<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT:
(DATE OF EARLIEST EVENT REPORTED)
MARCH 1, 1996
SUMMIT BANCORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 1-6451 22-1903313
(STATE OR OTHER JURIS- (COMMISSION (IRS EMPLOYER
DICTION OF INCORPORATION FILE NO.) IDENTIFICATION NO.)
OR ORGANIZATION)
301 CARNEGIE CENTER, P.O. BOX 2066,
PRINCETON, NEW JERSEY 08543-2066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 987-3200
UJB FINANCIAL CORP.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
(i) The following financial information for The Summit
Bancorporation ("Bancorporation" or "Summit") was filed as
part of the Annual Report on Form 10-K of Bancorporation for
the Fiscal Year ended December 31, 1994; financial
information located at the stated page numbers thereof is
herein incorporated by reference:
<TABLE>
<CAPTION>
<S> <C>
Auditors' Report......................................... 27
Consolidated Statement of Income - Three Years
Ended December 31, 1994......................... 28
Consolidated Balance Sheet - December 31, 1994 and 1993.. 29
Consolidated Statement of Stockholders' Equity -
Three Years Ended December 31, 1994............. 30
Consolidated Statement of Cash Flows - Three Years
Ended December 31, 1994......................... 31
Notes to Consolidated Financial Statements............... 32
(ii) Interim Financial Information - The following financial
information for Bancorporation was filed on Form 10-Q of
Bancorporation for the quarter ended September 30, 1995;
financial information located at the stated page numbers
thereof is herein incorporated by reference:
Consolidated Balance Sheet at September 30, 1995 and
December 31, 1994.............................. 1
Consolidated Statement of Income -Three Months and
Nine Months ended September 30, 1995 and 1994.. 2
Consolidated Statement of Stockholders' Equity-
Three Months and Nine Months Ended
September 30, 1995 and 1994.................... 3
Consolidated Statement of Cash Flows-
Three Months and Nine Months Ended
September 30, 1995 and 1994.................... 4
Notes to Consolidated Financial Statements ............. 5
</TABLE>
(b) Pro Forma Financial Information
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
The following unaudited pro forma condensed combined financial statements
reflect the Merger of UJB Financial Corp. (UJB) and The Summit Bancorporation
and the related mergers of Flemington National Bank and Trust Company
(Flemington) and Garden State Bancshares, Inc. (Garden State) (collectively the
"Pooling Acquisition"). This pro forma financial information is based on the
estimates and assumptions set forth in the notes to such statements. The pro
forma adjustments made in connection with the development of the pro forma
information are preliminary and have been made solely for purposes of
developing such pro forma information as necessary to comply with the
disclosure requirements of the Commission. The pro forma financial information
has been prepared using the historical consolidated financial statements and
notes thereto appearing in UJB's Form 10-K, Summit's Form 10-K, Flemington's
Form 10-KSB and Garden State's Form 10-K each for the fiscal year ended
December 31, 1994. The unaudited pro forma condensed combined financial
statements do not purport to be indicative of the combined financial position
or results of operations of future periods or indicative of the results that
actually would have been realized had the entities been a single entity during
these periods.
The Pro Forma Condensed Combined Statements of Income give effect to the
proposed Merger by combining the respective statements of income of UJB,
Summit, Garden State and Flemington for the nine months ended September 30,
1995 and 1994 and for each of the three years in the period ended December 31,
1994. The Pro Forma Condensed Combined Statements of Income do not give effect
to anticipated expenses and nonrecurring charges related to the Merger and the
estimated effect of revenue enhancements and expense savings associated with
the consolidation of the operations of UJB and Summit. Had these expenses and
nonrecurring charges been reflected in the Pro Forma Condensed Combined
Statements of Income for the nine months ended September 30, 1995, UJB and
Summit Pro Forma net income would decrease by $54 million or $.63 per share and
All Transactions Pro Forma net income would decrease by $61 million or $.67 per
share.
Earnings per common share amounts for UJB, Summit, Garden State and
Flemington are based on the historical weighted average number of common shares
outstanding for each company during the period. With respect to the pro forma
earnings per share computation, shares of Summit, Garden State and Flemington
have been adjusted to the equivalent shares of UJB for each period.
The pro forma financial information uses the Exchange Ratio of 0.90 shares of
UJB Common for each share of Summit Common, the exchange ratio of 1.3816 shares
of UJB Common for each share of Flemington common stock and the effective
exchange ratio of 0.972 shares of UJB Common for each share of Garden State
common stock, which were the actual exchange ratios at the consummation of these
mergers.
i) PRO FORMA CONDENSED COMBINED BALANCE SHEET DATED SEPTEMBER 30, 1995
Dollars in Thousands
<TABLE>
<CAPTION>
Pro Forma Adjustment Increase (Decrease) All Transactions Pro Forma
---------------------------------------- --------------------------
<S> <C> <C>
Shareholders' Equity
Common Stock $(9,515) $110,775
Surplus $ 9,058 $846,021
</TABLE>
2
<PAGE> 3
ii) PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
All Transactions Pro Forma
--------------------------
<S> <C>
Net Income Per Common Share $1.99
Average Common Shares Outstanding (in thousands) 90,400
</TABLE>
iii) PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
All Transactions Pro Forma
--------------------------
<S> <C>
Average Common Shares Outstanding (in thousands) 87,641
</TABLE>
iv) PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
All Transactions Pro Forma
--------------------------
<S> <C>
Average Common Shares Outstanding (12/31/94) (in thousands) 87,918
Average Common Shares Outstanding (12/31/93) (in thousands) 85,684
Average Common Shares Outstanding (12/31/92) (in thousands) 80,471
</TABLE>
v) NOTES TO THE PRO FORMA FINANCIAL INFORMATION:
(2) The Pro Forma Condensed Combined Balance Sheet gives effect to the Merger
and the Pooling Acquisitions by combining the respective balance sheets of UJB,
Summit, Garden State and Flemington at September 30, 1995 on a
pooling-of-interests basis. The capital accounts have been adjusted to reflect
the issuance of 34.7 million shares of UJB Common in exchange for all the
outstanding shares of Summit, Garden State and Flemington.
The following unaudited pro forma combined condensed financial
information for UJB Financial Corp. and Bancorporation, filed as part of
Registration Statement No. 33-63783 on Form S-4 (declared effective December 7,
1995), and located at the stated page numbers thereof, is herein incorporated by
reference with the specific exceptions therefrom of: (i) "Shareholder's Equity -
Common Stock" and "Shareholder's Equity Surplus" stated under "Pro Forma
Adjustment Increase (Decrease)" and "All Transactions Pro Forma", as reflected
on the Pro Forma Condensed Combined Balance Sheet dated September 30, 1995; (ii)
(a) Net Income Per Common Share and (b) Average Common Shares Outstanding stated
under "All Transactions Pro Forma" in the Pro Forma Condensed Combined
Statements of Income for the Nine Months Ended September 30, 1995; (iii) Average
Common Shares Outstanding stated under "All Transactions Pro Forma" in the Pro
Forma Condensed Combined Statements of Income for the Nine Months Ended
September 30, 1994; (iv) Average Common Shares Outstanding stated under "All
Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income
for the Years Ended December 31, 1994, 1993 and 1992 and (v) Note 2 in the Notes
to the Pro Forma Financial Information:
3
<PAGE> 4
<TABLE>
<S> <C>
Pro Forma Condensed Combined Balance Sheets -
September 30, 1995............................................................... 17
(except for "Shareholders' Equity - Common Stock" and "Shareholders' Equity -
Surplus" stated under "Pro Forma Adjustment Increase (Decrease)" and "All
Transactions Pro Forma")
Pro Forma Condensed Combined Statements of Income for
the Nine Months Ended September 30, 1995 and 1994 and
the Years Ended December 31, 1994, 1993 and 1992................................. 18
(except for (i) "Net Income Per Common Share" and
"Average Common Shares Outstanding" stated under "All
Transactions Pro Forma" in the Pro Forma Condensed
Combined Statements of Income for the Nine Months
Ended September 30, 1995; (ii) "Average Common Shares
Outstanding" stated under "All Transactions Pro
Forma" in the Pro Forma Condensed Combined Statements
of Income for the Nine Months Ended September 30,
1994 and (iii) "Average Common Shares Outstanding"
stated under "All Transactions Pro Forma" in the Pro
Forma Condensed Combined Statements of Income for the
Years Ended December 31, 1994, 1993 and 1992
Notes to Pro Forma Financial Information.................................................. 23
(except with respect to Note 2 )
</TABLE>
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(24) Auditors' Consent (The Summit Bancorporation)
(99) A. Item 8 Financial Statements and Supplementary Data from the Annual Report
on Form 10-K of the Summit Bancorporation for the Fiscal Year ended
December 31, 1994.
Auditors' Report
Consolidated Statement of Income - Three Years
Ended December 31, 1994
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Stockholders' Equity -
Three Years Ended December 31, 1994
Consolidated Statement of Cash Flows - Three Years
Ended December 31, 1994
Notes to Consolidated Financial Statements
(99) B. Item 1 Financial Statements from the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
Consolidated Balance Sheet at September 30, 1995 and
December 31, 1994
Consolidated Statement of Income - Three Months and Nine
Months ended September 30, 1995 and 1994
Consolidated Statement of Stockholders' Equity -
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
Three Months and Nine Months Ended September
30,1995 and 1994
Consolidated Statement of Cash Flows -
Three Months and Nine Months Ended September
30, 1995 and 1994
Notes to Consolidated Financial Statements
(99) C. Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheets -
September 30, 1995
(except for "Shareholders' Equity - Common Stock" and
"Shareholders' Equity - Surplus" stated under "Pro
Forma Adjustment Increase (Decrease)" and "All
Transactions Pro Forma")
Pro Forma Condensed Combined Statements of Income for the Nine
Months Ended September 30, 1995 and 1994 and the Years Ended
December 31, 1994, 1993, 1992
(except for (i) "Net Income Per Common Share" and
"Average Common Shares Outstanding" stated under "All
Transactions Pro Forma" in the Pro Forma Condensed
Combined Statements of Income for the Nine Months
Ended September 30, 1995; (ii) "Average Common Shares
Outstanding" stated under "All Transactions Pro
Forma" in the Pro Forma Condensed Combined Statements
of Income for the Nine Months Ended September 30,
1994 and (iii) "Average Common Shares Outstanding"
stated under "All Transactions Pro Forma" in the Pro
Forma Condensed Combined Statements of Income for the
Years Ended December 31, 1994, 1993 and 1992
Notes to Pro Forma Financial Information
(except with respect to Note 2)
</TABLE>
5
<PAGE> 6
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
Date: March 22, 1996 SUMMIT BANCORP.
By: /s/ Dennis A. Williams
----------------------
Dennis A. Williams
Senior Vice President
6
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Ex. No. Description
------- -----------
<S> <C>
(24) Auditors' Consent (The Summit Bancorporation)
(99) A. Item 8 Financial Statements and Supplementary Data from the Annual Report
on Form 10-K of the Summit Bancorporation for the Fiscal Year ended
December 31, 1994.
Auditors' Report
Consolidated Statement of Income - Three Years
Ended December 31, 1994
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Stockholders' Equity -
Three Years Ended December 31, 1994
Consolidated Statement of Cash Flows - Three Years
Ended December 31, 1994
Notes to Consolidated Financial Statements
(99) B. Item 1 Financial Statements from the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
Consolidated Balance Sheet at September 30, 1995 and
December 31, 1994
Consolidated Statement of Income - Three Months and Nine
Months ended September 30, 1995 and 1994
Consolidated Statement of Stockholders' Equity -
Three Months and Nine Months Ended September
30, 1995 and 1994
Consolidated Statement of Cash Flows -
Three Months and Nine Months Ended September
30, 1995 and 1994
Notes to Consolidated Financial Statements
(99) C. Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheets -
September 30, 1995
(except for "Shareholders' Equity - Common Stock" and
"Shareholders' Equity - Surplus" stated under "Pro
Forma Adjustment Increase (Decrease)" and "All
Transactions Pro Forma")
Pro Forma Condensed Combined Statements of Income for the Nine
Months Ended September 30, 1995 and 1994 and the Years Ended
December 31, 1994, 1993, 1992
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C>
(except for (i) "Net Income Per Common Share" and
"Average Common Shares Outstanding" stated under "All
Transactions Pro Forma" in the Pro Forma Condensed
Combined Statements of Income for the Nine Months
Ended September 30, 1995; (ii) "Average Common Shares
Outstanding" stated under "All Transactions Pro
Forma" in the Pro Forma Condensed Combined Statements
of Income for the Nine Months Ended September 30,
1994 and (iii) "Average Common Shares Outstanding"
stated under "All Transactions Pro Forma" in the Pro
Forma Condensed Combined Statements of Income for the
Years Ended December 31, 1994, 1993 and 1992
Notes to Pro Forma Financial Information
(except with respect to Note 2)
</TABLE>
8
<PAGE> 1
EXHIBIT (24)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Summit Bancorp:
We consent to the inclusion in the current report on Form 8-K/A of Summit
Bancorp. of our report dated January 17, 1995, relating to the consolidated
balance sheets of The Summit Bancorporation and subsidiaries as of December 31,
1994, and 1993, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, which report is included in the December 31,
1994 Annual Report on Form 10-K of The Summit Bancorporation.
/s/ KPMG Peat Marwick LLP
-----------------------------------
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 21, 1996
<PAGE> 1
KPMG Peat Marwick LLP
Certified Public Accountants
150 John F. Kennedy Parkway
Short Hills, NJ 07078
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
The Summit Bancorporation:
We have audited the accompanying consolidated balance sheets of The Summit
Bancorporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of The Summit
Bancorporation'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 The Summit
Bancorporation and subsidiaries as of December 31, 1994 and 1993 and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
January 17, 1995
27
<PAGE> 2
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans................................. $244,980 $232,981 $260,765
Interest and Dividends on Investment Securities:
Taxable.................................................. 44,133 65,661 89,299
Tax-Exempt............................................... 2,505 3,056 5,866
Interest and Dividends on Securities Available for Sale:
Taxable.................................................. 45,436 19,411 --
Tax-Exempt............................................... 1,451 1,665 --
Interest on Trading Account Securities..................... 79 68 66
Interest on Federal Funds Sold and Securities Purchased
Under Agreements to Resell............................... 2,918 5,175 4,997
Interest on Other Short-Term Investments................... 325 1,013 1,503
-------- -------- --------
Total Interest Income............................ 341,827 329,030 362,496
-------- -------- --------
INTEREST EXPENSE:
Interest on Deposits....................................... 105,499 110,517 144,446
Interest on Federal Funds Purchased, Securities Sold Under
Agreements to Repurchase and Other Short-Term
Borrowings............................................... 8,905 5,273 4,505
Interest on Long-Term Debt................................. 16,700 9,287 16,081
-------- -------- --------
Total Interest Expense........................... 131,104 125,077 165,032
-------- -------- --------
NET INTEREST INCOME........................................ 210,723 203,953 197,464
Provision for Loan Losses.................................. 7,995 17,200 25,998
-------- -------- --------
Net Interest Income After Provision for Loan Losses........ 202,728 186,753 171,466
-------- -------- --------
NONINTEREST INCOME:
Trust Income............................................... 11,875 11,125 10,899
Service Fees on Deposit Accounts........................... 18,523 16,936 16,233
Securities Gains........................................... 344 702 710
Other Income............................................... 21,256 22,554 13,863
-------- -------- --------
Total Noninterest Income......................... 51,998 51,317 41,705
-------- -------- --------
NONINTEREST EXPENSE:
Salaries and Employee Benefits............................. 86,087 84,624 78,436
Net Occupancy Expense...................................... 18,868 18,619 18,890
Furniture and Equipment Expense............................ 9,496 8,927 8,908
Loss on Sale of Assets..................................... 35,390 -- --
Restructuring and Other Merger-Related Costs............... 13,565 -- --
Other Expenses............................................. 50,280 55,680 57,110
-------- -------- --------
Total Noninterest Expense........................ 213,686 167,850 163,344
-------- -------- --------
Income Before Income Taxes................................. 41,040 70,220 49,827
Applicable Income Tax Expense.............................. 16,640 22,989 16,340
-------- -------- --------
Income Before Accounting Change and Extraordinary Item..... 24,400 47,231 33,487
-------- -------- --------
Cumulative Effect of a Change in Accounting Principle...... -- 5,303 --
Extraordinary Item......................................... -- (1,810) --
-------- -------- --------
Net Income................................................. $ 24,400 $ 50,724 $ 33,487
======== ======== ========
Net Income Available to Common Stockholders................ $ 23,200 $ 49,524 $ 32,287
======== ======== ========
PER COMMON SHARE:
Income Before Accounting Change and Extraordinary Item..... $ .70 $ 1.43 $ 1.07
Net Income................................................. .70 1.54 1.07
Weighted Average Shares Outstanding........................ 33,090 32,102 30,220
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
28
<PAGE> 3
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Due from Banks............................................. $ 261,665 $ 198,479
Short-Term Investments:
Federal Funds Sold and Securities Purchased
Under Agreements to Resell..................................... -- 248,000
Other Short-Term Investments...................................... 8,208 20,013
---------- ----------
Total Short-Term Investments.............................. 8,208 268,013
Investment Securities (Market Value of $669,154 and $789,949)....... 707,999 791,808
Securities Available for Sale....................................... 923,414 830,880
Trading Account Securities.......................................... 1,357 1,752
Loans............................................................... 3,448,605 3,137,718
Less: Allowance for Loan Losses..................................... 91,169 94,874
---------- ----------
Net Loans................................................. 3,357,436 3,042,844
Premises and Equipment.............................................. 45,034 45,513
Other Real Estate Owned............................................. 15,830 35,982
Accrued Interest Receivable......................................... 29,600 29,650
Other Assets........................................................ 116,922 107,028
---------- ----------
Total Assets.............................................. $5,467,465 $5,351,949
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand............................................................ $ 781,244 $ 692,627
Savings and NOW Accounts.......................................... 1,620,081 1,720,587
Money Market Accounts............................................. 770,987 772,178
Certificates of Deposit of $100,000 and Over...................... 223,326 82,347
Other Time........................................................ 1,013,680 1,144,988
---------- ----------
Total Deposits............................................ 4,409,318 4,412,727
Federal Funds Purchased, Securities Sold Under Agreements to
Repurchase and Other Short-Term Borrowings........................ 231,028 180,389
Accrued Expenses and Other Liabilities.............................. 56,786 67,673
Long-Term Debt...................................................... 338,763 251,800
---------- ----------
Total Liabilities......................................... 5,035,895 4,912,589
Stockholders' Equity:
Preferred Stock, No Par Value, Authorized 12,000 Shares
Cumulative Adjustable Rate, Issued and Outstanding 800
Shares......................................................... 20,000 20,000
Common Stock, No Par Value, Authorized 50,000 Shares
Issued and Outstanding 33,439 and 32,319 Shares................ 49,320 43,372
Surplus........................................................... 305,075 243,685
Retained Earnings................................................. 72,215 128,172
Net Unrealized (Losses) Gains on Securities Available for Sale.... (15,040) 4,131
---------- ----------
Total Stockholders' Equity................................ 431,570 439,360
---------- ----------
Total Liabilities and Stockholders' Equity................ $5,467,465 $5,351,949
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
29
<PAGE> 4
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
ADJUSTABLE GAINS (LOSSES)
RATE ON SECURITIES TOTAL
PREFERRED COMMON RETAINED AVAILABLE STOCKHOLDERS'
STOCK STOCK SURPLUS EARNINGS FOR SALE EQUITY
---------- ------- -------- -------- -------------- -------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992............... $ 20,000 $36,015 $183,820 $ 84,146 $ -- $ 323,981
Net Income............................. -- -- -- 33,487 -- 33,487
Common Stock Issued Under:
Public Stock Offering, Net........... -- 4,543 35,595 -- -- 40,138
Dividend Reinvestment and Stock
Purchase Plan...................... -- 1,866 15,893 -- -- 17,759
Stock Incentive Plans................ -- 309 1,979 -- -- 2,288
Cash Dividends Declared:
Adjustable Rate Preferred ($1.50 Per
Share)............................. -- -- -- (1,200) -- (1,200)
Common ($.73 Per Share).............. -- -- -- (18,784) -- (18,784)
Allowance for Marketable Equity
Securities........................... -- -- -- 1,277 -- 1,277
---------- ------- -------- -------- -------------- -------------
BALANCE, DECEMBER 31, 1992............. 20,000 42,733 237,287 98,926 -- 398,946
Net Income............................. -- -- -- 50,724 -- 50,724
Common Stock Issued Under:
Dividend Reinvestment and Stock
Purchase Plan...................... -- 306 3,644 -- -- 3,950
Stock Incentive Plans................ -- 333 2,754 -- -- 3,087
Cash Dividends Declared:
Adjustable Rate Preferred ($1.50 Per
Share)............................. -- -- -- (1,200) -- (1,200)
Common ($.74 Per Share).............. -- -- -- (20,278) -- (20,278)
Change in Net Unrealized Gains (Losses)
on Securities Available for Sale..... -- -- -- -- 4,131 4,131
---------- ------- -------- -------- -------------- -------------
BALANCE, DECEMBER 31, 1993............. 20,000 43,372 243,685 128,172 4,131 439,360
Net Income............................. -- -- -- 24,400 -- 24,400
Common Stock Issued Under:
Dividend Reinvestment and Stock
Purchase Plan...................... -- 424 5,115 -- -- 5,539
Stock Incentive Plans................ -- 647 3,520 -- -- 4,167
Cash Dividends Declared:
Adjustable Rate Preferred ($1.50 Per
Share)............................. -- -- -- (1,200) -- (1,200)
Common ($.78 Per Share).............. -- -- -- (23,025) -- (23,025)
Change in Net Unrealized Gains (Losses)
on Securities Available for Sale..... -- -- -- -- (19,171) (19,171)
Acquisition of Lancaster
Financial Ltd., Inc. ................ -- 400 -- 2,395 -- 2,795
Adjustment for the Pooling of a Company
with a Different Fiscal Year-End..... -- -- -- (1,295) -- (1,295)
Adjustment for 10% Stock Dividend...... -- 4,477 52,755 (57,232) -- --
---------- ------- -------- -------- -------------- -------------
BALANCE, DECEMBER 31, 1994............. $ 20,000 $49,320 $305,075 $ 72,215 $(15,040) $ 431,570
========= ======== ========= ========= ============== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
30
<PAGE> 5
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income............................................. $ 24,400 $ 50,724 $ 33,487
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization Expenses............ 10,816 5,740 6,009
Provision for Loan Losses......................... 7,995 17,200 25,998
Deferred Income Tax Expense (Benefit)............. 4,214 (1,039) (4,963)
Securities Gains.................................. (344) (702) (710)
Decrease (Increase) in Trading Account
Securities...................................... 395 981 (1,008)
Gain on Sale of Loans............................. (2,259) (8,186) (3,312)
Net Decrease (Increase) in Loans Originated for
Sale............................................ 49,194 (139,895) (162,635)
Decrease in Accrued Interest Receivable........... 20 3,031 4,474
Decrease in Accrued Interest Payable.............. (56) (1,654) (1,692)
Decrease in Other Real Estate Owned............... 21,380 20,576 27,684
(Increase) Decrease in Other Assets............... (16,969) (14,243) 32,999
(Decrease) Increase in Accrued Expenses
and Other Liabilities........................... (4,735) (2,611) 1,533
Other, Net........................................ -- 27 (68)
--------- --------- -----------
Net Cash Provided (Used) by Operating
Activities................................... 94,051 (70,051) (42,204)
--------- --------- -----------
INVESTING ACTIVITIES:
Net (Increase) Decrease in Loans Made to Customers..... (394,037) (100,134) 126,105
Purchases of Investment Securities..................... (434,195) (726,626) (1,119,075)
Maturities of Investment Securities.................... 400,181 785,681 699,078
Proceeds from Sales of Investment Securities........... -- -- 79,313
Proceeds from Sales of Loan Securitizations............ 35,334 116,950 152,582
Purchases of Securities Available for Sale............. (667,376) (581,186) (19,950)
Maturities of Securities Available for Sale............ 539,173 336,675 --
Proceeds from Sales of Securities Available for Sale... 105,914 78,753 20,048
Purchases of Premises and Equipment.................... (12,385) (12,167) (11,179)
Decrease (Increase) in Short-Term Investments.......... 259,805 (73,900) (35,100)
Other, Net............................................. -- 811 124
--------- --------- -----------
Net Cash Used by Investing Activities........... (167,586) (175,143) (108,054)
--------- --------- -----------
FINANCING ACTIVITIES:
(Decrease) Increase in Deposits........................ (4,630) 35,780 195,183
Increase (Decrease) in Federal Funds Purchased,
Securities Sold Under Agreements to Repurchase and
Other Short-Term Borrowings.......................... 40,297 44,663 (67,057)
Long-Term Debt Issued.................................. 474,399 764,180 513,425
Long-Term Debt Matured or Repurchased.................. (359,444) (623,574) (535,518)
Cash Dividends Paid.................................... (24,225) (21,478) (19,984)
Common Stock Issued.................................... 9,706 7,037 60,185
Adjustment Related to Acquisition...................... 2,795 -- --
Adjustment for the Pooling of a Company with a
Different Fiscal Year-End............................ (2,177) -- --
--------- --------- -----------
Net Cash Provided by Financing Activities.... 136,721 206,608 146,234
--------- --------- -----------
Net Increase (Decrease) in Cash and Due From Banks..... 63,186 (38,586) (4,024)
Cash and Due from Banks at January 1,.................. 198,479 237,065 241,089
--------- --------- -----------
Cash and Due from Banks at December 31,................ $ 261,665 $ 198,479 $ 237,065
========= ========= ==========
SUPPLEMENTAL DISCLOSURE:
Interest Paid.......................................... $ 131,104 $ 128,256 $ 165,825
Income Taxes Paid...................................... 13,128 26,658 15,622
Securities Transferred to Securities Available for
Sale................................................. 134,093 294,854 367,362
Loans Transferred to Other Real Estate Owned........... 6,611 27,806 16,462
Mortgage Loans Swapped into Mortgage Backed
Securities........................................... 35,233 116,777 152,025
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
31
<PAGE> 6
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the more significant accounting policies
followed by The Summit Bancorporation (the "Company") in the preparation of the
accompanying consolidated financial statements.
Investment Securities: Investment securities are comprised of debt
securities that the Company has the positive intent and ability to hold to
maturity. Such securities are stated at cost, adjusted for amortization of
premium and accretion of discount using the interest method over the term of the
investments. Net gains or losses on the sale of investment securities are
determined by the specific identification method.
Securities Available for Sale: On December 31, 1993, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Accordingly, debt securities
that cannot be categorized as either investment securities or trading account
securities are classified as securities available for sale. Such securities
include debt securities to be held for indefinite periods of time and not
intended to be held to maturity, as well as marketable equity securities.
Securities available for sale include securities that management intends to use
as part of its asset/liability management strategy and that may be sold in
response to changes in interest rates, resultant prepayment risk and other
factors related to interest rate and resultant prepayment risk changes.
Securities available for sale at December 31, 1994 and 1993 are carried at fair
market value and unrealized holding gains and losses (net of related tax
effects) on such securities are excluded from earnings, but are included in
stockholders' equity. Upon realization, such gains or losses will be included in
earnings using the specific identification method. On December 31, 1992, the
Company established an available for sale securities category and accounted for
these securities at the lower of cost or market using the aggregate method.
Trading Account Securities: Trading account securities are adjusted to
market value. Included in noninterest income are gains and losses resulting from
adjusting trading account securities to market value and from the sale of these
securities.
Loans: Loans are carried at their principal amounts, net of any unearned
income. Interest income on loans is credited to income based on loan principal
amounts outstanding at appropriate interest rates. Included in unearned income
are net deferred loan origination fees, which are recognized over the life of a
loan as interest income.
Generally, the accrual of interest income on loans is discontinued if
certain factors indicate reasonable doubt as to the timely collectibility of
such interest. Loans that are past due on which the accrual of interest income
has been discontinued are designated as nonaccrual. Interest payments received
on nonaccrual loans are generally either applied against principal or reported
as income, according to management's judgment as to the collectibility of
principal. Loans are returned to an accrual status when factors indicating
doubtful collectability on a timely basis no longer exist. The accrual of
interest income on commercial loans is generally discontinued when a loan is
past due 90 days or more. In some instances, consumer loans are classified as
nonaccrual when payments are past due 90 days, and as a matter of general policy
these loans are charged off after they become 120 days past due. The nonaccrual
policy regarding real estate loans ranges from 90 to 120 days past due before
they are classified as nonaccrual.
Mortgage loans which the Company services for investors are not included in
the accompanying consolidated financial statements. Fees earned for servicing
loans are reported as income when the related loan payments are collected. Loan
servicing costs are charged to expense as incurred.
Generally, residential mortgage loans held for sale are originated with an
outstanding purchase commitment from an investor. These loans are classified as
residential mortgage loans and carried at the lower of cost or market using the
aggregate method. Gains and losses on loans sold are included in other income.
32
<PAGE> 7
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Allowance for Loan Losses: The allowance for loan losses is increased by
provisions charged to expense and reduced by charge-offs, net of recoveries. The
provision for loan losses is based on management's evaluation of the adequacy of
the allowance for loan losses. This evaluation encompasses consideration of past
loan loss experience and other factors, including changes in the composition and
volume of the credit portfolio, the level and composition of nonperforming
loans, the condition of industries experiencing particular financial pressures,
the relationship of the current level of the allowance to the credit portfolio
and to nonperforming assets, and economic conditions.
Premises and Equipment: Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization are
generally computed by the straight-line method over the estimated useful lives
of the related assets. Leasehold improvements are amortized over the lives of
the respective leases or the estimated useful lives of the improvements,
whichever is shorter. Major improvements are capitalized, while repairs and
maintenance costs are charged to operations as incurred. Upon retirement or
sale, any gain or loss is credited or charged to operations.
Other Real Estate Owned: Other real estate owned (including in-substance
foreclosures) consists of assets acquired in partial or full satisfaction of
loan obligations. These assets are recorded at fair market value at the time of
acquisition, with any excess charged to the allowance for loan losses.
Subsequent declines in the market value of these assets are included in other
expenses.
Income Taxes: The Company files a consolidated Federal income tax return.
Separate state income tax returns are filed for each affiliate based on the laws
and regulations of the various states in which they do business.
In February 1992, SFAS No. 109, "Accounting for Income Taxes", was issued
by the FASB. SFAS No. 109 prescribes a change to the asset and liability method
of income tax accounting from the deferred method of accounting for income taxes
required by Accounting Principles Board ("APB") Opinion No 11. SFAS No. 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the Company's
financial statements or tax returns. The measurement of deferred tax assets and
liabilities is based on the enacted tax rates applicable to taxable income for
the years in which those temporary differences are expected to be recovered or
settled. SFAS No. 109 requires that deferred tax assets and liabilities be
adjusted for effect of a change in tax rates in the period of enactment.
Effective January 1, 1992 and prior to the acquisition of Crestmont Financial
Corp. ("Crestmont"), the Company adopted SFAS No. 109. Effective April 1, 1993,
Crestmont adopted SFAS No. 109.
Pension Plans: The Company has noncontributory pension plans covering
substantially all employees. Costs of the plans, based on actuarial computations
of current and future benefits for employees, are charged to expense and are
funded based on the maximum amount that can be deducted for Federal income tax
purposes.
Earnings Per Common Share: Earnings per common share is computed by
dividing net income, less dividend requirements on the preferred stock, by the
weighted average number of shares outstanding. Shares issuable under the stock
option incentive plan have not been included in the calculation of earnings per
share since their effect is not material.
Derivative Financial Instruments: The Company enters into interest rate
swap agreements, options, caps and floors as part of its management of interest
rate risk. Such instruments have been designated as hedges and are accounted for
primarily on an accrual basis. Gains and losses related to contracts that are
effective hedges are deferred when necessary to be recognized in income in the
same period as gains and losses on the hedged items. Gains and losses on early
terminations of contracts that modify the characteristics of specified assets or
liabilities are deferred and amortized as an adjustment to the yield of the
hedged assets or liabilities over the shorter of the remaining life of the
hedged item or the remaining contract period. The Company does not hold or issue
derivative financial instruments for trading purposes.
33
<PAGE> 8
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement of Cash Flows: For the statement of cash flows, cash and due
from banks are considered to be cash and cash equivalents.
Other: Trust income is generally recorded on an accrual basis. Securities
and other property (other than cash deposits) held in fiduciary or agency
capacities for customers of the trust division are not assets of the Company
and, accordingly, are not included in the accompanying financial statements.
Fees on standby letters of credit are recorded over the life of the commitment.
NOTE 2. EXTRAORDINARY ITEM
In May 1993, the Company (i.e., Crestmont) prepaid $27 million of
fixed-rate Federal Home Loan Bank of New York ("FHLB") borrowings with a
weighted average rate of 8.60% and replaced them with lower costing short-term
borrowings. The prepayment of the advances resulted in a prepayment penalty of
$1,810,000 net of income tax benefits.
NOTE 3. BUSINESS COMBINATIONS
On September 1, 1994, the Company exchanged 500,000 shares of its Common
Stock for all of the outstanding shares of Lancaster Financial Ltd., Inc.
("Lancaster"). The merger was accounted for using the pooling of interests
method of accounting with prior-period financial statements not restated due to
the nonmaterial nature of the Lancaster acquisition.
On September 13, 1994, the Company exchanged 4,255,098 shares of its Common
Stock for all of the outstanding common shares of Crestmont. The merger was
accounted for using the pooling of interests method of accounting and
prior-period financial statements were restated. The results of operations of
the Company and Crestmont for the six months ended June 30, 1994 and the years
ended December 31, 1993 and 1992 prior to restatement are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
The Company:
Net Interest Income..................................... $ 85,974* $171,190 $163,337
Cumulative Effect of a Change in Accounting Principle... -- -- --
Extraordinary Item...................................... -- -- --
Net Income.............................................. 23,833** 42,423 29,434
Crestmont:
Net Interest Income..................................... 16,054 32,763 34,127
Cumulative Effect of a Change in Accounting Principle... -- 5,303 --
Extraordinary Item...................................... -- (1,810) --
Net Income.............................................. 2,489 8,301 4,053
Combined:
Net Interest Income..................................... 102,028 203,953 197,464
Cumulative Effect of a Change in Accounting Principle... -- 5,303 --
Extraordinary Item...................................... -- (1,810) --
Net Income.............................................. 26,322 50,724 33,487
</TABLE>
- ---------------
* Includes $135 associated with Lancaster.
** Includes $225 associated with Lancaster.
34
<PAGE> 9
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to the combination, Crestmont's fiscal year ended March 31. In
recording the pooling of interests combination, Crestmont's financial statements
for the year ended December 31, 1994 were combined with the Company's financial
statements for the same period and Crestmont's financial statements for the
years ended March 31, 1994 and 1993 were combined with the Company's financial
statements for the years ended December 31, 1993 and 1992, respectively.
Crestmont's unaudited results of operations for the three months ended March 31,
1994 included net interest income of $8,055,000 and net income of $1,295,000. An
adjustment has been made to stockholders' equity to eliminate the effect of
including Crestmont's results of operations for the three months ended March 31,
1994 in both the year ended December 31, 1994 and the year ended December 31,
1993.
NOTE 4. CASH AND DUE FROM BANKS
Average required reserves for deposits maintained in accordance with
banking regulations were $125,855,000 and $112,217,000 for the years 1994 and
1993.
NOTE 5. INVESTMENT SECURITIES
The book value of investment securities included in the consolidated
balance sheet and the approximate market value consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1994 1993
------------------- -------------------
BOOK MARKET BOOK MARKET
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal Agency Securities:
Maturing Within 1 Year....................... $ 3,407 $ 3,374 $ 22,755 $ 22,945
Maturing Between 1-5 Years................... 14,220 14,032 12,125 12,290
No Fixed Maturity............................ -- -- 6,992 6,992
-------- -------- -------- --------
17,627 17,406 41,872 42,227
-------- -------- -------- --------
State and Municipal Securities:
Maturing Within 1 Year....................... 39,997 40,072 48,847 49,012
Maturing Between 1-5 Years................... 3,120 3,141 9,557 9,977
Maturing Between 5-10 Years.................. 1,790 1,849 2,041 2,163
Maturing In Over 10 Years.................... 3,012 2,992 3,131 3,405
-------- -------- -------- --------
47,919 48,054 63,576 64,557
-------- -------- -------- --------
Mortgage-Backed Securities:
Federal Agency............................... 388,757 362,488 449,061 447,358
Other........................................ 200,818 189,468 135,910 134,562
-------- -------- -------- --------
589,575 551,956 584,971 581,920
-------- -------- -------- --------
Other Bonds and Notes:
Maturing Within 1 Year....................... 1,065 1,123 70,781 70,523
Maturing Between 1-5 Years................... 17,587 16,678 30,017 30,127
Maturing Between 5-10 Years.................. 34,226 33,937 591 595
-------- -------- -------- --------
52,878 51,738 101,389 101,245
-------- -------- -------- --------
Total..................................... $707,999 $669,154 $791,808 $789,949
======== ======== ======== ========
</TABLE>
During 1994 the Company, as part of the merger, transferred $134,093,000 of
Crestmont securities from the investment securities portfolio and designated
them as securities available for sale. On December 31,
35
<PAGE> 10
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1993, the Company segregated $294,854,000 of securities from the investment
securities portfolio and designated them as securities available for sale as
part of its adoption of SFAS No. 115.
No sales of debt securities were made in 1994 and 1993. However, the
Company received proceeds of $8,293,000, reflecting gross realized gains of
$79,000 and incurred gross losses of $3,000 in connection with certain calls by
issuers on investment securities during 1994. In 1992, proceeds from the sale of
such securities were $64,725,000 resulting in gross realized gains of $35,000
and gross realized losses of $5,000.
The gross unrealized gains and losses on debt securities included in
investment securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1994 1993
---------------- ---------------
GAINS LOSSES GAINS LOSSES
------ ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal Agency Securities........... $ 3 $ 224 $ 355 $ --
State and Municipal Securities........................ 225 90 993 12
Mortgage-Backed Securities............................ 1,259 38,878 5,073 8,124
Other Bonds and Notes................................. 60 1,200 615 759
------ ------- ------ ------
Total Debt Securities Held for Investment........ $1,547 $40,392 $7,036 $8,895
====== ======= ====== ======
</TABLE>
Securities with a book value of $267,955,000 at December 31, 1994 and
$121,183,000 at December 31, 1993 were pledged to qualify for fiduciary powers
and other purposes required by law.
NOTE 6. SECURITIES AVAILABLE FOR SALE
A summary of securities available for sale included in the consolidated
balance sheet follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1994 1993
--------------------- ---------------------
MARKET AMORTIZED MARKET AMORTIZED
VALUE COST VALUE COST
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal Agency
Securities:
Maturing Within 1 Year................... $ 19,472 $ 19,876 $ 10,081 $ 9,998
Maturing Between 1-5 Years............... 135,266 141,287 -- --
Maturing Between 5-10 Years.............. -- -- 1,257 1,257
-------- -------- -------- --------
154,738 161,163 11,338 11,255
-------- -------- -------- --------
Mortgage-Backed Securities:
Federal Agency........................... 556,967 585,353 480,450 478,885
Other.................................... 153,404 161,820 275,901 279,489
-------- -------- -------- --------
710,371 747,173 756,351 758,374
-------- -------- -------- --------
Corporate Stock:
Maturing Within 1 Year................... -- -- 25,000 25,000
No Fixed Maturity........................ 58,305 41,159 38,191 29,426
-------- -------- -------- --------
58,305 41,159 63,191 54,426
-------- -------- -------- --------
Total................................. $923,414 $949,495 $830,880 $824,055
======== ======== ======== ========
</TABLE>
FHLB stock amounting to $12,894,000 at December 31, 1994 and $18,870,000 at
December 31, 1993 is reflected in the above table as corporate stock having no
fixed maturity. Such stock was carried at market value, which was equal to its
original cost, on these dates.
36
<PAGE> 11
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following information pertains to sales of securities available for
sale:
<TABLE>
<CAPTION>
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Sale Proceeds...................................................... $105,914 $78,753
======== =======
Gross Realized:
Gains............................................................ $ 1,102 $ 809
======== =======
Losses........................................................... $ 834 $ 107
======== =======
</TABLE>
The gross unrealized gains and losses on securities available for sale are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1994 1993
----------------- -----------------
GAINS LOSSES GAINS LOSSES
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal Agency Securities........ $ -- $ 6,425 $ 451 $ 654
Mortgage-Backed Securities......................... 1,198 38,000 4,516 6,253
Corporate Stock.................................... 17,823 677 9,687 922
------- ------- ------- -------
Total Securities Available for Sale.............. $19,021 $45,102 $14,654 $ 7,829
======= ======= ======= =======
</TABLE>
NOTE 7. LOANS
A composition of loans, net of unearned income, follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Commercial.................................................... $ 647,016 $ 605,084
Consumer...................................................... 507,600 393,229
Construction.................................................. 79,993 103,432
Commercial Mortgage........................................... 740,127 816,217
Residential Mortgage*......................................... 1,473,869 1,219,756
--------- ---------
Total....................................................... $3,448,605 $3,137,718
========= =========
</TABLE>
- ---------------
* Includes $29,842,000 and $112,776,000 of loans held for sale at December 31,
1994 and 1993.
Loans to directors, executive officers, and their related parties ("insider
loans"), which are made in the ordinary course of business and with the same
terms and interest rates as those prevailing for comparable transactions with
others, aggregated $23,241,000 at December 31, 1994 and $31,465,000 at December
31, 1993. During 1994, new loans in the amount of $2,614,000 were made to such
persons and repayments by such persons were $11,877,000, while other additions
of $1,039,000 resulted from loans to individuals, originated in previous
periods, who meet the criteria to be classified as insider loans in the current
period. The information for 1993 was not restated for Crestmont as the
outstanding loans to directors, executive officers and their related parties no
longer meet the criteria to be classified as insider loans.
37
<PAGE> 12
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents information concerning: (1) loans accounted
for on a nonaccrual basis, (2) loans whose terms have been restructured to
provide a reduction or deferral of interest or principal because of a
deterioration in the financial position of the borrower, (3) other real estate
owned (including in-substance foreclosures) and (4) loans which are
contractually past due 90 days or more as to interest or principal payments but
have not been classified as nonaccrual:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Nonaccrual Loans................................................. $ 34,244 $ 75,398
Restructured Loans............................................... 182 3,196
-------- --------
Total Nonperforming Loans...................................... 34,426 78,594
Other Real Estate Owned.......................................... 15,830 35,982
-------- --------
Total Nonperforming Assets..................................... $ 50,256 $114,576
======== ========
Loans Past Due 90 Days or More and Accruing...................... $ 14,182 $ 15,288
======== ========
</TABLE>
If interest income on nonaccrual and restructured loans outstanding at the
end of the period had been current in accordance with their original terms,
approximately $3,628,000, $6,652,000 and $9,693,000 of interest income would
have been recorded in 1994, 1993 and 1992, respectively. These amounts exclude
the effect of interest received on loans that were returned to an accruing basis
or fully written down during the year. Interest income on nonaccrual and
restructured loans outstanding at the end of the year that was recognized as
income for the year was $949,000, $1,545,000 and $1,054,000 in 1994, 1993 and
1992, respectively. Not included in these amounts are interest payments received
on certain nonaccrual loans that have been applied to reduce the outstanding
principal.
Commitments to lend additional funds to borrowers whose loans were
classified as nonaccrual were not material at December 31, 1994.
NOTE 8. ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1,................................... $ 94,874 $ 97,190 $ 96,356
Balance Related to Acquisition........................ 255 -- --
Adjustment for the Pooling of a Company with a
Different Fiscal Year-End........................... (178) -- --
Charge-Offs........................................... (16,665) (23,224) (29,934)
Recoveries............................................ 4,888 3,708 4,770
-------- -------- --------
Net Charge-Offs.................................. (11,777) (19,516) (25,164)
Provision for Loan Losses............................. 7,995 17,200 25,998
-------- -------- --------
Balance, December 31,................................. $ 91,169 $ 94,874 $ 97,190
======== ======== ========
</TABLE>
NOTE 9. PREMISES AND EQUIPMENT
An analysis of premises and equipment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land.............................................................. $ 5,535 $ 5,868
Buildings......................................................... 33,540 30,105
Furniture and Equipment........................................... 51,918 51,584
Leasehold Improvements............................................ 19,321 20,031
-------- --------
110,314 107,588
Less: Accumulated Depreciation and Amortization................... 65,280 62,075
-------- --------
Total........................................................ $ 45,034 $ 45,513
======== ========
</TABLE>
38
<PAGE> 13
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation and amortization of premises and equipment charged to
noninterest expense for the years ended December 31, 1994, 1993 and 1992
amounted to $8,434,000, $8,098,000 and $8,364,000, respectively.
NOTE 10. OTHER ASSETS
The excess of cost over fair value of net assets acquired ("goodwill")
relating to affiliates and branches purchased is included in other assets and is
amortized on a straight-line basis over periods from 10 to 40 years. Goodwill
amounted to $9,218,000 and $10,079,000 at December 31, 1994 and 1993. Such
goodwill at year-end 1994 consisted of $5,722,000 relating to acquisitions of
certain banking offices that is being amortized on a straight-line basis over 10
or 15 years and of $3,496,000 associated with certain pre-September 30, 1982
acquisitions of financial institutions that has a weighted-average amortization
period of 30 years.
NOTE 11. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Parent Company:
11 7/8% Notes Due February 1, 1995............................. $ 15,000 $ 15,000
Summit Bank:
6 3/4% Subordinated Notes Due June 15, 2003.................... 49,326 49,212
Federal Home Loan Bank Borrowings
Due 1994 (Average Rate of 3.69%)............................ -- 95,640
Due 1995 (Average Rate of 6.56% and 4.43%).................. 146,640 1,640
Due 1996 (Average Rate of 5.04% and 4.92%).................. 5,940 5,540
Due 1997 (Average Rate of 5.35% and 4.14%).................. 34,365 32,790
Due 1998 (Average Rate of 5.57% and 5.30%).................. 26,620 23,020
Due 1999 (Average Rate of 7.01% and 5.64%).................. 34,495 2,650
Due 2000 (Average Rate of 6.09% and 5.66%).................. 4,500 3,550
Due 2001 (Average Rate of 7.63% and 5.76%).................. 1,194 44
Due 2002 (Average Rate of 6.30% and 5.86%).................. 1,700 1,300
Due 2003 (Average Rate of 6.20% and 6.18%).................. 1,073 1,074
Due 2004 (Average Rate of 8.05%)............................ 1,336 --
-------- --------
257,863 167,248
-------- --------
Collateralized Mortgage Obligations*
Series 1985-1 (Average Rate of 16.17% and 9.50%)............ 2,210 2,395
Series 1985-2 (Average Rate of 16.51% and 10.55%)........... 3,094 3,952
Series 1986-1 (Average Rate of 9.18% and 8.25%)............. 5,315 6,278
Series 1986-2 (Average Rate of 9.28% and 7.71%)............. 5,455 6,865
-------- --------
16,074 19,490
-------- --------
Mortgages Payable
8% Due June 1, 1998........................................ 500 500
11% Due December 31, 1995................................... -- 350
-------- --------
500 850
-------- --------
Total..................................................... $338,763 $251,800
======== ========
</TABLE>
- ---------------
* As a result of greater than anticipated prepayments on the underlying
mortgage-backed securities, a larger portion of the unamortized discount
related to the collateralized mortgage obligations was amortized in 1994.
39
<PAGE> 14
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 11 7/8% Notes, due February 1, 1995, were not redeemable prior to
maturity and had no sinking fund requirements.
In July 1993, the Bank issued $50 million in 6 3/4% Subordinated Notes Due
2003 (the "Subordinated Notes"). Unamortized discount on the Subordinated Notes
was $674,000 at December 31, 1994 and resulted in an effective interest rate of
7.01% for 1994. Interest is payable semiannually on June 15 and December 15 of
each year. The Subordinated Notes will mature on June 15, 2003 and are not
subject to redemption prior to maturity.
The Bank is a member of the Federal Home Loan Bank of New York (the "FHLB")
and has access to term financing from the FHLB having a maturity up to 10 years.
The FHLB borrowings are secured by investment securities and loans receivable
under a blanket collateral agreement.
The collateralized mortgage obligations are secured by investments in
mortgage-backed securities having carrying and market values of $17,944,000 and
$17,295,000 at December 31, 1994, and $20,900,000 and $21,400,000 at December
31, 1993. 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.
Land and buildings having a carrying value of $847,000 at December 31, 1994
and $2,284,000 at December 31, 1993 were pledged as collateral to secure the
mortgages payable. The mortgages have a single principal payment due upon their
maturity.
The aggregate amounts of long-term debt maturing for the five years
subsequent to 1994 are $161,640,000 for 1995, $5,940,000 for 1996, $34,365,000
for 1997, $27,120,000 for 1998 and $34,495,000 for 1999.
NOTE 12. COMMON AND PREFERRED STOCK
Common Stock: On October 18, 1994, the Company declared a 10% stock
dividend payable on December 15, 1994 to shareholders of record of the Company's
Common Stock as of November 22, 1994, as a result the Company issued 3,035,154
shares of Common Stock on December 15, 1994.
On September 1, 1994, the Company exchanged 500,000 shares of its Common
Stock for all of the outstanding shares of Lancaster. The Lancaster merger was
accounted for using the pooling of interests method of accounting and
prior-period financial statements were not restated due to the nonmaterial
nature of the Lancaster acquisition. In addition, on September 13, 1994 the
Company exchanged 4,255,098 shares of its Common Stock for all of the
outstanding common shares of Crestmont. The Crestmont merger was accounted for
using the pooling of interests method of accounting and prior-period financial
statements were restated.
The Company's dividend reinvestment plan allows its existing shareholders
to reinvest their quarterly dividends and to make optional cash purchases of the
Company's Common Stock at a discount from the current market price (based on a
15-day market price average). Effective October 9, 1992, the Company amended its
dividend reinvestment plan to lower the discount rate from 5% to 3 1/2%. By
offering newly issued shares of its common stock, the proceeds of the equity
sales are added to the Company's stockholders' equity.
Adjustable Rate Cumulative Preferred Stock: On March 2, 1983, the Company
issued 800,000 shares of $25.00 stated value Adjustable Rate Cumulative
Preferred Stock. The holders of the preferred stock are entitled to receive,
when and as declared by the Company's Board of Directors, cumulative preferred
dividends payable quarterly in cash at the Applicable Rate in effect at the time
of declaration. The Applicable Rate for any dividend period is 2 3/4% below the
highest of the three-month "Treasury Bill Rate," the "Ten-Year Constant Maturity
Rate," and the "Twenty-Year Constant Maturity Rate" determined in advance of the
dividend period. However, the Applicable Rate for any dividend period will not
be less than 6% per annum nor greater than 12% per annum. The preferred stock is
redeemable at the option of the Company at $25.00 per share.
40
<PAGE> 15
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Share Purchase Rights: The Company's Shareholder Rights Plan
provides that attached to each share of Common Stock is one Right which, when
exercisable, entitles the holder of the Right to purchase one-hundredth of a
share of Series B Junior Participating Preferred Stock at a Purchase Price of
$70, subject to adjustment. In certain events (such as a person or group
acquiring or announcing an intent to acquire 15% or more of the Common Stock or
the Company's Board of Directors determining that 10% of more of the Common
Stock has been acquired by an Adverse Person as defined in the Shareholder
Rights Plan), exercise of the Rights would entitle the holder to Common Stock of
the Company or a surviving corporation with a market value of two times the
exercise Purchase Price. Accordingly, exercise of the Rights may cause
substantial dilution to a person that attempts to acquire the Company. The
Rights automatically attach to each outstanding share of Common Stock. There is
no monetary value presently assigned to the Rights, and they do not trade
separately from the shares of Common Stock unless and until they become
exercisable. The Rights expire on January 15, 2000. The Plan may have certain
antitakeover effects, although it is not intended to preclude any prospective
offer for all outstanding shares of Common Stock at a fair price and otherwise
in the best interest of the Company and its shareholders as determined by the
Company's Board of Directors. However, a shareholder could potentially disagree
with the Company's Board of Directors' determination of what constitutes a fair
price or the best interests of the Company and its shareholders.
NOTE 13. NONINTEREST INCOME
The major components of noninterest income for 1994, 1993 and 1992
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Trust Income............................................. $11,875 $11,125 $10,899
Service Fees on Deposit Accounts......................... 18,523 16,936 16,233
Securities Gains......................................... 344 702 710
Other Income:
Mortgage Banking Revenue............................... 9,782 9,795 3,000
Service Fees on Loans.................................. 1,686 1,956 1,555
Annuity Commissions.................................... 2,239 2,127 1,848
Mutual Fund Commissions................................ 1,455 1,720 --
Safe Deposit Income.................................... 1,405 1,397 1,354
All Other.............................................. 4,689 5,559 6,106
------- ------- -------
Total Other Income.................................. 21,256 22,554 13,863
------- ------- -------
Total Noninterest Income....................... $51,998 $51,317 $41,705
======= ======= =======
</TABLE>
NOTE 14. EMPLOYEE BENEFIT PLANS
Pension Plans: The Company has a defined benefit plan covering
substantially all of its employees. The benefits are based on years of service
and the employee's compensation during the last three years of employment. The
Company's funding policy is to contribute annually the maximum amount that can
be deducted for Federal income tax purposes. In addition, the Company maintains
a supplemental executive retirement plan ("SERP") for the benefit of certain key
officers. Total pension expense, including SERP benefits, was $1,973,000,
$1,657,000 and $1,666,000 for 1994, 1993 and 1992, respectively.
Net pension cost for 1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service Cost--Benefits Earned During the Period.......... $ 2,368 $ 2,201 $ 2,120
Interest Cost on Projected Benefit Obligation............ 3,199 3,009 2,756
Actual Return on Plan Assets............................. 10 (1,745) (872)
Net Amortization and Deferral............................ (3,604) (1,808) (2,338)
------- ------- -------
Total Pension Cost............................. $ 1,973 $ 1,657 $ 1,666
======= ======= =======
</TABLE>
41
<PAGE> 16
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plan's funded status:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial Present Value of Obligations:
Accumulated Benefit Obligation*................................. $(27,785) $(28,372)
======== ========
Projected Benefit Obligation.................................... $(39,622) $(42,230)
Plan Assets at Fair Value, Primarily Listed Stocks and U.S.
Bonds............................................................ 37,658 38,586
-------- --------
Deficiency of Assets Under Projected Benefit Obligation...... (1,964) (3,644)
Unrecognized Net Asset Being Recognized Over 16 Years............. (1,651) (1,815)
Unrecognized Prior Service Cost (Gain) Due to Amendments.......... 344 (95)
Unrecognized Net Gain Since Transition............................ (2,778) (808)
-------- --------
Unfunded Accrued Cost........................................ $ (6,049) $ (6,362)
======== ========
Weighted-Average Discount Rate.................................... 8.50% 7.50%
Expected Long-Term Rate of Return on Plan Assets.................. 8.50 9.00
Rate of Increase in Future Compensation Levels.................... 5.00 5.00
</TABLE>
- ---------------
* Including Vested Benefits of $(26,636) in 1994 and $(27,556) in 1993.
Profit Sharing Plan: The Company maintains a qualified profit sharing plan
for eligible employees. A portion of the Company's earnings are contributed
annually and participants may contribute up to 5% of their salaries on a pretax
basis, which is matched by the Company, and up to 10% on an after-tax basis. The
Company's contributions are based on its performance and are determined based on
a calculation approved by its Board of Directors. The contributions under this
plan were $2,677,000, $2,736,000 and $1,880,000 for 1994, 1993 and 1992,
respectively.
Stock Incentive Plan: The Company maintains a stock incentive plan for the
benefit of officers and key employees. Under the terms of the plan, selected
participants may receive awards of stock options, performance share units (which
may be accompanied by dividend equivalent rights) or restricted stock. At
December 31, 1994, the plan had 503,389 awards available which can be used for
either stock options, performance share units or restricted stock. The plan is
administered by the Compensation Committee of the Company's Board of Directors,
which determines the recipients and terms of the various options and awards,
subject to the provisions of the plan.
Under the terms of the stock incentive plan, options to purchase shares of
the Company's Common Stock are granted at a price equal to the market price of
the stock at the date of grant. The options vest in two years and expire in 10
years from the date of grant. Options granted prior to June 1988 did not have a
vesting date. At December 31, 1994 and 1993, stock options covering 972,868 and
737,922 shares of the Company's Common Stock were exercisable under the plan.
The following is a summary of transactions:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Outstanding at January 1,........................................ 1,507,471 1,554,220
Granted.......................................................... 117,150 229,088
Forfeited........................................................ (37,240) (145,431)
Exercised at:
$1.51 to $17.59................................................ (293,534)
---------
$1.51 to $18.75................................................ (130,406)
---------
Outstanding at December 31, at Option Prices of $1.51 to
$24.11.......................................................... 1,293,847 1,507,471
======== ========
</TABLE>
42
Other Postretirement Benefits: The Company also provides certain health
care and life insurance benefits for retired employees. Substantially all of the
company's employees may become eligible for those benefits if they satisfy
certain age and service requirements while working for the Company.
<PAGE> 17
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company prospectively adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in the first quarter of 1993. Since
the Company changed to the accrual method of accounting for postretirement
medical and life insurance benefits in 1989, the impact of adopting SFAS No. 106
was not material.
The cost of providing these benefits for 1994, 1993 and 1992 was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Service Cost-Benefits Earned During the Period............... $ 252 $ 169 $ 184
Interest Cost on Projected Benefit Obligation................ 448 371 340
Amortization of Unrecognized Gain............................ (165) (261) (284)
----- ----- -----
Net Postretirement Benefit Cost............................ $ 535 $ 279 $ 240
===== ===== =====
</TABLE>
The following table sets forth the plan's funded status:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees......................................................... $(2,905) $(3,440)
Fully Eligible Active Plan Participants.......................... (479) (607)
Other Active Plan Participants................................... (1,623) (1,595)
------- -------
Total Accumulated Postretirement Benefit Obligation........... (5,007) (5,642)
Unrecognized Gain Being Recognized Over 17.4 Years................. (4,278) (3,538)
------- -------
Accrued Postretirement Benefit Cost........................... $(9,285) $(9,180)
======= =======
Weighted-Average Discount Rate..................................... 8.50% 7.50%
</TABLE>
Postretirement benefits are estimated based on certain actuarial
assumptions and recognized on an accrual basis over the period in which active
employees become eligible for such postretirement benefits. The assumed health
care cost rate is 10% for 1995 and is projected to decline by 1% per year to a
floor of 6% in 1999. The effect of a 1% increase in the weighted-average health
care cost trend rate would be to increase the sum of service cost and interest
cost by 19% and to increase the accumulated postretirement benefit obligation by
15%. The weighted-average health care trend rate used to determine the
accumulated postretirement benefit obligation for 1993 was 7.5%.
43
<PAGE> 18
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. NONINTEREST EXPENSE
The major components of noninterest expense for 1994, 1993 and 1992
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Salaries and Employee Benefits........................ $ 86,087 $ 84,624 $ 78,436
Net Occupancy Expense................................. 18,868 18,619 18,890
Furniture and Equipment Expense....................... 9,496 8,927 8,908
Restructuring and Other Merger-Related Costs:
Loss on Sale of Assets.............................. 35,390 -- --
Severance, Outplacement and Benefits Continuation... 5,404 -- --
Facilities Closing and Consolidation Costs.......... 5,776 -- --
Transaction Expenses................................ 2,385 -- --
-------- -------- --------
Restructuring and Other Merger-Related Costs..... 48,955 -- --
Other Expenses:
Advertising and Marketing........................... 4,761 4,443 2,940
External Data Processing Services................... 2,839 4,045 4,365
FDIC Insurance...................................... 10,050 10,487 9,349
Legal and Consulting................................ 5,110 6,099 6,892
Other Real Estate Owned Expense..................... 3,053 6,849 9,258
Postage and Delivery................................ 2,820 2,894 2,605
Stationery, Supplies and Printing................... 2,331 3,322 3,709
Telecommunication................................... 3,160 2,754 2,516
All Other........................................... 16,156 14,787 15,476
-------- -------- --------
Total Other Expenses............................. 50,280 55,680 57,110
-------- -------- --------
Total Noninterest Expense................... $213,686 $167,850 $163,344
======== ======== ========
</TABLE>
44
<PAGE> 19
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 effective January
1, 1992. Both the cumulative effect of this accounting change and its impact on
earnings for 1992 were not material to the Company's results of operations.
During 1994, the Company acquired Crestmont, which had elected to adopt
prospectively SFAS No. 109 on April 1, 1993. The cumulative effect of adopting
SFAS No. 109 by Crestmont resulted in a $5,303,000 increase to 1993 earnings.
Certain deferred tax information for 1993 and 1992 has been adjusted from
amounts previously presented to conform with tax returns filed for these
periods.
The components of the income tax provision are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current Federal Income Taxes............................ $ 10,142 $19,108 $16,650
Current State Income Taxes.............................. 2,284 4,920 4,653
Deferred Federal Income Tax Expense (Benefit)........... 3,955 (183) (4,744)
Deferred State Income Tax Expense (Benefit)............. 259 (856) (219)
-------- ------- -------
Applicable Income Tax Expense................. 16,640 22,989 16,340
Deferred Tax (Benefit) Expense on Unrealized (Losses)
Gains on Securities Available for Sale:
Federal Income Tax (Benefit) Expense............... (13,941) 4,813 --
State Income Tax (Benefit) Expense................. (2,195) 283 --
-------- ------- -------
(16,136) 5,096 --
-------- ------- -------
Total......................................... $ 504 $28,085 $16,340
======== ======= =======
</TABLE>
In 1993, the Revenue Reconciliation Act of 1993 was enacted increasing the
top Federal corporate income tax rate from 34% to 35% for tax years beginning on
or after January 1, 1993. This increase in the tax rate did not have a material
effect on the Company's results of operations. A reconciliation, restated to
reflect the pooling of Crestmont, of the statutory Federal tax rate to the
effective tax rate is presented below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Tax Applicable to Total Income at Statutory Rate................. 35.0% 35.0% 34.0%
Tax Benefit Attributable to Tax-Exempt Income.................... (3.4) (3.3) (5.2)
State Income Taxes (Net of Federal Income Tax Benefit)........... 4.0 3.7 6.2
Low-Income Housing Credits....................................... (3.7) (1.9) (.3)
Merger-Related Bad Debt Recapture................................ 9.6 -- --
Other............................................................ (1.0) (.8) (1.9)
---- ---- ----
Total Income Tax Provision..................................... 40.5% 32.7% 32.8%
==== ==== ====
</TABLE>
45
<PAGE> 20
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1994 and 1993, the tax effects of temporary differences
that give rise to a significant portion of deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Allowance for Loan Losses...................................... $33,850 $38,144
Unrealized Losses on Securities Available for Sale............. 11,040 --
Accrued Expenses............................................... 6,674 6,921
Interest on Nonaccrual Loans................................... 4,007 3,902
Other Postretirement Benefits.................................. 3,769 3,769
Loan Fees...................................................... 3,298 3,266
Depreciation................................................... 2,406 2,121
Other.......................................................... 1,188 1,706
Valuation Allowance............................................ (4,150) (5,081)
------- -------
Total Deferred Tax Asset.................................... 62,082 54,748
------- -------
Deferred Tax Liabilities:
Unrealized Gains on Securities Available for Sale.............. -- 5,096
Mortgage Servicing Rights...................................... -- 98
Other.......................................................... 227 552
------- -------
Total Deferred Tax Liability................................ 227 5,746
------- -------
Net Deferred Tax Asset.................................... $61,855 $49,002
======= =======
</TABLE>
The valuation allowance for deferred tax assets was $4,150,000 and
$5,081,000 at December 31, 1994 and 1993. The net change in the valuation
allowance for the year ended December 31, 1994 was a decline of $931,000. Such
valuation allowance is included in other assets on the consolidated balance
sheet for these dates.
NOTE 17. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk: In the normal course of
business, the Company is a party to financial instruments with off-balance sheet
risk in order to meet the financing needs of its customers and to reduce its own
exposure to fluctuations in interest rates. These financial instruments include
commitments to extend credit and letters of credit. Those instruments involve,
to varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated balance sheet. Management does not expect
any material losses to result from these transactions.
46
<PAGE> 21
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of such financial instruments outstanding at December 31, 1994
and 1993 follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Commitments to Extend Credit:
Home Equity Lines.............................................. $242,273 $213,646
Commitments to Fund Loans Secured by Real Estate............... 22,829 61,861
Other Unused Commitments....................................... 473,152 385,282
Letters of Credit:
Standby Letters of Credit...................................... 38,829 44,026
Commercial Letters of Credit................................... 2,116 1,984
Notional Value of:
Interest Rate Swap Agreements.................................. 140,000 147,580
Interest Rate Cap Agreement.................................... 42,000 42,000
</TABLE>
The commitment and letter of credit amounts in the above table represent
the Company's maximum potential credit loss in the event that a commitment to
extend credit or letter of credit is drawn upon and the counterparty defaults.
The actual credit risk on these contracts rests upon the customer's
creditworthiness and the value of the collateral held. The Company employs the
same credit policies for these instruments as for those recorded on the balance
sheet.
The Company enters into interest rate swap agreements to hedge its
on-balance sheet exposures to fluctuations in interest rates after conducting a
review of the current and prospective financial implications of the transaction
by its Asset/Liability Management Committee. At December 31, 1994, the average
remaining life of outstanding interest rate swap agreements was 3.2 years. These
swap agreements primarily involved receiving a fixed rate of interest in
exchange for the payment of a short-term, variable rate of interest. During
November 1994, the Company terminated $64,659,000 in swap agreements resulting
in a deferred loss of $3,441,000. The unamortized deferred swap loss amounted to
$3,322,000 at year-end 1994 and had a remaining weighted-average amortization
period of 3.9 years. The Company also has a single interest rate cap agreement
in the amount of $42,000,000 that was originally purchased by Crestmont and
matured in January 1995. The notional value presented in the preceding table is
used to express the dollar amount of these agreements outstanding and does not
represent the actual amount of credit exposure to the Company. Such risk is much
less and is controlled though credit approvals, limits and monitoring
procedures.
The Company enters into commitments to extend credit to customers at
specified rates and for specific purposes, as long as there have been no
violations of any contractual conditions. All of the Company's commitments are
contingent upon customers maintaining an appropriate level of creditworthiness.
These commitments generally have fixed expiration dates, may have other
termination clauses and may require the payment of fees. Since 46% and 64% of
these obligations at December 31, 1994 and December 31, 1993 had a term of one
year or less and many are expected to expire without being drawn upon, the
amounts shown in the preceding table are not representative of future liquidity
requirements. The credit condition of each customer is evaluated on an
individual basis by the Company, as is the amount and nature of collateral
pledged by the customer upon the extension of credit. The collateral received
varies but may include accounts receivable, inventory, marketable securities,
residential properties, plant and equipment, and income-producing commercial
properties. Excluding retail checking credit lines of $53,988,000 and
$46,576,000 at December 31, 1994 and 1993, collateral is required for a
significant portion of the remaining commitments outstanding.
Letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party and fall into two
categories, standby and commercial. Standby letters of credit are issued as
either financial or performance letters of credit. Financial letters of credit
are typically issued by the Company to support such transactions as tax-exempt
borrowing arrangements, such as industrial development obligations, while
performance letters of credit are issued to support the satisfactory completion
of public and private construction projects. At December 31, 1994 and 1993, the
weighted-average life of these guarantees
47
<PAGE> 22
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was 1.7 and 1.3 years, respectively. Commercial letters of credit are issued to
finance the actual movement of goods between buyers and sellers and are
generally not issued for periods in excess of one year. Under such agreements, a
seller of merchandise is assured that prompt payment will be made by the buyer,
if the documents of the seller are drawn in compliance with the terms and
conditions of the underlying commercial letter of credit. The credit risk
associated with the issuance of both standby and commercial letters of credit is
essentially identical to that involved in the extension of credit facilities.
The Company requires collateral, generally in the form of an interest in the
underlying property being financed or, in some cases, cash collateral.
Lease Commitments: Aggregate minimum rental commitments on real property
at December 31, 1994, under noncancellable leases having initial or remaining
terms in excess of one year follow:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1995...................................................................... $ 8,906
1996...................................................................... 8,182
1997...................................................................... 7,035
1998...................................................................... 5,978
1999...................................................................... 5,181
Thereafter................................................................ 63,908
--------------
Total........................................................... $ 99,190
===========
</TABLE>
Certain leases provide for increases based upon the Department of Labor
Consumer Price Index and increases in real estate taxes. Net rental expense,
including computer and equipment, was approximately $11,034,000, $10,725,000 and
$10,512,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
Other Contingencies: The Company is subject to claims and lawsuits which
arise in the ordinary course of business. It is the best judgment of management,
after consultation with its legal advisors, that the financial position of the
Company will not be materially affected by the final outcome of these legal
proceedings and that adequate provision has been made therefor in the
accompanying consolidated financial statements.
The Company has entered into agreements with six executive officers
providing for the payment of cash and other benefits to them in the event of
their voluntary or involuntary termination within two years following a change
in control of the Company. Payment under these agreements would consist of,
among other things, a lump sum payment amounting to approximately two to three
years of annual gross compensation as defined in these agreements.
NOTE 18. THE SUMMIT BANCORPORATION (PARENT COMPANY ONLY)
At year-end 1994, the Company had a single wholly owned subsidiary in
operation, the Bank. The earnings of the Bank are recognized by the Company
using the equity method of accounting. Accordingly, earnings of the Bank are
recorded as increases in the Company's investment in the Bank and dividends paid
reduce the Company's investment in the Bank.
Certain limitations exist on the availability of subsidiary bank
undistributed net assets for the payment of dividends to the Company without the
prior approval of bank regulatory authorities. The Bank is restricted by
limitations imposed under New Jersey State law that permit the payment of
dividends to the extent that there is no impairment of the capital accounts of
the bank and either the bank will have a surplus of not less than 50% of its
capital stock, or the dividend will not reduce the surplus of the bank. The Bank
is also subject to FDIC regulations that require it to maintain certain minimum
capital ratios. Based on the more restrictive of these limitations (i.e., the
maintenance of a total risk-based capital of at least 8%, a Tier 1 risk-based
ratio of at least 4% and a Leverage Ratio of at least 4%), the amount available
for the payment of dividends was $123,180,000 of the $321,368,000 in total
undistributed net assets of the Bank at December 31, 1994.
48
<PAGE> 23
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Federal Reserve regulations restrict the amount of loans or advances that a
subsidiary bank may extend to their affiliates (including the Parent Company).
These regulations prohibit a subsidiary bank from lending to their affiliates
unless such loans are secured by specific collateral. Loans to any one affiliate
are generally limited to 10% of a subsidiary bank's capital and surplus with the
aggregate amount of such loans to all affiliates limited to 20% of that
subsidiary bank's capital and surplus. Based upon these regulations, the Bank
could have advanced, prior to the declaration of the maximum amount of dividends
mentioned above, up to $37,507,000 to the Parent Company.
Based upon the dividend and loan restrictions mentioned above, the maximum
amount of funds which the Bank could provide to the Parent Company in the form
of dividends and loans was $148,369,000 at December 31, 1994.
Condensed financial statements of the Parent Company Only are presented
below:
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Dividends from Subsidiaries.............................. $24,199 $17,838 $12,440
Interest and Dividends on Securities..................... 1,261 2,294 3,260
Interest on Short-Term Investments....................... 2,158 906 1,253
Securities Gains (Losses)................................ 123 643 (567)
Other Income............................................. 125 9,276 8,360
------- ------- -------
Total Income................................... 27,866 30,957 24,746
EXPENSES................................................. 2,016 10,152 10,290
------- ------- -------
Income Before Taxes...................................... 25,850 20,805 14,456
Applicable Income Tax Expense (Benefit).................. 356 300 (2,652)
------- ------- -------
Income Before Equity in Undistributed Income of
Subsidiaries........................................... 25,494 20,505 17,108
Equity in Undistributed (Loss) Income of Subsidiaries.... (1,094) 30,219 16,379
------- ------- -------
Net Income..................................... $24,400 $50,724 $33,487
======= ======= =======
</TABLE>
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Due from Banks............................................. $ 990 $ 908
Short-Term Investments.............................................. 77,946 56,739
Investment Securities............................................... 4,025 6,439
Securities Available for Sale....................................... 44,029 50,107
Investment in Subsidiaries.......................................... 325,783 348,602
Other Assets........................................................ 1,760 17,728
-------- --------
Total Assets.............................................. $454,533 $480,523
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Expenses and Other Liabilities.............................. $ 7,963 $ 26,163
Long-Term Debt...................................................... 15,000 15,000
Stockholders' Equity................................................ 431,570 439,360
-------- --------
Total Liabilities and Stockholders' Equity................ $454,533 $480,523
======== ========
</TABLE>
49
<PAGE> 24
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS (PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income........................................... $ 24,400 $ 50,724 $ 33,487
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Equity in Undistributed Loss (Income)
of Subsidiaries............................... 1,094 (30,219) (16,379)
Securities (Gains) Losses....................... (123) (643) 567
Decrease (Increase) in Other Assets............. 15,967 (4,035) (9,587)
(Decrease) Increase in Accrued Expenses and
Other Liabilities............................. (21,194) 1,521 2,044
Decrease in Accrued Interest Payable............ -- -- (115)
Increase in Investment in Bank Subsidiaries..... (3,950) -- (18,525)
-------- -------- --------
Net Cash Provided (Used) by Operating
Activities................................. 16,194 17,348 (8,508)
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of Investment Securities................... (261) (1,040) (177,193)
Maturities of Investment Securities.................. 2,674 33,920 120,152
Proceeds from Sales of Investment Securities......... -- -- 5,944
Purchases of Securities Available for Sale........... (71,602) (208,625) --
Maturities of Securities Available for Sale.......... 85,068 214,149 --
Proceeds from Sales of Securities Available for
Sale............................................... 940 4,410 --
(Increase) Decrease in Short-Term Investments........ (21,207) (45,557) 24,142
-------- -------- --------
Net Cash Used Provided by Investing Activities..... (4,388) (2,743) (26,955)
-------- -------- --------
FINANCING ACTIVITIES:
Long-Term Debt Matured or Repurchased................ -- -- (5,000)
Cash Dividends Paid.................................. (24,225) (21,478) (19,984)
Common Stock Issued.................................. 9,706 6,779 60,178
Adjustment Related to Acquisition.................... 2,795 -- --
-------- -------- --------
Net Cash (Used) Provided by Financing Activities... (11,724) (14,699) 35,194
-------- -------- --------
Net Increase (Decrease) in Cash and Due from Banks... 82 (94) (269)
Cash and Due from Banks at January 1,................ 908 1,002 1,271
-------- -------- --------
Cash and Due from Banks at December 31,.............. $ 990 $ 908 $ 1,002
======== ======== ========
</TABLE>
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following fair value estimates, methods and assumptions were used to
measure the fair value of each class of financial instruments for which it is
practical to estimate that value:
Cash and Short-Term Investments: For such short-term investments, the
carrying amount was considered to be a reasonable estimate of fair value.
Securities and Trading Account Assets: For marketable equity securities
available for sale and trading account assets, fair values were based on quoted
market prices or dealer quotes. For other securities held as investments or
available for sale, quoted market prices were used, if available, to determine
fair value.
50
<PAGE> 25
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
If a quoted market price was not available, fair values were estimated using
quoted market prices for similar securities.
Loans: Fair values were estimated for portfolios of performing loans with
similar financial characteristics. For certain analogous categories of loans,
such as residential mortgages and home equity loans, fair value was estimated
using the quoted market prices for securities backed by similar loans, adjusted
for differences in loan characteristics. The fair value of other performing loan
types was estimated by discounting the future cash flows using market discount
rates that reflect the credit and interest-rate risk inherent in the loan.
Fair value for significant nonperforming loans was based on recent external
appraisals of collateral securing such loans. If such appraisals were not
available, estimated cash flows were discounted employing a rate incorporating
the risk associated with such cash flows.
Deposit Liabilities: The fair value of demand deposits, savings deposits
and money market accounts was the amount payable on demand at December 31, 1994
and 1993. The fair value of time deposits was based on the discounted value of
contractual cash flows. The discount rate was estimated utilizing the rates
currently offered for deposits of similar remaining maturities.
Short-Term Borrowings: For such short-term borrowings, the carrying amount
was considered to be a reasonable estimate of fair value.
Long-Term Debt: Quoted market prices were used for instruments on which
such quotes were available. If quoted market prices were not available, the fair
value of long-term debt was estimated based on rates currently available to the
Company for debt with similar terms and remaining maturities.
Commitments to Extend Credit and Letters of Credit: Since the Company's
loan commitments typically have either a floating rate of interest or have terms
of less than one year and are at the prevailing market rate of interest and
since its letters of credit specify market rates of interest if drawings are
made, the deferred income amounts on such off-balance sheet financial
instruments approximated their estimated fair value.
Interest Rate Swap Agreements: The fair value of such agreements was based
on the net present value of the expected net cash flows using current market
interest rates. At December 31, 1994, the fair value of such agreements was a
payable of $8,665,000, while at December 31, 1993 there was no appreciable gain
or loss on these instruments.
The estimated fair values of the Company's financial instruments at
December 31, 1994 and 1993 are presented in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1994 1993
------------------------- -------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and Short-Term Investments..... $ 269,873 $ 269,873 $ 466,492 $ 466,492
Investment Securities............... 707,999 669,154 791,808 789,949
Securities Available for Sale....... 923,414 923,414 830,880 830,880
Trading Account Securities.......... 1,357 1,357 1,752 1,752
Loans............................... 3,448,605 3,137,718
Less: Allowance for Loan Losses..... 91,169 94,874
---------- ----------
Net Loans................... 3,357,436 3,348,426 3,042,844 3,123,743
Financial Liabilities:
Deposits............................ 4,409,318 4,397,593 4,412,727 4,420,863
Short-Term Borrowings............... 231,028 231,028 180,389 180,389
Long-Term Debt...................... 338,763 323,314 251,800 254,683
</TABLE>
Limitations: The foregoing fair value estimates were made at December 31,
1994 and 1993, based on pertinent market data and relevant information on the
financial instrument. These estimates do not include any premium or discount
that could result from an offer to sell at one time the Company's entire
holdings of a particular financial instrument or category thereof. Since no
market exists for a substantial portion of the Company's financial instruments,
fair value estimates were necessarily based on judgments with respect to
51
<PAGE> 26
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future expected loss experience, current economic conditions, risk assessments
of various financial instruments involving a myriad of individual borrowers, and
other factors. Given the innately subjective nature of these estimates, the
uncertainties surrounding them and the matters of significant judgment that must
be applied, these fair value estimations cannot be calculated with precision.
Modifications in such assumptions could meaningfully alter these estimates.
Since these fair value approximations were made solely for on-balance and
off-balance sheet financial instruments at December 31, 1994 and 1993, no
attempt was made to estimate the value of anticipated future business or the
value of nonfinancial statement assets and liabilities. For instance, the
Company has certain fee-generating activities (e.g., its trust department and
mortgage banking operation) that were not considered in these estimates since
these activities are not financial instruments. Other important elements which
are not deemed to be financial assets or liabilities include the value of the
Company's retail branch delivery system, its existing core deposit base,
premises and equipment, and goodwill. Furthermore, certain tax implications
related to the realization of the unrealized gains and losses could have a
substantial impact on these fair value estimates and have not been incorporated
into many of the estimates.
NOTE 20. RECENT ACCOUNTING PRONOUNCEMENT
On May 31, 1993, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 114, "Accounting by Creditors for the Impairment of a Loan." A
subsequent amendment, SFAS No. 118, "Accounting by Creditors for the Impairment
of a Loan--Income Recognition and Disclosures," was issued in October 1994.
Adoption of SFAS No. 114, as amended, is required for financial statements
issued for fiscal years beginning after December 15, 1994. It prescribes the
recognition criteria for loan impairment and the measurement methods for certain
impaired loans and loans whose terms are modified in troubled debt
restructurings and amends SFAS No. 5, "Accounting for Contingencies," and SFAS
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings."
The Company's adoption in the first quarter of 1995 of SFAS No. 114, as amended,
will not have a material effect on its future financial position or results of
operations.
NOTE 21. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The results of operations on a quarterly basis are presented in the
following tables:
<TABLE>
<CAPTION>
1994 1994*
------------------------------------- -----------------
FOURTH THIRD SECOND FIRST SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income.................. $53,990 $54,705 $52,513 $49,515 $44,491 $41,348
Provision for Loan Losses............ 1,200 1,695 2,550 2,550 1,800 1,800
Noninterest Income................... 12,018 11,752 12,894 15,334 10,122 11,904
Noninterest Expense.................. 38,976 89,444 42,611 42,655 34,434 34,121
Net Income (Loss).................... 16,543 (18,466) 13,468 12,855 12,279 11,329
Net Income (Loss) Per Share.......... .49 (.57) .40 .38 .43 .40
</TABLE>
<TABLE>
<CAPTION>
1993 1993*
------------------------------------- -----------------
FOURTH THIRD SECOND FIRST SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income.................. $50,452 $52,004 $51,448 $50,049 $43,370 $41,868
Provision for Loan Losses............ 2,925 4,425 4,925 4,925 3,675 3,675
Noninterest Income................... 14,392 12,350 13,025 11,550 11,992 10,630
Noninterest Expense.................. 43,962 42,627 41,258 40,003 35,268 33,996
Net Income........................... 12,414 11,811 11,837 14,662 10,622 9.944
Net Income Per Share................. .37 .36 .36 .45 .37 .35
</TABLE>
- ---------------
* Represents quarterly data previously reported on Form 10-Q for the three
months ending March 31, 1994 and 1993 and June 30, 1994 and 1993,
respectively, prior to the Crestmont and Lancaster mergers. Per share data has
been adjusted for a 10% stock dividend.
52
<PAGE> 1
PART I. FINANCIAL INFORMATION
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . $ 259,414 $ 261,665
Federal Funds Sold and Other
Short-Term Investments . . . . . . . . . . . . . . . . . . . . 68,883 8,208
Investment Securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 12,319 15,689
U.S. Government Agency . . . . . . . . . . . . . . . . . . . . 667,121 390,695
State and Municipal. . . . . . . . . . . . . . . . . . . . . . 22,008 47,919
Other Securities . . . . . . . . . . . . . . . . . . . . . . . 308,407 253,696
--------- ---------
Total Investment Securities (Market
Value of $1,005,224 and $669,154). . . . . . . . . . 1,009,855 707,999
Securities Available for Sale:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 30,025 96,404
U.S. Government Agency . . . . . . . . . . . . . . . . . . . . 487,839 615,301
State and Municipal. . . . . . . . . . . . . . . . . . . . . . 17,519 -
Other Securities . . . . . . . . . . . . . . . . . . . . . . . 144,167 211,709
--------- ---------
Total Securities Available for Sale . . . . . . . . . 679,550 923,414
Trading Account Securities. . . . . . . . . . . . . . . . . . . . 623 1,357
Loans . . . . . . . . . . . . . . . . . . . . . . . . . 3,503,775 3,448,605
Less: Allowance for Loan Losses. . . . . . . . . . . . . . . . . 90,819 91,169
--------- ---------
Net Loans . . . . . . . . . . . . . . . . . . . . . . 3,412,956 3,357,436
Premises and Equipment. . . . . . . . . . . . . . . . . . . . . . 43,667 45,034
Other Real Estate Owned . . . . . . . . . . . . . . . . . . . . . 13,401 15,830
Accrued Interest Receivable . . . . . . . . . . . . . . . . . . . 34,776 29,600
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 96,175 116,922
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . . . . . $5,619,300 $5,467,465
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . $ 800,273 $ 781,244
Savings and NOW Accounts . . . . . . . . . . . . . . . . . . . 1,500,466 1,620,081
Money Market Accounts. . . . . . . . . . . . . . . . . . . . . 847,542 770,987
Certificates of Deposits of $100,000 and Over. . . . . . . . . 347,399 223,326
Other Time . . . . . . . . . . . . . . . . . . . . . . . . . . 1,145,812 1,013,680
--------- ---------
Total Deposits. . . . . . . . . . . . . . . . . . . . 4,641,492 4,409,318
Federal Funds Purchased and Other
Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . 157,367 231,028
Accrued Expenses and Other Liabilities. . . . . . . . . . . . . . 65,456 56,786
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . 270,402 338,763
--------- ---------
Total Liabilities . . . . . . . . . . . . . . . . . . 5,134,717 5,035,895
Stockholders' Equity:
Preferred Stock, No Par Value, Authorized 12,000 Shares
Cumulative Adjustable Rate
Issued and Outstanding 504 and 800 Shares. . . . . . . . . . 12,612 20,000
Common Stock, No Par Value,
Authorized 50,000 Shares, Issued 33,982 and
Issued and Outstanding 33,439 Shares . . . . . . . . . . . . 50,172 49,320
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . 315,700 305,075
Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . 105,088 72,215
Common Stock in Treasury, at Cost, 84 Shares . . . . . . . . . (1,632) -
Net Unrealized Gains (Losses) on Securities
Available for Sale. . . . . . . . . . . . . . . . . . . . . 2,643 (15,040)
--------- ---------
Total Stockholders' Equity. . . . . . . . . . . . . . 484,583 431,570
--------- ---------
Total Liabilities and
Stockholders' Equity . . . . . . . . . . . . . . . $5,619,300 $5,467,465
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 2
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
-------- -------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans . . . . . . . . . . . . . . . $ 74,111 $ 63,198 $216,902 $178,040
Interest and Dividends on Investment Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . 14,956 11,046 40,461 34,665
Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . 340 566 1,340 1,950
Interest and Dividends on Securities Available for Sale:
Taxable . . . . . . . . . . . . . . . . . . . . . . . 10,020 12,674 32,815 31,735
Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . 602 335 1,637 1,111
Interest on Trading Account Securities . . . . . . . . . 14 16 37 59
Interest on Federal Funds Sold and
Other Short-Term Investments . . . . . . . . . . . . . 923 574 3,373 3,083
------- ------ ------- -------
Total Interest Income . . . . . . . . . . . . . . . 100,966 88,409 296,565 250,643
------- ------ ------- -------
INTEREST EXPENSE:
Interest on Deposits . . . . . . . . . . . . . . . . . . 39,750 26,765 110,279 76,061
Interest on Federal Funds Purchased and
Other Short-Term Borrowings. . . . . . . . . . . . . . 2,286 2,949 8,195 6,241
Interest on Long-Term Debt . . . . . . . . . . . . . . . 5,206 3,990 15,685 11,608
------- ------ ------- -------
Total Interest Expense. . . . . . . . . . . . . . . 47,242 33,704 134,159 93,910
------- ------ ------- -------
NET INTEREST INCOME. . . . . . . . . . . . . . . . . . . 53,724 54,705 162,406 156,733
Provision for Loan Losses. . . . . . . . . . . . . . . . 1,200 1,695 3,600 6,795
------- ------ ------- -------
Net Interest Income After Provision for Loan Losses. . . 52,524 53,010 158,806 149,938
------- ------ ------- -------
NONINTEREST INCOME:
Trust Income . . . . . . . . . . . . . . . . . . . . . . 3,000 2,800 8,740 8,501
Service Fees on Deposit Accounts . . . . . . . . . . . . 4,990 4,797 15,112 13,378
Securities Gains . . . . . . . . . . . . . . . . . . . . 789 - 1,610 180
Other Income . . . . . . . . . . . . . . . . . . . . . . 4,992 4,155 12,387 17,921
------- ------ ------- -------
Total Noninterest Income. . . . . . . . . . . . . . 13,771 11,752 37,849 39,980
------- ------ ------- -------
NONINTEREST EXPENSE:
Salaries and Employee Benefits . . . . . . . . . . . . . 20,237 21,482 60,625 66,228
Net Occupancy Expense. . . . . . . . . . . . . . . . . . 4,209 4,613 12,995 14,444
Furniture and Equipment Expense. . . . . . . . . . . . . 2,303 2,309 7,032 6,880
Loss on Sale of Assets . . . . . . . . . . . . . . . . . - 35,390 - 35,390
Restructuring and Other Merger-Related Costs . . . . . . - 13,565 - 13,565
Other Expenses . . . . . . . . . . . . . . . . . . . . . 11,248 12,085 33,127 38,203
------- ------ ------- -------
Total Noninterest Expense . . . . . . . . . . . . . 37,997 89,444 113,779 174,710
------- ------ ------- -------
Income Before Income Taxes . . . . . . . . . . . . . . . 28,298 (24,682) 82,876 15,208
Applicable Income Tax Expense (Benefit). . . . . . . . . 10,160 (6,216) 29,524 7,351
------- ------ ------- -------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . $ 18,138 $(18,466) $ 53,352 $ 7,857
====== ====== ======= =======
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS . . . . . . . . . . . . . . . . . $ 17,949 $(18,766) $ 52,674 $ 6,957
====== ====== ======= =======
Net Income (Loss) Per Common Share . . . . . . . . . . . $.53 $(.57) $1.56 $.21
Cash Dividends Declared Per Common Share . . . . . . . . .21 .19 .63 .57
Weighted Average Shares Outstanding. . . . . . . . . . . 33,802 33,124 33,658 32,997
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 3
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BEGINNING BALANCE. . . . . . . . . . . . . . . . . . . . $467,304 $458,851 $431,570 $439,360
Net Income (Loss). . . . . . . . . . . . . . . . . . . . 18,138 (18,466) 53,352 7,857
Common Stock Issued Under:
Dividend Reinvestment and Stock Purchase Plan . . . . 3,849 1,563 8,863 3,869
Stock Incentive Plans . . . . . . . . . . . . . . . . 660 1,664 2,614 3,035
Cash Dividends Declared:
Adjustable Rate Preferred Stock . . . . . . . . . . . (189) (300) (678) (900)
Common Stock. . . . . . . . . . . . . . . . . . . . . (7,084) (5,334) (21,205) (15,954)
Change in Net Unrealized Gains (Losses)
on Securities Available for Sale . . . . . . . . . . . 1,905 (8,456) 17,683 (9,245)
Purchase of Treasury Stock . . . . . . . . . . . . . . . - - (1,632) -
Repurchase of Preferred Stock. . . . . . . . . . . . . . - - (5,984) -
Acquisition of Lancaster Financial Ltd., Inc.. . . . . . - - - 2,795
Adjustment for the Pooling of a Company with
a Different Fiscal Year-End. . . . . . . . . . . . . . - - - (1,295)
------- ------- ------- -------
BALANCE, SEPTEMBER 30, . . . . . . . . . . . . . . . . . $484,583 $429,522 $484,583 $429,522
======= ======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss). . . . . . . . . . . . . . . . . . . . $ 18,138 $ (18,466) $ 53,352 $ 7,857
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation, Amortization and Accretion. . . . . . . 2,668 5,545 7,920 7,969
Provision for Loan Losses . . . . . . . . . . . . . . 1,200 1,695 3,600 6,795
Securities Gains. . . . . . . . . . . . . . . . . . . (789) - (1,610) (180)
Decrease (Increase) in Trading Account Securities . . 1,117 (276) 734 94
Gain on Sale of Loans . . . . . . . . . . . . . . . . (1,772) (130) (2,939) (2,125)
Net Decrease (Increase) in Loans Originated for Sale. 52 (16,133) (17,684) 64,084
Increase in Accrued Interest Receivable . . . . . . . (2,771) (1,612) (5,176) (3,547)
Increase in Accrued Interest Payable. . . . . . . . . 990 846 2,571 850
Decrease in Other Real Estate Owned . . . . . . . . . 4,471 14,019 9,072 18,997
(Increase) Decrease in Other Assets . . . . . . . . . (1,876) (6,777) 7,844 (24,065)
Increase in Accrued Expenses and Other Liabilities. . 6,425 5,812 6,627 568
------- ------- ------- -------
Net Cash Provided (Used) by Operating Activities. . 27,853 (15,477) 64,311 77,297
------- ------- ------- -------
INVESTING ACTIVITIES:
Net Increase in Loans Made to Customers. . . . . . . . . (52,770) (131,390) (45,140) (313,294)
Purchases of Investment Securities . . . . . . . . . . . (146,929) (13,222) (440,314) (375,753)
Maturities of Investment Securities. . . . . . . . . . . 52,980 107,313 137,924 346,599
Proceeds from Sales of Loan Securitization . . . . . . . - - - 35,334
Purchases of Securities Available for Sale . . . . . . . (11,771) (30,231) (130,813) (643,121)
Maturities of Securities Available for Sale. . . . . . . 33,939 70,684 84,935 511,362
Proceeds from Sales of Securities Available for Sale . . 2,254 - 320,745 81,306
Purchases of Premises and Equipment. . . . . . . . . . . (1,112) (6,448) (4,656) (11,673)
(Increase) Decrease in Short-Term Investments. . . . . . (10,002) 109,995 (60,675) 260,835
------- ------- ------- -------
Net Cash (Used) Provided by Investing Activities. . (133,411) 106,701 (137,994) (108,405)
------- ------- ------- -------
FINANCING ACTIVITIES:
Increase in Deposits . . . . . . . . . . . . . . . . . . 143,771 39,105 231,646 47,144
(Decrease) Increase in Federal Funds Purchased . . . . . (14,723) (136,167) (73,661) 39,990
Long-Term Debt Issued. . . . . . . . . . . . . . . . . . - 33,812 74,925 364,719
Long-Term Debt Matured or Repurchased . . . . . . . . . (46,841) - (143,456) (307,574)
Adjustment Related to Acquisition . . . . . . . . . . . - - - 2,795
Adjustment for Pooling of Interest Accounting. . . . . . - - - (2,177)
Cash Dividends Paid. . . . . . . . . . . . . . . . . . . (7,273) (5,634) (21,883) (16,854)
Common Stock Issued. . . . . . . . . . . . . . . . . . . 4,509 3,227 11,477 6,904
Purchase of Treasury Stock . . . . . . . . . . . . . . . - - (1,632) -
Repurchase of Preferred Stock. . . . . . . . . . . . . . - - (5,984) -
------- ------- ------- -------
Net Cash Provided (Used) by Financing Activities. . 79,443 (65,657) 71,432 134,947
------- ------- ------- -------
Net (Decrease) Increase in Cash and Due From Banks . . . (26,115) 25,567 (2,251) 103,839
Cash and Due from Banks at Beginning of Period . . . . . 285,529 276,751 261,665 198,479
------- ------- ------- -------
Cash and Due from Banks at End of Period . . . . . . . . $ 259,414 $ 302,318 $ 259,414 $ 302,318
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES:
Interest Paid. . . . . . . . . . . . . . . . . . . . . . $ 46,252 $ 32,858 $ 131,588 $ 93,060
Income Taxes Paid. . . . . . . . . . . . . . . . . . . . 4,349 622 17,879 12,788
Loans Transferred to Other Real Estate Owned . . . . . . 3,484 2,197 6,643 4,596
Mortgage Loans Swapped Into
Mortgage-Backed Securities . . . . . . . . . . . . . . - - - 35,233
Investment Securities Transferred to
Securities Available for Sale. . . . . . . . . . . . . - 134,093 - 134,093
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements include the accounts of The Summit Bancorporation and
its subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated in consolidation. In the opinion of the
Company, all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair statement of the results of the operations for the
interim periods have been reflected herein.
2. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions charged to expense
and reduced by charge-offs, net of recoveries. The provision for loan losses
is based on management's evaluation of the adequacy of the allowance for loan
losses. This evaluation encompasses consideration of past loan loss
experience, changes in the composition and volume of the credit portfolio, the
level and composition of nonperforming loans, the condition of industries
experiencing particular financial pressures, the relationship of the current
level of the allowance to the credit portfolio and to nonperforming assets,
and economic conditions. This evaluation is inherently subjective as it
requires material estimates including the amounts and timing of future cash
flows expected to be received on impaired loans that may vary significantly.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for the
Impairment of a Loan" and its subsequent amendment, SFAS No. 118, "Accounting
by Creditors for the Impairment of a Loan - Income Recognition and
Disclosures." Adoption of SFAS No. 114, as amended, prescribes the
recognition criteria for loan impairment and the measurement methods for
certain impaired loans and loans whose terms are modified in troubled debt
restructurings and amends SFAS No. 5, "Accounting for Contingencies," and SFAS
No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings."
SFAS No. 114, as amended, addresses the accounting for impaired loans and
specifies how allowances for credit losses related to these impaired loans
should be determined. SFAS No. 114 sets forth measurement methods for
estimating the portion of total loans attributable to impaired loans. It does
not address the overall adequacy of the allowance for loan losses, but focuses
instead on the allowance for estimated credit losses on impaired loans. It is
the Company's responsibility to ensure that the overall allowance for loan
losses is adequate to cover all estimated credit losses in the loan portfolio.
At September 30, 1995, impaired loans totaled $25.6 million (representing
total nonaccrual loans) and the related allowance for loan losses was $2.6
million. Since the Company sufficiently evaluates the adequacy of the
allowance for loan losses, the impact of adopting SFAS No. 114, as amended,
did not have an effect on the amount of the allowance for loan losses or the
existing income recognition and charge-off policies for nonperforming loans.
3. EARNINGS PER COMMON SHARE
Earnings per common share is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding.
Shares issuable under the Stock Incentive Plan have not been included in the
calculation of earnings per share since their effect is not material.
4. RECENT ACCOUNTING PRONOUNCEMENT
On May 12, 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 122, "Accounting for Mortgage Servicing Rights." This Statement requires
the recognition of mortgage servicing rights as an asset when a mortgage loan
is sold or securitized and servicing retained. Also, the Statement requires
enterprises to measure the impairment of the servicing rights based on the
difference between the carrying amount of the servicing rights and their
current value. SFAS No. 122 is to be applied prospectively in fiscal years
beginning after December 15, 1995 to transactions in which the Company sells
or securitizes mortgage loans with servicing rights retained. The provisions
of this Statement should be applied to the measurement of impairment for all
capitalized servicing rights, including servicing rights capitalized prior to
the initial adoption of this Statement. The Company does not expect the
adoption of SFAS No. 122 to have a material effect on its future financial
position or results of operations.
5
<PAGE> 1
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Pro Forma
Adjustment UJB and
Increase Summit Garden
UJB Summit (Decrease) Pro Forma State Flemington
------------ ---------- -------------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from banks... $807,173 $259,414 $1,066,587 $8,630 $10,591
Interest bearing deposits
with banks................ 15,938 13 15,951 77 -
Short-term investment
securities................ 2,000 68,870 70,870 14,500 850
Investment securities..... 4,027,611 1,690,028 $(3,089)(1) 5,714,550 68,450 82,140
Loans..................... 10,226,745 3,503,775 13,730,520 210,538 190,386
Less: Allowance for
loan losses............... 200,337 90,819 291,156 4,110 2,429
------------ ---------- ------------ -------- ----------
Net loans................. 10,026,408 3,412,956 13,439,364 206,428 187,957
Premises and equipment.... 163,774 43,667 207,441 8,071 3,657
Other real estate owned,
net....................... 27,082 13,401 40,483 3,347 342
Other assets.............. 463,084 130,951 31,506 (1)(3) 625,541 4,401 4,036
------------ ---------- -------------------- ------------ -------- ----------
Total Assets.............. $15,533,070 $5,619,300 $28,417 $21,180,787 $313,904 $289,573
============ ========== ==================== ============ ======== ==========
Liabilities and
Shareholders' Equity
Deposits.................. $12,871,632 $4,641,492 $17,513,124 $283,856 $257,725
Other borrowed funds...... 936,043 157,367 1,093,410 - 8,640
Other liabilities......... 257,060 65,456 $85,000 (3) 407,516 1,422 4,034
Long-term debt............ 204,338 270,402 474,740 - -
------------ ---------- -------------------- ------------ -------- ----------
Total Liabilities......... 14,269,073 5,134,717 85,000 19,488,790 285,278 270,399
Shareholders' equity
Preferred stock........... 30,008 12,612 42,620 - -
Common Stock.............. 69,098 50,172 (13,678)(2) 105,592 12,302 2,396
Surplus................... 490,781 314,068 11,977 (1)(2) 816,826 9,900 10,237
Retained earnings......... 677,631 105,088 (54,000)(3) 728,719 6,380 7,301
Net unrealized (loss) gain
on investment securities,
net of tax................ (3,521) 2,643 (882)(1) (1,760) 44 (760)
------------ ---------- -------------------- ------------ -------- ----------
Total Shareholders'
equity.................... 1,263,997 484,583 (56,583) 1,691,997 28,626 19,174
------------ ---------- -------------------- ------------ -------- ----------
Total Liabilities and
Shareholders' Equity...... $15,533,070 $5,619,300 $28,417 $21,180,787 $313,904 $289,573
============ ========== ==================== ============ ======== ==========
<CAPTION>
Pro Forma
Adjustment All
Increase Transactions
(Decrease) Pro Forma
------------------------- ------------
<S> <C> <C>
Assets
Cash and due from banks... $1,085,808
Interest bearing deposits
with banks................ 16,028
Short-term investment
securities................ 86,220
Investment securities..... $(1,119)(1) 5,864,021
Loans..................... 14,131,444
Less: Allowance for
loan losses............... 297,695
------------
Net loans................. 13,833,749
Premises and equipment.... 219,169
Other real estate owned,
net....................... 44,172
Other assets.............. 4,801 (1)(4)(5) 638,779
------------------------- ------------
Total Assets.............. $3,682 $21,787,946
========================= ============
Liabilities and
Shareholders' Equity
Deposits.................. $18,054,705
Other borrowed funds...... 1,102,050
Other liabilities......... $11,291 (4)(5) 424,263
Long-term debt............ 474,740
------------------------- ------------
Total Liabilities......... 11,291 20,055,758
Shareholders' equity
Preferred stock........... 42,620
Common Stock.............. *** (2) ***
Surplus................... *** (1)(2) ***
Retained earnings......... (6,732)(4)(5) 735,668
Net unrealized (loss) gain
on investment securities,
net of tax................ (420)(1) (2,896)
------------------------- ------------
Total Shareholders'
equity.................... (7,609) 1,732,188
------------------------- ------------
Total Liabilities and
Shareholders' Equity...... $3,682 $21,787,946
========================= ============
</TABLE>
- --------------
*** Revised see Item 7.
See Notes to Pro Forma Financial Information on page 23.
17
<PAGE> 2
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
UJB and All
Summit Garden Transactions
UJB Summit Pro Forma State Flemington Pro Forma
-------- -------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............................. $623,270 $216,902 $840,172 $15,076 $11,387 $866,635
Interest on investment securities...................... 190,296 76,253 266,549 2,984 3,756 273,289
Interest on Federal funds sold and securities purchased
under agreements to resell............................. 2,603 3,125 5,728 441 22 6,191
Interest on trading account securities................. 1,320 37 1,357 - - 1,357
Interest on bank balances.............................. 510 248 758 8 - 766
-------- -------- --------- --------- ---------- ------------
Total interest income.................................. 817,999 296,565 1,114,564 18,509 15,165 1,148,238
Interest Expense
Interest on savings and time deposits.................. 239,057 98,379 337,436 6,246 4,787 348,469
Interest on commercial certificates of deposits
$100,000 and over...................................... 18,860 11,900 30,760 902 703 32,365
Interest on borrowed funds............................. 75,808 23,880 99,688 74 447 100,209
-------- -------- --------- --------- ---------- ------------
Total interest expense................................. 333,725 134,159 467,884 7,222 5,937 481,043
-------- -------- --------- --------- ---------- ------------
Net interest income.................................... 484,274 162,406 646,680 11,287 9,228 667,195
Provision for loan losses.............................. 48,750 3,600 52,350 87 - 52,437
-------- -------- --------- --------- ---------- ------------
Net interest income after provision for loan losses.... 435,524 158,806 594,330 11,200 9,228 614,758
Non-Interest Income
Service charges on deposit accounts.................... 49,665 15,112 64,777 1,137 731 66,645
Service and loan fee income............................ 20,707 6,601 27,308 411 213 27,932
Trust income........................................... 16,421 8,740 25,161 462 134 25,757
Investment securities gains............................ 5,205 1,610 6,815 - - 6,815
Trading account gains.................................. 777 175 952 - - 952
Other.................................................. 37,399 5,611 43,010 228 89 43,327
-------- -------- --------- --------- ---------- ------------
Total non-interest income.............................. 130,174 37,849 168,023 2,238 1,167 171,428
Non-Interest Expenses
Salaries............................................... 146,639 45,670 192,309 4,082 3,413 199,804
Pension and other employee benefits.................... 47,072 14,955 62,027 1,146 1,057 64,230
Occupancy, net......................................... 39,329 12,995 52,324 923 862 54,109
Furniture and equipment................................ 37,965 7,032 44,997 582 575 46,154
Other real estate owned expenses....................... 5,779 1,998 7,777 439 (84) 8,132
FDIC insurance assessment.............................. 13,710 5,176 18,886 332 255 19,473
Advertising and public relations....................... 8,585 4,199 12,784 362 161 13,307
Other.................................................. 72,139 21,754 93,893 1,893 1,742 97,528
-------- -------- --------- --------- ---------- ------------
Total non-interest expenses............................ 371,218 113,779 484,997 9,759 7,981 502,737
-------- -------- --------- --------- ---------- ------------
Income before income taxes............................. 194,480 82,876 277,356 3,679 2,414 283,449
Federal and state income taxes......................... 70,118 29,524 99,642 1,183 831 101,656
-------- -------- --------- --------- ---------- ------------
Net Income............................................. $124,362 $53,352 $177,714 $2,496 $1,583 $181,793
======== ======== ========= ========= ========== ============
Net Income Per Common Share............................ $2.20 $1.56 $2.04 $0.82 $1.65 ***
======== ======== ========= ========= ========== ============
Average Common Shares Outstanding (1).................. 55,946 33,658 86,141 3,054 958 ***
======== ======== ========= ========= ========== ============
</TABLE>
- ---------------
*** Revised see Item 7.
See Notes to Pro Forma Financial Information on page 23.
18
<PAGE> 3
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Unaudited, in thousands except per share data)
<TABLE>
UJB and All
Summit Garden Transactions
UJB Summit Pro Forma State Flemington Pro Forma
--------- -------- --------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............................. $510,472 $178,040 $688,512 $11,901 $9,130 $709,543
Interest on investment securities...................... 188,484 69,461 257,945 3,259 4,268 265,472
Interest on Federal funds sold and securities purchased
under agreements to resell............................. 255 2,833 3,088 88 40 3,216
Interest on trading account securities................. 557 59 616 - - 616
Interest on bank balances.............................. 434 250 684 105 - 789
--------- -------- --------- ------- ---------- ------------
Total interest income.................................. 700,202 250,643 950,845 15,353 13,438 979,636
Interest Expense
Interest on savings and time deposits.................. 173,752 72,375 246,127 4,818 3,833 254,778
Interest on commercial certificates of deposits
$100,000 and over...................................... 8,256 3,686 11,942 505 219 12,666
Interest on borrowed funds............................. 62,890 17,849 80,739 11 227 80,977
--------- -------- --------- ------- ---------- ------------
Total interest expense................................. 244,898 93,910 338,808 5,334 4,279 348,421
--------- -------- --------- ------- ---------- ------------
Net interest income.................................... 455,304 156,733 612,037 10,019 9,159 631,215
Provision for loan losses.............................. 55,500 6,795 62,295 467 - 62,762
--------- -------- --------- ------- ---------- ------------
Net interest income after provision for loan losses.... 399,804 149,938 549,742 9,552 9,159 568,453
Non-Interest Income
Service charges on deposit accounts.................... 48,474 13,378 61,852 915 631 63,398
Service and loan fee income............................ 20,082 10,367 30,449 658 322 31,429
Trust income........................................... 16,410 8,501 24,911 397 118 25,426
Investment securities gains............................ 1,846 180 2,026 125 50 2,201
Trading account gains.................................. 522 129 651 - - 651
Other.................................................. 33,109 7,425 40,534 181 80 40,795
--------- -------- --------- ------- ---------- ------------
Total non-interest income.............................. 120,443 39,980 160,423 2,276 1,201 163,900
Non-Interest Expenses
Salaries............................................... 135,521 51,404 186,925 4,060 3,050 194,035
Pension and other employee benefits.................... 41,721 14,824 56,545 969 1,135 58,649
Occupancy, net......................................... 38,492 14,444 52,936 908 891 54,735
Furniture and equipment................................ 36,170 6,880 43,050 724 574 44,348
Other real estate owned expenses....................... 14,467 2,760 17,227 1,215 76 18,518
FDIC insurance assessment.............................. 20,815 7,555 28,370 609 437 29,416
Advertising and public relations....................... 8,039 2,991 11,030 310 178 11,518
Restructuring charges.................................. - 13,565 13,565 - - 13,565
Loss on sale of assets................................. - 35,390 35,390 - - 35,390
Other.................................................. 70,925 24,897 95,822 1,665 1,457 98,944
--------- -------- --------- ------- ---------- ------------
Total non-interest expenses............................ 366,150 174,710 540,860 10,460 7,798 559,118
--------- -------- --------- ------- ---------- ------------
Income before income taxes............................. 154,097 15,208 169,305 1,368 2,562 173,235
Federal and state income taxes......................... 56,539 7,351 63,890 75 952 64,917
--------- -------- --------- ------- ---------- ------------
Income before cumulative effect of a change in
accounting principle................................... 97,558 7,857 105,415 1,293 1,610 108,318
Cumulative effect of a change in accounting
principle.............................................. (1,731) - (1,731) - - (1,731)
--------- -------- --------- ------- ---------- ------------
Net Income............................................. $95,827 $7,857 $103,684 $1,293 $1,610 $106,587
========= ======== ========= ======= ========== ============
Net Income Per Common Share:
Income before cumulative effect of a change in
accounting principle................................... $1.76 $0.21 $1.22 $0.59 $1.68 $1.21
Cumulative effect of a change in accounting
principle.............................................. (0.03) - (0.02) - - (0.02)
--------- -------- --------- ------- ---------- ------------
Net Income............................................. $1.73 $0.21 $1.20 $0.59 $1.68 $1.19
========= ======== ========= ======= ========== ============
Average Common Shares Outstanding(1)................... 54,604 32,997 84,204 2,205 958 ***
========= ======== ========= ======= ========== ============
</TABLE>
- ----------------
*** Revised see Item 7.
See Notes to Pro Forma Financial Information on page 23.
19
<PAGE> 4
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(Unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
UJB and All
Summit Garden Transactions
UJB Summit Pro Forma State Flemington Pro Forma
--------- -------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............................. $706,049 $244,980 $951,029 $16,534 $12,733 $980,296
Interest on investment securities...................... 253,027 93,525 346,552 4,274 5,641 356,467
Interest on Federal funds sold and securities purchased
under agreements to resell............................. 600 2,918 3,518 140 44 3,702
Interest on trading account securities................. 668 79 747 - - 747
Interest on bank balances.............................. 629 325 954 137 - 1,091
--------- -------- ---------- -------- ---------- ------------
Total interest income.................................. 960,973 341,827 1,302,800 21,085 18,418 1,342,303
Interest Expense
Interest on savings and time deposits.................. 239,714 98,433 338,147 6,513 5,154 349,814
Interest on commercial certificates of deposits
$100,000 and over...................................... 13,639 7,066 20,705 766 346 21,817
Interest on borrowed funds............................. 91,516 25,605 117,121 54 467 117,642
--------- -------- ---------- -------- ---------- ------------
Total interest expense................................. 344,869 131,104 475,973 7,333 5,967 489,273
--------- -------- ---------- -------- ---------- ------------
Net interest income.................................... 616,104 210,723 826,827 13,752 12,451 853,030
Provision for loan losses.............................. 84,000 7,995 91,995 975 (622) 92,348
--------- -------- ---------- -------- ---------- ------------
Net interest income after provision for loan losses.... 532,104 202,728 734,832 12,777 13,073 760,682
Non-Interest Income
Service charges on deposit accounts.................... 64,474 18,523 82,997 1,230 854 85,081
Service and loan fee income............................ 27,531 11,468 38,999 773 408 40,180
Trust income........................................... 21,792 11,875 33,667 532 155 34,354
Investment securities gains (losses)................... 1,888 344 2,232 121 (328) 2,025
Trading account gains.................................. 670 177 847 - - 847
Other.................................................. 43,933 9,611 53,544 257 85 53,886
--------- -------- ---------- -------- ---------- ------------
Total non-interest income.............................. 160,288 51,998 212,286 2,913 1,174 216,373
Non-Interest Expenses
Salaries............................................... 183,339 66,868 250,207 5,467 4,324 259,998
Pension and other employee benefits.................... 53,386 19,219 72,605 1,320 1,421 75,346
Occupancy, net......................................... 50,749 18,868 69,617 1,198 1,197 72,012
Furniture and equipment................................ 49,065 9,496 58,561 918 759 60,238
Other real estate owned expenses....................... 18,287 3,053 21,340 1,404 158 22,902
FDIC insurance assessment.............................. 27,933 10,050 37,983 805 572 39,360
Advertising and public relations....................... 10,843 4,761 15,604 474 252 16,330
Restructuring charges.................................. - 13,565 13,565 - - 13,565
Loss on sale of assets................................. - 35,390 35,390 - - 35,390
Other.................................................. 94,597 32,416 127,013 2,556 2,096 131,665
--------- -------- ---------- -------- ---------- ------------
Total non-interest expenses............................ 488,199 213,686 701,885 14,142 10,779 726,806
--------- -------- ---------- -------- ---------- ------------
Income before income taxes............................. 204,193 41,040 245,233 1,548 3,468 250,249
Federal and state income taxes (benefit)............... 72,312 16,640 88,952 (509) 1,288 89,731
--------- -------- ---------- -------- ---------- ------------
Income before cumulative effect of a change in
accounting principle................................... 131,881 24,400 156,281 2,057 2,180 160,518
Cumulative effect of a change in accounting
principle.............................................. (1,731) - (1,731) - - (1,731)
--------- -------- ---------- -------- ---------- ------------
Net Income............................................. $130,150 $24,400 $154,550 $2,057 $2,180 $158,787
========= ======== ========== ======== ========== ============
Net Income Per Common Share:
Income before cumulative effect of a change in
accounting principle................................... $2.38 $0.70 $1.82 $0.89 $2.28 $1.79
Cumulative effect of a change in accounting
principle.............................................. (0.03) - (0.02) - - (0.02)
--------- -------- ---------- -------- ---------- ------------
Net Income............................................. $2.35 $0.70 $1.80 $0.89 $2.28 $1.77
========= ======== ========== ======== ========== ============
Average Common Shares Outstanding(1)................... 54,697 33,090 84,381 2,308 958 ***
========= ======== ========== ======== ========== ============
</TABLE>
- ---------------
*** Revised see Item 7.
See Notes to Pro Forma Financial Information on page 23.
20
<PAGE> 5
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(Unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
UJB and All
Summit Garden Transactions
UJB Summit Pro Forma State Flemington Pro Forma
-------- -------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............................. $670,705 $232,981 $903,686 $15,751 $10,952 $930,389
Interest on investment securities...................... 234,020 89,793 323,813 4,898 6,268 334,979
Interest on Federal funds sold and securities purchased
under agreements to resell............................. 955 5,175 6,130 102 156 6,388
Interest on trading account securities................. 1,297 68 1,365 - - 1,365
Interest on bank balances.............................. 651 1,013 1,664 61 - 1,725
-------- -------- --------- -------- ---------- ------------
Total interest income.................................. 907,628 329,030 1,236,658 20,812 17,376 1,274,846
Interest Expense
Interest on savings and time deposits.................. 271,345 108,452 379,797 7,409 5,758 392,964
Interest on commercial certificates of deposits
$100,000 and over...................................... 7,319 2,065 9,384 528 231 10,143
Interest on borrowed funds............................. 53,056 14,560 67,616 5 89 67,710
-------- -------- --------- -------- ---------- ------------
Total interest expense................................. 331,720 125,077 456,797 7,942 6,078 470,817
-------- -------- --------- -------- ---------- ------------
Net interest income.................................... 575,908 203,953 779,861 12,870 11,298 804,029
Provision for loan losses.............................. 95,685 17,200 112,885 1,117 440 114,442
-------- -------- --------- -------- ---------- ------------
Net interest income after provision for loan losses.... 480,223 186,753 666,976 11,753 10,858 689,587
Non-Interest Income
Service charges on deposit accounts.................... 60,474 16,936 77,410 1,211 800 79,421
Service and loan fee income............................ 21,063 11,751 32,814 1,065 355 34,234
Trust income........................................... 21,852 11,125 32,977 473 125 33,575
Investment securities gains............................ 8,877 702 9,579 258 1,512 11,349
Trading account gains.................................. 1,884 331 2,215 - - 2,215
Other.................................................. 49,151 10,472 59,623 217 160 60,000
-------- -------- --------- -------- ---------- ------------
Total non-interest income.............................. 163,301 51,317 214,618 3,224 2,952 220,794
Non-Interest Expenses
Salaries............................................... 185,570 67,030 252,600 4,892 3,982 261,474
Pension and other employee benefits.................... 58,601 17,594 76,195 1,009 1,041 78,245
Occupancy, net......................................... 48,487 18,619 67,106 1,138 992 69,236
Furniture and equipment................................ 45,592 8,927 54,519 887 692 56,098
Other real estate owned expenses....................... 40,925 6,849 47,774 4,319 1,387 53,480
FDIC insurance assessment.............................. 29,244 10,487 39,731 854 581 41,166
Advertising and public relations....................... 10,517 4,443 14,960 293 227 15,480
Restructuring charges.................................. 21,500 - 21,500 - - 21,500
Other.................................................. 97,533 36,728 134,261 2,168 3,549 139,978
-------- -------- --------- -------- ---------- ------------
Total non-interest expenses............................ 537,969 170,677 708,646 15,560 12,451 736,657
-------- -------- --------- -------- ---------- ------------
Income (loss) before income taxes...................... 105,555 67,393 172,948 (583) 1,359 173,724
Federal and state income taxes (benefit)............... 26,953 21,972 48,925 (46) 450 49,329
-------- -------- --------- -------- ---------- ------------
Income (loss) before cumulative effect of a change in
accounting principle................................... 78,602 45,421 124,023 (537) 909 124,395
Cumulative effect of a change in accounting
principle.............................................. 3,816 5,303 9,119 - - 9,119
-------- -------- --------- -------- ---------- ------------
Net Income (loss)...................................... $82,418 $50,724 $133,142 $(537) $909 $133,514
======== ======== ========= ======== ========== ============
Net Income (loss) Per Common Share:
Income (loss) before cumulative effect of a change in
accounting principle................................... $1.43 $1.37 $1.46 $(0.31) $0.95 $1.41
Cumulative effect of a change in accounting
principle.............................................. 0.07 0.17 0.11 - - 0.11
-------- -------- --------- -------- ---------- ------------
Net Income (loss)...................................... $1.50 $1.54 $1.57 $(0.31) $0.95 $1.52
======== ======== ========= ======== ========== ============
Average Common Shares Outstanding(1)................... 53,917 32,102 82,712 1,724 958 ***
======== ======== ========= ======== ========== ============
</TABLE>
- -----------------
*** Revised see Item 7.
See Notes to Pro Forma Financial Information on page 23.
21
<PAGE> 6
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1992
(Unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
UJB and All
Summit Garden Transactions
UJB Summit Pro Forma State Flemington Pro Forma
-------- -------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............................. $713,987 $260,765 $ 974,752 $18,176 $11,988 $1,004,916
Interest on investment securities...................... 258,371 95,165 353,536 5,270 6,609 365,415
Interest on Federal funds sold and securities purchased
under agreements to resell............................. 4,615 4,997 9,612 96 136 9,844
Interest on trading account securities................. 1,367 66 1,433 - - 1,433
Interest on bank balances.............................. 668 1,503 2,171 19 - 2,190
-------- -------- --------- --------- ---------- ------------
Total interest income.................................. 979,008 362,496 1,341,504 23,561 18,733 1,383,798
Interest Expense
Interest on savings and time deposits.................. 366,023 140,546 506,569 10,167 7,874 524,610
Interest on commercial certificates of deposits
$100,000 and over...................................... 16,320 3,900 20,220 782 309 21,311
Interest on borrowed funds............................. 47,382 20,586 67,968 6 103 68,077
-------- -------- --------- --------- ---------- ------------
Total interest expense................................. 429,725 165,032 594,757 10,955 8,286 613,998
-------- -------- --------- --------- ---------- ------------
Net interest income.................................... 549,283 197,464 746,747 12,606 10,447 769,800
Provision for loan losses.............................. 139,555 25,998 165,553 5,501 770 171,824
-------- -------- --------- --------- ---------- ------------
Net interest income after provision for loan losses.... 409,728 171,466 581,194 7,105 9,677 597,976
Non-Interest Income
Service charges on deposit accounts.................... 54,356 16,233 70,589 1,137 757 72,483
Service and loan fee income............................ 21,261 4,555 25,816 1,371 238 27,425
Trust income........................................... 19,837 10,899 30,736 314 87 31,137
Investment securities gains............................ 18,485 710 19,195 915 208 20,318
Trading account gains.................................. 1,804 525 2,329 - - 2,329
Other.................................................. 47,610 8,783 56,393 215 301 56,909
-------- -------- --------- --------- ---------- ------------
Total non-interest income.............................. 163,353 41,705 205,058 3,952 1,591 210,601
Non-Interest Expenses
Salaries............................................... 179,457 63,007 242,464 4,585 3,651 250,700
Pension and other employee benefits.................... 51,209 15,429 66,638 737 971 68,346
Occupancy, net......................................... 47,872 18,890 66,762 1,091 952 68,805
Furniture and equipment................................ 42,404 8,908 51,312 858 698 52,868
Other real estate owned expenses....................... 38,092 9,258 47,350 2,293 496 50,139
FDIC insurance assessment.............................. 26,047 9,349 35,396 637 505 36,538
Advertising and public relations....................... 10,578 2,940 13,518 273 106 13,897
Other.................................................. 101,204 35,563 136,767 2,225 2,003 140,995
-------- -------- --------- --------- ---------- ------------
Total non-interest expenses............................ 496,863 163,344 660,207 12,699 9,382 682,288
-------- -------- --------- --------- ---------- ------------
Income (loss) before income taxes...................... 76,218 49,827 126,045 (1,642) 1,886 126,289
Federal and state income taxes (benefit)............... 19,430 16,340 35,770 (257) 655 36,168
-------- -------- --------- --------- ---------- ------------
Net Income (loss)...................................... $56,788 $33,487 $90,275 $(1,385) $1,231 $90,121
======== ======== ========= ========= ========== ============
Net Income (loss) Per Common Share..................... $1.09 $1.07 $1.13 $(0.80) $1.28 $1.08
======== ======== ========= ========= ========== ============
Average Common Shares Outstanding(1)................... 50,398 30,220 77,499 1,724 958 ***
======== ======== ========= ========= ========== ============
</TABLE>
- ------------
*** Revised see Item 7.
See Notes to Pro Forma Financial Information on page 23.
22
<PAGE> 7
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) Reflects the elimination of 96,519 shares of UJB Common and 23,548 shares
of Flemington common stock owned by Summit at September 30, 1995.
(2) Revised see Item 7.
(3) Reflects charges of approximately $85 million, $54 million after the
related tax effects, which includes estimated severance and outplacement
costs, expenses related to facilities closures and consolidation costs
directly attributable to the Merger.
(4) Reflects charges of approximately $7.4 million, $4.4 million after the
related tax effects, which includes estimated severance and outplacement
costs, expenses related to facilities closures and consolidation costs
directly attributable to the merger of Garden State with and into Summit.
(5) Reflects charges of approximately $3.9 million, $2.3 million after the
related tax effects, which includes estimated severance and outplacement
costs, expenses related to facilities closures and consolidation costs
directly attributable to the merger of Flemington with and into UJB.
23
