<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report:
(Date of Earliest Event Reported)
March 18, 1994
UJB Financial Corp.
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
New Jersey 1-6451 22-1903313
- ------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
301 Carnegie Center, P.O. Box 2066
Princeton, New Jersey 08543-2066
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(609) 987-3200
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(Registrant's Telephone Number, including Area Code)
<PAGE> 2
<TABLE>
<S> <C>
Item 5. Other Events.
The Registrant hereby files certain financial statements and other
materials from Registrant's 1993 Annual Report to Shareholders.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
(1) Selected portions of the UJB Financial Corp. 1993 Annual
Report to Shareholders, namely:
Consolidated Balance Sheets at December 31, 1993 and
December 31, 1992; Consolidated Statements of Income for
the years ended December 31, 1993, December 31, 1992 and
December 31, 1991; Consolidated Statements of Shareholders'
Equity at December 31, 1993, December 31, 1992 and December
31, 1991; Consolidated Statements of Cash Flows for the
years ended December 31, 1993, December 31, 1992 and
December 31, 1991; and Notes to Consolidated Financial
Statements.
</TABLE>
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: March 18, 1994 UJB FINANCIAL CORP.
By:
/s/ WILLIAM J. HEALY
--------------------------
William J. Healy
Executive Vice President
and Comptroller
</TABLE>
-2-
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
(1) Selected portions of the UJB Financial Corp. 1993 Annual Report
to Shareholders, namely:
Consolidated Balance Sheets at December 31, 1993 and
December 31, 1992; Consolidated Statements of Income for
the years ended December 31, 1993, December 31, 1992 and
December 31, 1991; Consolidated Statements of Shareholders'
Equity at December 31, 1993, December 31, 1992 and December
31, 1991; Consolidated Statements of Cash Flows for the
years ended December 31, 1993, December 31, 1992 and
December 31, 1991; and Notes to Consolidated Financial
Statements.
</TABLE>
<PAGE> 1
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> 2
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> 3
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> 4
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> 5
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
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> 15
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> 16
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
