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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
['X'] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-6451
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SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
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NEW JERSEY 22-1903313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 CARNEGIE CENTER
P.O. BOX 2066
PRINCETON, NEW JERSEY 08543-2066
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 987-3200
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Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock $1.20 par value New York Stock Exchange
7.75% Sinking Fund Debentures due November 1, 1997 New York Stock Exchange
Adjustable-Rate Cumulative Preferred Stock -- Series B New York Stock Exchange
8.625% Subordinated Notes Due December 10, 2002 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Adjustable-Rate Cumulative Preferred Stock -- Series C
(Title of Class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
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AS OF MARCH 1, 1996, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT WAS $3,298,150,000.
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AS OF MARCH 1, 1996, THERE WERE 93,359,342 SHARES OF COMMON STOCK,
$1.20 PAR VALUE OUTSTANDING.
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DOCUMENTS INCORPORATED BY REFERENCE
Summit Bancorp 1995 Annual Report to Shareholders (portion) (Parts I, II and
IV).
Proxy Statement dated April 12, 1996 (portion) (Parts I and III).
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SUMMIT BANCORP
INDEX TO FORM 10-K
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PART I PAGE
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Item 1. Business
a) General development of business....................................... 3
b) Financial information about industry segments......................... 4
c) Narrative description of business..................................... 4
d) Financial information about foreign and domestic operations
and export sales................................................. 13
e) Statistical information............................................... 13
1) Combined consolidated (including The Summit Bancorporation)........... 13
2) Consolidated (UJB Financial Corp. only)............................... 19
Item 2. Properties............................................................... 28
Item 3. Legal Proceedings........................................................ 29
Item 4. Submission of Matters to a Vote of Security Holders...................... 33
Executive Officers of the Registrant..................................... 34
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.... 35
Item 6. Selected Financial Data.................................................. 35
a) Combined consolidated (including The Summit Bancorporation)........... 35
b) Consolidated (UJB Financial Corp. only)............................... 35
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................ 35
a) Combined consolidated (including The Summit Bancorporation)........... 35
b) Consolidated (UJB Financial Corp. only)............................... 36
Item 8. Financial Statements and Supplementary Data.............................. 40
a) Combined consolidated (including The Summit Bancorporation)........... 40
b) Consolidated (UJB Financial Corp. only)............................... 40
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................... 41
PART III
Item 10. Directors and Executive Officers of the Registrant....................... 42
Item 11. Executive Compensation................................................... 42
Item 12. Security Ownership of Certain Beneficial Owners and Management........... 42
Item 13. Certain Relationships and Related Transactions........................... 42
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......... 43
Signatures............................................................... 50
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PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
UJB Financial Corp. ("UJB") changed its name to Summit Bancorp. ("Summit"
or the "company") simultaneously with the acquisition of The Summit
Bancorporation on March 1, 1996.
Summit, the registrant, commenced operations on October 1, 1970 as a New
Jersey corporation and as a bank holding company registered under the Bank
Holding Company Act of 1956. The company owns three banks (bank subsidiaries)
and eleven active non-bank subsidiaries. At December 31, 1995 the company had
total consolidated assets of $21,536,935,000 which ranked it as the second
largest New Jersey based bank holding company. The bank subsidiaries engage in a
general banking business. United Jersey Bank is Summit's largest bank
subsidiary, accounting for approximately 61% of Summit's total consolidated
assets at December 31, 1995. The non-bank subsidiaries engage primarily in
securities brokerage, insurance brokerage, venture capital investment,
commercial finance lending, lease financing, asset-based lending production,
letter of credit issuance, data processing, and reinsuring credit life and
disability insurance policies related to consumer loans made by the bank
subsidiaries.
Summit has its corporate office at 301 Carnegie Center, P.O. Box 2066,
Princeton, New Jersey 08543-2066.
On March 1, 1996, UJB acquired The Summit Bancorporation in an exchange of
.90 shares of Summit common stock for each share of The Summit Bancorporation
common stock. There were 34,078,905 shares of Summit common stock issued for
37,865,450 shares of The Summit Bancorporation common stock. The combined
consolidated financial information contained herein and in the 1995 Annual
Report to Shareholders, incorporated herein by reference as Exhibit 13 gives
retroactive effect to the merger of The Summit Bancorporation with UJB. This
transaction has been accounted for on a pooling-of-interests basis, and such
financial information has been presented as if the merger had been consummated
for all periods presented. This combined consolidated financial information is
presented as supplemental information to the historical consolidated financial
information contained in the 1995 Annual Report to Shareholders, incorporated
herein by reference as Exhibit 13, and in Item 1(e)(2) Statistical
Information -- Consolidated (UJB Financial Corp. only) on pages 20 through 30 of
this report.
In August 1995, Summit (under its predecessor name UJB Financial Corp.)
signed a definitive merger agreement to acquire Flemington National Bank and
Trust Company ("Flemington"). The transaction was consummated on February 23,
1996 in an exchange of 1.3816 shares of Summit common stock for each share of
Flemington common stock. There were 1,324,000 shares of Summit common stock
issued for 958,476 shares of Flemington common stock. At December 31, 1995,
Flemington had total assets of $285,875,000.
In July 1995, The Summit Bancorporation signed a definitive merger
agreement with Garden State Bancshares, Inc. ("Garden State"). This transaction
was consummated on January 16, 1996, in an exchange of 1.08 shares of The Summit
Bancorporation common stock for each share of Garden State common stock. There
were 3,365,834 shares of The Summit Bancorporation common stock issued for
3,116,513 shares of Garden State common stock. At December 31, 1995, Garden
State had total assets of $311,796,000.
As the Garden State and Flemington acquisitions were considered immaterial
to Summit, these transactions will be recorded as adjustments to beginning
shareholders' equity at January 1, 1996, and the Combined Consolidated Financial
Statements for the years ended December 31, 1995 and prior periods have not been
restated.
On July 11, 1995, the company completed the acquisition of Bancorp New
Jersey, Inc. which was accounted for under the purchase method. Bancorp New
Jersey, Inc. had total assets of $504,528,000.
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The following table lists each bank subsidiary, the location of its
principal office, the number of its banking offices and, in thousands of
dollars, its total assets and deposits as of December 31, 1995. All the banks
are state banks, however only United Jersey Bank is a member of the Federal
Reserve System.
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LOCATION NO. OF
OF PRINCIPAL BANKING TOTAL TOTAL
OFFICE OFFICES ASSETS(1) DEPOSITS(1)
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United Jersey Bank(2)................. Hackensack, NJ 198 $ 13,105,865 $ 11,147,769
Summit Bank(3)........................ Summit, NJ 89 5,615,462 4,696,045
First Valley Bank..................... Bethlehem, PA 67 2,681,322 2,101,391
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(1) Not adjusted to exclude interbank deposits or other transactions among the
subsidiaries.
(2) Excludes Flemington which will be merged effective 1/1/96.
(3) Excludes Garden State which will be merged effective 1/1/96.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Summit is engaged in the business of managing or controlling banks and such
other businesses related to banking as may be authorized under the Bank Holding
Company Act of 1956, as amended. The registrant is also engaged in furnishing
services to, or performing services for its present operating subsidiaries.
The major line of business is banking. Summit owns and operates three bank
subsidiaries.
Summit also owns and operates eleven active non-bank subsidiaries -- two
stock brokerage firms, one insurance agency, a venture capital company, a
commercial finance company, a leasing company, two credit life reinsurance
companies, a data processing company, a company engaged in the production of
asset-based loans and a company engaged in issuing letters of credit. Total
revenues (excluding intercompany revenues) for the non-bank subsidiaries as a
group during the last three years did not account for 10% or more of
consolidated revenues of Summit and subsidiaries.
(c)(1) NARRATIVE DESCRIPTION OF BUSINESS.
Bank Subsidiaries
United Jersey Bank was organized in 1899 and is the company's largest bank
subsidiary. The bank had total assets of $13,105,865,000 at December 31, 1995.
Based on the latest available data, it ranked as the third largest New Jersey
based commercial bank. United Jersey Bank operates 46 offices to serve most of
the 70 communities in Bergen County, the second most populous county in New
Jersey. It also operates 152 other banking offices throughout New Jersey. Summit
Bank was organized in 1891. At December 31, 1995 the bank had total assets of
$5,615,462,000. Based on the latest available data it ranked as the fifth
largest New Jersey based commercial bank. Summit Bank operates 89 offices in 11
counties in Northern and Central New Jersey. First Valley Bank was organized in
1968 and is the company's Pennsylvania bank subsidiary. The bank had total
assets of $2,681,322,000 at December 31, 1995. First Valley Bank operates 67
offices in 13 counties in northeast Pennsylvania.
The company's bank subsidiaries are engaged in a general banking business.
Their major lines of business include commercial, retail and mortgage banking,
investment management and private banking. These lines of business offer a wide
range of financial services to individuals, businesses, not-for-profit
organizations, government entities and other financial institutions.
Non-Bank Subsidiaries
The company, through its wholly-owned subsidiary, UJB Credit Corporation,
owns and operates Gibraltar Corporation of America. The company directly owns
and operates UJB Discount Brokerage Co. (formerly known as UJB Investor Services
Co.), United Jersey Credit Life Insurance Company and United Jersey Venture
Capital, Inc. The company indirectly owns Beechwood Insurance Agency, Inc.,
United Jersey
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Leasing Corporation, Lehigh Securities Corporation, First Valley Life Insurance
Company, UJB Financial Service Corporation, UJB Commercial Corp. and UJB Trade
Finance (HK), Limited.
Gibraltar Corporation of America is a commercial finance company operating
in the New York and New Jersey metropolitan areas, which specializes in making
loans secured by accounts receivable, inventory, and equipment, as well as
financing sales and leases of equipment. UJB Discount Brokerage Co. and Lehigh
Securities Corporation are engaged in the stock brokerage business and Lehigh
Securities Corporation is additionally engaged in the underwriting of municipal
bonds. Beechwood Insurance Agency Corporation is a New Jersey licensed insurance
producer selling health, life, property and casualty insurance. United Jersey
Credit Life Insurance Company and First Valley Life Insurance Company reinsure
credit life and disability insurance policies related to the bank subsidiaries'
consumer loans. United Jersey Venture Capital, Inc. makes venture capital
investments. United Jersey Leasing Corporation was established for the purpose
of making equipment leases. UJB Financial Service Corporation provides data
processing services to banking subsidiaries. UJB Commercial Corp. operates an
office in Connecticut for the production of asset-collateralized loans to be
made by the bank subsidiaries. UJB Trade Finance (HK), Limited, operating under
a Hong Kong charter, issues documentary letters of credit to Asian suppliers on
behalf of U.S. importers.
Supervision and Regulation
The banking industry is highly regulated. Statutory and regulatory controls
increase a bank holding company's cost of doing business and limit the options
of its management to deploy assets and maximize income. Areas subject to
regulation and supervision by the bank regulatory agencies include: nature of
business activities; minimum capital levels; dividends; affiliate transactions;
expansion of locations; acquisitions and mergers; interest rates paid on certain
types of deposits; reserves against deposits; terms, amounts and interest rates
charged to various types of borrowers; and investments.
BANK HOLDING COMPANY REGULATION
Summit is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"). As a bank holding
company, Summit is supervised by the Board of Governors of the Federal Reserve
System (the "FRB") and is required to file reports with the FRB and provide such
additional information as the FRB may require. Summit is also regulated by the
New Jersey and Pennsylvania Departments of Banking.
The Holding Company Act prohibits Summit, with certain exceptions, from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to subsidiary banks, except that it may, upon application,
engage in, and may own shares of companies engaged in, certain businesses found
by the FRB to be so closely related to banking "as to be a proper incident
thereto" if the FRB determines that such acquisitions will be, on balance,
beneficial to the public. The Holding Company Act requires prior approval by the
FRB of the acquisition by Summit of more than five percent of the voting stock
of any additional bank. Acquisitions in any state are permitted after September
29, 1995. See "Interstate Banking" below. Satisfactory financial condition,
particularly with regard to capital adequacy, and satisfactory Community
Reinvestment Act ratings are generally prerequisites to obtaining federal
regulatory approval to make acquisitions. All of Summit's subsidiary banks are
currently rated "satisfactory" or better under the Community Reinvestment Act.
In addition, Summit is subject to various requirements under both New
Jersey and Pennsylvania laws concerning future acquisitions. Such laws require
the prior approval of the relevant Department of Banking to acquire any bank
chartered by that State. Statewide branching is permitted in New Jersey and
Pennsylvania. Branch approvals are subject to statutory standards relating to
safety and soundness, competition, and public convenience. The Holding Company
Act does not place territorial restrictions on the activities of non-bank
subsidiaries of bank holding companies.
The policy of the FRB provides that Summit is expected to act as a source
of financial strength to each of its subsidiary banks and to commit resources to
support such subsidiary banks in circumstances in which it
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might not do so absent such policy. In addition, any capital loans by Summit to
any subsidiary bank would be subordinate in right of payment to deposits and
certain other indebtedness of such subsidiary bank.
Summit is required by the Holding Company Act to file annual reports of its
operations with the FRB and is subject to examination by the FRB. Under Section
106 of the 1970 amendments to the Holding Company Act and the regulations of the
FRB, bank holding companies and their subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit or
provision of any property or services. Regulations of the FRB under the Federal
Reserve Act require that reserves be maintained by a Summit bank subsidiary to
the extent that the proceeds of any Summit promissory note, acknowledgement of
advance, due bill or similar obligation, with a maturity of less than four
years, are used to supply or to maintain the availability of funds (other than
capital) to the bank subsidiary, except any such obligation that, had it been
issued directly by the bank subsidiary, would not constitute a deposit. They
also place limits upon the amount of Summit's equity securities which may be
repurchased or redeemed by Summit.
Bank regulatory authorities in the United States have issued risk-based
capital standards by which all bank holding companies and banks are evaluated in
terms of capital adequacy. These guidelines relate a company's capital to the
risk profile of its assets. The standards require all banks to have Tier I
capital of at least 4 percent of risk adjusted assets, total capital, including
Tier I capital, of at least 8 percent of risk-adjusted assets and a minimum
leverage ratio of 4 percent for institutions that have a regulatory rating of
two or better. Failure to meet minimum capital requirements can initiate certain
actions by regulators that could have a direct effect on the operations and
financial statements. Tier I capital includes shareholders' equity less certain
intangibles and unrealized gains and losses on securities available for sale,
net of tax. Total capital is comprised of Tier I capital, qualifying debt
instruments, and a portion of the allowance for loan losses. Tier I leverage
ratio measures the ratio of Tier I capital to quarterly average assets less
certain intangibles. As of December 31, 1995, Summit's Tier I capital was
10.75%, total risk-based capital was 13.46%, and the leverage ratio was 7.97%.
INTERSTATE BANKING AND REGULATORY RELIEF LEGISLATION IN 1994
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
enacted September 29, 1994, permits full nationwide interstate banking (e.g.,
bank holding company ("BHC") acquisition of bank subsidiaries anywhere in the
U.S.), with interstate branching by merger to be permitted after June 1, 1997.
Importantly, states retain the right to opt-out of interstate branching and to
require that out-of-state BHCs and banks comply with state rules governing
entry.
A brief summary of the Act's major provisions follows:
(A) INTERSTATE BANKING. Adequately capitalized and adequately managed
BHCs are permitted to acquire banks in any state. States cannot opt-out of
this provision. State laws may prohibit the purchase of banks 5 years of
age or less. Concentration limits are imposed (10% of bank and thrift
deposits nationwide/30% in the state; the state supervisor may waive this
30% limit). States retain existing authority to impose nondiscriminatory
deposit caps. Those banks with over 30% of statewide deposits may be sold
to out-of-state BHCs without being subject to the 30% rule where the BHC
has no presence in the host state (some limited exceptions may apply).
(B) BANK/THRIFT AFFILIATE AGENCY AUTHORITY. An insured bank
subsidiary may act as agent for an affiliate bank or thrift in offering
specified banking services (receive deposits, renew time deposits, close
loans, service loans, and receive payments on loans and other obligations)
both within and across state lines without offices of the agent being
deemed branches of the affiliates on whose behalf they act. Thrift
affiliates may provide these same agency services under limited
circumstances.
(C) INTERSTATE BRANCHING.
(1) Branching Through Bank Mergers. After June 1, 1997, the
appropriate Federal regulator may approve the merger of adequately
capitalized banks across state lines, so long as the resulting
institution is adequately capitalized and adequately managed. This will
allow BHCs, after that date,
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to convert their subsidiary banks in different states into branches of
the same bank; banks in different states, whether within holding
companies or independent, will likewise be permitted to directly merge.
Bank mergers would have to conform with state laws which impose age
restrictions of up to 5 years on acquisitions of new banks. States may
opt-out of interstate branching from September 29, 1994 until June 1,
1997. Doing so will preclude the merger of banks in that state with
banks located in other states; banks located in states which opt-out
would not be permitted to have interstate branches. States may permit
interstate branching earlier than June 1, 1997, where both states
involved with the bank merger expressly permit it by statute.
Pennsylvania has passed such a law; New Jersey has not yet done so.
Where the bank/BHC would be effectively moving into a new state as a
result of the merger, regulators must consider Community Reinvestment
Act compliance of all bank affiliates before approving the merger
application. The 10% nationwide/30% state by state deposit concentration
limits discussed above also apply to bank mergers; states retain current
authority to impose deposit caps. Host state banks with over 30% of
statewide deposits may be merged with out-of-state banks without being
subject to the 30% rule where the out-of-state bank has no presence in
the host state (some limited exceptions may apply).
(2) Direct Branching by Banks. National and state banks are
prohibited from directly acquiring an existing branch (separate from the
acquisition of a charter), or establishing a de novo branch, in a host
state unless the law of the host state permits it.
(D) FOREIGN BANKS. Foreign branches and agencies located in the U.S.
will be permitted to branch interstate to the same extent as domestic
institutions. However, certain restrictions are placed on foreign branch
operations in the U.S.
(E) LAWS APPLICABLE TO STATE INTERSTATE BRANCHES. Branches of
out-of-state state chartered banks will be subject to the laws of the host
state, including permissible activities, as if it were a branch of a bank
located in that host state. State bank supervisors of the host state may
examine an in-state branch of an out-of-state state bank for purposes of
determining compliance with state law and to ensure that the branch is
being operated in a safe and sound manner.
(F) OTHER. For financial institutions that maintain one or more
branches outside the home state, the appropriate Federal banking agency
must prepare a written evaluation of the entire institution's Community
Reinvestment Act performance and a separate evaluation of the institution's
performance for each state and metropolitan statistical area, and for the
nonmetropolitan portion of the state. The Act prohibits the use of
interstate branches primarily for the purpose of deposit production, and
requires that the interstate bank's level of lending in the host state
relative to deposits from the host state (using available information) be
greater than half the average of all banks with home offices in that state.
The appropriate Federal regulator may require closure of a branch which
fails this test. In the case of an interstate bank that proposes to close
any branch in a low- or moderate-income area, the branch closure notices
must contain the mailing address of the bank's Federal regulator, and a
statement that comments regarding the closure may be mailed to that
regulator. If a person from the area in which the branch is located submits
a written request and includes a statement of specific reasons, and the
request is not frivolous, the agency must consult with community leaders
and convene a meeting with such leaders and depository institutions to
explore the feasibility of obtaining adequate alternative facilities and
services. The legislation specifically states that this process shall not
affect the authority of the bank to close the branch, or the timing of the
closing.
Congress also enacted the Riegle Community Development and Regulatory
Improvement Act of 1994 on September 23, 1994. This Act amended the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") to allow
regulators to issue guidelines instead of regulations on asset quality, earnings
and stock valuation standards, provides for electronic filing of call reports
and currency transaction reports, exempts business purpose loans from the Real
Estate Settlement Procedures Act, reduces certain audit requirements of FDICIA,
and included many other miscellaneous provisions intended to reduce regulatory
burdens. However, stricter requirements are imposed on banks with respect to
requiring flood insurance from borrowers.
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FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991, which
became law in December 1991, in addition to authorizing increased funding for
the Bank Insurance Fund ("BIF") by raising the FDIC's borrowing limits and
eliminating the cap on deposit insurance premiums, imposes extensive additional
statutory requirements regarding the roles, responsibilities, and liabilities of
a bank's senior management, directors, independent auditors, and regulators in
compliance, management and financial affairs of a bank. This Act has required
additional time, effort and resources to be devoted to compliance and internal
controls.
FDICIA requires each financial institution with $500 million or more in
total assets to have an annual audit of its financial statements by an
independent public accountant and to have an audit committee consisting of
independent outside directors. There are more stringent criteria for audit
committees of institutions with $3 billion or more in total assets. It also
requires that management report on and assess their responsibility for internal
controls over financial reporting and compliance with designated laws and
regulations.
FDICIA requires each federal banking agency to ensure that its risk-based
capital standards take adequate account of interest rate risk, concentration of
credit risk and the risks of non-traditional activities, as well as reflect the
actual performance and expected risk of loss on multi-family mortgages. In
addition, pursuant to FDICIA, each federal banking agency has promulgated
regulations specifying the levels at which a financial institution would be
considered "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized," and to take
certain mandatory and discretionary supervisory actions based on the capital
level of the institution.
Insured institutions are generally prohibited from paying dividends or
management fees if after making such payments, the institution would be
"undercapitalized." An "undercapitalized" institution also is required to
develop and submit to the appropriate federal banking agency a capital
restoration plan, and each company controlling such institution must guarantee
the institution's compliance with such plan. The liability of a holding company
under any such guarantee is limited to the lesser of five percent of the
institution's total assets at the time it became undercapitalized or the amount
needed to comply with all applicable capital standards. The FDIC is accorded a
priority over the claims of unsecured creditors in any bankruptcy proceeding of
a holding company that has guaranteed an institution's compliance with a capital
restoration plan. Further, "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized" institutions are subject to increasingly
extensive requirements and limitations, including mandatory sale of stock,
forced mergers, and ultimately receivership or conservatorship. A "critically
undercapitalized" institution, beginning 60 days after it becomes "critically
undercapitalized," generally is prohibited from making any payment of principal
or interest on the institution's subordinated debt.
FDICIA provides that the FDIC insurance assessments are to move from
flat-rate premiums to a new system of risk-based premium assessments. The
risk-based insurance assessment evaluates an institution's potential for causing
a loss to the insurance fund and bases deposit insurance premiums upon
individual bank profiles. The majority of the company's FDIC insured deposits
are covered under the Bank Insurance Fund ("BIF"). After BIF reached its
"designated rescue ratio" in 1995, the FDIC greatly reduced (and, in the case of
the most highly rated and well-capitalized banks, eventually eliminated)
assessments applicable to BIF-insured deposits commencing January 1, 1996. As a
result of deposits acquired through the acquisition of thrift institutions over
the last several years, the company has approximately $2.1 billion of deposits
that are insured under the Savings Association Insurance Fund ("SAIF"). Several
proposals are being discussed by Congress and banking regulators regarding the
recapitalization of the SAIF to bring its funding level up to that of the BIF.
Current discussions are considering a one-time assessment on all SAIF deposits
based upon such insured deposits. Until legislation is finalized by Congress and
signed into law, the company cannot determine the amount of the assessment. At
that time an accrual will be established. Currently the annual assessment rates
for the company's bank subsidiaries are 23 cents per $100 of deposits insured by
SAIF and less than one cent per $100 of deposits insured by BIF.
FDICIA also contains the Truth in Savings Act, which requires certain
disclosures to be made in connection with deposit accounts offered to consumers.
The FRB has adopted regulations implementing the provisions of the Truth in
Savings Act.
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In addition, significant provisions of FDICIA required federal banking
regulators to draft standards in a number of other areas to assure bank safety
and soundness, including internal controls, information systems and internal
audit systems, credit underwriting, asset growth, compensation, loan
documentation and interest rate exposure. The bank regulators have issued
substantially similar regulations that impose on banks which fail to meet the
safety and soundness standards of FDICIA substantially the same requirements
respecting the formulation and implementation of a corrective plan of action as
apply in the case of banks failing to meet the capital adequacy standards.
FDICIA requires the regulators to establish standards regarding asset quality
and earnings. The legislation also contains provisions which tighten independent
auditing requirements, restrict the activities and investments of
state-chartered banks to those permitted for national banks, amend various
consumer banking laws, limit the ability of "undercapitalized" banks to borrow
from the FRB discount window, and require federal banking regulators to perform
annual on-site bank examinations and set standards for real estate lending.
FDICIA significantly increased costs for the banking industry due to higher FDIC
assessments, additional layers of reporting and compliance requirements and more
limitations on the activities of all but the most well capitalized banks.
FIRREA
Although the most significant purpose of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA") was to restructure the savings
and loan industry, many of its provisions have importance for the commercial
banking industry, including the provision which authorized bank holding
companies to acquire healthy as well as troubled thrift institutions, generally
without limitations on interstate acquisitions, while retaining thrift branching
powers.
Under FIRREA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution in danger of default. "Default"
is defined generally as the appointment of a conservator or receiver and "in
danger of default" is defined generally as the existence of certain conditions,
including a failure to meet minimum capital requirements, indicating that a
"default" is likely to occur in the absence of regulatory assistance. These
provisions have commonly been referred to as FIRREA's "cross guarantee"
provisions. Liability under the "cross guarantee" provisions is subordinate to
claims (other than claims by shareholders, including bank holding companies, in
their capacity as shareholders, and affiliates of the institution) of
depositors, secured creditors, other general or senior creditors, and holders of
obligations subordinated to depositors or other creditors. The FDIC may waive
its rights under limited circumstances generally applicable to acquisitions of
troubled institutions.
FIRREA gives the FDIC as conservator or receiver of a failed depository
institution express authority to repudiate contracts with such institution which
it determines to be burdensome or if such repudiation will promote the orderly
administration of the institution's affairs. Certain "qualified financial
contracts", defined to include securities contracts, commodity contracts,
forward contracts, repurchase agreements, and swap agreements, are generally
excluded from the repudiation powers of the FDIC. The FDIC is also given
authority to enforce contracts made by a depository institution, notwithstanding
any contractual provision providing for termination, default, acceleration, or
exercise of rights upon, or solely by reason of, insolvency or the appointment
of a conservator or receiver. Insured depository institutions are also
prohibited from entering into contracts for goods, products or services which
would adversely affect the safety and soundness of the institution.
The bank regulatory agencies have broad discretion to issue cease and
desist orders if they determine that the company or its subsidiaries are
engaging in "unsafe or unsound banking practices." In addition, the federal bank
regulatory authorities are empowered to impose substantial civil money penalties
for violations of certain Federal banking statutes and regulations. Financial
institutions, and directors, officers, employees, controlling shareholders,
agents, consultants, attorneys, accountants, appraisers and others associated
with a financial institution could now be subject to increased fines, penalties,
and other enforcement actions as a result of provisions of FIRREA. Further,
under FIRREA the failure to meet capital guidelines could subject a banking
9
<PAGE> 10
institution to a variety of enforcement remedies available to Federal regulatory
authorities, including the termination of deposit insurance by the FDIC.
REGULATION OF SUBSIDIARIES
Various laws and the regulations thereunder applicable to the company and
its bank subsidiaries impose restrictions and requirements in many areas,
including capital requirements, the maintenance of reserves, establishment of
new offices, the making of loans and investments, consumer protection,
employment practices and other matters. There are various legal limitations,
including Sections 23A and 23B of the Federal Reserve Act, on the extent to
which a bank subsidiary may finance or otherwise supply funds to Summit or its
non-bank subsidiaries. Under federal law, no bank subsidiary may, subject to
certain limited exceptions, make loans or extensions of credit to, or
investments in the securities of, its parent or non-bank subsidiaries of its
parent or take their securities as collateral for loans to any borrower. Each
bank subsidiary is also subject to collateral security requirements for any
loans or extensions of credit permitted by such exceptions. Further, a
subsidiary bank may only engage in most transactions with other subsidiaries if
terms and conditions are at least as favorable to the bank as those prevailing
for transactions with unaffiliated companies. Summit and its banking and other
subsidiaries are also subject to certain restrictions with respect to engaging
in the business of issuing, underwriting, public sale, flotation or distribution
of securities.
The three state-chartered subsidiary banks are subject to the supervision
of, and to regular examination by, the New Jersey Departments of Insurance and
Banking, in the case of United Jersey Bank, the New Jersey Department of
Banking, in the case of Summit Bank, and the Pennsylvania Department of Banking,
in the case of First Valley Bank. In addition, the subsidiary banks are subject
to examination by the FDIC, and by the U.S Department of Education with respect
to student loan activity. United Jersey Bank is also subject to examination by
the FRB. The Municipal Bond Department of United Jersey Bank, as a registered
municipal securities dealer, is subject to the supervision of the Municipal
Securities Rulemaking Board.
None of the stocks of the subsidiary banks or other subsidiaries owned or
controlled by Summit carry statutory double liability. However, Article XIV,
Section 11 of the Constitution of the State of Arizona provides that the stock
of Summit's credit life insurance subsidiaries may be subject to assessment to
restore impaired capital under certain circumstances as and to the extent
provided therein. There is no such provision in New Jersey or Pennsylvania law
governing Summit's state-chartered banks.
Certain statutory restrictions may affect the declaration and payment of
dividends by the subsidiary banks to Summit. For additional information see Note
14 on page 42 of the 1995 Annual Report incorporated herein by reference as
Exhibit 13.
Summit and its non-bank subsidiaries are subject to examination by the New
Jersey and Pennsylvania state bank regulatory agencies and the FRB and FDIC at
their discretion. As mortgagees approved by the Department of Housing and Urban
Development and seller-servicers of mortgages approved by the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, and the New
Jersey Housing and Mortgage Finance Agency, Summit Bank and United Jersey Bank
are subject to regulation or supervision by these government agencies. First
Valley Bank is a participant in the mortgage program conducted by the
Pennsylvania Housing Finance Agency and is subject to the supervision of that
agency. UJB Discount Brokerage Co. and Lehigh Securities Corporation are subject
to regulation and examination by the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc. and the New Jersey Bureau of
Securities. UJB Discount Brokerage Co. is also subject to regulation and
examination by the New York Bureau of Investor Protection and Securities and the
Florida Department of Banking and Finance. Lehigh Securities Corporation is also
subject to regulation and examination by the Pennsylvania Securities Commission
and, as a registered municipal securities dealer, is subject to the supervision
of the Municipal Securities Rulemaking Board. United Jersey Credit Life
Insurance Company and First Valley Life Insurance Company are subject to
regulation and examination by the Department of Insurance of the State of
Arizona. Beechwood Insurance Agency, Inc. is subject to the jurisdiction of, and
to regular examination by, the New Jersey Department of Insurance. UJB
Commercial Corp. is subject to the jurisdiction of the Connecticut Department of
Banking.
10
<PAGE> 11
Summit and its subsidiaries are also subject to various reporting
requirements of Federal and state securities laws, and regulations of the
Securities and Exchange Commission and the New York Stock Exchange.
From time to time, various bills are introduced in the United States
Congress and the New Jersey or Pennsylvania Legislature which could result in
additional regulation of the business of Summit and its subsidiaries, or further
increase competition or expense. There is pending, but not yet passed, federal
legislation which would require commercial banks to share on a pro rata basis
with thrift institutions some or all of the interest payment obligations on the
bonds issued by the Financing Corp. in connection with the "bailout" of the
savings and loan industry in the late 1980s and early 1990s.
There is a continuing trend toward regulating every aspect of retail
banking through consumer protection laws, at significant expense to financial
institutions. At the same time, securities brokers, insurance companies,
retailers and other non-bank entities are being allowed to offer a variety of
traditional bank services without being subject to the same degree of regulation
as banks and bank holding companies. If these trends continue without providing
parity to the commercial banks in matters such as permissible services, taxation
and interest rates chargeable on loans, adverse effects on commercial banks
could ensue.
In its operations in other countries, United Jersey Bank is also subject to
restrictions imposed by the laws and banking authorities of such countries.
References under this caption, Supervision and Regulation, to applicable
statutes are brief summaries of portions thereof which do not purport to be
complete and which are qualified in their entirety by reference to such
statutes.
Monetary Policy and Economic Conditions
The earnings and business of Summit and its subsidiaries are affected by
the policies of regulatory authorities, including the FRB. The monetary policies
of the FRB have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future. Because
of the changing conditions in the national and international economy and in the
money markets, as a result of actions by monetary and fiscal authorities,
interest rates, credit availability and deposit levels may change due to
circumstances beyond the control of Summit or its subsidiaries.
Effects of Inflation
A bank's asset and liability structure differs from that of an industrial
company, since its assets and liabilities fluctuate over time based upon
monetary policies and changes in interest rates. The growth in the bank's
earning assets, regardless of the effects of inflation, will increase net
interest income if the bank is able to maintain a consistent interest spread
between earning assets and supporting liabilities.
A purchasing power gain or loss from holding net monetary assets during the
year represents the effect of general inflation on monetary assets and
liabilities. Almost all of the assets and liabilities of Summit are considered
monetary because they are fixed in terms of dollars and, therefore, are not
materially affected by inflation.
(c)(1)(i) PRINCIPAL PRODUCTS AND SERVICES RENDERED BY INDUSTRY SEGMENTS.
Not applicable. See response to Item 1(b) contained elsewhere in this
report.
(c)(1)(ii) DESCRIPTION OF NEW PRODUCTS OR SEGMENTS.
Not applicable.
(c)(1)(iii) SOURCES AND AVAILABILITY OF RAW MATERIALS.
Not applicable.
11
<PAGE> 12
(c)(1)(iv) IMPORTANCE OF PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND
CONCESSIONS HELD.
Patents and licenses, as such, are not of importance to Summit or its
subsidiaries, but operating charters (similar to licenses) -- approved banking
location authorizations granted by the New Jersey and Pennsylvania Departments
of Banking for state-chartered bank subsidiaries -- are vital to the operation
and expansion of the bank subsidiaries. Such charters are perpetual unless
revoked by the granting authorities. Various licenses and approvals to do
business are also required by the other regulatory agencies referred to under
Supervision and Regulation above. Most of these licenses and approvals require
periodic renewal.
Summit has several registered service marks, none of which is considered
material to its business. The duration of each registration is perpetual so long
as the registrant continues to use the mark.
(c)(1)(v) SEASONALITY OF BUSINESS.
Not applicable.
(c)(1)(vi) WORKING CAPITAL REQUIREMENTS RELATED TO INVENTORY.
Not applicable.
(c)(1)(vii) CONCENTRATION OF CUSTOMERS.
The business of the registrant and its subsidiaries is not dependent on a
single customer, nor on a small group of customers.
(c)(1)(viii) BACKLOG OF ORDERS.
Not applicable.
(c)(1)(ix) GOVERNMENT CONTRACTS.
No material portion of the business of Summit and its subsidiaries is
subject to renegotiation of profits or termination of contracts or subcontracts
at the election of the Government.
(c)(1)(x) COMPETITION.
Each bank subsidiary faces strong competition for local business in the
communities it serves from other banking institutions as well as from other
financial institutions. United Jersey Bank, Summit Bank and First Valley Bank
compete in the national market with other major banking and financial
institutions in the New York and Philadelphia areas, many of which are
substantially larger and may have greater financial resources. A number of these
institutions offer their services throughout New Jersey and Pennsylvania through
bank and non-bank subsidiaries, loan production offices and solicitations
through broadcast and print media and direct mail. For international business,
United Jersey Bank competes not only with a substantial number of United States
banks having foreign departments, but also with agencies and branches of foreign
banks located in the United States and with other major banks throughout the
world. The effect of liberalized branching and acquisition laws has been to
lower barriers to entry into the banking business and to increase competition
for banking business, as well as to increase both competition for and
opportunities to acquire other financial institutions. Nationwide interstate
banking will accelerate these trends.
For most of the services which the subsidiaries perform, there is
increasing competition from financial institutions other than commercial banks
due to the relaxation of regulatory restrictions. Money market funds actively
compete with banks for deposits. Savings banks, savings and loan associations
and credit unions also actively compete for deposits and for various types of
loans; such institutions, as well as securities brokers, consumer finance
companies, mortgage companies, factors, insurance companies and pension trusts,
are important competitors. Financial institutions such as these, as well as
retailers and other non-bank entities, have acquired so-called "non-bank banks"
permitting them to offer traditional banking services without being subject to
the same degree of regulation. Insurance companies, mutual fund investment
counseling firms and other business firms and individuals offer competition for
personal and corporate trust services and investment advisory services.
12
<PAGE> 13
Each of Summit's non-bank subsidiaries competes with a very large number of
competitors, many of which are substantially larger and have greater financial
resources.
Competition for banking and permitted non-bank services is based on price,
nature of product, quality of service, and in the case of retail activities,
convenience of location.
(c)(1)(xi) RESEARCH AND DEVELOPMENT.
Summit and its subsidiaries conduct research activities, from time to time,
relating to the development of new services. Expenditures for these activities
are not considered material to the financial condition of Summit and its
subsidiaries. Research expenditures during 1995 were charged directly to expense
as incurred.
(c)(1)(xii) COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS.
It is not expected that compliance with Federal, state and local provisions
relating to the protection of the environment will have any material effect on
Summit or its subsidiaries.
(c)(1)(xiii) NUMBER OF PERSONS EMPLOYED.
At December 31, 1995, there were 7,547 persons, on a full-time equivalent
basis, employed by Summit and its subsidiaries.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
United Jersey Bank operates an International Banking Department principally
for the benefit of its domestic customers and, in January 1974, opened its first
offshore banking facility on the island of Grand Cayman in the British West
Indies. UJB Trade Finance (HK), Limited, operating under a Hong Kong charter,
issues documentary letters of credit to Asian suppliers on behalf of U.S.
importers. Business at these offshore facilities constituted less than one-half
of one percent of the total assets and income of United Jersey Bank in 1995.
(e)(1) STATISTICAL INFORMATION -- COMBINED CONSOLIDATED (INCLUDING THE SUMMIT
BANCORPORATION).
The following tables set forth, on a combined consolidated basis, certain
statistical information concerning Summit and its subsidiaries, including The
Summit Bancorporation. The tables should be read in conjunction with the
combined consolidated financial statements contained in the 1995 Annual Report
to Shareholders, included herein as Exhibit 13. Average data have been derived
from daily balances except in the case of certain smaller subsidiaries where
month-end balances were used.
Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and
Interest Differential (including The Summit Bancorporation)
For information on average balances, interest and average rates earned and
paid see "Combined Consolidated Comparative Average Balance Sheets With
Resultant Interest and Rates" on pages 30 and 31 in the 1995 Annual Report to
Shareholders, included herein as Exhibit 13, which pages are incorporated herein
by reference.
The amount by which interest income exceeds interest expense is called net
interest income. The amount of net interest income in any given period is
affected by the average volume of earning assets and the yield earned on such
assets, the average volume of interest bearing sources of funds and the average
rate paid on such liabilities, and the average volume of interest-free sources
of funds.
For information on the effective interest differential of volume and rate
changes for the years 1995 and 1994 on a tax-equivalent basis see "Rate/Volume
Table" on page 23 in the 1995 Annual Report to Shareholders, included herein as
Exhibit 13, which pages are incorporated herein by reference.
13
<PAGE> 14
Securities Available for Sale (including The Summit Bancorporation)
The following table shows the carrying value of securities available for
sale at December 31 for each of the following years:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities available for sale:
U.S. Government............................ $ 182,793 $ -- $ --
Federal agencies........................... 1,719,466 821,430 1,159,981
States and political subdivisions.......... 2,012 -- --
Other securities........................... 503,794 300,834 823,846
--------- --------- ---------
Total securities available for sale..... $2,408,065 $1,122,264 $1,983,827
========= ========= =========
</TABLE>
The following table shows the maturity distribution and weighted average
yields to maturity on a tax-equivalent basis for securities available for sale,
by type and in total, of U.S. Government, Federal agencies, states and political
subdivisions and other securities at December 31, 1995. The carrying value
represents the market value of securities at December 31, 1995 and are
distributed by contractual maturity. However, mortgage-backed securities and
other securities which may have prepayment provisions are distributed to a
maturity category based on estimated average lives. These principal prepayments
are not scheduled over the life of the investment, but are reflected as
adjustments to the final maturity distribution. The distribution follows:
<TABLE>
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD(2)
----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Securities available for sale (by type):
U.S. Government:
Within 1 year................................................... $ 69,390 6.46%
After 1 year but within 5 years................................. 113,403 6.74
-----------
Total...................................................... 182,793 6.63
-----------
Federal agencies:
Within 1 year................................................... 53,648 6.48
After 1 year but within 5 years................................. 1,226,587 6.32
After 5 years but within 10 years............................... 272,994 6.67
After 10 years.................................................. 166,237 6.97
-----------
Total...................................................... 1,719,466 6.44
-----------
States and political subdivisions:
After 1 year but within 5 years................................. 1,912 6.38
After 5 years but within 10 years............................... 100 6.33
-----------
Total...................................................... 2,012 6.38
-----------
Other securities(1):
Within 1 year................................................... 20,967 5.41
After 1 year but within 5 years................................. 174,507 6.94
After 5 years but within 10 years............................... 101,105 6.31
After 10 years.................................................. 93,594 6.87
-----------
Total...................................................... 390,173 6.68
-----------
Total securities available for sale........................ $ 2,294,444 6.50%
========= =======
Securities available for sale (in total)(1):
Total within 1 year............................................. $ 144,005 6.31%
Total after 1 year but within 5 years........................... 1,516,409 6.42
Total after 5 years but within 10 years......................... 374,199 6.57
Total after 10 years............................................ 259,831 6.93
-----------
Total securities available for sale........................ $ 2,294,444 6.50%
========= =======
</TABLE>
- ---------------
(1) Excludes corporate stock with a carrying value of $104,363,000 and Federal
Reserve Bank stock with a carrying value of $9,258,000.
(2) Weighted average yields have been computed on a tax-equivalent basis using
the statutory Federal income tax rate of 35%.
14
<PAGE> 15
Securities Held to Maturity (including The Summit Bancorporation)
The following table shows the carrying value of securities held to maturity
at December 31 for each of the past three years:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities held to maturity:
U.S. Government...................................... $ 4,216 $ 234,268 $ 186,563
Federal agencies..................................... 1,256,956 2,188,731 1,789,795
States and political subdivisions.................... 271,621 378,919 371,580
Other securities..................................... 1,514,287 1,999,069 1,129,520
----------- ----------- -----------
Total securities held to maturity............ $ 3,047,080 $ 4,800,987 $ 3,477,458
========= ========= =========
</TABLE>
The following table shows the maturity distribution and weighted average
yields to maturity on a tax-equivalent basis for securities held to maturity, by
type and in total, of U.S. Government, Federal agencies, states and political
subdivisions and other securities at December 31, 1995. The carrying value and
market value of securities at December 31, 1995 are distributed by contractual
maturity. However, mortgage-backed securities and other securities which may
have prepayment provisions are distributed to a maturity category based on
estimated average lives. These principal prepayments are not scheduled over the
life of the investment, but are reflected as adjustments to the final maturity
distribution. The distribution follows:
<TABLE>
<CAPTION>
CARRYING MARKET WEIGHTED
VALUE VALUE AVERAGE YIELD(1)
---------- ---------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities held to maturity (by type):
U.S. Government:
Within 1 year................................... 1,500 1,499 4.29
After 1 year but within 5 years................. 2,716 2,717 6.00
---------- ----------
Total......................................... 4,216 4,216 5.39
---------- ----------
Federal agencies:
Within 1 year................................... 5,790 5,820 6.34
After 1 year but within 5 years................. 625,350 621,319 6.34
After 5 years but within 10 years............... 316,654 315,477 6.19
After 10 years.................................. 309,162 310,773 6.97
---------- ----------
Total......................................... 1,256,956 1,253,389 6.46
---------- ----------
States and political subdivisions:
Within 1 year................................... 49,001 49,437 6.78
After 1 year but within 5 years................. 119,377 125,958 6.43
After 5 years but within 10 years............... 72,781 78,103 6.49
After 10 years.................................. 30,462 32,752 7.23
---------- ----------
Total......................................... 271,621 286,250 6.60
---------- ----------
Other securities:
Within 1 year................................... 34,683 34,707 6.07
After 1 year but within 5 years................. 963,877 954,751 6.15
After 5 years but within 10 years............... 402,944 396,179 6.00
After 10 years.................................. 112,783 111,334 7.05
---------- ----------
Total......................................... 1,514,287 1,496,971 6.18
---------- ----------
Total securities held to maturity............. $3,047,080 $3,040,826 6.33%
========= ========= ============
Securities held to maturity (in total):
Total within 1 year............................. 90,974 91,463 6.44%
Total after 1 year but within 5 years........... 1,711,320 1,704,745 6.24
Total after 5 years but within 10 years......... 792,379 789,759 6.12
Total after 10 years............................ 452,407 454,859 7.01
---------- ----------
Total securities held to maturity............. $3,047,080 $3,040,826 6.33%
========= ========= ============
</TABLE>
- ---------------
(1) Weighted average yields have been computed on a tax-equivalent basis using
the statutory Federal income tax rate of 35%.
15
<PAGE> 16
Loan Portfolio (including The Summit Bancorporation)
The following table shows the classification of consolidated loans (net of
unearned discount and before deduction of the allowance for loan losses) by
major category at December 31 for each of the past five years:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial and industrial........ $ 4,432,111 $ 4,251,347 $ 3,766,499 $ 3,804,708 $ 3,941,739
Construction and development..... 569,820 785,595 973,279 1,112,655 1,285,185
Residential mortgage............. 3,296,818 2,803,286 2,148,004 2,097,504 2,332,807
Commercial mortgage.............. 2,315,384 2,201,698 2,381,630 2,312,332 1,976,648
Consumer......................... 3,086,325 2,745,837 2,407,431 2,491,633 2,429,207
Lease financing.................. 319,116 317,416 204,583 153,221 179,603
------------ ------------ ------------ ------------ ------------
Total loans................. $ 14,019,574 $ 13,105,179 $ 11,881,426 $ 11,972,053 $ 12,145,189
========== ========== ========== ========== ==========
</TABLE>
Unearned discount on loans and leases at December 31, 1995 and 1994 were
$103.4 million and $91.8 million, respectively. At December 31, 1995 commercial
mortgage loans and residential mortgage loans represented 16.5% and 23.5% of
total loans, respectively. Home equity loans represented 13.6% of the total loan
portfolio at year end which are included in consumer loans above. As of December
31, 1995 there are no other concentrations of loans which exceed 10% of total
loans.
The following table shows the approximate maturities of selected loans at
December 31, 1995. The loans are segregated between those which are at
predetermined interest rates and those at floating or adjustable interest rates.
The table includes non-performing loans which are discussed below and on page 17
of this report.
<TABLE>
<CAPTION>
OVER ONE OVER
ONE YEAR YEAR THROUGH FIVE
OR LESS FIVE YEARS YEARS TOTAL
---------- ------------ -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan categories:
Commercial and industrial....................... $2,401,706 $1,615,800 $414,605 $4,432,111
Construction and development.................... 367,906 165,561 36,353 569,820
---------- ------------ -------- ----------
Total................................... $2,769,612 $1,781,361 $450,958 $5,001,931
========= ========== ======== =========
Amounts of loans based upon:
Predetermined interest rates.................... $ 647,065 $ 828,783 $275,244 $1,751,092
Floating or adjustable interest rates........... 2,122,547 952,578 175,714 3,250,839
---------- ------------ -------- ----------
Total................................... $2,769,612 $1,781,361 $450,958 $5,001,931
========= ========== ======== =========
</TABLE>
The loan portfolio is reviewed regularly to determine whether specific
loans should be placed in a non-performing status. Non-performing loans consist
of commercial non-accrual and renegotiated loans. Non-accrual loans include
loans that are past due 90 days or more as to principal or interest, or where
reasonable doubt exists as to timely collectibility. At the time a loan is
placed on non-accrual status, previously accrued and uncollected interest is
reversed against interest income. Interest collections on non-accrual loans are
generally credited to interest income when received. However, if ultimate
collectibility of principal is in doubt, interest collections are applied as
principal reductions. After principal and interest payments are brought current
and future collectibility is reasonably assured, loans are returned to accrual
status. Renegotiated loans are loans whose contractual interest rates have been
reduced to below market rates or other significant concessions made due to a
borrower's financial difficulties. Interest income on renegotiated loans is
generally credited to interest income as received. Non-performing loans do not
include past due consumer and residential mortgage loans 90 days or more as to
principal or interest, but which are well collateralized and in the process of
collection.
16
<PAGE> 17
The following table shows, in thousands of dollars, the principal amount of
commercial non-accruing loans, renegotiated loans, and loans contractually past
due 90 days or more at December 31 for each of the past five years, and their
resultant impact on earnings before taxes for the years then ended. All loans in
the following table represent domestic loans. There are no foreign loans
included in any of the categories.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accruing loans........................... $ 188,289 $ 197,285 $ 312,605 $ 423,748 $ 543,761
Renegotiated loans........................... 199 2,920 6,778 34,710 41,682
Loans contractually past due 90 days or
more(1).................................... 47,786 39,645 58,852 76,766 104,627
Impact on interest income:
Interest income that would have been
recorded on non-accruing and
renegotiated loans outstanding at
December 31 in accordance with their
original terms.......................... 19,724 19,702 28,225 37,524 58,753
Interest income actually received and
recorded on non-accruing and
renegotiated loans outstanding at
December 31............................. 2,833 2,642 5,332 4,897 11,453
</TABLE>
- ---------------
(1) Primarily all consumer loans and residential mortgage which are well
collateralized and in the process of collection.
Potential problem loans are those which management believes conditions
indicate that the collection of principal and interest may be doubtful in
accordance with the original contract terms. They are not included in
non-performing loans as these loans are still performing. Potential problem
loans were $18,708,000 and $34,614,000 at December 31, 1995 and 1994
respectively. Potential problem loans at December 31, 1995 comprised commercial
and industrial loans of $13,132,000, construction and development loans of
$5,385,000, and real estate related loans of $191,000. Such risk associated with
these loans have been factored into the company's allowance for loan losses.
Summary of Loan Loss Experience (including The Summit Bancorporation)
The relationship for the past five years among loans, loans charged off and
loan recoveries, the provision for loan losses and the allowance for loan losses
is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans:
Average for the period........ $13,416,526 $12,387,584 $11,889,465 $12,043,874 $12,174,150
========== ========== ========== ========== ==========
Allowance for loan losses:
Balance, beginning of
period..................... $ 305,330 $ 339,028 $ 374,639 $ 388,846 $ 359,258
Purchase adjustment, net...... 6,131 2,088 -- -- --
Adjustment for pooling of
companies with different
fiscal year ends........... -- (178) -- -- --
Provision charged to operating
expenses................... 71,850 91,995 112,885 165,553 192,417
Loans charged off:
Commercial and
industrial............... 45,293 37,229 75,966 84,910 81,480
Construction and
development.............. 35,451 39,209 38,354 74,260 51,077
Residential mortgage....... 6,016 4,440 3,829 3,794 8,321
Commercial mortgage........ 25,741 21,731 18,590 13,490 15,604
Consumer................... 13,871 10,300 29,760 20,810 23,748
----------- ----------- ----------- ----------- -----------
Total loans charged
off................. 126,372 112,909 166,499 197,264 180,230
----------- ----------- ----------- ----------- -----------
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Recoveries:
Commercial and
industrial............... 14,684 13,921 10,856 9,489 6,926
Construction and
development.............. 2,072 1,320 1,657 1,662 1,967
Residential mortgage....... 667 594 315 181 537
Commercial mortgage........ 1,920 2,838 724 876 1,876
Consumer................... 2,752 3,585 4,451 5,296 6,095
----------- ----------- ----------- ----------- -----------
Total recoveries...... 22,095 22,258 18,003 17,504 17,401
----------- ----------- ----------- ----------- -----------
Net loans charged off......... 104,277 90,651 148,496 179,760 162,829
Write downs on transfer to
assets held for accelerated
disposition................ -- 36,952 -- -- --
----------- ----------- ----------- ----------- -----------
Balance, end of period........ $ 279,034 $ 305,330 $ 339,028 $ 374,639 $ 388,846
========== ========== ========== ========== ==========
Ratio of:
Net charge offs to average
loans outstanding.......... 0.78% 0.73% 1.25% 1.49% 1.34%
Allowance to year-end loans... 1.99% 2.33% 2.85% 3.13% 3.20%
</TABLE>
For additional information, see Financial Review on pages 19 through 29 of
the 1995 Annual Report to Shareholders incorporated herein by reference as
Exhibit 13.
Implicit in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan being
made, the creditworthiness of the borrower and prevailing economic conditions. A
standardized process has been established throughout the company to provide for
loan losses through a reasonable and prudent methodology. This methodology
includes a review to assess the risks inherent in the loan portfolio. It
incorporates a credit review and gives consideration to areas of exposure such
as concentrations of credit, economic and industry conditions, and negative
trends in delinquencies and collections. Consideration is also given to
collateral levels and the composition of the portfolio.
Specific allocations as well as a need for general reserves are identified
by loan type and allocated according to the following categories of loans at
December 31 for each of the past five years. The percentage of loans to total
loans is based upon the classification of loans shown as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------------- -------------------- -------------------- -------------------- --------------------
(DOLLARS IN THOUSANDS)
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF OF OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
-------- ---------- -------- ---------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
industrial........ $ 53,925 31.6% $ 62,300 32.4% $ 78,181 31.7% $ 85,906 31.8% $115,926 32.5%
Construction and
development....... 43,951 4.1 61,274 6.0 85,580 8.2 101,251 9.3 106,688 10.6
Residential
mortgage.......... 15,501 23.5 15,740 21.4 13,529 18.1 15,901 17.5 12,163 20.6
Commercial
mortgage.......... 31,754 16.5 31,943 16.8 30,814 20.0 32,689 19.3 26,890 14.8
Consumer............ 21,150 22.0 24,992 21.0 20,934 20.3 26,194 20.8 21,515 20.0
All other loans..... 26,895 2.3 3,221 2.4 1,226 1.7 1,696 1.3 1,266 1.5
Unallocated......... 85,858 N/A 105,860 N/A 108,764 N/A 111,002 N/A 104,398 N/A
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total........... $279,034 100.0% $305,330 100.0% $339,028 100.0% $374,639 100.0% $388,846 100.0%
======== ========= ======== ========= ======== ========= ======== ========= ======== =========
</TABLE>
Deposits (including The Summit Bancorporation)
For information on classification of average balances for deposits, see
"Comparative Average Balance Sheets With Resultant Interest and Rates" on pages
30 and 31 of the 1995 Annual Report to Shareholders incorporated herein by
reference as Exhibit 13.
18
<PAGE> 19
The following table shows, by time remaining to maturity, all commercial
certificates of deposit $100,000 and over at December 31, 1995 (in thousands):
<TABLE>
<S> <C>
Less than three months.................................... $ 625,137
Three to six months....................................... 42,553
Six to twelve months...................................... 39,748
More than twelve months................................... --
---------
Total........................................... $ 707,438
========
</TABLE>
Return on Equity and Assets (including The Summit Bancorporation)
For information on combined consolidated ratios, see "Summary of Selected
Financial Data" on pages 50 and 51 in the 1995 Annual Report to Shareholders
incorporated herein by reference as Exhibit 13.
Short-Term Borrowings (including The Summit Bancorporation)
The following table summarizes information relating to certain short-term
borrowings for each of the past three years:
<TABLE>
<CAPTION>
MAXIMUM
DAILY AVERAGE FOR YEAR AMOUNT
AMOUNT ---------------------------- OUTSTANDING
OUTSTANDING AT AVERAGE RATE AT AMOUNT INTEREST AT ANY
DECEMBER 31 DECEMBER 31 OUTSTANDING RATE MONTH END
-------------- --------------- ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Securities sold under agreements to repurchase:
1995 $ 649,650 5.48% $ 817,152 5.47% $ 966,269
1994 1,177,725 5.24 920,654 4.35 1,273,711
1993 387,464 2.57 436,571 2.89 707,724
Federal funds purchased:
1995 $ 200,700 5.57% $ 253,516 5.85% $ 442,675
1994 172,255 5.94 540,073 4.22 708,456
1993 225,686 2.66 319,753 3.06 372,976
</TABLE>
(e)(2) STATISTICAL INFORMATION -- CONSOLIDATED (UJB FINANCIAL CORP. ONLY)
The following tables set forth, on a consolidated basis, certain
statistical information concerning UJB Financial Corp. and its subsidiaries. The
tables should be read in conjunction with the consolidated financial statements
contained in the 1995 Annual Report to Shareholders, included herein as Exhibit
13. Average data have been derived from daily balances except in the case of
certain smaller subsidiaries where month-end balances were used.
19
<PAGE> 20
Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and
Interest Differential (UJB Financial Corp. only)
The following table shows the Average Balance Sheet with Resultant Interest
and Rates for the years ended 1995 through 1993. Net interest income is the
amount by which interest income exceeds interest expense. Net interest income in
any given period is affected by the average volume of earning assets and the
yield earned on such assets, the average volume of interest bearing sources of
funds and the average rate paid on such liabilities.
<TABLE>
<CAPTION>
TAX EQUIVALENT BASIS, IN
THOUSANDS 1995 1994 1993
NOT COVERED BY ---------------------------------- -------------------------------- --------------------------------
INDEPENDENT AUDITORS' AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
REPORT BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
- ------------------------ ----------- ---------- ------- ----------- -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and
securities purchased
under agreements to
resell............... $ 39,203 $ 2,752 7.02% $ 9,591 $ 600 6.26% $ 30,118 $ 955 3.17%
Interest bearing
deposits
with banks........... 11,130 642 5.77 16,910 629 3.72 21,934 651 2.97
Trading account
securities........... 33,927 2,002 5.90 27,495 772 2.81 31,447 1,385 4.40
Securities available
for sale............. 296,155 19,165 6.47 613,915 34,300 5.59 754,213 31,023 4.11
Securities held to
maturity:
U.S. Government and
Federal agencies... 1,854,275 112,425 6.06 1,871,038 107,700 5.76 2,227,309 146,926 6.60
States and political
subdivisions....... 291,628 28,832 9.89 323,133 34,050 10.54 340,141 37,827 11.12
Other securities..... 1,640,232 100,175 6.11 1,603,764 88,500 5.52 565,208 31,146 5.51
----------- ---------- ----------- -------- ----------- --------
Total securities
held to
maturity....... 3,786,135 241,432 6.38 3,797,935 230,250 6.06 3,132,658 215,899 6.89
----------- ---------- ----------- -------- ----------- --------
Loans:
Commercial........... 4,562,360 393,474 8.62 4,458,589 337,473 7.57 4,354,160 304,945 7.00
Residential
mortgage........... 1,534,703 113,880 7.42 1,065,090 75,777 7.11 917,899 74,579 8.12
Commercial
mortgage........... 1,489,161 133,054 8.93 1,509,535 125,559 8.32 1,542,071 126,314 8.19
Consumer............. 2,345,433 203,535 8.68 2,123,460 170,865 8.05 2,046,451 168,534 8.24
----------- ---------- ----------- -------- ----------- --------
Total loans...... 9,931,657 843,943 8.50 9,156,674 709,674 7.75 8,860,581 674,372 7.61
----------- ---------- ----------- -------- ----------- --------
Total interest
earning
assets......... 14,098,207 1,109,936 7.87 13,622,520 976,225 7.17 12,830,951 924,285 7.20
----------- ---------- ----------- -------- ----------- --------
Non-interest earning
assets:
Cash and due from
banks................ 844,391 894,054 854,408
Allowance for loan
losses............... (208,091) (247,587) (262,658)
Other assets........... 632,730 593,534 612,440
----------- ----------- -----------
Total
non-interest
earning
assets......... 1,269,030 1,240,001 1,204,190
----------- ----------- -----------
Total Assets............ $15,367,237 $14,862,521 $14,035,141
============= ============= =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing
liabilities:
Savings deposits....... $ 5,057,174 112,273 2.22 $ 5,563,805 115,932 2.08 $ 5,461,273 124,617 2.28
Time deposits.......... 4,082,388 208,446 5.11 3,106,316 123,783 3.98 3,495,293 146,728 4.20
Commercial certificates
of deposit $100,000
and over............. 448,496 25,496 5.68 338,427 13,639 4.03 256,018 7,319 2.86
----------- ---------- ----------- -------- ----------- --------
Total interest
bearing
deposits....... 9,588,058 346,215 3.61 9,008,548 253,354 2.81 9,212,584 278,664 3.02
----------- ---------- ----------- -------- ----------- --------
Commercial paper....... 47,696 2,719 5.70 46,545 1,891 4.06 58,920 1,737 2.95
Other borrowed funds... 1,045,800 79,459 7.60 1,417,304 71,427 5.04 803,187 32,045 3.99
Long-term debt......... 205,413 17,580 8.56 212,084 18,197 8.58 216,757 19,274 8.89
----------- ---------- ----------- -------- ----------- --------
Total interest
bearing
liabilities.... 10,886,967 445,973 4.10 10,684,481 344,869 3.23 10,291,448 331,720 3.22
----------- ---------- ----------- -------- ----------- --------
Non-interest bearing
liabilities:
Demand deposits........ 3,025,563 2,897,980 2,582,206
Other liabilities...... 252,100 211,497 162,497
----------- ----------- -----------
Total
non-interest
bearing
liabilities.... 3,277,663 3,109,477 2,744,703
----------- ----------- -----------
Shareholders' equity.... 1,202,607 1,068,563 998,990
----------- ----------- -----------
Total Liabilities and
Shareholders'
Equity................. $15,367,237 $14,862,521 $14,035,141
============= ============= =============
Net Interest Income
(tax-equivalent
basis)................. 663,963 3.77% 631,356 3.94% 592,565 3.98%
========= ========= =========
Tax-equivalent basis
adjustment............. (13,196) (15,252) (16,657)
---------- -------- --------
Net Interest Income..... $ 650,767 $616,104 $575,908
============ ========== ==========
Net Interest Income as a
Percent of Interest
Earning Assets
(tax-equivalent
basis)................. 4.71% 4.63% 4.62%
========= ========= =========
</TABLE>
- ---------------
Notes: -- The tax equivalent adjustment was computed based on a Federal income
tax rate of 35%.
-- Average balances and rates include non-accruing and renegotiated loans.
20
<PAGE> 21
The following table shows the approximate effect on the effective interest
differential of volume and rate changes for the years 1995 and 1994 on a
tax-equivalent basis. For purposes of this table, the change in interest due to
both volume and rate has been allocated to change due to volume and change due
to rate in proportion to the relationship of the absolute dollar amounts of the
change in each.
<TABLE>
<CAPTION>
1995 VERSUS 1994 1994 VERSUS 1993
------------------------------- --------------------------------
INCREASE/(DECREASE) INCREASE/(DECREASE)
DUE TO CHANGE IN: DUE TO CHANGE IN:
------------------------------- --------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
-------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Interest bearing deposits
with banks................... $ (261) $ 274 $ 13 $ (167) $ 145 $ (22)
Securities held to maturity:
U.S. Government and Federal
agencies................... (955) 5,680 4,725 (21,845) (17,381) (39,226)
states and political
subdivisions............... (3,197) (2,021) (5,218) (1,848) (1,929) (3,777)
Other securities............. 2,048 9,627 11,675 57,297 57 57,354
-------- ------- -------- -------- -------- --------
Total securities held to
maturity.............. (2,104) 13,286 11,182 33,604 (19,253) 14,351
Securities available for sale... (19,890) 4,755 (15,135) (6,488) 9,765 3,277
Trading account securities...... 216 1,014 1,230 (158) (455) (613)
Federal funds sold and
securities purchased under
agreements to resell......... 2,070 82 2,152 (912) 557 (355)
Loans:
Commercial................... 8,046 47,955 56,001 7,401 25,127 32,528
Residential mortgage......... 34,674 3,429 38,103 11,117 (9,919) 1,198
Commercial mortgage.......... (1,698) 9,193 7,495 (2,719) 1,964 (755)
Consumer..................... 18,683 13,987 32,670 6,267 (3,936) 2,331
-------- ------- -------- -------- -------- --------
Total loans............. 59,705 74,564 134,269 22,066 13,236 35,302
-------- ------- -------- -------- -------- --------
Total interest earning
assets................ 39,736 93,975 133,711 48,750 3,190 51,940
-------- ------- -------- -------- -------- --------
INTEREST BEARING LIABILITIES
Time Deposits:
Savings deposits............. (11,061) 7,402 (3,659) 2,320 (11,005) (8,685)
Other time deposits.......... 44,476 40,187 84,663 (15,602) (7,344) (22,946)
Commercial certificates of
deposit $100,000 and
over....................... 5,249 6,608 11,857 2,783 3,537 6,320
-------- ------- -------- -------- -------- --------
Total time deposits..... 38,664 54,197 92,861 (10,499) (14,812) (25,311)
Commercial paper................ 48 780 828 (413) 567 154
Other borrowed funds............ (21,967) 29,999 8,032 29,299 10,084 39,383
Long-term debt.................. (575) (42) (617) (411) (666) (1,077)
-------- ------- -------- -------- -------- --------
Total interest bearing
liabilities........... 16,170 84,934 101,104 17,976 (4,827) 13,149
-------- ------- -------- -------- -------- --------
Change in net interest income... $ 23,566 $ 9,041 $ 32,607 $ 30,774 $ 8,017 $ 38,791
======== ======= ======== ======== ======== ========
</TABLE>
21
<PAGE> 22
Securities Available for Sale (UJB Financial Corp. only)
The following table shows the carrying value of securities available for
sale at December 31 for each of the following years:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------
1993
1995 1994 -
---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities available for sale:
U.S. Government............................ $ 152,193 $ -- $ --
Federal agencies........................... 1,092,034 109,725 669,841
States and political subdivisions.......... 2,012 -- --
Other securities........................... 353,823 91,490 492,247
--------- --------- ---------
Total securities available for sale..... $1,600,062 $ 201,215 $1,162,088
========= ========= =========
</TABLE>
The following table shows the maturity distribution and weighted average
yields to maturity on a tax-equivalent basis for securities available for sale,
by type and in total, of U.S. Government, Federal agencies, States and political
subdivisions, and other securities at December 31, 1995. The carrying value
represents the market value of securities at December 31, 1995 and are
distributed by contractual maturity. However, mortgage-backed securities and
other securities which may have prepayment provisions are distributed to a
maturity category based on estimated average lives. These principal prepayments
are not scheduled over the life of the investment, but are reflected as
adjustments to the final maturity distribution. The distribution follows:
<TABLE>
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD(2)
----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Securities available for sale (by type):
U.S. Government:
Within 1 year................................................... $ 69,390 6.46%
After 1 year but within 5 years................................. 82,803 6.58
-----------
Total...................................................... 152,193 6.52
-----------
Federal agencies:
Within 1 year................................................... 52,776 6.50
After 1 year but within 5 years................................. 779,336 5.85
After 5 years but within 10 years............................... 163,898 6.38
After 10 years.................................................. 96,024 6.88
-----------
Total...................................................... 1,092,034 6.05
-----------
States and political subdivisions:
After 1 year but within 5 years................................. 1,912 6.38
After 5 years but within 10 years............................... 100 6.33
-----------
Total...................................................... $ 2,012 6.38%
-----------
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD(2)
----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Other securities(1):
Within 1 year................................................... $ 20,967 5.41%
After 1 year but within 5 years................................. 123,770 7.03
After 5 years but within 10 years............................... 56,629 6.82
After 10 years.................................................. 93,594 6.87
-----------
Total...................................................... 294,960 6.83
-----------
Total securities available for sale........................ $ 1,541,199 6.25%
========= =======
Securities available for sale (in total)(1):
Total within 1 year............................................. $ 143,133 6.32%
Total after 1 year but within 5 years........................... 987,821 6.06
Total after 5 years but within 10 years......................... 220,627 6.49
Total after 10 years............................................ 189,618 6.87
-----------
Total securities available for sale........................ $ 1,541,199 6.25%
========= =======
</TABLE>
- ---------------
(1) Excludes corporate stock with a carrying value of $49,605,000 and Federal
Reserve Bank stock with a carrying value of $9,258,000.
(2) Weighted average yields have been computed on a tax-equivalent basis using
the statutory Federal income tax rate of 35%.
Securities Held to Maturity (UJB Financial Corp. only)
The following table shows the carrying value of securities held to maturity
at December 31 for each of the past three years:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities held to maturity:
U.S. Government...................................... $ 1,599 $ 234,268 $ 186,563
Federal agencies..................................... 797,164 1,782,347 1,298,862
States and political subdivisions.................... 243,174 331,000 308,004
Other securities..................................... 1,244,063 1,745,373 892,221
----------- ----------- -----------
Total securities held to maturity............ $ 2,286,000 $ 4,092,988 $ 2,685,650
========= ========= =========
</TABLE>
23
<PAGE> 24
The following table shows the maturity distribution and weighted average
yields to maturity on a tax-equivalent basis for securities held to maturity, by
type and in total, of U.S. Government, Federal agencies, states and political
subdivisions and other securities at December 31, 1995. The carrying value and
market value of securities at December 31, 1995 are distributed by contractual
maturity. However, mortgage-backed securities and other securities which may
have prepayment provisions are distributed to a maturity category based on
estimated average lives. These principal prepayments are not scheduled over the
life of the investment, but are reflected as adjustments to the final maturity
distribution. The distribution follows:
<TABLE>
<CAPTION>
WEIGHTED
CARRYING MARKET AVERAGE
VALUE VALUE YIELD(1)
---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities held to maturity (by type):
U.S. Government:
After 1 year but within 5 years...................... $ 1,599 $ 1,599 6.50%
---------- ----------
Total.............................................. 1,599 1,599 6.50
---------- ----------
Federal agencies:
Within 1 year........................................ 4,667 4,681 5.83
After 1 year but within 5 years...................... 337,205 332,323 6.12
After 5 years but within 10 years.................... 205,694 204,676 6.29
After 10 years....................................... 249,598 251,502 6.97
---------- ----------
Total.............................................. 797,164 793,182 6.43
---------- ----------
States and political subdivisions:
Within 1 year........................................ 26,183 26,613 7.34
After 1 year but within 5 years...................... 117,207 123,742 6.38
After 5 years but within 10 years.................... 70,814 76,045 6.39
After 10 years....................................... 28,970 31,152 7.08
---------- ----------
Total.............................................. 243,174 257,552 6.57
---------- ----------
Other securities:
Within 1 year........................................ 1,518 1,532 7.28
After 1 year but within 5 years...................... 740,591 730,037 6.13
After 5 years but within 10 years.................... 394,088 387,413 6.01
After 10 years....................................... 107,866 106,437 7.14
---------- ----------
Total.............................................. 1,244,063 1,225,419 6.18
---------- ----------
Total securities held to maturity.................. $2,286,000 $2,277,752 6.31%
========= ========= =======
Securities held to maturity (in total):
Total within 1 year.................................. $ 32,368 $ 32,826 7.13%
Total after 1 year but within 5 years................ 1,196,602 1,187,701 6.15
Total after 5 years but within 10 years.............. 670,596 668,134 6.14
Total after 10 years................................. 386,434 389,091 7.03
---------- ----------
Total securities held to maturity.................. $2,286,000 $2,277,752 6.31%
========= ========= =======
</TABLE>
- ---------------
(1) Weighted average yields have been computed on a tax-equivalent basis using
the statutory Federal income tax rate of 35%.
24
<PAGE> 25
Loan Portfolio (UJB Financial Corp. only)
The following table shows the classification of consolidated loans (net of
unearned discount and before deduction of the allowance for loan losses) by
major category at December 31 for each of the past five years:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial and industrial............ $ 3,771,441 $ 3,604,331 $ 3,161,415 $ 3,257,245 $ 3,312,566
Construction and development......... 481,166 705,602 869,847 1,002,859 1,114,631
Residential mortgage................. 1,826,526 1,329,417 928,248 935,320 1,082,696
Commercial mortgage.................. 1,543,364 1,461,571 1,565,413 1,513,169 1,257,741
Consumer............................. 2,515,769 2,238,237 2,014,202 2,066,766 1,990,636
Lease financing...................... 319,116 317,416 204,583 153,221 179,603
------------ ----------- ----------- ----------- -----------
Total loans..................... $ 10,457,382 $ 9,656,574 $ 8,743,708 $ 8,928,580 $ 8,937,873
========== ========= ========= ========= =========
</TABLE>
Unearned discount on loans and leases at December 31, 1995 and 1994 were
$78.2 million and $68.7 million, respectively. At December 31, 1995 commercial
mortgage loans and residential mortgage loans represented 14.8% and 17.5% of
total loans, respectively. Home equity loans represented 15.2% of the total loan
portfolio at year end which are included in consumer loans above. As of December
31, 1995 there are no other concentrations of loans which exceed 10% of total
loans.
The following table shows the approximate maturities of selected loans at
December 31, 1995. The loans are segregated between those which are at
predetermined interest rates and those at floating or adjustable interest rates.
The table includes non-performing loans which are discussed below and on page 26
of this report:
<TABLE>
<CAPTION>
OVER ONE OVER
ONE YEAR YEAR THROUGH FIVE
OR LESS FIVE YEARS YEARS TOTAL
---------- ------------ -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan categories:
Commercial and industrial....................... $2,073,726 $1,407,113 $290,602 $3,771,441
Construction and development.................... 314,063 131,460 35,643 481,166
---------- ------------ -------- ----------
Total................................... $2,387,789 $1,538,573 $326,245 $4,252,607
========= ========== ======== =========
Amounts of loans based upon:
Predetermined interest rates.................... $ 610,711 $ 729,162 $199,957 $1,539,830
Floating or adjustable interest rates........... 1,777,078 809,411 126,288 2,712,777
---------- ------------ -------- ----------
Total................................... $2,387,789 $1,538,573 $326,245 $4,252,607
========= ========== ======== =========
</TABLE>
The loan portfolio is reviewed regularly to determine whether specific
loans should be placed in a non-performing status. Non-performing loans consist
of commercial non-accrual and renegotiated loans. Non-accrual loans include
loans that are past due 90 days or more as to principal or interest, or where
reasonable doubt exists as to timely collectibility. At the time a loan is
placed on non-accrual status, previously accrued and uncollected interest is
reversed against interest income. Interest collections on non-accrual loans are
generally credited to interest income when received. However, if ultimate
collectibility of principal is in doubt, interest collections are applied as
principal reductions. After principal and interest payments are brought current
and future collectibility is reasonably assured, loans are returned to accrual
status. Renegotiated loans are loans whose contractual interest rates have been
reduced to below market rates or other significant concessions made due to a
borrower's financial difficulties. Interest income on renegotiated loans is
generally credited to interest income as received. Non-performing loans do not
include past due consumer and residential mortgage loans 90 days or more as to
principal or interest, but which are well collateralized and in the process of
collection.
25
<PAGE> 26
The following table shows, in thousands of dollars, the principal amount of
commercial non-accruing loans, renegotiated loans, and loans contractually past
due 90 days or more at December 31 for each of the past five years, and their
resultant impact on earnings before taxes for the years then ended. All loans in
the following table represent domestic loans. There are no foreign loans
included in any of the categories.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accruing loans........................... $ 166,253 $ 164,909 $ 250,691 $ 343,138 $ 424,655
Renegotiated loans........................... 199 2,738 3,582 21,836 28,831
Loans contractually past due 90 days or
more(1).................................... 33,997 23,595 30,080 38,631 57,441
Impact on interest income:
Interest income that would have been
recorded on non-accruing and
renegotiated loans outstanding at
December 31 in accordance with their
original terms.......................... 16,976 16,074 21,573 27,831 44,106
Interest income actually received and
recorded on non-accruing and
renegotiated loans outstanding at
December 31............................. 1,752 1,693 3,787 3,843 8,463
</TABLE>
- ---------------
(1) Primarily all consumer and residential mortgage loans which are well
collateralized and in the process of collection.
Potential problem loans are those which management believes conditions
indicate that the collection of principal and interest may be doubtful in
accordance with the original contract terms. They are not included in
non-performing loans as these loans are still performing. Potential problem
loans were $18,708,000 and $34,614,000 at December 31, 1995 and 1994
respectively. Potential problem loans at December 31, 1995 comprised commercial
and industrial loans of $13,132,000, construction and development loans of
$5,385,000, and real estate related loans of $191,000. Such risk associated with
these loans have been factored into the company's allowance for loan losses.
Summary of Loan Loss Experience (UJB Financial Corp. only)
The relationship for the past five years among loans, loans charged off and
loan recoveries, the provision for loan losses and the allowance for loan losses
is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans:
Average for the period............. $9,931,657 $9,156,674 $8,860,581 $8,952,179 $8,854,036
========= ========= ========= ========= =========
Allowance for loan losses:
Balance, beginning of period....... $ 214,161 $ 244,154 $ 277,449 $ 292,490 $ 265,148
Purchase adjustment, net........... 6,131 1,833 -- -- --
Provision charged to operating
expenses........................ 65,250 84,000 95,685 139,555 167,650
Loans charged off:
Commercial and industrial....... 41,910 33,406 68,088 75,462 70,240
Construction and development.... 35,001 39,180 37,589 66,919 47,283
Residential mortgage............ 4,722 1,288 1,166 466 7,405
Commercial mortgage............. 23,348 13,686 10,834 8,856 9,856
Consumer........................ 11,804 8,684 25,598 15,627 17,578
---------- ---------- ---------- ---------- ----------
Total loans charged off.... 116,785 96,244 143,275 167,330 152,362
---------- ---------- ---------- ---------- ----------
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Recoveries:
Commercial and industrial....... 12,713 10,544 9,249 6,428 4,893
Construction and development.... 1,732 1,244 1,264 1,224 403
Residential mortgage............ 472 245 24 64 50
Commercial mortgage............. 1,690 2,372 263 428 1,443
Consumer........................ 2,286 2,965 3,495 4,590 5,265
---------- ---------- ---------- ---------- ----------
Total recoveries........... 18,893 17,370 14,295 12,734 12,054
---------- ---------- ---------- ---------- ----------
Net loans charged off.............. 97,892 78,874 128,980 154,596 140,308
Write downs on transfer to assets
held for accelerated
disposition..................... -- 36,952 -- -- --
---------- ---------- ---------- ---------- ----------
Balance, end of period............. $ 187,650 $ 214,161 $ 244,154 $ 277,449 $ 292,490
========= ========= ========= ========= =========
Ratio of:
Net charge offs to average loans
outstanding..................... .99% .86% 1.46% 1.73% 1.58%
Allowance to year-end loans........ 1.79 2.22 2.79 3.11 3.27
</TABLE>
For additional information, see Financial Review on pages 36 through 40 of
this report.
Implicit in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan being
made, the creditworthiness of the borrower and prevailing economic conditions. A
standardized process has been established throughout the company to provide for
loan losses through a reasonable and prudent methodology. This methodology
includes a review to assess the risks inherent in the loan portfolio. It
incorporates a credit review and gives consideration to areas of exposure such
as concentrations of credit, economic and industry conditions, and negative
trends in delinquencies and collections. Consideration is also given to
collateral levels and the composition of the portfolio.
Specific allocations as well as a need for general reserves are identified
by loan type and allocated according to the following categories of loans at
December 31 for each of the past five years. The percentage of loans to total
loans is based upon the classification of loans shown as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------------- -------------------- -------------------- -------------------- --------------------
(DOLLARS IN THOUSANDS)
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF OF OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
-------- ---------- -------- ---------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
industrial........ $ 37,650 36.1% $ 40,969 37.3% $ 53,561 36.2% $ 64,093 36.5% $ 96,218 37.0%
Construction and
development....... 41,994 4.6 57,960 7.3 65,387 10.0 77,135 11.2 82,243 12.5
Residential
Mortgage.......... 4,100 17.5 4,410 13.8 4,674 10.6 8,541 10.5 5,598 14.1
Commercial
Mortgage.......... 14,786 14.7 13,906 15.1 14,348 17.9 13,020 17.0 10,811 12.1
Consumer............ 12,205 24.1 11,560 23.2 11,120 23.0 13,767 23.1 12,730 22.3
All other loans..... 8,484 3.0 3,221 3.3 1,226 2.3 1,696 1.7 1,266 2.0
Unallocated......... 68,431 N/A 82,135 N/A 93,838 N/A 99,197 N/A 83,624 N/A
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total........... $187,650 100.0% $214,161 100.0% $244,154 100.0% $277,449 100.0% $292,490 100.0%
======== ========= ======== ========= ======== ========= ======== ========= ======== =========
</TABLE>
Deposits (UJB Financial Corp. only)
For information on classification of average balances for deposits, see
"Comparative Average Balance Sheets With Resultant Interest and Rates" on page
20 of this report.
27
<PAGE> 28
The following table shows, by time remaining to maturity, all commercial
certificates of deposit $100,000 and over at December 31, 1995 (in thousands):
<TABLE>
<S> <C>
Less than three months.................................... $ 465,226
Three to six months....................................... 20,745
Six to twelve months...................................... 10,192
More than twelve months................................... --
---------
Total........................................... $ 496,163
========
</TABLE>
Return on Equity and Assets (UJB Financial Corp. only)
The following table presents selected financial data for each of the past
three years:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Return on average assets................................ 1.11% .88% .59%
Return on average common equity......................... 14.37 12.36 8.32
Common stock dividend payout............................ 39.80 40.00 46.00
Average total equity to average total assets............ 7.83 7.19 7.12
</TABLE>
Short-Term Borrowings (UJB Financial Corp. only)
The following table summarizes information relating to certain short-term
borrowings for each of the past three years:
<TABLE>
<CAPTION>
MAXIMUM
DAILY AVERAGE FOR YEAR AMOUNT
AMOUNT ---------------------------- OUTSTANDING
OUTSTANDING AT AVERAGE RATE AT AMOUNT INTEREST AT ANY
DECEMBER 31 DECEMBER 31 OUTSTANDING RATE MONTH END
-------------- --------------- ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Securities sold under agreements to repurchase:
1995 $482,603 5.28% $ 672,681 5.46% $ 879,026
1994 948,697 5.49 764,275 4.41 1,095,316
1993 274,255 2.70 358,141 2.90 620,829
Federal funds purchased:
1995 $200,700 5.57% $ 251,256 5.85% $ 442,675
1994 172,255 5.94 494,311 4.20 582,749
1993 160,554 3.00 280,429 3.04 340,289
</TABLE>
ITEM 2. PROPERTIES.
United Jersey Bank owns the building, constructed in 1984, in West Windsor
Township, New Jersey where Summit maintains its administrative headquarters.
Additionally, Summit occupies offices in Hackensack, New Jersey in space
provided by United Jersey Bank as well as at other locations in New Jersey,
which it leases from third-party lessors. During 1978, Summit sold a six-story
office building that it owned in Hackensack, adjacent to the administrative and
principal banking office of United Jersey Bank. United Jersey Bank leases space
in the building.
The principal banking office of United Jersey Bank is located in Hackensack
in a nine-story building owned by the bank which was constructed in 1927. The
bank occupies substantially the entire building. In addition to its principal
office, United Jersey Bank owns 96 of its branch office buildings; office space
in certain of these buildings is leased to others. United Jersey Bank leases the
buildings and property for 102 of its branch offices. It leases a multi-level
parking garage accommodating 250 cars located near the principal office and an
office and warehouse facility in Fair Lawn, New Jersey. Summit leases real
property located in Ridgefield Park, New Jersey and a multi-story building
containing approximately 300,000 square feet of space for use by UJB Financial
Service Corporation as a data processing facility which was completed in 1991.
The tenant improvements and furniture, fixtures and equipment for the new
facility were initially funded by Summit. On August 31, 1992, the Company
consummated the sale of certain assets and simultaneously
28
<PAGE> 29
negotiated the leaseback of these assets. The previous computer center in
Hackensack, owned by United Jersey Bank, has been utilized to centralize certain
banking activities. The principal administrative offices of Summit Bank are
located in Chatham, New Jersey. The principal banking office of Summit Bank is
located in Summit, New Jersey. Summit Bank owns both of these buildings and
leases an operations and data processing center located in Cranford, New Jersey.
Summit Bank provides banking services at 89 banking locations, of which 41 are
owned and 48 are leased. The principal banking and administrative offices of
First Valley Bank are located in an eleven-story building built in 1974 in
Bethlehem, Pennsylvania. First Valley leases the building for an initial term
ending in the year 2000, with renewal options extending for an additional 38
years. First Valley occupies approximately two-thirds of the building. All
properties owned by the various bank subsidiaries are unencumbered by mortgages
or similar liens.
The bank subsidiaries at December 31, 1995 operated banking offices in 18
of the 21 counties in New Jersey (Atlantic, Bergen, Burlington, Camden,
Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth,
Morris, Ocean, Passaic, Somerset, Union and Warren), and 13 of the 67 counties
in Pennsylvania (Berks, Bucks, Carbon, Chester, Delaware, Lackawanna, Lancaster,
Lehigh, Luzerne, Montgomery, Northampton, Philadelphia and Schuylkill).
Gibraltar Corporation of America occupies leased offices in New York City, New
York. UJB Discount Brokerage Co. occupies leased offices in Fort Lee, Matawan,
Morristown, Paramus, Princeton and West Caldwell, New Jersey. Lehigh Securities
Corporation occupies leased offices in Whitehall, Pennsylvania.
ITEM 3. LEGAL PROCEEDINGS.
Management does not believe that the ultimate disposition of the litigation
discussed below will have a material adverse effect on the financial position
and results of operation of the company and its subsidiaries, taken as a whole.
SHAREHOLDER SUITS
In Re UJB Financial Corp. Shareholder Litigation, United States District
Court for the District of New Jersey, Trenton, Civil Action No. 90-1569. Suit
filed April 5, 1990.
1. Three suits, UJB Financial Corporation, derivatively by Chappaqua Family
Trust and Robert Bassman v. UJB Financial Corporation et al; Irwin Shapiro v.
UJB Financial Corp. et al; Lester Associates and Jerome Katz v. UJB Financial
Corp, et al were filed in April and May of 1990. These suits were consolidated
and a Consolidated Amended Complaint and Derivative Complaint was filed on
September 4, 1990.
This purported derivative and class action securities lawsuit against UJB
Financial Corp. ("UJB") (the former name of Summit Bancorp) and certain officers
and directors is brought by Plaintiffs who are alleged to have owned or
purchased securities of UJB from approximately February 1, 1988 through July
1990. Violations are alleged of Sections 10(b), 14(a) and 20 of the Exchange
Act, Sections 11, 12 and 15 of the Securities Act of 1933 and New Jersey common
law. The suit alleges that UJB's reserves for loan losses were inadequate,
resulting in inaccurate financial statements, and that the defendants made
misleading positive statements about UJB's financial condition and failed to
disclose negative information about UJB's lending policies, operations and
finances, thus artificially inflating UJB's earnings and the prices of UJB's
securities. The suit further alleges that UJB's internal credit review and
controls were inadequate.
In addition, plaintiffs assert that the 1990 Proxy Statement was false and
misleading because it did not disclose that defendants had engaged in the
conduct described in the preceding paragraph or that entrenchment allegedly was
defendants' true motive behind the adoption of a shareholder rights plan and a
provision amending UJB's certificate of incorporation to require 80% approval by
the shareholders to increase the authorized number of directors (and 80%
approval to amend or repeal any provision of the proposed amendments). The
plaintiffs demand judgment including unspecified money damages, a declaration
that all action taken at the 1990 Annual Meeting is null and void, a declaration
that the shareholder rights plan is void, and attorneys' fees.
29
<PAGE> 30
Discovery and determination of class issues were stayed by District Court
order. UJB and the defendant directors and officers moved to dismiss the
complaint and each claim for relief on various grounds, including, among others:
failure to state a claim; failure to plead with particularity; and failure to
make the required demand. The District Court granted the motion in part and
allowed plaintiffs thirty days to replead or amend their complaint with respect
to other alleged wrongdoing. The plaintiffs determined not to replead or amend
and appealed the District Court ruling to the U.S. Circuit Court of Appeals.
Plaintiffs did not appeal dismissal of the derivative claims and voluntarily
withdrew, with prejudice, the claim challenging UJB's 1990 Proxy Statement. On
May 22, 1992 the Court of Appeals reversed in part the District Court's decision
insofar as it dismissed certain claims in the complaint and remanded same to the
District Court for further proceedings, including repleading by the plaintiffs.
By orders dated July 7, 1992, the Court of Appeals denied the defendants'
petition for rehearing en banc but stayed entry of its mandate until August 13,
1992 to permit defendants to seek review by the United States Supreme Court. All
proceedings in the District Court were stayed pending entry of the mandate; the
mandate issued upon denial of review by the Supreme Court. On October 13, 1992,
the Supreme Court declined to accept the case for review. On March 22, 1993, the
Plaintiffs served the Second Consolidated Amended Class Action Complaint which
contained substantially the same claims (except for those that had been
dismissed) as set forth in the prior Amended Complaint. UJB and the defendant
directors and officers then moved to dismiss the Second Consolidated Amended
Class Action Complaint and each claim for relief contained therein on various
grounds. On September 13, 1993, the District Court denied the defendants' motion
to dismiss the plaintiffs' claims under the Securities Exchange Act of 1934 and
New Jersey common law and reserved decision on the motion with regard to
plaintiffs' claims under the Securities Act of 1933. The plaintiffs subsequently
stipulated to the dismissal with prejudice of their claims under the Securities
Act of 1933 on October 14, 1993. The defendants filed a motion requesting
certification of an appeal from the District Court order to the United States
Court of Appeals for the Third Circuit pursuant to 12 U.S.C. 1292(b) on October
29, 1993. The defendants also filed an Answer denying the allegations of the
Second Consolidated Amended Class Action Complaint on October 28, 1993. The
District Court by order dated December 3, 1993 denied the defendants' motion
requesting certification of an appeal. Discovery commenced in January 1994. On
April 21, 1994 the court entered another consent order dismissing without
prejudice all claims against the defendant Clifford H. Coyman (the former
president and CEO of United Jersey Bank) and dismissing with prejudice all
claims against the outside director defendants (Robert L. Boyle, Elinor J.
Ferdon, Walter L. Dealtry, Fred G. Harvey, Francis J. Mertz, Henry S. Patterson
II, James A. Skidmore, Jr. and Joseph M. Tabak.) On the same day, the court
entered a consent order conditionally certifying the matter to proceed as a
class action pursuant to Rule 23 of the Federal Rules of Civil Procedure with
respect to Counts I, II, and VI of the Complaint, on behalf of a plaintiff class
consisting of all persons who purchased UJB's common stock during the period
beginning February 1, 1988 through and including July 18, 1990, and who
allegedly sustained damages thereby. On December 30, 1994, the parties agreed to
settle the action for $3.65 million, subject to, among other things, notice to
the class and final approval by the Court. The Court approved the settlement on
March 29, 1995. A portion of this settlement was paid by UJB's insurance carrier
and the remaining balance had been paid by the company. Therefore, the effect of
this settlement had no significant impact on the financial operating results of
the company. The company agreed to the settlement in light of a number of
considerations including the avoidance of continuing costs of the litigation and
the burden and disruption to the company, its directors, management and
employees caused by the continued defense of the litigation. As permitted by New
Jersey law, the expenses of the individual defendants were advanced by UJB. The
matter has now been concluded.
2. Sol Urbach, on behalf of himself and all others similarly situated v. Thomas
D. Sayles, Jr., Robert G. Cox, Donald F. Ennis, John R. Feeney, Douglas E.
Johnson, S. Rogers Benjamin and Summit Bancorporation, United States District
Court for the District of New Jersey, Civil Action No. 91-1291.
This purported class action securities lawsuit was filed in 1991 against
Summit Bancorporation and various of its present and former directors and
officers by a plaintiff who is alleged to have purchased stock of Summit
Bancorporation and to have received stock of Summit Bancorporation in exchange
for securities of Somerset Bancorp., Inc. The lawsuit alleged violations of
federal securities laws and New Jersey common law. Following pretrial discovery,
the parties agreed to settle the lawsuit for $1.25 million, subject, among other
30
<PAGE> 31
things, to approval by the Court. The Court approved the settlement on December
5, 1995 and this matter has now been concluded.
OTHER LITIGATION
1. McAdoo CERCLA Matter. First Valley Bank ("FVB") foreclosed on property
in McAdoo, Pennsylvania, taking title by a sheriff's deed in 1980. The property
was later designated by the United States Environmental Protection Agency
("EPA") as a part of a site (the "McAdoo Site") listed on the National
Priorities List of sites to be remediated pursuant to the federal Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA").
On June 3, 1988, the United States District Court for the Eastern District
of Pennsylvania entered a Consent Decree in United States v. Air Products and
Chemicals, Inc., Civil Action No. 87-7352 (the "Air Products litigation"), in
which sixty-five potentially responsible parties ("PRPs"), not including FVB,
agreed to undertake remediation of the McAdoo Site and the United States agreed
to pay 25% of the settling PRPs (the "Initial PRPs") cost of remediation.
On June 11, 1988, after having made a demand upon FVB and a number of other
non-settling PRPs, the United States sued a number of the PRPs other than FVB
who did not enter into the Consent Decree in a matter entitled United States of
America v. Alcan Aluminum et al, United States District Court, Eastern District
of Pennsylvania, Civil Action No. 88-4970 (the "Alcan litigation"). Although the
United States did not sue FVB, on April 16, 1990, one defendant in the Alcan
Litigation, Kalama Chemical, Inc., filed a motion for leave to file a third
party complaint against FVB seeking contribution. The motion was denied without
prejudice.
FVB then participated in settlement discussions in the Alcan litigation.
Pursuant to those negotiations, FVB and certain defendants, third-party
defendants and other potential third-party defendants deposited, in a Court
registry, a sum which the United States agreed will satisfy all of its claims
against FVB. The parties also executed a Consent Decree which was approved by
the District Court by Order dated June 24, 1993. The Consent Decree gives FVB a
broad covenant not to sue and contribution protection to the extent available
under 42 U.S.C. sec. 9622(d)(2). The Consent Decree was the subject of public
notice and comment, pursuant to 42 U.S.C. sec. 9622(d)(2). The Initial PRPs
submitted comments to the United States objecting to the Consent Decree,
including inter alia, the broad release provided to FVB. The Initial PRPs also
filed a motion to intervene in the Alcan litigation, which was denied by the
District Court. The Initial PRPs then appealed that denial to the United States
Court of Appeals for the Third Circuit in a matter captioned United States v.
Alcan Aluminum, Inc., et al., Action No. 93-1099 (3rd Cir.). On May 25, 1994,
the Third Circuit vacated the District Court's orders denying the motion to
intervene and approving the Consent Decree, holding that the Initial PRPs may
intervene as a matter of right in the Alcan litigation if they can prove that
they have a protectable interest in that litigation. Consequently, the case was
remanded to the District Court to determine whether the Initial PRPs have a
protectable interest in the Alcan litigation.
As a result of settlement negotiations, the parties have reached an
agreement in principle for the settlement of the case. Under the agreement, the
Alcan Settlers agreed to pay an additional $190,000.00, upon the entry of two
new Consent decrees, one for the Alcan litigation and one for the Air Products
litigation. FVB's portion of the $190,000.00 amounts to $8,500.00. The parties
and the government now are engaged in negotiations over the specific terms of
the two consent decrees. In the course of these discussions, the United States
has requested additional compensation for costs incurred in conducting
additional work at the site, but has indicated that it is not seeking
compensation for this work from FVB and that it will provide FVB with a broad
release from past and future liability. In light of this agreement in principle,
the Court has suspended all proceedings in the case.
2. In re Payroll Express Corporation of New York and Payroll Express
Corporation, United States Bankruptcy Court for the Southern District of New
York, Case Nos. 92-B-43149 (CB) and 92-B-43150 (CB).
United Jersey Bank (the "Bank") is involved in a number of cases venued in
the United States Bankruptcy Court and the United States District Court for the
Southern District of New York (the
31
<PAGE> 32
"Bankruptcy Cases") involving a former customer of the Bank, Payroll Express
Corp. ("Payroll"), and several related entities. Payroll was primarily in the
business of providing on-site check cashing services.
Customers of Payroll deposited funds into a general deposit account
("Account") at the Bank to cover their payrolls. The Account was given credit
for deposits received by Payroll and cash was obtained by debiting the Account.
Payroll perpetrated a substantial check kiting scheme using the Account and
another account at National Westminster Bank, NJ ("NatWest"). NatWest apparently
discovered this scheme in late May of 1992. Due to this discovery, NatWest
ceased honoring checks drawn by Payroll on its account. UJB was ultimately left
with a loss of approximately $4 million in the Account.
On June 5, 1992, Robert Felzenberg, the President of Payroll, was charged
in a Federal court located in Manhattan with embezzlement and wire fraud. He has
pled guilty to among other things, wire and tax fraud, and was sentenced to
6 1/2 years imprisonment in March 1994.
A trustee (the "Trustee") has been appointed by the Bankruptcy Court, and
he is currently conducting an investigation of Payroll. The Trustee has also
retained special counsel to pursue potential claims against the fidelity
insurers of Payroll Express Corp. and possibly Payroll's insurance agent. The
claim by the Trustee against the primary fidelity insurance carrier for Payroll
was settled in 1995 for the policy limits of $1 million. The Trustee has
initiated litigation against certain other insurance companies which issued
fidelity insurance policies to Payroll.
Payroll customers deposited a total of $11.8 million into the Account
during this period of time. A number of these customers have asserted claims
against the Bank, although only five lawsuits are currently pending: Beth Israel
Medical Center, et al. v. United Jersey Bank and National Westminster Bank New
Jersey, United States District Court for the Southern District of New York,
Civil Action No. 94-8256 (LAP), Frederick Goldman, Inc. v. United Jersey Bank
and National Westminster Bank New Jersey, United States District Court for the
Southern District of New York, Civil Action No. 94-8256 (LAP), Towers Financial
Corporation v. United Jersey Bank, United States District Court for the District
of New Jersey, Civil Action No. 92-3175 (WGB), New York City Transit Authority
v. United Jersey Bank and National Westminster Bank New Jersey, United States
District Court for the Southern District of New York, Civil Action No. 95-3685
(LAP) and Copytone, Inc. on behalf of itself and others similarly situated v.
United Jersey Bank, National Westminster Bank New Jersey and John Does 1 through
20, United States District Court for the Southern District of New York, Civil
Action No. 95-8217 (LAP). The lawsuits allege various common law causes of
action against the Bank, including unjust enrichment, restitution, conversion,
fraud, negligence and/or breach of fiduciary duty. In addition, the Copytone
matter purports to be a class action. The Beth Israel, Frederick Goldman, New
York Transit Authority and Copytone matters have been consolidated and the Bank
has filed motions to dismiss the complaints for failure to state a claim upon
which relief can be granted. The motions were heard on February 15, 1996 but no
decision has been rendered to date by the court. Towers Financial has filed for
protection under the bankruptcy laws and the court has entered an order staying
all proceedings in the Towers Financial matter until April 23, 1996.
The Trustee appointed in the Bankruptcy Cases described above filed two
adversary proceedings against the Bank. The first, captioned John E. Pereira, as
Chapter 11 Trustee of the Estate of Payroll Express Corporation et al. v. United
Jersey Bank, was originally filed in the United States Bankruptcy Court for the
Southern District of New York. The adversary complaint alleges the Account
received incoming wire transfers of at least $17,013,537.54 within the 90 days
prior to the filing of bankruptcy by Payroll. These incoming wire transfers were
allegedly used by the Bank to reduce its losses on the check kiting scheme. The
Trustee claims that the amounts of the wire transfers are recoverable by the
Trustee as avoidable preferences under the Bankruptcy Code. The Bank
successfully moved to withdraw the reference of this matter to the United States
District Court for the Southern District of New York where it is currently
pending under Civil Action No. 94-1565 (LAP). The Bank has filed a motion for
summary judgment. In opposition, the Trustee filed a cross-motion for summary
judgment. Briefing on the motions has been completed but no hearing date has
been scheduled.
32
<PAGE> 33
The second adversary complaint, captioned John E. Pereira, as Chapter 11
Trustee of the Estate of Payroll Express Corporation et al. v. United Jersey
Bank, United States Bankruptcy Court for the Southern District of New York,
Adversary Proceeding No. 94-8297A, alleges that the mortgages given to UJB on
property owned by the various Felzenberg-controlled entities, together with
certain loan payments made by Payroll to UJB, were fraudulent conveyances. The
properties in question have all been sold. The Trustee also seeks the return of
$310,000.00 in principal and $152,487.50 in interest payments made by Payroll on
its loan in the year prior to the bankruptcy. The Trustee claims that these
transfers are recoverable under section 548 of the Bankruptcy Code, as well as
under the New Jersey Uniform Fraudulent Transfer Act. The Bank has filed an
answer denying the material allegations of the complaint and the parties have
concluded fact discovery. Discovery of experts has commenced and will be
followed by pre-trial motions (if necessary) and eventually a trial.
3. Annette Loatman on behalf of herself and all others similarly situated
v. United Jersey Bank, U.S. District Court for the District of New Jersey, Civil
Action #95CV05258 (JBS), filed on October 4, 1995. The plaintiff alleges that
she is representative of a class of Bank customers who obtained consumer loans
(primarily on automobiles and trailers) from the Bank and who either did not
obtain required insurance or permitted that insurance to lapse, after which the
Bank "force-placed" insurance. The complaint alleges breach of contract and of
the implied covenants of good faith and fair dealing, unconscionable commercial
practices under the New Jersey Consumer Fraud Act, unjust enrichment, breach of
fiduciary duty and violations of the National Bank Act and Depository
Institution and Monetary Control Act.
On January 6, 1996, the Bank filed a motion to dismiss Count V of the
complaint (in which plaintiff claims a violation of the National Bank Act and
Depository Institution and Monetary Control Act) for failure to state a federal
claim for which relief may be granted and to dismiss the remaining counts of the
complaint for lack of supplemental jurisdiction. The plaintiff has filed an
opposing brief but no decision has been rendered by the court. All discovery,
except for initial disclosures has been stayed by the court until the motion to
dismiss has been decided. A mandatory settlement conference was scheduled by the
U.S. Magistrate for February 27, 1996, but has been adjourned to April 25, 1996.
4. Michael Hochman and Joan Hochman, individually and on behalf of a class
of similarly situated depositors v. United Jersey Bank, a New Jersey corporation
and UJB Financial Corp., a New Jersey Corporation, Superior Court of New Jersey,
Law Division, Middlesex County, Docket No. MID-L-10623-95, filed December 7,
1995. The plaintiffs allege that they are representatives of a class of Bank
customers who purchased and redeemed certificates of deposit and who were
entitled to, but were not paid, interest for the period from the date of
maturity until the date of redemption. The plaintiffs allege breach of contract,
fraud and a violation of the New Jersey Consumer Fraud Act. They seek payment,
to themselves and other members of the putative class, of the interest alleged
to be owed, a declaratory judgment that the Bank is obligated to pay interest
during the 10 day redemption grace period after maturity, counsel fees and
costs. They also seek treble damages under the New Jersey Consumer Fraud Act.
On February 16, 1996, Plaintiffs filed an amended complaint, alleging
violations of the federal Truth in Savings Act. The Bank and UJB Financial Corp.
then removed the matter to the U.S. District Court for the District of New
Jersey where it is pending as Case No. 96-916 (MTB). The Bank and UJB Financial
Corp. intend to file a motion for summary judgment.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
33
<PAGE> 34
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following data is supplied as of April 12, 1996:
<TABLE>
<CAPTION>
TITLE (ALL POSITIONS AND OFFICES PRESENTLY HELD
NAME AGE WITH REGISTRANT) AND YEAR APPOINTED TO OFFICE(S)
- --------------------------------- --- ------------------------------------------------------
<S> <C> <C>
T. Joseph Semrod................. 59 Chairman of the Board and Chief Executive Officer
(1981)
Robert G. Cox.................... 55 President (1996)
John G. Collins.................. 59 Vice Chairman (1986)
John R. Howell................... 62 Vice Chairman (1987)
John R. Haggerty................. 60 Senior Executive Vice President/Finance (1987) and
Treasurer (1981)
Sabry J. Mackoul................. 55 Senior Executive Vice President/Retail Banking (1993)
Stephen H. Paneyko............... 53 Senior Executive Vice President/Commercial Banking
(1987)
Larry L. Betsinger............... 58 Executive Vice President/Corporate Information
Services (1990)
Alfred M. D'Augusta.............. 54 Executive Vice President/Human Resources (1988)
John R. Feeney................... 46 Executive Vice President/Asset Liability Management
(1996)
William J. Healy................. 51 Executive Vice President (1988) and Comptroller (1979)
and Assistant Secretary (1980)
Richard F. Ober, Jr. ............ 52 Executive Vice President (1988), General Counsel
(1975) and Secretary (1978)
Dennis Porterfield............... 59 Executive Vice President/Bank Investments (1991) and
Assistant Secretary (1975)
Alan N. Posencheg................ 54 Executive Vice President/Corporate Operations and
Information Services (1984)
Gary F. Simmerman................ 61 Executive Vice President/Consumer Loans and Services
(1994)
George J. Soltys, Jr. ........... 49 Executive Vice President/Corporate Planning (1996)
Edmund C. Weiss, Jr. ............ 53 Executive Vice President (1990) and Auditor (1977)
</TABLE>
The term of each of the above officers is until the next organization
meeting of the Board of Directors, which occurs immediately following the annual
meeting of shareholders, and until a successor is appointed by the Board of
Directors. Each officer may be removed at any time by the Board of Directors
without cause. Management of Summit is not aware of any family relationship
between any director or executive officer or person nominated or chosen to
become a director or executive officer. All of the executive officers named
above have been employed in executive positions by Summit, a subsidiary of
Summit or a bank holding company merged into Summit for more than the last five
years.
34
<PAGE> 35
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
This item has been omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference. See the Shareholders' Equity
and Dividends section in the Financial Review on pages 22 and 23, Notes 13 and
14 to the Combined Consolidated Financial Statements on pages 42 and 43 and
Unaudited Quarterly Financial Data on page 52 of the 1995 Annual Report to
Shareholders incorporated herein by reference as Exhibit 13. At March 1, 1996
there were 30,286 record holders of Summit Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
(a) Combined Consolidated (including the Summit Bancorporation)
This item is omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference. See Combined Consolidated
Summary of Selected Financial Data on pages 50 and 51 of the 1995 Annual Report
to Shareholders incorporated herein by reference as Exhibit 13. Included in
non-interest income for the years 1995 through 1991 were investment securities
gains of $8.6 million, $2.2 million, $9.6 million, $19.2 million and $13.4
million respectively.
(b) Consolidated (UJB Financial Corp. only)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income................. $ 1,096,740 $ 960,973 $ 907,628 $ 979,008 $ 1,134,624
Interest expense................ 445,973 344,869 331,720 429,725 634,432
Net interest income............. 650,767 616,104 575,908 549,283 500,192
Provision for loan losses....... 65,250 84,000 95,685 139,555 167,650
Securities gains................ 6,114 1,888 8,877 18,485 13,919
Net income...................... 170,367 130,150 82,418 56,788 24,252
Net income per share............ 2.99 2.35 1.50 1.09 .46
Cash dividends declare per
share......................... 1.19 .94 .69 .60 .60
BALANCE SHEET DATA:
Total assets.................... $15,885,655 $15,429,472 $13,789,641 $14,114,550 $13,727,539
Total deposits.................. 13,261,410 12,567,791 11,751,499 12,087,328 11,620,247
Total loans..................... 10,457,382 9,656,574 8,743,708 8,928,580 8,937,873
Shareholders' equity............ 1,296,846 1,104,260 1,019,252 959,492 850,873
Allowance for loan losses....... 187,650 214,161 244,154 277,449 292,490
Long term debt.................. 203,649 204,754 208,654 216,945 65,152
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(a) Combined consolidated (including The Summit Bancorporation)
This item is omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference. See Financial Review on
pages 19 through 29 of the 1995 Annual Report to Shareholders incorporated
herein by reference as Exhibit 13. Reference is made to page 11 of this report
for a discussion of the effects of inflation.
35
<PAGE> 36
(b) Consolidated (UJB Financial Corp. only)
YEARS ENDED DECEMBER 31, 1995 AND 1994
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
on pages 54 through 69 of the 1995 Annual Report to Shareholders included herein
as Exhibit 13, which are incorporated herein by reference.
At December 31, 1995, total assets were $15.9 billion, an increase of
$456.2 million or 3.0% from year-end 1994. The increase was primarily due to the
increase in the loan portfolio partially offset by a decrease in the securities
portfolio. In addition the purchase acquisition of Bancorp New Jersey
("Bancorp") on July 11, 1995, increased assets by $504.5 million.
Securities held to maturity at December 31, 1995 were $2.3 billion, a
decrease of $1.8 billion or 44.1% from year-end 1994. The Financial Accounting
Standards Board issued a special report on the implementation of Statement of
Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities," and permitted a one-time
reclassification of securities as of a single measurement date between November
15, 1995 and December 31, 1995. As a result, on December 31, 1995, $1.4 billion
of securities held to maturity with a net unrealized loss of $.4 million were
transferred to securities available for sale. Additionally, the decline from
year-end 1994 was a result of $735.8 million in maturities, partially offset by
$108.7 million in purchases. Securities held to maturity are recorded at
amortized cost. The aggregate market value at December 31, 1995 was $2.3
billion.
At December 31, 1995, securities available for sale, reported at fair
value, amounted to $1.6 billion. These securities increased $1.4 billion from
year-end 1994, and were comprised of $1.2 billion in U.S. Government and Federal
agencies primarily collateralized mortgage obligations (CMOs) and $355.8 million
of other securities (primarily corporate CMOs). The increase was primarily the
result of a $1.4 billion transfer from securities held to maturity. During 1995,
$303.6 million of securities were purchased, including $171.6 million of
securities from the acquisition of Bancorp. Offsetting these purchases were
maturities of $82.0 million and sales of $5.3 million.
Total loans at December 31, 1995 amounted to $10.5 billion and increased
$800.8 million or 8.3% from year-end 1994. Loan growth during 1995 was
concentrated in the mortgage and consumer loan portfolios, reflecting declining
rates during the second half of 1995, successful promotions throughout a period
of declining interest rates during the second half of 1995 and growth from the
Bancorp acquisition. Residential mortgage loans increased $497.1 million or
37.4% from December 31, 1994 to $1.8 billion at December 31, 1995. Commercial
mortgage loans amounted to $1.5 billion at December 31, 1995 increasing 5.6%
from year-end 1994. Consumer loans increased $277.5 million or 12.4% from
year-end 1994 to total $2.5 billion at December 31, 1995. Partially offsetting
these increases, commercial loans decreased $55.6 million or 1.2% from December
31, 1994.
At December 31, 1995, non-performing loans were $166.5 million or 1.59% of
total loans. This compares to $167.7 million or 1.74% of total loans at year-end
1994. At December 31, 1995, non-performing loans decreased by $1.2 million
compared with year-end 1994. Since December 31, 1994, other real estate owned
(OREO) decreased $11.6 million or 36.9% to $19.8 million at December 31, 1995.
On January 1, 1995, SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan," was adopted. This statement requires certain in-substance
foreclosures (ISFs) to be classified as non-performing loans. Upon adoption,
ISFs totaling $6.4 million, net of specific reserves of $3.8 million, were
transferred from other real estate owned ("OREO") to non-performing loans. Prior
period balances were not restated as the respective amounts were considered
immaterial. In conjunction with the adoption of SFAS 114, UJB also adopted SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition
and Disclosures". These statements prescribe the accounting for impaired loans
and specify acceptable methods for determining the allowance for loan losses
related to these impaired loans. UJB Financial has defined the population of
impaired loans to be all non-accrual loans. At December 31, 1995, the total
impaired loan portfolio was $166.5 million for which general and specific
allocations to the allowance for loan losses of $27.6
36
<PAGE> 37
million were identified. Interest collections on non-accrual loans are generally
credited to interest income when received. However, if ultimate collectibility
of the principal is in doubt, interest collection are applied as principal
reductions. The amount of cash basis interest income that was recognized on
impaired loans during 1995 was $2.2 million.
The allowance for loan losses at December 31, 1995 was $187.7 million or
1.79% of total loans, compared to $214.2 million or 2.22% of total loans at
December 31, 1994. For the year ended 1995, net charge offs were $97.9 million
or .99% of average loans compared to $78.9 million or .86% during the comparable
period in 1994.
Total deposits were $13.3 billion at December 31, 1995, an increase of
$693.6 million or 5.5% from December 31, 1994. This increase was primarily
attributable to the acquisition of Bancorp which had total deposits of $450.0
million, at July 11, 1995. Savings and time deposits increased $351.3 million or
3.9% from December 31, 1994 to $9.3 billion. Commercial certificates of deposit
$100,000 and over were $496.2 million, an increase of $125.0 million or 33.7%
compared to the prior year. Demand deposits increased $217.3 million or 6.7%
from year-end 1994 to $3.5 billion.
Borrowed funds, including long-term debt, at December 31, 1995 decreased
$462.1 million or 30.0% from December 31, 1994 to $1.1 billion. Cash flows from
maturities and other cash flows from the securities portfolio were used to
reduce the level of borrowed funds from year-end 1994.
Total shareholders' equity increased $192.6 million or 17.4% from December
31, 1994 to $1.3 billion. Unrealized gains and losses on securities were
recorded net of taxes as a separate component of shareholders' equity. As of
December 31, 1995, the unrealized loss recorded in equity amounted to $1.9
million, compared to $9.2 million from year-end 1994.
Under the risk-based capital guidelines, the Tier I leverage ratio of UJB
was 7.72% at December 31, 1995, compared to 7.02% at December 31, 1994. Tier I
capital was 10.02% and total capital was 12.76% at December 31, 1995, compared
with 9.27% and 12.04%, respectively, at December 31, 1994. The current minimum
regulatory guideline for the Tier I leverage ratio is 4.0% for institutions that
have a regulatory rating of two or better. The current minimum regulatory
guidelines for Tier I and total capital ratios are 4.0% and 8.0%, respectively.
In 1995, net income increased 30.9% to $170.4 million from $130.2 million
for 1994. Net income per share for 1995 was $2.99 compared with $2.35 in the
prior year, an increase of 27.2%. As a result of improved earnings for the fifth
year, the quarterly common dividend was increased twice during 1995 to an
annualized dividend rate of $1.28, a 23.1% increase over the $1.04 dividend rate
at year-end 1994.
Interest income on a tax-equivalent basis was $1.1 billion for 1995, an
increase of $133.7 million or 13.7% compared to 1994. The increase was primarily
due to both the rise in interest rates and growth in the loan portfolio.
Interest expense increased $101.1 million or 29.3% for 1995 from $344.9 million
in 1994. This increase reflects the rise in interest rates and the resultant
increased cost of time deposits and borrowed funds.
Net interest income on a tax-equivalent basis was $664.0 million for 1995
compared with $631.4 million for 1994, an increase of $32.6 million or 5.2%. The
net interest spread percentage on a tax-equivalent basis (the difference between
the rate earned on average interest earning assets and the rate paid on average
interest bearing liabilities) was 3.77% for 1995 compared to 3.94% from the
prior year. Net interest margin (net interest income on a tax-equivalent basis
as a percentage of average interest earning assets) was 4.71% for 1995 compared
to 4.63% in 1994.
Asset and liability management efforts involve the use of certain
derivative financial instruments. At December 31, 1995, the notional value of
this derivative financial instruments portfolio consisted of $795.0 million of
interest rate swaps. Interest rate swaps are contractual agreements between two
parties to exchange interest payments at particular intervals on a specified
notional amount. These swaps are accounted for as hedges and are not recorded on
the balance sheet. Income or expense related to these instruments is accrued
monthly and recognized as an adjustment to interest income or interest expense
for those balance sheet instruments being hedged. Hedged transactions resulted
in a net interest income reduction of $8.2 million for
37
<PAGE> 38
1995, compared to $1.2 million in 1994. The market value of these contracts at
December 31, 1995 was positive $.1 million compared to a negative $52.0 million
at December 31, 1994.
The provision for loan losses for 1995 was $65.3 million, a decline of
$18.8 million or 22.3%, compared with the same period in 1994. This decrease
resulted primarily from reductions in non-performing loans and OREO during 1995.
Non-interest income, including securities gains, for the year ended 1995
totaled $174.5 million, an increase of $14.2 million or 8.9% compared with the
year ended 1994. Effective June 30, 1995, merchant credit card and ATM fees are
recorded net of related processing expenses. Amounts for prior periods have been
reclassified for comparative purposes.
Service charges on deposit accounts amounted to $68.0 million in 1995, an
increase of $3.5 million or 5.4% from 1994. This increase was primarily due to
higher fees charged on personal demand deposit accounts. Service and loan fees
income in 1995 increased $.5 million or 1.7% compared to 1994. This increase was
primarily due to higher commercial loan fees.
During 1995, other income increased $5.1 million or 11.5% to $49.0 million.
This increase was primarily attributable to increased discount brokerage fees,
other commissions and gains on the sales of branch assets.
For the year ended December 31, 1995, net gains of $6.1 million on the
sales of securities were realized compared with net gains of $1.9 million over
the prior year period.
Non-interest expenses during 1995 totaled $493.4 million, an increase of
$5.2 million or 1.1% from 1994. Salaries expense totaled $195.6 million in 1995,
an increase of $12.3 million or 6.7% compared to 1994. This increase was
primarily attributable to merit increases, the purchase of Palisade Savings
Bank, FSB in September 1994, and the purchase of Bancorp in July 1995. Pension
and other employee benefits for the year ended 1995 were $60.1 million, an
increase of $6.7 million or 12.5% compared with 1994. This increase was due to
pension and other postemployment benefit costs.
Occupancy expenses for the year ended December 31, 1995 were $52.9 million,
an increase of $2.1 million or 4.2% from 1994. Furniture and equipment expenses
amounted to $51.4 million, an increase of $2.3 million or 4.7% from $49.1
million in 1994.
The FDIC assessment totaled $15.6 million, a decrease of $12.3 million or
44.1% from 1994. This decrease is attributable to the lower premiums charged for
deposit insurance, retroactive to June 1, 1995. The company received a $5.2
million premium reduction and a $1.8 million one-time rebate.
Other real estate owned expenses were $6.3 million for 1995, a decrease of
$12.0 million or 65.4% from 1994. Included in these amounts was a provision for
losses on other real estate owned and expenses related to holding property. A
provision of $4.2 million and $10.6 million was added to the allowance for other
real estate owned for the year ended December 31, 1995 and December 31, 1994,
respectively. Other real estate owned expenses also include expenses related to
holding and operating foreclosed properties and are net of rental income and
gains on sales of properties. These costs amounted to $2.1 million for 1995
compared with $7.7 million for 1994. The decline in these expenses reflects the
benefits from the ongoing workout efforts.
Other expenses totaled $100.7 million for 1995, an increase of $6.1 million
or 6.5% from 1994. This increase is primarily attributable to the amortization
of goodwill and intangibles from acquisitions, an increase of $3.7 million;
professional and other fees, an increase of $1.0 million; and communication
expenses, an increase of $1.5 million.
Liquidity is the ability to meet the borrowing needs and deposit withdrawal
requirements of customers and support asset growth. Principal sources of
liquidity are deposit generation, access to purchased funds, maturities and
repayments of loans and securities and interest and fee income.
The Consolidated Statements of Cash Flows present the change in cash and
cash equivalents from operating, investing and financing activities. During
1995, net cash provided by operating activities totaled $348.0 million.
Contributing to net cash provided by operating activities were the results of
operations adjusted for the provisions for loan losses and other real estate
owned, and proceeds from the sales of mortgages held for
38
<PAGE> 39
sale. Net cash used in investing activities totaled $502.3 million and was the
result of activity in the securities and loan portfolios. Net cash provided by
financing activities totaled $246.4 million, reflecting the reductions in
borrowed funds offset by a net increase in time deposits from year-end 1994.
During 1995, proceeds of $818.6 million from maturities in the held to
maturity and available for sale portfolio, combined with an increase of $693.6
million in total deposits contributed to liquidity. Offsetting these sources,
were increases in total loans of $904.0 million, purchases of securities,
totaling $412.4 million and a decrease of $460.3 million in short-term
borrowing.
Scheduled maturities and anticipated principal repayments of the securities
portfolios will approximate $582.8 million during 1996. In addition, all or part
of the securities available for sale of $1.6 billion could be sold to provide
liquidity. These sources can be used to meet the funding needs during periods of
loan growth. Liquidity is also available through additional lines of credit and
the ability to incur additional debt. At December 31, 1995, there were $40.0
million of short-term lines of credit available for general corporate purposes,
with no outstandings. In addition, the banking subsidiaries have established
lines of credit with the Federal Home Loan Bank of New York which further
support and enhance liquidity.
RESULTS OF OPERATIONS -- 1994 COMPARED WITH 1993
Net income in 1994 was $130.2 million, or $2.35 per share, compared to
$82.4 million for 1993, or $1.50 per share. As a result of improved earnings for
the fourth year, the quarterly dividend paid on common stock was increased
during 1994 to an annualized dividend rate of $1.04 per share, a 23.8% increase
over the $.84 dividend rate at year-end 1993. Improved earnings were primarily
the result of growth in net interest income and a reduction in the provision for
loan losses and non-interest expenses.
Net interest income on a tax-equivalent basis amounted to $631.4 million,
an increase of $38.8 million, or 6.5%, from $592.6 million earned in 1993. The
net interest spread on a tax-equivalent basis decreased to 3.94%, compared to
3.98% earned in 1993. Net interest margin increased to 4.63% during 1994
compared to 4.62% in 1993.
Interest income on a tax-equivalent basis was $976.2 million, an increase
of $51.9 million, or 5.6%, compared to 1993. This increase was primarily due to
volume increases in the loan and securities portfolios. Interest expense was
$344.9 million, an increase of $13.1 million, or 4.0% from $331.7 million in
1993. The increase was principally a result of volume increases in borrowed
funds and commercial CDs. These increases were partially offset by the decline
in retail time deposits.
The provision for loan losses was $84.0 million for the year ended December
31, 1994, down $11.7 million, or 12.2%, from $95.7 million recorded in 1993.
This decrease resulted primarily from improvement in asset quality during 1994
as non-performing loans declined 34.1% and net charge offs declined 38.8%. Net
charge offs in 1994, which do not include the write down of $37.0 million on the
transfer of assets held for accelerated disposition, totaled $78.9 million, a
decline of $50.1 million from $129.0 million in 1993. These net charge offs
represented .86% of average loans in 1994, compared to 1.46% of average loans in
1993.
Non-interest income, including securities gains, amounted to $160.3 million
in 1994, compared to $163.3 million the prior year, a decrease of $3.0 million,
or 1.8%. Excluding securities gains, non-interest income rose $4.0 million, or
2.6%, from 1993. Service charges on deposit accounts increased $4.0 million, or
6.6%, to $64.5 million in 1994. This growth was primarily attributed to service
charges on personal demand deposit accounts. Service and loan fee income
increased $6.5 million, or 30.7% to $27.5 million in 1994. Trust income of $21.8
million was relatively unchanged from the prior year. Other income amounted to
$43.9 million, a decline of $5.2 million, or 10.6%, compared to the prior year.
This decrease was primarily due to a $1.4 million decline in brokerage fees and
a $2.7 million decrease in secondary market mortgage income as a result of lower
fixed-rate mortgage loan originations.
For the year ended December 31, 1994, securities gains were $1.9 million,
compared to $8.9 million in 1993, a decline of $7.0 million, or 78.7%. The 1993
gains were realized as securities available for sale were sold to reduce
prepayment risk in the CMO portfolio.
39
<PAGE> 40
Non-interest expenses totaled $488.2 million in 1994, a decrease of $49.8
million, or 9.2%, compared to 1993. Excluding the 1993 restructuring charge of
$21.5 million, non-interest expenses decreased $28.3 million, or 5.5%, from
1993. Salaries totaled $183.3 million in 1994, a decrease of $2.2 million, or
1.2%, compared to 1993. Pension and other employee benefits totaled $53.4
million for the year ended December 31, 1994, and were $5.2 million, or 8.9%,
below 1993. The decreases in salaries and benefits reflected the impact of the
restructuring and consolidation activities in 1994.
Occupancy expenses were $50.7 million for 1994, an increase of $2.3
million, or 4.7%. This increase was attributed to additional maintenance costs,
primarily snow removal in the first quarter of 1994, as well as increased rental
expense and real estate taxes.
Furniture and equipment expenses amounted to $49.1 million, an increase of
$3.5 million, or 7.6%, from $45.6 million in 1993. OREO expenses totaled $18.3
million for 1994, down $22.6 million, or 55.3%, from 1993 due to a reduction in
the number of OREO properties. A provision of $10.6 million was recorded in
1994, compared to $32.1 million in 1993. OREO expenses also include expenses
related to holding and operating foreclosed properties and are net of rental
income and gains on sales of properties. These costs declined $1.1 million, or
13.0%, in 1994 and amounted to $7.7 million for the year.
The FDIC assessment of $27.9 million decreased $1.3 million, or 4.5%, from
1993. Other expenses, which include professional fees and communication
expenses, were $94.6 million in 1994, a decrease of $2.9 million, or 3.0%, from
1993. This decline was primarily the result of a reduction in professional fees
which totaled $35.5 million for 1994.
In the third quarter of 1993, a charge of $21.5 million was recorded to
reflect the costs associated with consolidation of the bank subsidiaries and
reorganizing the company along business lines. The charge generally represented
those incremental costs incurred as a result of the restructuring plan.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This item is omitted pursuant to paragraph (2) of General Instruction
"G" -- Information to be Incorporated by Reference.
(a) Combined consolidated (including The Summit Bancorporation)
See Combined Consolidated Financial Statements and Notes to Consolidated
Financial Statements on pages 32 through 48 of the 1995 Annual Report
incorporated herein by reference as Exhibit 13.
(b) Consolidated (UJB Financial Corp. only)
See Consolidated Financial Statements and Notes to Consolidated Financial
Statements on pages 54 through 69 of the 1995 Annual Report included herein as
Exhibit 13, which are incorporated herein by reference.
40
<PAGE> 41
The following summarizes certain 1995 and 1994 quarterly consolidated
financial data for UJB Financial Corp. and subsidiaries. In the opinion of
management, all adjustments necessary for a fair presentation of the results for
each quarter have been included.
<TABLE>
<CAPTION>
1995 1994
----------------------------------------- -----------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(IN THOUSANDS)
Interest income....................... $278,741 $276,548 $273,934 $267,517 $260,771 $248,285 $232,623 $219,294
Interest expense...................... 112,248 113,892 113,207 106,626 99,971 89,302 81,605 73,991
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income................. 166,493 162,656 160,727 160,891 160,800 158,983 151,018 145,303
Provision for loan losses............. 16,500 18,000 15,750 15,000 28,500 18,500 18,500 18,500
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses................... 149,993 144,656 144,977 145,891 132,300 140,483 132,518 126,803
Non-interest income................... 44,362 45,075 43,655 41,444 39,845 40,759 39,267 40,417
Non-interest expenses................. 122,160 121,040 124,820 125,358 122,049 121,632 124,196 120,322
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes.......... 72,195 68,691 63,812 61,977 50,096 59,610 47,589 46,898
Federal and state income taxes........ 26,190 24,652 23,476 21,990 15,773 21,039 18,893 16,607
-------- -------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of a
change in accounting principle.... 46,005 44,039 40,336 39,987 34,323 38,571 28,696 30,291
Cumulative effect of a change in
accounting principle................ -- -- -- -- -- -- -- (1,731)
-------- -------- -------- -------- -------- -------- -------- --------
Net income.......................... $ 46,005 $ 44,039 $ 40,336 $ 39,987 $ 34,323 $ 38,571 $ 28,696 $ 28,560
======== ======== ======== ======== ======== ======== ======== ========
Net income per common share data...... $ .79 $ .76 $ .72 $ .72 $ .62 $ .70 $ .52 $ .51
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
41
<PAGE> 42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
This item is omitted pursuant to paragraph (3) of General Instruction
"G" -- Information to be Incorporated by Reference, except that certain
information on Executive Officers of the Registrant is included in Part I of
this report. A definitive proxy statement, dated April 12, 1996 (the "Proxy
Statement"), will be filed with the Securities and Exchange Commission no later
than April 12, 1996. Information required by Item 401 of Regulation S-K is
provided at page 34 of this Annual Report on Form 10-K and in the Proxy
Statement under the caption "Election of Directors", which is hereby
incorporated herein by reference. Information required by Item 405 of Regulation
S-K is provided in the Proxy Statement in the material appearing under the
caption "Additional Information Regarding Directors and Officers" and is hereby
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
This item is omitted pursuant to paragraph (3) of General Instruction
"G" -- Information to be Incorporated by Reference. Information required by Item
402 of Regulation S-K is provided in the Proxy Statement under the captions
"Corporate Governance Guidelines -- Remuneration of Outside Directors",
"Compensation Committee Report on Executive Compensation", "Summary Compensation
Table", "Option/SAR Grants in Last Fiscal Year", "Aggregated Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values", "Stock
Performance Graph" and "Certain Information As To Executive Officers", all of
which information is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This item has been omitted pursuant to paragraph (3) of General Instruction
"G" -- "Information to be Incorporated by Reference". Information required by
Item 403 of Regulation S-K is provided at page 1 of the Proxy Statement in the
introductory information to the Proxy Statement and at pages 7-8 of the Proxy
Statement under the caption "Beneficial Ownership of Summit Equity Securities by
Directors and Executive Officers", all of which is hereby incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item is omitted pursuant to paragraph (3) of Instruction
"G" -- "Information to be Incorporated by Reference". Information required by
Item 404 of Regulation S-K is provided in the Proxy Statement in the material
appearing under the caption "Additional Information Regarding Directors and
Officers", which is hereby incorporated herein by reference.
42
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
a)(1) Financial statements, Summit Bancorp. and Subsidiaries:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Management's and Independent Auditors' Report.......................... 49
Combined Consolidated Balance Sheets -- December 31, 1995 and 1994..... 32
Combined Consolidated Statements of Income -- Three Years Ended
December 31, 1995.................................................... 33
Combined Consolidated Statements of Cash Flows -- Three Years Ended
December 31, 1995.................................................... 34
Consolidated Statements of Shareholders' Equity -- Three Years Ended
December 31, 1995.................................................... 35
Notes to Consolidated Financial Statements............................. 36
Unaudited Quarterly Financial Data..................................... 52
</TABLE>
a)(2) Financial statements, UJB Financial Corp. and Subsidiaries:
<TABLE>
<S> <C>
Independent Auditors' Report........................................... 70
Consolidated Balance Sheets -- December 31, 1995 and 1994.............. 54
Consolidated Statements of Income -- Three Years Ended December 31,
1995................................................................. 55
Consolidated Statements of Cash Flows -- Three Years Ended December 31,
1995................................................................. 56
Consolidated Statements of Shareholders' Equity -- Three Years Ended
December 31, 1995.................................................... 57
Notes to Consolidated Financial Statements............................. 58
</TABLE>
Financial statement schedules are omitted as the required information is not
applicable or the information is presented in the financial statements or
related notes thereto.
a)(3) Other Exhibits (All references to Forms 8-K, 10-K, 10-Q, 8-A, S-1, S-3,
S-4, S-8 and other Forms provided for by the Securities Act of 1933,
Securities Exchange Act of 1934 or the Trust Indenture Act of 1940 refer
to Securities and Exchange Commission File No. 1-6451 of Summit Bancorp.,
unless otherwise specifically noted below. Specific exhibits are numbered
in accordance with Item 601 of Regulation S-K):
(3) Articles of incorporation; By-laws.
A. Restated Certificate of Incorporation of Summit Bancorp.,
as restated March 1, 1996.
B. By-Laws of Summit Bancorp., as restated October 18, 1995.
(4) Instruments defining the rights of security holders, including
indentures.
A. Rights Agreement, dated as of August 16, 1989, by and
between Summit Bancorp. (under former name UJB Financial
Corp.) and First Chicago Trust Company of New York, as
Rights Agent (incorporated by reference to Exhibit 2 to the
Registration Statement on Form 8-A, filed August 28, 1989).
B. Indenture, dated as of November 1, 1972, between Summit
Bancorp. (under former name United Jersey Banks) and The
Bank of New York, as Trustee, for $20,000,000 of 7 3/4%
Sinking Fund Debentures due November 1, 1997 (incorporated
by reference to Exhibit 4(a) to Amendment No. 2 to
Registration Statement No. 2-45397 on Form S-1, filed
October 25, 1972).
- ---------------
*Refers to the respective page numbers of Summit Bancorp. 1995 Annual Report to
Shareholders included as Exhibit 13. Such pages are incorporated herein by
reference.
43
<PAGE> 44
C. Purchase Agreement, dated October 25, 1972, between Summit
Bancorp. (under former name United Jersey Banks) and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Brothers, for 7 3/4% Sinking Fund Debentures
(incorporated by reference to Exhibit 1(b) to Amendment No.
2 to Registration Statement No. 2-45397 on Form S-1, filed
October 25, 1972).
D. Note Agreement, dated as of August 19, 1993, between
Summit Bancorp. (under former name UJB Financial Corp.) and
The Northwestern Mutual Life Insurance Company relating to
$20,000,000 of 7.95% Senior Notes Due August 25, 2003
(incorporated by reference to Exhibit (4)D. on Form 10-Q
for the quarter ended September 30, 1993).
E. (deleted)
F. (deleted)
G. (i) Subordinated Indenture, dated as of December 1, 1992,
between Summit Bancorp. (under former name UJB Financial
Corp.) and Citibank, N.A., Trustee, relating to
$175,000,000 of 8 5/8% Subordinated Notes Due December 10,
2002 of Summit Bancorp. (incorporated by reference to
Exhibit (4)G. on Form 10-K for the year ended December 31,
1992), and (ii) Specimen of Summit Bancorp.'s 8 5/8%
Subordinated Notes Due December 10, 2002 (incorporated by
reference to Exhibit 4 on Form 8-K, dated December 10,
1992).
(10) Material Contracts
A. (i) Asset Purchase Agreement, dated as of March 1, 1995,
among United Jersey Bank and certain subsidiaries of United
Jersey Bank, as Sellers, and ANJ Portfolio, LLC, as
Purchaser (incorporated by reference to Exhibit (10)A.(i)
on Form 10-K for the year ended December 31, 1994), and
(ii) Amendment, dated March 27, 1995, to the Asset Purchase
Agreement (incorporated by reference to Exhibit (10)A.(ii)
on Form 10-K for the year ended December 31, 1994).
B. (i) Master Agreement of Lease, dated January 26, 1982,
between Summit Bancorp. (under former name United Jersey
Banks) and Sha-Li Leasing Associates, Inc. relating to
equipment leases in excess of $10,000,000 in aggregate
lease obligations, including form of Equipment Schedule
(incorporated by referenced to Exhibit (10)B.(i) on Form
10-Q for the quarter ended September 30, 1993), (ii)
Assignment and Assumption of Equipment Lease, effective
December 31, 1991, between Summit Bancorp. (under former
name UJB Financial Corp.) and UJB Financial Service
Corporation (relating to assignment of Master Agreement of
Lease) (incorporated by reference to Exhibit (10)B.(ii) on
Form 10-Q for the quarter ended September 30, 1993), and
(iii) Form of Guaranty Agreement between Summit Bancorp.
(under former name UJB Financial Corp.) and various lenders
under the Master Agreement of Lease relating to certain
equipment leases in excess of $10,000,000 in aggregate
lease obligations (incorporated by reference to Exhibit
(10)B.(iii) on Form 10-Q for the quarter ended September
30, 1993).
*C. (i) UJB Financial Corp. (former name of Summit Bancorp.)
1993 Incentive Stock and Option Plan (incorporated by
reference to Exhibit 10(C) to Registration Statement No.
33-62972 on Form S-8, filed May 19, 1993), (ii)
Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted
July 19, 1993) (incorporated by reference to Exhibit
(10)C.(ii) on Form 10-Q for the quarter ended June 30,
1993), and (iii) Compensation Commit-
- ---------------
* Management contract or compensatory plan or arrangement.
44
<PAGE> 45
tee Interpretation of Section 5(e)(ii)(F) (incorporated by
reference to Exhibit (10)C. (iii) on Form 10-Q for the
quarter ended March 31, 1994).
*D. (i) UJB Financial Corp. (former name of Summit Bancorp.)
1990 Stock Option Plan (incorporated by reference to Exhibit
(10) to Registration Statement No. 33-36209 on Form S-8,
filed July 26, 1990), and (ii) Compensation Committee
Regulations for the Grant and Exercise of Stock Options and
Restricted Stock (adopted July 19, 1993) (incorporated by
reference to Exhibit (10)C.(ii) on Form 10-Q for the quarter
ended June 30, 1993).
E. (deleted)
F. Description of Incentive Plan approved January 20, 1982
(incorporated by reference to Exhibit (10)F. on Form 10-K
for the year ended December 31, 1994).
G. (i) Deferred Compensation Plan for Directors, as revised
October 17, 1979, (incorporated by reference to Exhibit
(10)G.(i) on Form 10-K for the year ended December 31,
1994), and (ii) Amendment adopted April 25, 1994
(incorporated by reference to Exhibit (10)G.(ii) on Form
10-K for the year ended December 31, 1994).
*H. (i) Agreement dated April 2, 1981 between Summit Bancorp.
(under former name United Jersey Banks) and T. Joseph Semrod
(incorporated by reference to Exhibit (10)H.(i) on Form 10-K
for the year ended December 31, 1994), with (ii) Amendment
No. 1 dated May 5, 1981 (incorporated by reference to
Exhibit (10)H.(ii) on Form 10-K for the year ended December
31, 1994), (iii) Amendment No. 2 dated December 15, 1982
(incorporated by reference to Exhibit (10)H.(iii) on Form
10-K for the year ended December 31, 1994), and (iv)
Amendment No. 3 dated August 20, 1986 (incorporated by
reference to Exhibit (10)H.(iv) on Form 10-K for the year
ended December 31, 1994).
*I. (i) Employment Agreement, dated March 1, 1996, between
Summit Bancorp. and Robert G. Cox, and (ii) Agreement,
dated as of September 1, 1995, between The Summit
Bancorporation (predecessor corporation to Summit Bancorp.)
and Robert G. Cox assumed by Summit Bancorp.
*J. Consulting Agreement effective July 1, 1994 between The
Summit Bancorporation (predecessor corporation to Summit
Bancorp.) and Thomas D. Sayles, Jr. assumed by Summit
Bancorp. (incorporated by reference to Exhibit 10(a) on
Form 10-K of The Summit Bancorporation (File No. 0-8026)
for the year ended December 31, 1994).
K. (i) Guaranty Agreement, dated August 7, 1991, by and between
Summit Bancorp. (under former name UJB Financial Corp.) and
Security Pacific National Bank, as Trustee (incorporated by
reference to Exhibit (10)K.(i) on Form 10-Q for the quarter
ended June 30, 1991), (ii) Warranty Bill of Sale, dated
August 7, 1991, of Trico Mortgage Company (incorporated by
reference to Exhibit (10)K.(ii) on Form 10-Q for the quarter
ended June 30, 1991), and (iii) Pooling and Servicing
Agreement, dated as of June 30, 1991, by and among Trico
Mortgage Company, Inc., Securitization Subsidiary I, Inc.
and Security Pacific National Bank, as Trustee (incorporated
by reference to Exhibit (10)K.(iii) on Form 10-Q for the
quarter ended June 30, 1991).
*L. (i) United Jersey Banks (former name of Summit Bancorp.)
1982 Stock Option Plan (incorporated by reference to Exhibit
4 to Registration Statement No. 2-78500
- ---------------
* Management contract or compensatory plan or arrangement.
45
<PAGE> 46
on Form S-8, filed July 21, 1982) with (ii) Amendment No. 1,
dated June 16, 1984 (incorporated by reference to Exhibit
(10)L.(ii) on Form 10-K for the year ended December 31,
1994), (iii) Amendment No. 2, dated December 19, 1990, and
(iv) Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted July
19, 1993) (incorporated by reference to Exhibit (10)C.(ii)
on Form 10-Q for the quarter ended June 30, 1993).
.
*M. (i) Retirement Restoration Plan, adopted April 19, 1983
(incorporated by reference to Exhibit (10)M.(i) on Form 10-K
for the year ended December 31, 1994), (ii) Supplemental
Retirement Plan, adopted August 16, 1989 (incorporated by
reference to Exhibit (10)M.(ii) on Form 10-K for the year
ended December 31, 1994), (iii) Written Consent of UJB
Financial Corp. (former name of Summit Bancorp.) Benefits
Committee interpreting the Retirement Restoration Plan,
adopted August 30, 1989 (incorporated by reference to
Exhibit (10)M.(iii) on Form 10-K for the year ended December
31, 1994), and (iv) Amendments to the Retirement Restoration
Plan and Supplemental Retirement Plan adopted April 25, 1994
(incorporated by reference to Exhibit (10)M.(iv) on Form
10-K for the year ended December 31, 1994).
N. (i) Equipment Lease Guaranty dated as of August 31, 1992 by
Summit Bancorp. (under former name UJB Financial Corp.) to
Sanwa General Equipment Leasing, Inc. (incorporated by
reference to Exhibit (10)N.(i) on Form 10-Q for the quarter
ended March 31, 1993), and (ii) Equipment Lease Agreement
dated as of August 31, 1992 and Equipment Schedule Nos. A-1
and A-2 dated as of August 31, 1992 between Sanwa General
Equipment Leasing, Inc. and UJB Financial Service
Corporation, United Jersey Bank, United Jersey Bank/Central,
N.A. (predecessor bank to United Jersey Bank) and United
Jersey Bank/South, N.A. (predecessor bank to United Jersey
Bank), pursuant to Equipment Lease Agreement dated as of
August 31, 1992, for five year lease of furniture, fixtures
and equipment (incorporated by reference to Exhibit
(10)N.(ii) on Form 10-Q for the quarter ended March 31,
1993).
O. (i) Equipment Lease Guaranty dated as of August 31, 1992 by
Summit Bancorp. (under former name UJB Financial Corp.) to
MetLife Capital Corporation (incorporated by reference to
Exhibit (10)O.(i) on Form 10-Q for the quarter ended March
31, 1993), and (ii) Equipment Schedule Nos. B-1 and B-2
dated as of August 31, 1992 between MetLife Capital
Corporation and UJB Financial Service Corporation, United
Jersey Bank, United Jersey Bank/Central, N.A. (predecessor
bank to United Jersey Bank) and United Jersey Bank/South,
N.A. (predecessor bank to United Jersey Bank) pursuant to
Equipment Lease Agreement dated as of August 31, 1992
between Sanwa General Equipment Leasing, Inc. and United
Jersey Bank, United Jersey Bank/Central, N.A. (predecessor
bank to United Jersey Bank) and United Jersey Bank/South,
N.A.(predecessor bank to United Jersey Bank) , for five year
lease of furniture, fixtures and equipment (incorporated by
reference to Exhibit (10)O.(ii) on Form 10-Q for the quarter
ended March 31, 1993).
P. Twenty-year real estate lease executed and dated December
12, 1988 from Hartz Mountain Industries, Inc. for real
property located in Ridgefield Park, New Jersey used as a
data processing facility (incorporated by reference to
Exhibit (10)P. on Form 10-K for the year ended December 31,
1993).
- ---------------
* Management contract or compensatory plan or arrangement.
46
<PAGE> 47
Q. (deleted)
*R. Agreement, dated as of September 1, 1995, between Summit
Bancorp. (under name of predecessor corporation The Summit
Bancorporation) and John R. Feeney.
S. (deleted)
T. (deleted)
U. (deleted)
V. (deleted)
W. (i) Retirement Plan for Outside Directors of UJB Financial
Corp., (former name of Summit Bancorp.), as amended and
restated February 20, 1991, (ii) Interpretation, dated March
15, 1993, of the Retirement Plan for Outside Directors of
UJB Financial Corp. (former name of Summit Bancorp.)
(incorporated by reference to Exhibit (10)W.(ii) on Form
10-K for the year ended December 31, 1992), and (iii)
Amendment adopted April 25, 1994 (incorporated by reference
to Exhibit (10)W.(iii) on Form 10-K for the year ended
December 31, 1994).
X. (deleted)
Y. (deleted)
Z. (deleted)
AA. (deleted)
BB. (deleted)
CC. (deleted)
DD. (deleted)
*EE. (i) Form of Termination Agreement between Summit Bancorp.
(under former name UJB Financial Corp.) and each of T.
Joseph Semrod, John G. Collins, John R. Howell, John R.
Haggerty, Stephen H. Paneyko, Larry L. Betsinger, Alfred M.
D'Augusta, William J. Healy, Sabry J. Mackoul, Richard F.
Ober, Jr., Dennis Porterfield, Alan N. Posencheg, Gary F.
Simmerman and Edmund C. Weiss, Jr. (incorporated by
reference to Exhibit (10)EE.(i) on Form 10-K for the year
ended December 31, 1991) with (ii) Amendment No. 1, dated
December 20, 1989 (incorporated by reference to Exhibit
(10)EE.(ii) on Form 10-K for the year ended December 31,
1991), (iii) Amendment No. 2, dated October 16, 1991
(incorporated by reference to Exhibit (10)EE.(iii) on Form
10-K for the year ended December 31, 1991), and (iv)
Amendment No. 3, dated December 16, 1992 (incorporated by
reference to Exhibit (10)EE.(iv) on Form 8-K, dated January
19, 1993).
*FF. (i) UJB Financial Corp. (former name of Summit Bancorp.)
Executive Severance Plan, as amended through December 16,
1992 (incorporated by reference to Exhibit (10)FF. on Form
8-K, dated January 19, 1993), and (ii) Amendment adopted
April 25, 1994 (incorporated by reference to Exhibit
(10)FF.(ii) on Form 10-K for the year ended December 31,
1994).
GG. (deleted)
- ---------------
* Management contract or compensatory plan or arrangement.
47
<PAGE> 48
HH. Retirement Program for Outside Directors of Franklin State
Bank (incorporated by reference to Exhibit (10)HH. on Form
10-K for the year ended December 31, 1991).
II. Franklin State Bank Deferred Compensation Plan adopted
January 10, 1984 (incorporated by reference to Exhibit
(10)II. on Form 10-K for the year ended December 31, 1991).
JJ. (i) Retirement Plan for Outside Directors of Commercial
Bancshares, Inc. adopted May 1, 1986 (incorporated by
reference to Exhibit (10)JJ. on Form 10-K for the year ended
December 31, 1991), and (ii) Compensation Committee
Interpretation, dated July 19, 1993 (incorporated by
reference to Exhibit (10)JJ.(ii) on Form 10-Q for the quarter
ended June 30, 1993).
KK. (i) Commercial Bancshares, Inc. Directors Deferred
Compensation Plan adopted May 20, 1986 (substantially
identical plans were adopted by former subsidiaries of
Commercial Bancshares, Inc.) (incorporated by reference to
Exhibit (10)KK.(i) on Form 10-K for the year ended December
31, 1991) and (ii) related Master Trust Agreement
(incorporated by reference to Exhibit (10)KK.(ii) on Form
10-K for the year ended December 31, 1991).
*LL. (i) United Jersey Banks (former name of Summit Bancorp.) 1987
Stock Option Plan (incorporated by reference to Exhibit
(10)LL.(i) on Form 10-K for the year ended December 31, 1991)
with (ii) Amendment dated April 25, 1989, (incorporated by
reference to Exhibit (10)LL.(ii) on Form 10-K for the year
ended December 31, 1994), (iii) amendment dated June 30,
1990, and (iv) Compensation Committee Regulations for the
Grant and Exercise of Stock Options and Restricted Stock
(adopted July 19, 1993) (incorporated by reference to Exhibit
(10)C.(ii) on Form 10-Q for the quarter ended June 30, 1993).
MM. (deleted)
*NN. First Valley Bank Executive Management Incentive Bonus Plan
(incorporated by reference to Exhibit (10)NN. on Form 10-K
for the year ended December 31, 1992).
(13) Summit Bancorp 1995 Annual Report to Shareholders
(21) Subsidiaries of the registrant.
(23) Consents of Experts and Counsel
A. Independent Auditors' Consent -- KPMG Peat Marwick LLP
(27) A. Financial Data Schedule -- Summit Bancorp.
B. Financial Data Schedule -- UJB Financial Corp.
- ---------------
* Management contract or compensatory plan or arrangement.
None of the Exhibits listed above other than the Summit Bancorp 1995 Annual
Report to Shareholders are furnished herewith (other than certain copies filed
with the Securities and Exchange Commission). Any of such Exhibits will be
furnished to any requesting securityholder upon payment of a fee of 15 cents per
page. Contact Lori A. Wierzbinsky, Assistant Corporate Secretary, Summit
Bancorp, P.O. Box 2066, Princeton, NJ 08543-2066 for a determination of the fee
necessary to fulfill any request.
b) Reports on Form 8-K.
In a current report on Form 8-K dated January 19, 1995, under Item 5,
Other Events, the Company reported the execution of an Agreement and Plan
of Merger, dated January 19, 1995, between Bancorp New Jersey, Inc. and
Summit Bancorp. (under the former name UJB Financial Corp.).
48
<PAGE> 49
In a current report on Form 8-K dated March 10, 1995, under Item 5, Other
Events, and Item 7, Financial Statements and Exhibits, the Company issued
consolidated balance sheets at December 31, 1994 and December 31, 1993 and
consolidated statements of income for the years ended December 31, 1994
and 1993.
In a current report on Form 8-K dated August 1, 1995, under Item 5, Other
Events, the Company reported the execution of an Agreement and Plan of
Merger, dated August 1, 1995, among The Flemington National Bank and Trust
Company, Summit Bancorp. (under the former name UJB Financial Corp.) and
United Jersey Bank.
In a current report on Form 8-K dated September 10, 1995, under Item 5,
Other Events, the Company reported the execution of an Agreement and Plan
of Merger, dated September 10, 1995, between The Summit Bancorporation and
Summit Bancorp. (under the former name UJB Financial Corp.), the related
issuance, on September 11, 1995, of a contingent stock option by The
Summit Bancorporation to Summit Bancorp. (under the former name UJB
Financial Corp.) for 19.9% of the then outstanding common stock of The
Summit Bancorporation and the related issuance, on September 11, 1995, of
a contingent stock option by Summit Bancorp. (under the former name UJB
Financial Corp.) to The Summit Bancorporation for 19.9% of the then
outstanding common stock of Summit Bancorp.
In a current report on Form 8-K dated September 10, 1995, under Item 5,
Other Events, the Company filed certain information provided to securities
analysts in connection with the proposed merger and related transactions
contemplated by the Agreement and Plan of Merger, dated September 10,
1995, between The Summit Bancorporation and Summit Bancorp. (under the
former name UJB Financial Corp.).
In a current report on Form 8-K dated October 27, 1995, the Company under
Item 5, Other Events, and Item 7, Financial Statements and Exhibits,
issued consolidated balance sheets at September 30, 1995, December 31,
1994, and September 30, 1994, and consolidated statements of income for
the nine months and three months ended September 30, 1995 and 1994.
49
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUMMIT BANCORP
Dated: March 29, 1996 By: /s/ J. R. HAGGERTY
---------------------------------
John R. Haggerty
Senior Executive Vice
President/Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ T. JOSEPH SEMROD Chairman of the Board and March 29, 1996
- --------------------------------------------- Director (Chief Executive
T. Joseph Semrod Officer)
/s/ ROBERT G. COX President and Director March 29, 1996
- ---------------------------------------------
Robert G. Cox
/s/ JOHN G. COLLINS Vice Chairman and Director March 29, 1996
- ---------------------------------------------
John G. Collins
/s/ JOHN R. HOWELL Vice Chairman and Director March 29, 1996
- ---------------------------------------------
John R. Howell
/s/ J. R. HAGGERTY Senior Executive Vice March 29, 1996
- --------------------------------------------- President/Finance (Principal
John R. Haggerty Financial Officer)
/s/ WILLIAM J. HEALY Executive Vice President and March 29, 1996
- --------------------------------------------- Comptroller (Principal
William J. Healy Accounting Officer)
/s/ S. ROGERS BENJAMIN Director March 29, 1996
- ---------------------------------------------
S. Rogers Benjamin
/s/ ROBERT L. BOYLE Director March 29, 1996
- ---------------------------------------------
Robert L. Boyle
/s/ JAMES C. BRADY, JR. Director March 29, 1996
- ---------------------------------------------
James C. Brady, Jr.
/s/ T.J. DERMOT DUNPHY Director March 29, 1996
- ---------------------------------------------
T.J. Dermot Dunphy
</TABLE>
50
<PAGE> 51
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ ANNE EVANS ESTABROOK Director March 29, 1996
- ---------------------------------------------
Anne Evans Estabrook
/s/ ELINOR J. FERDON Director March 29, 1996
- ---------------------------------------------
Elinor J. Ferdon
/s/ FRED G. HARVEY Director March 29, 1996
- ---------------------------------------------
Fred G. Harvey
/s/ FRANCIS J. MERTZ Director March 29, 1996
- ---------------------------------------------
Francis J. Mertz
/s/ GEORGE L. MILES, JR. Director March 29, 1996
- ---------------------------------------------
George L. Miles, Jr.
/s/ HENRY S. PATTERSON II Director March 29, 1996
- ---------------------------------------------
Henry S. Patterson II
/s/ THOMAS D. SAYLES, JR. Director March 29, 1996
- ---------------------------------------------
Thomas D. Sayles, Jr.
/s/ RAYMOND SILVERSTEIN Director March 29, 1996
- ---------------------------------------------
Raymond Silverstein
/s/ ORIN R. SMITH Director March 29, 1996
- ---------------------------------------------
Orin R. Smith
/s/ JOSEPH M. TABAK Director March 29, 1996
- ---------------------------------------------
Joseph M. Tabak
/s/ DOUGLAS G. WATSON Director March 29, 1996
- ---------------------------------------------
Douglas G. Watson
</TABLE>
51
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------------------------------------------------
<S> <C> <C>
(3)A. Restated Certificate of Incorporation of Summit Bancorp., as
restated March 1, 1996.
B. By-Laws of Summit Bancorp., as restated October 18, 1995.
(10)I.(i) Employment Agreement, dated March 1, 1996, between Summit
Bancorp. and Robert G. Cox.
(ii) Agreement, dated as of September 1, 1995, between The Summit
Bancorporation (predecessor corporation to Summit Bancorp.)
and Robert G. Cox assumed by Summit Bancorp.
L.(iii) Amendment No. 2 dated December 19, 1990 to the United Jersey
Banks (former name of Summit Bancorp.) 1982 Stock Option Plan.
R. Agreement, dated as of September 1, 1995, between Summit
Bancorp. (under name of predecessor corporation The Summit
Bancorporation) and John R. Feeney.
W.(i) Retirement Plan for Outside Directors of UJB Financial Corp.
(former name of Summit Bancorp.), as amended and restated
February 20, 1991.
LL.(iii) Amendment dated June 30, 1990 to the United Jersey Banks
(former name of Summit Bancorp.) 1987 Stock Option Plan.
(13) Summit Bancorp. 1995 Annual Report to Shareholders.
(21) Subsidiaries of the Registrant.
(23)A. Independent Auditors' Consent -- KPMG Peat Marwick LLP (Summit
Bancorp.)
(27)A. Financial Data Schedule -- Summit Bancorp.
B. Financial Data Schedule -- UJB Financial Corp.
</TABLE>
<PAGE> 1
EXHIBIT (3)A.
RESTATED
CERTIFICATE OF INCORPORATION
OF
SUMMIT BANCORP.
(Restated March 1, 1996)
SUMMIT BANCORP., a corporation formed pursuant to the provisions of the New
Jersey Business Corporation Act (N.J.S.A. 14A: 1-1 et. seq.), hereby restates
its Certificate of Incorporation pursuant to the provisions of the New Jersey
Business Corporation Act (N.J.S.A. 14A:9-5).
1. The name of the Corporation is SUMMIT BANCORP.
2. The purposes for which the corporation is formed are:
A. To engage in and carry on the business of a registered bank
holding company.
B. To acquire, by purchase, subscription or otherwise, own, hold for
investment or otherwise, use, sell, exchange, mortgage, pledge,
hypothecate, create a security interest in, or otherwise deal with and
dispose of, any and all securities, as hereinafter defined, and to possess
and exercise any and all rights, powers and privileges of ownership of any
and all such securities, including the right to vote thereon and to
consent, assent or dissent with respect thereto for any and all purposes,
and to issue or deliver its own securities in payment or exchange, in whole
or in part, for any securities or to make payment therefor by any other
lawful means; to aid by loan, subsidy or in any other lawful manner any
corporation, firm, organization, association or other entity in which the
Corporation may be or become interested through the direct or indirect
holding of securities or in any other manner; to do any and all acts and
things for the enhancement, protection or preservation of any securities
which are in any manner, directly or indirectly, held or guaranteed by the
Corporation, and to do any and all acts and things designed to accomplish
any such purpose.
The term "securities", as used in this article, shall mean any
and all shares, stocks, bonds, debentures, notes, acceptances, voting trust
certificates, certificates of deposit, evidences of indebtedness, other
obligations, certificates of any interest in or of the deposit of any of
the foregoing, scrip, interim or other receipts, warrants or rights to
subscribe for or purchase, or guarantees of, any of the foregoing, or any
other interests or instruments commonly known as securities.
C. To the extent permitted by law, to cause to be formed, organized,
reorganized, consolidated, merged or liquidated and to take charge of, any
corporation, firm, organization, association or other entity, foreign or
domestic.
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<PAGE> 2
D. To the extent permitted by law, to furnish services to and
perform services for, and to act in any representative capacity for, any
corporation, firm, organization, association, or other entity in which the
Corporation may be or become interested through the direct or indirect
holding of securities or in any other manner, whether in the development,
exploitation, promotion, operation, management, liquidation, or otherwise,
of any of the business or property thereof or of any lawful enterprise
related thereto.
E. To make loans and give other forms of credit with or without
security.
F. To borrow money for its corporate purposes; to draw, make,
accept, endorse, execute, issue, deliver and negotiate bonds, debentures,
promissory notes, drafts, bills of exchange and other negotiable or
transferable instruments and to secure the payment thereof and the interest
thereon by a deed or deeds of trust or by mortgage or pledge of or upon, or
by the creation of a security interest in, all or any part of the property
of the Corporation, real or personal, or any interest therein, wherever
situated, whether at the time owned or thereafter acquired, and to sell,
pledge, create a security interest in or otherwise dispose of such bonds,
debentures, notes or other obligations.
G. To purchase, lease or otherwise acquire, take, hold, own, use,
improve, maintain, develop, complete, extend, manage, operate, mortgage or
otherwise impose a lien upon or create a security interest in, sell,
exchange, lease or otherwise dispose of or convey or transfer in any
manner, buildings, storage and other facilities, real and personal property
of all kinds, and any and all rights, interests or easements therein,
without limit as to amount and wherever situated.
H. To engage in any such activity directly or through a subsidiary
or subsidiaries, and to take all acts deemed appropriate to promote the
interest of such subsidiary or subsidiaries, including without limiting the
foregoing, making contracts and incurring liabilities for the benefit of
such subsidiary or subsidiaries; and transferring or causing to be
transferred to any such subsidiary or subsidiaries assets of the
Corporation.
I. To guarantee the bonds, debentures, notes or other evidences of
indebtedness issued, or obligations incurred by subsidiary companies in
which the Corporation holds, directly or indirectly, at least a majority of
the voting stock, or by any corporation, partnership, limited partnership,
joint venture or other association where the Corporation has or may acquire
a substantial interest in such corporation, partnership, limited
partnership, joint venture or other association or where such guarantee is
otherwise in furtherance of the interest of the Corporation.
J. To provide that the obligations of such subsidiary companies may
be convertible into, or exchangeable for, or carry rights or options to
purchase or subscribe to, or both, shares of the Corporation of any class.
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<PAGE> 3
K. In general, to do any and all of the acts and things herein set
forth to the same extent as natural persons could do, and in any part of
the world, as principal, factor, agent, contractor or otherwise, either
alone or in company with any person, entity, syndicate, partnership,
association, corporation or others; to establish and maintain offices and
agencies within and anywhere outside of the State of New Jersey; and to
exercise all or any of its corporate powers and rights in the State of New
Jersey and in any and all other states, territories, districts, possessions
or dependencies of the United States of America and in any other countries
or places.
L. To do everything necessary, proper, advisable or convenient for
the accomplishment of any of the purposes herein set forth and to do every
other act and thing incidental thereto or connected therewith, provided the
same be not forbidden by law.
3. The total number of shares of capital stock authorized and which may
be issued by this Corporation is One Hundred Thirty-Four Million (134,000,000)
shares, of which One Hundred Thirty Million (130,000,000) shares of One and
20/100 Dollars ($1.20) par value each shall be designated as Common Stock, and
of which Four Million (4,000,000) shares without par value shall be designed as
Preferred Stock. All or any part of such authorized Common Stock and Preferred
Stock may be issued by the Corporation from time to time and for such
consideration as may be determined upon and fixed by the Board of Directors as
provided by law.
No holders of shares of Common Stock or Preferred Stock of the Corporation
shall be entitled, as such, as a matter of preemptive or preferential right, to
subscribe for or purchase any part of any new or additional issue of shares of
Common Stock or Preferred Stock, or any treasury shares of Common Stock or
Preferred Stock, or of securities of the Corporation or of any subsidiary of the
Corporation convertible into or exchangeable for, or carrying rights or options
to purchase or subscribe to, or both, shares of any class whatsoever, whether
now or hereafter authorized, and whether issued for cash, property, services or
otherwise.
The Board of Directors of the Corporation is, pursuant to the New
Jersey Business Corporation Law (N.J.S.A. 14A:7-2), authorized to amend this
Restated Certificate of Incorporation of the Corporation so as (a) to divide the
authorized shares of Preferred Stock of the Corporation into series within such
class, (b) to determine the designation and the number of shares of any such
series, and (c) to determine the relative voting, dividend, conversion,
redemption, liquidation and other rights, preferences and limitations of the
authorized shares of Preferred Stock of the Corporation.
A. Creation of Preferred Stock, Series R. A series of Preferred
Stock of the Corporation, consisting of 1,000,000 Shares, is hereby created
and designated as "Series R Preferred Stock" (the "Series R Preferred
Stock") which series of Preferred Stock shall have a stated value of $100
per share and the following rights and preferences:
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<PAGE> 4
(a) Dividends and Distributions.
(1) Subject to the provisions for adjustment hereinafter
set forth, the holders of shares of Series R Preferred Stock
shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the
purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to one hundred (100) times the aggregate
per share amount of all cash dividends declared or paid on the
Common Shares, $1.20 par value per share, of the Corporation (the
"Common Shares"), and (ii) a preferential cash dividend (the
"Preferential Dividends"), if any, on the first business day of
February, May, August and November of each year (each a
"Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of Series R Preferred Stock in an
amount equal to $1.00 per share of Series R Preferred Stock
reduced (but not to an amount less than zero) by the per share
amount of all cash dividends declared on the Series R Preferred
Stock pursuant to clause (i) of this sentence since the
immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series R
Preferred Stock. In the event the Corporation shall, at any time
after the issuance of any share or fraction of a share of Series
R Preferred Stock, make any distribution on the Common Shares of
the Corporation, whether by way of a dividend or a
reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Corporation or otherwise, which is
payable in cash or any debt security, debt instrument, real or
personal property or any other property (other than cash
dividends subject to the immediately preceding sentence, a
distribution of Common Shares or other capital stock of the
Corporation or a distribution of rights or warrants to acquire
any such share, including any debt security convertible into or
exchangeable for any such share, at a price less than the Fair
Market Value (as hereinafter defined) of such share), then and in
each such event the Corporation shall simultaneously pay on each
then outstanding share of Series R Preferred Stock of the
Corporation a distribution, in like kind, of one hundred (100)
times such distribution paid on a Common Share (subject to the
provisions for adjustment hereinafter set forth). The dividends
and distributions on the Series R Preferred Stock to which
holders thereof are entitled pursuant to clause (i) of the first
sentence of this paragraph and pursuant to the second sentence of
this paragraph are hereinafter referred to as "Participating
Dividends" and the multiple of such cash and non-cash dividends
on the Common Shares applicable to the determination of the
Participating Dividends, which shall be one hundred (100)
initially but shall be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend
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<PAGE> 5
Multiple". In the event the Corporation shall at any time after
August 28, 1989 declare or pay any dividend or make any
distribution on Common Shares payable in Common Shares or any
class or series thereof, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding
Common Shares into a greater or lesser number of Common Shares,
then in each such case the Dividend Multiple thereafter
applicable to the determination of the amount of Participating
Dividends which holders of shares of Series R Preferred Stock
shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding
immediately prior to such event.
(2) The Corporation shall declare each Participating
Dividend at the same time it declares any cash or non-cash
dividend or distribution on the Common Shares in respect of which
a Participating Dividend is required to be paid. No cash or
non-cash dividend or distribution on the Common Shares in respect
of which a Participating Dividend is required to be paid shall be
paid or set aside for payment on the Common Shares unless a
Participating Dividend in respect of such dividend or
distribution on the Common Shares shall be simultaneously paid,
or set aside for payment, on the Series R Preferred Stock.
(3) Preferential Dividends shall begin to accrue on
outstanding shares of Series R Preferred Stock commencing with
the Quarterly Dividend Payment Date next following the date of
issuance of any shares of Series R Preferred Stock and shall
accrue on and as of such date and each successive Quarterly
Dividend Payment Date thereafter. Accrued but unpaid
Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series R
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
b) Voting Rights. The holders of shares of Series R Preferred
Stock shall have the following voting rights:
(1) Subject to the provisions for adjustment hereinafter
set forth, each share of Series R Preferred Stock shall entitle
the holder thereof to one hundred (100) votes on all matters
submitted to a vote of the shareholders of the Corporation. The
number of votes which a holder of Series R Preferred Stock is
entitled to cast, as the same may be adjusted from time to time
as hereinafter provided, is hereinafter referred
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<PAGE> 6
to as the "Vote Multiple." In the event the Corporation shall at
any time after August 28, 1989 declare or pay any dividend on
Common Stock payable in Common Shares, or effect a subdivision or
split or a combination, consolidation or reverse split of the
outstanding Common Shares into a greater or lesser number of
Common Shares, then in each such case the Vote Multiple
thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series R Preferred Stock
shall be entitled after such event shall be the Vote Multiple
immediately prior to such event multiplied by a fraction the
numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior
to such event.
(2) Except as otherwise provided herein, or by law, the
Certificate of Incorporation or the By-laws, the holders of
shares of Series R Preferred Stock and the holders of Common
Shares shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(3) If at the time of any annual meeting of shareholders
of the Corporation for the election of directors, the Corporation
shall have failed to pay the Preferential Dividends on the shares
of the Series R Preferred Stock for six dividend payment periods,
whether or not consecutive, or shall fail to pay in full such
dividends, if any, as may accumulate on any other series of
Preferred Stock for a period of 18 months (referred to herein as
a "Dividend Payment Default"), the number of directors of the
Corporation shall be increased by two and the holders of the all
outstanding series of Preferred Stock in respect of which such a
default in payment of dividends as described hereinabove exists,
voting as a single class without regard to series, will be
entitled to elect such additional two directors until full
cumulative dividends for all past dividend periods upon all
series of Preferred Stock have been paid or declared and set
apart for payment. If and when the full cumulative dividends on
all series of Preferred Stock for all past dividend payment
periods shall have been paid or declared and set apart for
payment, the holders of Preferred Stock shall be divested of the
foregoing special voting right, subject to revesting in the event
of each and every subsequent Dividend Payment Default. Upon the
termination of each such special voting right, the term of office
of each director elected by the holders of shares of Preferred
Stock in respect of which a default exists in the payment of
dividends as described hereinabove (herein referred to as a
"Preferred Director") pursuant to such special voting right shall
forthwith terminate and the number of directors constituting the
Board of Directors shall be reduced by two. Any Preferred
Director may be removed by, and shall not be removed except
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<PAGE> 7
by, the vote of the holders of record of the outstanding shares
of Preferred Stock in respect of which such a default exists,
voting together as a single class without regard to series, at a
meeting of the shareholders, or of the holders of shares of such
Preferred Stock, called for the purpose. As long as a Dividend
Payment Default shall continue (A) any vacancy in the office of a
Preferred Director may be filled (except as provided in the
following clause (B)) by an instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and
(B) in the case of the removal of any Preferred Director, the
vacancy may be filled by the vote of the holders of the
outstanding shares of Preferred Stock in respect of which such a
default exists, voting together as a single class without regard
to series, at the same meeting at which such removal shall be
voted or a subsequent meeting. Each director appointed as
aforesaid by the remaining Preferred Director shall be deemed,
for all purposes hereof, to be a Preferred Director.
(4) Except as otherwise set forth herein or required by
law, the Certificate of Incorporation or the By-laws, holders of
Series R Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Shares as set forth
herein) for the taking of any corporate action.
(c) Certain Restrictions.
(1) Whenever Preferential Dividends or Participating
Dividends are in arrears or the Corporation shall be in default
of payment thereof, thereafter and until all accrued and unpaid
Preferential Dividends and Participating Dividends, whether or
not declared, on shares of Series R Preferred Stock outstanding
shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment, and in addition to any and
all other rights which any holder of shares of Series R Preferred
Stock may have in such circumstances, the Corporation shall not:
(i) declare or pay or set apart for payment dividends
on, make any other distributions on, or redeem or purchase
or otherwise acquire for consideration, any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series R Preferred Stock;
(ii) declare or pay or set apart for payment
dividends on or make any other distributions on any shares
of stock ranking on a parity as to dividends with the Series
R Preferred Stock, unless dividends are paid ratably on the
Series R Preferred Stock and all such parity stock on which
dividends are payable or in
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<PAGE> 8
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled if the full
dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this
paragraph (c)(1), redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series R Preferred Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking
junior (both as to dividends and upon liquidation,
dissolution or winding up) to the Series R Preferred Stock;
or
(iv) purchase or otherwise acquire for consideration
any shares of Series R Preferred Stock, or any shares of
stock ranking on a parity with the Series R Preferred Stock
(either as to dividends or upon liquidation, dissolution or
winding up), except in accordance with a purchase offer made
to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(2) The Corporation shall not permit any Subsidiary (as
hereinafter defined) of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (1) of this Section
(c), purchase or otherwise acquire such shares at such time and
in such manner. A "Subsidiary" of the Corporation shall mean any
corporation or other entity of which securities or other
ownership interests having ordinary voting power sufficient to
elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or
indirectly, by the Corporation or by any corporation or other
entity that is otherwise controlled by the Corporation.
(3) The Corporation shall not issue any shares of Series R
Preferred Stock except upon exercise of rights issued pursuant to
that certain Rights Agreement dated as of August 16, 1989 between
the Corporation and First Chicago Trust Company of New York, as
Rights Agent, a copy of which is on file with the Secretary of
the Corporation at its principal executive office and shall be
made available to shareholders of record without charge upon
written request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence,
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<PAGE> 9
nothing contained in the provisions hereof shall prohibit or
restrict the Corporation from issuing for any purpose any series
of Preferred Stock with rights and privileges similar to,
different from, or greater than, those of the Series R Preferred
Stock.
(d) Reacquired Shares. Any shares of Series R Preferred Stock
purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares upon their retirement and
cancellation shall become authorized but unissued shares of Preferred
Stock, without designation as to series, and such shares may be
reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
(e) Liquidation, Dissolution or Winding Up. Upon the
dissolution, liquidation or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series R Preferred Stock unless the
holders of shares of Series R Preferred Stock shall have received,
subject to adjustment as hereinafter provided, (1) $1.00 per
one-hundredth share ($100 per share) plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, or (2) if greater than the
amount specified in clause (i)(1) of this sentence, an amount equal to
one hundred (100) times the aggregate amount to be distributed per
share to holders of Common Shares, as the same may be adjusted as
hereinafter provided, and (ii) to the holders of stock ranking on a
parity upon liquidation, dissolution or winding up with the Series R
Preferred Stock, unless simultaneously therewith distributions are
made ratably on the Series R Preferred Stock and all other shares of
such parity stock in proportion to the total amounts to which the
holders of shares of Series R Preferred Stock are entitled under
clause (i)(1) of this sentence and to which the holders of such parity
shares are entitled, in each case upon such liquidation, dissolution
or winding up. The amount to which holders of Series R Preferred
Stock may be entitled upon liquidation, dissolution or winding up of
the Corporation pursuant to clause (i)(2) of the foregoing sentence is
hereinafter referred to as the "Participating Liquidation Amount" and
the multiple of the amount to be distributed to holders of Common
Shares upon the liquidation, dissolution or winding up of the
Corporation applicable, pursuant to said clause, to the determination
of the Participating Liquidation Amount, as said multiple may be
adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Liquidation Multiple". In the event the
Corporation shall at any time after August 28, 1989 declare or pay any
dividend on Common Shares payable in Common Shares or any class or
series thereof, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding Common Shares into a
greater or lesser number of Common Shares, then in each such case the
Liquidation Multiple thereafter applicable to the determination of the
Participating Liquidation Amount to which holders of Series R
Preferred Stock
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<PAGE> 10
shall be entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event multiplied by a fraction
the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to
such event. The sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation shall not
be deemed a dissolution, liquidation or winding up of the Corporation
for the purposes of this Section (e), nor shall the merger or
consolidation of the Corporation into or with any other corporation or
association or the merger or consolidation of any other corporation or
association into or with the Corporation, be deemed to be a
dissolution, liquidation or winding up of the Corporation for the
purposes of this Section (e).
(f) Certain Reclassifications and Other Events.
(1) In the event that holders of Common Shares of the
Corporation receive after August 28, 1989 in respect of their
Common Shares any share of capital stock of the Corporation
(other than any Common Shares of the Corporation of the same
class and series as such outstanding Common Shares), whether by
way of reclassification, recapitalization, reorganization,
dividend or other distribution or otherwise (a "Transaction"),
then and in each such event the dividend rights, voting rights
and rights upon the liquidation, dissolution or winding up of the
Corporation of the shares of Series R Preferred Stock shall be
adjusted so that after such event the holders of Series R
Preferred Stock shall be entitled, in respect of each share of
Series R Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately
prior to such adjustment, to (i) such additional dividends as
equal the Dividend Multiple in effect immediately prior to such
Transaction multiplied by the additional dividends which the
holder of a Common Share shall be entitled to receive by virtue
of the receipt in the Transaction of such capital stock; (ii)
such additional voting rights as equal the Vote Multiple in
effect immediately prior to such Transaction multiplied by the
additional voting rights which the holder of a Common Share shall
be entitled to receive by virtue of the receipt in the
Transaction of such capital stock; and (iii) such additional
distributions upon liquidation, dissolution or winding up of the
Corporation as equal the Liquidation Multiple in effect
immediately prior to such Transaction multiplied by the
additional amount which the holder of a Common Share shall be
entitled to receive upon liquidation, dissolution or winding up
of the Corporation by virtue of the receipt in the Transaction of
such capital stock, as the case may be, all as provided by the
terms of such capital stock.
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<PAGE> 11
(2) In the event that all holders of Common Shares of the
Corporation receive after August 28, 1989 in respect of their
Common Shares any right or warrant to purchase Common Shares
(including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for Common Shares)
at a purchase price per share less than the Fair Market Value of
a Common Share on the date of issuance of such right or warrant,
then and in each such event the dividend rights, voting rights
and rights upon the liquidation, dissolution or winding up of the
Corporation of the shares of Series R Preferred Stock shall each
be adjusted so that after such event the Dividend Multiple, the
Vote Multiple and the Liquidation Multiple shall each be the
product of the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple, as the case may be, in effect immediately
prior to such event multiplied by a fraction the numerator of
which shall be the number of Common Shares outstanding
immediately before such issuance of rights or warrants plus the
maximum number of Common Shares which could be acquired upon
exercise in full of all such rights or warrants and the
denominator of which shall be the number of Common Shares
outstanding immediately before such issuance of rights or
warrants plus the number of Common Shares which could be
purchased, at the Fair Market Value of the Common Shares at the
time of such issuance, by the maximum aggregate consideration
payable upon exercise in full of all such rights or warrants.
(3) In the event that holders of Common Shares of the
Corporation receive after August 28, 1989 in respect of their
Common Shares any right or warrant to purchase capital stock of
the Corporation (other than Common Shares of any class or
series), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for
capital stock of the Corporation (other than Common Shares of any
class or series), at a purchase price per share less than the
Fair Market Value of such shares of capital stock on the date of
issuance of such right or warrant, then and in each such event
the dividend rights, voting rights and rights upon liquidation,
dissolution or winding up of the Corporation of the shares of
Series R Preferred Stock shall each be adjusted so that after
such event each holder of a share of Series R Preferred Stock
shall be entitled, in respect of each share of Series R Preferred
Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such event,
to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied,
first, by the additional dividends to which the holder of a
Common Share shall be entitled upon exercise of such right or
warrant by virtue of the capital stock which could be acquired
upon such exercise and multiplied again by the Discount Fraction
(as hereinafter defined); (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such
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<PAGE> 12
event multiplied, first, by the additional voting rights to which
the holder of a Common Share shall be entitled upon exercise of
such right or warrant by virtue of the capital stock which could
be acquired upon such exercise and multiplied again by the
Discount Fraction; and (iii) such additional distributions upon
liquidation, dissolution or winding up of the Corporation as
equal the Liquidation Multiple in effect immediately prior to
such event multiplied, first, by the additional amount which the
holder of a Common Share shall be entitled to receive upon
liquidation, dissolution or winding up of the Corporation upon
exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again
by the Discount Fraction. For purposes of this paragraph, the
"Discount Fraction" shall be a fraction the numerator of which
shall be the difference between the Fair Market Value of a share
of the capital stock subject to a right or warrant distributed to
holders of Common Shares of the Corporation as contemplated by
this paragraph immediately after the distribution thereof and the
purchase price per share for such share of capital stock pursuant
to such right or warrant and the denominator of which shall be
the Fair Market Value of a share of such capital stock
immediately after the distribution of such right or warrant.
(4) For purposes hereof, the "Fair Market Value" of a
share of capital stock of the Corporation (including a Common
Share) on any date shall be deemed to be the average of the daily
closing price per share thereof over the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to
such date; provided, however, that, in the event that such Fair
Market Value of any such share of capital stock is determined
during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for a dividend or
distribution on stock payable in shares of such stock or
securities convertible into shares of such stock, or (ii) the
effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such
stock, then, and in each such case, the Fair Market Value shall
be appropriately adjusted by the Board of Directors of the
Corporation to take into account ex-dividend or post-effective
date trading. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices,
regular way (in either case, as reported in the applicable
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange), or, if the
shares are not listed or admitted to trading on the New York
Stock Exchange, as reported in the applicable transaction
reporting system with respect to securities listed on the
principal national securities exchange on which the shares are
listed or admitted to trading or, if the shares are not listed or
admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the
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<PAGE> 13
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then
in use, or if on any such date the shares are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the shares selected by the Board of Directors of the
Corporation. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares
are listed or admitted to trading is open for the transaction of
business or, if the shares are not listed or admitted to trading
on any national securities exchange, on which the New York Stock
Exchange or such other national securities exchange as may be
selected by the Board of Directors of the Corporation is open.
If the shares are not publicly held or not so listed or traded on
any day within the period of 30 Trading Days applicable to the
determination of Fair Market Value thereof as aforesaid, "Fair
Market Value" shall mean the fair market value thereof per share
as determined in good faith by the Board of Directors of the
Corporation. In either case referred to in the foregoing
sentence, the determination of Fair Market Value shall be
described in a statement filed with the Secretary of the
Corporation.
(g) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction
in which the Common Shares are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such
case each outstanding share of Series R Preferred Stock shall at the
same time be similarly exchanged for or changed into the aggregate
amount of stock, securities, cash and/or other property (payable in
like kind), as the case may be, for which or into which each Common
Share is changed or exchanged multiplied by the highest of the
Dividend Multiple, the Vote Multiple or the Liquidation Multiple in
effect immediately prior to such event.
(h) Effective Time of Adjustments.
(1) Adjustments to the Series R Preferred Stock required
by the provisions hereof shall be effective as of the time at
which the event requiring such adjustments occurs.
(2) The Corporation shall give prompt written notice to
each holder of a share of Series R Preferred Stock of the effect
of any adjustment to the voting rights, dividend rights or rights
upon liquidation, dissolution or winding up of the Corporation of
such shares required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Corporation to give
such notice shall not affect the validity of or the force or
effect of or the requirement for such adjustment.
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<PAGE> 14
(i) No Redemption. The shares of Series R Preferred Stock
shall not be redeemable at the option of the Corporation or any holder
thereof. Notwithstanding the foregoing sentence of this Section, the
Corporation may acquire shares of Series R Preferred Stock in any
other manner permitted by law, the provisions hereof and the
Certificate of Incorporation of the Corporation.
(j) Ranking. Unless otherwise provided in the Certificate of
Incorporation of the Corporation or a Certificate of Amendment
relating to a subsequent series of preferred stock of the Corporation,
the Series R Preferred Stock shall rank junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and
the distribution of assets on liquidation, dissolution or winding up
and senior to the Common Shares.
(k) Conversion or Exchange. The holders of shares of Series R
Preferred Stock shall not have any rights to convert such shares into
or exchange such shares for Common Shares of the Corporation or any
other stock of the Corporation.
(l) Preemptive Rights. Shares of the Series R Preferred Stock
are not entitled to any preemptive rights.
(m) Amendment. Unless the vote or consent of the holders of a
greater number of shares shall then be required by law, the consent of
the holders of at least 66-2/3% of all of the shares of this Series R
Preferred Stock at the time outstanding given in person or by proxy,
either in writing or by a vote at a meeting called for the purpose, on
which matter the holders of shares of this Series R Preferred Stock
shall vote together as a separate class, shall be necessary to
authorize, effect or validate any amendment, alteration or repeal of
any of the provisions of the Restated Certificate of Incorporation of
the Corporation or of any certificate amendatory or supplemental
thereto which amendment, alteration or repeal would, if effected,
adversely affect the preferences, rights, powers or privileges of this
Series R Preferred Stock.
B. Creation of Adjustable Rate Cumulative Preferred Stock, Series B.
A series of Preferred Stock of the Corporation, consisting of 1,200,000
shares, is hereby created and designated as "Adjustable Rate Cumulative
Preferred Stock, Series B" (hereinafter referred to as "this Series B"),
which series of Preferred Stock shall have a stated value of $50 per share
and the following rights and preferences:
(a) Dividends.
(1) Dividends shall accrue daily on the shares of this
Series B for each dividend payment period at the following rates:
(i) for the dividend payment period from the date of their
original issuance to and including July 31, 1987 at the rate of
7.25% per annum, and (ii) for each
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<PAGE> 15
quarterly dividend payment period thereafter, commencing on
August 1, November 1, February 1 or May 1, as the case may be, of
each year and ending on and including the day next preceding the
first day of the next such quarterly dividend payment period (a
"Quarterly Dividend Period"), at the Applicable Rate (as defined
in paragraph (2) of this Section (a)) from time to time in effect
for each such Quarterly Dividend Period. Such dividends,
calculated as a percentage of stated value, shall accrue from the
date of original issuance of such shares, shall be payable in
arrears, when, as and if declared by the Board of Directors, on
the first day of February, May, August and November of each year,
commencing August 1, 1987 and shall cumulate if not paid on such
payment date. Each such dividend shall be paid to the holders of
record of shares of this Series B as they appear on the books of
the Corporation on such record dates, not exceeding 30 days
preceding the payment dates thereof, as shall be fixed by the
Board of Directors of the Corporation or by a duly authorized
committee thereof.
(2) Except as provided below in this paragraph, the
"Applicable Rate" for any Quarterly Dividend Period shall be
1.50% less than the highest of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate and the Thirty Year Constant Maturity
Rate (each as hereinafter defined) as determined in advance for
such Quarterly Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or
more of such rates cannot be determined for any Quarterly
Dividend Period, then the Applicable Rate for such Quarterly
Dividend Period shall be 1.50% less than the higher of whichever
of such rates can be so determined. In the event that the
Corporation determines in good faith that none of such rates can
be determined for any Quarterly Dividend Period, then the
Applicable Rate in effect for the preceding dividend payment
period shall continue for such Quarterly Dividend Period.
Notwithstanding the foregoing, the Applicable Rate for any
Quarterly Dividend Period shall in no event be less than 6% per
annum nor greater than 11% per annum.
(3) Except as provided below in this paragraph, the
"Treasury Bill Rate" for each Quarterly Dividend Period shall be
the arithmetic average of the two most recent weekly per annum
market discount rates for three-month U.S. Treasury bills, as
published weekly by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") during the period of
fourteen calendar days (a "Calendar Period") immediately prior to
the last ten calendar days of January, April, July or October, as
the case may be, prior to the commencement of the Quarterly
Dividend Period for which the dividend rate on this Series B is
being determined (or the one weekly per annum market discount
rate, if only one such rate shall be so published during such
Calendar Period). In the event that the Federal Reserve Board
does not publish such a
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<PAGE> 16
weekly per annum market discount rate during such Calendar
Period, then the Treasury Bill Rate for such Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum market discount rates for three-month U.S.
Treasury bills as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation (or the one weekly per annum
market discount rate, if only one such rate shall be so published
during such Calendar Period). In the event that a per annum
market discount rate for three-month U.S. Treasury bills shall
not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such
Quarterly Dividend Period shall be the arithmetic average of the
two most recent weekly per annum market discount rates for all of
the U.S. Treasury bills then having maturities of not less than
80 nor more than 100 days, as published during such Calendar
Period by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such rates, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by the
Corporation (or the one weekly per annum market discount rate, if
only one such rate shall be so published during such Calendar
Period). In the event that the Corporation determines in good
faith that for any reason no such U.S. Treasury bill rates were
published as provided above during such Calendar Period, then the
Treasury Bill Rate for such Quarterly Dividend Period shall be
the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each
of the issues of marketable non-interest bearing U.S. Treasury
securities with a maturity of not less than 80 nor more than 100
days from the date of each such quotation, as chosen and quoted
daily for each business day in New York City (or less frequently
if daily quotations shall not be generally available) to the
Corporation by at least three recognized dealers in the U.S.
Government securities selected by the Corporation. In the event
that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Treasury Bill Rate for any
Quarterly Dividend Period as provided above in this paragraph,
the Treasury Bill Rate for such dividend period shall be the
arithmetic average of the per annum market discount rates based
upon the closing bids during such Calendar Period for each of the
issues of marketable interest-bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days (from
the date of such quotation), as chosen and quoted daily for each
business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation
by at least three recognized dealers in U.S. Government
securities selected by the Corporation.
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<PAGE> 17
(4) Except as provided below in this paragraph, the "Ten
Year Constant Maturity Rate" for each Quarterly Dividend Period
shall be the arithmetic average of the two most recent weekly per
annum Ten Year Average Yields (as hereinafter defined), as
published weekly by the Federal Reserve Board during the Calendar
Period immediately prior to the last ten calendar days of
January, April, July or October, as the case may be, prior to the
commencement of the Quarterly Dividend Period for which the
dividend rate on this Series B is being determined (or the one
weekly per annum Ten Year Average Yield, if only one such Yield
shall be so published during such Calendar Period). In the event
that the Federal Reserve Board does not publish such a weekly per
annum Ten Year Average Yield during such Calendar Period, then
the Ten Year Constant Maturity Rate for such Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields, as published weekly
during such Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the Corporation
(or the one weekly per annum Ten Year Average Yield, if only one
such Yield shall be so published during such Calendar Period).
In the event that a per annum Ten Year Average Yield shall not be
published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for
such dividend period shall be the arithmetic average of the two
most recent weekly per annum average yields to maturity for all
of the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) then having
maturities of not less than eight nor more than twelve years, as
published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board shall not publish such
yields, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation (or the one
weekly per annum average yield to maturity, if only one such
yield shall be so published during such Calendar Period). In the
event that the Corporation determines in good faith that for any
reason the Corporation cannot determine the Ten Year Constant
Maturity Rate for any Quarterly Dividend Period as provided above
in this paragraph, then the Ten Year Constant Maturity Rate for
such dividend period shall be the arithmetic average of the per
annum average yields to maturity based upon the closing bids
during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not
less than eight nor more than twelve years from the date of each
such quotation, as chosen and quoted daily for each business day
in New York City (or less frequently if daily quotations shall
not be generally available) to the Corporation by at least three
recognized dealers in U.S. Government securities selected by the
Corporation.
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<PAGE> 18
(5) Except as provided below in this paragraph, the
"Thirty Year Constant Maturity Rate" for each Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields (as hereinafter
defined), as published weekly by the Federal Reserve Board during
the Calendar Period immediately prior to the last ten calendar
days of January, April, July or October, as the case may be,
prior to the Quarterly Dividend Period for which the dividend
rate on this Series B is being determined (or the one weekly per
annum Thirty Year Average Yield, if only one such Yield shall be
so published during such Calendar Period). In the event that the
Federal Reserve Board does not publish such a weekly per annum
Thirty Year Average Yield during such Calendar Period, then the
Thirty Year Constant Maturity Rate for such Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields, as published weekly
during such Calendar Period by any Federal Reserve Bank or by and
U.S. Government department or agency selected by the Corporation
(or the one weekly per annum Thirty Year Average yield, if only
one such yield shall be so published during such Calendar
Period). In the event that a per annum Thirty Year Average Yield
shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Thirty Year Constant
Maturity Rate for such Quarterly Dividend Period shall be the
arithmetic average of the two most recent weekly per annum
average yields to maturity for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having maturities of not less than
twenty-eight nor more than thirty years, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency
selected by the Corporation (or the one weekly per annum average
yield to maturity, if only one such yield shall be so published
during such Calendar Period). In the event that the Corporation
determines in good faith that for any reason the Corporation
cannot determine the Thirty Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph,
then the Thirty Year Constant Maturity Rate for such Quarterly
Dividend Period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during
such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) with a final maturity date not less than
twenty-eight nor more than thirty years from the date of each
such quotation, as chosen and quoted daily for each business day
in New York City (or less frequently if daily quotations shall
not be generally available) to the Corporation by at least three
recognized dealers in U.S. Government securities selected by the
Corporation.
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<PAGE> 19
(6) The Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate shall each be
rounded to the nearest five hundredths of a percentage point.
(7) The amount of dividends per share payable for each
dividend period shall be computed by dividing the Applicable Rate
for such dividend period by four and applying such rate against
the $50 stated value per share of the shares of this Series B,
rounding to the nearest cent. The amount of dividends payable
for the dividend payment period from the date of original issue
to and including July 31, 1987 or any period shorter than a full
dividend payment period shall be computed on the basis of 30-day
months, a 360-day year and the actual number of days elapsed in
the period.
(8) The Applicable Rate with respect to each Quarterly
Dividend Period will be calculated as promptly as practicable by
the Corporation according to the appropriate method described
herein. The mathematical accuracy of each such calculation will
be confirmed in writing by independent accountants of recognized
standing. The Corporation will cause notice of the Applicable
Rate for the then current Quarterly Dividend Period to be mailed
to holders of shares of this Series B with the dividend payment
checks for the preceding Quarterly Dividend Period, or, if such
notice is not practicable, will cause notice of the Applicable
Rate to be published as soon thereafter as practicable in a
newspaper of general circulation in New York City.
(9) For purposes of this Section (a), the term
(i) "Special Securities" shall mean securities which
can, at the option of the holder, be surrendered at face
value in payment of any federal estate tax or which provide
tax benefits to the holder and are priced to reflect such
tax benefits or which were originally issued at a deep or
substantial discount;
(ii) "Ten Year Average Yield" shall mean the average
yield to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to
constant maturities of ten years); and
(iii) "Thirty Year Average Yield" shall mean the
average yield to maturity for actively traded marketable
U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 30 years).
(10) No dividends shall be declared or paid or set apart
for payment on any series of Preferred Stock or any class of
capital stock of
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<PAGE> 20
the Corporation ranking, as to dividends, on a parity with or
junior to this Series B for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart
for payment on this Series B for all past dividend payment
periods. When full cumulative dividends for all past dividend
periods are not paid or provided for, as aforesaid, upon the
shares of this Series B and any other series of Preferred Stock
and any other class of capital stock of the Corporation ranking,
as to dividends, on a parity with this Series B (herein referred
to as "Dividend Parity Stock"), all dividends declared upon
shares of this Series B and any other Dividend Parity Stock shall
be declared pro rata so that the amount of dividends declared per
share on this Series B and all other Dividend Parity Stock shall
in all cases bear to each other the same ratio that accrued
dividends per share on the shares of this Series B and such other
Dividend Parity Stock bear to each other. Holders of shares of
this Series B shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on this Series B. No interest or
sum of money in lieu of interest shall be payable in respect of
any dividend payment or payments on this Series B which may have
accumulated or be in arrears.
(11) So long as any shares of this Series B are
outstanding, no dividend, other than a dividend in Common Stock
or in any other stock of the Corporation ranking junior to this
Series B as to dividends and upon liquidation and other than as
provided in paragraph (10) of this Section (a), shall be declared
or paid or set aside for payment nor shall any other distribution
be declared or made upon the Common Stock or upon any other stock
of the Corporation ranking junior to or on a parity with this
Series B as to dividends or upon liquidation, nor shall any
Common Stock nor any other stock of the Corporation ranking
junior to or on a parity with this Series B as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for
a sinking fund for the redemption of any shares of any such
stock) by the Corporation or any subsidiary thereof (except by
conversion into or exchange for stock of the Corporation ranking
junior to this Series B as to dividends and upon liquidation)
unless, in each case, full cumulative dividends on all
outstanding shares of this Series B shall have been paid for all
past dividend payment periods.
(b) Redemption.
(1) The shares of this Series B shall not be redeemable
prior to May 1, 1992. On and after May 1, 1992, the Corporation,
at its option, may redeem shares of this Series B, as a whole or
in part, upon not less than 30 nor more than 60 days' notice by
mail, at a redemption
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<PAGE> 21
price (i) in the case of redemption on or after May 1, 1992 and
prior to May 1, 1995, of $51.50 per share and (ii) in the case of
a redemption occurring on or after May 1, 1995, of $50 per share,
plus, in each case, all accrued and unpaid dividends thereon to
the date fixed for redemption.
(2) In the event that fewer than all the outstanding
shares of this Series B are to be redeemed as permitted by this
Section (b), the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be
redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by such other method as
may be approved by the Board of Directors to conform to any rule
or regulation of any stock exchange upon which the shares of this
Series B may at the time be listed.
(3) Notice of any redemption of shares of this Series B,
specifying the date fixed for redemption (herein referred to as
the "Redemption Date") and place of redemption, shall be given by
first class mail mailed to each holder of record of the shares to
be redeemed, at his address of record, not more than 60 nor less
than 30 days prior to the Redemption Date; if less than all the
shares owned by such shareholder are then to be redeemed, the
notice shall also specify the number of shares thereof which are
to be redeemed.
(4) Notice of redemption of shares of this Series B having
been given as provided in paragraph (3) of this Section (b),
unless default be made in the payment in full of the redemption
price and all accrued and unpaid dividends to the Redemption
Date, dividends on the shares called for redemption shall cease
to accrue at the Redemption Date, and all rights of the holders
of such shares as shareholders of the Corporation by reason of
the ownership of such shares shall cease on the Redemption Date,
except the right to receive the amount payable upon redemption of
such shares, without interest thereon, on presentation and
surrender of the respective certificates representing such
shares, and such shares shall not after the Redemption Date be
deemed to be outstanding. In case fewer than all the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series B which shall at any time
have been redeemed shall, after such redemption, have the status
of authorized but unissued shares of Preferred Stock, without
designation as to series until such shares are once more
designated as part of a particular series by the Board of
Directors.
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<PAGE> 22
(6) In the event that full cumulative dividends for all
past dividend payment periods on shares of this Series B have not
been paid, no shares of this Series B shall be redeemed unless
all outstanding shares of this Series B are simultaneously
redeemed, and neither the Corporation nor any subsidiary thereof
shall purchase or otherwise acquire any shares of this Series B;
provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series B pursuant to a
purchase or exchange offer made on the same terms to holders of
all outstanding shares of this Series B.
(7) Shares of this Series B are not subject or entitled to
the benefit of a sinking fund.
(c) Conversion or Exchange. The holders of shares of this
Series B shall not have any rights to convert such shares into or
exchange such shares for shares of Common Stock of the Corporation or
any other stock of the Corporation.
(d) Preemptive Rights. Shares of this Series B are not
entitled to any preemptive rights.
(e) Voting. Except as required by law, the shares of this
Series B shall not have any voting powers, either general or special,
except as provided in the following paragraphs (1) through (3):
(1) If at the time of any annual meeting of shareholders
of the Corporation for the election of directors, the Corporation
shall have failed to pay full cumulative dividends on the shares
of this Series B for six dividend payment periods, whether or not
consecutive, or shall fail to pay in full such dividends, if any,
as may accumulate on any other series of Preferred Stock for a
period of 18 months (referred to herein as a "Dividend Payment
Default"), the number of directors of the Corporation shall be
increased by two and the holders of all outstanding series of
Preferred Stock in respect of which such a default in payment of
dividends as described hereinabove exists, voting as a single
class without regard to series, will be entitled to elect such
additional two directors until full cumulative dividends for all
past dividend payment periods on all series of Preferred Stock
have been paid or declared and set apart for payment. If and
when full cumulative dividends upon all series of Preferred Stock
for all past dividend payment periods shall have been paid or
declared and set apart for payment, the holders of Preferred
Stock shall be divested of the foregoing special voting right,
subject to revesting in the event of each and every subsequent
Dividend Payment Default. Upon the termination of each such
special voting right, the term of office of each director elected
by the holders of shares of Preferred Stock in respect of which a
default exists in the payment of
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<PAGE> 23
dividends as described hereinabove (herein referred to as a
"Preferred Director") pursuant to such special voting right shall
forthwith terminate and the number of directors constituting the
Board of Directors shall be reduced by two. Any Preferred
Director may be removed by, and shall not be removed except by,
the vote of the holders of record of the outstanding shares of
Preferred Stock in respect of which such a default exists, voting
together as a single class without regard to series, at a meeting
of the shareholders, or of the holders of shares of such
Preferred Stock, called for the purpose. So long as a Dividend
Payment Default shall continue (A) any vacancy in the office of a
Preferred Director may be filled (except as provided in the
following clause (B)) by an instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and
(B) in the case of the removal of any Preferred Director, the
vacancy may be filled by the vote of the holders of the
outstanding shares of Preferred Stock in respect of which such a
default exists, voting together as a single class without regard
to series, at the same meeting at which such removal shall be
voted or a subsequent meeting. Each director appointed as
aforesaid by the remaining Preferred Director shall be deemed,
for all purposes hereof, to be a Preferred Director.
(2) Unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of
the holders of at least 66-2/3% of all of the shares of this
Series B at the time outstanding given in person or by proxy,
either in writing or by a vote at a meeting called for the
purpose, on which matter the holders of shares of this Series B
shall vote together as a separate class, shall be necessary to
authorize, effect or validate any amendment, alteration or repeal
of any of the provisions of the Restated Certificate of
Incorporation of the Corporation or of any certificate amendatory
or supplemental thereto which amendment, alteration or repeal
would, if effected, adversely affect the preferences, rights,
powers or privileges of this Series B other than any such
amendment or alteration subject to paragraph (3) of this Section
(e).
(3) Unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of
the holders of at least a majority of all of the shares of this
Series B and all other series of Preferred Stock ranking on a
parity with this Series B either as to the dividends or upon
liquidation, at the time outstanding, given in person or by
proxy, either in writing or by a vote at a meeting called for the
purpose, on which matter the holders of shares of this Series B
and such other series of Preferred Stock shall vote together as a
single class without regard to series, shall be necessary to
issue, authorize or increase the authorized amount of any class
of capital stock of the Corporation or series of Preferred Stock
ranking prior to the shares
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<PAGE> 24
of this Series B as to dividends or upon liquidation or the
creation or authorization of any obligation or security
convertible into or evidencing the right to purchase any such
shares.
(f) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of the shares of this Series B shall be
entitled to receive out of the assets of the Corporation, before
any payment or distribution shall be made on the Common Stock or
on any other stock of the Corporation ranking junior to this
Series B upon liquidation, the amount of $50 per share, plus a
sum equal to all dividends accrued on such shares (whether or not
earned or declared) and unpaid to the date of final distribution.
The sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially
all the property and assets of the Corporation shall not be
deemed a dissolution, liquidation or winding up of the
Corporation for the purposes of this Section (f), nor shall the
merger or consolidation of the Corporation into or with any other
corporation or association or the merger or consolidation of any
other corporation or association into or with the Corporation, be
deemed to be a dissolution, liquidation or winding up of the
Corporation for the purposes of this Section (f).
(2) After the payment in cash (in New York Clearing House
funds or its equivalent) to the holders of the shares of this
Series B of the full preferential amounts for the shares of this
Series B, the holders of this Series B as such shall have no
right or claim to any of the remaining assets of the Corporation.
(3) In the event the assets of the Corporation available
for distribution to the holders of shares of this Series B upon
any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in
full all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f), no distribution shall be made
on account of any shares of any other series of Preferred Stock
or any other class of stock of the Corporation ranking on a
parity with the shares of this Series B upon such dissolution,
liquidation or winding up unless proportionate amounts shall be
paid on account of the shares of this Series B, ratably, in
proportion to the full amounts to which holders of all such
shares which are on a parity with the shares of this Series B are
respectively entitled upon such dissolution, liquidation or
winding up.
(4) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of this Series B then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for
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<PAGE> 25
distribution to its shareholders all amounts to which such
holders are entitled pursuant to paragraph (1) of this Section
(f) before any payment shall be made to the holders of any series
of Preferred Stock or any class of stock of the Corporation
ranking junior to this Series B upon liquidation.
(g) For purposes of this amendment, any stock of any series or
class of the Corporation shall be deemed to rank:
(1) prior to the shares of this Series B, as to dividends
or upon liquidation, if the holders of such series or class shall
be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of shares of this Series B;
(2) on a parity with shares of this Series B, as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those
of this Series B, if the holders of such stock shall be entitled
to the receipt of dividends or of amounts distributable upon the
dissolution, liquidation or winding up of the Corporation, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority, one over the
other, as between the holders of such stock and the holders of
shares of this Series B; and
(3) junior to shares of this Series B, as to dividends or
upon liquidation, if such stock shall be Common Stock or if the
holders of shares of this Series B shall be entitled to receipt
of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such series
or class.
C. Creation of Adjustable Rate Cumulative Preferred Stock, Series C.
A series of Preferred Stock of the Corporation, consisting of 504,481
shares, is hereby created and designated as Adjustable Rate Cumulative
Preferred Stock, Series C (hereinafter referred to as "this Series C"),
which series of Preferred Stock shall have a stated value of $25 per share
and the following rights and preferences:
1. Dividends. The holders of this Series C shall be entitled to the
payment of cumulative dividends, from the date of issuance, at the
Applicable Rate (as defined below), payable in cash. Such dividends,
when due, must be paid before any dividend shall be paid on shares of
common stock of the Corporation. Such dividends shall be payable, on
a pro rata basis, with dividends on this Series C.
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<PAGE> 26
Holders of shares of this Series C will be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation,
out of assets of the Corporation legally available for payment,
dividends payable at the rate of 9.50% per annum for the initial
period ending June 15, 1983, and at the Applicable Rate from time to
time in effect, for each quarterly dividend period thereafter.
Dividends on this Series C will be payable quarterly on March 15, June
15, September 15 and December 15 of each year, with the first dividend
payable on March 15, 1996. Each such dividend will be payable to
holders of record as they appear on the stock books of the Corporation
on such record dates, not exceeding 30 days preceding the payment
dates thereof, as shall be fixed by the Board of Directors of the
Corporation. Dividends will be cumulative from the date of issue. No
full dividends will be declared or paid or set apart for payment on
preferred stock of any series ranking, as to dividends, on a parity
with or junior to this Series C for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for
such payment on this Series C for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. When dividends are not paid in full upon this Series C and
any other preferred stock ranking on a parity as to dividends with
this Series C, all dividends declared upon shares of this Series C and
any other preferred stock ranking on a parity as to dividends will be
declared pro rata. Except as provided in the preceding sentence,
unless full cumulative dividends on this Series C have been paid or
declared and set apart for payment, no dividends (other than in common
stock or another stock ranking junior to this Series C as to dividends
and upon liquidation) will be declared or paid or set aside for
payment or other distribution made upon the common stock of the
Corporation or on any other stock of the Corporation ranking junior to
or on a parity with this Series C as to dividends or upon liquidation,
nor shall any common stock nor any other stock of the Corporation
ranking junior to or on a parity with this Series C as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any monies be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by
the Corporation (except by conversion into or exchange for stock of
the Corporation ranking junior to this Series C as to dividends and
upon liquidation).
Except as provided below in this paragraph, the "Applicable Rate"
for any dividend period will be 2.75% less than the highest of (a) the
3 month Treasury Bill Rate, (b) the Ten Year Constant Maturity Rate
and (c) the Twenty Year Constant Maturity Rate (each as hereinafter
defined) for such dividend period. If the Corporation determines in
good faith that for any reason one or more of such rates cannot be
determined for any dividend period, then the Applicable Rate for such
dividend period will be 2.75% less than the higher of whichever of
such rates can be so determined. If the Corporation determines in
good faith that none of such rates can be determined for any dividend
period, then the Applicable Rate in effect for the preceding dividend
period will be
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<PAGE> 27
continued for such dividend period. However, the Applicable Rate
for any dividend period will in no event be less than 6.00% per
annum nor greater than 12.00% per annum.
Except as provided below, the "Treasury Bill Rate" for each
quarterly dividend will be the arithmetic average of the two most
recent weekly per annum secondary market discount rates (or the
one weekly per annum secondary market discount rate, if only one
such rate shall be published during the relevant Calendar Period)
for 3 month U.S. Treasury bills, as published by the Federal
Reserve Board (the "Board") during the Calendar Period
immediately prior to the ten calendar days immediately preceding
the March 15, June 15, September 15 or December 15, as the case
may be, prior to the dividend period for which the dividend rate
is being determined.
Except as provided below, the "Ten Year Constant Maturity
Rate" for each dividend period will be the arithmetic average of
the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such
Yield shall be published during the relevant Calendar Period) as
published by the Board during the Calendar Period immediately
prior to the ten calendar days immediately preceding the March
15, June 15, September 15 or December 15, as the case may be,
prior to the dividend period for which the dividend rate is being
determined.
Except as provided below, the "Twenty Year Constant Maturity
Rate" for each dividend period will be the arithmetic average of
the two most recent weekly per annum Twenty Year Average Yields
(or the one weekly per annum Twenty Year Average Yield, if only
one such Yield shall be published during the relevant Calendar
Period), as published by the Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding
the March 15, June 15, September 15 or December 15, as the case
may be, prior to the dividend period for which the dividend rate
is being determined.
If in any case the Board does not publish weekly any per
annum data required for determination of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant
Maturity Rate, as the case may be, for any dividend period as
aforesaid during any such Calendar Period, then such calculation
will be made on the basis of the arithmetic average of such per
annum data for the most recent weeks (or on the basis of such per
annum data for one week if such per annum data shall be published
for only one week during the relevant Calendar Period), as
published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. If such per annum data shall not be
published by the Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during the Calendar Period,
then such calculation will be made on the basis of the arithmetic
average of such per annum data for the two most recent weeks (or
such per annum data for one
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<PAGE> 28
week if such data shall be published for only one week during the
relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury bills or securities, as the case may be
(other than Special Securities, as defined below) having
comparable maturities as follows: (a) for U.S. Treasury bills,
those having maturities of not less than 80 not more than 100
days; (b) for ten year U.S. Treasury securities, those fixed
interest rate securities having maturities of not less than eight
nor more than 12 years; and (c) for twenty year U.S. Treasury
securities, those fixed interest rate securities having
maturities of not less than 18 nor more than 22 years, in each
case as published during such Calendar Period by the Board or,
if, in any case, the Board shall not publish such data, by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. If the Corporation
determines in good faith that for any reason no U.S. Treasury
bill rates are published during any relevant Calendar Period,
then the Treasury Bill Rate for the relevant dividend period will
be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each
of the issues of marketable bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from
the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation
by at least three recognized dealers in U.S Government securities
selected by the Corporation. If the Corporation determines in
good faith that for any reason it cannot determine the Applicable
Rate for any dividend period on the basis of such per annum data
published during such calendar period by the Board or such other
bank, agency or department as aforesaid, then the Applicable Rate
will be calculated on the basis of the arithmetic average of the
per annum market discount rates (or average yields to maturity,
as the case may be) based upon the closing bids during such
Calendar Period for each of the issues of actively traded
marketable interest-bearing or fixed interest rate U.S. Treasury
securities or bills, as the case may be (other than Special
Securities), of relevant maturities from the date of any such
quotation, as chosen and quoted daily for each business day in
New York City (or less frequently if daily Quotations are not
generally available) to the Corporation by at least three
recognized dealers in U.S. Government securities selected by the
Corporation.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Twenty Year Constant Maturity Rate will each be rounded
to the nearest five-hundredths of a percentage point.
The amount of dividends per share for each dividend period
will be computed by dividing the dividend rate for such dividend
period by four and applying such rate against the stated value
per share of this Series C. The amount of dividends payable for
the initial dividend period or for any period shorter than a full
quarterly dividend period will be computed on the basis of a
90-day quarter and the actual number of days elapsed in such
period.
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<PAGE> 29
The Applicable Rate with respect to each dividend period
will be calculated as promptly as practicable by the Corporation
according to the appropriate method described herein. The
mathematical accuracy of each such calculation will be confirmed
in writing by independent accountants of recognized standing.
The Corporation will cause each Applicable Rate to be published
in a newspaper of general circulation in New York City prior to
the commencement of the new dividend period to which it applies
and will cause notice of such Applicable Rate to be enclosed with
the dividend payment checks next mailed to the holders of this
Series C.
As used herein, the term "Calendar Period" means a period of
14 days; the term "Special Securities" means securities which
can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax benefits
to the holder and are priced to reflect such tax benefits or
which were originally issued at a deep or substantial discount;
the term "Ten Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of ten
years); and the term "Twenty Year Average Yield" means the
average yield to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to constant
maturities of 20 years).
2. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders
of shares of this Series C are entitled to receive, out of assets of
the Corporation available for distribution to stockholders, before any
distribution of assets is made to holders of common stock, liquidating
distributions in the amount of $25.00 per share plus accrued and
unpaid dividends. If upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the amounts payable with
respect to this Series C and any other shares of stock of the
Corporation ranking as to any such distribution on a parity with this
Series C are not paid in full, the holders of this Series C and of
such other shares will share ratably in any such distribution of
assets of the Corporation in proportion to the full respective
liquidation preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which
they are entitled, the holders of shares of this Series C will not be
entitled to any further participation in any distribution of assets of
the Corporation. A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation in consideration
for the issuance of securities of another corporation, will not be
deemed to be a liquidation, dissolution or winding up of the
Corporation.
3. No Voting Rights. The holders of this Series C shall not be
entitled to vote at any meeting of shareholders or for any other
purpose or otherwise to participate in any action taken by the
shareholders, or to receive notice of any meeting of shareholders,
except that the holders of this Series C will have the right to vote
to elect directors of the Corporation if the equivalent of six
quarterly dividends payable on this Series C are in default. In the
case of such default, and until all dividends in default
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<PAGE> 30
have been paid or declared and set apart for payment, the holders of
outstanding shares of this Series C will be entitled to vote in the
election of directors on the same basis as the holders of the
Corporation's common stock are entitled to vote.
The affirmative vote of the holders of a majority of the
outstanding shares of this Series C, voting together as a single
class, on the basis of one vote per share, will be required for any
amendment of the Corporation's Restated Certificate of Incorporation
which will materially and adversely affect the rights or preferences
of this Series C.
4. Redemption. Shares of this Series C are redeemable in whole
or in part, at the option of the Corporation, upon not less than 30
nor more than 60 days' notice by mail at a redemption price of $25.00
per share, plus accrued and unpaid dividends to the date fixed for
redemption.
If full cumulative dividends on this Series C have not been paid
or declared and set apart for payment, this Series C may not be
redeemed in part and the Corporation may not purchase or acquire any
shares of this Series C.
Any shares of this Series C redeemed shall assume the status of
authorized and unissued shares and may be reissued as shares of the
same or any other series of preferred stock.
4. The location of the current registered office of the Corporation
in this State is 301 Carnegie Center, P. O. Box 2066, Princeton, New Jersey
08543-2066, and the name of the current agent therein and in charge thereof
upon whom process against this Corporation may be served is Richard F.
Ober, Jr.
5. The current Board of Directors consists of nineteen persons whose
names and addresses are as follows:
S. RODGERS BENJAMIN Chairman
Flemington Fur Company
8 Spring Street
Flemington, NJ 08822
ROBERT L. BOYLE Publisher Emeritus
of the Dispatch
7 Orchard Lane
Rumson, NJ 07760
JAMES C. BRADY, JR. Partner
Mill House Associates, Inc.
Box 351
Gladstone, NJ 07934
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<PAGE> 31
JOHN G. COLLINS Vice Chairman
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
ROBERT G. COX President
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
T. J. DERMOT DUNPHY President & CEO
Sealed Air Corporation
Park 80 Plaza East
Saddle Brook, NJ 07662
ANNE EVANS ESTABROOK Owner
Elberon Development Co.
P.O. Box 677
Kenilworth, NJ 07033-0677
ELINOR J. FERDON Professional Volunteer
Litchfield Way
P.O. Box 255
Alpine, NJ 07620
FRED G. HARVEY Vice President
E. & E. Corp.
225 West 2nd Street
Bethlehem, PA 18015
JOHN R. HOWELL Chairman
First Valley Corporation
One Bethlehem Plaza
Bethlehem, PA 18018
FRANCIS J. MERTZ President
Fairleigh Dickinson University
1000 River Road
Teaneck, NJ 07666
GEORGE L. MILES, JR. President & CEO
WQED Pittsburgh
4802 Fifth Avenue
Pittsburgh, PA 15213
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<PAGE> 32
HENRY S. PATTERSON II President
E'town Corporation
P.O. Box 788
Westfield, NJ 07091
THOMAS D. SAYLES JR. Former Chairman
The Summit Bancorporation
One Main Street
Chatham, NJ 07928
T. JOSEPH SEMROD Chairman and CEO
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
RAYMOND SILVERSTEIN Consultant
Alloy, Silverstein, Shapiro, Adams
Mulford & Co.
900 North Kings Highway
Cherry Hill, NJ 08034
ORIN R. SMITH Chairman and CEO
Engelhard Corporation
101 Wood Avenue
Iselin, NJ 08830
JOSEPH M. TABAK President and CEO
JPC Enterprises, Inc.
30 South Adelaide Avenue
Penthouse F
Highland Park, NJ 08904
DOUGLAS G. WATSON President
Pharmaceuticals Division
Ciba-Geigy Corporation
556 Morris Avenue
Summit, NJ 07901
The Board of Directors shall consist of not less than five (5) persons
and not more than forty (40) persons, as may be determined from time to time in
the discretion of the Board of Directors.
Except as otherwise provided by statute, by this Restated Certificate
of Incorporation as the same may be amended from time to time, or by By-Laws as
the same may be amended from time to time, all corporate powers may be exercised
by the Board of
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<PAGE> 33
Directors. Without limiting the foregoing, the Board of Directors shall have
power, without shareholders' action:
A. To authorize and cause to be executed and/or issued mortgages,
liens, bonds, debentures or other obligations including bonds, debentures
or other obligations convertible into, or exchangeable for stock of any
class, or bearing, warrants or other evidences of optional rights to
purchase or subscribe to, or both, stock of any class, upon the terms, in
the manner and under the condition fixed by resolution of the Board of
Directors prior to the issue thereof, secured or not secured, upon the real
and personal or other property of the Corporation, or any part thereof,
provided that a majority of the whole Board of Directors concur therein by
resolution or in writing.
B. With the sanction of a resolution passed by the holders of
two-thirds of the shares issued and outstanding at any annual or special
meeting of shareholders duly called for that purpose, to sell, assign,
transfer or otherwise dispose of all the rights, franchises and property of
the Corporation as an entirety; and any such sale may be wholly or partly
in consideration of the bonds, mortgages, debenture obligations, securities
or evidences of indebtedness, or shares of the capital stock, of any
corporation or corporations of any state, territory or foreign country,
formed or to be formed for the purpose of purchasing the same.
C. To loan money to, or guarantee an obligation of, or otherwise
assist any officer or other employee of the Corporation or of any
subsidiary, including an officer or employee who is also a director of the
Corporation, whenever, in the judgment of the Board of Directors, such
loan, guarantee, or assistance may reasonably be expected to benefit the
Corporation.
D. To designate three (3) or more of their number to constitute an
executive committee, which committee shall for the time being and subject
to the control and direction of the Board of Directors have and exercise
all the powers of the Board of Directors which may be lawfully delegated
for the management of the business and affairs of the Corporation, and
shall have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
6. This Restated Certificate of Incorporation is to become effective as
of March 1, 1996.
7. Except to the extent prohibited by law, no Director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders,
provided that a Director or officer shall not be relieved from liability for any
breach of duty based upon an act or omission (a) in breach of such person's duty
of loyalty to the Corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt by such person
of an improper personal benefit. Neither the amendment or repeal of this
Article 7, nor the adoption of any provision of this Restated Certificate of
Incorporation inconsistent with this Article 7, shall
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<PAGE> 34
eliminate or reduce the effect of this Article 7 in respect of any matter which
occurred, or any cause of action, suit or claim which but for this Article 7
would have accrued or arisen, prior to such amendment, repeal or adoption.
8. Except as may be otherwise provided in respect of directors to be
elected by the holders of Preferred Stock, or any series thereof, by the terms
of any resolution or resolutions of the Board of Directors providing for any
series of Preferred Stock adopted pursuant to the provisions of Article 3
hereof, the Board of Directors shall be classified, with respect to the time for
which directors shall hold office, into three classes, as determined by the
Board of Directors, each as nearly equal in number as possible. At the annual
meeting of the shareholders of the Corporation at which this Article 8 is
adopted, the first such class of directors shall be elected for a term expiring
upon the next following annual meeting of shareholders and upon the election and
qualification of their respective successors, the second such class of directors
shall be elected for a term expiring upon the second following annual meeting of
shareholders and upon the election and qualification of their respective
successors, and the third such class of directors shall be elected for a term
expiring upon the third following annual meeting of shareholders and upon the
election and qualification of their respective successors. At each annual
meeting of shareholders following the annual meeting at which this Article 8 is
adopted, directors of the class of directors whose term expires at such annual
meeting shall be elected for a term expiring upon the third following annual
meeting of shareholders and upon the election and qualification of their
respective successors. Whenever the number of directors constituting the whole
Board of Directors is changed, except as may be otherwise provided in respect of
directors to be elected by the holders of Preferred Stock, or any series
thereof, by the terms of any resolution or resolutions of the Board of Directors
providing for any series of Preferred Stock adopted pursuant to the provisions
of Article 3 hereof, any increase or decrease in the number of directors shall
be apportioned by the Board of Directors among the three classes so as to
maintain all the classes as equal in number as possible, and each such director
shall hold office until the next annual meeting of shareholders and until such
director's successor shall have been elected and qualified; provided, however,
that no decrease in the number of directors shall effect the then-current term
of any director then in office.
A director may be disqualified from office as required by law or under
any applicable rules, regulations or orders of any federal or state regulatory
authority or by provisions of general applicability in the Restated Certificate
of Incorporation or By-Laws adopted prior to such director's election.
Any action by the Board of Directors or shareholders creating one or
more vacancies on the Board of Directors by increasing the authorized number of
directors shall be effective only if such action has received the affirmative
vote, in the case of the Board of Directors, of eighty percent (80%) or more of
the directors then holding office or, in the case of the shareholders, of eighty
percent (80%) or more of the combined voting power of the then outstanding
shares of all classes and series of stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
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<PAGE> 35
9. Subject to the rights of the holders of shares of any series of
Preferred Stock or any other class of stock or series thereof having a
preference over the Common Stock as to dividends or upon liquidation, any action
required or permitted to be taken by the shareholders of the Corporation must be
effected exclusively either at a duly called annual or special meeting of
shareholders of the Corporation or by the unanimous (but no less than unanimous)
written consent of the shareholders.
10. In addition to any requirements of law and any other provision of the
Restated Certificate of Incorporation of the Corporation or any resolution or
resolutions of the Board of Directors providing for any series of Preferred
Stock adopted pursuant to Article 3 hereof (and notwithstanding the fact that
approval by a lesser vote may be permitted by law, any other Article, or other
provisions hereof or any such resolution or resolutions), the affirmative vote
of the holders of eighty percent (80%) or more of the combined voting power of
the then outstanding shares of all classes and series of stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend, alter or repeal, or
adopted any provision or take action inconsistent with, this Article 10 or
Articles 8 or 9 hereof.
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<PAGE> 1
EXHIBIT (3)B.
INDEX
TO
BY-LAWS
OF
SUMMIT BANCORP.
RESTATED OCTOBER 18, 1995
ARTICLE I - OFFICES
Section 1. Registered Office
ARTICLE II - MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting
Section 2. Special Meetings
Section 3. Place of Meetings
Section 4. Notice of Meetings
Section 5. Notice of Shareholder Business and Nominations
Section 6. Conduct of Meeting
Section 7. Quorum and Adjournment
Section 8. Vote of Shareholders
ARTICLE III - BOARD OF DIRECTORS
Section 1. Number
Section 2. General Powers
Section 3. Place of Meetings
Section 4. Organization Meeting
Section 5. Regular Meetings
Section 6. Special Meetings: Notice
Section 7. Quorum and Manner of Acting
Section 8. Voting
Section 9. Directors' Compensation
Section 10. Action Without Meeting
Section 11. Resignations
Section 12. Vacancies
Section 13. Eligibility
ARTICLE IV - COMMITTEES OF THE BOARD: EXECUTIVE COMMITTEE
Section 1. Constitution and Powers
Section 2. Regular Meetings
Section 3. Special Meetings
Section 4. Records
Section 5. Executive Committee
<PAGE> 2
ARTICLE V - AUDIT COMMITTEE
Section 1. Appointment
Section 2. Selection of Certified Public Accountants:
Conferences Therewith
Section 3. Conferring with Officers of the Corporation
ARTICLE VI - OFFICERS
Section 1. Officers
Section 2. Election and Term of Office
Section 3. Chief Executive Officer
Section 4. Chairman
Section 5. President
Section 6. Chairman of the Executive Committee
Section 7. Vice Chairmen
Section 8. Vice Presidents
Section 9. Secretary, Treasurer and Comptroller
Section 10. Auditor
Section 11. Compensation
ARTICLE VII - STOCK AND TRANSFERS OF STOCK
Section 1. Stock Certificates
Section 2. Transfer Agents and Registrars
Section 3. Transfers of Stock
Section 4. Lost Certificates
ARTICLE VIII - CORPORATE SEAL
Section 1. Seal
Section 2. Affixing and Attesting
ARTICLE IX - MISCELLANEOUS
Section 1. Fiscal Year
Section 2. Signatures on Negotiable Instruments
Section 3. Shares of Other Corporations
Section 4. References to Article and Section
Numbers and to the Certificate of Incorporation
Section 5. Indemnification and Insurance
Section 6. Waiver of Notice
ARTICLE X - AMENDMENTS
<PAGE> 3
As Restated October 18, 1995
BY-LAWS
OF
SUMMIT BANCORP.
ARTICLE I.
OFFICES.
Section 1. Registered Office. The registered office of Summit Bancorp.
(the "Corporation") shall be at 301 Carnegie Center, Princeton, New Jersey.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. An annual meeting of shareholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held in each calendar year. Unless the Board
of Directors fixes another date or time, which the Board is hereby authorized to
do, the annual meeting shall be held at 3:00 P.M. on the third Monday in April
of each year, if not a legal holiday, and if a legal holiday, the next business
day not a legal holiday.
Section 2. Special Meetings. Except as otherwise provided by law, special
meetings of the shareholders may be called at any time only by the Chairman, any
Vice Chairman, the President or a majority of the entire Board of Directors, as
defined in Article III, Section 1. Only such business may be transacted at any
special meeting of shareholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting pursuant to Section 4 hereof.
Section 3. Place of Meetings. Each meeting of shareholders shall be held
at such place either within or outside the State of New Jersey as may be
designated by the Board of Directors.
Section 4. Notice of Meetings. Except as otherwise provided or permitted
by law, the Certificate of Incorporation, or the By-Laws, written notice of each
meeting of shareholders shall be given to each shareholder of record entitled to
vote either by delivering such notice to the shareholder personally or by
mailing the same to the shareholder. If mailed, the notice shall be directed to
the shareholder in a postage-prepaid envelope at the shareholder's address as it
appears on the records of the Corporation. Notice of each meeting shall state
the place, date and hour of the meeting, and the purpose or purposes for which
the meeting is called, and shall be given or mailed not less than ten nor more
than sixty days before the date of the meeting. No notice of the time and place
of an adjourned annual or special meeting of shareholders need be given other
than by announcement at the meeting at which such
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adjournment is taken, unless a new record date is fixed by the Board. Except
as prohibited by law, any previously scheduled meeting of the shareholders may
be postponed and any special meeting of the shareholders may be canceled by
resolution of the Board of Directors upon public announcement given prior to
the date previously scheduled for such meeting.
Section 5. Notice of Shareholder Business and Nominations.
(a) Annual Meetings of Shareholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the shareholders may be made at an annual meeting
of shareholders: (A) pursuant to the Corporation's notice of meeting; (B) by or
at the direction of the Board of Directors; or (C) by any shareholder of the
Corporation who was a shareholder of record at the time of giving of a
shareholder's notice provided for in this By-Law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this By-law.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (C) of Section 5(a)(1) of
this By-Law, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareholder action. To be timely, a shareholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 80th day nor earlier
than the close of business on the 100th day prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the shareholder to be timely must be so
delivered not earlier than the close of business on the 100th day prior to such
annual meeting and not later than the close of business on the later of the 80th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a shareholder's
notice as described above. Such shareholder's notice shall set forth: (A) as
to each person whom the shareholder proposes to nominate for election or
re-election as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
nominated by the Board of Directors and those not nominated by the Board of
Directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected) and a written representation by such person that such
person, at the time of notification satisfies, and, on the date of the meeting
of shareholders at which such nomination would be voted upon and thereafter
during the continuation of directorship, will satisfy, the qualifications for
service as a director of Section 13 of Article III of these By-Laws; (B) as to
any other business that the shareholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any interest in such
business of such shareholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (C) as to the shareholder giving the notice and the
beneficial owner, if any, on
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whose behalf the nomination or proposal is made (i) the name and address of
such shareholder, as they appear on the Corporation's books, and of such
beneficial owner and the record owner of the shares beneficially owned, (ii)
the class and number of shares of the Corporation which are owned beneficially
and of record by such shareholder and such beneficial owner, (iii) a
description of all agreements, arrangements or understandings between such
shareholder and beneficial owner and any other shareholder or beneficial owner
relating to the matter to be voted on and any financial or contractual interest
of such shareholder or beneficial owner in the outcome of such vote and (iv)
such other information regarding the matter to be voted on and the shareholder
or beneficial owner intending to present the matter for a vote as would be
required to be included in a proxy statement soliciting the vote of
shareholders in respect of such matter pursuant to the proxy rules of the
Securities and Exchange Commission.
(3) Notwithstanding anything in the second sentence of Section 5(a)(2) of
this By-Law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 80
days prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this By-Law shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of shareholders at which directors are to be elected pursuant to the
Corporation's notice of meeting: (A) by or at the direction of the Board of
Directors; or (B) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any shareholder of the
Corporation who was a shareholder of record at the time of giving of a
shareholder's notice provided for in this By-Law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this By-Law. In
the event the Corporation calls a special meeting of shareholders for the
purpose of electing one or more directors to the Board of Directors, any such
shareholder may nominate a person or persons (as the case may be), for election
to such position(s) as specified in the Corporation's notice of meeting, if the
shareholder's notice required by Section 5(a)(2) of this By-Law shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 70th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a shareholder's notice as described
above.
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(c) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this By-Law shall be eligible to be voted for or
elected by the shareholders as directors and only such business shall be
conducted at a meeting of shareholders as shall have been brought before the
meeting in accordance with the procedures set forth in this By-Law. Except as
otherwise provided by law, the chairman of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to be brought
before the meeting was made or proposed, as the case may be, in accordance with
the procedures set forth in this By-Law and, if any proposed nomination or
business is not in compliance with this By-Law, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press, Bloomberg, Reuters, Business Wire, PR News Wire or comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act or in a notice mailed to shareholders of record.
(3) Notwithstanding the foregoing provisions of this By-Law, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights (A) of shareholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(B) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
Section 6. Conduct of Meeting. At each meeting of shareholders, unless
otherwise determined by the Board of Directors, the Chairman, or if the Chairman
is not present, the President, or if the President is not present a Vice
Chairman, or if none of the foregoing is present the Chairman of the Executive
Committee, or in the absence of all of the aforementioned, a chairman chosen by
the vote of the shareholders present in person or represented by proxy at the
meeting and entitled to cast a majority of the votes which might be cast at such
meeting for the election of directors or, if in the case of a special meeting at
which directors are not to be elected, the matter to be voted on at the meeting
on which the greatest number of shareholders are entitled to vote, shall act as
chairman. The Secretary, or in the Secretary's absence an Assistant Secretary,
or in the absence of the Secretary and all Assistant Secretaries, a person whom
the chairman of the meeting shall appoint, shall act as secretary of the meeting
and keep a record of the proceedings thereof. The Board of Directors of the
Corporation shall be entitled to make such rules, regulations and procedures for
the conduct of meetings of shareholders as it shall deem necessary, appropriate
or convenient. Subject to such rules and regulations of the Board of Directors,
if any, the chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules, regulations and procedures
for maintaining order at the meeting and the safety of those present,
limitations on entry to and participation in such meeting to shareholders of
record of the Corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit,
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restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless, and except to
the extent determined by the Board of Directors or the chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance with
rules of parliamentary procedure.
Section 7. Quorum and Adjournment. Except as otherwise provided by law or
by the Certificate of Incorporation, the holders of shares of stock entitled to
cast a majority of the votes at the meeting, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders, except that when
specified business is to be voted on by a class or series of stock voting as a
class, the holders of shares of such class or series entitled to cast a majority
of the votes shall constitute a quorum of such class or series for the
transaction of such business. The chairman of the meeting or a majority of the
shares so represented may adjourn the meeting from time to time, whether or not
there is such a quorum. The shareholders present at a duly called meeting at
which a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 8. Vote of Shareholders. Except as otherwise required by law or
the Certificate of Incorporation: (a) all action by shareholders shall be taken
at a shareholders' meeting unless the Board of Directors shall determine that
such action shall be taken by written consent of shareholders; (b) directors to
be elected at a meeting of shareholders shall be elected by plurality of the
votes cast at such meeting by the holders of shares entitled to vote in the
election; and (c) whenever any corporate action, other than the election of
directors, is to be taken by vote of the shareholders at a meeting thereof, it
shall be authorized by a majority of the votes cast at such meeting by the
holders of stock entitled to vote thereon.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. Number. The number of directors constituting the Board of
Directors of the Corporation shall be such number as is fixed from time to time
in accordance with Articles 5 and 8 of the Certificate of Incorporation of the
Corporation by resolution adopted by a majority of the entire Board of Directors
or by the shareholders, but in no event shall be less than five nor more than
forty. Each director elected by the shareholders shall hold office until the
next annual meeting of shareholders at which directors of the class to which
such director was apportioned are to be elected and until that director's
successor shall have been elected and qualified, unless such director dies,
resigns, becomes disqualified, or is removed. As used in these By-Laws, "entire
board" means the total number of directors which the Corporation would have if
there were no vacancies.
Section 2. General Powers. The business, properties and affairs of the
Corporation shall be managed under the direction of the Board of Directors,
which, without limiting the
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generality of the foregoing, shall have power to elect the officers of the
Corporation, to appoint and direct agents, and to grant general or limited
authority to officers, employees and agents of the Corporation to make, execute
and deliver contracts and other instruments and documents in the name and on
behalf of the Corporation and over its seal, without specific authority in each
case. In addition, the Board of Directors may exercise all the powers of the
Corporation and do all lawful acts and things which are not reserved to the
shareholders by law or the Certificate of Incorporation.
Section 3. Place of Meetings. Meetings of the Board of Directors shall be
held at the principal executive offices of the Corporation, or at such other
place within or without the State of New Jersey as may, from time to time, be
fixed by resolution of the Board of Directors, or in the absence of such
resolution, as may be fixed by the Chairman or President.
Section 4. Organization Meeting. A newly elected Board of Directors shall
meet and organize, as soon as practicable, after each annual meeting of
shareholders, without notice of such meeting, provided a majority of the entire
Board of Directors is present. If such a majority is not present, such
organization meeting may be held at any other time or place which may be
specified in a notice given as provided in Section 6 of this Article III for
special meetings of the Board of Directors.
Section 5. Regular Meetings. The Board of Directors shall meet without
notice at least five times each calendar year at such times and places as shall
have been previously fixed by resolution of the Board of Directors.
Section 6. Special Meetings: Notice. Special meetings of the Board of
Directors shall be called by the Secretary on the request of the Chairman, any
Vice Chairman, the President, or the Chairman of the Executive Committee, or on
the request in writing of a majority of the entire Board of Directors. Notices
of special meetings shall be mailed to each director, addressed to the
director's residence or usual place of business, not later than five days before
the day on which the meeting is to be held, or shall be sent to the director at
such place by courier, overnight mail, telex, telegram or facsimile, or be
delivered personally or by telephone, not later than twelve hours before the
time and day of meeting. Neither the business to be transacted at, nor the
purpose of, any special meeting of the Board of Directors need be specified in
the notice, or waiver of notice, of such meeting, although in the ordinary
course of events the purpose of the meeting will be indicated in the notice.
Unless limited by law, the Certificate of Incorporation, the By-Laws or by the
terms of the notice thereof, any and all business may be transacted at any
special meeting.
Section 7. Quorum and Manner of Acting. At every meeting of the Board of
Directors or a Committee thereof, a majority of the entire Board of Directors or
Committee, as the case may be, shall constitute a quorum; and except as
otherwise provided by law, the Certificate of Incorporation, or the By-Laws, the
vote of a majority of the directors present at any such meeting at which a
quorum is present shall be the act of the Board of Directors or the Committee.
Any or all of the directors may participate in all or any part of a meeting of
the Board or a Committee of the Board of which the director is a member by means
of conference
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telephone or any means of communication by which all persons participating in
the meeting are able to hear each other. Directors so participating will be
deemed present.
Section 8. Voting. On any question on which the Board of Directors or any
Committee thereof shall vote, the names of those voting and their votes shall be
entered in the minutes of the meeting when any member of the Board or such
Committee so requests. A director present at any meeting of the Board of
Directors or any Committee thereof of which such director is a member at which
any corporate action is taken shall be presumed to have concurred in the action
taken unless such director's dissent shall be entered in the minutes of the
meeting or unless such director shall file a written dissent to such action with
the person acting as the secretary of the meeting before or promptly after the
adjournment thereof. Such right to dissent shall not apply to a director who
voted in favor of such action. A director who is absent from a meeting of the
Board, or any Committee thereof of which such director is a member, at which any
such action is taken shall be presumed to have concurred in the action unless
such director shall file a dissent with the Secretary of the Corporation within
a reasonable time after learning of such action.
Section 9. Directors' Compensation. A majority of the directors in office
shall have authority to establish, from time to time, the amount of compensation
which shall be paid to any of its members for services as directors, officers,
or otherwise.
Section 10. Action Without Meeting. The Board of Directors or any
Committee thereof may act without a meeting if, prior or subsequent to such
action, all members of the Board of Directors or of such Committee consent
thereto in writing and such written consents are filed with the minutes of the
proceedings of the Board of Directors or such Committee.
Section 11. Resignations. Any director may resign at any time by giving
written notice thereof to the Corporation. Any resignation shall be effective
immediately upon receipt or at such subsequent time as shall be specified in the
notice of resignation.
Section 12. Vacancies. Subject to applicable law and the Certificate of
Incorporation and the rights of holders of Preferred Stock, any vacancy in the
Board of Directors, however caused, and any newly created directorships
resulting from an increase in the authorized number of directors, may be filled
by the affirmative vote of a majority of the remaining directors, even though
less than a quorum of the Board of Directors. A director so chosen shall hold
office until the next Annual Meeting of Shareholders and until such director's
successor shall have been elected and qualified. The death, disability, removal
or resignation of a director shall not create a vacancy, but shall automatically
reduce by one the number of directors determined pursuant to Article III,
Section 1.
Section 13. Eligibility. A person at the time of election to the Board of
Directors, at the time of any nomination pursuant to Section 5 of Article II,
and during the continuation of directorship, must have record ownership,
individually or jointly with another, of 1,000 shares of Common Stock of the
Corporation. No person shall be eligible for election or reelection to the
Board of Directors after attaining age 73.
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ARTICLE IV.
COMMITTEES OF THE BOARD: EXECUTIVE COMMITTEE
Section 1. Constitution and Powers. The Board of Directors, by resolution
adopted by a majority of the entire Board of Directors, shall appoint from among
its members an Executive Committee and an Audit Committee and may appoint one or
more other Committees, and may appoint one of its members to serve as Chairman
of any such Committee. Unless otherwise determined by resolution adopted by a
majority of the entire Board of Directors, all directors not serving as members
of a Committee are appointed to serve as alternate members of such Committee who
may replace any absent or disabled member at any meeting of the Committee. In
the absence or disability of any member of a Committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may, by a unanimous, but not less than unanimous, vote
appoint any alternate member of the Committee to act at the meeting with all the
powers of such absent or disabled member. Each Committee shall have such powers
as provided in such resolution or in the By-Laws, except that no such Committee
shall:
(a) make, alter or repeal any By-Law of the Corporation;
(b) elect or appoint any director, or remove any officer or director;
(c) submit to the shareholders any action which requires approval of the
shareholders; or
(d) amend or repeal any resolution theretofore adopted by the Board of
Directors which by its terms is amendable or repealable only by the
Board of Directors.
Section 2. Regular Meetings. Meetings of a Committee of the Board of
Directors shall be held at such times and places as shall have been previously
fixed by resolution of the Committee or the Board of Directors.
Section 3. Special Meetings. A special meeting of a Committee may be
called at any time by the Chairman of the Committee, the Chairman, any Vice
Chairman, or the President; on the written request of any three members of a
Committee such meeting shall be called by one of said officers or by the
Secretary. Notice of any such special meeting shall be given to each member in
the manner provided in Section 6 of Article III for the giving of notice of a
special meeting of the Board of Directors.
Section 4. Records. Each Committee shall keep minutes of its acts and
proceedings, which shall be submitted to the Board of Directors no later than
the next meeting of the Board of Directors occurring more than two days after
the Committee meeting. Any action taken by the Board of Directors with respect
thereto shall be entered in the minutes of the Board of Directors.
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Section 5. Executive Committee. The Executive Committee shall have and
may exercise, when the Board of Directors is not in session, all the powers of
the Board of Directors in the management of the business and affairs of the
Corporation including authority to take all action provided in the By-Laws to be
taken by the Board of Directors, and may authorize the seal of the Corporation
to be affixed to all papers which may require it, except as provided in Section
1 of this Article IV.
ARTICLE V.
AUDIT COMMITTEE
Section 1. Appointment. The Board of Directors shall appoint an Audit
Committee consisting of not less than three directors who are not officers or
employees of the Corporation or of any of its subsidiaries.
Section 2. Selection of Certified Public Accountants: Conferences
Therewith. The Audit Committee shall select and employ on behalf of the
Corporation, subject to ratification by the shareholders, a firm of certified
public accountants whose duty it shall be to audit the books and accounts of the
Corporation for the fiscal years in which they are appointed, and who shall
report to said Committee. The Audit Committee shall confer with the auditors
and shall determine, and from time to time shall report to the Board of
Directors, upon the scope of the auditing of the books and accounts of the
Corporation.
Section 3. Conferring with Officers of the Corporation. In general, the
Committee shall have the power to confer with and direct the officers of the
Corporation to the extent necessary to perform the customary duties of an Audit
Committee of a public company and carry out the purposes of this Article V.
ARTICLE VI.
OFFICERS
Section 1. Officers. The Corporation shall have a Chairman of the Board,
who may be referred to by the title of Chairman, a President, a Chairman of the
Executive Committee, a Treasurer, a Secretary and an Auditor, and may have one
or more Vice Chairmen, and one or more Vice Presidents and a Comptroller; and
such officers shall be elected by the Board of Directors, except that officers
below the rank of Senior Vice President may be appointed by the Chief Executive
Officer. The Board of Directors may also elect such other officers and appoint
such other agents as in their judgment the business of the Corporation may
require. A vacancy in any office other than that of Chairman or President may
be filled by the Chief Executive Officer until the next meeting of the Board of
Directors.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at the regular meeting of
the Board of Directors held after
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the annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until the next annual election of
officers or until such officer's death or until such officer shall be
disqualified, resign or be removed from office. The Chairman and the President
each shall be removed only by resolution adopted by two-thirds of the entire
Board of Directors (other than the officer being voted upon). All other
officers shall hold office at will at the pleasure of and until removed or not
re-elected by the Board of Directors.
Any officer may resign at any time by giving written notice thereof to the
Corporation. Any resignation shall be effective immediately unless a
subsequent date certain is specified for it to take effect.
Section 3. Chief Executive Officer. The Board of Directors of the
Corporation may designate either the Chairman or the President to act as Chief
Executive Officer of the Corporation. The Chief Executive Officer shall
supervise the carrying out of the policies adopted or approved by the Board of
Directors and, subject to the authority of the Board of Directors, the Chief
Executive Officer shall be responsible for formulation and execution of policy
for the Corporation, and shall have authority to cause the employment or
appointment of such employees and agents of the Corporation as the conduct of
the business of the Corporation may require, and in general to exercise all
powers generally appertaining to the chief executive officer of a corporation.
Section 4. Chairman. The Chairman shall act as chairman at meetings of
the shareholders and preside at meetings of the Board of Directors and
shareholders. The Chairman shall exercise all powers generally pertaining to
the chairman of a corporation, and shall have such further powers and duties as
may from time to time be assigned by the Board of Directors.
Section 5. President. The President, in the absence of the Chairman,
shall preside at all meetings of the Board of Directors and the shareholders.
In the absence of the Chairman, the President shall exercise the powers and
duties of the Chairman. The President shall exercise all powers generally
appertaining to the president of a corporation, and shall also have such
further powers and duties as may from time to time be assigned by the Board of
Directors.
Section 6. Chairman of the Executive Committee. The Chairman of the
Executive Committee, in the absence of the Chairman and the President, shall
act as chairman at meetings of the shareholders and of the Board of Directors
and shall preside at meetings of the Executive Committee and shall also have
such further powers and duties as may from time to time be assigned by the
Board of Directors.
Section 7. Vice Chairmen. The Board of Directors may elect one or more
Vice Chairmen of the Corporation. In the absence of the Chairman and the
President, their powers and duties shall be exercised by the Vice Chairman, or
if there be more than one Vice Chairman present, by the one of them first
elected to such office. In the absence or unavailability of the Chairman or
the President, each Vice Chairman shall have general
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authority to execute bonds, deeds and contracts in the name and on behalf of
the Corporation. Each of them shall also have such further powers and duties
as may from time to time be assigned by the Board of Directors or the Chief
Executive Officer.
Section 8. Vice Presidents. Vice Presidents shall perform such duties
and have such powers as may, from time to time, be assigned to them by the
Board of Directors or the Chief Executive Officer.
Section 9. Secretary, Treasurer and Comptroller. The Secretary,
Treasurer and Comptroller shall generally have such powers and perform all the
duties usually appertaining to their respective offices. In the absence of the
Secretary, Treasurer or Comptroller such person as shall be designated by the
Chief Executive Officer shall perform the duties of the absent officer.
Section 10. Auditor. The Auditor is responsible for all matters relating
to accounting controls, financial controls and asset controls of the
Corporation and its subsidiaries, under direction of the Audit Committee of the
Board of Directors and the general supervision of the Chief Executive Officer.
The Auditor shall perform such additional duties as shall be assigned by the
Board of Directors, the Audit Committee, the Chairman of the Audit Committee,
and the Chief Executive Officer. In the absence of the Auditor, such other
person as shall be designated by the Chairman of the Audit Committee shall
perform the duties of the Auditor.
Section 11. Compensation. The compensation of the Chairman, the
President, the Chairman of the Executive Committee, the Vice Chairmen, and the
Auditor shall be fixed by the Board of Directors. The compensation of all
other officers and other employees and agents of the Corporation may be fixed
by the Chief Executive Officer unless determined to the contrary by the Board
of Directors.
ARTICLE VII.
STOCK AND TRANSFERS OF STOCK
Section 1. Stock Certificates. The stock of the Corporation shall be
represented by certificates in such form as approved by and as signed by the
Chairman or a Vice Chairman of the Board of Directors or the President or a
Vice President and may be countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer. Any or all signatures
may be facsimiles. In case any officer, Transfer Agent or Registrar who has
signed or whose facsimile signature has been placed upon any certificate shall
have ceased to hold such position before such certificate is issued, it may be
issued by the Corporation with the same effect as if such officer, Transfer
Agent or Registrar held such position at the date of its issue. The
certificates representing the stock of the Corporation shall be in such form as
shall be approved by the Board of Directors.
Section 2. Transfer Agents and Registrars. The Board of Directors may,
in its discretion, appoint one or more banks or trust companies in the Borough
of Manhattan, City,
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County and State of New York, and in such other city or cities as the Board of
Directors may deem advisable, including any banking subsidiaries of the
Corporation, from time to time, to act as Transfer Agents and Registrars of the
stock of the Corporation; and upon such appointments being made, no stock
certificate shall be valid until countersigned by one of such Transfer Agents
and registered by one of such Registrars. Any or all of such signatures may be
facsimiles.
Section 3. Transfers of Stock. Transfers of stock shall be made on the
books of the Corporation only by the person named in the certificate, or by an
attorney lawfully constituted in writing, and upon surrender and cancellation
of a certificate or certificates for a like number of shares of the same class
of stock, with duly executed assignment and power of transfer endorsed thereon
or attached thereto, and with such proof of the authenticity of the signatures
as the Corporation or its agents may reasonably require. No transfer of stock
other than on the records of the Corporation shall affect the right of the
Corporation to pay any dividend upon the stock to the holder of record thereof
or to treat the holder of record as the holder in fact thereof for all
purposes, and no transfer shall be valid, except between the parties thereto,
until such transfer shall have been made upon the records of the Corporation.
Section 4. Lost Certificates. In case any certificate of stock shall be
lost, stolen or destroyed, the Chairman, President, or Secretary or any other
officer or officers or any agent or agents thereunto duly authorized by the
Board of Directors, may authorize the issuance of a substitute certificate in
place of the certificate so lost, stolen or destroyed, and may cause or
authorize such substitute certificate to be countersigned by the appropriate
Transfer Agent (or where such duly authorized agent is the Transfer Agent may
itself countersign) and registered by the appropriate Registrar; provided,
however, that, in each such case, the applicant for a substitute certificate
shall furnish to the Corporation and to such of its Transfer Agents and
Registrars as may require the same evidence to their satisfaction, in their
discretion, of the loss, theft or destruction of such certificate and of the
ownership thereof, and also such security or indemnity as may by them be
required.
ARTICLE VIII.
CORPORATE SEAL
Section 1. Seal. The seal of the Corporation shall be in such form as
may be approved, from time to time, by the Board of Directors.
Section 2. Affixing and Attesting. The seal of the Corporation shall be
in the custody of the Secretary, who shall have power to affix it to the proper
corporate instruments and documents, and who shall attest it. In the absence
of Secretary, it may be affixed and attested by an Assistant Secretary, or by
the Treasurer or an Assistant Treasurer or by any other person or persons as
may be designated by the Board of Directors.
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ARTICLE IX.
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
Section 2. Signatures on Negotiable Instruments. All bills, notes,
checks, or other instruments for the payment of money shall be signed or
countersigned by such officers or agents and in such manner as, from time to
time, may be prescribed by resolution (whether general or special) of the Board
of Directors, or may be prescribed by any officer or officers, or any officer
and agent jointly, thereunto duly authorized by the Board of Directors.
Section 3. Shares of Other Corporations. The Chairman, President, Vice
Chairman or Secretary is authorized to nominate directors or trustees and to
vote, represent and exercise on behalf of the Corporation, all rights incident
to any and all shares or membership rights of any other corporation,
association, bank or governmental entity, standing in the name of the
Corporation. The authority herein granted to said officer to vote or represent
on behalf of the Corporation may be exercised either by said officer in person
or by any person authorized so to do by proxy or power of attorney duly
executed by said officer on behalf of the Corporation. Notwithstanding the
above, however, the Board of Directors, in its discretion, may designate by
resolution the person to vote or represent said shares of other corporations.
Section 4. References to Article and Section Numbers and to the
Certificate of Incorporation. Whenever in the By-Laws reference is made to an
Article or Section number, such reference is to the number of an Article or
Section of the By-Laws. Whenever in the By-Laws reference is made to the
Certificate of Incorporation, such reference is to the Restated Certificate of
Incorporation, as may be amended from time to time.
Section 5. Indemnification and Insurance. (a) Each person who was or is
made a party or is threatened to be made a party to or is involved in any
proceeding, by reason of the fact that he or she is or was a corporate agent of
the Corporation, whether the basis of such proceeding is alleged action in an
official capacity as a corporate agent or in any other capacity while serving
as a corporate agent, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the laws of the State of New Jersey as the
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expenses and liabilities in
connection therewith, and such indemnification shall continue as to a person
who has ceased to be a corporate agent and shall inure to the benefit of such
corporate agent's heirs, executors, administrators and other legal
representatives; provided, however, that except as provided in Section 5(c) of
this By-Law, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this By-Law
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition, such advances to be paid
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by the Corporation within 20 days after the receipt by the Corporation of a
statement or statements from the claimant requesting such advance or advances
from time to time; provided, however, that the advancement of counsel fees to a
claimant other than a claimant who is or was a director or Executive Vice
President or higher ranking officer of the Corporation shall be made only when
the Board of Directors or the General Counsel of the Corporation determines
that arrangements for counsel are satisfactory to the Corporation; and
provided, further, that if the laws of the State of New Jersey so require, the
payment of such expenses incurred by a corporate agent in such corporate
agent's capacity as a corporate agent (and not in any other capacity in which
service was or is rendered by such person while a corporate agent, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such corporate agent to repay
all amounts so advanced if it shall ultimately be determined that such
corporate agent is not entitled to be indemnified under this By-Law or
otherwise.
(b) To obtain indemnification under this By-Law, a claimant shall submit
to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 5(b), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by a claimant who
is or was a director or Executive Vice President or higher ranking officer of
this Corporation, by independent counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be delivered to the
claimant; or (2) if the claimant is not a person described in Section 5(b)(1),
or is such a person and if no request is made by such a claimant for a
determination by independent counsel, (A) by the Board of Directors by a
majority vote of a quorum consisting of disinterested directors (as hereinafter
defined), or (B) if a quorum of the Board of Directors consisting of
disinterested directors is not obtainable or, even if obtainable, such quorum of
disinterested directors so directs, by independent counsel in a written opinion
to the Board of Directors, a copy of which shall be delivered to the claimant.
In the event the determination of entitlement to indemnification is to be made
by independent counsel at the request of the claimant, the independent counsel
shall be selected by the Board of Directors and paid by the Corporation. If it
is so determined that the claimant is entitled to indemnification, payment to
the claimant shall be made within 20 days after such determination.
(c) If a claim under Section 5(a) of this By-Law is not paid in full by
the Corporation within thirty days after a written claim pursuant to Section
5(b) of this By-Law has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim, including
attorney's fees. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standard of conduct which makes it permissible
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<PAGE> 17
under the laws of the State of New Jersey for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors or independent counsel) to have made a determination prior
to the commencement of such action that indemnification of the claimant is
proper in the circumstances because the claimant has met the applicable
standard of conduct set forth in the laws of the State of New Jersey, nor an
actual determination by the Corporation (including its Board of Directors or
independent counsel) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(d) If a determination shall have been made pursuant to Section 5(b) of
this By-Law that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to Section 5(c) of this By-Law.
(e) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
By-Law shall not be exclusive of any other rights which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of shareholders or disinterested
directors or otherwise. No repeal or modification of this By-Law shall in any
way diminish or adversely affect the rights of any corporate agent of the
Corporation hereunder in respect of any occurrence or matter arising prior to
any such repeal or modification.
(f) The Corporation may maintain insurance, at its expense, to protect
itself and any corporate agent of the Corporation or other enterprise against
any expense or liability, whether or not the Corporation would have the power to
indemnify such person against such expense or liability under the laws of the
State of New Jersey.
(g) If any provision or provisions of this By-Law shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this By-Law
(including, without limitation, each portion of any section of this By-Law
containing any such provision held to be invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (2) to the fullest
extent possible, the provisions of this By-Law (including, without limitation,
each such portion of any section of this By-Law containing any such provision
held to be invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
(h) For purposes of this By-Law:
(1) "disinterested director" means a director of the Corporation who is
not and was not a party to or otherwise involved in the matter in respect
of which indemnification is sought by the claimant.
(2) "independent counsel" means a law firm, a member of a law firm, or an
independent practitioner that is experienced in matters of corporation law
and shall include any person who, under the applicable standards of
professional conduct then
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<PAGE> 18
prevailing, would not have a conflict of interest in representing either
the Corporation or the claimant in an action to determine the claimant's
rights under this By-Law.
(3) "corporate agent" means any person who is or was a director, officer,
employee or agent of the Corporation or of any constituent corporation
absorbed by the Corporation in an consolidation or merger and any person
who is or was a director, officer, trustee, employee or agent of any
subsidiary of the Corporation or of any other enterprise, serving as such
at the request of this Corporation, or of any such constituent corporation,
or the legal representative of any such director, officer, trustee,
employee or agent;
(4) "other enterprise" means any domestic or foreign corporation, other
than the Corporation, and any partnership, joint venture, sole
proprietorship, trust or other enterprise, whether or not for profit,
served by a corporate agent;
(5) "expenses" means reasonable costs, disbursements and counsel fees;
(6) "liabilities" means amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties;
(7) "proceeding" means any pending, threatened or completed civil,
criminal, administrative, legislative, investigative or arbitrative action,
suit or proceeding, and any appeal therein and any inquiry or investigation
which could lead to such action, suit or proceeding; and
(8) References to "other enterprises" include employee benefit plans;
references to "fines" include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the
request of the indemnifying corporation" include any service as a corporate
agent which imposes duties on, or involves services by, the corporate agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner the
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the corporation."
(i) Any notice, request or other communication required or permitted to
be given to the Corporation under this By-Law shall be in writing and either
delivered in person or sent by facsimile, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
(j) This By-Law shall be implemented and construed to provide any
corporate agent described above who is found to have acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation the maximum indemnification, advancement of
expenses, and reimbursement for liabilities and expenses allowed by law.
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Section 6. Waiver of Notice. Any notice required by these By-Laws, by
the Certificate of Incorporation, or by law may be waived in writing by any
person entitled to notice. The waiver or waivers may be executed either before
or after the event with respect to which notice is waived. Each director or
shareholder attending a meeting without protesting, prior to its conclusion,
the lack of proper notice shall be deemed conclusively to have waived notice of
the meeting.
ARTICLE X.
AMENDMENTS
The By-Laws may be altered, amended or repealed, and new By-Laws adopted
from time to time, by resolution adopted by two-thirds of the entire Board of
Directors at any regular or special meeting.
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<PAGE> 1
EXHIBIT (10)I.(i)
EMPLOYMENT AGREEMENT
This Agreement made this 1st day of March, 1996, by and among Summit
Bancorp. (formerly known as UJB Financial Corp. and successor to The Summit
Bancorporation), a New Jersey corporation ("Summit") and Robert G. Cox, (the
"Executive").
WHEREAS, the Board of Directors of Summit believes that the services of
the Executive in the future will be valuable to Summit and is desirous of
retaining the Executive's services for a period of not less than three years,
and the Executive has indicated his willingness to enter into an employment
agreement upon the terms and conditions hereinafter set forth;
WHEREAS, Section 8.08 of the Agreement and Plan of Merger dated September
10, 1995, as amended by Amendment No. l dated December 1, 1995 (the
"Agreement"), among The Summit Bancorporation, a New Jersey corporation, and
UJB Financial Corp., a New Jersey corporation and Summit's predecessor,
contemplates that, in connection with the merger (the "Merger") provided for in
the Merger Agreement, the Executive shall enter into an employment agreement
with Summit at the time of closing of the Merger if he shall be ready, willing
and able to perform the services to be rendered by him thereunder; and
WHEREAS, Executive and The Summit Bancorporation have entered into an
agreement dated as of September 1, 1995 (the "Summit Agreement") which
Agreement remains in full force and effect and is hereby assumed by Summit,
certain Sections of which are incorporated herein by reference, as hereinafter
stated, including the definitions found at Sections 1.1 through 1.9 (it being
acknowledged that a Potential Change of Control occurred when the Merger
Agreement was executed on September 10, 1995 and a Change of Control will take
place prior to execution of this Agreement). That Potential Change of Control
and that Change of Control are together referred to herein as the Summit-UJB
Change. Capitalized terms used in this Agreement and not defined herein but
defined in the Summit Agreement shall have the meanings assigned thereto in the
Summit Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein contained, the parties hereto agree as follows:
1. Term. Summit agrees to employ the Executive as President of Summit,
as President of Summit Bank until the merger of Summit Bank into United Jersey
Bank under the name Summit Bank (the "Bank Merger") (the surviving bank in the
Bank Merger is referred to herein as the "Bank"), as President of the Bank after
the Bank Merger and as a member of the Managing Committees of Summit, Summit
Bank (before the Bank Merger) and the Bank (after the Bank Merger), and the
Executive hereby agrees to serve Summit, Summit Bank and the Bank in such
capacity, for a period of three years from the date hereof, provided, however,
that on the first and second anniversary dates of this Agreement, the term of
this Agreement shall automatically be extended for one additional year unless,
not later than 180 days prior to such anniversary date, Summit or the
Executive shall have given written notice to the other party of its or his
election not to extend this Agreement.
<PAGE> 2
2. Duties. The Executive shall perform such duties as President as may
be assigned to him from time to time by the Boards of Directors of Summit, and
Summit Bank or the Bank, as the case may be, and the Chairman of the Board and
Chief Executive Officer of Summit and as are appropriate to the position of
President of a publicly held bank holding company. The Executive agrees to
fulfill such duties in accordance with the Executive's covenants as set forth in
Sections 4.1, 4.2 and 4.3 of the Summit Agreement, which Sections are hereby
incorporated by reference. The Executive expressly gives his written consent
under Sections 1.6 and 3.2 of the Summit Agreement to employment in such
position and duties, and to the basing of Executive at Summit's principal
executive offices (which are currently located at 301 Carnegie Center, Princeton
(West Windsor Township), New Jersey. This consent under Sections 1.6 and 3.2 is
expressly limited to the Summit-UJB Change.
3. Compensation, Compensation Plans. During the Employment Period, the
Executive shall receive Base Salary of not less than $500,000, and Annual Bonus,
Expenses, Fringe Benefits, Office and Support Staff, and Vacation and
participate in Incentive, Savings and Retirement Plans and Welfare Benefit Plans
in accordance with the provisions of Sections 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9
and 3.10 of the Summit Agreement, which Sections are hereby incorporated by
reference.
4. Resignation or Discharge. Summit shall always have the right to
terminate the employment of the Executive for Cause. In the event Executive's
employment with Summit is terminated prior to the expiration of the term of this
Agreement on account of (i) the Executive's resignation (in contravention of the
terms of this Agreement) or (ii) the Executive' s discharge by Summit for Cause,
all compensation payable under Section 3 of this Agreement shall terminate as of
the date of such termination of employment, except for compensation provided by
vested or contractual rights under the Incentive, Savings and Retirement Plans
and Welfare Benefit Plans.
5. Death or Disability. The term of employment of the Executive shall
terminate forthwith in the event of the death of the Executive, or, at the
option of Summit, in the event that the Executive shall fail to render and
perform the services required of him under this Agreement because of Disability.
In the event of such a termination, all compensation payable under Section 3 of
this Agreement, except for compensation provided by vested or contractual rights
under the Incentive, Savings and Retirement Plans and Welfare Benefit Plans or
by statute, shall terminate as of the date of such termination.
6. Restrictive Covenant. The parties recognize that the Executive is an
important officer of Summit, that his reputation and business and personal
relationships are of significant benefit to Summit, and that he has access to
information about Summit's plans and projections as well as other confidential
information. The parties further agree that Summit is in direct competition
with certain banks and bank holding companies and thrifts and the Executive
agrees that upon the termination of the Executive's employment as an executive
of Summit pursuant to Sections 4 and 5, he shall not for a period of twelve
months after such termination accept employment or serve in any capacity with
any national or state bank or a thrift institution or affiliate thereof, other
than Summit or a subsidiary of Summit at a principal place of employment
within 25 miles of any branch location of Summit
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<PAGE> 3
or any of its subsidiaries, without the written permission of Summit.
7. Offset. Except as set forth in Section 2 hereof, nothing in this
Agreement is intended to terminate, amend, alter or affect any rights Executive
may have under the Summit Agreement setting forth benefits to be paid under
certain circumstances after a Change of Control of The Summit Bancorporation;
provided, however, that if Executive receives compensation under the Summit
Agreement, such compensation shall be a credit against any amounts payable
hereunder.
8. Legal Costs. Section 6.4 of the Summit Agreement is hereby
incorporated by reference.
9. Termination Procedures and Compensation During Dispute. Sections 7.1
through 7.4 of the Summit Agreement are hereby incorporated by reference.
10. Arbitration. Any controversy, claim, dispute or difference arising
out of the interpretation, construction or performance of this Agreement shall
be settled by arbitration at Newark, New Jersey according to the rules of the
American Arbitration Association, and judgment upon the award rendered in such
arbitration may be entered in any court having jurisdiction thereof.
11. Successors and Assigns, Binding Agreement. Section 9.1 of the Summit
Agreement is hereby incorporated by reference.
Summit hereby assumes all of the obligation of The Summit
Bancorporation under the Summit Agreement. All rights and duties of Summit
under this Agreement shall be binding on and inure to the benefit of Summit, its
successors, assigns or any company which purchases or otherwise acquires Summit
or all or substantially all of its assets by any method. On request of the
Executive, any successor or assignee shall agree in writing to assume and be
bound by this Agreement.
No provision of this Agreement shall be deemed to restrict the
absolute right of Summit at any time to sell or dispose of all or any part of
the assets of Summit, or to reconstitute the same in any one or more other
entities or to merge, consolidate, sell or otherwise dispose of any assets
thereof, or to dissolve or liquidate or otherwise abandon or cease the active
conduct of the business, but none of the foregoing shall relieve Summit of its
obligations hereunder.
12. Notices. All notices, request, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally with receipt acknowledged or sent by registered or
certified mail, postage prepaid, to the address shown below, unless changed by
notices given as herein provided:
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<PAGE> 4
(a) If to Summit, to:
Summit Bancorp.
Att.: T. Joseph Semrod
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
with a copy to:
General Counsel
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
(b) If to the Executive, to:
Robert G. Cox
211 Liberty Corner Road
Far Hills, NJ 07931
13. Miscellaneous. Sections 11, 12 and 13 of the Summit Agreement are
hereby incorporated by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
CORPORATE SEAL SUMMIT BANCORP.
Attest: /s/ Richard F. Ober, Jr. By: /s/ T. Joseph Semrod
------------------------- --------------------------
Richard F. Ober, Jr., T. Joseph Semrod
Secretary Chairman of the Board
BY THE EXECUTIVE
/s/ John F. Kuntz /s/ Robert G. Cox
- -------------------------------- --------------------------
Witness: John F. Kuntz Robert G. Cox
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<PAGE> 1
EXHIBIT (10) I. (ii)
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. Robert G. Cox residing at 211 Liberty Corner Road, Far
Hills, New Jersey 07931 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
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<PAGE> 2
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company
and its subsidiaries. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice of any
such meeting is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in clause (i) or (ii) above, and specifying the particulars
thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a
2
<PAGE> 3
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
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with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
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subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
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(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
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(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
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prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
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4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
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or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
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6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to three (3) or, if less, the
number of years, including fractions, from the Date of Termination
until the Executive reaches the age of sixty-five (65) years times
the sum of (i) the highest Annual Base Salary paid or payable to the
Executive during the thirty-six (36) month period immediately
preceding the month in which the Change in Control occurs, and (ii)
the highest annual bonus paid or determined and payable to the
Executive during such thirty-six (36) month period.
6.1.2 For a thirty-six (36) month period after the Date of
Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
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the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
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such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
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is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
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7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
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<PAGE> 15
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. Robert G. Cox
211 Liberty Corner Road
Far Hills, New Jersey 07931
15
<PAGE> 16
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Samuel V. Gilman Jr.
----------------------------
Samuel V. Gilman Jr.
16
<PAGE> 17
/s/ Robert G. Cox
----------------------------
Robert G. Cox
17
<PAGE> 1
Exhibit (10)L.(iii)
AMENDMENT NO. 1
(dated June 16, 1984)
to the
UNITED JERSEY BANKS
1982 STOCK OPTION PLAN
(dated February 17, 1982)
RECITALS
WHEREAS, on February 17, 1982, the Board of Directors of United Jersey
Banks adopted the United Jersey Banks 1982 Stock Option Plan (the "Plan");
WHEREAS, the shareholders of United Jersey Banks approved the Plan on
April 20, 1982;
WHEREAS, the Board of Directors of United Jersey Banks desires to amend
the Plan in accordance with Article XIX thereof;
NOW, THEREFORE, effective June 16, 1984, the United Jersey Banks 1982
Stock Option Plan is hereby amended as follows:
1. Article XII, TERMINATION OF EMPLOYMENT, is hereby amended by
inserting after the third full paragraph of said Article XII, so as to
constitute the fourth full paragraph of said Article XII, the following:
Notwithstanding any other provision of this Article XII, if
the employment of any employee with the Company and all subsidiary and
parent corporations is terminated, whether voluntarily or
involuntarily, following a change in control of the Company (as defined
in Article XIII) and while such employee is entitled to exercise an
Option or Right as herein provided, other than a termination of such
employment by the employer for cause, such employee shall have the
right to exercise all or any portion of such Option or Right at any
time up to and including three (3) months after the date of such
termination of employment, at which time such Option or Right shall
cease to be exercisable.
2. The second paragraph of Article XIII, ADJUSTMENT OF SHARES, EFFECT
OF CERTAIN TRANSACTIONS, is hereby amended and restated in its entirety to read
as follows:
<PAGE> 2
In the event of a change in control of the Company all then
outstanding Options and Rights shall immediately become exercisable.
For purposes of the Plan, a "change in control" of the Company occurs
if: (a) any "person" (including as such term is used in Section 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended) is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing thirty-three percent or more of the combined
voting power of the Company's outstanding securities then entitled to
vote for the election of directors; or (b) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a
majority thereof; or (c) the Company shall meet the delisting criteria
of the New York Stock Exchange or any successor exchange in respect of
the number of publicly-held shares or the number of stockholders
holding one hundred shares or more; or (d) the Board shall approve the
sale of all or substantially all of the assets of the Company; or (e)
the Board shall approve any merger, consolidation, issuance of
securities or purchase of assets, the result of which would be the
occurrence of any event described in clause (a), (b) or (c) above.
3. Article IX, EXERCISE OF OPTIONS, is hereby amended by deleting from
the fourth line of said Article IX the following words and marks:
, not less than ten (10) days and
* * * *
I Richard F. Ober, Jr., Secretary of United Jersey Banks, DO HEREBY
CERTIFY that the foregoing is a true, correct and complete copy of an amendment
to the 1982 Stock Option Plan passed at a meeting of the Board of Directors of
the Corporation at a meeting duly held on the 20th day of June 1984, and that
the same has not since been modified, amended or rescinded, and is still in full
force and effect.
IN WITNESS WHERE, I have set my hand and affixed the seal of the
Corporation this day of .
---------------------------------
Richard F. Ober, Jr., Secretary
CORPORATE SEAL
<PAGE> 1
EXHIBIT (10) R.
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. John R. Feeney residing at 249 Williamsburg Drive,
Shrewsbury, New Jersey 07702 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
1
<PAGE> 2
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a
2
<PAGE> 3
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
3
<PAGE> 4
with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
4
<PAGE> 5
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
-------- -------
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
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<PAGE> 6
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
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<PAGE> 7
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
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<PAGE> 8
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
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<PAGE> 9
4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
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<PAGE> 10
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
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<PAGE> 11
6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
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<PAGE> 12
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
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<PAGE> 13
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
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<PAGE> 14
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
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<PAGE> 15
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. John R. Feeney
249 Williamsburg Drive
Shrewsbury, New Jersey 07702
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11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
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/s/ John R. Feeney
----------------------------
John R. Feeney
17
<PAGE> 1
EXHIBIT (10)W.(i)
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
OF UJB FINANCIAL CORP.
(As Amended and Restated February 20, 1991)
1. PURPOSE
The Retirement Plan for Outside Directors of UJB Financial Corp., a New
Jersey business corporation, (the "Plan") is designed to enhance UJB
Financial Corp's ability to attract and retain competent and experienced
Directors by providing retirement benefits for Directors of UJB Financial
Corp. who retire after the Effective Date.
2. DEFINITIONS
Except as otherwise specified or as the context may otherwise require, the
following terms have the meanings indicated below for all purposes of this
Plan:
DIRECTOR means a member of the Board of Directors of UJB Financial Corp. on
or after the Effective Date who is not an employee of UJB Financial Corp. on
his or her date of death or retirement as a Director.
BOARD SERVICE means service as a Director of UJB Financial Corp. both before
and after the Effective Date; provided, however, that Board Service shall
not include any period during which the Director was an employee of UJB
Financial Corp. or any subsidiary thereof. Service on the Board of a
subsidiary or a company which was merged into UJB Financial Corp. is not
Board Service.
RETAINER means the annual retainer paid to a Director as compensation for
services as a Director of UJB Financial Corp., excluding committee or
committee Chairman's retainers and any fees paid for attendance at meetings
of the Board of Directors of UJB Financial Corp. or any committee of the
Board of Directors.
EFFECTIVE DATE means April 1, 1984.
3. ELIGIBILITY
Any Director who has completed five (5) or more years of Board Service, has
not been removed for cause, attains the age of 65, and retires from the
Board of Directors of UJB Financial Corp. on or after the Effective Date
shall be eligible for retirement benefits as provided herein. The lawful
spouse of any Director who completed five (5) or more years of Board Service
and had not been removed for cause, but who died after April 20, 1988, but
before the commencement of a Director's Retirement Benefit, shall be
eligible for the Alternate Spousal Benefit.
<PAGE> 2
4. DIRECTOR'S RETIREMENT BENEFIT
The benefits payable to a Director hereunder shall be an amount equal to the
highest Retainer in effect at any time during the two-year period
immediately preceding the Director's retirement under the Plan. A Director
may elect the method of payment, which may be paid monthly, quarterly or
annually, but such method of payment shall be further subject to the
approval of the Personnel Committee of the Board of Directors of UJB
Financial Corp. Benefits shall commence as of the first day of the month
after the last to occur of the following: (a) the date of adoption of this
Plan by the Board of Directors; (b) the date the Director has attained his
or her 65th birthday; or (c) the date of Directors' retirement under the
Plan or death while serving as a Director, and shall be paid until the
earliest of: (1) the later of the Director's death and the Director's
spouse's death; (2) a period equal to the length of the Director's Board
service; or (3) 120 monthly payments or 40 calendar quarters or 10 full
years, whichever applies to the method of payment. Upon the death of a
Director receiving a Director's retirement benefit, benefit payments shall
be made to the Director's lawful spouse as set forth above but shall be
further subject to the Personnel Committee's direction that such continued
payments be paid under a different distribution method.
5. ALTERNATE SPOUSAL BENEFIT
The benefits payable to an eligible spouse of a deceased Director hereunder
shall be an amount equal to the highest Retainer in effect at any time
during the two-year period immediately preceding the earlier of the date of
the Director's death or retirement under the Plan. Such spouse may elect
the method of payment, which may be paid monthly, quarterly or annually, but
such method of payment shall be further subject to the approval of the
Personnel Committee of the Board of Directors of UJB Financial Corp.
Benefits shall commence as of the first day of the month after the later to
occur of the following: (a) April 20, 1988; or (b) the date of the
Director's death, and shall be paid until the earliest of: (1) the
Director's spouse death; (2) a period equal to the length of the Director's
Board Service; or (3) 120 monthly payments or 40 calendar quarters or 10
full years, whichever applies to the method of payment.
6. DISABILITY
Notwithstanding Section 3, any Director who has completed five (5) or more
years of Board Service, has not been removed for cause and becomes disabled
shall be eligible for the retirement benefits provided in the Plan. Benefit
payments shall be made to such Director in accordance with Section 4, except
that (i) the date of reference to be used for determining the amount of
benefits payable shall be the date of disability, and (ii) payment of
benefits shall commence on the first day of the month following the date of
disability. "Disabled" or "disability" for purposes of this Plan is hereby
defined as an incapacity due to physical or mental illness or injury to
fulfil the normal duties of a Director of UJB Financial Corp. for a period
reasonably anticipated to be at least one year.
<PAGE> 3
7. CHANGE IN CONTROL
A "Change in Control" of UJB Financial Corp. shall be deemed to have
occurred if there occurs a change in control of a nature that would be
required to be reported in response to Item 5(f) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934
("Exchange Act"); provided that, without limitation, such a Change in
Control shall be deemed to have occurred if (a) any "person" (including as
such term is used in Section 13(d) and 14(d) (2) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing thirty-three and one-third percent (33-1/3%) or more of
the combined voting power of the company's outstanding securities then
entitled to vote for the election of directors; (b) during any period of two
(2) consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof (excluding, for purposes of this calculation, any director who dies
during such periods); (c) the Company shall meet the delisting criteria of
the New York Stock Exchange or any successor exchange in respect of the
number of publicly-held shares or the number of stockholders holding one
hundred (100) shares or more; (d) the Board shall approve the sale of all or
substantially all of the assets of the Company; or (e) the Board shall
approve any merger, consolidation, issuance of securities or purchase of
assets, the result of which would be the occurrence of any event described
in clause (a), (b) or (c) above.
Upon the occurrence of a Change in Control of UJB Financial Corp., and
notwithstanding any other provisions of the Plan, a Director shall
immediately become entitled to receive an annual benefit amount equal to the
higher of (i) the Director's Retainer at the time of the Director's
termination of Board Service, and (ii) the highest Retainer in effect at
any time during the two-year period immediately preceding the Change in
Control. Payment of benefits shall commence as of the first day of the
month following the latest to occur of (i) the termination of the Director's
Board Service, (ii) attainment of age 65, or (iii) any date designated by
the Director at any time and from time to time following the adoption of
this Section 7 but prior to a Change in Control of UJB Financial Corp., and
shall continue in monthly, quarterly or annual installments, as selected in
accordance with Section 4, for a period of years, up to a maximum of 10,
equal to two times the number of years of Board Service completed by the
Director.
8. PROVISION OF BENEFITS
All benefits payable hereunder shall be provided from the general assets of
UJB Financial Corp. No Director or spouse shall acquire any interest in any
specific assets of UJB Financial Corp. by reason of this Plan.
9. AMENDMENT AND TERMINATION
UJB Financial Corp. reserves the right to terminate this Plan or amend this
Plan in any respect at any time, and any such amendment may be retroactive;
provided, however, that no such termination or amendment may reduce the
benefits of any Director who has previously retired hereunder or any spouse
receiving benefits hereunder.
<PAGE> 4
10. ADMINISTRATION
This Plan shall be administered by the Personnel Committee of the Board of
Directors of UJB Financial Corp. Such Committee's final decision, in
making any determination or construction under this Plan and in exercising
any discretionary power, shall in all instances be final and binding on
all persons having or claiming any rights under this Plan.
11. MISCELLANEOUS
The adoption and maintenance of this Plan shall not constitute a contract
between UJB Financial Corp. and any Director. Nothing herein contained
shall be deemed to give any Director the right to be retained as a
Director, nor shall it interfere with the Director's right to terminate his
or her directorship at any time. No benefit payable hereunder shall be
subject to alienation or assignment, except as otherwise provided by law.
<PAGE> 1
EXHIBIT (10) LL. (iii)
UJB FINANCIAL CORP.
BOARD OF DIRECTORS
Meeting of June 20, 1990
-------------
Amendment No. 1
to the
1987 Stock Option Plan
WHEREAS, the Board has been advised that it is desirable and in the
best interests of the Corporation that the 1987 Stock Option Plan (the "1987
Plan") be amended so as to permit optionees who exercise options under the 1987
Plan to satisfy the estimated tax liabilities arising therefrom with shares of
UJB Common Stock either by having the Corporation withhold shares from those
the optionee would otherwise receive pursuant to the option exercise or by
tendering shares already owned; provided, however, that such amendment do no
more than cause the 1987 Plan to parallel with respect tot his right the
provisions providing for same in the Corporation's 1990 Stock Option Plan.
NOW, THEREFORE, BE IT:
RESOLVED, that Article XVII of the 1987 Plan be amended in its entirety
to read as follows:
XVII. WITHHOLDING TAXES
The Company may require an employee exercising a Right or a
Non-Qualified Option granted hereunder, or disposing of Shares acquired
pursuant to the exercise of an Incentive Option in a disqualifying
disposition (within the meaning of Section 421(b) of the Code), to
reimburse the corporation that employs such employee for any taxes
required by any government to be withheld or otherwise deducted and
paid by such corporation in respect of the issuance or disposition of
Shares. In lieu thereof, the corporation that employs such employee
shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such corporation to the employee
upon such terms and conditions as the Board of Directors or the
Committee, as the case may be, shall prescribe. At any time that the
Company or a Subsidiary becomes subject to a withholding obligation
under applicable law with respect to the exercise of a Right for
<PAGE> 2
Shares or the exercise of a Non-Qualified Option except as set forth
below, an employee may elect to satisfy, in whole or in part, the
employee's related personal tax liabilities (an "Election") by (i)
directing the Company or the Subsidiary to withhold from Shares
issuable in the related exercise either a specified number of Shares
or Shares having a specified value in each case with a value not in
excess of such tax liabilities, (ii) tendering Shares previously issued
pursuant to an exercise or other shares of the Company's common stock
owned by the employee or (iii) combining either or both of the
foregoing options in any fashion. An Election shall be irrevocable.
The withheld Shares and other shares tendered in payment shall be
valued at their fair market value on the date that the withholding
obligation arises (the "Tax Date"). The Committee may disapprove of
any Election, suspend or terminate the right to make Elections or
provide that the right to Make Elections shall not apply to particular
grants, Shares or exercises. If an employee is a person subject to
Section 16 of the Exchange Act then (1) any Election by such employee
must be made (i) at least six months prior to the relevant Tax Date or
(ii) on or prior to the relevant Tax Date and during a period that
begins on the third business day following the date of release for
publication of the Company's quarterly or annual summary statements of
sales and earnings and that ends on the twelfth business day following
the date of release for publication of the Company's quarterly or annual
summary statements of sales and earnings and that ends on the twelfth
business day following such date and (2) the Election may not be made
with respect to an exercise, or the withholding obligation arising
thereon, if the relevant Right or Non-Qualified Option was granted six
months or less prior to the date of Election. The Committee may impose
any other conditions or restrictions on the right to make an Election as
it shall deem appropriate.
<PAGE> 1
SUMMIT BANCORP
ANNUAL REPORT
1995
REACHING THE SUMMIT
[PHOTO]
Two mountain climbers reaching the summit of a mountain.
<PAGE> 2
SUMMIT BANCORP MISSION STATEMENT
Summit Bancorp will be the most consistent regional provider of profitable,
quality financial services. We seek preeminent position in the marketplace.
Summit will lead by delivering:
- - Superior products and excellent customer service.
- - An environment in which employees share mutual respect and operate as a team.
Employees will be trained, empowered and rewarded for excellence.
- - The commitment and support to enhance the quality of life in our communities.
- - Long-term shareholder value.
CONTENTS
<TABLE>
<CAPTION>
==================================================================
<S> <C>
Financial Highlights........................................ 1
Summit Bancorp Market Penetration........................... 2
Chairman's Message.......................................... 4
Strategic Direction......................................... 8
Board of Directors.......................................... 16
1995 Financial Review....................................... 19
==================================================================
</TABLE>
ABOUT THE COVER:
Employees of the former UJB Financial Corp. and The Summit Bancorporation have
worked as a team to create Summit Bancorp. We believe that this strategic
partnership brings us to the summit in customer service.
<PAGE> 3
Summit Bancorp and Subsidiaries
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Increase
(Dollars in thousands, except per share data) 1995 1994 (Decrease)
============================================================================================
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31
Net income .................................. $ 242,870 $ 154,550 57.1%
Per common share:
Net income ............................... 2.77 1.80 53.9
Cash dividends declared .................. 1.19 .94 26.6
Book value at year end ................... 19.89 17.45 14.0
=========================================================================================
BALANCE SHEET DATA AT DECEMBER 31
Total assets ................................ $21,536,935 $20,894,815 3.1%
Total deposits .............................. 17,955,103 16,977,109 5.8
Demand deposits .......................... 3,873,801 3,728,313 3.9
Savings and time deposits ................ 13,373,864 12,734,662 5.0
Total loans ................................. 14,019,574 13,105,179 7.0
Commercial loans ......................... 5,321,047 5,354,358 (0.6)
Residential mortgage loans ............... 3,296,818 2,803,286 17.6
Commercial mortgage loans ................ 2,315,384 2,201,698 5.2
Consumer loans ........................... 3,086,325 2,745,837 12.4
Shareholders' equity ........................ 1,802,316 1,533,717 17.5
Allowance for loan losses ................... 279,034 305,330 (8.6)
=========================================================================================
CONSOLIDATED RATIOS
Return on average assets .................... 1.16% .76%
Return on average common equity ............. 14.82 10.37
Efficiency ratio ............................ 57.55 59.71
Tier I capital to average assets (leverage) . 7.97 7.27
Tier I capital to risk-adjusted assets ...... 10.75 9.95
Total capital to risk-adjusted assets ....... 13.46 12.69
Allowance for loan losses to year-end loans . 1.99 2.33
Non-performing loans to year-end loans ...... 1.34 1.53
=========================================================================================
</TABLE>
The combined consolidated financial information includes the results of Summit
Bancorp which gives retroactive effect to the merger of UJB Financial Corp. and
The Summit Bancorporation. The management of Summit Bancorp believes that such a
presentation is important for shareholders and potential investors. The
acquisition, which was consummated on March 1, 1996, has been accounted for on a
pooling-of-interests basis and all 1995 and prior period data has been restated
as if both companies were always combined.
[BAR GRAPH]
Earnings Per Share (in dollars)
<TABLE>
<S> <C>
1991 $ .60
1992 1.13
1993 1.57
1994 1.80
1995 2.77
</TABLE>
[BAR GRAPH]
Annual Indicated Dividend (in dollars)
<TABLE>
<S> <C>
1991 $ .60
1992 .60
1993 .84
1994 1.04
1995 1.28
</TABLE>
[BAR GRAPH]
Return on Average Assets (in percent)
<TABLE>
<S> <C>
1991 0.25%
1992 0.48
1993 0.70
1994 0.76
1995 1.16
</TABLE>
1
<PAGE> 4
STRATEGIC
PARTNERSHIPS
- - The merger has created New Jersey's largest independent bank.
- - We see our new organization as large enough to leverage costs, but small
enough to manage local markets.
- - Summit Bancorp has signed an agreement with Pathmark Stores, Inc. to install
in-store branches in most of their locations in New Jersey and eastern
Pennsyl-vania. This partnership will establish us as a major player in the
in-store banking arena.
CHAIRMAN'S MESSAGE
Strategic partnerships we formed during the past two years have brought us
significant market strength and economies of scale. In March, we changed our
name from UJB Financial Corp. to Summit Bancorp -- a name which is more
universal and better reflects the full geographic scope of our financial
services organization. We have an extensive banking network in New Jersey and
eastern Pennsylvania, as well as lending offices in New York and Connecticut. By
merging with The Summit Bancorporation, we have created New Jersey's largest
independent bank. We are now a $22 billion organization, and this begins a new
era for our company.
Summit Bancorp is an industry leader with a premier retail and middle market
franchise. Our competitive position is strong, and we have earned an excellent
reputation in the marketplace. The entire organization is committed to achieving
and maintaining total customer satisfaction through superior customer service --
a strategy that we believe will enhance shareholder value.
Our three acquisitions in the past year brought us $6.4 billion in assets and
even further enhanced our market position. Bancorp New Jersey added $505 million
in assets and banking offices in Somerset, Hunterdon and Mercer counties. The
Flemington National Bank and Trust Company contributed $286 million in assets to
our January 1996 numbers. The Summit Bancorporation provided $5.65 billion in
assets, and a strong banking network in northern and central New Jersey.
When we joined with The Summit Bancorporation, we merged the third and sixth
largest banking institutions in New Jersey. This combination created a very
strong organization in an affluent, urbanized state with tremendous banking
opportunities. We expect to merge the New Jersey banks' operations early in the
third quarter of 1996. Once that is completed, all New Jersey branches will have
the same name -- Summit Bank. Our Pennsylvania offices will also operate as
Summit Bank.
In the first quarter of 1996, we formed another strategic partnership. We
have signed an agreement with Pathmark Stores, Inc. to
4
<PAGE> 5
install in-store branches in most of their locations in New Jersey and eastern
Pennsylvania. Approximately 70 Summit branches will be opened in Pathmark stores
by year-end 1998. This partnership establishes us as a regional market leader in
the in-store banking arena.
The financial pages of this report include combined operating results, as the
Summit merger was accounted for as a pooling of interests. Net income for 1995
for Summit Bancorp rose 57 percent over 1994 to $242.9 million, or $2.77 per
common share.
Our improved levels of loan growth were in large part attributable to New
Jersey's economy exhibiting solid income and employment growth in 1995, and
eastern Pennsylvania also showing moderate growth. We remain optimistic for 1996
as economic growth is expected to continue, although at a somewhat slower rate.
Our sustained earnings and capital strength combined with our expectations
for future growth resulted in the common stock dividend being raised 23 percent
during 1995. The first increase in February raised the quarterly dividend from
$.26 to $.29, followed by a second increase to $.32 in late December. The new
annualized dividend is $1.28 per common share. It is the highest dividend in
this company's 25 year history.
The restructuring program we began in the fall of 1993 is now complete and
forms a sound organizational structure to further expand our market penetration.
Furthermore, the results of the restructuring were in line with our financial
expectations.
As part of that initiative, UJB Financial established three performance goals
to be achieved by the last quarter of 1995. Excluding the effects of the
purchase acquisition of Bancorp New Jersey, we met the performance goals for
return on assets of 1.20 percent and return on common equity of 15 percent. We
are especially pleased that we surpassed the third goal of reducing our
efficiency ratio to 59 percent. This ratio declined to 57.1 percent in the
fourth quarter of 1995.
New performance goals have been established for Summit Bancorp. By 1997, we
plan to produce a return on assets of 1.40 percent, a return on common equity of
17 percent, and an efficiency ratio of 52 percent.
Strategic
Partnerships
- - We have earned an excellent reputation in the marketplace and offer superior
customer service.
- - Our sustained earnings and capital strength combined with our expectations for
future growth resulted in the common stock dividend being raised 23 percent
during 1995.
- - Long a leader in home mortgage financing, with the Summit merger we have
become the single largest bank mortgage originator in New Jersey.
5
<PAGE> 6
STRATEGIC
PARTNERSHIPS
- - Our merger created a very strong organization in an affluent, urbanized state
with tremendous banking opportunities.
- - Summit Bancorp recognizes the value of diversity and has made it an integral
part of our business strategy.
- - Moody's Investors Service significantly upgraded our long-term debt ratings
for senior debt, preferred stock and subordinated debt.
PHOTO OPPOSITE PAGE:
Summit Bancorp will be led by Chairman and Chief Executive Officer T. Joseph
Semrod (left) and President Robert G. Cox.
In February 1996, Moody's Investors Service significantly upgraded our
long-term debt ratings for senior debt, preferred stock and subordinated debt.
This action will permit Summit Bancorp to borrow money at more advantageous
rates. Moody's reported that the upgrades reflect the enhancement of the value
of our franchise in New Jersey.
The New Jersey/eastern Pennsylvania region in which we operate has a highly
diverse population. For us to be a strong competitor going forward, we must
continue to understand and relate to many different cultures and ethnic groups.
We have found that the more closely our workforce mirrors the marketplace, the
more successful we are in meeting the needs of our customers. That is why
community outreach has always been an integral part of our business strategy. To
further strengthen our commitment to our customers and employees, we have formed
a Diversity Advisory Group to guide our efforts.
In February 1996, United Jersey Bank announced a new Community Development
Agreement that will provide $275 million over a three year period in targeted
loans and grants to low and moderate income individuals, businesses and
community organizations.
As part of The Summit Bancorporation merger, six former Summit directors were
elected to our Board. Robert G. Cox joins us as president of the combined
organization and as a new director. Thomas D. Sayles, Jr., the former chairman
of The Summit Bancorporation, has also agreed to serve on the Board. I am very
pleased to have the business experience and vision of S. Rodgers Benjamin, James
C. Brady, Jr., Orin R. Smith and Douglas G. Watson as new directors.
Our strategic partnerships have allowed us to realign the organization for
maximum efficiency and profitability. This is a very exciting time for our
company. The banking environment is highly competitive, but offers many
opportunities. We are confident that Summit Bancorp's premier franchise is
positioned for success.
/s/ T. Joseph Semrod
- -----------------------------
T. Joseph Semrod
Chairman and Chief Executive Officer
April 12, 1996
6
<PAGE> 7
[FULL PAGE PHOTO]
Chairman and Chief Executive Officer
T. Joseph Semrod (left) and President Robert G. Cox.
<PAGE> 8
[FULL PAGE PHOTO]
UJB FINANCIAL
+ = SUPERIOR MARKET POWER
SUMMIT
Senior Executive Vice President Sabry J. Mackoul (right)
and Elwood L. Bowman II, director of Branch Banking
for New Jersey and Pennsylvania, discuss our strong branch network.
<PAGE> 9
SUPERIOR MARKET POWER
Summit Bancorp's four core business lines -- commercial banking, retail banking,
mortgage banking and investment management - offer customers proven expertise
and innovative solutions. For example, marketplace segmentation is an important
banking concept. Summit's program for Managing Local Markets employs a street
corner strategy. This means anticipating the needs of each individual market
area and effectively serving that need. The bank's focus is on gaining and
retaining the most profitable customer relationships.
With the addition of Summit Bank, we have very significantly enhanced our
strength in the private banking and trust arenas. Our new private banking
division is a recognized leader in providing financial services to
professionals. We are focusing on building comprehensive relationships with
individual accountants, lawyers and doctors and with their firms.
In addition to facilities in New Jersey and Pennsylvania, we will be
expanding our private banking presence into New York City. This will accommodate
New Jersey residents who work in the city, and will also serve individuals from
Connecticut and New York.
Our New Jersey discount brokerage operation has been an industry leader for
over 18 years. To achieve economies of scale, in the second quarter we will
combine our New Jersey and Pennsylvania discount brokerages. The combined entity
will be a self-clearing operation. This will substantially reduce our trade
execution and clearance costs, and give us flexibility in an increasingly
competitive marketplace.
Within commercial banking, our corporate finance group has formed a strategic
alliance with SPP Hambro & Co. to provide private placement and investment
banking expertise to middle market and large corporate clients. This new area
has significant growth opportunities.
Strategic
Partnerships
- - Summit Bancorp commands one of the top three market share positions in 13 of
New Jersey's 21 counties.
- - We rank number 2 statewide in New Jersey market share with over 12 percent of
all deposits.
- - Summit Bancorp is the largest issuer in New Jersey of the Global Access Visa
Check Card for both consumers and small businesses.
PHOTO OPPOSITE PAGE:
Senior Executive Vice President Sabry J. Mackoul (right) and Elwood L. Bowman
II, director of Branch Banking for New Jersey and Pennsylvania, discuss our
strong branch network.
9
<PAGE> 10
STRATEGIC
PARTNERSHIPS
- - Gains will be achieved from expanded product offerings and cross selling
opportunities including private banking, asset based lending, leasing and
discount brokerage.
- - In commercial banking, Summit brings us new selling opportunities in Union,
Middlesex and Ocean counties.
- - Our over 450 ATMs provide excellent convenience for customers.
CUSTOMER FOCUS
Customer focus is not just about basic financial services. It means anticipating
needs and offering your customers the convenience of electronic banking such as
automated teller machines (ATMs) and telephone banking. As competition grows,
ease of access becomes a critical issue. In the fall of 1995, we acquired 118
ATMs located in Wal-Marts, Sam's Clubs and Pathmark stores as well as other
retail sites and colleges in the tri-state area. Now with the Summit
acquisition, we have over 450 ATMs. These offer excellent convenience to
customers and are also an important source of fee income for the bank.
The company's profitability is increased when alternate delivery systems
reduce the cost per transaction. Our goal is to substantially lower the net cost
per self-service transaction.
Commercial customers will soon benefit from an innovative approach to
servicing. The Commercial Banking Customer Service Center is specifically
designed to promptly meet customer needs and enhance relationships. Commercial
customers will call a toll free number for information and to receive assistance
from experienced professionals. Utilizing advanced technology, our commercial
customers will be able to receive answers to even the most complex questions by
the end of the day.
In an effort to even better serve customers, commercial lenders are now using
automated work stations. These allow information to be consistently available
across the system. The new work stations also maximize efficiency and heighten
the lenders' effectiveness by giving them quicker access to information and
reducing administrative duties.
Our commercial relationship managers often work with unique and specialized
industries, such as media and health services, where we can offer our in-depth
knowledge to companies that meet our credit criteria. This is one way that we
can extend special services to customers and differentiate ourselves from both
non-banks and other banks.
PHOTO OPPOSITE PAGE:
Commercial lender Dante J. Bucci (right) welcomes Trotter Inc. From left: Peter
Haines, president and chief executive officer; Joan Carter, vice chairman; and
John J. Aglialoro, chairman.
10
<PAGE> 11
[FULL PAGE PHOTO]
[PHOTO BOX]
+ = Maximizing Share-
holder Value
[PHOTO BOX]
Portrait of shareholder reading financial publication.
<PAGE> 12
MAXIMIZING SHAREHOLDER VALUE
Maximizing shareholder value means looking at every decision in terms of how it
will benefit customers and increase profitability. Rationalizing the branch
network is a perfect example. Before the merger, UJB Financial and The Summit
Bancorporation combined with other pending acquisitions had a total of 384
branches. When all aspects of the integration are completed, Summit Bancorp will
have less than 330 full-service banking offices. We will continue to prune our
retail branches as required.
We are also carefully examining the changing mix of our distribution
channels. That is why we have recently established ourselves as a major player
in the in-store banking arena by signing an agreement with Pathmark Stores, Inc.
to install in-store branches in most of their locations in New Jersey and
eastern Pennsylvania. Approximately 70 branches will be opened by year-end 1998.
In addition, we have in-store branches in certain A&P and ShopRite stores, and
continue to explore additional in-store branch opportunities. These in-store
branches are very economical to open, and allow us to provide banking services
at our customers' convenience.
Maximizing shareholder value also means aligning technology resources. We
recognize that we simply cannot spend as much as our largest competitors.
Instead, we must allocate technology dollars where they will best meet the needs
of our lines of business. This takes a great amount of coordination and
planning, and we believe that we do this better than most other banks. The
objective is not only to make us more efficient, but also more effective.
Our goals continue to be enhanced profitability and top customer service. To
increase the number of products that we sell per customer, relevant database
information has been consolidated. Soon representatives at the retail Customer
Call Center will know what products a customer would most likely buy next. Also,
an application processing system called COIN has improved our consumer loan
approval and processing times. We are now modifying this system to handle higher
volumes of loans with the same number of employees.
STRATEGIC
PARTNERSHIPS
- - Summit Bancorp has relationships with 26 percent of New Jersey's 2.9 million
households.
- - We have created a premier retail and middle market franchise.
- - This alliance will be ready to meet the competition head on.
- - We have long enjoyed a competitive advantage over other banks because of our
early dedication to consolidation, standardization of operations and use of
common systems.
PHOTO OPPOSITE PAGE:
We remain committed to maximizing shareholder value and maintaining long-term
earnings growth.
13
<PAGE> 13
STRATEGIC
PARTNERSHIPS
- - We are the number one merchant bankcard processor in New Jersey and among the
top 50 in the country.
- - Small business banking can handle a multitude of customer needs and provide
loans up to $1 million.
- - Our ATM network is functioning 99 percent of the time, while the industry
average is substantially less.
- - Summit is ahead of most banks by offering a wide array of insurance products
for both the personal and corporate marketplace.
PHOTO OPPOSITE PAGE:
When the Customer Call Center handles questions, branch personnel can
concentrate on selling bank services in the branches.
SERVICE EXCELLENCE
To excel against the competition, our service to customers must be exemplary. In
the merged organization, we have intensified our efforts to meet and exceed
customer expectations.
The challenge is to be extremely cost effective while offering the finest
service. We have selected the best operations and services from both
organizations, but we have also added new procedures and benchmarks for speed
and efficiency to serve more customers in less time.
For example, our retail Customer Call Center processed seven million calls in
1995. Normally, 18 percent of consumer loan applications are handled by the
Center, but during sales promotions this rises to 45 percent. This year with the
addition of First Valley Bank and Summit Bank customers, the Center expects to
process nearly ten million calls. To even further enhance service, we will be
introducing a Customer Look Ahead process which during peak periods lets
customers know how quickly a representative will be able to handle their call.
Service means having our automated teller machines (ATMs) available a maximum
amount of time. Our ATM network is functioning at a 99 percent rate, while the
industry average is substantially lower. When one of our ATMs stops functioning,
a sophisticated communications network instantly recognizes the problem. Then,
without human intervention, it recommends the necessary remedial action to the
service center.
Mortgage loan processing has already been automated. In the near future, we
will go a step further. Calling officers with portable personal computers will
be able to go to the customer's home or office, enter the essential information,
dial into a network and receive an immediate preliminary approval.
14
<PAGE> 14
BOARD OF DIRECTORS
SUMMIT BANCORP
[PHOTO OF BOARD OF DIRECTORS]
Pictured above from left
T.J. DERMOT DUNPHY
President and Chief Executive Officer
Sealed Air Corporation
Director since 1984
ROBERT L. BOYLE
Representative
William H. Hintelmann Firm
Director since 1986
ELINOR J. FERDON
Volunteer Professional
First Vice President
Girl Scouts of U.S.A.
Director since 1984
JOHN R. HOWELL
Vice Chairman
Summit Bancorp
Director since 1988
HENRY S. PATTERSON II
President
E'town Corporation
Director since 1971
ANNE EVANS ESTABROOK
Owner
Elberon Development Co.
Director since 1994
FRED G. HARVEY
Vice President
E&E Corporation
Director since 1988
JOSEPH M. TABAK
President and Chief Executive Officer
JPC Enterprises, Inc.
Director since 1987
FRANCIS J.MERTZ
President
Fairleigh Dickinson University
Director since 1986
16
<PAGE> 15
[PHOTO OF BOARD OF DIRECTORS]
Pictured above from left
ROBERT G. COX
President
Summit Bancorp
Director The Summit Bancorporation
since 1981
DOUGLAS G. WATSON
President
CIBA-GEIGY Corporation
Pharmaceuticals Division
Director The Summit Bancorporation
since 1988
S. RODGERS BENJAMIN
Chairman and Chief Executive Officer
Flemington Fur Company
Director The Summit Bancorporation
since 1982
JOHN G. COLLINS
Vice Chairman
Summit Bancorp
Director since 1986
GEORGE L. MILES, JR., CPA
President and Chief Executive Officer
WQED Pittsburgh
Director since 1994
RAYMOND SILVERSTEIN, CPA
Consultant
Alloy, Silverstein, Shapiro, Adams,
Mulford & Co., P.C.
Director since 1991
T. JOSEPH SEMROD
Chairman and Chief Executive Officer
Summit Bancorp
Director since 1981
THOMAS D. SAYLES, JR.
Former Chairman
The Summit Bancorporation
Director The Summit Bancorporation
since 1974
ORIN R. SMITH
Chairman and Chief Executive Officer
Engelhard Corporation
Director The Summit Bancorporation
since 1984
JAMES C. BRADY, JR.
Partner
Mill House Associates, L.P.
Director The Summit Bancorporation
since 1989
17
<PAGE> 16
SUMMIT BANCORP MARKET PENETRATION
PRODUCTS AND SERVICES
Individuals and families purchased from us in 1995:
- - More than 13,000 personal trust accounts
- - More than 1,038,000 checking accounts
- - More than 798,000 savings accounts
- - More than 400,000 certificates of deposit or individual retirement accounts
- - More than 250,000 consumer loans
- - Over 475,000 ATM or debit cards
- - Over 441,000 package accounts
- - Over 63,000 discount brokerage and investment services
TOP 25 U.S. COUNTIES RANKED
BY PER CAPITA INCOME
<TABLE>
<CAPTION>
# of Counties
Institution with #1 Market Share Position
=======================================================================
<S> <C>
SUMMIT BANCORP.......................... 4
Chase Manhattan Corporation............. 3
First Union Corporation................. 2
First Chicago NBD Corporation........... 2
=======================================================================
</TABLE>
NEW JERSEY MARKET SHARE ANALYSIS
<TABLE>
<CAPTION>
Deposits Market
Institution (billions) Share
===========================================================
<S> <C> <C>
1. First Union Corporation......... $16.1 12.9%
2. SUMMIT BANCORP.................. 15.5 12.4
3. PNC Bank Corp................... 11.1 8.9
4. National Westminster Bancorp.... 9.2 7.3
5. CoreStates Financial Corp....... 5.7 4.5
===========================================================
</TABLE>
TOP 100 U.S.
COUNTIES RANKED BY
PER CAPITA INCOME
<TABLE>
<CAPTION>
# of Counties
Institution with Market Share Position in Top 3
================================================================================
<S> <C>
First Union Corporation................. 25
NationsBank Corporation................. 18
BankAmerica Corporation................. 14
SUMMIT BANCORP.......................... 8
Chase Manhattan Corporation............. 8
================================================================================
</TABLE>
[GRAPHIC OF NEW JERSEY AND PENNSYLVANIA COUNTIES, AND A BLOWN UP GRAPHIC OF NEW
JERSEY WITH ALL OF ITS COUNTIES. WITH THE LEGEND DEPICTING SUMMIT BANCORP IN NEW
JERSEY COUNTIES, SUMMIT BANCORP NEW JERSEY AND PENNSYLVANIA COUNTIES, PERCENTAGE
OF DEPOSITS, RANK AMONG ALL BANKS AND THRIFT INSTITUTIONS. NOTE: 6/94 DEPOSITS,
ADJUSTED TO REFLECT ALL COMPLETED AND PENDING ACQUISITIONS AS OF 9/95]
<PAGE> 17
MARKET PROFILES
Summit's retail sites can be divided into 95 markets. Each market has its own
demographic and commercial profile. The markets served range from urban, high
density areas in the northern part of New Jersey and in the Philadelphia area of
Pennsylvania, to rural, low density parts of southern New Jersey and the
northern and central parts of Pennsylvania. A range of economic classes are
covered from low to moderate income areas in some of New Jersey's largest cities
to some of the most affluent areas of the country in Somerset, Bergen and Morris
counties.
COMMERCIAL BANKING STRENGTHS
- - New Jersey and eastern Pennsylvania represent 9,500 middle market companies -
2nd largest middle market segment in U.S.
- - Largest middle market commercial and industrial lender based in New Jersey
- - 245 commercial banking relationship managers devoted to 31 county marketplace
- - 89 percent of Summit's commercial loans are to companies with sales of less
than $125,000,000
STRATEGIC PARTNERSHIPS
- - Summit Bancorp has relationships with 26% of New Jersey's 2.9 million
households
- - Summit Bancorp is the recognized New Jersey based premier provider of
financial services to middle market companies
- - Summit Bancorp is number one in deposit market share in Bergen, Hunterdon,
Morris, Somserset and Union counties in New Jersey. In Pennsylvania, we rank
number one in Carbon and Northampton counties
<PAGE> 18
Our merger with The Summit Bancorporation was completed on March 1, 1996, and
the financial pages of this annual report include the combined operating results
of the new organization, Summit Bancorp, as if both companies had always been
together. Financial statements for UJB Financial Corp. prior to the merger are
also included.
<TABLE>
<CAPTION>
CONTENTS
==================================================================
<C> <C>
1995 Financial Review........................................ 19
Combined Consolidated Comparative Average
Balance Sheets with Resultant Interest and Rates........... 30
Combined Consolidated Financial Statements and Notes......... 32
Management's Report and Independent Auditors' Report......... 49
Combined Consolidated Summary of Selected
Financial Data............................................. 50
Summit Bancorp Unaudited Quarterly Financial Data............ 52
UJB Financial Corp. Consolidated Financial Statements
and Notes.................................................. 54
Independent Auditors' Report................................. 70
Corporate Directory.......................................... 71
Corporate Information........................................ 73
==================================================================
</TABLE>
18
<PAGE> 19
Summit Bancorp and Subsidiaries
1995 FINANCIAL REVIEW
BASIS OF PRESENTATION
Summit Bancorp is the new name of the company that emerged from UJB Financial's
acquisition of The Summit Bancorporation on March 1, 1996. The acquisition was
accounted for on a pooling-of-interests basis, therefore, the Financial Review
is presented as if UJB Financial and The Summit Bancorporation were always one
company, and all prior period financial information has been restated. The
Financial Review should be read in conjunction with the Combined Consolidated
Comparative Average Balance Sheets on pages 30 and 31, and the Combined
Consolidated Financial Statements and Notes beginning on page 32, and the
Combined Consolidated Summary of Selected Financial Data on pages 50 and 51.
SUMMARY OF PERFORMANCE
Summit Bancorp's performance for 1995 was highlighted by loan growth,
principally in the residential mortgage and consumer loan portfolios, and
improved asset quality which resulted in a lower provision for loan losses and
reduced other real estate owned (OREO) expenses. This was the fifth consecutive
year of improved earnings. As a result of sustained earnings and capital growth,
the quarterly dividend paid on common stock was increased twice during the year
to an annualized dividend rate of $1.28 per share, a 23.1% increase over the
$1.04 dividend rate at year-end 1994.
NET INCOME
(In millions)
<TABLE>
[BAR GRAPH]
<S> <C>
1991 46.50
1992 90.28
1993 133.14
1994 154.55
1995 242.87
</TABLE>
Net income for the year ended December 31, 1995 was $242.9 million, a 57.1%
increase compared to $154.6 million earned in 1994. Earnings per common share
increased 53.9% to $2.77 from $1.80 earned in 1994. As a result of this growth,
key performance ratios showed significant improvement. Return on average assets
improved to 1.16% compared to .76% the previous year, while return on common
equity rose to 14.82% versus 10.37% for 1994. In addition, the efficiency ratio,
which is the relationship of non-interest expenses (excluding OREO and
non-recurring expenses) to tax-equivalent net interest income plus non-interest
income (excluding securities gains), improved to 57.55% for 1995 from 59.71% in
1994.
Earnings were enhanced by significant loan growth experienced during the year.
Average total loans increased $1.0 billion, or 8.3%, with the residential
mortgage loan and consumer loan portfolios contributing $958.0 million of the
increase. Net interest income rose $42.4 million, or 5.1%, over the prior year
and benefited from loan growth as well as an increased level of non-interest
bearing demand deposits.
Continued improvement in asset quality was evidenced by declines in
non-performing loans and OREO. During 1995 non-performing loans were reduced by
$11.7 million, or 5.9%, to $188.5 million. Non-performing loans as a percentage
of total loans declined to 1.34% at year-end 1995 from 1.53% at the prior year
end. As a result of this improvement, the provision for loan losses was reduced
to $71.9 million, a decline of $20.1 million, or 21.9%. OREO declined $23.0
million, or 48.6%, to $24.3 million.
FINANCIAL CONDITION
INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES: Average interest
earning assets totaled $19.3 billion in 1995, an increase of $608.6 million, or
3.3%, compared to 1994, reflecting strong loan growth partially offset by a
decline in securities as maturities and other cash flows were used to reduce
other borrowed funds. Total loans increased $1.0 billion, or 8.3%, to average
$13.4 billion, while securities available for sale and securities held to
maturity declined $430.2 million, or 7.0%, to average $5.7 billion.
Average interest bearing liabilities totaled $15.5 billion in 1995, an increase
of $339.4 million, or 2.2%, compared to 1994. This increase was primarily
attributable to an increase in interest bearing deposits of $710.7 million,
partially offset by a $392.5 million decrease in other borrowed funds.
The average tax-equivalent yield on total interest earning assets amounted to
7.85%, an increase of 76 basis points from 7.09% earned in 1994. The average
cost of interest bearing liabilities was 4.05% for 1995, a 91 basis point
increase over the 3.14% paid in 1994. These increases were due to the rising
interest rate environment during the second half of 1994 and early 1995. The
average prime rate was 8.83% in 1995 compared to 7.14% in 1994. Net interest
spread, which is the difference between the average yield on interest earning
assets and the average cost of interest bearing liabilities, was 3.80% for 1995
compared to 3.95% in 1994, a decline of 15 basis points. This decline reflected
a more expensive retail deposit mix and narrower spreads on interest earning
assets.
SECURITIES AVAILABLE FOR SALE:
Securities available for sale are held for an indefinite period of time and may
be sold in response to changing market and interest rate conditions. These
securities are reported at fair value with unrealized gains and losses, net of
tax, included as a separate component of shareholders' equity.
19
<PAGE> 20
Securities available for sale averaged $1.0 billion during 1995 compared to an
average of $1.5 billion in 1994, a decrease of $499.2 million, or 33.4%. The
decline resulted primarily from the full-year impact of a transfer of $707.8
million of collateralized mortgage obligations (CMOs) to securities held to
maturity in the second quarter of 1994 and the use of maturities and other cash
flows to reduce other borrowed funds. The portfolio consists primarily of U.S.
Government and Federal agency securities which averaged $738.0 million and other
securities, primarily corporate CMOs, which averaged $247.0 million.
In November 1995 the Financial Accounting Standards Board (FASB) issued a
special report on the implementation of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," and permitted a one-time reclassification of securities as of a
single measurement date between November 15, 1995, and December 31, 1995. As a
result, on December 31, 1995, $1.7 billion of securities held to maturity with
net unrealized gains of $7.6 million were transferred to securities available
for sale. This will increase the overall level of liquidity and provide
flexibility in managing interest rate risk. At December 31, 1995, securities
available for sale totaled $2.4 billion, an increase of $1.3 billion, or 114.6%,
over the prior year, primarily as a result of the transfer.
During the year $393.2 million of securities available for sale were sold for a
net gain of $7.9 million and maturities for the period amounted to $203.6
million. At December 31, 1995, there were pre-tax net unrealized gains of $11.3
million on securities available for sale compared to pre-tax net unrealized
losses of $39.2 million at December 31, 1994.
At December 31, 1995, the average estimated life of securities available for
sale, adjusted for historical prepayment patterns on mortgage-backed securities,
was 3 years, 11 months. The average yield on this portfolio increased 109 basis
points to 6.59% in 1995 compared to 5.50% in 1994.
SECURITIES HELD TO MATURITY:
Securities held to maturity are carried at amortized historical cost and consist
of those securities for which there is a positive intent and ability to hold to
maturity. Securities held to maturity averaged $4.7 billion during 1995,
relatively unchanged from the 1994 average of $4.6 billion. At December 31,
1995, securities held to maturity totaled $3.0 billion, a decline of $1.8
billion, or 36.5%, from the $4.8 billion at year-end 1994. This decline is
primarily due to the aforementioned transfer of $1.7 billion to securities
available for sale and the use of maturities and other cash flows from the
portfolio during the year to reduce other borrowed funds.
The portfolio consists primarily of U.S. Government and Federal agency
securities which averaged $2.4 billion, and other securities, primarily
corporate CMOs, which averaged $1.9 billion. The average estimated life of
securities held to maturity, adjusted for historical prepayment patterns on
mortgage-backed securities, was 5 years at December 31, 1995. The average yield
on this portfolio increased 37 basis points during 1995 to 6.38% compared to
6.01% in 1994.
LOANS:
Loan growth during 1995 occurred primarily in the residential mortgage and
consumer loan portfolios. This growth resulted from successful promotions
concurrent with declining interest rates during the second half of 1995 and from
purchase acquisitions. Total loans averaged $13.4 billion during 1995, an
increase of $1.0 billion, or 8.3%, compared to an average of $12.4 billion in
1994. On average, commercial loans increased $138.0 million, residential
mortgage loans grew $648.9 million, and consumer loans rose $309.1 million.
These increases were partially offset by a $67.0 million decline in commercial
mortgage loans. The average yield on the total loan portfolio was 8.48% in 1995
compared to 7.72% in 1994, an increase of 76 basis points, reflecting the impact
of higher average interest rates in 1995.
The following chart shows the growth in average total loans for the past five
years.
AVERAGE TOTAL LOANS
(In billions)
[BAR GRAPH]
<TABLE>
<S> <C>
1991 $12,174.1
1992 $12,043.8
1993 $11,889.5
1994 $12,387.6
1995 $13,416.5
</TABLE>
The commercial loan portfolio, which consists primarily of commercial and
industrial (C & I) and construction and development loans, grew $138.0 million,
or 2.7%, to average $5.3 billion for 1995. The increase in average commercial
loans during 1995 was a result of growth in the C & I portfolio, partially
offset by a managed decline in construction loans. The commercial portfolio
totaled $5.3 billion at December 31, 1995, a decline of $33.3 million, or .6%,
from the prior year end. The average yield on the portfolio increased 113 basis
points to 8.75% in 1995 from 7.62% the prior year.
C & I loans totaled $4.8 billion at December 31, 1995, an increase of $182.5
million, or 4.0%, over 1994. Asset based and middle market lending were the
major contributors to C & I growth during the year. This portfolio continued to
mirror the business diversification of the region with no industry
concentrations greater than 10% of total C & I loans.
Construction and development loans amounted to $569.8 million at December 31,
1995, a decline of $215.8 million, or 27.5%, compared to 1994. Contributing to
this decline were pay downs and transfers to permanent financing, as well as a
managed reduction in construction loan activity.
Commercial mortgage loans averaged $2.2 billion for 1995, a decrease of $67.0
million, or 2.9%, from 1994. Generally, these loans represent owner-occupied or
investment properties and complement a broader commercial lending relationship.
At December 31, 1995, commercial mortgage loans amounted to $2.3 billion, an
increase of $113.7 million, or 5.2%, over the prior year. The average yield on
commercial mortgage loans was 8.97% for 1995 compared to 8.25% for 1994, an
increase of 72 basis points.
20
<PAGE> 21
Residential mortgage loans averaged $3.0 billion, up $648.9 million, or 27.3%,
from 1994. Most of the growth occurred in adjustable-rate loans which are
generally retained for long-term investment. With rising rates in 1994 and
continuing into early 1995, there was a shift in borrower preference from
fixed-rate to adjustable-rate loans. In addition, approximately $174 million of
residential mortgage loans were added to the portfolio on July 11, 1995, with
the acquisition of Bancorp New Jersey, Inc.
Mortgage loan originations totaled $912.7 million in 1995, a decline of $414.4
million, or 31.2%, compared to $1.3 billion in 1994, primarily due to the
interest rate environment. Sales of loans in the secondary market, generally
fixed-rate loans, declined $323.0 million, or 72.1%, to $124.8 million compared
to $447.8 million in 1994. The decline was primarily the result of fewer
fixed-rate originations. Residential mortgage loans held for sale totaled $68.8
million at December 31, 1995, versus $33.4 million at year-end 1994. The average
yield on residential mortgage loans was 7.40% for 1995 compared to 6.95% for
1994, an increase of 45 basis points.
Consumer loans averaged $2.9 billion for the year, an increase of $309.1
million, or 12.0%, from 1994. The growth in this portfolio occurred primarily in
automobile, home equity, and personal line of credit loans and was the result of
successful promotions supported by a strong advertising campaign. Automobile
loans totaled $826.3 million as of December 31, 1995, an increase of $170.0
million, or 25.9%, over year-end 1994 and represented growth in both direct
lending and leasing activity. Home equity loans grew $91.3 million, or 5.0%, to
total $1.9 billion at year-end 1995, while personal line of credit loans
increased $23.6 million, or 88.7%, and reached $50.2 million at December 31,
1995. The average yield on the consumer loan portfolio was 8.73%, an increase of
59 basis points from the 8.14% earned in 1994.
DEPOSITS:
Average total deposits were $17.1 billion for 1995 compared to $16.3 billion for
1994, an increase of $790.6 million, or 4.8%. The most significant growth
occurred in time deposits, while demand deposits experienced modest growth, and
savings deposits declined.
The following chart illustrates the growth in average total deposits for the
past five years.
AVERAGE TOTAL DEPOSITS
(In billions)
[BAR GRAPH]
<TABLE>
<S> <C>
1991 $15,166.8
1992 $15,861.0
1993 $16,105.6
1994 $16,306.7
1995 $17,097.4
</TABLE>
Deposit growth continued to be impacted by the investors' desire for
higher-yielding investment alternatives such as mutual funds, annuities, and the
stock market. As interest rates began to rise in 1994, depositors started to
shift funds from lower-yielding savings accounts into higher-yielding retail
certificates of deposit. This shift continued into 1995.
Average demand deposits were $3.4 billion for 1995, an increase of $79.9
million, or 2.4%, from the prior year. Demand deposit growth occurred primarily
in correspondent bank and business accounts. The increase in this interest-free
source of funds in the higher interest rate environment of 1995 compared to 1994
was a contributing factor to the growth of net interest income.
Savings deposits, which include interest bearing checking, money market and
savings accounts, declined $553.8 million, or 6.7%, to average $7.8 billion
during 1995. Savings accounts decreased $362.9 million, money market accounts
went down $108.5 million, and interest bearing checking accounts declined $82.4
million. The average cost of savings deposits increased 45 basis points to 2.64%
in 1995 compared to 2.19% in 1994.
Time deposits, which consist primarily of retail certificates of deposit,
increased $1.1 billion, or 26.0%, during 1995 to average $5.3 billion. The
majority of the increase was in certificates of deposit with a term of one year
or more. The average cost of other time deposits increased 118 basis points to
5.16% in 1995 from 3.98% in 1994.
Commercial certificates of deposit $100,000 and over are primarily used as an
additional funding source to support growth in the loan portfolio and as an
alternative to other sources of borrowed funds. These deposits averaged $631.6
million during 1995, an increase of $171.5 million, or 37.3%, compared to 1994.
The cost of these deposits increased by 161 basis points during the year to
5.71% compared with 4.10% in 1994, and reflected the impact of competitive
pricing in a higher rate environment.
OTHER BORROWED FUNDS:
Other borrowed funds include Federal funds purchased, repurchase agreements,
treasury tax and loan deposits, and other short-term borrowings. These
borrowings provide an additional source of funds to support loan or securities
growth. During 1995 other borrowed funds decreased $392.5 million, or 24.2%, to
average $1.2 billion, as maturities and other cash flows in the securities
portfolios were used to reduce these borrowings. The average cost of other
borrowed funds increased 146 basis points during the year to 5.79% compared with
4.33% in 1994, due to higher interest rates in 1995.
Commercial paper, a funding source for certain non-bank subsidiaries, averaged
$47.7 million during 1995, an increase of $1.2 million, or 2.5%, from 1994. The
average cost of commercial paper increased 164 basis points to 5.70% in 1995
from 4.06% in 1994.
LONG-TERM DEBT:
Long-term debt averaged $499.6 million for 1995, an increase of $20.0 million,
or 4.2%, over 1994. At year-end 1995 long-term debt totaled $424.9 million, a
decline of $120.1 million, or 22.0%, compared to December 31, 1994. The decline
was primarily the result of a $100.4 million reduction in Federal Home Loan Bank
borrowings as maturities of one-year match-funded borrowings from late 1994
matured.
21
<PAGE> 22
Certain of the long-term debt agreements contain limitations on the amount of
additional funded debt that can be assumed. At December 31, 1995, under the most
restrictive covenants, the amount of additional funded debt that could have been
created was $418.2 million. Long-term debt totaling $233.8 million qualified as
risk-based Tier II capital at December 31, 1995. The average cost of long-term
debt increased 24 basis points during 1995 to 7.52% compared to 7.28% in 1994.
For additional information on long-term debt, see Note 12 of the Notes to
Combined Consolidated Financial Statements.
SHAREHOLDERS' EQUITY AND DIVIDENDS:
A strong capital position is necessary to support continued growth and
profitability, to serve the needs of depositors and creditors, and to yield an
attractive return for shareholders. Shareholders' equity averaged $1.7 billion
during 1995, an increase of $152.8 million, or 10.1%, compared to 1994. The
ratio of average total equity to average total assets increased to 7.97% for
1995 compared to 7.46% for 1994. Book value per common share rose 14.0% to
$19.89 at year-end 1995 from $17.45 at the prior year end.
The following chart shows the growth in average total equity for the past five
years.
AVERAGE TOTAL EQUITY
(In millions)
[BAR GRAPH]
<TABLE>
<S> <C>
1991 $1,161.8
1992 $1,257.6
1993 $1,413.5
1994 $1,511.5
1995 $1,664.3
</TABLE>
As a result of continued earnings progress, the quarterly dividend paid on
common stock was increased from $.26 per share to $.29 per share in the first
quarter of 1995 and was raised again to $.32 per share in the fourth quarter of
1995. Common stock dividends declared totaled $1.19 per share for 1995 compared
to $.94 for 1994, an increase of 26.6%. Certain of the long-term debt agreements
impose limitations on the amount of dividends that can be paid. At December 31,
1995, under the most restrictive of these limitations, the unrestricted
consolidated retained earnings available for dividends amounted to $717.6
million.
The market price of the common stock was $35.63 at December 31, 1995, compared
to $24.13 the prior year end. The common stock of Summit Bancorp is traded on
the New York Stock Exchange under the new symbol SUB (formerly UJB). The
quarterly market price ranges and dividends declared per common share for the
last two years are shown in the following table.
<TABLE>
<CAPTION>
Trade Price Cash
----------------------- Dividends
High Low Close Declared
====================================== ====== ====== =========
<S> <C> <C> <C> <C>
1995 Quarter Ended:
December 31............... $35.75 $31.50 $35.63 $.32
September 30.............. 37.25 30.00 32.00 .29
June 30................... 30.75 27.13 30.38 .29
March 31.................. 28.75 24.13 27.50 .29
- -------------------------------------- ------ ------ ----
1994 Quarter Ended:
December 31............... $27.13 $22.50 $24.13 $.26
September 30.............. 29.13 26.13 26.38 .26
June 30................... 29.25 25.50 27.63 .21
March 31.................. 28.63 23.50 26.88 .21
====================================== ====== ====== ====
</TABLE>
The dividends declared on the Series B, $50 stated value, adjustable-rate
cumulative preferred stock are determined based on prevailing interest rates,
subject to a 6.0% floor and an 11.0% ceiling. Preferred dividends declared
during 1995 amounted to $3.04 per share compared to $3.07 per share during 1994.
The dividends declared on the Series C, $25 stated value, adjustable-rate
cumulative preferred stock are also determined based on prevailing interest
rates, subject to a 6.0% floor and a 12.0% ceiling. Series C dividends of $1.50
per share were declared for 1995 and 1994.
Summit Bancorp and its bank subsidiaries are subject to various regulatory
capital requirements administered by the Federal Reserve Board and the Federal
Deposit Insurance Corporation. Regulatory capital is defined in terms of Tier I
capital (shareholders' equity excluding unrealized gains or losses on securities
available for sale and certain intangibles), Tier II capital (certain debt
instruments and a portion of the allowance for loan losses) and total capital
(Tier I plus Tier II). In addition, the Tier I leverage ratio measures the ratio
of Tier I capital to quarterly average assets less certain intangibles.
Risk-based capital ratios are expressed as a percentage of risk-adjusted assets,
where balance sheet assets and off-balance-sheet exposures are assigned a
predetermined weight to measure their level of risk.
The current minimum regulatory guideline for the Tier I leverage ratio is 4.0%
for institutions that have a regulatory rating of two or better. For Tier I and
total risk-based capital ratios, the minimum regulatory guidelines are 4.0% and
8.0%, respectively. Failure to meet minimum capital requirements can initiate
certain actions by regulators that could have a direct effect on the operations
and financial statements.
22
<PAGE> 23
The following table illustrates the Tier I leverage, Tier I capital, and total
risk-based capital ratios at December 31, 1995 and 1994, which were well above
the required minimums.
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994
====================================================== =========
<S> <C> <C>
Ratios:
Tier I leverage.......................... 7.97% 7.27%
Tier I risk-based capital................ 10.75 9.95
Total risk-based capital................. 13.46 12.69
Capital:
Tier I................................... $ 1,687.6 $ 1,512.1
Tier II.................................. 425.1 416.1
Total regulatory......................... 2,112.7 1,928.2
Assets:
Risk-adjusted assets..................... $15,693.2 $15,193.6
Average assets (leverage capital basis) . 21,149.3 20,796.6
====================================================== =========
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
established five capital level designations ranging from "well capitalized" to
"critically undercapitalized." At December 31, 1995, each of the subsidiary
banks met the "well capitalized" criteria, which requires a minimum Tier I
leverage ratio of 5.0% and minimum Tier I and total risk-based capital ratios of
6.0% and 10.0%, respectively.
RESULTS OF OPERATIONS
NET INTEREST INCOME:
Interest income on a tax-equivalent basis was $1.5 billion, an increase of
$190.8 million, or 14.4%, compared to 1994. This increase was primarily due to
the impact of higher interest rates in 1995 on the loan and securities
portfolios. Average volume increases in loans were partially offset by the
decline in securities available for sale. The average yield on interest earning
assets was 7.85% for 1995 compared to 7.09% for 1994, an increase of 76 basis
points.
Interest expense was $626.4 million for 1995, an increase of $150.4 million, or
31.6%, from a year ago. The increase is primarily the result of the higher rates
paid for deposits and other borrowed funds. Average volume increases in interest
bearing deposits were partially offset by a decrease in other borrowed funds.
The average cost of total interest bearing liabilities was 4.05% in 1995, an
increase of 91 basis points from 3.14% in 1994.
The accompanying Rate/Volume Table presents an analysis of the impact on
interest income and interest expense resulting from changes in average volumes
and rates over the past two years. For purposes of this disclosure, changes that
are not solely due to volume or rate have been allocated proportionally to both,
based on their relative absolute values.
<TABLE>
<CAPTION>
RATE/VOLUME TABLE Amount of Increase (Decrease)
-----------------------------------------------------------------
1995 versus 1994 1994 versus 1993
----------------------------- --------------------------------
Due to Change in: Due to Change in:
------------------ --------------------
(Tax-equivalent basis, in thousands) Volume Rate Total Volume Rate Total
====================================================================== ======== ======== ======== ======== ========
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans
Commercial ............................................. $ 10,747 $ 59,467 $ 70,214 $ 10,045 $ 29,629 $ 39,674
Residential mortgage ................................... 47,429 11,228 58,657 21,254 (19,215) 2,039
Commercial mortgage .................................... (5,673) 16,116 10,443 (3,175) 3,269 94
Consumer ............................................... 26,353 15,869 42,222 8,734 (3,273) 5,461
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
Total loans .......................................... 78,856 102,680 181,536 36,858 10,410 47,268
Securities held to maturity ............................. 1,647 19,759 21,406 17,771 (25,843) (8,072)
Securities available for sale ........................... (30,902) 14,234 (16,668) 17,988 11,009 28,997
Federal funds sold and securities purchased under
agreements to resell ................................... 394 2,885 3,279 (4,573) 1,276 (3,297)
Trading account securities .............................. 203 998 1,201 (154) (448) (602)
Deposits with banks ..................................... (261) 279 18 (168) 143 (25)
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
Total Interest Income ............................... 49,937 140,835 190,772 67,722 (3,453) 64,269
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
Interest Expense:
Deposits
Savings deposits ....................................... (12,761) 35,520 22,759 7,652 (9,564) (1,912)
Time deposits .......................................... 49,469 56,425 105,894 (22,388) (10,087) (32,475)
Commercial certificates of deposit $100,000 and over ... 8,392 8,840 17,232 4,733 4,741 9,474
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
Total deposits ....................................... 45,100 100,785 145,885 (10,003) (14,910) (24,913)
Commercial paper ........................................ 48 780 828 (413) 567 154
Other borrowed funds .................................... (19,385) 20,386 1,001 29,171 8,428 37,599
Long-term debt .......................................... 1,503 1,186 2,689 8,004 (1,668) 6,336
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
Total Interest Expense .............................. 27,266 123,137 150,403 26,759 (7,583) 19,176
- ---------------------------------------------------------------------- -------- -------- -------- -------- --------
Net Interest Income ....................................... $ 22,671 $ 17,698 $ 40,369 $ 40,963 $ 4,130 $ 45,093
====================================================================== ======== ======== ======== ======== ========
</TABLE>
23
<PAGE> 24
The following chart illustrates the growth in tax-equivalent net interest income
for the past five years.
NET INTEREST INCOME
(Tax-equivalent basis, in millions)
[BAR GRAPH]
<TABLE>
<S> <C>
1991 $707.727
1992 $769.959
1993 $801.086
1994 $846.179
1995 $886.548
</TABLE>
Net interest income on a tax-equivalent basis amounted to $886.5 million, an
increase of $40.4 million, or 4.8%, from $846.2 million earned in 1994. Net
interest spread on a tax-equivalent basis declined 15 basis points to 3.80% for
the year compared to 3.95% earned in 1994. Net interest margin, which is
tax-equivalent net interest income expressed as a percentage of average interest
earning assets, rose slightly to 4.60% for 1995 compared to 4.53% in 1994, as
the growth in net interest income outpaced the growth in average interest
earning assets.
NON-INTEREST INCOME:
Non-interest income, including securities gains, amounted to $224.2 million in
1995 compared to $210.1 million in the prior year, an increase of $14.1 million,
or 6.7%. Excluding securities gains, non-interest income rose $7.7 million, or
3.7%, from 1994.
Non-interest income categories compared to the prior year are shown in the
following table.
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
(Dollars in thousands) 1995 1994 Amount Percent
======================================= ======== ======= =======
<S> <C> <C> <C> <C>
Service charges on deposit
accounts.................. $ 88,083 $ 82,997 $ 5,086 6.1%
Service and loan fee income. 35,562 37,013 (1,451) (3.9)
Trust income................ 35,418 33,667 1,751 5.2
Trading account gains....... 1,295 847 448 52.9
Other....................... 55,225 53,310 1,915 3.6
- --------------------------------------- -------- ------- -----
215,583 207,834 7,749 3.7
Securities gains............ 8,606 2,232 6,374 285.6
- --------------------------------------- -------- ------- -----
$224,189 $210,066 $14,123 6.7%
======================================= ======== ======= =====
</TABLE>
Service charges on deposit accounts amounted to $88.1 million in 1995, an
increase of $5.1 million, or 6.1%. This growth occurred primarily in
insufficient funds fees on personal demand deposit accounts, resulting from
changes in fee schedules and improved monitoring of waivers.
Service and loan fee income decreased $1.5 million, or 3.9%, to $35.6 million in
1995 primarily due to a decline in mortgage origination fees as the volume of
loan originations decreased significantly in 1995 compared to the prior year.
Trust income of $35.4 million increased $1.8 million, or 5.2%, over the prior
year. Assets under trust administration, including corporate debt issue
trusteeships, grew $1.8 billion, or 8.4%, during the year to total $23.4 billion
at December 31, 1995. Trust assets under discretionary management were $6.4
billion at year-end 1995, an increase of $933.8 million, or 17.2%, compared to
$5.4 billion at year-end 1994. These assets include the Pillar Funds, a family
of mutual funds established in 1992, which totaled $1.4 billion at December 31,
1995, an increase of $260.0 million, or 23.6%, from the prior year end.
Other income amounted to $55.2 million, an increase of $1.9 million, or 3.6%,
compared to the prior year. The increase was primarily due to increased discount
brokerage fees, other commissions, and gains recorded on the sale of branch
assets.
For the year ended December 31, 1995, securities gains were $8.6 million, an
increase of $6.4 million, or 285.6%, over 1994. These gains were primarily due
to sales of equity securities.
NON-INTEREST EXPENSE:
Non-interest expenses totaled $642.4 million in 1995, a decrease of $57.3
million, or 8.2%, compared to 1994. Excluding the restructuring charge and the
loss on sale of assets taken in 1994, non-interest expenses decreased $8.3
million, or 1.3%, in 1995. The efficiency ratio improved to 57.55% for 1995
compared to 59.71% in 1994. The improvement in the efficiency ratio was
primarily attributable to increased net interest income, reduced FDIC assessment
expense, and savings realized from the Crestmont Financial Corp. (Crestmont)
restructuring and internal consolidation programs.
Non-interest expense categories compared to the prior year are shown in the
following table.
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
(Dollars in thousands) 1995 1994 Amount Percent
============================================ ======== ======== =======
<S> <C> <C> <C> <C>
Salaries.......................... $256,835 $250,207 $ 6,628 2.6%
Pension and other
employee benefits............... 79,715 72,605 7,110 9.8
Occupancy, net.................... 70,297 69,617 680 1.0
Furniture and equipment........... 61,104 58,561 2,543 4.3
FDIC assessment................... 21,600 37,983 (16,383) (43.1)
Advertising and public relations.. 16,135 15,604 531 3.4
OREO expenses..................... 8,093 21,340 (13,247) (62.1)
Restructuring charge.............. - 13,565 (13,565) (100.0)
Loss on sale of assets............ - 35,390 (35,390) (100.0)
Other............................. 128,582 124,793 3,789 3.0
- -------------------------------------------- -------- -------- ------
$642,361 $699,665 $(57,304) (8.2)%
============================================ ======== ======== ======
</TABLE>
Salaries expense totaled $256.8 million in 1995, an increase of $6.6 million, or
2.6%, compared to 1994. Merit increases were partially offset by reductions in
staff realized from mergers and ongoing internal consolidations. Total full-time
equivalent employees at December 31, 1995 were 7,547 compared to 7,766 at
December 31, 1994, a decrease of 2.8%. Pension and other employee benefits
expense totaled $79.7 million for the year ended December 31, 1995, and were
$7.1 million, or 9.8%, greater than 1994. Most of this increase can be
attributed to higher costs associated with employee medical and pension plans.
24
<PAGE> 25
Net occupancy expenses were relatively unchanged at $70.3 million for 1995
compared to $69.6 million for 1994. Furniture and equipment expenses amounted to
$61.1 million, an increase of $2.5 million, or 4.3%, from $58.6 million in 1994.
Most of the increase resulted from costs incurred for new equipment required to
expand computer applications and improve customer service.
The FDIC assessment expense of $21.6 million represented a decline of $16.4
million, or 43.1%, from 1994. This decrease was attributable to the FDIC's
decision to reduce the assessment rate on deposits insured under the Bank
Insurance Fund effective June 1, 1995. All of the subsidiary banks are in the
lowest risk classification and received a reduction in the assessment on
deposits insured by the Bank Insurance Fund from twenty-three cents per $100 of
deposits to four cents per $100 of deposits.
OREO expenses totaled $8.1 million for 1995, a decline of $13.2 million, or
62.1%, from 1994, reflecting a continued decline in the number of OREO
properties. A provision of $5.9 million was recorded in 1995 compared to $10.6
million in 1994. OREO expenses also include costs related to holding and
operating foreclosed properties and are net of rental income and gains on sales
of properties. These costs decreased $8.6 million, or 79.5%, in 1995 and
amounted to $2.2 million for the year. Gains on sales amounted to $3.5 million
in 1995 compared to $1.5 million in 1994.
During 1994, a restructuring charge of $13.6 million was recorded in conjunction
with the Crestmont acquisition. In addition, a loss of $35.4 million was
recorded on the sale of certain non-performing loans and OREO acquired from
Crestmont.
Other expenses, which consist primarily of professional and other fees and
communication expenses, were $128.6 million in 1995, an increase of $3.8
million, or 3.0%, from 1994. Professional and other fees increased $2.7 million
to $45.1 million for 1995. Communication expenses amounted to $26.2 million for
1995, an increase of $1.3 million over 1994.
INCOME TAXES:
Federal and state income tax expenses for 1995 were $136.3 million compared to
$89.0 million in 1994. The increase was primarily the result of higher pre-tax
income. The combined Federal and state effective income tax rate, which is
income tax expense as a percentage of pre-tax income, was 36.0% for 1995
compared to 36.3% for 1994.
Differences between the book basis and tax basis of assets and liabilities
recorded in the financial statements result in deferred taxes. As of December
31, 1995 and 1994, net deferred tax assets were $123.3 million and $167.4
million, respectively. For additional information on income taxes, see Note 18
of the Notes to Combined Consolidated Financial Statements.
ASSET QUALITY
NON-PERFORMING LOANS:
At December 31, 1995, non-performing loans totaled $188.5 million and
represented 1.34% of total loans, compared to $200.2 million, or 1.53% of total
loans, the prior year. Non-performing loans declined $11.7 million, or 5.9%, in
1995, following a decline of $119.2 million, or 37.3%, in 1994. The transfer of
$46.8 million of non-performing loans to assets held for accelerated disposition
and the sale of $24.3 million of non-performing loans acquired from Crestmont
contributed to the 1994 decline.
The following chart illustrates the trend in non-performing loans for the past
five years.
NON-PERFORMING LOANS TO YEAR-END LOANS
(In percent)
[BAR GRAPH]
<TABLE>
<S> <C>
1991 4.82%
1992 3.83%
1993 2.69%
1994 1.53%
1995 1.34%
</TABLE>
During the year, lost interest on non-accrual loans amounted to $19.1 million,
compared to $20.1 million in 1994. Interest payments received on non-accrual
loans totaled $3.3 million in 1995 and $4.3 million in 1994. Total lost interest
on non-accrual loans, after deducting interest payments received, amounted to
$15.8 million for both 1995 and 1994.
On January 1, 1995, SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," was adopted. This statement requires certain in-substance foreclosures
(ISFs) to be classified as non-performing loans. Upon adoption, ISFs totaling
$6.4 million, net of specific reserves of $3.8 million, were transferred from
OREO to non-performing loans.
The following table illustrates the activity in non-performing loans over the
past two years.
<TABLE>
<CAPTION>
(In thousands) 1995 1994
========================================================= ========
<S> <C> <C>
Balance, beginning of year.................... $200,205 $319,383
Adjustment for the pooling of a company
with a different fiscal year end........... - (1,400)
Additions:
From loan portfolio........................ 224,302 251,444
From purchase acquisitions................. 4,126 1,579
Transfer from other real estate owned,
net of reserve........................... 6,411 -
- --------------------------------------------------------- --------
Total additions 234,839 253,023
- --------------------------------------------------------- --------
Deductions:
To full performing......................... 36,606 53,485
Payments received.......................... 102,253 141,681
Loan charge offs........................... 75,736 93,772
To other real estate owned................. 29,496 35,086
Transferred to assets held for
accelerated disposition.................. 2,465 46,777
- --------------------------------------------------------- --------
Total deductions 246,556 370,801
- --------------------------------------------------------- --------
Balance, end of year $188,488 $200,205
========================================================= ========
</TABLE>
25
<PAGE> 26
Loans 90 days or more past due and not included in the non-performing loan
category totaled $47.8 million at year-end 1995, compared to $39.6 million at
the prior year end. These loans are primarily residential mortgages and consumer
loans which are generally well-secured and in the process of collection.
Unsecured consumer loans included in this category are typically charged off
after 120 days of delinquency.
The following table represents the composition of non-performing loans by type.
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
(Dollars in thousands) 1995 1994 Amount Percent
======================================= ======== ======== =======
<S> <C> <C> <C> <C>
Commercial and industrial.... $ 52,086 $ 52,082 $ 4 -%
Construction and development. 52,975 52,620 355 0.7
Commercial mortgage.......... 83,427 95,503 (12,076) (12.6)
- --------------------------------------- -------- -------- -------
$188,488 $200,205 $(11,717) (5.9)%
======================================= ======== ======== =======
</TABLE>
OTHER REAL ESTATE OWNED:
OREO, net of a valuation allowance, amounted to $24.3 million at year end
compared to $47.3 million the prior year, a decline of $23.0 million, or 48.6%.
The decline was primarily attributable to a reduction of $10.0 million in
additions to OREO and the aforementioned transfer of ISFs to non-performing
loans.
The following table illustrates the activity in OREO for the past two years.
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================= ========
<S> <C> <C>
Balance, beginning of year.............................. $62,256 $130,811
Additions:
From non-performing loans............................ 31,647 35,139
From loan portfolio.................................. 5,814 13,376
From purchase acquisitions........................... 1,064 -
- ----------------------------------------------------------------- --------
Total additions 38,525 48,515
- ----------------------------------------------------------------- --------
Deductions:
Sales and other reductions........................... 38,343 57,574
Write downs on sales................................. 14,364 25,626
Transfer to non-performing loans, gross.............. 10,235 -
Transfer to assets held for accelerated disposition . 300 33,870
- ----------------------------------------------------------------- --------
Total deductions 63,242 117,070
- ----------------------------------------------------------------- --------
Balance, end of year 37,539 62,256
Less allowance for OREO............................... 13,244 14,977
- ----------------------------------------------------------------- --------
Balance, end of year, net $24,295 $ 47,279
================================================================= ========
</TABLE>
OREO is carried at the lower of cost or fair value less estimated costs to sell
with any deficiency charged against the valuation allowance. At year-end 1995,
the allowance totaled $13.2 million, compared to $15.0 million at the prior year
end.
ASSETS HELD FOR ACCELERATED DISPOSITION:
In the fourth quarter of 1994, certain assets were identified for potential sale
in bulk transactions and were recognized in a separate category on the balance
sheet entitled "assets held for accelerated disposition" at a net realizable
value of $90.9 million. At December 31, 1995, this portfolio had been reduced by
82% and had a net realizable value of $16.7 million. Efforts to liquidate the
remaining assets continue and it is anticipated that their disposition will be
completed during 1996. The sales of these assets are subject to successful
negotiation of terms, completion of definitive agreements, and satisfaction
of closing conditions. No assurance can be given that the sale of these assets
will be consummated or that, if consummated, they will be sold for their current
carrying value.
ALLOWANCE FOR LOAN LOSSES AND RELATED PROVISION:
The allowance for loan losses at December 31, 1995 was $279.0 million compared
to $305.3 million at the prior year end, a decrease of $26.3 million, or 8.6%.
The ratio of the allowance for loan losses to total loans was 1.99% at year-end
1995 and 2.33% at year-end 1994. The allowance for loan losses as a percentage
of non-performing loans was 148.0% at December 31, 1995 compared to 152.5% at
the end of 1994.
In conjunction with the adoption of SFAS No. 114 on January 1, 1995, SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-- Income Recognition and
Disclosures," was also adopted. These Statements prescribe the accounting
treatment for impaired loans and specify acceptable methods for determining the
allowance for loan losses related to impaired loans. SFAS No. 114 defines an
impaired loan as a loan for which it is probable, based on current information,
that the lender will not collect all amounts due under the contractual terms of
the loan agreement.
The population of impaired loans has been identified as all non-accrual loans.
At December 31, 1995, the impaired loan portfolio, which was primarily
collateral dependent as defined by SFAS No. 114, totaled $188.5 million for
which general and specific allocations of the allowance for loan losses of $29.5
million were identified.
A standardized process has been established to assess the adequacy of the
allowance for loan losses and to identify the risks inherent in the loan
portfolio. This process incorporates credit reviews and gives consideration to
areas of exposure such as concentrations of credit, economic and industry
conditions, trends in delinquencies and collections, collateral coverage, and
the composition of the performing and non-performing loan portfolios. Specific
allocations, when required under SFAS No. 114, are identified by individual loan
while general reserve percentages are identified by loan category or grade and
allocated accordingly. All other loans not considered impaired, as defined
above, are graded and incorporated in the process of assessing the adequacy of
the allowance for loan losses. The allowance is maintained at a level considered
sufficient to absorb estimated losses in the loan portfolio.
At year-end 1995, of the total $279.0 million loan loss allowance approximately
$4.1 million was specifically identified for impaired loans, $163.6 million was
allocated to specific categories or grades of loans not considered impaired as
deemed necessary under the assessment process, $25.4 million was allocated as a
general reserve on impaired loans, and $85.9 million was considered a general
unallocated reserve for the remaining inherent risk in the portfolio.
The provision for loan losses was $71.9 million for the year ended December 31,
1995, down $20.1 million, or 21.9%, from $92.0 million recorded in 1994. This
decrease resulted primarily from reductions in non-performing loans during 1995.
Net charge offs of $104.3 million were recorded in 1995, an increase of $13.6
million, or 15.0%, compared to $90.7 million recorded in 1994. The increase in
net charge offs was the result of reducing non-performing loans to current net
realizable value and ongoing efforts to improve asset quality. These net charge
offs represented .78% of average loans in 1995 compared to .73% of average loans
in 1994.
26
<PAGE> 27
ASSET/LIABILITY MANAGEMENT
INTEREST SENSITIVITY:
Interest rate sensitivity and the repricing characteristics of assets and
liabilities are managed by the Asset/Liability Management Committee (ALCO). The
principal objective of ALCO is to maximize net interest income within acceptable
levels of risk established by policy. Interest rate risk is measured using
financial modeling techniques, including stress tests, to measure the impact of
changes in interest rates on future earnings.
Net interest income, the primary source of earnings, is affected by interest
rate movements. To mitigate the impact of changes in interest rates, the balance
sheet must be structured so that repricing opportunities exist for both assets
and liabilities in approximately equivalent amounts at basically the same time
intervals. Imbalances in these repricing opportunities at any point in time
constitute interest-sensitivity gaps, which is the difference between
interest-sensitive assets and interest-sensitive liabilities. These static
measurements do not reflect the results of any projected activity and are best
used as early indicators of potential interest rate exposures.
As illustrated by the interest rate sensitivity analysis in the accompanying
table, sensitivity to interest rate fluctuations is measured in a number of time
frames. The gap position is presented on an adjusted basis allowing for the
impact of off-balance-sheet transactions.
An asset sensitive gap means an excess of interest-sensitive assets over
interest-sensitive liabilities, whereas a liability sensitive gap means an
excess of interest-sensitive liabilities over interest-sensitive assets. At
December 31, 1995, there was a thirty-day liability sensitive gap of $2.3
billion and a one-year cumulative liability sensitive gap of $1.1 billion. In a
rising rate environment, a liability sensitive gap position generally indicates
that increases in the cost of interest bearing liabilities will outpace
increases in income from interest earning assets. This risk can be reduced by
various strategies, including the administration of liability costs and the
investment of asset maturities and cash flows in such a way as to insulate net
interest income from the effects of changes in interest rates.
These gap positions are also monitored through the use of simulation modeling
techniques which apply alternative interest rate scenarios to periodic forecasts
of future business activity and estimate the related impact on net interest
income. The use of simulation modeling assists management in its continuing
efforts to achieve earnings growth in ever-changing interest rate environments.
Asset and liability management efforts also involved the use of derivatives,
primarily interest rate swaps, to modify the interest rate characteristics of
designated assets and liabilities. These swaps were accounted for as hedges and
were not recorded on the balance sheet. Income or expense related to these
instruments was accrued monthly and recognized as an adjustment to interest
income or interest expense for those balance sheet instruments being hedged.
Hedged transactions resulted in a reduction in net interest income of $9.8
million in 1995 compared to a $.5 million contribution in 1994.
The following table illustrates the aggregate notional amounts and expected
maturities of interest rate swaps at December 31, 1995.
<TABLE>
<CAPTION>
Weighted
Notional Avg. Est.
(Dollars in millions) Amount Maturity
======================================================= =========
<S> <C> <C>
Receive fixed/pay floating.................. $856.7 4/97
Receive floating/pay fixed.................. 70.8 6/96
Receive floating/pay different floating..... 40.0 5/98
- ------------------------------------------------------- ----
$967.5 -
======================================================= ====
</TABLE>
Notional values of interest rate swaps represent the contractual balances on
which calculations of the amount of interest to be exchanged are based. Most of
the swaps were indexed amortizing swaps that were structured to contain an
initial principal lockout period followed by a scheduled principal amortization
period. The amortization speed was determined by a sliding percentage scale
which used different amortization percentages for varying levels of LIBOR. The
scheduled principal amortization speed is designed to increase or decrease in a
man-
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY TABLE Interest Sensitivity Period Total One Year
AS OF DECEMBER 31, 1995 ------------------------------------------------------------ Within to
(In thousands) 30 Day 90 Day 180 Day 365 Day One Year Two Years
============================================== ============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Total securities ............ $ 1,103,133 $ 395,001 $ 421,950 $ 746,992 $ 2,667,076 $ 850,210
Loans, net .................. 5,304,308 1,024,688 823,552 1,246,846 8,399,394 1,403,747
Money market investments .... 161,650 -- -- -- 161,650 --
- ---------------------------------------------- ------------ ------------ ------------ ------------ ------------
Total 6,569,091 1,419,689 1,245,502 1,993,838 11,228,120 2,253,957
- ---------------------------------------------- ------------ ------------ ------------ ------------ ------------
Sources of Funds:
Savings and time deposits ... 7,414,773 758,217 766,265 1,201,854 10,141,109 1,210,399
Commercial CDs .............. 397,148 227,989 42,553 39,748 707,438 --
Borrowed funds .............. 1,030,979 60,565 5,226 7,340 1,104,110 9,905
Non-interest bearing sources -- -- -- -- -- --
- ---------------------------------------------- ------------ ------------ ------------ ------------ ------------
Total 8,842,900 1,046,771 814,044 1,248,942 11,952,657 1,220,304
- ---------------------------------------------- ------------ ------------ ------------ ------------ ------------
Asset/Liability Interval Gap .. (2,273,809) 372,918 431,458 744,896 (724,537) 1,033,653
Net effect of off-balance-sheet
instruments ................. 20,836 (805,881) 131,998 309,300 (343,747) 43,083
- ---------------------------------------------- ------------ ------------ ------------ ------------ ------------
Asset/Liability Sensitivity Gap
Period gap (2,252,973) (432,963) 563,456 1,054,196 (1,068,284) 1,076,736
Cumulative gap $ (2,252,973) $ (2,685,936) $ (2,122,480) $ (1,068,284) $ (1,068,284) $ 8,452
============================================== ============ ============ ============ ============ ============
<CAPTION>
INTEREST RATE SENSITIVITY TABLE Non-Interest
AS OF DECEMBER 31, 1995 Sensitive and
(In thousands) Over Two Years Total
================================================= ============
<S> <C> <C>
Earning Assets:
Total securities ............ $ 1,984,825 $ 5,502,111
Loans, net .................. 3,937,399 13,740,540
Money market investments .... -- 161,650
- ------------------------------------------------ ------------
Total 5,922,224 19,404,301
- ------------------------------------------------ ------------
Sources of Funds:
Savings and time deposits ... 2,022,356 13,373,864
Commercial CDs .............. -- 707,438
Borrowed funds .............. 353,403 1,467,418
Non-interest bearing sources 3,855,581 3,855,581
- ------------------------------------------------ ------------
Total 6,231,340 19,404,301
- ------------------------------------------------ ------------
Asset/Liability Interval Gap .. (309,116)
Net effect of off-balance-sheet
instruments ................. 300,664
- ------------------------------------------------ ------------
Asset/Liability Sensitivity Gap
Period gap (8,452)
Cumulative gap $ -
================================================ ============
</TABLE>
27
<PAGE> 28
ner similar to that of the hedged asset or liability. The actual lives of these
agreements will move with the level of rates, but cannot exceed the maximum life
contained in each agreement. At year-end 1995, the swap agreements had an
average maximum remaining maturity of 19 months.
The following table illustrates the interest rate swap activity for the past two
years.
<TABLE>
<CAPTION>
(In millions) 1995 1994
===================================================================
<S> <C> <C>
Balance, beginning of year.................. $1,063.5 $1,166.6
Additions................................. 40.0 95.0
Maturities/amortizations.................. (136.0) (55.4)
Terminations.............................. - (142.7)
- -------------------------------------------------------------------
Balance, end of year $ 967.5 $1,063.5
===================================================================
</TABLE>
During 1994 losses of $3.9 million were incurred on the termination of interest
rate swaps with a remaining notional value of $142.7 million. These termination
losses are being amortized over the remaining lives of the related hedged assets
or liabilities. At December 31, 1995, the remaining unamortized termination
losses were $2.5 million with the remaining amortization periods ranging from 17
to 43 months.
For additional information on the use of derivative financial instruments, see
Notes 21 and 22 of the Notes to Combined Consolidated Financial Statements.
LIQUIDITY:
Bank liquidity is the ability to support asset growth while satisfying the
borrowing needs and deposit withdrawal requirements of customers. Traditional
sources of liquidity include asset maturities, asset repayments, and deposit
growth. Purchased liabilities such as Federal funds purchased and securities
sold under agreements to repurchase represent other major sources of funding. In
addition, the bank subsidiaries have established lines of credit with the
Federal Home Loan Bank of New York and other correspondent banks which further
support and enhance liquidity.
A strong base of low-cost demand and retail deposits, which is the cornerstone
of liquidity, is managed through an extensive branch network. Total demand and
retail deposits amounted to $17.2 billion at December 31, 1995, compared to
$16.5 billion at year-end 1994.
Liquidity is also important at the Parent Corporation in order to provide funds
for operations and to pay dividends to shareholders. Parent Corporation cash
requirements are met primarily through management fees and dividends from its
subsidiaries and the issuance of short and long-term debt. The amount of
dividends from bank subsidiaries is subject to certain regulatory restrictions
as detailed in Note 14 of the Notes to Combined Consolidated Financial
Statements. At December 31, 1995, there were $40.0 million of short-term lines
of credit available for general corporate purposes.
Commercial paper issued by the Parent Corporation is primarily a funding source
for certain non-bank subsidiaries. These funds averaged $47.7 million during the
year, relatively unchanged from the 1994 average of $46.5 million. At December
31, 1995, commercial paper totaled $38.5 million.
Liquidity management is a function of ALCO and includes monitoring current and
projected cash flows, as well as economic forecasts for the industry. A
liquidity contingency plan, which is designed to effectively manage potential
liquidity concerns due to changes in interest rates, credit markets, or other
external risks, is also in place.
The Combined Consolidated Statements of Cash Flows present the change in cash
and cash equivalents from operating, investing, and financing activities. Cash
and cash equivalents increased by $259.2 million during 1995. Net cash provided
by operating activities totaled $409.0 million. This amount was primarily
attributable to results of operations adjusted for: provisions for loan losses
and OREO, depreciation, amortization and accretion, originations of mortgages
held for sale, and proceeds from the sales of mortgages held for sale. Net cash
used in investing activities totaled $483.1 million and was the result of loan
and securities activity. Net cash provided by financing activities totaled
$333.3 million, reflecting increases in time deposits partially offset by
declines in short-term borrowings, long-term debt, and demand and savings
deposits.
The combined securities portfolio is also a source of liquidity as portfolio
assets provide cash flows through maturities and periodic repayments of
principal. During the year ended December 31, 1995, proceeds from maturities and
other cash flows in the combined securities portfolios were $1.1 billion, while
proceeds from the sales of securities available for sale were $401.1 million.
Cash flows from the securities portfolios were primarily used to fund loan
growth and reduce the other borrowed funds position. Total scheduled maturities
of interest bearing deposits with banks plus maturities and anticipated
principal repayments of the combined securities portfolios will be approximately
$583.0 million during 1996. In addition, all or part of the $2.4 billion of
securities available for sale could be sold to provide additional liquidity. At
December 31, 1995, the average maturity of securities held to maturity and
securities available for sale, adjusted for historical prepayment patterns on
mortgage-backed securities, was estimated to be approximately 5 years and 3
years, 11 months, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995 the FASB issued SFAS No. 121, "Accounting for the Impairment Of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Goodwill is included in the
scope of SFAS No. 121 while core deposit intangibles and mortgage servicing
rights are specifically excluded. SFAS No. 121 is effective for fiscal years
beginning after December 15, 1995, and will be adopted in 1996. The effect of
adopting SFAS No. 121 is expected to be immaterial.
In May 1995 the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights." This Statement requires capitalization of the value of rights to
service mortgage loans for others, whether those rights were acquired through
purchase or origination. SFAS No. 122 also requires that capitalized mortgage
servicing rights be evaluated for impairment based on their fair value with any
adjustments recognized through a valuation allowance. Effective January 1, 1996,
SFAS No. 122 was adopted and capitalization of originated mortgage servicing
28
<PAGE> 29
rights began. All capitalized mortgage servicing rights, both originated and
purchased, will be evaluated for impairment on a quarterly basis. The impact of
adopting SFAS No. 122 is expected to be immaterial.
In October 1995 the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This Statement encourages use of a fair value based method of
accounting for stock-based compensation plans while allowing continued use of
the intrinsic value method of accounting prescribed by Accounting Principles
Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees." Entities
electing to continue using the APB No. 25 method of accounting must make pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting, as defined in SFAS No. 123, had been applied.
The accounting and disclosure requirements for SFAS No. 123 are effective for
fiscal years beginning after December 15, 1995. Summit Bancorp intends to
continue accounting for stock-based compensation under APB No. 25 and will
include the pro forma disclosures required by SFAS No. 123 in financial
statements issued for fiscal years beginning January 1, 1996.
RESULTS OF OPERATIONS - 1994 COMPARED WITH 1993
Total earnings in 1994 amounted to $154.6 million, or $1.80 per share, compared
to $133.1 million, or $1.57 per share, for 1993. Improved earnings were
primarily the result of growth in net interest income, a lower provision for
loan losses, and a reduction of non-interest expenses. Earnings were also
impacted by the cumulative effects of changes in accounting principles in both
1994 and 1993. The adoption of SFAS No. 112, "Employers' Accounting for
Postretirement Benefits," reduced 1994 net income by $1.7 million, while the
1993 adoption of SFAS No. 109, "Accounting for Income Taxes," increased net
income by $9.1 million. Excluding the impact of these accounting changes, net
income increased $32.3 million, or 26.0%, from 1993 to 1994. As a result of
these improved earnings, the quarterly common stock dividend was increased to an
annualized dividend rate of $1.04 per share, a 23.8% increase over the $.84
dividend rate at year-end 1993.
Both internal consolidations and acquisitions of other financial organizations
were completed during 1994. In New Jersey, United Jersey Bank/Central, N.A. and
United Jersey Bank/South, N.A. were consolidated into United Jersey Bank. In
Pennsylvania, The Hazleton National Bank and Hanover Bank were consolidated into
First Valley Bank. In addition, VSB Bancorp, Inc., Lancaster Financial Ltd.,
Inc. and Crestmont were all acquired under the pooling-of-interests method of
accounting, while Palisade Savings Bank, FSB was acquired under the purchase
method of accounting.
Net interest income on a tax-equivalent basis amounted to $846.2 million, an
increase of $45.1 million, or 5.6%, from $801.1 million earned in 1993. Net
interest spread on a tax-equivalent basis declined slightly to 3.95% compared to
3.99% earned in 1993. Net interest margin was relatively unchanged at 4.53% for
1994 compared to 4.56% in 1993.
Interest income on a tax-equivalent basis was $1.3 billion, an increase of $64.3
million, or 5.1%, compared to 1993. This increase was primarily due to volume
increases in the loan and securities portfolios. Inter-est expense was $476.0
million, an increase of $19.2 million, or 4.2%, from $456.8 million in 1993. The
increase was principally a result of volume increases in borrowed funds and
commercial CDs. These increases were partially offset by a decline in retail
time deposits.
The provision for loan losses was $92.0 million for the year ended December 31,
1994, down $20.9 million, or 18.5%, from $112.9 million recorded in 1993. This
decrease resulted primarily from improvements in asset quality during 1994, as
both non-performing loans and net charge offs declined. Non-performing loans
declined $119.2 million, or 37.3%, to 1.53% of total loans at year-end 1994. The
transfer of $46.8 million of non-performing loans to assets held for accelerated
disposition and the sale of $24.3 million of non-performing loans acquired from
Crestmont contributed to the decline. Net charge offs declined $57.8 million to
$90.7 million, or .73% of average loans, compared to $148.5 million, or 1.25% of
average loans, in 1993.
Non-interest income, including securities gains, amounted to $210.1 million in
1994 compared to $212.8 million in 1993, a decrease of $2.7 million, or 1.3%.
Excluding securities gains, non-interest income rose 2.3% over 1993. Service
charges on deposit accounts increased $5.6 million, or 7.2%, to $83.0 million in
1994. Service and loan fee income increased $5.9 million, or 19.1%, to $37.0
million for the year. Trust income rose $.7 million, or 2.1%, to $33.7 million
in 1994. Other income amounted to $53.3 million, a decrease of $6.2 million, or
10.5%, compared to the prior year.
For the year ended December 31, 1994, securities gains were $2.2 million
compared to $9.6 million in 1993. The 1993 gains were realized as securities
available for sale were sold to reduce prepayment risk in the CMO portfolio.
Non-interest expenses totaled $699.7 million, a decrease of $7.2 million, or
1.0%, compared to 1993. Salaries expense totaled $250.2 million in 1994, a
decrease of $2.4 million, or .9%, compared to 1993. Pension and other employee
benefits expense was $72.6 million for the year ended December 31, 1994, a
decline of $3.6 million, or 4.7%, from 1993.
Occupancy expenses were $69.6 million for 1994, an increase of $2.5 million, or
3.7%, compared to the prior year. Furniture and equipment expenses amounted to
$58.6 million, an increase of $4.0 million, or 7.4%, over $54.5 million in 1993.
The FDIC assessment expense of $38.0 million decreased $1.7 million, or 4.4%,
from 1993.
OREO expenses totaled $21.3 million for 1994, a decline of $26.4 million, or
55.3%, from 1993 due to a reduction in the number of OREO properties. A
provision of $10.6 million was recorded in 1994, compared to $32.1 million in
1993. OREO expenses also include expenses related to holding and operating
foreclosed properties. These costs declined $4.9 million, or 31.5%, in 1994 and
amounted to $10.8 million for the year.
Other expenses were $124.8 million in 1994, a decrease of $7.7 million, or 5.8%,
from 1993. During 1994 a loss of $35.4 million was recorded on the sale of
non-performing loans and OREO obtained in the Crestmont acquisition.
29
<PAGE> 30
Summit Bancorp and Subsidiaries
COMBINED CONSOLIDATED COMPARATIVE AVERAGE BALANCE SHEETS WITH
RESULTANT INTEREST AND RATES
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
Tax-equivalent basis, dollars in thousands Average Average Average Average
Not covered by independent auditors' report Balance Interest Rate Balance Interest Rate
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and securities purchased
under agreements to resell......................... $ 112,849 $ 7,122 6.31% $ 103,130 $ 3,843 3.73%
Interest bearing deposits with banks.................. 11,140 647 5.81 16,923 629 3.72
Trading account securities............................ 34,829 2,052 5.89 28,904 851 2.94
Securities available for sale......................... 994,246 65,530 6.59 1,493,423 82,198 5.50
Securities held to maturity:
U.S. Government and Federal agencies............... 2,445,505 151,351 6.19 2,378,413 136,122 5.72
States and political subdivisions.................. 323,523 31,363 9.69 381,454 38,121 9.99
Other securities................................... 1,929,350 117,146 6.07 1,869,549 104,211 5.57
- ---------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 4,698,378 299,860 6.38 4,629,416 278,454 6.01
- ---------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial......................................... 5,286,002 462,697 8.75 5,148,036 392,483 7.62
Residential mortgage............................... 3,021,526 223,607 7.40 2,372,623 164,950 6.95
Commercial mortgage................................ 2,232,279 200,215 8.97 2,299,264 189,772 8.25
Consumer........................................... 2,876,719 251,194 8.73 2,567,661 208,972 8.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans 13,416,526 1,137,713 8.48 12,387,584 956,177 7.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 19,267,968 1,512,924 7.85 18,659,380 1,322,152 7.09
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks............................... 1,079,265 1,130,198
Allowance for loan losses............................. (299,946) (341,984)
Other assets.......................................... 822,861 810,593
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest earning assets 1,602,180 1,598,807
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $20,870,148 $20,258,187
=================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits...................................... $ 7,773,726 205,270 2.64 $ 8,327,520 182,511 2.19
Time deposits......................................... 5,298,179 273,373 5.16 4,205,143 167,479 3.98
Commercial certificates of deposit $100,000 and over.. 631,579 36,090 5.71 460,092 18,858 4.10
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 13,703,484 514,733 3.76 12,992,755 368,848 2.84
- ---------------------------------------------------------------------------------------------------------------------------------
Commercial paper...................................... 47,696 2,719 5.70 46,545 1,891 4.06
Other borrowed funds.................................. 1,232,051 71,338 5.79 1,624,560 70,337 4.33
Long-term debt........................................ 499,572 37,586 7.52 479,532 34,897 7.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 15,482,803 626,376 4.05 15,143,392 475,973 3.14
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits....................................... 3,393,893 3,313,975
Other liabilities..................................... 329,128 289,288
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest bearing liabilities 3,723,021 3,603,263
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 1,664,324 1,511,532
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $20,870,148 $20,258,187
=================================================================================================================================
Net Interest Income (tax-equivalent basis)............... 886,548 3.80% 846,179 3.95%
Tax-equivalent basis adjustment.......................... (17,307) (19,352)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 869,241 $ 826,827
=================================================================================================================================
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.60% 4.53%
=================================================================================================================================
</TABLE>
Notes: Average balances and rates include non-accruing and renegotiated loans.
The tax-equivalent adjustment was computed based on a Federal income tax
rate of 35% for 1995 through 1993 and 34% for 1992 through 1990.
30
<PAGE> 31
<TABLE>
<CAPTION>
1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
Tax-equivalent basis, dollars in thousands Average Average Average Average
Not covered by independent auditors' report Balance Interest Rate Balance Interest Rate
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and securities purchased
under agreements to resell......................... $ 231,851 $ 7,140 3.08% $ 286,984 $ 11,091 3.86%
Interest bearing deposits with banks.................. 21,947 654 2.98 18,738 694 3.70
Trading account securities............................ 32,707 1,453 4.44 23,852 1,493 6.26
Securities available for sale......................... 1,146,264 53,201 4.64 126,820 10,782 8.50
Securities held to maturity:
U.S. Government and Federal agencies............... 2,898,475 189,804 6.55 3,781,887 276,438 7.31
States and political subdivisions.................. 403,104 42,818 10.62 498,239 51,517 10.34
Other securities................................... 947,664 53,904 5.69 486,057 31,931 6.57
- --------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 4,249,243 286,526 6.74 4,766,183 359,886 7.55
- --------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial......................................... 5,008,156 352,809 7.04 5,249,882 381,149 7.26
Residential mortgage............................... 2,083,469 162,911 7.82 2,025,927 178,442 8.81
Commercial mortgage................................ 2,338,359 189,678 8.11 2,265,640 199,290 8.80
Consumer........................................... 2,459,481 203,511 8.27 2,502,425 221,889 8.87
- --------------------------------------------------------------------------------------------------------------------------------
Total loans 11,889,465 908,909 7.64 12,043,874 980,770 8.14
- --------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 17,571,477 1,257,883 7.16 17,266,451 1,364,716 7.90
- --------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks............................... 1,073,457 974,590
Allowance for loan losses............................. (359,501) (401,586)
Other assets.......................................... 830,161 858,196
- --------------------------------------------------------------------------------------------------------------------------------
Total non-interest earning assets 1,544,117 1,431,200
- --------------------------------------------------------------------------------------------------------------------------------
Total Assets $19,115,594 $18,697,651
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits...................................... $ 7,997,446 184,423 2.31 $ 7,246,271 226,689 3.13
Time deposits......................................... 4,758,318 199,954 4.20 5,417,598 282,053 5.21
Commercial certificates of deposit $100,000 and over.. 324,487 9,384 2.89 517,002 20,220 3.91
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 13,080,251 393,761 3.01 13,180,871 528,962 4.01
- --------------------------------------------------------------------------------------------------------------------------------
Commercial paper...................................... 58,920 1,737 2.95 94,297 3,408 3.61
Other borrowed funds.................................. 922,757 32,738 3.55 1,027,048 38,317 3.73
Long-term debt........................................ 370,579 28,561 7.71 248,648 24,070 9.68
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 14,432,507 456,797 3.17 14,550,864 594,757 4.09
- --------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits....................................... 3,025,331 2,680,143
Other liabilities..................................... 244,233 209,076
- --------------------------------------------------------------------------------------------------------------------------------
Total non-interest bearing liabilities 3,269,564 2,889,219
- --------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 1,413,523 1,257,568
- --------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $19,115,594 $18,697,651
================================================================================================================================
Net Interest Income (tax-equivalent basis)............... 801,086 3.99% 769,959 3.81%
Tax-equivalent basis adjustment.......................... (21,225) (23,212)
- --------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 779,861 $ 746,747
================================================================================================================================
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.56% 4.46%
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
Tax-equivalent basis, dollars in thousands Average Average Average Average
Not covered by independent auditors' report Balance Interest Rate Balance Interest Rate
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold and securities purchased
under agreements to resell......................... $ 526,920 $ 31,520 5.98% $ 495,460 $ 40,330 8.14%
Interest bearing deposits with banks.................. 34,672 2,283 6.58 65,521 5,726 8.74
Trading account securities............................ 14,534 1,332 9.16 6,707 503 7.50
Securities available for sale......................... 35,199 3,509 9.97 -- -- --
Securities held to maturity:
U.S. Government and Federal agencies............... 3,067,704 268,498 8.75 2,420,977 220,505 9.11
States and political subdivisions.................. 581,612 61,509 10.58 685,027 73,115 10.67
Other securities................................... 701,100 60,054 8.57 1,116,502 96,586 8.65
- ---------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 4,350,416 390,061 8.97 4,222,506 390,206 9.24
- ---------------------------------------------------------------------------------------------------------------------------------
Loans:
Commercial......................................... 5,542,688 494,939 8.93 5,825,495 605,368 10.39
Residential mortgage............................... 2,098,910 204,052 9.72 2,067,255 209,834 10.15
Commercial mortgage................................ 2,055,116 203,657 9.91 1,990,410 209,012 10.50
Consumer........................................... 2,477,436 258,979 10.45 2,372,501 278,030 11.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans 12,174,150 1,161,627 9.54 12,255,661 1,302,244 10.63
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 17,135,891 1,590,332 9.28 17,045,855 1,739,009 10.20
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks............................... 865,695 832,947
Allowance for loan losses............................. (397,222) (228,099)
Other assets.......................................... 840,004 626,612
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest earning assets 1,308,477 1,231,460
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $18,444,368 $18,277,315
=================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits...................................... $ 6,033,970 300,027 4.97 $ 5,431,634 302,292 5.57
Time deposits......................................... 5,785,073 399,413 6.90 5,336,049 423,977 7.95
Commercial certificates of deposit $100,000 and over.. 1,000,019 61,405 6.14 1,249,622 100,021 8.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 12,819,062 760,845 5.94 12,017,305 826,290 6.88
- ---------------------------------------------------------------------------------------------------------------------------------
Commercial paper...................................... 167,396 10,216 6.10 234,069 18,975 8.11
Other borrowed funds.................................. 1,417,166 82,228 5.80 1,930,136 155,152 8.04
Long-term debt........................................ 303,596 29,316 9.66 369,040 35,220 9.54
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 14,707,220 882,605 6.00 14,550,550 1,035,637 7.12
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits....................................... 2,347,701 2,296,191
Other liabilities..................................... 227,656 182,237
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest bearing liabilities 2,575,357 2,478,428
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 1,161,791 1,248,337
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $18,444,368 $18,277,315
=================================================================================================================================
Net Interest Income (tax-equivalent basis)............... 707,727 3.28% 703,372 3.08%
Tax-equivalent basis adjustment.......................... (27,939) (34,214)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 679,788 $ 669,158
=================================================================================================================================
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.13% 4.13%
=================================================================================================================================
</TABLE>
31
<PAGE> 32
Summit Bancorp and Subsidiaries
COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------
(Dollars in thousands) 1995 1994
=============================================================================================== ===========
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks (Note 3)............................................... $ 1,337,718 $ 1,187,086
Federal funds sold and securities purchased under agreements to resell......... 161,650 53,070
- ----------------------------------------------------------------------------------------------- -----------
Total cash and cash equivalents 1,499,368 1,240,156
- ----------------------------------------------------------------------------------------------- -----------
Interest bearing deposits with banks.............................................. 18,329 18,822
Trading account securities........................................................ 28,637 34,870
Securities available for sale (Notes 4 and 12).................................... 2,408,065 1,122,264
Securities held to maturity (Notes 5 and 12) (Market value of
$3,040,826 in 1995 and $4,571,593 in 1994)..................................... 3,047,080 4,800,987
Loans (Notes 6, 7, 12, and 23).................................................... 14,019,574 13,105,179
Less: Allowance for loan losses (Note 8)....................................... 279,034 305,330
- ----------------------------------------------------------------------------------------------- -----------
Net loans 13,740,540 12,799,849
- ----------------------------------------------------------------------------------------------- -----------
Premises and equipment (Note 9)................................................... 206,691 212,939
Assets held for accelerated disposition........................................... 16,650 90,888
Accrued interest receivable....................................................... 132,441 119,526
Other real estate owned, net (Note 10)............................................ 24,295 47,279
Due from customers on acceptances................................................. 26,740 21,159
Other assets (Notes 1 and 18)..................................................... 388,099 386,076
- ----------------------------------------------------------------------------------------------- -----------
Total Assets $21,536,935 $20,894,815
=============================================================================================== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits........................................... $ 3,873,801 $ 3,728,313
Interest bearing deposits:
Savings and time deposits................................................... 13,373,864 12,734,662
Commercial certificates of deposit $100,000 and over........................ 707,438 514,134
- ----------------------------------------------------------------------------------------------- -----------
Total deposits 17,955,103 16,977,109
- ----------------------------------------------------------------------------------------------- -----------
Other borrowed funds (Note 11).................................................... 1,042,556 1,563,039
Long-term debt (Note 12).......................................................... 424,862 544,936
Accrued interest payable.......................................................... 45,567 34,941
Bank acceptances outstanding...................................................... 26,740 21,159
Accrued expenses and other liabilities (Notes 15 and 18).......................... 239,791 219,914
- ----------------------------------------------------------------------------------------------- -----------
Total liabilities 19,734,619 19,361,098
- ----------------------------------------------------------------------------------------------- -----------
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
1995 and 1994, adjustable-rate cumulative, $50 stated value.............. 30,008 30,008
Series C: Authorized, issued, and outstanding 504,481 in
1995 and 800,000 in 1994, adjustable-rate cumulative, $25 stated value... 12,612 20,000
Common stock par value $1.20:
Authorized 130,000,000 shares; issued and outstanding 88,471,028 in
1995 and 85,003,952 in 1994.............................................. 106,165 102,005
Surplus........................................................................ 826,788 730,131
Retained earnings.............................................................. 821,579 676,281
Net unrealized gain (loss) on securities, net of tax........................... 5,164 (24,708)
- ----------------------------------------------------------------------------------------------- -----------
Total shareholders' equity 1,802,316 1,533,717
- ----------------------------------------------------------------------------------------------- -----------
Total Liabilities and Shareholders' Equity $21,536,935 $20,894,815
=============================================================================================== ===========
</TABLE>
See accompanying Notes to Combined Consolidated Financial Statements.
32
<PAGE> 33
Summit Bancorp and Subsidiaries
COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993
================================================================================================ ========== ==========
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (Note 7)................................................. $1,132,584 $ 951,029 $ 903,686
Interest on securities held to maturity (Note 5):
Taxable.......................................................................... 268,183 240,037 243,210
Tax-exempt....................................................................... 21,127 25,328 28,504
Interest on securities available for sale (Note 4).................................. 63,973 81,187 52,099
Interest on Federal funds sold and securities purchased under agreements to resell.. 7,122 3,843 7,140
Interest on trading account securities.............................................. 1,981 747 1,365
Interest on deposits with banks..................................................... 647 629 654
- ------------------------------------------------------------------------------------------------ ---------- ----------
Total interest income 1,495,617 1,302,800 1,236,658
- ------------------------------------------------------------------------------------------------ ---------- ----------
INTEREST EXPENSE
Interest on savings and time deposits............................................... 478,643 349,989 384,377
Interest on commercial certificates of deposit $100,000 and over.................... 36,090 18,858 9,384
Interest on borrowed funds (Notes 11 and 12)........................................ 111,643 107,126 63,036
- ------------------------------------------------------------------------------------------------ ---------- ----------
Total interest expense 626,376 475,973 456,797
- ------------------------------------------------------------------------------------------------ ---------- ----------
Net interest income........................................................... 869,241 826,827 779,861
Provision for loan losses (Note 8).................................................. 71,850 91,995 112,885
- ------------------------------------------------------------------------------------------------ ---------- ----------
Net interest income after provision for loan losses 797,391 734,832 666,976
- ------------------------------------------------------------------------------------------------ ---------- ----------
NON-INTEREST INCOME
Service charges on deposit accounts................................................. 88,083 82,997 77,410
Service and loan fee income......................................................... 35,562 37,013 31,089
Trust income........................................................................ 35,418 33,667 32,977
Securities gains (Notes 4 and 5).................................................... 8,606 2,232 9,579
Trading account gains............................................................... 1,295 847 2,215
Other............................................................................... 55,225 53,310 59,532
- ------------------------------------------------------------------------------------------------ ---------- ----------
Total non-interest income 224,189 210,066 212,802
- ------------------------------------------------------------------------------------------------ ---------- ----------
NON-INTEREST EXPENSES
Salaries............................................................................ 256,835 250,207 252,600
Pension and other employee benefits (Note 15)....................................... 79,715 72,605 76,195
Occupancy, net (Notes 9 and 19)..................................................... 70,297 69,617 67,106
Furniture and equipment (Notes 9 and 19)............................................ 61,104 58,561 54,519
FDIC assessment..................................................................... 21,600 37,983 39,731
Advertising and public relations.................................................... 16,135 15,604 14,960
Other real estate owned expenses (Note 10).......................................... 8,093 21,340 47,774
Restructuring charge................................................................ -- 13,565 21,500
Loss on sale of assets.............................................................. -- 35,390 --
Other (Note 17)..................................................................... 128,582 124,793 132,445
- ------------------------------------------------------------------------------------------------ ---------- ----------
Total non-interest expenses 642,361 699,665 706,830
- ------------------------------------------------------------------------------------------------ ---------- ----------
Income before income taxes.................................................... 379,219 245,233 172,948
Federal and state income taxes (Note 18)............................................ 136,349 88,952 48,925
- ------------------------------------------------------------------------------------------------ ---------- ----------
Income before cumulative effect of a change in accounting principle........... 242,870 156,281 124,023
Cumulative effect of a change in accounting principle (Notes 15 and 18)............. -- (1,731) 9,119
- ------------------------------------------------------------------------------------------------ ---------- ----------
Net Income $ 242,870 $ 154,550 $ 133,142
================================================================================================ ========== ==========
Net Income Per Common Share:
Income before cumulative effect of a change in accounting principle........... $ 2.77 $ 1.82 $ 1.46
Cumulative effect of a change in accounting principle (Notes 15 and 18)............. -- (.02) .11
- ------------------------------------------------------------------------------------------------ ---------- ----------
Net Income Per Common Share $ 2.77 $ 1.80 $ 1.57
================================================================================================ ========== ==========
Average Common Shares Outstanding (in thousands) 86,674 84,381 82,712
================================================================================================ ========== ==========
</TABLE>
See accompanying Notes to Combined Consolidated Financial Statements.
33
<PAGE> 34
Summit Bancorp and Subsidiaries
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(Dollars in thousands) 1995 1994 1993
==================================================================================================== =========== ===========
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................................................. $ 242,870 $ 154,550 $ 133,142
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for loan losses and other real estate owned............................... 77,736 102,568 144,947
Depreciation, amortization, and accretion, net....................................... 44,075 44,168 33,616
Restructuring charge................................................................. -- 13,565 21,500
Deferred income tax (benefit)........................................................ 22,486 23,244 (6,764)
Gains on sales of trading account securities and securities available for sale....... (9,901) (3,079) (11,794)
Gains on sales of mortgages held for sale............................................ (4,806) (2,759) (11,678)
Gains on sales of other real estate owned............................................ (3,528) (1,457) (1,716)
Proceeds from sales of other real estate owned....................................... 24,534 44,927 62,012
Proceeds from sales of mortgages held for sale....................................... 129,650 450,554 565,377
Originations of mortgages held for sale.............................................. (160,290) (373,552) (653,701)
Net decrease (increase) in trading account securities................................ 7,528 (2,536) (4,578)
Decrease (increase) in accrued interest receivable and other assets.................. 2,829 (184,906) (37,593)
Increase in accrued interest payable, accrued expenses, and other liabilities........ 35,850 26,761 24,721
- ---------------------------------------------------------------------------------------------------- ----------- -----------
Net cash provided by operating activities 409,033 292,048 257,491
- ---------------------------------------------------------------------------------------------------- ----------- -----------
INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity................................. 924,202 1,375,252 2,069,332
Purchases of securities held to maturity................................................ (565,122) (2,134,258) (2,560,132)
Purchases of securities available for sale.............................................. (447,840) (678,847) (897,489)
Proceeds from maturities of securities available for sale............................... 203,609 800,271 529,280
Proceeds from sales of securities available for sale.................................... 401,104 111,023 596,659
Net decrease in interest bearing deposits with banks.................................... 493 12,958 22,857
Proceeds from sales of loans............................................................ -- 35,334 201,786
Net increase in loans................................................................... (976,711) (1,434,533) (188,946)
Purchases of premises and equipment, net................................................ (22,856) (28,974) (26,759)
- ---------------------------------------------------------------------------------------------------- ----------- -----------
Net cash used in investing activities (483,121) (1,941,774) (253,412)
- ---------------------------------------------------------------------------------------------------- ----------- -----------
FINANCING ACTIVITIES
Net (decrease) increase in demand and savings deposits.................................. (67,549) 245,211 600,994
Net increase (decrease) in time deposits................................................ 1,045,543 567,672 (898,857)
Net (decrease) increase in short-term borrowings........................................ (520,483) 770,010 (10,119)
Principal payments on long-term debt, net............................................... (196,499) (398,004) (651,649)
Proceeds from issuance of debt, net of related expenses................................. 76,425 475,439 754,388
Dividends paid.......................................................................... (94,784) (74,042) (56,284)
Proceeds from issuance of common stock in connection with the purchase
acquisition of Bancorp New Jersey, Inc............................................... 68,186 -- --
Proceeds from issuance of common stock under dividend reinvestment and
other stock plans.................................................................... 32,631 24,962 22,223
Repurchase of preferred stock........................................................... (5,984) -- --
Other, net.............................................................................. (4,186) (714) (2,490)
- ---------------------------------------------------------------------------------------------------- ----------- -----------
Net cash provided by (used in) financing activities 333,300 1,610,534 (241,794)
- ---------------------------------------------------------------------------------------------------- ----------- -----------
Increase (decrease) in cash and cash equivalents........................................ 259,212 (39,192) (237,715)
Cash and cash equivalents at beginning of year.......................................... 1,240,156 1,279,348 1,517,063
- ---------------------------------------------------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year $1,499,368 $ 1,240,156 $ 1,279,348
==================================================================================================== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid:
Interest payments.................................................................... $ 615,750 $ 469,079 $ 474,061
Income tax payments.................................................................. 100,386 73,191 55,571
Noncash investing activities:
Loans made in conjunction with the sale of other real estate owned................... 2,292 9,891 17,112
Net transfer of securities held to maturity to (from) securities available for sale.. 1,397,526 (573,715) 961,541
Net transfer of loans to other real estate owned..................................... 29,963 47,628 79,590
Net transfer of assets to assets held for accelerated disposition.................... 965 90,888 --
Securitization of mortgage loans..................................................... -- 35,233 116,777
==================================================================================================== =========== ===========
</TABLE>
See accompanying Notes to Combined Consolidated Financial Statements.
34
<PAGE> 35
Summit Bancorp and Subsidiaries
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net Total
Preferred Common Retained Unrealized Shareholders'
(Dollars in thousands) Stock Stock Surplus Earnings Gain (Loss) Equity
======================================================== ======== ======== ======== ========== ============
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992................... $50,008 $ 98,448 $685,760 $522,788 $ (260) $1,356,744
Net income, 1993.......................... -- -- -- 133,142 -- 133,142
Cash dividends declared:
Preferred stock - Series B............. -- -- -- (1,801) -- (1,801)
Preferred stock - Series C............. -- -- -- (1,200) -- (1,200)
Common stock........................... -- -- -- (56,581) -- (56,581)
Common stock issued:
Dividend reinvestment and other
stock plans (785,128 shares)........ -- 942 15,414 -- -- 16,356
Exercise of stock options, net
(425,760 shares).................... -- 511 5,356 -- -- 5,867
Change in valuation allowance for
marketable equity securities........... -- -- -- -- 4,000 4,000
- -------------------------------------------------------- -------- -------- -------- -------- ----------
Balance, December 31, 1993 50,008 99,901 706,530 596,348 3,740 1,456,527
- -------------------------------------------------------- -------- -------- -------- -------- ----------
Net unrealized gain (loss) on
securities upon adoption of a change
in accounting principle, net of tax.... -- -- -- -- 9,355 9,355
Adjustment for the pooling of companies
with different fiscal year ends........ -- -- 343 474 -- 817
Net income, 1994.......................... -- -- -- 154,550 -- 154,550
Cash dividends declared:
Preferred stock - Series B............. -- -- -- (1,835) -- (1,835)
Preferred stock - Series C............. -- -- -- (1,200) -- (1,200)
Common stock........................... -- -- -- (74,451) -- (74,451)
Common stock issued:
In connection with pooling
acquisition of Lancaster Financial
Ltd., Inc. (450,000 shares)......... -- 540 (140) 2,395 -- 2,795
Dividend reinvestment and other
stock plans (647,661 shares)........ -- 777 14,690 -- -- 15,467
Exercise of stock options, net
(655,374 shares).................... -- 787 8,708 -- -- 9,495
Change in unrealized gain (loss) on
securities, net of tax................. -- -- -- -- (37,803) (37,803)
- -------------------------------------------------------- -------- -------- -------- -------- ----------
Balance, December 31, 1994 50,008 102,005 730,131 676,281 (24,708) 1,533,717
- -------------------------------------------------------- -------- -------- -------- -------- ----------
Net income, 1995.......................... -- -- -- 242,870 -- 242,870
Cash dividends declared:
Preferred stock - Series B............. -- -- -- (1,832) -- (1,832)
Preferred stock - Series C............. -- -- -- (868) -- (868)
Common stock........................... -- -- -- (96,276) -- (96,276)
Common stock issued:
In connection with purchase
acquisition of Bancorp New Jersey,
Inc. (1,948,153 shares)............. -- 2,338 65,848 -- -- 68,186
Dividend reinvestment and other
stock plans (894,061 shares)........ -- 1,073 24,684 -- -- 25,757
Exercise of stock options, net
(624,862 shares).................... -- 749 6,125 -- -- 6,874
Preferred stock:
Redemption of Series C
preferred stock..................... (7,388) -- -- 1,404 -- (5,984)
Change in unrealized gain (loss) on
securities, net of tax................. -- -- -- -- 29,872 29,872
- -------------------------------------------------------- -------- -------- -------- -------- ----------
Balance, December 31, 1995 $42,620 $106,165 $826,788 $821,579 $ 5,164 $1,802,316
======================================================== ======== ======== ======== ======== ==========
</TABLE>
See accompanying Notes to Combined Consolidated Financial Statements.
35
<PAGE> 36
Summit Bancorp and Subsidiaries
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Combined Consolidated Financial Statements have been prepared in accordance
with generally accepted accounting principles and prevailing industry practices.
These statements give retroactive effect to the merger of UJB Financial Corp.
and The Summit Bancorporation to form Summit Bancorp. This transaction has been
accounted for as a pooling of interests; therefore, the Combined Consolidated
Financial Statements are presented as if UJB Financial and Summit were always
one company. These statements are presented as supplemental information to the
audited historical Consolidated Financial Statements of UJB Financial included
on pages 54 through 69.
The following is a description of significant accounting policies used in
preparing the Combined Consolidated Financial Statements.
BUSINESS:
Summit Bancorp is a bank holding company registered under the Bank Holding
Company Act of 1956. Through its bank and active non-bank subsidiaries, a full
range of banking services and certain non-banking services are provided to
individual and corporate customers in a competitive environment. Summit Bancorp
is regulated by various Federal and state agencies and is subject to periodic
examinations by those regulatory authorities.
PRINCIPLES OF CONSOLIDATION:
The accompanying Combined Consolidated Financial Statements include the accounts
of Summit Bancorp and its subsidiaries after elimination of all significant
intercompany accounts and transactions. Prior period financial statements have
been restated to include the accounts and results of operations for acquisitions
accounted for as pooling-of-interests combinations, unless immaterial. For
acquisitions using the purchase method of accounting, results of operations are
included from the dates of acquisition. The assets and liabilities of companies
acquired under the purchase method of accounting have been adjusted to estimated
fair values at the date of acquisition; the resulting net discount or premium is
being accreted or amortized into income over the estimated remaining lives of
the related assets and liabilities.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the dates of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates.
CASH FLOW REPORTING:
The Combined Consolidated Statements of Cash Flows are presented using the
indirect method. 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:
Effective January 1, 1994, Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," was
adopted. SFAS No. 115 requires the classification of securities into one of
three categories: trading account securities, securities held to maturity, and
securities available for sale.
Securities that are purchased specifically for short-term appreciation with the
intent of selling in the near future are classified as trading account
securities. Trading account securities are carried at market value with realized
and unrealized gains and losses reported in non-interest income as trading
account gains.
Debt securities purchased with the intent and ability to hold until maturity are
classified as securities held to maturity and are carried at cost, adjusted for
amortization of premiums and accretion of discounts.
All other securities, including equity securities, are classified as securities
available for sale. Securities available for sale may be sold prior to maturity
in response to changes in interest rates or prepayment risk, for asset/liability
management purposes, or other similar factors. These securities are carried at
fair value with unrealized gains and losses, including the effect of hedges,
reported as a separate component of shareholders' equity on a net-of-tax basis.
Realized gains and losses, which are generally computed by the specific
identification method, are reported in non-interest income as securities gains.
Transfers of securities between categories are recorded at fair value, including
the effect of hedges, as of the transfer date, with the accounting treatment of
unrealized gains or losses determined by the category into which the security is
transferred.
LOANS:
Loans are generally carried at the principal amount outstanding, net of unearned
discounts and deferred loan origination fees and costs. Interest income on loans
is accrued and credited to interest and fees on loans as earned. Loan
origination fees and certain direct loan origination costs are deferred and
amortized over the estimated life of the loan as an adjustment to the yield.
Other loan fees are recognized as earned and are reported in non-interest
income.
Residential mortgage loans which are serviced for others are not included in the
Combined Consolidated Financial Statements. Fees earned for servicing loans are
reported as non-interest income when the related loan payments are collected.
Loan servicing costs are charged to non-interest expense as incurred.
Effective January 1, 1996, SFAS No. 122, "Accounting for Mortgage Servicing
Rights," was adopted on a prospective basis. This Statement requires
capitalization of the rights to service mortgage loans for others, whether those
rights are acquired through purchase or origination. All capitalized mortgage
servicing rights, both originated and purchased, will be evaluated for
impairment on a quarterly basis with any adjustments recognized through a
valuation allowance.
36
<PAGE> 37
NON-PERFORMING LOANS:
Non-performing loans consist primarily of commercial and industrial,
construction and development, and commercial mortgage loans for which the
accrual of interest has been discontinued (non-accrual loans). These loans are
classified as non-accrual when they 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 received on
non-accrual loans is generally credited to interest income for the current
period. However, if ultimate collectibility of principal is in doubt, interest
collections are applied as principal reductions. If principal and interest
payments are brought contractually current and future collectibility is
reasonably assured, loans are returned to accrual status.
On January 1, 1995, SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures," was adopted. Summit Bancorp has
chosen to maintain existing income recognition policies with respect to
non-accrual loans. Generally, interest accruals on residential mortgage loans
cease at 90 or 180 days, depending on lien priority. Past due residential
mortgage loans are monitored and charged off when considered uncollectible;
consumer loans are charged off when they are 120 days past due.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," was adopted
prospectively on January 1, 1995. This Statement defines an impaired loan as a
loan for which it is probable, based on current information, that the lender
will not collect all amounts due under the contractual terms of the loan
agreement. Smaller balance homogeneous loans that are collectively evaluated for
impairment, such as residential mortgage loans and consumer loans, are
specifically excluded from the impaired loan portfolio. Summit Bancorp has
defined the population of impaired loans to be all non-accrual loans. The
impaired loan portfolio is primarily collateral dependent, as defined by SFAS
No. 114. Impaired loans greater than $250,000 are individually assessed to
determine that each loan's carrying value is not in excess of the fair value of
the related collateral or the present value of the expected future cash flows.
Upon adoption of SFAS No. 114, certain loans which had been considered
in-substance foreclosed and previously classified as OREO have been reclassified
as non-performing loans. Prior period balances have not been restated as the
amounts are considered immaterial.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is a valuation reserve available for losses
incurred or expected on extensions of credit. Credit losses arise primarily from
the loan portfolio, but may also be derived from other credit-related sources
including commitments to extend credit, guarantees, and standby letters of
credit. Additions are made to the allowance through periodic provisions which
are charged to earnings. All losses of principal are charged to the allowance
when incurred or when a determination is made that a loss is expected.
Subsequent recoveries, if any, are credited to the allowance.
The adequacy of the allowance for loan losses is determined through a quarterly
review of outstanding loans and commitments to extend credit. The impact of
economic conditions on the creditworthiness of the borrowers is given
consideration, as well as loan loss experience, changes in the composition and
volume of the loan 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.
PREMISES AND EQUIPMENT:
Premises, furniture, and equipment are stated at cost, less accumulated
depreciation and amortization. The provisions for depreciation and amortization
are computed using the straight-line method. Premises, furniture, and equipment
are depreciated over the estimated useful life of the assets or terms of the
leases, as applicable. Estimated useful lives are ten to forty years for
premises, and three to ten years for furniture and equipment. Maintenance and
repairs are charged to expense as incurred, while renewals and major
improvements are capitalized. Upon disposition, premises and major items of
furniture and equipment are removed from the property accounts at their carrying
amount with the resulting gain or loss included in other non-interest income.
ASSETS HELD FOR ACCELERATED DISPOSITION:
In December 1994 certain commercial accruing and non-accruing loans and OREO
properties were identified for sale under an accelerated disposition program.
These assets were transferred to a separate account in other assets and are
carried at their estimated net realizable value.
OTHER REAL ESTATE OWNED (OREO):
OREO is carried at the lower of cost or fair value less estimated cost to sell.
When a property is acquired, the excess of the carrying amount over fair value,
if any, is charged to the allowance for loan losses. An allowance for OREO has
been established, through charges to OREO expense, to maintain properties at the
lower of cost or fair value less estimated cost to sell. Operating results of
OREO, including rental income, operating expenses, and gains and losses realized
from the sale of properties owned, are also recorded in OREO expense.
INTANGIBLE ASSETS:
Intangible assets, primarily goodwill and core deposit intangibles, are included
in other assets. Goodwill represents the excess of the purchase price over the
estimated fair value of identifiable net assets acquired through purchase
acquisitions and amounted to $100,139,000 and $41,216,000 at December 31, 1995
and 1994, respectively. Goodwill is amortized on a straight-line method over the
estimated periods to be benefited, ranging from ten to forty years, and included
in non-interest expense.
Core deposit intangibles represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in acquisitions. Core
deposit intangibles and other identifiable intangibles amounted to $19,537,000
and $16,331,000 at December 31, 1995 and 1994, respectively, and are amortized
on an accelerated basis over their estimated periods of benefit, ranging from
five to ten years, and included in non-interest expense. Other identifiable
intangibles consist primarily of purchased mortgage servicing rights which
represent the intangible value of purchased rights to service mortgage loans.
FINANCIAL INSTRUMENTS:
Derivative financial instruments, primarily interest rate swaps, are one of the
tools used to manage interest rate risk. The net periodic interest payments or
receipts arising from these instruments are recognized on an accrual basis in
interest income or interest expense as yield adjustments to the hedged assets or
liabilities. Gains or losses on the termination of interest rate swaps are
deferred and amortized in interest income or interest expense as an adjustment
to the yield of
37
<PAGE> 38
the hedged asset or liability over the shorter of the remaining life of the
hedged item or the remaining contract period.
RETIREMENT PLANS:
Summit Bancorp and its subsidiaries have several formal non-contributory
retirement plans which cover substantially all employees. Annual contributions
are made to the plans in amounts at least equal to the minimum regulatory
requirements and no greater than the maximum amount that can be deducted for
Federal income tax purposes. The costs associated with these benefits are
accrued based on actuarial assumptions and included in non-interest expenses.
INCOME TAXES:
The amount provided for income taxes is based on income reported for combined
consolidated financial statement purposes, after elimination of Federal
tax-exempt income which is derived primarily from securities of states and
political subdivisions and certain commercial and mortgage loans.
On January 1, 1993, SFAS No. 109, "Accounting for Income Taxes," was adopted by
UJB Financial on a prospective basis. SFAS No. 109 was adopted prospectively by
Summit on January 1, 1992. Under SFAS No. 109, deferred tax assets and
liabilities are recognized for the expected future tax consequences of existing
differences between financial statement and tax bases of existing assets and
liabilities, as well as for operating losses and tax credit carryforwards. The
effect on deferred taxes of a change in the tax rate is recognized in the period
of the enactment date. The cumulative effect at January 1, 1993, of this change
in the method of accounting for income taxes has been included in the Combined
Consolidated Statements of Income for the year ended December 31, 1993.
Summit Bancorp and its subsidiaries file consolidated Federal income tax returns
with the amount of income tax expense or benefit computed and allocated on a
separate return basis.
INCOME PER SHARE:
Income per common share is calculated by dividing net income, less the dividends
on the adjustable-rate cumulative preferred stocks, by the average daily number
of common shares outstanding during the period. Common stock equivalents are not
included in the calculation as they have no material dilutive effect.
NOTE 2 ACQUISITIONS
In September 1995 UJB Financial and The Summit Bancorporation (Summit) announced
a definitive agreement to merge in a stock-for-stock exchange to form Summit
Bancorp. The transaction, accounted for as a pooling of interests, was
consummated on March 1, 1996, in an exchange of .90 shares of UJB Financial
common stock for each share of Summit common stock. There were 34,078,905 shares
of UJB Financial common stock issued for 37,865,450 shares of Summit common
stock. At December 31, 1995, Summit had total assets of $5,654,110,000.
Combined Condensed Consolidated Results of Operations, which are based upon the
audited consolidated financial statements of UJB Financial and Summit for the
three years ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
(In thousands, except per share) 1995 1994 1993
======================================================= ======== ========
<S> <C> <C> <C>
Net interest income:
UJB Financial.............................. $650,767 $616,104 $575,908
Summit..................................... 218,474 210,723 203,953
- ------------------------------------------------------- -------- --------
Combined $869,241 $826,827 $779,861
======================================================= ======== ========
Net income:
UJB Financial.............................. $170,367 $130,150 $ 82,418
Summit..................................... 72,503 24,400 50,724
- ------------------------------------------------------- -------- --------
Combined $242,870 $154,550 $133,142
======================================================= ======== ========
Net income per share:
UJB Financial.............................. $ 2.99 $ 2.35 $ 1.50
Summit..................................... 2.12 .70 1.54
Combined................................... 2.77 1.80 1.57
======================================================= ======== ========
</TABLE>
The Combined Consolidated Results of Operations are not necessarily indicative
of the results that would have occurred had the acquisition been consummated in
the past or which may be attained in the future.
In August 1995 UJB Financial signed a definitive merger agreement to acquire
Flemington National Bank and Trust Company. The transaction was consummated on
February 23, 1996, in an exchange of 1.3816 shares of UJB Financial common stock
for each share of Flemington common stock. There were 1,324,000 shares of UJB
Financial common stock issued for 958,476 shares of Flemington common stock. At
December 31, 1995, Flemington had total assets of $285,875,000. This transaction
was accounted for under the pooling-of-interests method.
In July 1995 Summit signed a definitive merger agreement with Garden State
Bancshares, Inc. This transaction was consummated on January 16, 1996, in an
exchange of 1.08 shares of Summit common stock for each share of Garden State
common stock. There were 3,365,834 shares of Summit common stock issued for
3,116,513 shares of Garden State common stock. At December 31, 1995, Garden
State had total assets of $311,796,000. This transaction was accounted for under
the pooling-of-interests method.
However, because these acquisitions were considered immaterial to Summit
Bancorp, the Garden State and Flemington transactions will be recorded as
adjustments to beginning shareholders' equity at January 1, 1996 without
restating the Combined Consolidated Financial Statements for 1995 and prior
years.
In January 1995 UJB Financial entered into a definitive merger agreement to
acquire Bancorp New Jersey, Inc. for a combination of cash and stock. The
transaction, accounted for under the purchase method, was consummated on July
11, 1995. Bancorp New Jersey had total assets of $504,528,000, loans of
$290,444,000 and deposits of $449,971,000. Results of operations are included
from the acquisition date. The acquisition of Bancorp New Jersey resulted in
goodwill of $63,764,000 which is being amortized over 20 years on a
straight-line basis.
The pro forma results of operations for the period January 1, 1995 to July 11,
1995 and for the year ended December 31, 1994, assuming Bancorp New Jersey had
been acquired as of January 1, 1994, would not have been significantly different
from those presented in the Combined Consolidated Statements of Income.
During the year ended December 31, 1994, UJB Financial completed two
acquisitions. In July 1994 VSB Bancorp, Inc., with assets of $381,100,000, was
acquired and accounted for as a pooling of interests. In September 1994 Palisade
Savings Bank, FSB, with assets of $324,237,000, was acquired and accounted for
under the purchase method.
38
<PAGE> 39
During the year ended December 31, 1994, Summit completed two acquisitions. In
September 1994 Summit acquired Crestmont Financial Corp., with assets of
$859,402,000, and Lancaster Financial Ltd., Inc., with assets of $16,104,000.
Both transactions were accounted for under the pooling-of-interests method.
NOTE 3 RESTRICTIONS ON CASH AND DUE FROM BANKS
Certain subsidiary banks are required to maintain reserve balances with a
Federal Reserve Bank based principally upon deposits. These reserve balances
averaged $486,373,000 in 1995 and $484,979,000 in 1994.
NOTE 4 SECURITIES AVAILABLE FOR SALE
The following is a comparative summary of 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>
1995
U.S. Government
and Federal agencies.......... $1,904,017 $14,238 $15,996 $1,902,259
Other securities:
Mortgage-backed............... 348,939 2,079 2,285 348,733
Other debt.................... 41,497 2,042 87 43,452
Equities, net................. 102,269 11,531 179 113,621
- -------------------------------------------- ------- ------- ----------
Total other 492,705 15,652 2,551 505,806
- -------------------------------------------- ------- ------- ----------
$2,396,722 $29,890 $18,547 $2,408,065
============================================ ======= ======= ==========
1994
U.S. Government
and Federal agencies.......... $ 869,490 $ 1,200 $49,260 $ 821,430
Other securities:
Mortgage-backed............... 216,910 - 11,301 205,609
Equities, net................. 75,063 21,969 1,807 95,225
- -------------------------------------------- ------- ------- ----------
Total other 291,973 21,969 13,108 300,834
- -------------------------------------------- ------- ------- ----------
$1,161,463 $23,169 $62,368 $1,122,264
============================================ ======= ======= ==========
</TABLE>
The amortized cost and market value of securities available for sale at December
31, 1995, are distributed by contractual maturity. However, mortgage-backed
securities and other securities which may have principal prepayment provisions
are distributed to a maturity category based on their estimated average life.
These prepayments are not scheduled over the life of the investment, but are
reflected as adjustments to the final maturity distribution.
The following is a summary of the expected maturity distribution at December 31,
1995:
<TABLE>
<CAPTION>
Amortized Market
(In thousands) Cost Value
================================================================= ==========
<S> <C> <C>
Due in one year or less.............................. $ 143,269 $ 144,005
Due after one year through five years................ 1,512,920 1,516,409
Due after five years through ten years............... 375,816 374,199
Due after ten years.................................. 262,448 259,831
Marketable equity securities, net.................... 102,269 113,621
- ----------------------------------------------------------------- ----------
$2,396,722 $2,408,065
================================================================= ==========
</TABLE>
Gains and losses were realized on sales of securities available for sale as
follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ====== =======
<S> <C> <C> <C>
Gains........................................... $ 23,892 $2,693 $11,956
Losses.......................................... (15,994) (834) (2,923)
- ---------------------------------------------------------- ------ -------
Net gains $ 7,898 $1,859 $ 9,033
========================================================== ====== =======
</TABLE>
Interest and dividend income on securities available for sale was as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======= =======
<S> <C> <C> <C>
U.S. Government and Federal
agencies....................................... $48,693 $55,488 $31,742
States and political subdivisions................ 402 - -
Other securities................................. 14,878 25,699 20,357
- ---------------------------------------------------------- ------- -------
$63,973 $81,187 $52,099
========================================================== ======= =======
</TABLE>
The carrying value of securities available for sale pledged to secure public
funds and securities sold under agreements to repurchase, as well as for other
purposes required by law, was $1,087,038,000 at December 31, 1995.
NOTE 5 SECURITIES HELD TO MATURITY
The following is a comparative summary of securities held to maturity at
December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
============================================ ========== ========== ==========
<S> <C> <C> <C> <C>
1995
U.S. Government
and Federal agencies.......... $1,261,172 $ 8,180 $ 11,747 $1,257,605
States and political
subdivisions.................. 271,621 14,815 186 286,250
Other securities:
Mortgage-backed............... 1,404,834 1,138 20,453 1,385,519
Other debt.................... 109,453 2,326 327 111,452
- -------------------------------------------- ------- -------- ----------
Total other 1,514,287 3,464 20,780 1,496,971
- -------------------------------------------- ------- -------- ----------
$3,047,080 $26,459 $ 32,713 $3,040,826
============================================ ======= ======== ==========
1994
U.S. Government
and Federal agencies.......... $2,422,999 $ 888 $127,503 $2,296,384
States and political
subdivisions.................. 378,919 11,974 3,409 387,484
Other securities:
Mortgage-backed............... 1,926,185 1,166 111,370 1,815,981
Other debt.................... 72,884 60 1,200 71,744
- -------------------------------------------- ------- -------- ----------
Total other 1,999,069 1,226 112,570 1,887,725
- -------------------------------------------- ------- -------- ----------
$4,800,987 $14,088 $243,482 $4,571,593
============================================ ======= ======== ==========
</TABLE>
The amortized cost and the market value of securities held to maturity at
December 31, 1995, are distributed by contractual maturity. However,
mortgage-backed securities and other securities which may have principal
prepayment provisions are distributed to a maturity category based on their
estimated average life. These prepayments are not scheduled over the life of the
investment, but are reflected as adjustments to the final maturity distribution.
39
<PAGE> 40
The following is a summary of the expected maturity distribution at December 31,
1995:
<TABLE>
<CAPTION>
Amortized Market
(In thousands) Cost Value
================================================================= ============
<S> <C> <C>
Due in one year or less.............................. $ 90,974 $ 91,463
Due after one year through five years................ 1,711,320 1,704,745
Due after five years through ten years............... 792,379 789,759
Due after ten years.................................. 452,407 454,859
- ----------------------------------------------------------------- ------------
$3,047,080 $3,040,826
================================================================= ============
</TABLE>
Gains and losses were realized on early redemptions of securities held to
maturity as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
============================================================== ==== =====
<S> <C> <C> <C>
Gains................................................... $714 $382 $ 732
Losses.................................................. (6) (9) (186)
- -------------------------------------------------------------- ---- -----
Net gains $708 $373 $ 546
============================================================== ==== =====
</TABLE>
Interest and dividend income on securities held to maturity was as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======== ========
<S> <C> <C> <C>
U.S. Government and Federal
agencies...................................... $151,351 $136,122 $189,804
States and political subdivisions............... 21,107 25,321 28,285
Other securities................................ 116,852 103,922 53,625
- ---------------------------------------------------------- -------- --------
$289,310 $265,365 $271,714
========================================================== ======== ========
</TABLE>
The carrying value of securities held to maturity pledged to secure public funds
and securities sold under agreements to repurchase, as well as for other
purposes required by law, was $1,260,419,000 at December 31, 1995.
In November 1995 the Financial Accounting Standards Board issued a special
report on the implementation of SFAS No. 115. This special report provided an
opportunity for a one-time reassessment of the classification of securities as
of a single measurement date between November 15, 1995, and December 31, 1995.
As a result, securities held to maturity with an amortized cost of
$1,684,443,000 and a net unrealized gain of $7,637,000 were transferred to
securities available for sale on December 31, 1995. These securities were
transferred to increase the overall level of liquidity and improve the ability
to manage interest rate risk.
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) 1995 1994
================================================================== ===========
<S> <C> <C>
Commercial and industrial............................ $ 4,751,227 $ 4,568,763
Construction and development......................... 569,820 785,595
- ------------------------------------------------------------------ -----------
Total commercial loans............................. 5,321,047 5,354,358
Residential mortgage................................. 3,296,818 2,803,286
Commercial mortgage.................................. 2,315,384 2,201,698
- ------------------------------------------------------------------ -----------
Total mortgage loans............................... 5,612,202 5,004,984
Home equity.......................................... 1,907,883 1,816,611
Automobile........................................... 826,263 656,293
Other consumer....................................... 352,179 272,933
- ------------------------------------------------------------------ -----------
Total consumer loans............................... 3,086,325 2,745,837
- ------------------------------------------------------------------ -----------
$14,019,574 $13,105,179
================================================================== ===========
</TABLE>
Residential mortgage loans held for sale amounted to $68,824,000 at December 31,
1995 and $33,378,000 at December 31, 1994. These loans are accounted for at the
lower of aggregate cost or market value.
Subsidiaries of Summit Bancorp have granted loans to Parent Corporation and
subsidiary officers and directors 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 $96,016,000 and $106,862,000 at
December 31, 1995, and 1994, respectively. During 1995 there were $28,112,000 of
new loans made and repayments totaled $38,958,000.
NOTE 7 NON-PERFORMING LOANS
At December 31 non-performing loans were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================== ========
<S> <C> <C>
Non-accrual loans....................................... $188,289 $197,285
Renegotiated loans...................................... 199 2,920
- ------------------------------------------------------------------ --------
$188,488 $200,205
================================================================== ========
</TABLE>
The following information is presented for those loans classified as
non-performing at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======= =======
<S> <C> <C> <C>
Income that would have been recorded
under original contract terms.................. $19,724 $19,702 $28,225
Less interest income received.................... 2,833 2,642 5,332
- ---------------------------------------------------------- ------- -------
Lost income on non-performing
loans at year end $16,891 $17,060 $22,893
========================================================== ======= =======
</TABLE>
NOTE 8 ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======== ========
<S> <C> <C> <C>
Balance, January 1.............................. $305,330 $339,028 $374,639
Purchase adjustment, net...................... 6,131 2,088 -
Adjustment for pooling of companies
with different fiscal year ends.............. - (178) -
Add provision charged to expense.............. 71,850 91,995 112,885
- ---------------------------------------------------------- -------- --------
383,311 432,933 487,524
- ---------------------------------------------------------- -------- --------
Less charge offs:
Commercial................................... 80,744 76,438 114,320
Residential mortgage......................... 6,016 4,440 3,829
Commercial mortgage.......................... 25,741 21,731 18,590
Consumer..................................... 13,871 10,300 29,760
- ---------------------------------------------------------- -------- --------
Total charge offs 126,372 112,909 166,499
- ---------------------------------------------------------- -------- --------
Add recoveries:
Commercial................................... 16,756 15,241 12,513
Residential mortgage......................... 667 594 315
Commercial mortgage.......................... 1,920 2,838 724
Consumer..................................... 2,752 3,585 4,451
- ---------------------------------------------------------- -------- --------
Total recoveries 22,095 22,258 18,003
- ---------------------------------------------------------- -------- --------
Net charge offs............................... 104,277 90,651 148,496
- ---------------------------------------------------------- -------- --------
Less write downs on transfer to assets
held for accelerated disposition............. - 36,952 -
- ---------------------------------------------------------- -------- --------
Balance, December 31 $279,034 $305,330 $339,028
========================================================== ======== ========
</TABLE>
40
<PAGE> 41
At December 31, 1995, the impaired loan portfolio was primarily collateral
dependent as defined under SFAS No. 114 and totaled $188,488,000 for which
general and specific allocations to the allowance for loan losses of $29,473,000
were identified. The amount of cash basis interest income that was recognized on
impaired loans during 1995 was $3,254,000.
NOTE 9 PREMISES AND EQUIPMENT
The major components of premises and equipment at December 31, were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================== ========
<S> <C> <C>
Land.................................................... $ 21,046 $ 24,011
Premises and leasehold improvements..................... 251,875 246,875
Furniture and equipment................................. 210,832 189,132
- ------------------------------------------------------------------ --------
483,753 460,018
Less accumulated depreciation and
amortization.......................................... 277,062 247,079
- ------------------------------------------------------------------ --------
$206,691 $212,939
================================================================== ========
</TABLE>
Amounts charged to non-interest expenses for depreciation and amortization
amounted to $29,191,000 in 1995, $28,558,000 in 1994, and $28,587,000 in 1993.
NOTE 10 OTHER REAL ESTATE OWNED
At December 31 other real estate owned consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================== =======
<S> <C> <C>
Other real estate owned.................................. $37,539 $62,256
Less allowance for other real estate owned............... 13,244 14,977
- ------------------------------------------------------------------ -------
$24,295 $47,279
================================================================== =======
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======= =======
<S> <C> <C> <C>
Balance, January 1............................... $14,977 $31,117 $13,416
Add provision charged to expense............... 5,886 10,573 32,062
- ---------------------------------------------------------- ------- -------
20,863 41,690 45,478
Less:Write downs on sales...................... 3,795 16,818 14,361
Other write downs........................... 3,824 9,895 -
- ---------------------------------------------------------- ------- -------
Balance, December 31 $13,244 $14,977 $31,117
========================================================== ======= =======
</TABLE>
Other write downs during 1995 resulted from the adoption of SFAS No. 114 which
required in-substance foreclosures to be classified as non-performing loans. The
implementation of SFAS No. 114 resulted in a reclassification of $6,411,000, net
of specific reserves of $3,824,000, from other real estate owned to
non-performing loans. Other write downs during 1994 of $9,895,000 resulted from
the transfer of other real estate owned to assets held for accelerated
disposition.
NOTE 11 OTHER BORROWED FUNDS
Other borrowed funds at December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================== ==========
<S> <C> <C>
Securities sold under agreements to
repurchase.......................................... $ 649,650 $1,177,725
Federal funds purchased............................... 200,700 172,255
Treasury tax and loan deposits........................ 90,689 137,746
Commercial paper...................................... 38,503 42,211
Other................................................. 63,014 33,102
- ------------------------------------------------------------------ ----------
$1,042,556 $1,563,039
================================================================== ==========
</TABLE>
Lines of credit, at the Parent Corporation, are available to support commercial
paper borrowings and for general corporate purposes. Interest on these lines of
credit approximates the prime lending rate at the time of borrowing. Unused
lines amounted to $40,000,000 at December 31, 1995. Commitment fees on the
credit facilities and the lines of credit amounted to $75,000 in 1995, $86,000
in 1994, and $161,000 in 1993.
NOTE 12 LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
====================================================================== ========
<S> <C> <C>
8.625% Subordinated notes due December 10, 2002*............ $175,000 $175,000
FHLB Notes and advances, 4.00% to 8.05%,
due 1995 through 2010..................................... 157,460 257,863
6.75% Subordinated notes due June 15, 2003.................. 49,405 49,326
7.95% Senior notes due August 25, 2003*..................... 20,000 20,000
Collateralized mortgage obligations......................... 13,148 16,074
7.75% Sinking fund debentures due
November 1, 1997*......................................... 9,349 10,038
11.875% Notes due February 1, 1995*......................... - 15,000
Other....................................................... 500 1,635
- ---------------------------------------------------------------------- --------
$424,862 $544,936
====================================================================== ========
</TABLE>
* Indicates Parent Corporation obligation.
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 subordinated
notes are not subject to redemption prior to maturity, and no sinking fund is
provided for these notes.
The banking subsidiaries of Summit Bancorp are members of the Federal Home Loan
Bank of New York (the "FHLB") and have access to term financing from the FHLB
having a maturity of up to 10 years. The FHLB borrowings are secured by
securities and loans under a blanket collateral agreement.
The 6.75% subordinated notes were issued in 1993. Unamortized discount on the
subordinated notes was $594,750 at December 31, 1995, and resulted in an
effective interest rate of 7.00% for 1995. Interest is payable semiannually on
June 15 and December 15 of each year. The 6.75% subordinated notes are not
subject to redemption prior to maturity.
The 7.95% ten-year maturity private placement senior notes were issued in 1993
with interest payable quarterly on the twenty-fifth day of each February, May,
August, and November. Summit Bancorp has the option to prepay the notes, in
whole or in part, on any interest pay-
41
<PAGE> 42
ment date, but in no event shall the prepayment be less than $1,000,000, subject
to certain contractual prepayment provisions.
The collateralized mortgage obligations are secured by investments in
mortgage-backed securities having carrying and market values of $14,859,000 and
$15,399,000 at December 31, 1995, and $17,944,000 and $17,295,000 at December
31, 1994. These mortgage-backed securities had interest rates ranging from 7.25%
to 9.50%. A trustee holds the collateral certificates, collects all principal
and interest payments thereon, and disburses all funds to the noteholders. The
repayment of note principal and interest is directly related to the amount of
principal and interest received on the mortgage-backed securities
collateralizing a particular series of collateralized mortgage obligations.
Within a series, principal payments are first applied to the note with the
shortest maturity.
The 7.75% sinking fund debentures are currently redeemable at the option of
Summit Bancorp 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. Summit Bancorp may, at its option, increase its sinking fund payment
in any year. Any additional payment may not exceed the mandatory sinking fund
payment for that year. The debentures are redeemable, through the sinking fund,
at the principal amount thereof plus accrued interest. At December 31, 1995,
$151,000 was being held to satisfy future sinking fund requirements.
Certain of the above long-term debt agreements include restrictions upon the
creation of liens by Summit Bancorp, the disposition of stock of subsidiaries,
the payment of cash dividends, and the creation of funded debt, as defined. At
December 31, 1995, under the most restrictive limitations, combined consolidated
retained earnings of $717,595,000 were unrestricted and available for dividends
and the amount of additional funded debt, as defined, that could be created was
$418,233,000.
Principal amounts due, including sinking fund payments, for the years 1996
through 2000 are $36,640,000, $42,314,000, $27,760,000, $34,495,000, and
$13,805,000, respectively.
NOTE 13 COMMON AND PREFERRED STOCK
At December 31, 1995, approximately 9,168,000 common shares were reserved for
issuance under the Dividend Reinvestment Plan, Incentive Stock and Option Plan,
Stock Option Plans, Savings Incentive Plan, and Long-Term Performance Stock
Plan.
At December 31, 1995, Summit Bancorp 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 Preferred Stock has a $50 stated value, 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 or 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 Summit Bancorp, in whole or
in part, plus accrued and unpaid dividends. The preferred stock may be redeemed
at $50 per share. Dividends in the amounts of $3.04, $3.07, and $3.00 per share
were declared on the Series B Preferred Stock for 1995, 1994, and 1993,
respectively.
Prior to the merger of The Summit Bancorporation and UJB Financial, Summit had
12,000,000 shares of Adjustable-Rate Cumulative Preferred Stock (Adjustable
Preferred) authorized of which 504,481 shares were outstanding. Each outstanding
share of Adjustable Preferred had a $25 stated value. Dividends were cumulative
and were payable quarterly on March 15, June 15, September 15, and December 15
of each year. The dividend shall equal 2.75% below the highest of the
Three-Month Treasury Bill Rate, the Ten-Year Constant Maturity Rate and the
Twenty-Year Constant Maturity Rate. The dividend rate for any dividend period
will not be less than 6% per annum or greater than 12% per annum. The Adjustable
Preferred is redeemable at the option of Summit Bancorp. Dividends of $1.50 per
share were declared on the Adjustable Preferred for 1995, 1994, and 1993. After
the merger, 504,481 shares of the Adjustable Preferred were converted to shares
of Adjustable-Rate Cumulative Preferred Stock, Series C, having the same
relative rights, preferences, and limitations as the Adjustable Preferred.
A Shareholder Rights Plan exists which is designed to ensure fair and equal
treatment for all Summit Bancorp shareholders in the event of any proposal to
acquire Summit Bancorp. 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 Summit Bancorp Parent
Corporation without prior approval of bank regulatory authorities.
The Federal Reserve Act, which affects the New Jersey state-member bank,
restricts 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. The
Pennsylvania state-chartered bank may declare a dividend up to the amount of
accumulated net profit. In
42
<PAGE> 43
addition to these statutory restrictions, the subsidiary banks are required to
maintain adequate levels of capital under FDICIA. At December 31, 1995, the
total undistributed net assets of the subsidiary banks were $1,639,045,000 of
which $399,645,000 was available, under the most restrictive limitations, for
the payment of dividends to Summit Bancorp Parent Corporation.
NOTE 15 BENEFIT PLANS
Summit Bancorp 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 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 for service to date, but also for those expected to be earned in the
future.
The following table sets forth the qualified plans' funding status and amounts
recognized in the Combined Consolidated Financial Statements at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
======================================================== ========= =========
<S> <C> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$172,135 in 1995, $145,420 in
1994, and $136,047 in 1993................. $(184,262) $(155,855) $(144,407)
======================================================== ========= =========
Projected benefit obligation for
services rendered to date.................. $(230,626) $(195,003) $(187,929)
Plan assets at fair value.................... 219,119 173,225 183,083
- -------------------------------------------------------- --------- ---------
Plan assets (under) over projected
benefit obligation......................... (11,507) (21,778) (4,846)
Unrecognized transition asset................ (7,758) (10,319) (12,854)
Unrecognized prior service cost.............. 354 667 (102)
Unrecognized net loss from past
experience, which is different
from that assumed, and effect
of change in assumptions................... 14,650 20,726 5,290
- -------------------------------------------------------- --------- ---------
Accrued pension cost $ (4,261) $ (10,704) $ (12,512)
======================================================== ========= =========
Net pension expense components:
Service cost.............................. $ 9,482 $ 9,063 $ 8,984
Interest cost............................. 16,315 14,309 13,441
Actual return on plan assets.............. (41,635) 7,890 (16,733)
Net deferral and amortization............. 22,337 (25,726) 302
- -------------------------------------------------------- --------- ---------
Net pension expense $ 6,499 $ 5,536 $ 5,994
======================================================== ========= =========
</TABLE>
The plans' assets were principally invested in units of mutual funds, listed
stocks, and U.S. Bonds. The weighted average discount rates for the plans were
7.5% in 1995, 8.0% to 8.5% in 1994, and 7.5% in 1993. The rate of increase in
future compensation levels used in determining the actuarial present value of
the projected benefit obligation was 5.0% in 1995 and 5.0% to 5.5% in 1994 and
1993. The expected long-term rate of return on plan assets was 9.0% in 1995,
8.5% to 9.0% in 1994, and 9.0% in 1993.
Summit Bancorp also maintains non-qualified supplemental retirement plans for
certain officers of the company. The plans, which are unfunded, provide benefits
in excess of that permitted to be paid by the pension plan under provisions of
the tax law. The plans' cost was $3,170,000 for 1995, $887,000 for 1994, and
$738,000 for 1993. At December 31, 1995, the projected benefit obligation
amounted to $15,364,000 and the accrued liability amounted to $11,021,000.
In addition to pension benefits, certain health care and life insurance benefits
are made available to retired employees. In 1993 Summit Bancorp adopted, on a
prospective basis, SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Under SFAS No. 106 the cost of such benefits are
accrued based on actuarial assumptions from the date of hire to the date the
employee is fully eligible to receive benefits.
The following table sets forth the net periodic postretirement benefit cost and
accumulated postretirement benefit obligation at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======== ========
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation (APBO)............................. $(36,160) $(38,062) $(40,651)
Fair value of assets.......................... - - -
- ---------------------------------------------------------- -------- --------
Projected benefit obligation
funded status................................. (36,160) (38,062) (40,651)
Unrecognized transition obligation............ 20,983 24,514 26,414
Unrecognized prior service cost............... 634 141 -
Unrecognized loss............................. (2,695) (1,122) 2,193
- ---------------------------------------------------------- -------- --------
Accrued APBO $(17,238) $(14,529) $(12,044)
========================================================== ======== ========
Net postretirement benefit cost components:
Service cost.................................. $ 482 $ 574 $ 474
Interest cost................................. 2,670 2,696 2,674
Amortization of transition obligation......... 1,161 1,190 1,129
- ---------------------------------------------------------- -------- --------
Net postretirement benefit cost $ 4,313 $ 4,460 $ 4,277
========================================================== ======== ========
</TABLE>
For measurement purposes, the cost of medical benefits was projected to increase
at a rate of 13.0% in 1995, 14.0% in 1994, and 15.0% in 1993 and thereafter
decreasing linearly to 6.0% over seven 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, 1995, by $2,833,000 and the
aggregate of the service and interest components of net periodic postretirement
benefit cost for the year ended December 31, 1995, by $254,000. The present
value of the accumulated benefit obligation assumed a discount rate of 7.5%,
8.0%, and 7.5% in 1995, 1994, and 1993, respectively. The rate of increase used
in future compensation levels was 5.0% in 1995 and 5.5% in 1994 and 1993.
SFAS No. 112, "Employers' Accounting for Postemployment Benefits" was issued in
inactive employees after employment but before retirement. SFAS No. 112 requires
that employers accrue the costs associated with providing benefits, such as
salary and benefit continuation under disability plans, when payment of the
benefits is probable and the amount of the obligation can be reasonably
estimated. Effective January 1, 1994, Summit Bancorp adopted SFAS No. 112 and
recognized a transitional liability of $2,663,000. Net costs of $2,989,000 and
$2,945,000 were recognized during 1995 and 1994, of which $2,023,000 and
$2,174,000 were paid, respec-
43
<PAGE> 44
tively. At December 31, 1995, the resultant SFAS No. 112 liability was
$4,400,000 compared to $3,434,000 at December 31, 1994.
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 $4,570,000, $3,258,000, and
$1,640,000 in 1995, 1994, and 1993, respectively.
Summit Bancorp has several qualified 401(k) plans. A Savings Incentive Plan
covers certain employees with one or more years of service. The Plan permits
eligible employees to make basic contributions to the Plan up to 3% of their
base compensation in 1995, 1994, and 1993, and additional contributions up to
12% of their base compensation. Under the Plan, the employer provides a matching
contribution equal to 65% of the basic contributions in 1993 and through October
31, 1994. Effective November 1, 1994, the employer matching contribution was
increased to 100% of the basic contributions. Matching contributions to the Plan
amounted to $3,270,000, $2,446,000, and $2,084,000 in 1995, 1994, and 1993,
respectively.
Additionally, there is a qualified 401(k) plan for eligible employees of the
former Summit Bancorporation. Participants may contribute up to 10% of their
salaries on a pre-tax basis, which Summit matches 75% of the first 6%
contributed, and up to 10% on an after-tax basis. The contributions under this
plan were $1,414,000, $1,250,000, and $1,760,000 for 1995, 1994, and 1993,
respectively.
Summit Bancorp's subsidiaries have other incentive plans and profit sharing
agreements. Accruals under these plans amounted to $4,310,000, $3,386,000, and
$2,802,000 in 1995, 1994, and 1993, respectively.
The Incentive Stock and Option Plan and previous Long-Term Performance Stock
Plans of Summit Bancorp provide for the grant of shares of common stock in the
form of restricted stock awards. Shares issued as stock awards were 101,117 in
1995, 130,306 in 1994, and 234,781 in 1993. The shares awarded are subject to
certain forfeiture restrictions as set forth in the Plans.
NOTE 16 STOCK OPTION PLANS
The Stock Option Plans permit Summit Bancorp 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, 1992
(3,144,555 shares exercisable)................. 4,520,893 $ 1.678 to $29.438
Granted during 1993............................ 695,561 12.133 to 25.063
Exercised during 1993.......................... 507,919 1.678 to 29.438
Expired or cancelled during 1993............... 162,015 7.875 to 29.438
- ------------------------------------------------------------ ------------------
Outstanding, December 31, 1993
(3,364,544 shares exercisable)................. 4,546,520 1.678 to 29.438
Granted during 1994............................ 554,935 19.944 to 24.688
Exercised during 1994.......................... 750,754 1.678 to 28.333
Expired or cancelled during 1994............... 98,845 7.875 to 29.438
- ------------------------------------------------------------ ------------------
Outstanding, December 31, 1994
(3,513,475 shares exercisable)................. 4,251,856 1.678 to 29.438
Granted during 1995............................ 1,193,987 5.667 to 28.334
Exercised during 1995.......................... 1,142,601 1.678 to 29.438
Expired or cancelled during 1995............... 30,125 7.875 to 29.438
- ------------------------------------------------------------ ------------------
Outstanding, December 31, 1995
(3,402,035 shares exercisable) 4,273,117 $ 3.467 to $29.438
============================================================ ==================
</TABLE>
NOTE 17 OTHER EXPENSES
Other expenses consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
============================================================ ======== ========
<S> <C> <C> <C>
Professional and other fees....................... $ 45,098 $ 42,371 $ 46,449
Communications (postage and telephone)............ 26,155 24,885 24,183
Other............................................. 57,329 57,537 61,813
- ------------------------------------------------------------ -------- --------
$128,582 $124,793 $132,445
============================================================ ======== ========
</TABLE>
NOTE 18 INCOME TAXES
Effective January 1, 1993, SFAS No. 109, "Accounting for Income Taxes" was
adopted by UJB Financial on a prospective basis. The cumulative effect of the
adoption resulted in a positive effect to earnings of $3,816,000. During 1994
The Summit Bancorporation acquired Crestmont, which had elected to adopt SFAS
No. 109 prospectively on April 1, 1993. The cumulative effect of the adoption
resulted in a positive effect to earnings of $5,303,000.
The provision for income taxes in the Combined Consolidated Statements of Income
consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======= =======
<S> <C> <C> <C>
Current provision:
Federal....................................... $ 89,760 $55,219 $41,314
State......................................... 22,801 10,489 14,375
- ---------------------------------------------------------- ------- -------
112,561 65,708 55,689
Deferred provision (benefit):
Federal....................................... 19,684 17,636 (865)
State......................................... 4,104 5,608 (5,899)
- ---------------------------------------------------------- ------- -------
23,788 23,244 (6,764)
- ---------------------------------------------------------- ------- -------
Provision for income taxes $136,349 $88,952 $48,925
========================================================== ======= =======
</TABLE>
44
<PAGE> 45
A summary of the differences between the actual income tax provision and the
amounts computed by applying the statutory Federal income tax rate to income is
as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======== ========
<S> <C> <C> <C>
Federal tax at statutory rate................... $132,727 $ 85,832 $ 60,532
Increase (decrease) in taxes resulting from:
Tax-exempt interest income.................... (13,970) (10,886) (12,840)
State taxes, net of Federal tax effect........ 17,488 10,452 5,466
Other, net.................................... 104 3,554 (4,233)
- ---------------------------------------------------------- -------- --------
$136,349 $ 88,952 $ 48,925
========================================================== ======== ========
</TABLE>
The significant Federal and state temporary differences which comprise the
deferred tax assets and liabilities presented at December 31, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
===================================================================== ========
<S> <C> <C>
Deferred tax assets:
Provision for loan losses................................ $105,622 $118,229
Provision for other real estate owned.................... 8,704 10,098
Restructuring charge..................................... - 2,479
Net unrealized loss on securities........................ - 16,735
Other.................................................... 34,911 37,111
- --------------------------------------------------------------------- --------
149,237 184,652
Deferred tax liabilities:
Leasing operations....................................... (21,829) (12,601)
Net unrealized gain on securities........................ (3,524) -
Other.................................................... (539) (4,659)
- --------------------------------------------------------------------- --------
(25,892) (17,260)
- --------------------------------------------------------------------- --------
Net deferred tax asset $123,345 $167,392
===================================================================== ========
</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 $12,416,000 at December 31, 1995, and $11,906,000 at
December 31, 1994. At December 31, 1995, there was a deferred state tax asset of
$5,792,000 resulting from operating loss carryforwards. This asset was reserved
by the valuation allowance.
Summit Bancorp is not aware of any factors which would generate significant
differences between taxable income and pre-tax 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.
Included in shareholders' equity are income tax benefits attributable to
restricted stock awards and the exercise of non-qualified stock options of
$1,359,000, $1,957,000, and $1,207,000 for the years ended December 31, 1995,
1994, and 1993, respectively. Also included in shareholders' equity are income
tax expense (benefits) attributable to net unrealized gains (losses) on
securities in the amounts of $3,524,000 and $(16,735,000) for the years ended
December 31, 1995, and 1994, respectively.
NOTE 19 LEASE COMMITMENTS
Non-interest expenses include rentals for premises and equipment of $51,629,000
in 1995, $46,881,000 in 1994, and $43,478,000 in 1993, after reduction for
sublease rentals of $3,683,000, $2,986,000, and $3,070,000 in each of the
respective years. At December 31, 1995, Summit Bancorp 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 the years 1996 through 2000 are $50,521,000,
$44,155,000, $35,407,000, $24,157,000, and $19,388,000, respectively. Minimum
rentals due after 2000 are $124,622,000.
NOTE 20 CONTINGENT LIABILITIES
Summit Bancorp and its subsidiaries may, from time to time, be defendants in
legal proceedings relating to the conduct of their businesses. In the best
judgment of management, the consolidated financial position of Summit Bancorp
and its subsidiaries will not be affected materially by the final outcome of any
pending legal proceedings or other contingent liabilities and commitments.
NOTE 21 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, Summit Bancorp and its subsidiaries enter
into a variety of financial instruments that are recorded off the balance sheet.
This reporting is considered appropriate where either the exchange of the
underlying asset or liability has not yet occurred or the notional amounts are
used solely as a means to determine the cash flows to be exchanged. These
off-balance-sheet financial instruments are primarily divided into two
categories: credit-related financial instruments and derivative financial
instruments.
Credit-related financial instruments are principally customer related, while
derivative financial instruments are acquired primarily for asset/liability
management purposes. Credit-related financial instruments include commitments to
extend credit, standby letters of credit, and commercial letters of credit.
Summit Bancorp's derivative financial instruments are limited to interest rate
swaps, interest rate caps, and foreign exchange contracts.
The following table summarizes the notional amount of significant
off-balance-sheet financial instruments at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================== ==========
<S> <C> <C>
Credit-related instruments:
Commitments to extend credit....... $4,578,939 $4,380,677
Standby letters of credit.......... 298,327 330,441
Commercial letters of credit....... 104,845 95,345
Derivative instruments:
Interest rate swaps................ 967,537 1,063,541
Interest rate caps................. 63,892 89,895
Foreign exchange contracts......... 24,382 45,496
================================================================== ==========
</TABLE>
45
<PAGE> 46
CREDIT-RELATED FINANCIAL INSTRUMENTS:
Commitments to extend credit are legally binding agreements to lend to a
customer provided all established contractual conditions are met. These
commitments generally have fixed expiration dates and usually require the
payment of a fee. Summit Bancorp did not issue fixed-rate loan commitments that
could be locked in during the commitment period.
Standby letters of credit are conditional guarantees issued to ensure the
performance of a customer to a third party and are generally terminated through
the fulfillment of a specific condition or through the lapse of time.
Commercial letters of credit are conditional commitments, generally less than
180 days, issued to guarantee payment by a customer to a third party upon proof
of an international trade shipment. The short-term nature of these instruments
limit their credit risk.
Fees received from credit-related financial instruments are recognized over the
terms of the contracts and are generally included in non-interest income as
service and loan fee income.
The credit risk associated with these financial instruments is essentially the
same as that involved in extending loans to customers and is incorporated in the
assessment of the adequacy of the allowance for loan losses. Credit risk is
managed by limiting the total amount of arrangements outstanding and by applying
normal credit policies. Many of the commitments to extend credit are expected to
expire without being drawn upon and, therefore, the amounts do not necessarily
represent future cash flow requirements.
DERIVATIVE FINANCIAL INSTRUMENTS:
At December 31, 1995, the notional value of the derivative financial instruments
portfolio consisted of $967,537,000 of interest rate swaps, $63,892,000 of
interest rate caps, and $24,382,000 of foreign exchange contracts.
Activities involving interest rate swaps are primarily attributed to
asset/liability risk management efforts. Asset/liability risk management
objectives are aimed at stabilizing net interest income through periods of
changing interest rates. The interest rate swaps were acquired to hedge interest
rate risk on certain interest earning assets and interest bearing liabilities.
Interest rate swaps are contractual agreements between two parties to exchange
interest payments at particular intervals, computed on different terms, on a
specified notional amount. The notional amounts represent the base on which
interest due each counterparty is calculated and do not represent the potential
for gains or losses associated with the market risk or credit risk of such
transactions.
Under the terms of the interest rate swaps at December 31, 1995, there were
$856,704,000 of contracts to receive fixed payments of 5.86% with an expected
maturity of April 1997 and an average payout based on LIBOR plus .74%.
Additionally, there were $70,833,000 of interest rate swaps to receive payments
at LIBOR and make fixed payments of 6.65% with an expected maturity of June
1996. At December 31, 1995, there were $40,000,000 in interest rate swap
contracts whereby the bank receives the Three-Year Constant Maturity Treasury
Rate less .54% and pays LIBOR with an expected maturity of May 1998. These swaps
have resulted in a decrease of $9,846,000 in net interest income during 1995 and
an increase of $530,000 in 1994.
Credit-related losses can occur in the event of non-performance by the
counterparties to the derivative financial instruments. The credit risk that
results from interest rate swaps is represented by the fair value of contracts
that have a positive value at the reporting date. At December 31, 1995, the
total amount of credit risk was $1,372,000; however, this amount can increase or
decrease if interest rates change. To minimize the risk of credit losses, Summit
Bancorp monitors the credit standing of the counterparties and only transacts
with those that have credit ratings of AA or better.
Interest rate caps are purchased from brokers to accommodate those customers who
desire interest rate protection on variable rate loans. There is nominal risk
associated with these products as the credit rating of the counterparties are
closely monitored.
Summit Bancorp enters into contracts to purchase or sell foreign currency to be
delivered at a future date to facilitate customer transactions. The notional
amount represents the outstanding contracts at year end.
NOTE 22 FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is the amount at which an asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced liquidation. Fair value estimates are made at a specific
point in time based on the type of financial instrument and relevant market
information.
Because no quoted market price exists for a significant portion of Summit
Bancorp's financial instruments, the fair values of such financial instruments
are derived based on the amount and timing of future cash flows, estimated
discount rates, as well as management's best judgment with respect to current
economic conditions. Many of these estimates involve uncertainties and matters
of significant judgment and cannot be determined with precision.
The fair value information provided is indicative of the estimated fair values
of those financial instruments and should not be interpreted as an estimate of
the value of Summit Bancorp taken as a whole. The disclosures do not address the
value of recognized and unrecognized non-financial assets and liabilities or the
value of future anticipated business.
The following methods and assumptions were used to estimate the fair values of
significant financial instruments at December 31, 1995, and 1994.
CASH, SHORT-TERM INVESTMENTS AND CUSTOMER ACCEPTANCES:
These financial instruments have relatively short maturities or no defined
maturities but are payable on demand, with little or no credit risk. The
carrying amounts reported in the Combined Consolidated Balance Sheets
approximate fair value.
SECURITIES:
Trading account securities and securities available for sale are reported at
their respective fair values in the Combined Consolidated Balance Sheets. These
values were based on quoted market prices. The fair values of securities held to
maturity were also based upon quoted market prices.
46
<PAGE> 47
LOANS:
The fair value of loans is estimated using a combination of techniques including
discounted estimated future cash flows and, where available, quoted market
prices of similar instruments. The loan portfolios are segmented based upon loan
type, credit quality, and repricing characteristics. The fair values of most
fixed-rate loans are estimated using discounted cash flow models taking into
consideration current rates that would be offered to borrowers with similar
credit risk for loans with similar remaining terms. The fair values of variable
rate loans are estimated by reducing their carrying values by their
corresponding general and specific credit reserves. Non-performing loans are
primarily valued based upon the net realizable value of the loan's underlying
collateral.
DEPOSITS:
The estimated fair values of demand and savings deposits are equal to the
amounts recognized in the Combined Consolidated Balance Sheets. These amounts do
not recognize the fair value of core deposit intangibles, which represent the
value of a core deposit base with an expected duration.
The fair values for medium- to long-term deposit liabilities are calculated by
discounting estimated future cash flows using current rates offered for deposits
of similar remaining maturities.
BORROWED FUNDS AND BANK ACCEPTANCES:
The fair values for borrowed funds are calculated by discounting estimated
future cash flows using current rates offered for borrowings of similar
remaining maturities. Due to the short maturities of bank acceptances, their
carrying value approximates fair value.
LONG-TERM DEBT:
The fair value of long-term debt is based upon quoted market prices. For
long-term debt issuances where quoted market prices are not available, the fair
values are determined using discounted cash flow analyses.
OTHER:
The estimated fair values of accrued interest receivable, accrued interest
payable, and assets held for accelerated disposition are considered to be equal
to the amounts recognized in the Combined Consolidated Balance Sheets.
OFF-BALANCE-SHEET INSTRUMENTS:
The estimated fair values of derivative financial instruments are based upon
quoted market prices, without consideration of the market values related to the
hedged on-balance-sheet financial instruments. For commitments to extend credit
and letters of credit, the fair values would approximate fees currently charged
to enter into similar agreements.
The following table presents the carrying amounts and fair values of financial
instruments at December 31:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------------
Carrying Fair Carrying Fair
(In millions) Value Value Value Value
============================================= ========= ========= =========
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term
investments..................... $ 1,517.7 $ 1,517.7 $ 1,259.0 $ 1,259.0
Trading account
securities...................... 28.6 28.6 34.9 34.9
Securities available
for sale........................ 2,408.1 2,408.1 1,122.3 1,122.3
Securities held to
maturity........................ 3,047.1 3,040.8 4,801.0 4,571.6
Loans, net....................... 13,740.5 14,066.5 12,799.8 12,822.9
Assets held for
accelerated disposition......... 16.7 16.7 90.9 90.9
Accrued interest
receivable...................... 132.4 132.4 119.5 119.5
Due from customers
on acceptances.................. 26.7 26.7 21.2 21.2
Financial liabilities:
Deposits......................... $17,955.1 $18,002.0 $16,977.1 $16,957.6
Other borrowed funds............. 1,042.5 1,042.5 1,563.0 1,560.6
Long-term debt................... 424.8 449.2 544.9 528.1
Accrued interest payable......... 45.5 45.5 34.9 34.9
Bank acceptances
outstanding..................... 26.7 26.7 21.2 21.2
Off-balance-sheet
instruments:
Interest rate swaps.............. NA $ (1.1) NA $ (60.7)
Loan commitments................. NA (25.6) NA (24.1)
Standby letters of credit........ NA (1.9) NA (3.3)
Commercial letters of
credit.......................... NA (.1) NA (.1)
============================================= ========= ========= =========
</TABLE>
NA - Not applicable, off-balance-sheet financial instruments
NOTE 23 CONCENTRATIONS OF CREDIT RISK
Summit Bancorp's credit policy emphasizes diversification of risk among
industries and borrowers. Concentrations of credit risk, whether on or off the
balance sheet, exist in relation to certain groups of customers or
counterparties. A group concentration arises when a number of customers or
counterparties have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes in
economic or other conditions. Summit Bancorp does not have a significant
exposure to any individual customer or counterparty. At December 31, 1995, the
ten largest credit relationships have outstanding loan balances of $246,019,000
and have unexercised commitments of $336,480,000.
Summit Bancorp's business is concentrated in New Jersey and eastern
Pennsylvania. A significant portion of the total loan portfolio is secured by
real estate or other collateral located in these states. This concentration is
mitigated by the diversification of the loan portfolio among consumer,
residential mortgage, commercial mortgage, construction and commercial loans.
The commercial loan portfolio, excluding construction and development loans,
represents approximately 34% of the entire loan portfolio and has no
concentration greater than 10% to any specific industry.
47
<PAGE> 48
NOTE 24 PARENT CORPORATION INFORMATION
As part of the comprehensive restructuring program, on August 31, 1994, UJB
Financial Parent Corporation transferred a significant portion of its operations
to United Jersey Bank. This included the transfer of 649 employees and
$26,269,000 of assets, primarily premises and equipment. Beginning September 1,
1994, the operating results of these functions were recorded in the operating
results and financial condition of United Jersey Bank. The Parent Corporations
of UJB Financial and The Summit Bancorporation were merged and the name changed
to Summit Bancorp. Information on Summit Bancorp Parent Corporation is as
follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------
(In thousands) 1995 1994
=================================================================== ==========
<S> <C> <C>
ASSETS
Cash and cash equivalents.............................. $ 194,820 $ 197,188
Interest bearing deposits with banks................... 5,000 5,000
Securities available for sale.......................... 34,276 50,683
Investment in subsidiaries............................. 1,673,115 1,424,453
Due from subsidiaries.................................. 181,142 156,832
Premises and equipment................................. 500 503
Other assets........................................... 20,481 20,066
- ------------------------------------------------------------------- ----------
Total Assets $2,109,334 $1,854,725
=================================================================== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper....................................... $ 38,503 $ 42,211
Accrued expenses and other liabilities................. 64,166 58,759
Long-term debt......................................... 204,349 220,038
- ------------------------------------------------------------------- ----------
Total liabilities.................................... 307,018 321,008
Total shareholders' equity............................. 1,802,316 1,533,717
- ------------------------------------------------------------------- ----------
Total Liabilities and Shareholders' Equity $2,109,334 $1,854,725
=================================================================== ==========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
(In thousands) 1995 1994 1993
========================================================== ======== ========
<S> <C> <C> <C>
OPERATING INCOME
Management fees due from subsidiaries........... $ 32,761 $ 29,322 $ 38,994
Dividends from subsidiaries..................... 121,010 80,640 58,149
Interest from subsidiaries...................... 22,925 17,026 16,356
Securities gains................................ 18,829 123 643
Other interest.................................. 102 3,719 3,320
Other........................................... 2,564 684 9,916
- ---------------------------------------------------------- -------- --------
Total operating income 198,191 131,514 127,378
- ---------------------------------------------------------- -------- --------
OPERATING EXPENSES
Service charges due to subsidiaries............. 33,144 - -
Salaries and employee benefits.................. 4,193 26,491 32,887
Interest........................................ 20,412 19,586 20,044
Occupancy and equipment......................... 70 4,340 6,396
Other........................................... 522 11,314 21,949
- ---------------------------------------------------------- -------- --------
Total operating expenses 58,341 61,731 81,276
- ---------------------------------------------------------- -------- --------
Income before income taxes and equity
in undistributed net income of
subsidiaries................................. 139,850 69,783 46,102
Federal and state income taxes (benefit)........ 4,891 (3,758) (401)
- ---------------------------------------------------------- -------- --------
134,959 73,541 46,503
Equity in undistributed net income of
subsidiaries.................................. 107,911 81,009 86,639
- ---------------------------------------------------------- -------- --------
Net Income $242,870 $154,550 $133,142
========================================================== ======== ========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
(In thousands) 1995 1994 1993
======================================================== ========= =========
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................... $ 242,870 $ 154,550 $ 133,142
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.............. 3 1,794 2,481
(Increase) decrease in other assets........ (50) 18,421 (14,712)
Increase (decrease) in accrued
expenses and other liabilities............ 6,998 (28,316) 15,218
Equity in undistributed net
income of subsidiaries.................... (107,911) (81,009) (86,639)
Securities gains........................... (18,829) (123) (643)
- -------------------------------------------------------- --------- ---------
Net cash provided by operating
activities 123,081 65,317 48,847
- -------------------------------------------------------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sales of
securities available for sale.............. 28,332 16,819 42,814
Net increase in short-term
investments................................ - - (5,000)
Payments received on advances to
subsidiaries............................... 180,278 205,611 191,761
Advances to subsidiaries..................... (204,588) (198,189) (168,000)
Purchases of premises and
equipment, net............................. - (2,069) (817)
Capital contributions to subsidiaries........ (114,770) (56,476) (55,000)
- -------------------------------------------------------- --------- ---------
Net cash (used in) provided by
investing activities (110,748) (34,304) 5,758
- -------------------------------------------------------- --------- ---------
FINANCING ACTIVITIES
Net (decrease) increase in commercial
paper...................................... (3,708) 8,852 (29,502)
Net decrease in borrowed funds............... - - (5,250)
Proceeds from issuance of long-term
debt, net of related expenses.............. - - 20,000
Principal payments on long-term debt......... (15,689) (3,134) (21,830)
Dividends paid............................... (94,785) (74,042) (56,284)
Proceeds from common stock
issued for acquisitions.................... 68,186 2,795 -
Proceeds from issuance of common
stock, net................................. 32,637 24,962 21,965
Others, net.................................. (1,342) (2,929) (2,891)
- -------------------------------------------------------- --------- ---------
Net cash used in financing
activities............................. (14,701) (43,496) (73,792)
- -------------------------------------------------------- --------- ---------
Decrease in cash and
cash equivalents........................... (2,368) (12,483) (19,187)
Cash and cash equivalents
at beginning of year....................... 197,188 209,671 228,858
- -------------------------------------------------------- --------- ---------
Cash and cash equivalents at
end of year $ 194,820 $ 197,188 $ 209,671
======================================================== ========= =========
</TABLE>
48
<PAGE> 49
MANAGEMENT'S REPORT
Summit Bancorp and its subsidiaries are responsible for the preparation,
integrity, and fair presentation of the audited combined consolidated financial
statements contained on pages 32 through 48 in this report. The statements were
prepared in conformity with generally accepted accounting principles appropriate
in the circumstances and include amounts that are based on management's
estimates and judgments. Other financial information presented throughout the
annual report is prepared on a basis consistent with these financial statements.
The combined consolidated financial statements of Summit Bancorp have been
audited by KPMG Peat Marwick LLP, 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.
Summit Bancorp is responsible for establishing and maintaining an internal
control structure to provide reasonable assurance that financial statements are
presented in conformity with generally accepted accounting principles. There are
inherent limitations in the effectiveness of any internal control structure, no
matter how well designed, including the possibility of human error, the
circumvention or overriding of controls, and the consideration of cost in
relation to the benefit of the control. Accordingly, even an effective internal
control structure can provide only reasonable assurance with respect to
financial statement preparation. Furthermore, because of changes in conditions,
the effectiveness of an internal control structure may vary over time. To
monitor compliance, Summit Bancorp 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 Summit Bancorp, composed
entirely 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 independent auditors and
internal auditors have full and free access to the Committee to discuss the
results of their audit work, their evaluation of internal controls, and the
quality of financial reporting.
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Summit Bancorp:
We have audited the accompanying combined consolidated balance sheets of Summit
Bancorp (formerly UJB Financial Corp.) and subsidiaries as of December 31, 1995
and 1994, and the related combined consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995 (which statements are supplemental to the
historical audited consolidated financial statements and related notes thereto,
included on pages 54 through 69 herein). The combined consolidated financial
statements of Summit Bancorp and subsidiaries give retroactive effect to the
combination of UJB Financial Corp. and The Summit Bancorporation which occurred
on March 1, 1996, as if the combination, accounted for on a pooling-of-interests
basis, took place on January 1, 1993 as described in Note 2 to the combined
consolidated financial statements. These combined consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these combined 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 combined consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Summit
Bancorp and subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Notes 1, 15 and 18 to the combined consolidated financial
statements, the Corporation adopted Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity Securities" and
Statement No. 112, "Employers' Accounting for Postemployment Benefits" in 1994
and Statement No. 109 "Accounting for Income Taxes" in 1993.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
January 16, 1996, except as to the first and fourth paragraphs of
Note 2, which are as of March 1, 1996
49
<PAGE> 50
Summit Bancorp and Subsidiaries
COMBINED CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Not covered by independent auditors' report) 1995 1994 1993
======================================================================= =========== ===========
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income........................................... $ 1,495,617 $ 1,302,800 $ 1,236,658
Interest expense.......................................... 626,376 475,973 456,797
- ----------------------------------------------------------------------- ----------- -----------
Net interest income.................................... 869,241 826,827 779,861
Provision for loan losses................................. 71,850 91,995 112,885
- ----------------------------------------------------------------------- ----------- -----------
Net interest income after provision for loan losses.... 797,391 734,832 666,976
Non-interest income....................................... 224,189 210,066 212,802
Non-interest expenses..................................... 642,361 699,665 706,830
- ----------------------------------------------------------------------- ----------- -----------
Income (loss) before income taxes...................... 379,219 245,233 172,948
Federal and state income taxes (benefit).................. 136,349 88,952 48,925
- ----------------------------------------------------------------------- ----------- -----------
Income (loss) before cumulative effect of a change in
accounting principle................................ 242,870 156,281 124,023
Cumulative effect of a change in accounting principle..... -- (1,731) 9,119
- ----------------------------------------------------------------------- ----------- -----------
Net income (loss) $ 242,870 $ 154,550 $ 133,142
======================================================================= =========== ===========
COMMON SHARE DATA
Net income (loss)......................................... $ 2.77 $ 1.80 $ 1.57
Cash dividends declared................................... 1.19 .94 .69
Book value at year end.................................... 19.89 17.45 16.89
Market value at year end.................................. 35.63 24.13 24.00
Number of registered common shareholders at year end...... 29,983 28,333 29,896
Average common shares outstanding (in thousands).......... 86,674 84,381 82,712
Common shares outstanding at year end (in thousands)...... 88,471 85,004 83,251
Common stock dividend payout.............................. 42.96% 52.22% 43.95%
======================================================================= =========== ===========
BALANCE SHEET DATA (AT YEAR END, IN THOUSANDS)
Total assets.............................................. $21,536,935 $20,894,815 $19,139,498
Total deposits............................................ 17,955,103 16,977,109 16,164,226
Total loans............................................... 14,019,574 13,105,179 11,881,426
Shareholders' equity...................................... 1,802,316 1,533,717 1,456,527
Allowance for loan losses................................. 279,034 305,330 339,028
Long-term debt............................................ 424,862 544,936 467,501
======================================================================= =========== ===========
OPERATING RATIOS
Return on average assets.................................. 1.16% .76% .70%
Return on average common equity........................... 14.82 10.37 9.54
Net interest margin....................................... 4.60 4.53 4.56
Efficiency ratio.......................................... 57.55 59.71 63.48
======================================================================= =========== ===========
LOAN QUALITY RATIOS
Allowance for loan losses to year-end loans............... 1.99% 2.33% 2.85%
Net charge offs to average loans.......................... .78 .73 1.25
Non-performing loans to year-end loans.................... 1.34 1.53 2.69
======================================================================= =========== ===========
CAPITAL RATIOS
Average total equity to average total assets.............. 7.97% 7.46% 7.39%
Tier I capital to average assets (leverage)............... 7.97 7.27 7.42
Tier I capital to risk-adjusted assets.................... 10.75 9.95 10.74
Total capital to risk-adjusted assets..................... 13.46 12.69 13.78
======================================================================= ========== ===========
OTHER DATA (AT YEAR END)
Number of banking offices................................. 354 361 366
Number of employees (full-time equivalent)................ 7,547 7,766 8,160
Number of employees (full-time)........................... 6,560 6,816 7,270
Number of employees (part-time)........................... 1,259 1,323 1,224
======================================================================= ========== ===========
</TABLE>
See accompanying Combined Consolidated Financial Statements and Notes.
NA - Not applicable.
50
<PAGE> 51
<TABLE>
<CAPTION>
(Not covered by independent auditors' report) 1992 1991 1990 1989
======================================================================= =========== =========== ===========
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income........................................... $ 1,341,504 $ 1,562,393 $ 1,704,795 $ 1,654,498
Interest expense.......................................... 594,757 882,605 1,035,637 986,011
- ----------------------------------------------------------------------- ----------- ----------- -----------
Net interest income.................................... 746,747 679,788 669,158 668,487
Provision for loan losses................................. 165,553 192,417 335,416 97,245
- ----------------------------------------------------------------------- ----------- ----------- -----------
Net interest income after provision for loan losses.... 581,194 487,371 333,742 571,242
Non-interest income....................................... 205,058 178,463 202,218 189,732
Non-interest expenses..................................... 660,207 604,893 580,863 542,647
- ----------------------------------------------------------------------- ----------- ----------- -----------
Income (loss) before income taxes...................... 126,045 60,941 (44,903) 218,327
Federal and state income taxes (benefit).................. 35,770 14,445 (21,291) 65,020
- ----------------------------------------------------------------------- ----------- ----------- -----------
Income (loss) before cumulative effect of a change in
accounting principle................................ 90,275 46,496 (23,612) 153,307
Cumulative effect of a change in accounting principle..... -- -- -- (10,730)
- ----------------------------------------------------------------------- ----------- ----------- -----------
Net income (loss) $ 90,275 $ 46,496 $ (23,612) $ 142,577
======================================================================= =========== =========== ===========
COMMON SHARE DATA
Net income (loss)......................................... $ 1.13 $ .60 $ (.38) $ 1.98
Cash dividends declared................................... .60 .60 1.02 1.11
Book value at year end.................................... 15.93 15.35 15.32 16.79
Market value at year end.................................. 24.25 14.63 7.13 18.88
Number of registered common shareholders at year end...... 31,075 31,702 32,200 31,602
Average common shares outstanding (in thousands).......... 77,499 72,496 71,291 67,764
Common shares outstanding at year end (in thousands)...... 82,039 73,186 71,792 68,129
Common stock dividend payout.............................. 53.10% 100.00% NA 56.06%
======================================================================= =========== =========== ===========
BALANCE SHEET DATA (AT YEAR END, IN THOUSANDS)
Total assets.............................................. $19,204,120 $18,636,270 $18,158,687 $17,953,260
Total deposits............................................ 16,462,089 15,790,487 14,991,980 13,896,961
Total loans............................................... 11,972,053 12,145,189 12,280,607 12,382,014
Shareholders' equity...................................... 1,356,744 1,173,160 1,150,098 1,239,311
Allowance for loan losses................................. 374,639 388,846 359,258 179,286
Long-term debt............................................ 364,762 270,044 394,143 448,848
======================================================================= =========== =========== ===========
OPERATING RATIOS
Return on average assets.................................. .48% .25% (.13)% .84%
Return on average common equity........................... 7.22 3.89 (2.25) 11.90
Net interest margin....................................... 4.46 4.13 4.13 4.52
Efficiency ratio.......................................... 64.44 66.32 64.96 60.68
======================================================================= =========== =========== ===========
LOAN QUALITY RATIOS
Allowance for loan losses to year-end loans............... 3.13% 3.20% 2.93% 1.45%
Net charge offs to average loans.......................... 1.49 1.34 1.24 .52
Non-performing loans to year-end loans.................... 3.83 4.82 4.80 2.13
======================================================================= =========== =========== ===========
CAPITAL RATIOS
Average total equity to average total assets.............. 6.73% 6.30% 6.83% 7.26%
Tier I capital to average assets (leverage)............... 7.03 6.18 6.02 6.97
Tier I capital to risk-adjusted assets.................... 9.77 8.55 8.25 NA
Total capital to risk-adjusted assets..................... 12.45 10.06 9.90 NA
======================================================================= =========== =========== ===========
OTHER DATA (AT YEAR END)
Number of banking offices................................. 361 361 369 364
Number of employees (full-time equivalent)................ 8,295 8,549 8,594 8,587
Number of employees (full-time)........................... 7,470 7,692 7,701 7,607
Number of employees (part-time)........................... 1,160 1,234 1,254 1,228
======================================================================= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
(Not covered by independent auditors' report) 1988 1987 1986
======================================================================= =========== ===========
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (IN THOUSANDS)
Interest income........................................... $ 1,396,494 $ 1,198,911 $ 1,080,713
Interest expense.......................................... 784,590 645,534 609,930
- ----------------------------------------------------------------------- ----------- -----------
Net interest income.................................... 611,904 553,377 470,783
Provision for loan losses................................. 49,480 40,996 45,599
- ----------------------------------------------------------------------- ----------- -----------
Net interest income after provision for loan losses.... 562,424 512,381 425,184
Non-interest income....................................... 151,814 148,002 156,580
Non-interest expenses..................................... 491,333 451,508 411,737
- ----------------------------------------------------------------------- ----------- -----------
Income (loss) before income taxes...................... 222,905 208,875 170,027
Federal and state income taxes (benefit).................. 59,888 58,601 38,436
- ----------------------------------------------------------------------- ----------- -----------
Income (loss) before cumulative effect of a change in
accounting principle................................ 163,017 150,274 131,591
Cumulative effect of a change in accounting principle..... -- -- --
- ----------------------------------------------------------------------- ----------- -----------
Net income (loss) $ 163,017 $ 150,274 $ 131,591
======================================================================= =========== ===========
COMMON SHARE DATA
Net income (loss)......................................... $ 2.32 $ 2.13 $ 2.03
Cash dividends declared................................... 1.01 .91 .82
Book value at year end.................................... 15.72 14.78 13.58
Market value at year end.................................. 20.75 22.25 23.75
Number of registered common shareholders at year end...... 31,764 28,419 32,211
Average common shares outstanding (in thousands).......... 66,740 65,791 61,542
Common shares outstanding at year end (in thousands)...... 67,067 64,105 61,235
Common stock dividend payout.............................. 43.53% 42.72% 40.39%
======================================================================= =========== ===========
BALANCE SHEET DATA (AT YEAR END, IN THOUSANDS)
Total assets.............................................. $16,458,403 $15,060,173 $13,669,747
Total deposits............................................ 13,324,326 11,765,187 11,324,119
Total loans............................................... 11,041,416 9,864,525 8,602,955
Shareholders' equity...................................... 1,157,545 1,078,339 898,857
Allowance for loan losses................................. 142,997 127,460 109,905
Long-term debt............................................ 501,350 431,284 388,854
======================================================================= =========== ===========
OPERATING RATIOS
Return on average assets.................................. 1.05% 1.07% 1.07%
Return on average common equity........................... 15.32 15.68 17.05
Net interest margin....................................... 4.56 4.73 5.22
Efficiency ratio.......................................... 61.44 59.76 60.92
======================================================================= =========== ===========
LOAN QUALITY RATIOS
Allowance for loan losses to year-end loans............... 1.29% 1.29% 1.28%
Net charge offs to average loans.......................... .32 .25 .31
Non-performing loans to year-end loans.................... 1.25 .76 .83
======================================================================= =========== ===========
CAPITAL RATIOS
Average total equity to average total assets.............. 7.17% 7.16% 6.51%
Tier I capital to average assets (leverage)............... 7.01 7.11 NA
Tier I capital to risk-adjusted assets.................... NA NA NA
Total capital to risk-adjusted assets..................... NA NA NA
======================================================================= =========== ===========
OTHER DATA (AT YEAR END)
Number of banking offices................................. 355 345 334
Number of employees (full-time equivalent)................ 8,624 8,320 8,050
Number of employees (full-time)........................... 7,738 7,513 7,264
Number of employees (part-time)........................... 1,439 1,370 1,325
======================================================================= =========== ===========
</TABLE>
51
<PAGE> 52
Summit Bancorp and Subsidiaries
UNAUDITED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1995
-----------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
=============================================== =========== =========== ===========
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(IN THOUSANDS)
Interest income................... $ 381,053 $ 377,514 $ 373,890 $ 363,160
Interest expense.................. 158,492 161,134 159,178 147,572
- ----------------------------------------------- ----------- ----------- -----------
Net interest income............. 222,561 216,380 214,712 215,588
Provision for loan losses......... 19,500 19,200 16,950 16,200
- ----------------------------------------------- ----------- ----------- -----------
Net interest income after
provision for loan losses...... 203,061 197,180 197,762 199,388
Non-interest income............... 58,150 58,131 55,918 51,990
Non-interest expenses............. 159,348 158,322 162,318 162,373
- ----------------------------------------------- ----------- ----------- -----------
Income before income taxes...... 101,863 96,989 91,362 89,005
Federal and state income taxes.... 36,707 34,812 33,092 31,738
- ----------------------------------------------- ----------- ----------- -----------
Income before cumulative
effect of a change in
accounting principle........... 65,156 62,177 58,270 57,267
Cumulative effect of a change in
accounting principle............ -- -- -- --
- ----------------------------------------------- ----------- ----------- -----------
Net income $ 65,156 $ 62,177 $ 58,270 $ 57,267
=============================================== =========== =========== ===========
COMMON SHARE DATA
Net income........................ $ .73 $ .70 $ .68 $ .66
Cash dividends declared........... .32 .29 .29 .29
Book value........................ 19.89 19.36 18.50 17.98
Market value...................... 35.63 32.00 30.38 27.50
Common stock dividend payout...... 43.84% 41.43% 43.28% 43.94% %
Number of registered common
shareholders.................... 29,983 30,779 29,954 28,285
Average common shares
outstanding (in thousands)...... 88,252 87,627 85,563 85,208
Common shares outstanding
(in thousands).................. 88,471 87,993 85,719 85,403
=============================================== =========== =========== ===========
BALANCE SHEET DATA
(AT QUARTER END, IN THOUSANDS)
Total assets...................... $21,536,935 $21,149,787 $20,952,796 $20,750,376
Total deposits.................... 17,955,103 17,513,124 17,185,629 16,834,242
Total loans....................... 14,019,574 13,730,520 13,221,085 13,165,614
Shareholders' equity.............. 1,802,316 1,745,997 1,628,324 1,578,397
Allowance for loan losses......... 279,034 291,156 290,366 296,936
Long-term debt.................... 424,862 475,530 522,890 513,331
=============================================== =========== =========== ===========
OPERATING RATIOS
Return on average assets.......... 1.22% 1.17% 1.13% 1.13%
Return on average
common equity................... 14.81 14.63 14.73 15.14
Net interest margin............... 4.59 4.51 4.60 4.71
Efficiency ratio.................. 56.22 55.70 58.95 59.43
=============================================== =========== =========== ===========
LOAN QUALITY RATIOS
Allowance for loan losses
to quarter-end loans............ 1.99% 2.12% 2.20% 2.26%
Net charge offs to average loans.. .91 .72 .72 .76
Non-performing loans to
quarter-end loans............... 1.34 1.51 1.67 1.53
=============================================== =========== =========== ===========
CAPITAL RATIOS
Tier I capital to average assets
(leverage)...................... 7.97% 7.82% 7.69% 7.49%
Tier I capital to risk-adjusted
assets.......................... 10.75 10.60 10.49 10.22
Total capital to risk-adjusted
assets.......................... 13.46 13.33 13.25 12.98
=============================================== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1994
-----------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
=============================================== =========== =========== ===========
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(IN THOUSANDS)
Interest income................... $ 351,955 $ 336,694 $ 315,877 $ 298,274
Interest expense.................. 137,165 123,006 112,346 103,456
- ----------------------------------------------- ----------- ----------- -----------
Net interest income............. 214,790 213,688 203,531 194,818
Provision for loan losses......... 29,700 20,195 21,050 21,050
- ----------------------------------------------- ----------- ----------- -----------
Net interest income after
provision for loan losses...... 185,090 193,493 182,481 173,768
Non-interest income............... 51,359 51,902 51,615 55,190
Non-interest expenses............. 160,521 210,467 166,261 162,416
- ----------------------------------------------- ----------- ----------- -----------
Income before income taxes...... 75,928 34,928 67,835 66,542
Federal and state income taxes.... 25,062 14,823 25,671 23,396
- ----------------------------------------------- ----------- ----------- -----------
Income before cumulative
effect of a change in
accounting principle........... 50,866 20,105 42,164 43,146
Cumulative effect of a change in
accounting principle............ -- -- -- (1,731)
- ----------------------------------------------- ----------- ----------- -----------
Net income $ 50,866 $ 20,105 $ 42,164 $ 41,415
=============================================== =========== =========== ===========
COMMON SHARE DATA
Net income........................ $ .60 $ .23 $ .49 $ .48
Cash dividends declared........... .26 .26 .21 .21
Book value........................ 17.45 17.25 17.36 17.16
Market value...................... 24.13 26.38 27.63 26.88
Common stock dividend payout...... 43.33% 113.04% 42.86% 43.75
Number of registered common
shareholders.................... 28,333 29,265 29,410 29,856
Average common shares
outstanding (in thousands)...... 84,905 84,512 84,201 83,894
Common shares outstanding
(in thousands).................. 85,003 84,756 84,327 84,049
=============================================== =========== =========== ===========
BALANCE SHEET DATA
(AT QUARTER END, IN THOUSANDS)
Total assets...................... $20,894,815 $20,980,797 $20,375,288 $19,834,654
Total deposits.................... 16,977,109 16,628,427 16,272,454 16,101,163
Total loans....................... 13,105,179 12,952,455 12,303,707 11,932,319
Shareholders' equity.............. 1,533,717 1,512,267 1,513,905 1,492,711
Allowance for loan losses......... 305,330 328,607 332,947 335,162
Long-term debt.................... 544,936 466,706 458,449 475,885
=============================================== =========== =========== ===========
OPERATING RATIOS
Return on average assets.......... .97% .39% .84% .86%
Return on average
common equity................... 13.46 5.21 11.37 11.50
Net interest margin............... 4.55 4.59 4.51 4.49
Efficiency ratio.................. 57.78 57.71 61.56 62.01
=============================================== =========== =========== ===========
LOAN QUALITY RATIOS
Allowance for loan losses
to quarter-end loans............ 2.33% 2.54% 2.71% 2.81%
Net charge offs to average loans.. .49 .83 .77 .86
Non-performing loans to
quarter-end loans............... 1.53 1.99 2.35 2.56
=============================================== =========== =========== ===========
CAPITAL RATIOS
Tier I capital to average assets
(leverage)...................... 7.27% 7.23% 7.36% 7.46%
Tier I capital to risk-adjusted
assets.......................... 9.95 9.72 10.28 10.25
Total capital to risk-adjusted
assets.......................... 12.69 12.50 13.13 13.15
=============================================== =========== =========== ===========
</TABLE>
52
<PAGE> 53
CONTENTS
==================================================================
UJB Financial Corp. Consolidated Financial Statements
and Notes.................................................. 54
Independent Auditors' Report................................. 70
Corporate Directory.......................................... 71
Corporate Information........................................ 73
==================================================================
53
<PAGE> 54
UJB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
(Dollars in thousands) 1995 1994
============================================================================================= ============
<S> <C> <C>
Assets Cash and cash equivalents:
Cash and due from banks (Note 3) .......................................... $ 1,028,923 $ 925,421
Federal funds sold and securities purchased under agreements to resell .... 33,500 44,875
- --------------------------------------------------------------------------------------------- ------------
Total cash and cash equivalents 1,062,423 970,296
- --------------------------------------------------------------------------------------------- ------------
Interest bearing deposits with banks ......................................... 18,329 18,809
Trading account securities ................................................... 27,400 33,513
Securities available for sale (Note 4) ....................................... 1,600,062 201,215
Securities held to maturity (Note 5) (Market value of
$2,277,752 in 1995 and $3,902,439 in 1994) ................................ 2,286,000 4,092,988
Loans (Notes 6, 7 and 23) .................................................... 10,457,382 9,656,574
Less: Allowance for loan losses (Note 8) .................................. 187,650 214,161
- --------------------------------------------------------------------------------------------- ------------
Net loans 10,269,732 9,442,413
- --------------------------------------------------------------------------------------------- ------------
Premises and equipment (Note 9) .............................................. 162,664 167,905
Assets held for accelerated disposition ...................................... 16,650 90,888
Accrued interest receivable .................................................. 97,471 89,926
Other real estate owned, net (Note 10) ....................................... 19,836 31,449
Due from customers on acceptances ............................................ 26,740 21,159
Other assets (Notes 1 and 18) ................................................ 298,348 268,911
- --------------------------------------------------------------------------------------------- ------------
Total Assets $ 15,885,655 $ 15,429,472
============================================================================================= ============
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing demand deposits ...................................... $ 3,477,897 $ 3,260,641
Interest bearing deposits:
Savings and time deposits .............................................. 9,287,350 8,936,009
Commercial certificates of deposit $100,000 and over ................... 496,163 371,141
- --------------------------------------------------------------------------------------------- ------------
Total deposits 13,261,410 12,567,791
- --------------------------------------------------------------------------------------------- ------------
Other borrowed funds (Note 11) ............................................... 872,430 1,333,430
Long-term debt (Note 12) ..................................................... 203,649 204,754
Accrued interest payable ..................................................... 39,030 30,234
Bank acceptances outstanding ................................................. 26,740 21,159
Accrued expenses and other liabilities (Notes 15 and 18) ..................... 185,550 167,844
- --------------------------------------------------------------------------------------------- ------------
Total liabilities 14,588,809 14,325,212
- --------------------------------------------------------------------------------------------- ------------
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
1995 and 1994, adjustable-rate cumulative, $50 stated value 30,008 30,008
Common stock par value $1.20:
Authorized 130,000,000 shares; issued and outstanding 57,789,774 in
1995 and 55,005,306 in 1994 ......................................... 69,348 66,006
Surplus ................................................................... 494,685 413,429
Retained earnings ......................................................... 704,692 604,066
Net unrealized gain (loss) on securities, net of tax ...................... (1,887) (9,249)
- --------------------------------------------------------------------------------------------- ------------
Total shareholders' equity 1,296,846 1,104,260
- --------------------------------------------------------------------------------------------- ------------
Total Liabilities and Shareholders' Equity $ 15,885,655 $ 15,429,472
============================================================================================= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
54
<PAGE> 55
UJB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993
=============================================================================================== ========== ==========
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (Note 7) .............................................. $ 840,411 $ 706,049 $ 670,705
Interest on securities held to maturity (Note 5):
Taxable ....................................................................... 212,286 195,904 177,549
Tax-exempt .................................................................... 19,553 22,823 25,448
Interest on securities available for sale (Note 4) ............................... 19,165 34,300 31,023
Interest on Federal funds sold and securities purchased under agreements to resell 2,752 600 955
Interest on trading account securities ........................................... 1,931 668 1,297
Interest on deposits with banks .................................................. 642 629 651
- ----------------------------------------------------------------------------------------------- ---------- ----------
Total interest income 1,096,740 960,973 907,628
- ----------------------------------------------------------------------------------------------- ---------- ----------
INTEREST EXPENSE
Interest on savings and time deposits ............................................ 320,719 239,714 271,345
Interest on commercial certificates of deposit $100,000 and over ................. 25,496 13,639 7,319
Interest on borrowed funds (Notes 11 and 12) ..................................... 99,758 91,516 53,056
- ----------------------------------------------------------------------------------------------- ---------- ----------
Total interest expense 445,973 344,869 331,720
- ----------------------------------------------------------------------------------------------- ---------- ----------
Net interest income ........................................................ 650,767 616,104 575,908
Provision for loan losses (Note 8) ............................................... 65,250 84,000 95,685
- ----------------------------------------------------------------------------------------------- ---------- ----------
Net interest income after provision for loan losses 585,517 532,104 480,223
- ----------------------------------------------------------------------------------------------- ---------- ----------
NON-INTEREST INCOME
Service charges on deposit accounts .............................................. 67,953 64,474 60,474
Service and loan fee income ...................................................... 27,994 27,531 21,063
Trust income ..................................................................... 22,411 21,792 21,852
Securities gains (Notes 4 and 5) ................................................. 6,114 1,888 8,877
Trading account gains ............................................................ 1,065 670 1,884
Other ............................................................................ 48,999 43,933 49,151
- ----------------------------------------------------------------------------------------------- ---------- ----------
Total non-interest income 174,536 160,288 163,301
- ----------------------------------------------------------------------------------------------- ---------- ----------
NON-INTEREST EXPENSES
Salaries ......................................................................... 195,638 183,339 185,570
Pension and other employee benefits (Note 15) .................................... 60,067 53,386 58,601
Occupancy, net (Notes 9 and 19) .................................................. 52,888 50,749 48,487
Furniture and equipment (Notes 9 and 19) ......................................... 51,391 49,065 45,592
FDIC assessment .................................................................. 15,611 27,933 29,244
Advertising and public relations ................................................. 10,750 10,843 10,517
Other real estate owned expenses (Note 10) ....................................... 6,321 18,287 40,925
Restructuring charge ............................................................. -- -- 21,500
Other (Note 17) .................................................................. 100,712 94,597 97,533
- ----------------------------------------------------------------------------------------------- ---------- ----------
Total non-interest expenses 493,378 488,199 537,969
- ----------------------------------------------------------------------------------------------- ---------- ----------
Income before income taxes ................................................. 266,675 204,193 105,555
Federal and state income taxes (Note 18) ......................................... 96,308 72,312 26,953
- ----------------------------------------------------------------------------------------------- ---------- ----------
Income before cumulative effect of a change in accounting principle ........ 170,367 131,881 78,602
Cumulative effect of a change in accounting principle (Notes 15 and 18) .......... -- (1,731) 3,816
- ----------------------------------------------------------------------------------------------- ---------- ----------
Net Income $ 170,367 $ 130,150 $ 82,418
=============================================================================================== ========== ==========
Net Income Per Common Share:
Income before cumulative effect of a change in accounting principle ........ $ 2.99 $ 2.38 $ 1.43
Cumulative effect of a change in accounting principle (Notes 15 and 18) .......... -- (.03) .07
- ----------------------------------------------------------------------------------------------- ---------- ----------
Net Income Per Common Share $ 2.99 $ 2.35 $ 1.50
=============================================================================================== ========== ==========
Average Common Shares Outstanding (in thousands) 56,391 54,697 53,917
=============================================================================================== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
55
<PAGE> 56
UJB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
(Dollars in thousands) 1995 1994 1993
===================================================================================================== =========== ===========
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .............................................................................. $ 170,367 $ 130,150 $ 82,418
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for loan losses and other real estate owned ............................... 69,472 94,573 127,747
Depreciation, amortization, and accretion, net ....................................... 33,335 33,352 27,876
Restructuring charge ................................................................. -- -- 21,500
Deferred income tax (benefit) ........................................................ 23,511 19,030 (5,725)
Gains on sales of trading account and securities available for sale .................. (7,179) (2,558) (10,761)
Gains on sales of mortgages held for sale ............................................ (436) (500) (3,492)
Gains on sales of other real estate owned ............................................ (3,552) (1,457) (1,716)
Proceeds from sales of other real estate owned ....................................... 24,558 44,927 62,012
Proceeds from sales of mortgages held for sale ....................................... 40,112 146,435 321,226
Originations of mortgages held for sale .............................................. (37,546) (118,627) (269,655)
Net decrease (increase) in trading account securities ................................ 7,178 (3,108) (5,890)
Decrease in accrued interest receivable and other assets ............................. (3,874) (167,957) (26,381)
Increase in accrued interest payable, accrued expenses, and
other liabilities ................................................................. 32,083 28,688 31,145
- ----------------------------------------------------------------------------------------------------- ----------- -----------
Net cash provided by operating activities ......................................... 348,029 202,948 350,304
- ----------------------------------------------------------------------------------------------------- ----------- -----------
INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity ................................. 736,536 975,071 1,283,651
Purchases of securities held to maturity ................................................ (108,723) (1,700,063) (1,833,506)
Purchases of securities available for sale .............................................. (303,628) (11,471) (316,303)
Proceeds from maturities of securities available for sale ............................... 82,017 261,098 192,605
Proceeds from sales of securities available for sale .................................... 10,673 5,109 517,906
Net decrease (increase) in interest bearing deposits with banks ......................... 480 1,153 (6,143)
Proceeds from sales of loans ............................................................ -- -- 84,836
Net increase in loans ................................................................... (904,022) (1,061,876) (109,388)
Purchases of premises and equipment, net ................................................ (15,606) (16,589) (14,592)
- ----------------------------------------------------------------------------------------------------- ----------- -----------
Net cash used in investing activities ............................................. (502,273) (1,547,568) (200,934)
- ----------------------------------------------------------------------------------------------------- ----------- -----------
FINANCING ACTIVITIES
Net (decrease) increase in demand and savings deposits .................................. (110,708) 258,291 362,450
Net increase (decrease) in time deposits ................................................ 804,327 558,001 (698,279)
Net (decrease) increase in short-term borrowings ........................................ (460,281) 719,371 (84,574)
Principal payments on long-term debt, net ............................................... (1,824) (10,568) (28,075)
Proceeds from issuance of debt, net of related expenses ................................. -- 1,040 20,000
Dividends paid .......................................................................... (65,549) (49,817) (34,806)
Proceeds from issuance of common stock in connection with purchase acquisition
of Bancorp New Jersey, Inc. .......................................................... 68,186 -- --
Proceeds from issuance of common stock under dividend reinvestment and
other stock plans .................................................................... 16,412 15,256 15,186
Other, net .............................................................................. (4,192) (1,332) (3,301)
- ----------------------------------------------------------------------------------------------------- ----------- -----------
Net cash provided by (used in) financing activities ............................... 246,371 1,490,242 (451,399)
- ----------------------------------------------------------------------------------------------------- ----------- -----------
Increase (decrease) in cash and cash equivalents ........................................ 92,127 145,622 (302,029)
Cash and cash equivalents at beginning of year .......................................... 970,296 824,674 1,126,703
- ----------------------------------------------------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year ................................................ $1,062,423 $ 970,296 $ 824,674
===================================================================================================== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid:
Interest payments .................................................................... $ 437,177 $ 337,975 $ 345,805
Income tax payments .................................................................. 73,442 60,063 28,913
Noncash investing activities:
Loans made in conjunction with the sale of other real estate owned ................... 2,292 9,891 17,112
Net transfer of securities held to maturity to (from) securities available for sale .. 1,182,503 (707,808) 666,687
Transfer of loans to other real estate owned ......................................... 21,777 41,017 51,784
Net transfer of assets to assets held for accelerated disposition .................... 965 90,888 --
===================================================================================================== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
56
<PAGE> 57
UJB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net Total
Preferred Common Retained Unrealized Shareholders'
(Dollars in thousands) Stock Stock Surplus Earnings Gain (Loss) Equity
======================================================== ======== ========== ========= =========== =============
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992................... $30,008 $64,192 $384,458 $481,094 $ (260) $ 959,492
Net income, 1993.......................... -- -- -- 82,418 -- 82,418
Cash dividends declared:
Preferred stock........................ -- -- -- (1,801) -- (1,801)
Common stock........................... -- -- -- (36,303) -- (36,303)
Common stock issued:
Dividend reinvestment and other
stock plans (459,430 shares)........ -- 551 9,918 -- -- 10,469
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 65,113 398,723 525,408 -- 1,019,252
- -------------------------------------------------------- ------- -------- -------- -------- ----------
Net unrealized gain (loss) on securities
upon adoption of a change
in accounting principle, net of tax.... -- -- -- -- 9,355 9,355
Adjustment for the pooling of a company
with a different fiscal year end....... -- -- 343 1,769 -- 2,112
Net income, 1994.......................... -- -- -- 130,150 -- 130,150
Cash dividends declared:
Preferred stock........................ -- -- -- (1,835) -- (1,835)
Common stock........................... -- -- -- (51,426) -- (51,426)
Common stock issued:
Dividend reinvestment and other
stock plans (353,345 shares)........ -- 424 8,635 -- -- 9,059
Exercise of stock options, net
(391,193 shares).................... -- 469 5,728 -- -- 6,197
Change in unrealized gain (loss) on
securities, net of tax................. -- -- -- -- (18,604) (18,604)
- -------------------------------------------------------- ------- -------- -------- -------- ----------
Balance, December 31, 1994 30,008 66,006 413,429 604,066 (9,249) 1,104,260
- -------------------------------------------------------- ------- -------- -------- -------- ----------
Net income, 1995.......................... -- -- -- 170,367 -- 170,367
Cash dividends declared:
Preferred stock........................ -- -- -- (1,832) -- (1,832)
Common stock........................... -- -- -- (67,909) -- (67,909)
Common stock issued:
In connection with purchase
acquisition of Bancorp New Jersey,
Inc. (1,948,153 shares)............. -- 2,338 65,848 -- -- 68,186
Dividend reinvestment and other
stock plans (401,810 shares)........ -- 482 11,544 -- -- 12,026
Exercise of stock options, net
(434,505 shares).................... -- 522 3,864 -- -- 4,386
Change in unrealized gain (loss) on
securities, net of tax................. -- -- -- -- 7,362 7,362
- -------------------------------------------------------- ------- -------- -------- -------- ----------
Balance, December 31, 1995 $30,008 $69,348 $494,685 $704,692 $ (1,887) $1,296,846
======================================================== ======= ======== ======== ======== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
57
<PAGE> 58
UJB FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS:
UJB Financial Corp. 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 bank and active non-bank subsidiaries, a full
range of banking services and certain non-banking services are provided to
individual and corporate customers in a competitive environment. UJB Financial
is regulated by various Federal and state agencies and is subject to periodic
examination by those regulatory authorities. The accounting and financial
reporting policies of UJB Financial and its subsidiaries conform to generally
accepted accounting principles and prevailing industry practices. The following
is a description of significant accounting policies used in preparing the
Consolidated Financial Statements.
PRINCIPLES OF CONSOLIDATION:
The accompanying Consolidated Financial Statements include the accounts of UJB
Financial and its subsidiaries after elimination of all significant intercompany
accounts and transactions. Prior period financial statements have been restated
to include the accounts and results of operations for acquisitions accounted for
as pooling-of-interests combinations. For acquisitions using the purchase method
of accounting, results of operations are included from the dates of acquisition.
The assets and liabilities of companies acquired under the purchase method of
accounting have been adjusted to estimated fair values at the date of
acquisition; the resulting net discount or premium is being accreted or
amortized into income over the estimated remaining lives of the related assets
and liabilities. Certain prior period amounts have been reclassified to conform
to the financial statement presentation for 1995. The reclassifications have no
effect on shareholders' equity or net income as previously reported.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the dates of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates.
CASH FLOW REPORTING:
The Consolidated Statements of Cash Flows are presented using the indirect
method. 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:
Effective January 1, 1994, Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," was
adopted. SFAS No. 115 requires the classification of securities into one of
three categories: trading account securities, securities held to maturity, and
securities available for sale.
Securities that are purchased specifically for short-term appreciation with the
intent of selling in the near future are classified as trading account
securities. Trading account securities are carried at market value with realized
and unrealized gains and losses reported in non-interest income as trading
account gains.
Debt securities purchased with the intent and ability to hold until maturity are
classified as securities held to maturity and are carried at cost, adjusted for
amortization of premiums and accretion of discounts.
All other securities, including equity securities, are classified as securities
available for sale. Securities available for sale may be sold prior to maturity
in response to changes in interest rates or prepayment risk, for asset/liability
management purposes, or other similar factors. These securities are carried at
fair value with unrealized gains and losses, including the effect of hedges,
reported as a separate component of shareholders' equity on a net-of-tax basis.
Realized gains and losses, which are generally computed by the specific
identification method, are reported in non-interest income as securities gains.
Transfers of securities between categories are recorded at fair value, including
the effect of hedges, as of the transfer date, with the accounting treatment of
unrealized gains or losses determined by the category into which the security is
transferred.
LOANS:
Loans are generally carried at the principal amount outstanding, net of unearned
discounts and deferred loan origination fees and costs. Interest income on loans
is accrued and credited to interest and fees on loans as earned. Loan
origination fees and certain direct loan origination costs are deferred and
amortized over the estimated life of the loan as an adjustment of the yield.
Other loan fees are recognized as earned and are reported in non-interest
income.
Residential mortgage loans which are serviced for others are not included in the
Consolidated Financial Statements. Fees earned for servicing loans are reported
as non-interest income when the related loan payments are collected. Loan
servicing costs are charged to non-interest expense as incurred.
Effective January 1, 1996, SFAS No. 122, "Accounting for Mortgage Servicing
Rights," was adopted on a prospective basis. This Statement requires
capitalization of the rights to service mortgage loans for others, whether those
rights are acquired through purchase or origination. All capitalized mortgage
servicing rights, both originated and purchased, will be evaluated for
impairment on a quarterly basis with any adjustments recognized through a
valuation allowance.
NON-PERFORMING LOANS:
Non-performing loans consist primarily of commercial and industrial,
construction and development, and commercial mortgage loans for which the
accrual of interest has been discontinued (non-accrual loans). These loans are
classified as non-accrual when they are past due 90 days or more as to principal
or interest, or where reasonable doubt exists as to timely collectibility.
58
<PAGE> 59
At the time a loan is placed on non-accrual status, previously accrued and
uncollected interest is reversed against interest income. Interest received on
non-accrual loans is generally credited to interest income for the current
period. However, if ultimate collectibility of principal is in doubt, interest
collections are applied as principal reductions. If principal and interest
payments are brought contractually current and future collectibility is
reasonably assured, these loans are returned to accrual status.
On January 1, 1995, SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures," was adopted. UJB Financial has
chosen to maintain existing income recognition policies with respect to
non-accrual loans. Generally, interest accruals on residential mortgage loans
cease at 90 or 180 days, depending on lien priority. Past due residential
mortgage loans are monitored and charged off when considered uncollectible;
consumer loans are charged off when they are 120 days past due.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," was adopted
prospectively on January 1, 1995. This Statement defines an impaired loan as a
loan for which it is probable, based on current information, that the lender
will not collect all amounts due under the contractual terms of the loan
agreement. Smaller balance homogeneous loans that are collectively evaluated for
impairment, such as residential mortgage loans and consumer loans, are
specifically excluded from the impaired loan portfolio. UJB Financial has
defined the population of impaired loans to be all non-accrual loans. The
impaired loan portfolio is primarily collateral dependent, as defined by SFAS
No. 114. Impaired loans greater than $250,000 are individually assessed to
determine that each loan's carrying value is not in excess of the fair value of
the related collateral or the present value of the expected future cash flows.
Upon adoption of SFAS No. 114, certain loans which had been considered
in-substance foreclosed and previously classified as OREO have been reclassified
as non-performing loans. Prior period balances have not been restated as the
amounts are considered immaterial.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is a valuation reserve available for losses
incurred or expected on extensions of credit. Credit losses arise primarily from
the loan portfolio, but may also be derived from other credit-related sources
including commitments to extend credit, guarantees, and standby letters of
credit. Additions are made to the allowance through periodic provisions which
are charged to earnings. All losses of principal are charged to the allowance
when incurred or when a determination is made that a loss is expected.
Subsequent recoveries, if any, are credited to the allowance.
The adequacy of the allowance for loan losses is determined through a quarterly
review of outstanding loans and commitments to extend credit. The impact of
economic conditions on the creditworthiness of the borrowers is given
consideration, as well as loan loss experience, changes in the composition and
volume of the loan 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.
PREMISES AND EQUIPMENT:
Premises, furniture, and equipment are stated at cost less accumulated
depreciation and amortization. The provisions for depreciation and amortization
are computed using the straight-line method. Premises, furniture, and equipment
are depreciated over the estimated useful life of the assets or terms of the
leases, as applicable. Estimated useful lives are ten to forty years for
premises, and three to ten years for furniture and equipment. Maintenance and
repairs are charged to expense as incurred, while renewals and major
improvements are capitalized. Upon disposition, premises and major items of
furniture and equipment are removed from the property accounts at their carrying
amount with the resulting gain or loss included in other non-interest income.
ASSETS HELD FOR ACCELERATED DISPOSITION:
In December 1994 certain commercial accruing and non-accruing loans and OREO
properties were identified for sale under an accelerated disposition program.
These assets were transferred to a separate account in other assets and are
carried at their estimated net realizable value.
OTHER REAL ESTATE OWNED (OREO):
OREO is carried at the lower of cost or fair value less estimated cost to sell.
When a property is acquired, the excess of the carrying amount over fair value,
if any, is charged to the allowance for loan losses. An allowance for OREO has
been established, through charges to OREO expense, to maintain properties at the
lower of cost or fair value less estimated cost to sell. Operating results of
OREO, including rental income, operating expenses, and gains and losses realized
from the sale of properties owned, are also recorded in OREO expense.
INTANGIBLE ASSETS:
Intangible assets, primarily goodwill and core deposit intangibles, are included
in other assets. Goodwill represents the excess of the purchase price over the
estimated fair value of identifiable net assets acquired through purchase
acquisitions and amounted to $91,786,000 and $31,998,000 at December 31, 1995
and 1994, respectively. Goodwill is amortized on a straight-line method over the
estimated periods to be benefited, ranging from ten to forty years, and included
in non-interest expense.
Core deposit intangibles represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in acquisitions. Core
deposit intangibles and other identifiable intangibles amounted to $19,301,000
and $16,004,000 at December 31, 1995 and 1994, respectively, and are amortized
on an accelerated basis over their estimated periods of benefit, ranging from
five to ten years and included in non-interest expense. Other identifiable
intangibles consist primarily of purchased mortgage servicing rights which
represent the intangible value of purchased rights to service mortgage loans.
FINANCIAL INSTRUMENTS:
Derivative financial instruments, primarily interest rate swaps, are one of the
tools used to manage interest rate risk. The net periodic interest payments or
receipts arising from these instruments are recognized on an accrual basis in
interest income or interest expense as yield adjustments to the hedged assets or
liabilities. Gains or losses on the termination of interest rate swaps are
deferred and amortized in interest income or interest expense as an adjustment
to the yield of the hedged asset or liability over the shorter of the remaining
life of the hedged item or the remaining contract period.
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 at least equal to the minimum regulatory
requirements and no greater than the maximum
59
<PAGE> 60
amount that can be deducted for Federal income tax purposes. The costs
associated with these benefits are accrued based on actuarial assumptions and
included in non-interest expenses.
INCOME TAXES:
The amount provided for income taxes is based on income reported for
consolidated financial statement purposes, after elimination of Federal
tax-exempt income, which is derived primarily from securities of states and
political subdivisions and certain commercial and mortgage loans.
On January 1, 1993, SFAS No. 109, "Accounting for Income Taxes," was adopted.
Under SFAS No. 109, deferred tax assets and liabilities are recognized for the
expected future tax consequences of existing differences between financial
statement and tax bases of existing assets and liabilities, as well as for
operating losses and tax credit carryforwards. The effect on deferred taxes of a
change in the tax rate is recognized in the period of the enactment date. The
cumulative effect at January 1, 1993, of this change in the method of accounting
for income taxes has been included in the Consolidated Statements of Income for
the year ended December 31, 1993.
UJB Financial and its subsidiaries file a consolidated Federal income tax return
with the amount of income tax expense or benefit computed and allocated on a
separate return basis.
INCOME PER SHARE:
Income per common share is calculated by dividing net income, less the dividends
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 have no material dilutive effect.
NOTE 2 ACQUISITIONS
In September 1995 UJB Financial and The Summit Bancorporation (Summit) announced
a definitive agreement to merge in a stock-for-stock exchange to form Summit
Bancorp. The transaction, accounted for as a pooling of interests, was
consummated on March 1, 1996 in an exchange of .90 shares of UJB Financial
common stock for each share of Summit common stock. There were 34,078,905 shares
of UJB Financial common stock issued for 37,865,450 shares of Summit common
stock. At December 31, 1995, Summit had total assets of $5,654,110,000.
The transaction was accounted for as a pooling of interests. Separate results of
operations of the combined entities for the three years ended December 31 were
as follows:
<TABLE>
<CAPTION>
(In thousands, except per share) 1995 1994 1993
========================================= ======== ========
<S> <C> <C> <C>
Net interest income:
UJB Financial.......... $650,767 $616,104 $575,908
Summit................. 218,474 210,723 203,953
- ----------------------------------------- -------- --------
Combined $869,241 $826,827 $779,861
========================================= ======== ========
Net income:
UJB Financial.......... $170,367 $130,150 $ 82,418
Summit................. 72,503 24,400 50,724
- ----------------------------------------- -------- --------
Combined $242,870 $154,550 $133,142
========================================= ======== ========
Net income per common share:
UJB Financial.......... $ 2.99 $ 2.35 $ 1.50
Summit................. 2.12 .70 1.54
Combined............... 2.77 1.80 1.57
========================================= ======== ========
</TABLE>
The Combined Consolidated Results of Operations are not necessarily indicative
of the results that would have occurred had the acquisition been consummated in
the past or which may be attained in the future. See the Combined Consolidated
Financial Statements and the notes thereto found on pages 32 to 48.
In August 1995 UJB Financial signed a definitive merger agreement to acquire
Flemington National Bank and Trust Company. The transaction was consummated on
February 23, 1996, in an exchange of 1.3816 shares of UJB Financial common stock
for each share of Flemington common stock. There were 1,324,000 shares of
UJB Financial common stock issued for 958,476 shares of Flemington common stock.
At December 31, 1995, Flemington had total assets of $285,875,000. This
transaction was accounted for under the pooling-of-interests method. However,
because this acquisition was considered immaterial to UJB Financial, the
transaction will be recorded as an adjustment to beginning shareholders' equity
at January 1, 1996 without restating the Consolidated Financial Statements for
1995 and prior years.
In January 1995 UJB Financial entered into a definitive merger agreement to
acquire Bancorp New Jersey, Inc. for a combination of cash and stock. The
transaction, accounted for under the purchase method, was consummated on July
11, 1995. Bancorp New Jersey had total assets of $504,528,000, loans of
$290,444,000 and deposits of $449,971,000. Results of operations are included
from the acquisition date. The acquisition of Bancorp New Jersey resulted in
goodwill of $63,764,000 which is being amortized over 20 years on a
straight-line basis.
The pro forma results of operations for the period January 1, 1995 to July 11,
1995, and for the year ended December 31, 1994, assuming Bancorp New Jersey had
been acquired as of January 1, 1994, would not have been significantly different
from those presented in the Consolidated Statements of Income.
During the year ended December 31, 1994, UJB Financial completed two
acquisitions. In July 1994 VSB Bancorp, Inc., with assets of $381,100,000, was
acquired and accounted for as a pooling of interests. In September 1994 Palisade
Savings Bank, FSB with assets of $324,237,000, was acquired and accounted for
under the purchase method.
NOTE 3 RESTRICTIONS ON CASH AND DUE FROM BANKS
Certain subsidiary banks are required to maintain reserve balances with a
Federal Reserve Bank based principally upon deposits. These reserve balances
averaged $359,190,000 in 1995 and $359,124,000 in 1994.
60
<PAGE> 61
NOTE 4 SECURITIES AVAILABLE FOR SALE
The following is a comparative summary of 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>
1995
U.S. Government
and Federal agencies ... $1,246,623 $ 6,060 $ 8,456 $1,244,227
Other securities:
Mortgage-backed ........ 293,383 2,068 491 294,960
Other debt ............. 1,503 594 85 2,012
Equities, net .......... 58,480 383 -- 58,863
- ------------------------------------------ ---------- ---------- ----------
Total other 353,366 3,045 576 355,835
- ------------------------------------------ ---------- ---------- ----------
$1,599,989 $ 9,105 $ 9,032 $1,600,062
========================================== ========== ========== ==========
1994
U.S. Government
and Federal agencies ... $ 122,974 $ 2 $ 13,251 $ 109,725
Other securities:
Mortgage-backed ........ 55,090 -- 2,885 52,205
Equities, net .......... 35,605 4,810 1,130 39,285
- ------------------------------------------ ---------- ---------- ----------
Total other 90,695 4,810 4,015 91,490
- ------------------------------------------ ---------- ---------- ----------
$ 213,669 $ 4,812 $ 17,266 $ 201,215
========================================== ========== ========== ==========
</TABLE>
The amortized cost and market value of securities available for sale at December
31, 1995, are distributed by contractual maturity. However, mortgage-backed
securities and other securities which may have principal prepayment provisions
are distributed to a maturity category based on their estimated average life.
These prepayments are not scheduled over the life of the investment, but are
reflected as adjustments to the final maturity distribution. The following is a
summary of the expected maturity distribution at December 31, 1995:
<TABLE>
<CAPTION>
Amortized Market
(In thousands) Cost Value
================================================================ ==========
<S> <C> <C>
Due in one year or less ........................ $ 142,395 $ 143,133
Due after one year through five years .......... 990,747 987,821
Due after five years through ten years ......... 220,538 220,627
Due after ten years ............................ 187,829 189,618
Marketable equity securities, net .............. 58,480 58,863
- ---------------------------------------------------------------- ----------
$1,599,989 $1,600,062
</TABLE>
Gains and losses were realized on sales of securities available for sale as
follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
============================================ ====== =======
<S> <C> <C> <C>
Gains............................ $5,406 $1,591 $11,147
Losses........................... - - (2,816)
- -------------------------------------------- ------ -------
Net gains $5,406 $1,591 $ 8,331
</TABLE>
Interest and dividend income on securities available for sale was as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
============================================ ======= =======
<S> <C> <C> <C>
U.S. Government and Federal
agencies....................... $12,513 $20,504 $17,082
Other securities................. 6,652 13,796 13,941
- -------------------------------------------- ------- -------
$19,165 $34,300 $31,023
============================================ ======= =======
</TABLE>
The carrying value of securities available for sale pledged to secure public
funds and securities sold under agreements to repurchase, as well as for other
purposes required by law, was $983,674,000 at December 31, 1995.
NOTE 5 SECURITIES HELD TO MATURITY
The following is a comparative summary of securities held to maturity at
December 31:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
========================================= ========== ========== ==========
<S> <C> <C> <C> <C>
1995
U.S. Government
and Federal agencies .. $ 798,763 $ 4,411 $ 8,393 $ 794,781
States and political
subdivisions .......... 243,174 14,558 180 257,552
Other securities:
Mortgage-backed ....... 1,224,128 411 19,055 1,205,484
Other debt ............ 19,935 -- -- 19,935
- ----------------------------------------- ---------- ---------- ----------
Total other 1,244,063 411 19,055 1,225,419
- ----------------------------------------- ---------- ---------- ----------
$2,286,000 $ 19,380 $ 27,628 $2,277,752
========================================= ========== ========== ==========
1994
U.S. Government
and Federal agencies .. $2,016,615 $ 517 $ 100,643 $1,916,489
States and political
subdivisions .......... 331,000 11,749 3,319 339,430
Other securities:
Mortgage-backed ....... 1,725,367 275 99,128 1,626,514
Other debt ............ 20,006 -- -- 20,006
- ----------------------------------------- ---------- ---------- ----------
Total other 1,745,373 275 99,128 1,646,520
- ----------------------------------------- ---------- ---------- ----------
$4,092,988 $ 12,541 $ 203,090 $3,902,439
========================================= ========== ========== ==========
</TABLE>
The amortized cost and the market value of securities held to maturity at
December 31, 1995, are distributed by contractual maturity. However,
mortgage-backed securities and other securities which may have principal
prepayment provisions are distributed to a maturity category based on their
estimated average life. These prepayments are not scheduled over the life of the
investment, but are reflected as adjustments to the final maturity distribution.
The following is a summary of the expected maturity distribution at December 31,
1995:
<TABLE>
<CAPTION>
Amortized Market
(In thousands) Cost Value
=================================================== ==========
<S> <C> <C>
Due in one year or less............. $ 32,368 $ 32,826
Due after one year through five years 1,196,602 1,187,701
Due after five years through ten years 670,596 668,134
Due after ten years................. 386,434 389,091
- --------------------------------------------------- ----------
$2,286,000 $2,277,752
=================================================== ==========
</TABLE>
Gains and losses were realized on early redemptions of securities held to
maturity as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
================================================ ==== =====
<S> <C> <C> <C>
Gains.................................. $714 $303 $ 732
Losses................................. (6) (6) (186)
- ------------------------------------------------ ---- -----
Net gains $708 $297 $ 546
================================================ ==== =====
</TABLE>
61
<PAGE> 62
Interest and dividend income on securities held to maturity was as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
==================================================== ======== ========
<S> <C> <C> <C>
U.S. Government and Federal
agencies ........................... $112,425 $107,700 $146,926
States and political subdivisions .... 19,533 22,816 25,204
Other securities ..................... 99,881 88,211 30,867
- ---------------------------------------------------- -------- --------
$231,839 $218,727 $202,997
==================================================== ======== ========
</TABLE>
The carrying value of securities held to maturity pledged to secure public funds
and securities sold under agreements to repurchase, as well as for other
purposes required by law, was $1,096,683,000 at December 31, 1995.
In November 1995 the Financial Accounting Standards Board issued a special
report on the implementation of SFAS No. 115. This special report provided an
opportunity for a one-time reassessment of the classification of securities as
of a single measurement date between November 15, 1995, and December 31, 1995.
As a result, securities held to maturity with an amortized cost of
$1,414,995,000 and a net unrealized loss of $387,000 were transferred to
securities available for sale on December 31, 1995. These securities were
transferred to increase the overall level of liquidity and improve the ability
to manage interest rate risk.
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) 1995 1994
==================================================== ==========
<S> <C> <C>
Commercial and industrial............. $ 4,090,557 $3,921,747
Construction and development.......... 481,166 705,602
- ---------------------------------------------------- ----------
Total commercial loans.............. 4,571,723 4,627,349
Residential mortgage.................. 1,826,526 1,329,417
Commercial mortgage................... 1,543,364 1,461,571
- ---------------------------------------------------- ----------
Total mortgage loans................ 3,369,890 2,790,988
Home equity........................... 1,589,519 1,529,468
Automobile............................ 639,847 504,574
Other consumer........................ 286,403 204,195
- ---------------------------------------------------- ----------
Total consumer loans................ 2,515,769 2,238,237
- ---------------------------------------------------- ----------
$10,457,382 $9,656,574
==================================================== ==========
</TABLE>
Residential mortgage loans held for sale amounted to $1,406,000 at December 31,
1995, and $3,536,000 at December 31, 1994. These loans are accounted for at the
lower of aggregate cost or market value.
Subsidiaries of UJB Financial have granted loans to Parent Corporation and
subsidiary officers and directors 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 the normal risk of
collectibility. The aggregate dollar amount of these loans was $66,568,000 and
$83,351,000 at December 31, 1995, and 1994, respectively. During 1995 there were
$19,197,000 of new loans made and repayments totaled $35,980,000.
NOTE 7 NON-PERFORMING LOANS
At December 31 non-performing loans were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
==================================================== ========
<S> <C> <C>
Non-accrual loans..................... $166,253 $164,909
Renegotiated loans.................... 199 2,738
- ---------------------------------------------------- --------
$166,452 $167,647
==================================================== ========
</TABLE>
The following information is presented for those loans classified as
non-performing at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
====================================================== ======= =======
<S> <C> <C> <C>
Income that would have been recorded
under original contract terms ......... $16,976 $16,074 $21,573
Less interest income received ........... 1,752 1,693 3,787
- ------------------------------------------------------ ------- -------
Lost income on non-performing
loans at year end .................... $15,224 $14,381 $17,786
====================================================== ======= =======
</TABLE>
NOTE 8 ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
====================================================== ======== ========
<S> <C> <C> <C>
Balance, January 1 ..................... $214,161 $244,154 $277,449
Purchase adjustment, net ............. 6,131 1,833 --
Add provision charged to expense ..... 65,250 84,000 95,685
- ------------------------------------------------------ -------- --------
285,542 329,987 373,134
- ------------------------------------------------------ -------- --------
Less charge offs:
Commercial .......................... 76,911 72,586 105,677
Residential mortgage ................ 4,722 1,288 1,166
Commercial mortgage ................. 23,348 13,686 10,834
Consumer ............................ 11,804 8,684 25,598
- ------------------------------------------------------ -------- --------
Total charge offs ................. 116,785 96,244 143,275
- ------------------------------------------------------ -------- --------
Add recoveries:
Commercial .......................... 14,445 11,788 10,513
Residential mortgage ................ 472 245 24
Commercial mortgage ................. 1,690 2,372 263
Consumer ............................ 2,286 2,965 3,495
- ------------------------------------------------------ -------- --------
Total recoveries .................. 18,893 17,370 14,295
- ------------------------------------------------------ -------- --------
Net charge offs ...................... 97,892 78,874 128,980
- ------------------------------------------------------ -------- --------
Less write downs on transfer to assets
held for accelerated disposition .... -- 36,952 --
- ------------------------------------------------------ -------- --------
Balance, December 31 ................... $187,650 $214,161 $244,154
====================================================== ======== ========
</TABLE>
62
<PAGE> 63
At December 31, 1995, the impaired loan portfolio was primarily collateral
dependent as defined under SFAS No. 114 and totaled $166,452,000, for which
general and specific allocations to the allowance for loan losses of $27,561,000
were identified. The amount of cash basis interest income that was recognized on
impaired loans during 1995 was $2,173,000.
NOTE 9 PREMISES AND EQUIPMENT
The major components of premises and equipment at December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
==================================================== ========
<S> <C> <C>
Land.................................. $ 15,638 $ 18,476
Premises and leasehold improvements... 199,488 194,014
Furniture and equipment............... 151,854 137,214
- ---------------------------------------------------- --------
366,980 349,704
Less accumulated depreciation and
amortization........................ 204,316 181,799
- ---------------------------------------------------- --------
$162,664 $167,905
==================================================== ========
</TABLE>
Amounts charged to non-interest expenses for depreciation and amortization
amounted to $20,847,000 in 1995, $20,124,000 in 1994, and $20,489,000 in 1993.
NOTE 10 OTHER REAL ESTATE OWNED
At December 31 other real estate owned consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
================================================================================
<S> <C> <C>
Other real estate owned .......................... $31,416 $46,426
Less allowance for other real estate owned ....... 11,580 14,977
- ----------------------------------------------------------------- -------
$19,836 $31,449
================================================================= =======
</TABLE>
Transactions in the allowance for other real estate owned were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
====================================================== ======= =======
<S> <C> <C> <C>
Balance, January 1 ...................... $14,977 $31,117 $13,416
Add provision charged to expense ...... 4,222 10,573 32,062
- ------------------------------------------------------ ------- -------
19,199 41,690 45,478
Less:Write downs on sales ............. 3,795 16,818 14,361
Other write downs .................. 3,824 9,895 --
- ------------------------------------------------------ ------- -------
Balance, December 31 .................... $11,580 $14,977 $31,117
====================================================== ======= =======
</TABLE>
Other write downs during 1995 resulted from the adoption of SFAS No. 114 which
required in-substance foreclosures to be classified as non-performing loans. The
implementation of SFAS No. 114 resulted in a reclassification of $6,411,000, net
of specific reserves of $3,824,000, from other real estate owned to
non-performing loans. Other write downs during 1994 of $9,895,000 resulted from
the transfer of other real estate owned to assets held for accelerated
disposition.
NOTE 11 OTHER BORROWED FUNDS
Other borrowed funds at December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
==================================================== ==========
<S> <C> <C>
Securities sold under agreements to
repurchase.......................... $482,603 $ 948,697
Federal funds purchased............... 200,700 172,255
Treasury tax and loan deposits........ 88,689 135,746
Commercial paper...................... 38,503 42,211
Other................................. 61,935 34,521
- ---------------------------------------------------- ----------
$872,430 $1,333,430
===================================================== ==========
</TABLE>
Lines of credit, at the Parent Corporation, are available to support commercial
paper borrowings and for general corporate purposes. Interest on these lines of
credit approximates the prime lending rate at the time of borrowing. Unused
lines amounted to $40,000,000 at December 31, 1995. Commitment fees on the
credit facilities and the lines of credit amounted to $75,000 in 1995, $86,000
in 1994, and $161,000 in 1993.
NOTE 12 LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
========================================================= ========
<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 20,000
7.75% Sinking fund debentures due
November 1, 1997*........................... 8,649 9,338
Other......................................... - 416
- --------------------------------------------------------- --------
$203,649 $204,754
========================================================= ========
</TABLE>
* Indicates Parent Corporation obligation.
The 8.625% subordinated notes of UJB Financial were issued in 1992 and are
unsecured. Interest is payable semi-annually on June 10 and December 10 of each
year. The subordinated notes are not subject to redemption prior to maturity,
and no sinking fund is provided for these notes.
The 7.95% ten-year maturity private placement senior notes were issued in 1993
with interest payable quarterly on the twenty-fifth day of each February, May,
August, and November. UJB Financial has the option to prepay the notes, in whole
or in part, on any interest payment date, but in no event shall the prepayment
be less than $1,000,000, subject to certain contractual prepayment provisions.
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. UJB Financial may, at its option, increase its sinking fund payment in
any year. Any additional payment may not exceed the mandatory sinking fund
payment for that year. The debentures are redeemable, through the sinking fund,
at the principal amount thereof plus accrued interest. At December 31, 1995,
$151,000 was being held to satisfy future sinking fund requirements.
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 fund-
63
<PAGE> 64
ed debt, as defined. At December 31, 1995, under the most restrictive
limitations, consolidated retained earnings of $293,716,000 were unrestricted
and available for dividends and the amount of additional funded debt, as
defined, that could be created was $351,694,000.
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 1996 and 1997 are $700,000 and $7,949,000. No principal amounts
are due for 1998, 1999, and 2000.
NOTE 13 COMMON AND PREFERRED STOCK
At December 31, 1995, approximately 6,919,000 common shares were reserved for
issuance under the Dividend Reinvestment Plan, Incentive Stock and Option Plan,
Stock Option Plans, Savings Incentive Plan, and Long-Term Performance Stock
Plan.
At December 31, 1995, 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 Preferred Stock has a $50 stated value, 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 or 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 at
a price of $50 per share. Dividends in the amounts of $3.04, $3.07, and $3.00
per share were declared on the Series B Preferred Stock for 1995, 1994, and
1993, respectively.
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 prior approval of bank regulatory authorities.
The Federal Reserve Act, which affects the New Jersey state-member bank,
restricts 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. The
Pennsylvania state-chartered bank may declare a dividend up to the amount of
accumulated net profit. In addition to these statutory restrictions, the
subsidiary banks are required to maintain adequate levels of capital under
FDICIA. At December 31, 1995, the total undistributed net assets of the
subsidiary banks were $1,262,301,000 of which $253,530,000 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 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 for service to date, but also for those expected to be earned in the
future.
The following table sets forth the qualified plans' funding status and amounts
recognized in the Consolidated Financial Statements at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
======================================================== ========= =========
<S> <C> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$137,807 in 1995, $118,784 in
1994, and $108,491 in 1993................. $(148,988) $(128,070) $(116,035)
======================================================== ========= =========
Projected benefit obligation for
services rendered to date.................. $(183,821) $(157,157) $(146,772)
Plan assets at fair value.................... 173,335 135,567 144,497
- -------------------------------------------------------- --------- ---------
Plan assets (under) over projected
benefit obligation......................... (10,486) (21,590) (2,275)
Unrecognized transition asset................ (6,327) (8,727) (11,101)
Unrecognized prior service cost.............. 431 753 (7)
Unrecognized net loss from past
experience, which is different from
that assumed, and effect of
change in assumptions...................... 15,396 23,560 6,020
- -------------------------------------------------------- --------- ---------
Accrued pension cost $ (986) $ (6,004) $ (7,363)
======================================================== ========= =========
Net pension expense components:
Service cost............................. $ 7,534 $ 6,736 $ 6,833
Interest cost............................ 13,149 11,210 10,510
Actual return on plan assets............. (32,837) 7,879 (14,987)
Net deferral and amortization............ 17,278 (22,074) 2,049
- -------------------------------------------------------- --------- ---------
Net pension expense $ 5,124 $ 3,751 $ 4,405
======================================================== ========= =========
</TABLE>
The plans' assets were principally invested in units of mutual funds. The
weighted average discount rates for the plans were 7.5% in 1995, 8.0% in 1994,
and 7.5% in 1993. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation was
5.0% in 1995, 5.5% in 1994 and 1993. The expected long-term rate of return on
plan assets was 9.0% in 1995, 1994, and 1993.
UJB Financial also maintains non-qualified supplemental retirement plans for
certain officers of the company. The plans, which are unfunded, provide benefits
in excess of that permitted to be paid by the pension plan under provisions of
the tax law. The plans' cost was $2,518,000 for 1995, $699,000 for 1994, and
$738,000 for 1993.At December 31, 1995, the projected benefit obligation
amounted to $12,973,000 and the accrued liability amounted to $9,124,000.
64
<PAGE> 65
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, SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Under SFAS No. 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.
The following table sets forth the net periodic postretirement benefit cost and
accumulated postretirement benefit obligation at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======== ========
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation (APBO)............................. $(28,006) $(33,055) $(35,009)
Fair value of assets.......................... - - -
- ---------------------------------------------------------- -------- --------
Projected benefit obligation
funded status................................. (28,006) (33,055) (35,009)
Unrecognized transition obligation............ 20,983 24,514 26,414
Unrecognized prior service cost............... 84 141 -
Unrecognized loss............................. (803) 3,156 5,731
- ---------------------------------------------------------- -------- --------
Accrued APBO $ (7,742) $ (5,244) $ (2,864)
========================================================== ======== ========
Net postretirement benefit cost components:
Service cost.................................. $ 228 $ 322 $ 305
Interest cost................................. 2,175 2,248 2,303
Amortization of transition obligation......... 1,341 1,355 1,390
- ---------------------------------------------------------- -------- --------
Net postretirement benefit cost $ 3,744 $ 3,925 $ 3,998
========================================================== ======== ========
</TABLE>
For measurement purposes, the cost of medical benefits was projected to increase
at a rate of 13.0% in 1995, 14.0% in 1994, and 15.0% in 1993 and thereafter
decreasing linearly to 6.0% over seven 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, 1995, by $1,610,000 and the
aggregate of the service and interest components of net periodic postretirement
benefit cost for the year ended December 31, 1995, by $119,000. The present
value of the accumulated benefit obligation assumed discount rates of 7.5%,
8.0%, and 7.5% in 1995, 1994, and 1993, respectively. The rate of increase used
in future compensation levels was 5.0% in 1995, and 5.5% in 1994 and 1993.
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," was issued in
November 1992 to establish accounting for benefits provided to former or
inactive employees after employment but before retirement. SFAS No. 112 requires
that employers accrue the costs associated with providing benefits, such as
salary and benefit continuation under disability plans, when payment of the
benefits is probable and the amount of the obligation can be reasonably
estimated. Effective January 1, 1994, UJB Financial adopted SFAS No. 112 and
recognized a transitional liability of $2,663,000. Net costs of $2,989,000 and
$2,945,000 were recognized during 1995 and 1994, of which $2,023,000 and
$2,174,000 were paid, respectively. At December 31, 1995, the resultant SFAS No.
112 liability was $4,400,000 compared to $3,434,000 at December 31, 1994.
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 $4,570,000, $3,258,000, and
$1,640,000 in 1995, 1994 and 1993, 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 their base compensation in 1995, 1994 and
1993, and additional contributions up to 12% of their base compensation. Under
the Plan, the employer provides a matching contribution equal to 65% of their
basic contributions in 1993 and through October 31, 1994. Effective November 1,
1994, the employer matching contribution was increased to 100% of the basic
contributions. Matching contributions to the Plan amounted to $3,270,000,
$2,446,000, and $2,084,000 in 1995, 1994, and 1993, respectively.
Certain subsidiaries have other incentive plans and profit sharing agreements.
Accruals under these plans amounted to $1,919,000, $1,959,000, and $1,826,000 in
1995, 1994, and 1993, respectively.
The Incentive Stock and Option Plan and previous Long-Term Performance Stock
Plans of UJB Financial provide for the grant of shares of common stock in the
form of restricted stock awards. Shares issued as stock awards were 67,920 in
1995, 60,250 in 1994, and 73,431 in 1993. The shares awarded are subject to
certain forfeiture restrictions as set forth in the Plans.
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, 1992
(2,559,502 shares exercisable)................. 3,122,095 $ 3.745 to $29.438
Granted during 1993............................ 489,382 12.133 to 25.063
Exercised during 1993.......................... 390,554 3.745 to 29.438
Expired or cancelled during 1993............... 31,127 7.875 to 29.438
- ------------------------------------------------------------ ------------------
Outstanding, December 31, 1993
(2,700,414 shares exercisable)................. 3,189,796 3.745 to 29.438
Granted during 1994............................ 449,500 24.688
Exercised during 1994.......................... 486,573 7.864 to 28.333
Expired or cancelled during 1994............... 65,329 7.875 to 29.438
- ------------------------------------------------------------ ------------------
Outstanding, December 31, 1994
(2,637,894 shares exercisable)................. 3,087,394 7.864 to 29.438
Granted during 1995............................ 896,913 5.667 to 28.334
Exercised during 1995.......................... 952,244 3.745 to 29.438
Expired or cancelled during 1995............... 25,837 7.875 to 29.438
- ------------------------------------------------------------ ------------------
Outstanding, December 31, 1995
(2,518,976 shares exercisable) 3,006,226 $ 6.800 to $29.438
============================================================ ==================
</TABLE>
65
<PAGE> 66
NOTE 17 OTHER EXPENSES
Other expenses consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
================================================================================
<S> <C> <C> <C>
Professional and other fees......................... $ 36,516 $35,516 $38,510
Communications (postage and telephone).............. 20,432 18,905 18,535
Other............................................... 43,764 40,176 40,488
- --------------------------------------------------------------------------------
$100,712 $94,597 $97,533
================================================================================
</TABLE>
NOTE 18 INCOME TAXES
Effective January 1, 1993, SFAS No. 109, "Accounting for Income Taxes," was
adopted on a prospective basis. The cumulative effect of the adoption resulted
in a positive effect to earnings of $3,816,000.
The provision for income taxes in the Consolidated Statements of Income consists
of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
========================================================== ======= =======
<S> <C> <C> <C>
Current provision:
Federal........................................ $56,984 $45,077 $23,223
State.......................................... 15,813 8,205 9,455
- ---------------------------------------------------------- ------- -------
72,797 53,282 32,678
Deferred provision (benefit):
Federal........................................ 19,893 13,681 (682)
State.......................................... 3,618 5,349 (5,043)
- ---------------------------------------------------------- ------- -------
23,511 19,030 (5,725)
- ---------------------------------------------------------- ------- -------
Provision for income taxes $96,308 $72,312 $26,953
========================================================== ======= =======
</TABLE>
A summary of the differences between the actual income tax provision and the
amounts computed by applying the statutory Federal income tax rate to income is
as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
=========================================================== ======= ========
<S> <C> <C> <C>
Federal tax at statutory rate..................... $93,336 $71,468 $ 36,944
Increase (decrease) in taxes resulting from:
Tax-exempt interest income...................... (8,118) (9,491) (10,523)
State taxes, net of Federal tax effect.......... 12,630 8,810 2,868
Other, net...................................... (1,540) 1,525 (2,336)
- ----------------------------------------------------------- ------- --------
$96,308 $72,312 $ 26,953
=========================================================== ======= ========
</TABLE>
The significant Federal and state temporary differences which comprise the
deferred tax assets and liabilities presented at December 31, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
===================================================================== ========
<S> <C> <C>
Deferred tax assets:
Provision for loan losses................................ $ 71,716 $ 84,379
Provision for other real estate owned.................... 8,704 10,098
Restructuring charge..................................... - 2,479
Net unrealized loss on securities........................ 1,302 5,695
Other.................................................... 17,914 19,919
- --------------------------------------------------------------------- --------
99,636 122,570
Deferred tax liabilities:
Leasing operations....................................... (21,829) (12,601)
Other.................................................... (174) (4,432)
- --------------------------------------------------------------------- --------
(22,003) (17,033)
- --------------------------------------------------------------------- --------
Net deferred tax asset $ 77,633 $105,537
===================================================================== ========
</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 $8,746,000 at December 31, 1995, and $7,756,000 at
December 31, 1994. At December 31, 1995, there was a deferred state tax asset of
$5,792,000 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 pre-tax 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.
Included in shareholders' equity are income tax benefits attributable to
restricted stock awards and the exercise of non-qualified stock options of
$1,359,000, $1,957,000, and $1,207,000 for the years ended December 31, 1995,
1994, and 1993, respectively. Also included in shareholders' equity are income
tax benefits attributable to net unrealized losses on securities in the amounts
of $1,302,000 and $5,695,000 for the years ended December 31, 1995 and 1994
respectively.
NOTE 19 LEASE COMMITMENTS
Non-interest expenses include rentals for premises and equipment of $41,742,000
in 1995, $38,403,000 in 1994, and $34,435,000 in 1993, after reduction for
sublease rentals of $2,948,000, $2,684,000, and $2,894,000 in each of the
respective years. At December 31, 1995, 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 the years 1996 through 2000 are $41,510,000,
$36,196,000, $28,618,000, $18,234,000, and $13,737,000, respectively. Minimum
rentals due after 2000 are $74,528,000.
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 businesses. In the best
judgment of management, the consolidated financial position of UJB Financial and
its subsidiaries will not be affected materially by the final outcome of any
pending legal proceedings or other contingent liabilities and commitments.
NOTE 21 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, UJB Financial and its subsidiaries enter
into a variety of financial instruments that are recorded off the balance sheet.
This reporting is considered appropriate where either
66
<PAGE> 67
the exchange of the underlying asset or liability has not yet occurred or the
notional amounts are used solely as a means to determine the cash flows to be
exchanged. These off-balance-sheet financial instruments are primarily divided
into two categories: credit-related financial instruments and derivative
financial instruments.
Credit-related financial instruments are principally customer related, while
derivative financial instruments are acquired primarily for asset/liability
management purposes. Credit-related financial instruments include commitments to
extend credit, standby letters of credit, and commercial letters of credit.
UJB Financial's derivative financial instruments are limited to interest rate
swaps, interest rate caps, and foreign exchange contracts.
The following table summarizes the notional amount of significant
off-balance-sheet financial instruments at December 31:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
==================================================================
<S> <C> <C>
Credit-related instruments:
Commitments to extend credit........ $3,726,052 $3,642,423
Standby letters of credit........... 258,009 291,612
Commercial letters of credit........ 101,875 93,229
Derivative instruments:
Interest rate swaps................. 794,978 923,541
Interest rate caps.................. 63,892 47,895
Foreign exchange contracts.......... 23,735 45,496
==================================================================
</TABLE>
CREDIT-RELATED FINANCIAL INSTRUMENTS:
Commitments to extend credit are legally binding agreements to lend to a
customer provided all established contractual conditions are met. These
commitments generally have fixed expiration dates and usually require the
payment of a fee. UJB Financial did not issue fixed-rate loan commitments that
could be locked in during the commitment period.
Standby letters of credit are conditional guarantees issued to ensure the
performance of a customer to a third party and are generally terminated through
the fulfillment of a specific condition or through the lapse of time.
Commercial letters of credit are conditional commitments, generally less than
180 days, issued to guarantee payment by a customer to a third party upon proof
of an international trade shipment. The short-term nature of these instruments
limit their credit risk.
Fees received from credit-related financial instruments are recognized over the
terms of the contracts and are generally included in non-interest income as
service and loan fee income.
The credit risk associated with these financial instruments is essentially the
same as that involved in extending loans to customers and is incorporated in the
assessment of the adequacy of the allowance for loan losses. Credit risk is
managed by limiting the total amount of arrangements outstanding and by applying
normal credit policies. Many of the commitments to extend credit are expected to
expire without being drawn upon and, therefore, the amounts do not necessarily
represent future cash flow requirements.
DERIVATIVE FINANCIAL INSTRUMENTS:
At December 31, 1995, the notional value of the derivative financial instruments
portfolio consisted of $794,978,000 of interest rate swaps, $63,892,000 of
interest rate caps, and $23,735,000 of foreign exchange contracts.
Activities involving interest rate swaps are primarily attributed to
asset/liability risk management efforts. Asset/liability risk manage
ment objectives are aimed at stabilizing net interest income through periods of
changing interest rates. The interest rate swaps were acquired to hedge interest
rate risk on certain interest earning assets and interest bearing liabilities.
Interest rate swaps are contractual agreements between two parties to exchange
interest payments at particular intervals, computed on different terms, on a
specified notional amount. The notional amounts represent the base on which
interest due each counterparty is calculated and do not represent the potential
for gains or losses associated with the market risk or credit risk of such
transactions.
Under the terms of the interest rate swaps at December 31, 1995, there were
$764,145,000 of contracts to receive fixed payments of 5.94% with an expected
maturity of March 1997 and an average payout based on LIBOR plus .82%.
Additionally, there were $30,833,000 of interest rate swaps to receive payments
at LIBOR and make fixed payments of 6.90% with an expected maturity of August
1996. These swaps have resulted in decreases of $8,169,000 and $1,176,000 in net
interest income during 1995 and 1994, respectively.
Credit-related losses can occur in the event of non-performance by the
counterparties to the derivative financial instruments. The credit risk that
results from interest rate swaps is represented by the fair value of contracts
that have a positive value at the reporting date. At December 31, 1995, the
total amount of credit risk was $1,372,000; however, this amount can increase or
decrease if interest rates change. To minimize the risk of credit losses, UJB
Financial monitors the credit standing of the counterparties and only transacts
with those that have credit ratings of AA or better.
Interest rate caps are purchased from brokers to accommodate those customers who
desire interest rate protection on variable rate loans. There is nominal risk
associated with these products as the credit rating of the counterparties are
closely monitored.
UJB Financial enters into contracts to purchase or sell foreign currency to be
delivered at a future date to facilitate customer transactions. The notional
amount represents the outstanding contracts at year end.
NOTE 22 FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is the amount at which an asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced liquidation. Fair value estimates are made at a specific
point in time based on the type of financial instrument and relevant market
information.
Because no quoted market price exists for a significant portion of
UJB Financial's financial instruments, the fair values of such financial
instruments are derived based on the amount and timing of future cash flows,
estimated discount rates, as well as management's best judgment with respect to
current economic conditions. Many of these estimates involve uncertainties and
matters of significant judgment and cannot be determined with precision.
The fair value information provided is indicative of the estimated fair values
of those financial instruments and should not be interpreted as an estimate of
the value of UJB Financial taken as a whole. The disclosures do not address the
value of recognized and unrecognized non-financial assets and liabilities or the
value of future anticipated business.
67
<PAGE> 68
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair values of
significant financial instruments at December 31, 1995, and 1994.
CASH, SHORT-TERM INVESTMENTS AND CUSTOMER ACCEPTANCES:
These financial instruments have relatively short maturities or no defined
maturities but are payable on demand, with little or no credit risk. The
carrying amounts reported in the Consolidated Balance Sheets approximate fair
value.
SECURITIES:
Trading account securities and securities available for sale are reported at
their respective fair values in the Consolidated Balance Sheets. These values
were based on quoted market prices. The fair values of securities held to
maturity were also based upon quoted market prices.
LOANS:
The fair value of loans is estimated using a combination of techniques including
discounted estimated future cash flows and, where available, quoted market
prices of similar instruments. The loan portfolios are segmented based upon loan
type, credit quality, and repricing characteristics. The fair values of most
fixed-rate loans are estimated using discounted cash flow models taking into
consideration current rates that would be offered to borrowers with similar
credit risk for loans with similar remaining terms. The fair values of variable
rate loans are estimated by reducing their carrying values by their
corresponding general and specific credit reserves. Non-performing loans are
primarily valued based upon the net realizable value of the loan's underlying
collateral.
DEPOSITS:
The estimated fair values of demand and savings deposits are equal to the
amounts recognized in the Consolidated Balance Sheets. These amounts do not
recognize the fair value of core deposit intangibles, which represent the value
of a core deposit base with an expected duration.
The fair values for medium- to long-term deposit liabilities are calculated by
discounting estimated future cash flows using current rates offered for deposits
of similar remaining maturities.
BORROWED FUNDS AND BANK ACCEPTANCES:
The fair values for borrowed funds are calculated by discounting estimated
future cash flows using current rates offered for borrowings of similar
remaining maturities. Due to the short maturities of bank acceptances, their
carrying value approximates fair value.
LONG-TERM DEBT:
The fair value of long-term debt is based upon quoted market prices. For
long-term debt issuances where quoted market prices are not available, the fair
values are determined using discounted cash flow analyses.
OTHER:
The estimated fair values of accrued interest receivable, accrued interest
payable, and assets held for accelerated disposition are considered to be equal
to the amounts recognized in the Consolidated Balance Sheets.
OFF-BALANCE-SHEET INSTRUMENTS:
The estimated fair values of derivative financial instruments are based upon
quoted market prices, without consideration of the market values related to the
hedged on-balance-sheet financial instruments. For commitments to extend credit
and letters of credit, the fair values would approximate fees currently charged
to enter into similar agreements.
The following table presents the carrying amounts and fair values of financial
instruments at December 31:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------
Carrying Fair Carrying Fair
(In millions) Value Value Value Value
===============================================================================
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term
investments ................ $ 1,080.8 $ 1,080.8 $ 989.1 $ 989.1
Trading account
securities ................. 27.4 27.4 33.5 33.5
Securities available
for sale ................... 1,600.1 1,600.1 201.2 201.2
Securities held to
maturity ................... 2,286.0 2,277.8 4,093.0 3,902.4
Loans, net .................. 10,269.7 10,534.9 9,442.4 9,474.5
Assets held for
accelerated disposition .... 16.7 16.7 90.9 90.9
Accrued interest
receivable ................. 97.5 97.5 89.9 89.9
Due from customers
on acceptances ............. 26.7 26.7 21.2 21.2
Financial liabilities:
Deposits .................... $13,261.4 $13,299.5 $12,567.8 $12,560.0
Other borrowed funds ........ 872.4 872.4 1,333.4 1,331.0
Long-term debt .............. 203.6 225.5 204.8 203.4
Accrued interest payable .... 39.0 39.0 30.2 30.2
Bank acceptances
outstanding ................ 26.7 26.7 21.2 21.2
Off-balance-sheet
instruments:
Interest rate swaps ......... NA $ .1 NA $ (52.0)
Loan commitments ............ NA (20.9) NA (20.3)
Standby letters of credit ... NA (1.5) NA (2.9)
Commercial letters of
credit ..................... NA (.1) NA (.1)
===============================================================================
</TABLE>
NA - Not applicable, off-balance-sheet financial instruments
NOTE 23 CONCENTRATIONS OF CREDIT RISK
UJB Financial's credit policy emphasizes diversification of risk among
industries and borrowers. Concentrations of credit risk, whether on or off the
balance sheet, exist in relation to certain groups of customers or
counterparties. A group concentration arises when a number of customers or
counterparties have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes in
economic or other conditions. UJB Financial does not have a significant exposure
to any individual customer or counterparty. At December 31, 1995, the ten
largest credit relationships have outstanding loan balances of $246,019,000 and
have unexercised commitments of $336,480,000.
UJB Financial's business is concentrated in New Jersey and eastern Pennsylvania.
A significant portion of the total loan portfolio is secured by real estate or
other collateral located in these states. This concentration is mitigated by the
diversification of the loan portfolio among consumer, residential mortgage,
commercial mortgage, construction and commercial loans. The commercial loan
portfolio, excluding construction and development loans, represents
approximately 39% of the entire loan portfolio and has no concentration greater
than 10% to any specific industry.
68
<PAGE> 69
- --------------------------------------------------------------------------------
NOTE 24 PARENT CORPORATION INFORMATION
As part of the comprehensive restructuring program, on August 31, 1994, UJB
Financial Parent Corporation transferred a significant portion of its operations
to United Jersey Bank. This included the transfer of 649 employees and
$26,269,000 of assets, primarily premises and equipment. Beginning September 1,
1994, the operating results of these functions were recorded in the operating
results and financial condition of United Jersey Bank. UJB Financial Parent
Corporation information is as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
(In thousands) 1995 1994
================================================================================
<S> <C> <C>
ASSETS
Cash and cash equivalents ........................ $ 95,399 $ 118,252
Interest bearing deposits with banks ............. 5,000 5,000
Securities available for sale .................... 815 4,994
Investment in subsidiaries ....................... 1,292,489 1,098,670
Due from subsidiaries ............................ 181,142 156,832
Premises and equipment ........................... 500 503
Other assets ..................................... 18,193 18,063
- --------------------------------------------------------------------------------
Total Assets ..................................... $1,593,538 $1,402,314
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper ................................. $ 38,503 $ 42,211
Accrued expenses and other liabilities ........... 54,540 51,505
Long-term debt ................................... 203,649 204,338
- --------------------------------------------------------------------------------
Total liabilities .............................. 296,692 298,054
Total shareholders' equity ....................... 1,296,846 1,104,260
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ....... $1,593,538 $1,402,314
================================================================================
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
(In thousands) 1995 1994 1993
================================================================================
<S> <C> <C> <C>
OPERATING INCOME
Management fees due from subsidiaries .... $ 32,761 $ 29,322 $ 38,994
Dividends from subsidiaries .............. 91,811 56,441 40,311
Interest from subsidiaries ............... 18,895 17,026 16,356
Securities gains ......................... 1,447 -- --
Other interest ........................... 102 300 120
Other .................................... 1,222 559 640
- -------------------------------------------------------------------------------
Total operating income ................. 146,238 103,648 96,421
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Service charges due to subsidiaries ...... 33,144 -- --
Salaries and employee benefits ........... 4,193 26,491 32,887
Interest ................................. 20,262 19,586 20,044
Occupancy and equipment .................. 70 4,340 6,396
Other .................................... 208 9,298 11,797
- -------------------------------------------------------------------------------
Total operating expenses ............... 57,877 59,715 71,124
- -------------------------------------------------------------------------------
Income before income taxes and equity
in undistributed net income of
subsidiaries .......................... 88,361 43,933 25,297
Federal and state income taxes (benefit) . (2,957) (4,114) (701)
- -------------------------------------------------------------------------------
91,318 48,047 25,998
Equity in undistributed net income of
subsidiaries ........................... 79,049 82,103 56,420
- -------------------------------------------------------------------------------
Net Income ............................. $ 170,367 $ 130,150 $ 82,418
- -------------------------------------------------------------------------------
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
(In thousands) 1995 1994 1993
===============================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .............................. $ 170,367 $ 130,150 $ 82,418
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ......... 3 1,794 2,481
(Increase) decrease in other assets ... (130) 6,404 (10,677)
Increase (decrease) in accrued
expenses and other liabilities ....... 3,035 (7,122) 13,697
Equity in undistributed net
income of subsidiaries ............... (79,049) (82,103) (56,420)
Securities gains ...................... (1,447) -- --
- -------------------------------------------------------------------------------
Net cash provided by operating
activities ........................ 92,779 49,123 31,499
- -------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of
securities available for sale ......... 4,154 -- --
Net increase in short-term
investments ........................... -- -- (5,000)
Payments received on advances to
subsidiaries .......................... 180,278 205,611 191,761
Advances to subsidiaries ................ (204,588) (198,189) (168,000)
Purchases of premises and
equipment, net ........................ -- (2,069) (817)
Capital contributions to subsidiaries ... (114,770) (56,476) (55,000)
- -------------------------------------------------------------------------------
Net cash used in investing
activities ........................ (134,926) (51,123) (37,056)
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net (decrease) increase in commercial
paper ................................. (3,708) 8,852 (29,502)
Net decrease in borrowed funds .......... -- -- (5,250)
Proceeds from issuance of long-term
debt, net of related expenses ......... -- -- 20,000
Principal payments on long-term debt .... (689) (3,134) (21,830)
Dividends paid .......................... (65,549) (49,817) (34,806)
Common stock issued for acquisition
of Bancorp New Jersey, Inc. ........... 68,186 -- --
Proceeds from issuance of common
stock, net ............................ 16,412 15,256 15,186
Other, net .............................. 4,642 (2,929) (2,891)
- -------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities .............. 19,294 (31,772) (59,093)
- -------------------------------------------------------------------------------
Decrease in cash and
cash equivalents ...................... (22,853) (33,772) (64,650)
Cash and cash equivalents
at beginning of year ................. 118,252 152,024 216,674
- -------------------------------------------------------------------------------
Cash and cash equivalents at
end of year ............................. $ 95,399 $ 118,252 $ 152,024
===============================================================================
</TABLE>
69
<PAGE> 70
- --------------------------------------------------------------------------------
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, 1995 and 1994, 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, 1995. 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 as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Notes 1, 15 and 18 to the consolidated financial statements, the
Corporation adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" and Statement
No. 112, "Employers' Accounting for Postemployment Benefits" in 1994 and
Statement No. 109 "Accounting for Income Taxes" in 1993.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
January 16, 1996, except as to the first and fourth paragraphs of Note 2, which
are as of March 1, 1996
70
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- --------------------------------------------------------------------------------
CORPORATE DIRECTORY
<TABLE>
====================================================================================================================================
<S> <C> <C> <C>
SUMMIT BANCORP James C. Brady, Jr. Orin R. Smith Richard O. Carmichael
301 Carnegie Center Partner Chairman and Paul J. Cavaliere
P.O. Box 2066 Mill House Associates, L.P. Chief Executive Officer Stephen Chaberski
Princeton, New Jersey Engelhard Corporation J. Michael Cunnane
08543-2066 John G. Collins Gaetana P. Cunsolo
609-987-3200 Vice Chairman Joseph M. Tabak Thomas J. D'Angelo
Summit Bancorp President and James F. Deutsch
Chief Executive Officer James N. Ferrier
Robert G. Cox JPC Enterprises, Inc. Thomas M. Finn
President William R. Frasca
Summit Bancorp Douglas G. Watson Laura Gilardini
President Kevin T. Gillen
CORPORATE MANAGEMENT T.J. Dermot Dunphy CIBA-GEIGYCorporation Ferdinand R. Horn IV
President and Pharmaceuticals Division Virginia A. Ibarra
Chairman and Chief Executive Officer Dorinda Jenkins-Glover
Chief Executive Officer Sealed Air Corporation UNITED JERSEY BANK Christopher Lahoda
T. Joseph Semrod 210 Main Street L. David Lyons
President Anne Evans Estabrook Hackensack, New Jersey 07602 Michael J. Maiorino, Jr.
Robert G. Cox Owner 201-646-5000 Charles A. Maraziti
Elberon Development Co. Simone Marino
Vice Chairmen Stephen J. Mauger
John G. Collins Elinor J. Ferdon SENIOR MANAGEMENT James T. Melone
John R. Howell Volunteer Professional Richard J. Morbee
First Vice President Chairman, President George L. Nichols
Senior Executive Vice Presidents Girl Scouts of U.S.A. and Chief Executive Officer William C. Pasko
John R. Haggerty T. Joseph Semrod Ronald Phillips
Sabry J. Mackoul Fred G. Harvey Peter C. Platt
John J. O'Gorman Vice President Vice Chairman Edward E. Poor IV
Stephen H. Paneyko E&E Corporation John G. Collins Richard D. Rein
Garrett W. Roberts
Executive Vice Presidents John R. Howell Senior Executive Vice Presidents Jorge Rojas
Larry L. Betsinger Vice Chairman John R. Haggerty Maurice J. Spagnoletti
Alfred M. D'Augusta Summit Bancorp Sabry J. Mackoul Paul V. Stahlin
John R. Feeney John J. O'Gorman Francis P. Testa
William J. Healy Francis J. Mertz Stephen H. Paneyko Paul A. Towers
Richard F. Ober, Jr. President Roger M. Tully
Dennis Porterfield Fairleigh Dickinson University Executive Vice Presidents Harold W. Ullmann
Alan N. Posencheg Anthony J. Allora Joseph Verbaro, Jr.
Gary F. Simmerman George L. Miles, Jr., CPA Alfred M. D'Augusta Arty C. Zulawski
George J. Soltys, Jr. President and Robert Eberhardt, Jr.
Edmund C. Weiss, Jr. Chief Executive Officer Peter D. Halstead BOARD OF DIRECTORS
WQED Pittsburgh William J. Healy Bjorn Ahlstrom
Senior Vice Presidents H. Richard Minette Robert L. Boyle
Susan U. Bredehoft Henry S. Patterson II Richard F. Ober, Jr. Barry D. Brown
Kerry K. Calaiaro President Robert J. Peters John G. Collins
Peter J. Gindin E'town Corporation Dennis Porterfield T.J. Dermot Dunphy
Robert A. Gunther Gary F. Simmerman Anne Evans Estabrook
James J. Kreig Thomas D. Sayles, Jr. Lenore Smith Elinor J. Ferdon
C. Scott Rombach Former Chairman Christophe-Pierre Terlizzi Samuel Gerstein, Esq.
Paul V. Stahlin The Summit Bancorporation Timothy S. Tracey Richard H. Goldberger
Timothy S. Tracey William J. Wolverton Robert S. Hekemian
Dennis A. Williams T. Joseph Semrod Thomas C. Jamieson, Jr., Esq.
Chairman and Senior Vice Presidents Vincent P. Langone
BOARD OF DIRECTORS Chief Executive Officer John D. Battaglia
S. Rodgers Benjamin Summit Bancorp Donald W. Blum
Chairman and Susan U. Bredehoft
Chief Executive Officer Raymond Silverstein, CPA Arthur J. Brown
Flemington Fur Company Consultant Thomas B. Butler
Alloy, Silverstein, Shapiro,
Robert L. Boyle Adams, Mulford & Co., P.C.
Representative
William H. Hintelmann Firm
</TABLE>
71
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- --------------------------------------------------------------------------------
CORPORATE DIRECTORY
<TABLE>
(Continued)
====================================================================================================================================
<S> <C> <C> <C>
Francis J. Mertz David V. Merklin Thomas L. Burns UJB DISCOUNT BROKERAGE
George L. Miles, Jr., CPA Thomas J. Mies Stephen D. Gilligan 305 Route 17 South
Bertram B. Miller F. Richard Patryn Brian C. Zwann P.O. Box 929
Henry S. Patterson II Mary S. Riether Paramus, New Jersey 07652
T. Joseph Semrod Richard G. Tappen BOARD OF DIRECTORS 201-262-8400
Raymond Silverstein, CPA Charles J. Bufalino, Esq. 1-800-631-1635
Sylvester L. Sullivan Regional Presidents Walter J. Dealtrey
Alexander von Summer, Jr. J. Michael Feeks Ronald D. Ertley SENIOR MANAGEMENT
Joseph M. Tabak Michael J. Giacobello Alfred M. Giannangeli President and
Robert A. Woodruff, Sr. John A. Kenny Henry A. Giuliani, Esq. Chief Executive Officer
Allan L. Goodman Joseph J. McCaffrey
SUMMIT BANK BOARD OF DIRECTORS John R. Haggerty
One Main Street Eustace Anselmi Fred G. Harvey Executive Vice President
Chatham, New Jersey 07928 S. Rodgers Benjamin John R. Howell Jack R. Ader
201-701-2666 James C. Brady, Jr. Msgr. Andrew J. McGowan
John B. Cave Robert J. Miorelli Senior Vice President
SENIOR MANAGEMENT Robert G. Cox William L. Morse, Jr. John T. Henry
Samuel V. Gilman, Jr. Michael J. Naples, Jr.
Chairman, President Kathleen D. Hammond Donald M. Pachence UNITED JERSEY VENTURE
and Chief Executive Officer Peter Kalkus Richard H. Penske CAPITAL, INC.
Robert G. Cox Warren S. Kimber, Jr. Robert J. Tunnessen 301 Carnegie Center
William Boyce Lum Robert E. Wilkes P.O. Box 2066
Senior Executive Vice Presidents William P. McCaughey John W. Woltjen Princeton, New Jersey 08543
John R. Feeney 609-987-3200
Dennis S. McChesney S. Griffin McClellan III UJB FINANCIAL SERVICE
Anthony Papetti CORPORATION President and
Group Executive Vice Presidents Robert W. Parsons, Jr. 55 Challenger Road Chief Executive Officer
Elwood L. Bowman II Orin R. Smith Ridgefield Park, New Jersey Stephen H. Paneyko
James S. Little Douglas G. Watson 07660
Stewart E. McClure, Jr. Kate B. Wood 201-296-3000 GIBRALTAR CORPORATION
Richard J. Ranelli OF AMERICA
First Valley Bank SENIOR MANAGEMENT 350 Fifth Avenue
Executive Vice Presidents One Bethlehem Plaza New York, New York 10118
Jack D. Cussen Bethlehem, Pennsylvania Chairman of the Board 212-868-4400
Barry S. Duerk 18018 John G. Collins
Gerald L. Facciani 610-865-8411 SENIOR MANAGEMENT
Michael J. Griffin President and
Paul Kalamaras SENIOR MANAGEMENT Chief Executive Officer Chairman of the Board
Eugene E. Schwarzenbek Alan N. Posencheg Robert J. Peters
Alfred J. Soles Chairman of the Board
J. Page Stiger, Jr. and Chief Executive Officer Executive Vice Presidents President and
John R. Howell Larry L. Betsinger Chief Executive Officer
Senior Vice Presidents Joseph L. Branciforte Irwin Schwartz
John P. Babcock President and
Bette A. Bauer Chief Operating Officer Senior Vice Presidents Executive Vice President and
William S. Burns Robert E. Wilkes Hubert P. Clarke Chief Operating Officer
Michael C. Costin Theodore M. Kest Harvey A. Mackler
Margaret L. Domber Regional President Frank Litterio
John A. Eickman Gary F. Lamont George Manning LEHIGH SECURITIES
Stephen T. Emr Ray W. Mead CORPORATION
Hilton M. Jervey Executive Vice Presidents Santiago Pati-o 1457 MacArthur Road
Jeffrey J. Kraft Tomas J. Bamberger John J. Smith Whitehall, Pennsylvania
John F. Kuntz Fredric B. Cort 18052
James B. Kurdek 1-800-245-4487
James F. Liccardo Senior Vice Presidents
George B. Littlejohn John M. Adams, Jr. President
Philip D. Beck Lawrence J. Dottor
</TABLE>
72
<PAGE> 73
- --------------------------------------------------------------------------------
CORPORATE INFORMATION
================================================================================
HEADQUARTERS
Summit Bancorp
301 Carnegie Center
P.O. Box 2066
Princeton,
New Jersey 08543-2066
ANNUAL SHAREHOLDERS
MEETING
Summit Bancorp's annual shareholders meeting will be held on Monday, May 20,
1996 at 3:00 p.m. at the Hyatt Regency Princeton, Route One and Alexander Road,
Princeton, New Jersey.
DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLAN
Summit Bancorp offers its shareholders a convenient plan to increase their
investment in the company. Through the Dividend Reinvestment and Stock Purchase
Plan, holders of stock may have their quarterly dividends automatically
reinvested in additional common shares without service charges. In addition,
optional cash payments toward the purchase of additional shares are permitted at
any time, up to $25,000 per quarter. Shareholders not enrolled in this plan, as
well as brokers and custodians who hold stock for clients, may receive a plan
prospectus and enrollment card by contacting First Chicago Trust Company of New
York at 201-324-0498.
CONTACTS
Security analysts, portfolio managers, and others seeking financial information
about Summit Bancorp should contact Kerry K. Calaiaro, senior vice president,
investor relations, at 609-987-3226.
News media representatives and others seeking general information should contact
C. Scott Rombach, senior vice president, director of corporate communications,
at 609-987-3350.
Shareholders seeking assistance should write to Lori A. Wierzbinsky, assistant
corporate secretary, at the Princeton headquarters address to the left.
For assistance with stock records, please contact First Chicago Trust Company of
New York at 201-324-0498, Monday through Friday 8:00 a.m. to 6:00 p.m., and
Saturday 8:00 a.m. to 3:00 p.m. (Eastern Time).
OTHER REPORTS
Copies of Summit Bancorp's Form 10-K and regulatory reports required under
Section 112 of the Federal Deposit Insurance Corporation Improvement Act are
available without charge by writing Summit Bancorp, Corporate Comptroller, P.O.
Box 2066, Princeton, New Jersey 08543-2066.
NYSE SYMBOL
Summit Bancorp's common and Series B preferred stock are traded on the New York
Stock Exchange under the symbols SUB and SUBB, respectively. Daily stock quotes
appear in The New York Times under SumtBc and in The Wall Street Journal under
SummitBcp.
TRANSFER AND DIVIDEND
PAYING AGENT/REGISTRAR
(COMMON AND PREFERRED)
First Chicago Trust Company of
New York
P.O. Box 2500
Jersey City,
New Jersey 07303-2500
CO-TRANSFER AGENT
(COMMON)
United Jersey Bank
Design: Bloch Graulich Whelan Inc. / New York
<PAGE> 74
[SUMMIT BANCORP LOGO]
301 Carnegie Center
P.O. Box 2066
Princeton,
New Jersey 08543-2066
<PAGE> 75
SUMMIT BANCORP 1995 Annual report
<PAGE> 76
[FULL PAGE PHOTO]
[PHOTO BOX]
+ = Customer Focus
[PHOTO BOX]
Commercial lender Dante J. Bucci (right) welcomes
Trotter Inc. From left: Peter Haines, president
and chief executive officer, Joan Carter, vice chairman,
and John J. Aglialoro, chairman.
<PAGE> 77
[FULL PAGE PHOTO]
[PHOTO BOX]
+ = Service Excellence
[PHOTO BOX]
Service Representative at the Customer Call
Center handles call from customer.
<PAGE> 1
Exhibit (21)
Subsidiaries of Summit Bancorp.
Summit Bancorp. is the parent corporation. Detailed information on its
present subsidiaries appears in the Narrative description of business.
Additional information is as follows:
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
United Jersey Bank New Jersey
Palisade Funding Corp. New Jersey
Palvest Corp. New Jersey
Palservco, Inc. New Jersey
Palisade Financial Services, Inc. New Jersey
Nelav, Inc. New Jersey
VerValen, Inc. New Jersey
UJB International Trade Finance Corp. New Jersey
UJB Trade Finance (HK), Limited Hong Kong
First Pipco, Inc. New Jersey
C.I. Pip Restaurant Co. New Jersey
CiPip Properties Co. New Jersey
UJB Leasing Corporation New Jersey
United Jersey Hackensack Investment Corporation New Jersey
CTC Investment Co. Delaware
S.A.R. Realty Holding Corporation New Jersey
Pipco-On-The-Hudson, Inc. New Jersey
Pipco/TM8, Inc. New Jersey
Pipco/TM10, Inc. New Jersey
Pipco/TM13, Inc. New Jersey
Pipco/Spring Hill, Inc. New Jersey
Pipco 205 Park, Inc. New Jersey
Pipco Schoolhouse Estates, Inc. New Jersey
Pipco Urban Restoration, Inc. New Jersey
Pipco Windsong, Inc. New Jersey
Pipco Parsippany, Inc. New Jersey
Pipco 121-123 Grand Avenue, Inc. New Jersey
Pipco Bright, Inc. New Jersey
Pipco Oakland, Inc. New Jersey
Pipco Raintree, Inc. New Jersey
Pipco Underhill, Inc. New York
Pipco MK, Inc. New Jersey
Pipco Carlstadt, Inc. New Jersey
Pipco Ewing, Inc. New Jersey
Pipco 851 Boulevard, Inc. New Jersey
Pipco Alpine, Inc. New Jersey
Pipco Norte, Inc. New Jersey
Alternative Financial Group, Inc. Pennsylvania
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
PipHam Gardens, Inc. New York
PipAshley, Inc. New Jersey
Pipco Urban Renewal Corporation, Inc. New Jersey
Commonwealth Pipco Corp. Pennsylvania
Pipco Hansen Land Corp. Pennsylvania
PipCRA, Inc. New Jersey
PipLandCo, Inc. New Jersey
PipCondoCo, Inc. New Jersey
PipWarehouseCo, Inc. New Jersey
PipQuarryCo, Inc. New Jersey
PipPomonaCo, Inc. New York
Second PipLandCo, Inc. New Jersey
Second PipCondoCo, Inc. New Jersey
Houses-R-Pip, Inc. New Jersey
PipGate Mill Properties, Ltd. New Jersey
PipHyde Park, Limited New York
NewPip Properties Co., Ltd. New Jersey
FSB Investment Corp. New Jersey
Franklin State Armored Corporation New Jersey
Central Pipco, Inc. New Jersey
Central Pipco Sanson, Inc. New Jersey
Central Pipco Petrocella/Temes, Inc. New Jersey
Central Pipco Spring Knolls, Inc. New Jersey
Evergreen Cenpipco, Inc. New Jersey
CenPipMaple, Inc. New Jersey
CenPipPRD, Inc. New Jersey
CenPipCho35, Inc. New Jersey
Central Pipco Thom, Inc. New Jersey
CenPipColt, Inc. New Jersey
CenPipUnited, Inc. New Jersey
ExeCenPip EM1, Inc. New Jersey
MorCenPip EM2, Inc. New Jersey
EmsCenPip EM3, Inc. New Jersey
ProCentip Plains, Inc. New Jersey
SayCenPipVille, Inc. New Jersey
HalCenPip Tides, Inc. New Jersey
VolCenPipChik, Inc. New Jersey
StakCenPipWood, Inc. New Jersey
Alternative Financial Group, Inc. New Jersey
34 Cen Pip Plaza, Inc. New Jersey
BunnCenPip 202, Inc. New Jersey
Central Residential Properties, Inc. New Jersey
Madison CenPipRidge, Inc. New Jersey
Clearbrook ProCenPip, Inc. Pennsylvania
CenPipMatawan, Inc. New Jersey
EIN Cen Pip Binder, Inc. New Jersey
CenPipChowderPot, Inc. New Jersey
South Pipco, Inc. New Jersey
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ManSoPip Management Corp. New Jersey
PropSoPip Properties Corp. New Jersey
DevSoPip Development Corp. New Jersey
Aristone So Pip, Inc. New Jersey
New Jersey Affiliated Financial Services, Inc. New Jersey
NJS Realty Corporation New Jersey
High Acre Realty Corporation New Jersey
N.J.S. Advisory Services, Inc. New Jersey
First Valley Corporation Pennsylvania
First Valley Bank Pennsylvania
Valbeth, Inc. Pennsylvania
North-Val, Inc. Pennsylvania
Lehigh Securities Corporation Pennsylvania
First Valley Capital Corporation Pennsylvania
First Valprop, Inc. Delaware
First North-Val, Inc. Pennsylvania
Second North-Val, Inc. Pennsylvania
Third North-Val, Inc. Pennsylvania
Fourth North-Val, Inc. Pennsylvania
Fifth North-Val, Inc. Pennsylvania
Sixth North-Val, Inc. Pennsylvania
Seventh North-Val, Inc. Pennsylvania
Eighth North-Val, Inc. Pennsylvania
Ninth North-Val, Inc. Pennsylvania
Timco Property Corp. Pennsylvania
HBP Financial Corp. Pennsylvania
First Valley Financial Services, Inc. Pennsylvania
First Valley Life Insurance Company Arizona
Valprop, Inc. Pennsylvania
FirstVal Properties, Inc. Pennsylvania
UJB Credit Corporation Delaware
Gibraltar Corporation of America New York
United Jersey Leasing Company New Jersey
United Jersey Mortgage Company New Jersey
Asset Management Corp. New Jersey
UJB Discount Brokerage Co. New Jersey
Rahway Avenue Urban Renewal Corporation New Jersey
Trico Mortgage Company, Inc. New Jersey
Securitization Subsidiary I, Inc. New Jersey
Zumbadora Corporation New Jersey
United Jersey Credit Life Insurance Company Arizona
United Jersey Venture Capital, Inc. New Jersey
India, Inc. Delaware
United Jersey Financial Corp. New Jersey
United Jersey Insurance Agency, Inc. New Jersey
UJB Financial Service Corporation New Jersey
CARTCO, Ltd. New Jersey
UJB Commercial Corp. New Jersey
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Summit Bank New Jersey
STC Investment Holding Company New Jersey
Beechwood Insurance Agency Corporation New Jersey
One Main Properties - Berkeley Heights, Inc. New Jersey
One Main Properties - Lebanon, Inc. New Jersey
One Main Properties - New Brunswick, Inc. New Jersey
One Main Properties - Millburn, Inc. New Jersey
One Main Properties - Atlantic Highlands, Inc. New Jersey
One Main Properties - Union Township, Inc. New Jersey
One Main Properties - Red Bank, Inc. New Jersey
One Main Properties - Chatham, Inc. New Jersey
Smithcrest Realty, Inc. New Jersey
34 West - Bethlehem Corporation New Jersey
34 West - Memorial Parkway Corporation New Jersey
34 West - Rte. 22/523 Corporation New Jersey
34 West - White Twp. Corporation New Jersey
34 West - Lafayette Corporation New Jersey
34 West - Main Street Hackettstown Corporation New Jersey
34 West - Route 206 Hillsborough Corporation New Jersey
34 West - Route 31 Flemington Corporation New Jersey
34 West - Omni Drive Hillsborough Corporation New Jersey
34 West - Greenwich TP., Inc. New Jersey
34 West - Route 206 Branchburg Corporation New Jersey
34 West - Route 31/Pennsylvania Ave. Corp. New Jersey
34 West - Washington Office Corp. New Jersey
34 West - Leland Ave. Plainfield Corporation New Jersey
34 West - Arbor Glen Corporation New Jersey
34 West - Rt. 22 Branchburg Corp. New Jersey
Seagull Red Bank, Inc. New Jersey
Seagull Landmark, Inc. New Jersey
Seagull Beaver Dam, Inc. New Jersey
Seagull Richmond, Inc. New Jersey
Seagull Ninth Street, Inc. New Jersey
Seagull Dock Inc. New Jersey
Seagull 15th Street, Inc. New Jersey
The Summit Mortgage Company New Jersey
Seagull Lacey, Inc. New Jersey
Seagull Manahawkin, Inc. New Jersey
Seagull Atlantic, Inc. New Jersey
Crestmont Finance Corporation I New Jersey
GS Holdings NJ, Inc. New Jersey
Pro One, Inc. New Jersey
Pro Two, Inc. New Jersey
Pro Three, Inc. New Jersey
Pro Four, Inc. New Jersey
Pro Five, Inc. New Jersey
Garden Financial, Inc. New Jersey
GSB Financial Services, Inc. New Jersey
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Greenbriar Service Corporation New Jersey
Crestmont Insurance Agency, Inc. New Jersey
Crestmont Securities, Inc. New Jersey
Colts Neck Orchard Construction Service Corporation New Jersey
GLP, Inc. New Jersey
173 Elm Street Leasing Corp., Inc. New Jersey
Eastern Monmouth Service Corporation New Jersey
Central Monmouth Service Corporation New Jersey
Crestmont Hospitality, Inc. New Jersey
Crestmont Residential Service Corp. I New Jersey
Crestmont Residential Service Corp. II New Jersey
Crestmont Residential Service Corp. III New Jersey
Crestmont Middletown 35, Inc. New Jersey
Crestmont Orange 209, Inc. New Jersey
Crestmont Lodi 17, Inc. New Jersey
Crestmont Residential Edison Alva, Inc. New Jersey
Crestmont Residential Asbury Park, Inc. New Jersey
Lancaster Financial Ltd. New Jersey
</TABLE>
All listed subsidiaries in existence during 1995 are included in the
consolidated financial statements in the Summit Bancorp. 1995 Annual Report to
Shareholders contained herein as Exhibit 13.
As of 3/27/96
<PAGE> 1
Exhibit (23)A.
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Summit Bancorp (formerly UJB Financial Corp.):
We consent to incorporation by reference in Registration Statement No. 2-78500
on Form S-8, Registration Statement No. 33-13930 on Form S-8, Registration
Statement No. 33-19469 on Form S-8, Registration Statement No. 33-36209 on Form
S-8, Registration Statement No. 33-38172 on Form S-8, Registration Statement
No. 33-53870 on Form S-3, Registration Statement No. 33-58152 on Form S-3,
Registration Statement No. 33-62972 on Form S-8, Registration Statement No.
33-54667 on Form S-8, and Registration Statement No. 33-61353 on Form S-8 of
Summit Bancorp (formerly UJB Financial Corp.) of our report dated January 16,
1996 except as to the first and fourth paragraphs of Note 2, which are as of
March 1, 1996, relating to the consolidated balance sheets of UJB Financial
Corp. and subsidiaries as of December 31, 1995 and 1994, 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, 1995, and our
report dated January 16, 1996, except as to the first and fourth paragraphs of
Note 2, which are as of March 1, 1996, relating to the combined consolidated
balance sheets of Summit Bancorp and subsidiaries as of December 31, 1995 and
1994, and the related combined consolidated statements of income, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995 which reports are incorporated by reference in the December
31, 1995 Annual Report on Form 10-K of Summit Bancorp.
The reports of KPMG Peat Marwick LLP refer to changes in the method of
accounting for certain investments and postemployment benefits in 1994 and a
change in the method of accounting for income taxes in 1993.
/s/ KPMG Peat Marwick LLP
------------------------------
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 29, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1995 10-K FINANCIAL STATEMENTS OF SUMMIT BANCORP. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1337718
<INT-BEARING-DEPOSITS> 183290
<FED-FUNDS-SOLD> 161650
<TRADING-ASSETS> 28637
<INVESTMENTS-HELD-FOR-SALE> 2408065
<INVESTMENTS-CARRYING> 3047080
<INVESTMENTS-MARKET> 3040826
<LOANS> 14019574
<ALLOWANCE> 279034
<TOTAL-ASSETS> 21536935
<DEPOSITS> 17955103
<SHORT-TERM> 1042556
<LIABILITIES-OTHER> 312098
<LONG-TERM> 424852
0
42620
<COMMON> 106165
<OTHER-SE> 1653531
<TOTAL-LIABILITIES-AND-EQUITY> 21536935
<INTEREST-LOAN> 1132584
<INTEREST-INVEST> 353283
<INTEREST-OTHER> 9750
<INTEREST-TOTAL> 1495617
<INTEREST-DEPOSIT> 514733
<INTEREST-EXPENSE> 626376
<INTEREST-INCOME-NET> 869241
<LOAN-LOSSES> 71850
<SECURITIES-GAINS> 8606
<EXPENSE-OTHER> 642361
<INCOME-PRETAX> 379219
<INCOME-PRE-EXTRAORDINARY> 242870
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242870
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.77
<YIELD-ACTUAL> 4.60
<LOANS-NON> 188289
<LOANS-PAST> 9746
<LOANS-TROUBLED> 199
<LOANS-PROBLEM> 18708
<ALLOWANCE-OPEN> 305330
<CHARGE-OFFS> 126372
<RECOVERIES> 22095
<ALLOWANCE-CLOSE> 279034
<ALLOWANCE-DOMESTIC> 193176
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 85858
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1995 10-K FINANCIAL STATEMENT OF UJB FINANCIAL CORP. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1028923
<INT-BEARING-DEPOSITS> 18329
<FED-FUNDS-SOLD> 22500
<TRADING-ASSETS> 27400
<INVESTMENTS-HELD-FOR-SALE> 1600062
<INVESTMENTS-CARRYING> 2286000
<INVESTMENTS-MARKET> 2277752
<LOANS> 10457382
<ALLOWANCE> 187650
<TOTAL-ASSETS> 15885655
<DEPOSITS> 13261410
<SHORT-TERM> 872430
<LIABILITIES-OTHER> 251320
<LONG-TERM> 203649
0
30008
<COMMON> 69348
<OTHER-SE> 1197490
<TOTAL-LIABILITIES-AND-EQUITY> 15885655
<INTEREST-LOAN> 840411
<INTEREST-INVEST> 251004
<INTEREST-OTHER> 5325
<INTEREST-TOTAL> 1096740
<INTEREST-DEPOSIT> 346215
<INTEREST-EXPENSE> 445973
<INTEREST-INCOME-NET> 650767
<LOAN-LOSSES> 65250
<SECURITIES-GAINS> 6114
<EXPENSE-OTHER> 493378
<INCOME-PRETAX> 266675
<INCOME-PRE-EXTRAORDINARY> 170367
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170367
<EPS-PRIMARY> 2.99
<EPS-DILUTED> 2.99
<YIELD-ACTUAL> 4.71
<LOANS-NON> 166253
<LOANS-PAST> 3585
<LOANS-TROUBLED> 199
<LOANS-PROBLEM> 18708
<ALLOWANCE-OPEN> 214161
<CHARGE-OFFS> 116785
<RECOVERIES> 18893
<ALLOWANCE-CLOSE> 187650
<ALLOWANCE-DOMESTIC> 119219
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 68431
</TABLE>
