haggerty Elinor J. Ferdon
Sabry J. Mackoul Volunteer Professional
Stephen H. Paneyko First Vice President
Girl Scouts of U.S.A.
Executive Vice Presidents
Larry L. Betsinger Fred G. Harvey
Alfred M. D'Augusta Vice President
William F. Flyge E&E Corporation
William J. Healy
James J. Holzinger John R. Howell
Richard F. Ober, Jr. Vice Chairman
Dennis Porterfield UJB Financial Corp.
Alan N. Posencheg
Edmund C. Weiss, Jr. Francis J. Mertz
President
Senior Vice Presidents Fairleigh Dickinson University
John D. Battaglia
Susan U. Bredehoft George L. Miles, Jr., CPA
Paul J. Cavaliere Executive Vice President
James N. Ferrier and Chief Operating Officer
Dennis J. Flanagan Thirteen/WNET
Peter J. Gindin
Robert A. Gunther Henry S. Patterson II
Michael J. Maiorino, Jr. President
Charles A. Maraziti E'town Corporation
Ronald Phillips
Lenore Smith T. Joseph Semrod
George J. Soltys, Jr. Chairman, President and
Paul V. Stahlin Chief Executive Officer
William J. Wolverton UJB Financial Corp.
Vice Presidents Raymond Silverstein, CPA
Richard H. Ayres Consultant
Bruce O. Baker Alloy, Silverstein, Shapiro,
Robert M. Barilla Adams, Mulford & Co., P.C.
Guy M. Bolter
Michael C. Brennan Joseph M. Tabak
Arthur J. Brown President and
Robert E. Brownlee Chief Executive Officer
Kerry K. Calaiaro JPC Enterprises, Inc.
David C. Chandler
Frank A. Cocco UNITED JERSEY BANK
John F. Conners, Sr. 210 Main Street
R. John Custodio Hackensack, New Jersey 07602
Eugene J. Domowicz 201-646-5000
Gregory G. Driscoll
Joan E. Ferrante-Rich SENIOR MANAGEMENT COMMITTEE
Kyle S. Furtis
Paul J. Galizio Chairman of the Board
Faith P. Goldstein T. Joseph Semrod
Barry E. Griffin
R. Scott Haeckler President and
Robert S. Hanna Chief Executive Officer
Angela J. Harrison Sabry J. Mackoul
Sheryl M. Hempel
James A. Hughes Senior Executive Vice Presidents
Virginia A. Ibarra James J. Holzinger
Carl E. Johnson Robert J. Peters
F. Richard Kennedy
Robert A. Klahre Executive Vice Presidents
Anna R. Kolesnik Joseph L. Branciforte
James J. Kreig William F. Flyge
Joseph A. La Duca Stephen H. Paneyko
Christopher Lahoda Dennis Porterfield
Barbara J. Laird William J. Wolverton
Bruce D. Linger
Catherine A. Mallard Senior Vice President and
Francis J. McGarry Chief Financial Officer
Laura Metules Stephen J. Mauger
Richard S. Nichols
Joseph Ortu Senior Vice Presidents
Carl R. Osterlof Anthony J. Allora
William C. Pasko William R. Frasca
Joseph J. Patrick
Richard E. Pryor II Vice President
Sucre B. Ramirez Edward J. O'Connell
Michael D. Richey
C. Scott Rombach BOARD OF DIRECTORS
Brigitta E. Schmudde
Stephen R. Schragger Bjorn Ahlstrom
Carl B. Short Gene A. Burns
Joseph N. Somma Murray L. Cole, Esq.
Joseph A. Spatola Robert A.M. Coppenrath
Leonard J. Speakman T.J. Dermot Dunphy
Dennis M. Spinelli Elinor J. Ferdon
Frank J. Stanziola Arthur B. Fowler
Robert R. Steinberg Robert S. Gates
Ronald F. Suppin Daniel A. Gillings
Riki Swede-Floyd Robert S. Hekemian
H. Robert Tillman Vincent P. Langone
James R. White Sabry J. Mackoul
</TABLE>
54
<PAGE> 58
<TABLE>
<S> <C>
Francis J. Mertz Senior Vice President
Henry S. Patterson II and Comptroller
T. Joseph Semrod Michael J. Foster
Alexander Summer, Jr.
Peter H. Zecher BOARD OF DIRECTORS
UNITED JERSEY BANK/ Charles J. Bufalino, Esq.
CENTRAL, N.A. Walter J. Dealtrey
4365 Route 1 South Ronald D. Ertley
Princeton, New Jersey 08543 Alfred M. Giannangeli
609-243-4000 Robert K. Gicking
Henry A. Giuliani, Esq.
SENIOR MANAGEMENT Allan L. Goodman
John R. Haggerty
Chairman, President Fred G. Harvey
and Chief Executive Officer John R. Howell
John J. O'Gorman Gary F. Lamont
Robert J. Miorelli
Senior Executive Vice President William L. Morse, Jr.
Peter D. Halstead Michael J. Naples, Jr.
Donald M. Pachence
Executive Vice Presidents Richard H. Penske
H. Richard Minette John W. Pharo
Timothy S. Tracey Robert J. Tunnessen
Robert E. Wilkes
Senior Vice Presidents John W. Woltjen
J. Michael Cunnane
Harry H. Edel, Jr. FIRST VALLEY BANK
Dorinda Jenkins-Glover One Bethlehem Plaza
Michael T. Jordan Bethlehem,
Eric J. Lange Pennsylvania 18018
Ray W. Mead 610-865-8411
Peter G. Mitchell
Richard J. Morbee SENIOR MANAGEMENT
Howard A. Rice
Robert Shaffery Chairman of the Board
John R. Howell
BOARD OF DIRECTORS
President and
Robert L. Boyle Chief Executive Officer
Angelo H. Dalto, Esq. Robert E. Wilkes
Kenneth H. Fisher
Richard H. Goldberger Executive Vice Presidents
Daniel R. Goldenson Tomas J. Bamberger
Thomas C. Jamieson, Jr., Esq. Frederick P. Banyard
Alvin P. Levine, CPA Fredric B. Cort
Bertram B. Miller
John J. O'Gorman Senior Vice Presidents
Henry S. Patterson II John M. Adams, Jr.
Anthony D. Schoberl Philip D. Beck
Sylvester L. Sullivan James F. Deutsch
Joseph M. Tabak Michael J. Foster
I. Gail Howard
UNITED JERSEY BANK/ Jack E. Taylor
SOUTH, N.A. Christophe-Pierre Terlizzi
1800 Chapel Avenue West C. Palmer Zigmund
Cherry Hill, New Jersey 08002 Brian C. Zwaan
609-665-4800 BOARD OF DIRECTORS
(Camden County)
609-451-3400 Walter J. Dealtrey
(Cumberland County) Ronald D. Ertley
609-848-5100 Alfred M. Giannangeli
(Gloucester County) Allan L. Goodman
Fred G. Harvey
SENIOR MANAGEMENT John R. Howell
Robert J. Miorelli
Chairman of the Board Michael J. Naples, Jr.
Raymond Silverstein, CPA Richard H. Penske
John W. Pharo
President and Robert E. Wilkes
Chief Executive Officer John W. Woltjen
Gary F. Simmerman
THE HAZLETON
Executive Vice Presidents NATIONAL BANK
Garrett W. Roberts 101 West Broad Street
William F. Sharp Hazleton, Pennsylvania 18201
717-459-4211
Senior Vice President
and Comptroller SENIOR MANAGEMENT
John Kartanowicz
President and
Senior Vice Presidents Chief Executive Officer
David L. Fithian Gary F. Lamont
Alan C. King
Francis P. Testa Senior Vice President
George S. Waddington Thomas L. Burns
Arty C. Zulawski
Vice Presidents
BOARD OF DIRECTORS Norman A. Bachart, Jr.
Joseph M. Baran
Barry D. Brown John P. Frable
Anthony S. Chigounis Jeffrey S. Gicking
William C. Englehart Diana L. James
Nathan A. Friedman, Esq. William C. Kringe
Samuel Gerstein, Esq. Lionel L. Lawson III
Alvin E. Granite, Esq. Clyde L. Rhodes
Harold R. Isdaner Thomas W. Sheppard
P. Marvin Padgett Gail D. Snyder
Raymond Silverstein, CPA William H. Troll, Jr.
Gary F. Simmerman
Robert A. Woodruff, Sr.
FIRST VALLEY CORPORATION
One Bethlehem Plaza
Bethlehem,
Pennsylvania 18018
610-865-8411
SENIOR MANAGEMENT
Chairman and
Chief Executive Officer
John R. Howell
Executive Vice Presidents
Frederick P. Banyard
Robert E. Wilkes
</TABLE>
55
<PAGE> 59
<TABLE>
<S> <C>
BOARD OF DIRECTORS BOARD OF DIRECTORS
Gerald L. Cohn William F. Flyge
Eugene S. Durigan Joseph J. McCaffrey
Alfred M. Giannangeli John J. O'Gorman
Robert K. Gicking Henry S. Patterson II
Henry A. Giuliani, Esq. Dennis A. Williams
John R. Howell
Gary F. Lamont UNITED JERSEY VENTURE
Robert J. Miorelli CAPITAL, INC.
William L. Morse, Jr. 301 Carnegie Center
Donald M. Pachence P.O. Box 2066
William R. Shull Princeton, New Jersey 08543-2066
William J. Smith 609-987-3200
Sally A. Thomas
Robert J. Tunnessen President and
Chief Executive Officer
HANOVER BANK Stephen H. Paneyko
639 South Main Street
Wilkes-Barre, UNITED JERSEY CREDIT LIFE
Pennsylvania 18703 INSURANCE COMPANY
717-825-1300 301 Carnegie Center
P.O. Box 2066
SENIOR MANAGEMENT Princeton, New Jersey 08543-2066
609-987-3200
President and
Chief Executive Officer President and
Fredric B. Cort Chief Executive Officer
Charles A. Maraziti
Senior Vice President
Stephen D. Gilligan UNITED JERSEY
LEASING COMPANY
Vice Presidents 301 Carnegie Center
Ernest Ashbridge P.O. Box 2066
Gloria Pomicter Princeton, New Jersey 08543-2066
609-987-3200
BOARD OF DIRECTORS
President and
Norma Agati Chief Executive Officer
Charles J. Bufalino, Esq. Stephen H. Paneyko
M. Keen Cornell
Fredric B. Cort GIBRALTAR CORPORATION
William L. Davis OF AMERICA
Ronald D. Ertley 350 Fifth Avenue
Allan J. Gerstein New York, New York 10118
John R. Howell 212-868-4400
Msgr. Andrew J. McGowan 201-869-2444
Michael J. Naples, Jr.
Edward J. Sekol SENIOR MANAGEMENT
H. Melvin Vivian, Jr.
William C. Williams Chairman of the Board
Stephen H. Paneyko
UJB FINANCIAL SERVICE
CORPORATION President and
55 Challenger Road Chief Executive Officer
Ridgefield Park, Irwin Schwartz
New Jersey 07660
201-296-3000 Executive Vice President
and Chief Operating Officer
SENIOR MANAGEMENT Harvey A. Mackler
Chairman of the Board Executive Vice President
John G. Collins Leonard Stowe
President and Senior Vice President
Chief Executive Officer Harvey Friedman
Alan N. Posencheg
BOARD OF DIRECTORS
Executive Vice Presidents
Larry L. Betsinger John D. Battaglia
Joseph L. Branciforte Murray L. Cole, Esq.
Harvey A. Mackler
Senior Vice Presidents Michael J. Maiorino, Jr.
Hubert P. Clarke Francis J. Mertz
Louis Greenspan Stephen H. Paneyko
Theodore M. Kest Edward E. Poor IV
Ray W. Mead Irwin Schwartz
Robert J. Motherwell
Santiago Patino FIRST VALLEY LEASING, INC.
John J. Smith One Bethlehem Plaza
Bethlehem,
BOARD OF DIRECTORS Pennsylvania 18018
610-865-8713
John G. Collins
John R. Howell President
Sabry J. Mackoul Patrick A. McGee
John J. O'Gorman
Alan N. Posencheg LEHIGH SECURITIES
Gary F. Simmerman CORPORATION
1457 MacArthur Road
UJB INVESTOR Whitehall, Pennsylvania 18052
SERVICES COMPANY 1-800-245-4487
295 Route 17 South
P.O. Box 929 President
Paramus, New Jersey 07652 Lawrence J. Dottor
201-368-0800
1-800-631-1635 FIRST VALLEY LIFE
INSURANCE COMPANY
Regional Offices: One Bethlehem Plaza
201-224-0700 (Fort Lee) Bethlehem,
908-290-3050 (Matawan) Pennsylvania 18018
201-984-1151 (Morristown) 610-865-8411
609-683-5470 (Princeton)
201-575-6035 (West Caldwell) President
Philip D. Beck
SENIOR MANAGEMENT
President and
Chief Executive Officer
Joseph J. McCaffrey
Executive Vice President
Jack R. Ader
</TABLE>
56
<PAGE> 60
CORPORATE INFORMATION
HEADQUARTERS
UJB Financial Corp.
301 Carnegie Center
P.O. Box 2066
Princeton,
New Jersey 08543-2066
ANNUAL SHAREHOLDERS MEETING
UJB Financial Corp.'s annual shareholders meeting will be held on Monday, April
25, 1994 at 2:30 p.m. at the Hyatt Regency Princeton, Route One and Alexander
Road, Princeton, New Jersey.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
UJB Financial Corp. offers its shareholders a convenient plan to increase their
investment in the company. Through the Dividend Reinvestment and Stock
Purchase Plan, holders of stock may have their quarterly dividends
automatically reinvested in additional common shares without brokerage fees,
commissions or service charges. In addition, optional cash payments toward the
purchase of additional shares are permitted at any time, up to $10,000 per
quarter. Shareholders not enrolled in this plan, as well as brokers and
custodians who hold stock for clients, may receive a plan prospectus and
enrollment card by contacting First Chicago Trust Company of New York
at 201-324-0498.
CONTACTS
Analysts, portfolio managers, and others seeking financial information about
UJB Financial Corp. should contact Kerry K. Calaiaro, vice president, investor
relations, at 609-987-3226.
News media representatives and others seeking general information
should contact C. Scott Rombach, vice president, director of corporate
communications/investor relations, at 609-987-3350.
Shareholders seeking assistance should write to Lori A. Wierzbinsky,
assistant corporate secretary. For assistance with stock records, please
contact First Chicago Trust Company of New York at 201-324-0498, Monday through
Friday 8:00 a.m. to 10:00 p.m., and Saturday 8:00 a.m. to 3:00 p.m. (Eastern
Time).
OTHER REPORTS
Copies of UJB Financial Corp.'s Form 10-K and Regulatory Reports required under
Section 112 of the Federal Deposit Insurance Corporation Improvement Act are
available without charge by writing UJB Financial Corp., Corporate Comptroller,
P.O. Box 2066, Princeton, New Jersey 08543-2066.
NYSE SYMBOL
UJB Financial Corp.'s common stock is traded on the New York Stock Exchange
under the symbol UJB.
TRANSFER AND DIVIDEND PAYING AGENT/REGISTRAR (COMMON AND PREFERRED)
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
CO-TRANSFER AGENT (COMMON)
United Jersey Bank
<PAGE> 61
UJB FINANCIAL CORP.
301 Carnegie Center
P.O. Box 2066
Princeton,
New Jersey 08543-2066
<PAGE> 62
UJB Financial Corp.
Appendix to Exhibit 13
1993 Annual Report
Graphic and image material
Page Title of Graphic Material
----- -------------------------
Cover Photo of the Galaxy
2 Net Income (graph) (for the years 1988 to 1993)
The information conveyed by this graph is presented in
the Summary of Selected Financial Data table on this
page.
2 Annual Indicated Dividend (graph)
The following table presents the Annual Indicated
Dividend for the years 1988 to 1993.
<TABLE>
<CAPTION>
Year Dividend
---- --------
<S> <C>
1988 $1.06
1989 1.16
1990 0.60
1991 0.60
1992 0.60
1993 0.84
</TABLE>
2 Capital Ratios (graph) (for the years 1990 to 1993)
The information conveyed by this graph is presented in
the Summary of Selected Financial Data table on this
page.
4 Chairman's Photo
Photo of T. Joseph Semrod, Chairman and Chief Executive
Officer.
5 Photo of Mountains
10 Drawing of Lion
10 Commercial & Industrial Loans and New Jersey Market Share
(graph)
<TABLE>
<CAPTION>
C&I Loans UJB Financial
at NJ Banks Market Share
Year ($ in billions) Percent
---- -------------- ------------
<S> <C> <C>
1988 $16.276 13.51%
1989 17.515 13.69
1990 17.550 14.48
1991 14.910 16.01
1992 13.072 17.48
1993 12.569 17.98
</TABLE>
<PAGE> 63
11 Photo of Lions
12 Drawing of a Dolphin
12 Average Commercial Loans (graph) ($ in billions)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1988 $3.869
1989 4.452
1990 4.863
1991 4.682
1992 4.550
1993 4.354
</TABLE>
13 Photo of a Dolphin
14 Drawing of a gazelle
14 Customer Call Center (graph) (number of calls, in millions)
<TABLE>
<CAPTION>
Year Calls
---- -----
<S> <C>
1990 .900
1991 1.986
1992 2.458
1993 3.169
</TABLE>
15 Photo of a Gazelle
16 Drawing of a tree
16 Merchant BankCard Sales Volume (graph) ($ in billions)
<TABLE>
<CAPTION>
Year Volume
---- ------
<S> <C>
1988 $6.40
1989 7.00
1990 7.90
1991 8.90
1992 10.00
1993 12.00
</TABLE>
17 Photo of a Grove of Trees
18 Drawing of birds in a nest
<PAGE> 64
18 Residential Mortgage Servicing Portfolio (graph) ($ in billions)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1988 $1.080
1989 1.187
1990 1.178
1991 1.321
1992 1.675
1993 1.780
</TABLE>
19 Photo of a Bird
20 Drawing of sea shells
20 Total Trust Assets Under Management (graph) ($ in billions)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1988 $ 6.223
1989 7.026
1990 7.808
1991 12.021
1992 15.100
1993 17.502
</TABLE>
21 Photo of a collection of Sea Shells
<PAGE> 65
23 Photo of the UJB Board of Directors
Photo includes UJB Board of Directors:
1.) Elinor J. Ferdon
2.) T. Joseph Semrod
3.) Henry S. Patterson II
4.) John R. Howell
5.) Fred G. Harvey
6.) Joseph M. Tabak
7.) Raymond Silverstein
8.) George L. Miles, Jr.
9.) T.J. Dermot Dunphy
10.) Francis J. Mertz
11.) John G. Collins
12.) Robert L. Boyle
25 Earnings per Share (graph)
The following table presents Earnings per Share
for the years 1988 to 1993.
<TABLE>
<CAPTION>
Earnings
Year Per Share
---- ---------
<S> <C>
1988 $ 2.58
1989 2.62
1990 (0.17)
1991 0.45
1992 1.09
1993 1.49
</TABLE>
26 Average Loans (graph) ($ in billions)
<TABLE>
<CAPTION>
Year Commercial Mortgage Instalment Total
---- ---------- -------- ---------- -----
<S> <C> <C> <C> <C>
1988 $3.869 $1.519 $1.517 $6.905
1989 4.452 1.706 1.633 7.791
1990 4.863 1.819 1.866 8.548
1991 4.682 2.000 1.988 8.670
1992 4.550 2.208 2.035 8.793
1993 4.354 2.340 2.024 8.718
</TABLE>
27 Average Demand Deposits (graph) ($ in billions)
<TABLE>
<CAPTION>
Year Amount
---- ---------
<S> <C>
1988 $1.900
1989 1.840
1990 1.834
1991 1.853
1992 2.176
1993 2.579
</TABLE>
<PAGE> 66
28 Interest Spread & Interest Margin (graph)
<TABLE>
<CAPTION>
Interest Interest
Year Spread Margin
---- ------ ------
<S> <C> <C>
1988 3.64% 4.93%
1989 3.46 4.84
1990 3.20 4.33
1991 3.34 4.22
1992 3.84 4.52
1993 3.99 4.64
</TABLE>
31 Non-Performing Loans (graph) ($ in millions)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1988 $115.6
1989 185.9
1990 432.0
1991 444.7
1992 361.8
1993 251.7
</TABLE>
32 Average Total Equity (graph) ($ in millions)
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1988 $773.5
1989 844.0
1990 867.2
1991 812.4
1992 854.3
1993 958.1
</TABLE>
33 UJB Financial Common Stock Price Range (graph)
<TABLE>
<CAPTION>
High Low Close
---- --- -----
<S> <C> <C> <C>
1992
First Quarter $18.75 $14.00 $18.38
Second Quarter 20.38 14.63 19.63
Third Quarter 20.75 16.50 17.50
Fourth Quarter 24.50 16.13 24.25
1993
First Quarter $29.38 $22.50 $27.13
Second Quarter 29.25 21.63 24.50
Third Quarter 33.25 24.25 30.00
Fourth Quarter 30.25 23.38 24.00
</TABLE>
<PAGE> 1
Exhibit (21)
Subsidiaries of UJB Financial Corp.
UJB Financial Corp. is the parent corporation. Detailed information on
its present subsidiaries appears in the Narrative description of business.
Additional information is as follows:
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- ---------------
<S> <C>
United Jersey Bank New Jersey
First Pipco, Inc. New Jersey
C.I. Pip Restaurant Co. New Jersey
CiPip Properties Co. New Jersey
UJB Leasing Corporation New Jersey
United Jersey Hackensack Investment Corporation New Jersey
CTC Investment Co. Delaware
S.A.R. Realty Holding Corporation New Jersey
Pipco-On-The-Hudson, Inc. New Jersey
Pipco/TM8, Inc. New Jersey
Pipco/TM10, Inc. New Jersey
Pipco/TM13, Inc. New Jersey
Pipco/Spring Hill, Inc. New Jersey
Pipco 205 Park, Inc. New Jersey
Pipco Schoolhouse Estates, Inc. New Jersey
Pipco Urban Restoration, Inc. New Jersey
Pipco Windsong, Inc. New Jersey
Pipco Parsippany, Inc. New Jersey
Pipco 121-123 Grand Avenue, Inc. New Jersey
Pipco Bright, Inc. New Jersey
Pipco Oakland, Inc. New Jersey
Pipco Raintree, Inc. New Jersey
Pipco Underhill, Inc. New York
Pipco MK, Inc. New Jersey
Pipco Carlstadt, Inc. New Jersey
Pipco Ewing, Inc. New Jersey
Pipco 851 Boulevard, Inc. New Jersey
Pipco Alpine, Inc. New Jersey
Pipco Norte, Inc. New Jersey
Alternative Financial Group, Inc. Pennsylvania
PipHam Gardens, Inc. New York
PipAshley, Inc. New Jersey
Pipco Urban Renewal Corporation, Inc. New Jersey
Commonwealth Pipco Corp. Pennsylvania
Pipco Hansen Land Corp. Pennsylvania
PipCRA, Inc. New Jersey
PipLandCo, Inc. New Jersey
PipCondoCo, Inc. New Jersey
PipWarehouseCo, Inc. New Jersey
PipQuarryCo, Inc. New Jersey
PipPomonaCo, Inc. New York
Second PipLandCo, Inc. New Jersey
Second PipCondoCo, Inc. New Jersey
Houses-R-Pip, Inc. New Jersey
PipGate Mill Properties, Inc. New Jersey
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
United Jersey Bank/Central, N.A. United States
FSB Investment Corp. New Jersey
Franklin State Armored Corporation New Jersey
Colonia Investment Co. Delaware
Central Pipco, Inc. New Jersey
Central Pipco Sanson, Inc. New Jersey
Central Pipco Petrocella/Temes, Inc. New Jersey
Central Pipco Spring Knolls, Inc. New Jersey
Evergreen Cenpipco, Inc. New Jersey
CenPipMaple, Inc. New Jersey
CenPipPRD, Inc. New Jersey
CenPipCho35, Inc. New Jersey
Central Pipco Thom, Inc. New Jersey
CenPipColt, Inc. New Jersey
CenPipUnited, Inc. New Jersey
ExeCenPip EM1, Inc. New Jersey
MorCenPip EM2, Inc. New Jersey
EmsCenPip EM3, Inc. New Jersey
ProCentip Plains, Inc. New Jersey
SayCenPipVille, Inc. New Jersey
HalCenPip Tides, Inc. New Jersey
VolCenPipChik, Inc. New Jersey
StakCenPipWood, Inc. New Jersey
Alternative Financial Group, Inc. New Jersey
34 Cen Pip Plaza, Inc. New Jersey
BunnCenPip 202, Inc. New Jersey
Central Residential Properties, Inc. New Jersey
Madison CenPipRidge, Inc. New Jersey
Clearbrook ProCenPip, Inc. Pennsylvania
CenPipMatawan, Inc. New Jersey
EIN Cen Pip Binder, Inc. New Jersey
CenPipChowderPot, Inc. New Jersey
United Jersey Bank/South, N.A. United States
Lenape Financial Services Corporation Delaware
South Pipco, Inc. New Jersey
ManSoPip Management Corp. New Jersey
PropSoPip Properties Corp. New Jersey
DevSoPip Development Corp. New Jersey
Aristone So Pip, Inc. New Jersey
First Valley Corporation Pennsylvania
First Valley Bank Pennsylvania
Valbeth, Inc. Pennsylvania
North-Val, Inc. Pennsylvania
Lehigh Securities Corporation Pennsylvania
First Valley Capital Corporation Pennsylvania
Affiliated Financial Advisors, Inc. Pennsylvania
First Valprop, Inc. Delaware
First North-Val, Inc. Pennsylvania
Second North-Val, Inc. Pennsylvania
Third North-Val, Inc. Pennsylvania
Fourth North-Val, Inc. Pennsylvania
Fifth North-Val, Inc. Pennsylvania
Sixth North-Val, Inc. Pennsylvania
Seventh North-Val, Inc. Pennsylvania
Eighth North-Val, Inc. Pennsylvania
HBP Financial Corp. Pennsylvania
First Valley Financial Services, Inc. Pennsylvania
First Valley Life Insurance Company Arizona
First Valley Leasing, Inc. Pennsylvania
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Valprop, Inc. Pennsylvania
FirstVal Properties, Inc. Pennsylvania
UJB Credit Corporation Delaware
Gibraltar Corporation of America New York
United Jersey Leasing Company New Jersey
United Jersey Mortgage Company New Jersey
United Jersey Corporation New York
Asset Management Corp. New Jersey
UJB Investor Services Co. New Jersey
Rahway Avenue Urban Renewal Corporation New Jersey
Trico Mortgage Company, Inc. New Jersey
Securitization Subsidiary I, Inc. New Jersey
United Jersey Credit Life Insurance Company Arizona
United Jersey Venture Capital, Inc. New Jersey
India, Inc. Delaware
United Jersey Financial Corp. New Jersey
United Jersey Insurance Agency, Inc. New Jersey
UJB Financial Service Corporation New Jersey
CARTCO, Ltd. New Jersey
</TABLE>
All listed subsidiaries in existence during 1993 are included in the
consolidated financial statements in the UJB Financial 1993 Annual Report to
Shareholders contained herein as Exhibit 13.
As of 3/21/94
<PAGE> 1
EXHIBIT (23)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
UJB Financial Corp.:
We consent to incorporation by reference in Registration Statement No. 2-78500
on Form S-8, Registration Statement No. 33-10170 on Form S-3, Registration
Statement No. 33-13930 on Form S-8, Registration Statement No. 33-19469 on Form
S-8, Registration Statement No. 33-36209 on Form S-8, Registration Statement
No. 33-38172 on Form S-8, Registration Statement No. 33-53870 on Form S-3,
Registration Statement No. 33-58152 on Form S-3, Registration Statement No.
33-62972 on Form S-8 and Registration Statement No. 33- 52769 on Form S-4 of
UJB Financial Corp. of our report dated January 17, 1994 relating to the
consolidated balance sheets of UJB Financial Corp. and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1993, which report is incorporated by reference in
the December 31, 1993 Annual Report on Form 10-K of UJB Financial Corp.
Our report refers to a change in the method of accounting for income taxes.
KPMG Peat Marwick
Short Hills, New Jersey
March 28, 1994
