SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report:
(Date of earliest event reported)
February 27, 1997
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
<PAGE>
Item 5. Other Information.
Agreement and Plan of Merger
On February 27, 1997, Summit Bancorp. ("Registrant" or "Summit") and
Collective Bancorp, Inc. ("Collective") entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing for, among other things, (i) the
merger of Collective into Summit (the "Merger") and (ii) the exchange of each
outstanding share of the Common Stock of Collective ("Collective Common") for
.895 shares of the Common Stock of Summit ("Summit Common") and cash in lieu of
any fractional shares of Summit Common, all upon the satisfaction of the terms
and conditions set forth in the Merger Agreement, including the receipt of
approval from the shareholders of Collective, the Board of Governors of the
Federal Reserve System and the New Jersey Department of Banking. Collective has
the right to terminate the Merger Agreement if the "Average Closing Price" of
Summit Common (as defined in the Merger Agreement) is less than certain
thresholds set forth in the Merger Agreement. No assurance can be given that the
Merger will be consummated.
In connection with the execution of the Merger Agreement, Summit and
Collective entered into a stock option agreement pursuant to which Collective
granted to Summit an option to purchase, under certain circumstances, up to
4,067,424 shares of Collective Common at an exercise price of $38.125. The
exercise price of the option was arrived at by agreement of the parties.
On February 28, 1997, a news release ("News Release") announcing the
execution of the Merger Agreement was issued by Summit. The News Release is
attached hereto as Exhibit 99(b) and is incorporated herein by reference.
On February 28, 1997, a meeting with respect to the Merger (the
"Meeting") was held by the Registrant with investment analysts. At the Meeting,
certain financial and other information was presented. The information and
materials presented at the meeting contained, among other things, information
with respect to (i) terms of transaction; (ii) pricing overview; (iii)
transaction economics (earnings-per-share accretions in 1998; expense savings;
potential revenue enhancements; book value dilution and internal rate of
return); (iv) New Jersey Market Share Analysis; (v) estimated pro forma earnings
for 1997 and 1998; (vi) estimated expense reductions for 1998; (vii) one-time
restructuring changes; (viii) expanded prospects for key business lines; (ix)
comparative financial data for the quarter ended December 31, 1996 for Summit,
Collective and on a pro forma basis; (x) Summit, Collective and pro forma
balance sheet at December 31, 1996; (xi) Summit, Collective and pro forma loan
portfolio at December 31, 1996; (xii) Summit, Collective and pro forma credit
quality at December 31, 1996. (xiii) Summit, Collective and pro forma deposit
portfolio at December 31, 1996. Certain of the materials are attached hereto as
Exhibit 99(c) and are incorporated herein by reference.
Collective operates Collective Bank and is headquartered in Egg Harbor
City, New Jersey. It has $5.5 billion in assets and operates 82 branches in 15
counties throughout New Jersey.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Description
No.
(2) Agreement and Plan of Merger, dated February 27, 1997, between the
Registrant and Collective Bancorp, Inc. (Incorporated by reference to
Exhibit 10(a) to the Schedule 13D dated February 28, 1997 filed by
Summit Bancorp. with respect to the Common Stock, $.01 par value per
share, of Collective Bancorp, Inc. (SEC File No. 0-17515).
(99)(a) Collective Stock Option Agreement dated as of February 28, 1997, by
and between the Registrant and Collective Bancorp, Inc. (Incorporated
by reference to Exhibit 10(b) to the Schedule 13D dated February 28,
1997 filed by Summit Bancorp. with respect to the Common Stock, $.01
par value per share, of Collective Bancorp, Inc. (SEC File No.
0-17515).
(b) News Release dated February 28, 1997.
(c) Meeting Materials Illustrating: (i) terms of transaction; (ii) pricing
overview; (iii) transaction economics (earnings-per-share accretions
in 1998; expense savings; potential revenue enhancements; book value
dilution and internal rate of return); (iv) New Jersey Market Share
Analysis; (v) estimated pro forma earnings for 1997 and 1998; (vi)
estimated expense reductions for 1998; (vii) one-time restructuring
changes; (viii) expanded prospects for key business lines; (ix)
comparative financial data for the quarter ended December 31, 1996 for
Summit, Collective and on a pro forma basis; (x) Summit, Collective
and pro forma balance sheet at December 31, 1996; (xi) Summit,
Collective and pro forma loan portfolio at December 31, 1996; (xii)
Summit, Collective and pro forma credit quality at December 31, 1996.
(xiii) Summit, Collective and pro forma deposit portfolio at December
31, 1996.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
Date: March 13, 1997 SUMMIT BANCORP.
By: /s/ Dennis A. Williams
Dennis A. Williams
Senior Vice President
4
<PAGE>
EXHIBIT INDEX
Ex. No. Description
(2) Agreement and Plan of Merger, dated February 27, 1997, between the
Registrant and Collective Bancorp, Inc. (Incorporated by reference to
Exhibit 10(a) to the Schedule 13D dated February 28, 1997 filed by
Summit Bancorp. with respect to the Common Stock, $.01 par value per
share, of Collective Bancorp, Inc. (SEC File No. 0-17515)
(99)(a) Collective Stock Option Agreement dated as of February 28, 1997, by
and between the Registrant and Collective Bancorp, Inc. (Incorporated
by reference to Exhibit 10(b) to the Schedule 13D dated February 28,
1997 filed by Summit Bancorp. with respect to the Common Stock, $.01
par value per share, of Collective Bancorp, Inc. (SEC File No.
0-17515)
(b) News Release dated February 28, 1997.
(c) Meeting Materials Illustrating: (i) terms of transaction; (ii) pricing
overview; (iii) transaction economics (earnings-per-share accretions
in 1998; expense savings; potential revenue enhancements; book value
dilution and internal rate of return); (iv) New Jersey Market Share
Analysis; (v) estimated pro forma earnings for 1997 and 1998; (vi)
estimated expense reductions for 1998; (vii) one-time restructuring
changes; (viii) expanded prospects for key business lines; (ix)
comparative financial data for the quarter ended December 31, 1996 for
Summit, Collective and on a pro forma basis; (x) Summit, Collective
and pro forma balance sheet at December 31, 1996; (xi) Summit,
Collective and pro forma loan portfolio at December 31, 1996; (xii)
Summit, Collective and pro forma credit quality at December 31, 1996.
(xiii) Summit, Collective and pro forma deposit portfolio at December
31, 1996.
5
Exhibit (2)
AGREEMENT AND PLAN OF MERGER
(Incorporated by reference to Exhibit 10(a) to the Schedule 13D dated
February 28, 1997 filed by Registrant with respect to the Common Stock, par
value $.01 per share, of Collective Bancorp, Inc.)
Exhibit 99(a)
COLLECTIVE BANCORP, INC. STOCK OPTION AGREEMENT
(Incorporated by reference to Exhibit 10(b) to the Schedule 13D dated
February 28, 1997 filed by the Registrant with respect to the Common Stock, par
value $.01 per share, of Collective Bancorp, Inc.)
Exhibit 99(b) to 8-K
Release: Immediate
Contact at Collective Bancorp: Contact at Summit Bancorp:
Scott T. Page Faith P. Goldstein, SVP
SEVP and General Counsel Corporate Communications
(609) 625-1110 (609) 987-3341
Kerry Calaiaro, SVP
Investor Relations
(609) 987-3226
Summit Bancorp to Acquire Collective Bancorp
#1 Position in New Jersey Market Share Further Strengthened
Princeton, New Jersey, February 28, 1997 - Summit Bancorp (NYSE: SUB) and
Collective Bancorp, Inc. (NASDAQ: COFD) today announced a definitive agreement
to merge in a stock-for-stock exchange. Collective is a thrift holding company
with $5.5 billion in assets and is headquartered in Egg Harbor City, New Jersey.
Through its subsidiary Collective Bank, it operates 82 branches in 15 counties
throughout the state.
"The acquisition of Collective further secures Summit's number one market share
position in New Jersey, especially in the growing shore markets," Summit
Chairman and Chief Executive Officer T. Joseph Semrod said. "We will now have
the number one market position in nine of New Jersey's 21 counties, and one of
the top three positions in 16 counties. New Jersey ranks second in per capita
income in the country, and Summit will have a relationship with 1.2 million of
the state's 2.9 million households."
Collective Chairman, President and Chief Executive Officer Thomas H. Hamilton
stated, "Collective has always focused on customer service and this has allowed
us to build an impressive franchise in communities throughout the state. We are
very pleased to be joining with Summit, an organization with an extensive array
of products and services and a reputation for quality customer service. We
believe that this merger will accelerate the strategies that we have been
pursuing and will benefit our shareholders and customers."
<PAGE>
Mr. Semrod added, "Like the other acquisitions that we have initiated or
completed in the past year, Collective is consistent with our long-term
acquisition strategy. Collective offers us the opportunity to expand the market
penetration of our key businesses into additional important areas of the state.
We expect this acquisition to be accretive to earnings in 1998."
Under the terms of the merger agreement which was approved by the board of
directors of both companies, Collective shareholders will receive 0.895 shares
of Summit Bancorp common stock for each share of Collective common stock in a
tax-free exchange. Collective had 20.4 million common shares outstanding on
December 31, 1996. Summit will receive an option to purchase up to 19.9 percent
of Collective's common stock if certain conditions occur. Based on the closing
price of Summit Bancorp's common stock last night, the transaction has a value
of $42.51 per share for a total of $867 million. Collective has the right to
terminate the transaction if Summit's average price during the determination
period falls below $39.00 and is 18 percent below an index of 20 banking
companies.
Mr. Semrod continued,"The acquisition of Collective will afford Summit a
strategic position in South Jersey that the company already enjoys in the
northern and central regions of the state. In fact, at 17 percent, our South
Jersey deposit franchise will total $4.4 billion, double the current size.
Collective's strong first position in Atlantic County is especially desirable as
this is one of New Jersey's best growth markets."
The transaction is expected to be completed by the third quarter of 1997,
subject to regulatory and Collective shareholder approval. Summit will account
for the acquisition as a pooling-of-interests, and expects to incur a one-time
restructuring charge of approximately $33 million after taxes.
Keefe, Bruyette & Woods is acting as advisor to Summit Bancorp, and Merrill
Lynch & Co. is acting as advisor to Collective. Both have provided fairness
opinions in connection with the transaction.
Summit Bancorp is a Princeton, New Jersey based financial services company with
$23 billion in assets and $18 billion in deposits. It is the 31st largest bank
holding company in the United States and operates over 350 traditional and
in-store branches throughout New Jersey and eastern Pennsylvania and 500 ATMs.
Summit's major lines of business are retail, commercial, mortgage and private
banking and investment management.
<PAGE>
TRANSACTION SUMMARY
TERMS
Fixed Exchange Ratio 0.895 Summit share for each Collective share
Indicated Price Per Share $42.51
Indicated Total Price $867 million
Payment Tax-free exchange of stock
18.3 million new Summit shares
Targeted Closing Third Quarter 1997
Subject to normal regulatory and Collective
shareholder approval
Terms Walkaway if Summit is less than $39.00 per share,
and has declined more than 18% versus a selected
bank index during the determination period.
No collars
19.9% lock-up option granted to Summit
Due diligence completed
New Board Seats Two
OVERVIEW
Price to Book Value 2.30x
Price to 1996 LTM core EPS 14.92x
Price to 1997 Estimated EPS 13.00x
Price to 1998 Estimated EPS 12.04x
Earnings Accretion 2% in 1998
Expense Savings $18 million, or 25% of Collective's expense base
One-Time Restructuring Charges $49 million, $33 million after-tax
Book Value Dilution 1%
Accounting Treatment Pooling - of - interests
The estimates of earnings, expense savings, and restructuring charges are based
on various assumptions. Factors outside the control of Summit, such as
significant changes in the regional and national economies, interest rates and
technology, as well as changes in the competitive environment, could result in
these estimates not being realized.
<PAGE>
KEY MESSAGES
o Improves #1 market share position in New Jersey to 16.1 percent from
13.4 percent with $20.5 billion in deposits
o Summit will have a relationship with 1.2 million of the state's 2.9
million households
o Summit will hold #1 position in 9 of 21 New Jersey counties; one of
top three positions in 16 counties
o Adds 213,000 households in New Jersey
o Doubles market share in South Jersey at 17 percent -- $4.4 billion
o Summit moves to #1 position in Atlantic, Burlington and Ocean
counties, and to #2 in Monmouth
o 57% household penetration in Atlantic County
o Accretive to earnings by 1998, with improved return on equity and
efficiency
o Summit becomes $29 billion institution, #29 in U.S.
o 82 additional branches in 15 New Jersey counties
o 50 additional ATMs, a 10% increase
o Increases residential mortgage servicing portfolio by 66% to $8.3
billion
o Residential mortgage originations increase 50% to $1.4 billion (based
on 1996 figures) with expansion into Delaware
o Expands prospects for key business lines, with focus on revenue
generation through market penetration
o In-market acquisition consistent with Summit's long-term acquisition
strategy
NOTE: To obtain a copy of the full financial presentation giving details of this
transaction, please call 800-753-0352, ext. 726, and enter your fax number
according to the instructions.
###
Exhibit 99(C)
TERMS OF TRANSACTION
Fixed Exchange Ratio 0.895 Summit Share For Each Collective Share
Indicated Price Per Share $42.51
Indicated Total Price $867 Million
Payment Tax-free Exchange of Stock
18.3 Million New Summit Shares
Targeted Closing Third Quarter 1997
Subject to Normal Regulatory and
Collective Shareholder Approval
Terms Walkaway if Summit is Less Than $39.00 per Share,
and has Declined More Than 18% Relative to Bank Index
No Collars
19.9% Lock-up Option Granted to Summit
Due Diligence Completed
New Board Seats Two
<PAGE>
PRICING OVERVIEW
Indicated Price Per Share $42.51
Price to Book Value 2.30x
Price to LTM Core EPS 14.92x
Price to 1997 Estimated EPS 13.00x
Price to 1998 Estimated EPS 12.04x
<PAGE>
TRANSACTION ECONOMICS
EPS Accretion 2% in 1998
Expense Savings $18 Million, or 25% of Collective Expense Base,
Reflected in Earnings Accretion
One - Time Restructuring $49 Million, $33 Million after tax
Charges
Potential Revenue $4 - $6 Million Annually, Not Reflected in Earnings
Enhancements Accretion
Book Value Dilution 1%
Internal Rate of Return 15.5%
Accounting Treatment Pooling of Interests
<PAGE>
NEW JERSEY MARKET SHARE ANALYSIS
Deposits Market
Institution (billions) Share
----------- ---------- -----
1. SUMMIT BANCORP (pro forma) $20.5 16.1 %
2. First Union 13.9 10.9
3. PNC Bank 10.8 8.5
4. Fleet Financial 9.9 7.7
5. CoreStates Financial 7.1 5.6
6. Sovereign Bancorp 5.8 4.6
7. Hudson City Savings 5.4 4.2
8. Valley National Bank 4.4 3.5
9. Bank of New York 3.5 2.8
10 Commerce Bancorp 2.4 1.9
Summit Bancorp (pro forma)
Northern NJ 16.1 15.8
Southern NJ 4.4 16.9
<PAGE>
ESTIMATED PRO FORMA EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
1997 1998
Total Per Share Total Per Share
<S> <C> <C> <C> <C>
Net Income Stand Alone:
Summit $361.3 $3.66 $399.7 $4.02
Collective 66.8 3.27 71.9 3.53
Adjustments:
Revenue Enhancements - - - -
Expense Reductions - - 10.6
------ ------
Pro Forma $428.1 $3.66 $482.2 $4.09
------ ----- ------ -----
Accretion 0.0% 1.7%
---- ----
Pro Forma Shares MM 117.1 118.0
</TABLE>
<PAGE>
ESTIMATED EXPENSE REDUCTIONS
(Dollars in millions, except per share amounts)
Target: $18 Million Total Reduction by 1998, 25% of Collective Expense Base
1998
Human Resources $6.3
Operations 4.1
Occupancy 2.8
Other Cost Savings 4.8
------
Total Pre-Tax $ 18.0
------
Total After-Tax $ 10.6
------
EPS Impact $ 0.09
------
<PAGE>
ONE-TIME RESTRUCTURING CHARGES
(Dollars in millions, except per share amounts)
Facilities and Equipment $17.6
Human Resources 13.4
Professional and Other Expenses 11.5
Operations and Conversions 6.8
-----
Total Pre-Tax $49.3
-----
Total After - Tax $33.2
-----
EPS Impact $0.28
-----
<PAGE>
EXPANDS PROSPECTS FOR KEY BUSINESS LINES
o Increased Penetration of 213,000 Additional Households
o Revenue Gains from Expanded Product Offerings and Cross Selling
Opportunities
o Retail Banking - Managing Local Markets
o Small Business and Middle Market Lending
o Investment Services / Discount Brokerage
o Mortgage Banking: Servicing Increases 66% to $8.3 Billion
Originations Increase 50% to $1.4 Billion
o Private Banking
<PAGE>
COMPARATIVE FINANCIAL DATA- 12/31/96
At or for the quarter ended December 31,1996
(Dollars in millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Summit * Collective Pro Forma
Net Interest Income $236.4 $39.0 $275.4
Provision 15.5 0.8 16.3
Non-lnterest Income 66.5 4.1 70.6
Non-lnterest Expense 161.5 18.6 180.1
Taxes 41.8 8.5 50.3
---- --- ----
Net Income $84.1 $15.2 $99.3
----- ----- -----
Return on Assets 1.46 % 1.10 % 1.39 %
Return on Common Equity 17.26 16.23 17.09
Efficiency Ratio 53.80 43.10 52.40
Non-Int. Inc. / Avg. Assets 1.16 0.30 0.99
Non-Int. Exp. / Avg. Assets 2.81 1.35 2.53
Net Interest Margin 4.51 2.99 4.23
Common Equity / Assets 8.55 6.79 8.21
Tangible Equity/Assets 7.95 6.14 7.61
</TABLE>
* Reflects pending acquisition
<PAGE>
BALANCE SHEET- 12/31/96
(Dollars in millions)
Assets: Summit* Collective ProForma
Investments $6,237 $2,445 $8,682
Loans 15,269 2,874 18,143
-------- -------- --------
Total Earning Assets 21,506 5,319 26,825
Loan Loss Allowance (276) (14) (290)
Other Assets 2,115 239 2,354
-------- -------- --------
Total Assets $23,345 $5,544 $28,889
-------- -------- --------
Liabilities and Equity:
Total Deposits $18,927 $3,553 $22,480
Purchased Funds 2,140 1,588 3,728
Other Liabilities 282 27 309
-------- -------- --------
Total Liabilities 21,349 5,168 26,517
Common Equity 1,996 376 2,372
-------- -------- --------
Total Equity 1,996 376 2,372
-------- -------- --------
Total Liabilities and Equity $23,345 $5,544 $28,889
-------- -------- --------
* Reflects pending acquisition
<PAGE>
LOAN PORTFOLIO - 12/31/96
(Dollars in millions)
<TABLE>
<CAPTION>
Summit* Collective Pro Forma
Total Percent Total Percent Total Percent
<S> <C> <C> <C> <C> <C> <C>
Commercial $5,358 35 % $ 139 5 % $5,497 30 %
Commercial Mortgages 2,451 16 263 9 2,714 15
Residential Mortgages 3,878 25 2,215 77 6,093 34
Consumer Loans 3,581 24 257 9 3,838 21
------- --- ------ --- ------- ---
Total Loans $15,268 100 % $2,874 100 % $18,142 100 %
------- --- ------ --- ------- ---
</TABLE>
* Reflects pending acquisition
<PAGE>
CREDIT QUALITY - 12/31/96
(Dollars in millions)
<TABLE>
<CAPTION>
Summit* Collective Pro Forma
Total Percent Total Percent Total Percent
<S> <C> <C> <C> <C> <C> <C>
Non - Performing Loans $133.3 86 % $17.4 77 % $150.7 85 %
OREO 22.2 14 5.1 23 27.3 15
---- -- --- -- ---- --
Total Non Performing Assets $155.5 100 % $22.5 100 % $178.0 100 %
------ --- ---- --- ------ ---
Total Reserve $276.4 $14.2 $290.6
NPls / Loans 0.87 % 0.60 % 0.83%
NPAs/Loans&OREO 1.02 0.78 0.98
Reserve/Loans 1.81 0.49 1.60
Reserve/NPLs 207.30 81.55 192.81
Reserve/ NPAs 177.76 63.02 163.27
* Reflects pending
acquisition
</TABLE>
<PAGE>
DEPOSIT PORTFOLIO 12/31/96
(Dollars in millions)
<TABLE>
<CAPTION>
Summit* Collective Pro Forma
Total Percent Total Percent Total Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Demand $4,053.8 21.4 % $136.7 3.8 % $4,190.5 18.6%
Now and Savings 4,929.6 26.0 1,143.9 32.2 6,073.5 27.0
Money Market Accounts 3,497.0 18.5 299.0 8.4 3,796.0 16.9
Certificates of Deposit
Less Than $100,000 5,794.0 30.6 1,729.1 48.7 7,523.1 33.5
Certificates of Deposit
Greater Than $100,000 652.2 3.5 244.3 6.9 896.5 4.0
------ --- ----- --- ----- ---
Total Deposits $18,926.6 100% $3,553.0 100% $22,479.6 100%
--------- --- -------- --- --------- ---
Core Deposits/Deposits 97% 93% 96%
</TABLE>
* Reflects pending acquisition
<PAGE>
FORWARD-LOOKING INFORMATION
Summit Bancorp's earnings estimates included herein are based upon First Call
consensus for 1997 and 1998. Earnings estimates for Collective Bancorp are based
upon consensus for 1997, with an 8% growth factor for 1998. These estimates are
presented for illustrative purposes only.
The accompanying estimates of revenue growth, expense reductions and
restructuring charges constitute forward- looking information. This information
is based upon various factors and numerous assumptions. In reviewing such
information, the reader should be mindful that failure to realize these
assumptions may cause such estimates to differ materially from those presented.
Additionally, it is recognized that objectives, no matter how focused, are
subject to factors beyond the control of Summit Bancorp which can impede the
ability to achieve its goals as presented herein. Such factors include, but are
not limited to, significant changes in: regional and national economies,
competition, interest rates and technology.
Future performance is predicated on Summit Bancorp's ability to compete in an
ever-changing marketplace, adapt its product lines and provide superior customer
service.
