FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
-----------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-6451
-----------------------------------
Summit Bancorp.
- -------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1903313
- -------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 Carnegie Center, P.O. Box 2066, Princeton, New Jersey
08543-2066
- --------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(609) 987-3200
- ---------------------------------------------------------------
Registrant's telephone number, including area code)
- ---------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
As of April 30, 1997 there were 98,540,507 shares
of common stock, $1.20 par value, outstanding.
<PAGE>
SUMMIT BANCORP.
FORM 10-Q
INDEX
Part I Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997, December 31, 1996
and March 31, 1996............................... 2
Consolidated Statements of Income -
Three Months Ended March 31, 1997 and 1996....... 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996....... 4
Consolidated Statements of Shareholders' Equity -
Three Months Ended March 31, 1997 and 1996....... 5
Consolidated Average Balance Sheets With Resultant
Interest and Rates -
Three Months Ended March 31, 1997 and 1996....... 6
Notes to Consolidated Financial Statements........... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 9
Part II. Other Information.
Item 1. Legal Proceedings........................... 17
Item 2. Changes in Securities....................... 18
Item 4. Submission of Matters to a Vote
of Security Holders......................... 19
Item 6. Exhibits and Reports on Form 8-K............ 20
Signatures.......................................... 21
Exhibit Index....................................... 22
1
<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED BALANCE SHEETS
Unaudited
(dollars in thousands)
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
------------- ------------ ------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 968,930 $ 1,256,684 $ 1,122,977
Federal funds sold and securities purchased
under agreements to resell 188,800 111,143 41,892
Interest bearing deposits with banks 13,457 24,825 36,338
Securities:
Trading account securities 33,806 26,376 49,755
Securities available for sale 3,079,597 2,670,414 2,476,859
Securities held to maturity 3,085,774 3,217,384 3,471,920
------------- ------------ ------------
Total securities 6,199,177 5,914,174 5,998,534
Loans (net of unearned discount):
Commercial 5,616,090 5,266,665 5,354,519
Commercial mortgage 2,395,650 2,313,610 2,456,852
Residential mortgage 3,829,124 3,795,752 3,551,936
Consumer 3,655,081 3,443,568 3,192,783
------------- ------------ ------------
Total loans 15,495,945 14,819,595 14,556,090
Less: Allowance for loan losses 277,011 267,719 280,590
------------- ------------ ------------
Net loans 15,218,934 14,551,876 14,275,500
------------- ------------ ------------
Premises and equipment 201,363 204,953 213,192
Accrued interest receivable 139,880 140,368 136,227
Due from customers on acceptances 17,915 15,671 19,838
Other assets 490,889 448,318 485,278
------------- ------------ ------------
Total Assets $ 23,439,345 $ 22,668,012 $ 22,329,776
============= ============ ============
Deposits:
Non-interest bearing demand deposits $ 4,184,241 $ 3,984,366 $ 3,628,466
Interest bearing deposits:
Savings and time deposits 13,981,408 13,779,803 13,698,428
Commercial certificates of deposit $100,000 and over 665,885 610,817 766,910
------------- ------------ ------------
Total deposits 18,831,534 18,374,986 18,093,804
------------- ------------ ------------
Other borrowed funds 1,374,190 1,338,734 1,568,639
Accrued expenses and other liabilities 300,215 271,510 375,540
Accrued interest payable 67,434 50,261 56,428
Bank acceptances outstanding 17,915 15,671 19,838
Long-term debt 680,257 689,977 398,605
Capital trust pass-through securities 150,000 - -
------------- ------------ ------------
Total liabilities 21,421,545 20,741,139 20,512,854
Shareholders' equity:
Preferred stock: Series B and C - - 42,620
Common stock par value $1.20: Authorized 130,000,000 shares;
issued and outstanding 98,450,950 at March 31, 1997; 93,962,565
at December 31, 1996 and 93,398,970 at March 31, 1996 118,141 112,755 112,079
Surplus 926,802 881,483 869,307
Retained earnings 984,161 927,672 794,948
Net unrealized gain (loss) on securities, net of tax (11,304) 4,963 (2,032)
------------- ------------ ------------
Total shareholders' equity 2,017,800 1,926,873 1,816,922
------------- ------------ ------------
Total Liabilities and Shareholders' Equity $ 23,439,345 $ 22,668,012 $ 22,329,776
============= ============ ============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(dollars in thousands, except per share data)
<CAPTION> Three Months Ended
March 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Interest Income
Loans $ 309,338 $ 295,129
Securities:
Trading account securities 373 568
Securities available for sale 44,702 39,211
Securities held to maturity 50,098 51,539
----------- -----------
Total securities 95,173 91,318
Federal funds sold and securities purchased under agreements to resell 877 1,115
Deposits with banks 174 191
----------- -----------
Total interest income 405,562 387,753
----------- -----------
Interest Expense
Savings and time deposits 124,408 123,601
Commercial certificates of deposit $100,000 and over 8,387 10,541
Borrowed funds, long-term debt and Capital trust pass-through securities 32,710 27,620
----------- -----------
Total interest expense 165,505 161,762
----------- -----------
Net interest income 240,057 225,991
Provision for loan losses 14,500 15,500
----------- -----------
Net interest income after provision for loan losses 225,557 210,491
----------- -----------
Non-Interest Income
Service charges on deposit accounts 26,271 23,456
Service and loan fee income 10,718 10,569
Trust income 11,329 9,243
Securities gains 1,140 757
Trading account gains 432 31
Other 15,546 14,207
----------- -----------
Total non-interest income 65,436 58,263
Non-Interest Expenses
Salaries 64,610 62,992
Pension and other employee benefits 23,049 23,927
Occupancy, net 16,855 20,241
Furniture and equipment 16,836 15,633
Communications 7,834 7,252
Deposit insurance premiums 905 1,226
Restructuring charges 26,500 110,700
Other 32,663 30,764
----------- -----------
Total non-interest expenses 189,252 272,735
----------- -----------
Income (loss) before income taxes 101,741 (3,981)
Federal and state income taxes (benefit) 35,256 (1,742)
----------- -----------
Net Income (loss) $ 66,485 $ (2,239)
=========== ===========
Net Income (loss) Per Common Share $ 0.68 $ (0.03)
=========== ===========
Average Common Shares Outstanding (in thousands) 98,271 93,134
=========== ===========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(dollars in thousands)
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
------------- -------------
<S> <C> <C>
Operating activities
Net income (loss) $ 66,485 $ (2,239)
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and other real estate owned 14,750 15,872
Depreciation, amortization and accretion, net 21,403 7,001
Restructuring charges 26,500 110,700
Gains on sales of trading account securities and securities available for sale (1,572) (788)
Gains (losses) on sales of mortgages held for sale (1,715) 18
Gains on sales of other real estate owned (288) (503)
Proceeds from sales of other real estate owned 2,971 6,138
Proceeds from sales of mortgages held for sale 92,909 17,232
Originations of mortgages held for sale (70,165) (15,625)
Increase in trading account securities (6,998) (21,087)
Increase in accrued interest receivable and other assets (14,247) (38,079)
Increase in accrued interest payable, accrued
expenses and other liabilities 12,888 23,831
------------- -------------
Net cash provided by operating activities 142,921 102,471
------------- -------------
Investing activities
Purchases of securities held to maturity (21,044) (473,623)
Purchases of securities available for sale (712,695) (244,913)
Proceeds from maturities of securities held to maturity 163,170 154,550
Proceeds from maturities of securities available for sale 202,543 121,299
Proceeds from sales of securities available for sale 235,436 81,018
Net (increase) decrease in Federal funds sold and securities purchased under
agreements to resell (77,657) 133,083
Net decrease (increase) in interest bearing deposits with banks 11,466 (18,009)
Net increase in loans (265,047) (162,881)
Purchases of premises and equipment, net (1,587) (2,190)
------------- -------------
Net cash used in investing activities (465,415) (411,666)
------------- -------------
Financing activities
Net decrease in deposits (95,163) (400,622)
Net increase in short-term borrowings 2,780 520,946
Principal payments on long-term debt (26,496) (26,257)
Proceeds from issuance of long-term debt 4,500 -
Proceeds from issuance of capital trust pass-through securities 150,000 -
Dividends paid (33,836) (38,156)
Proceeds from issuance of common stock under dividend
reinvestment and other stock plans 11,163 13,597
------------- -------------
Net cash provided by financing activities 12,948 69,508
------------- -------------
Decrease in cash and due from banks (309,546) (239,687)
Begining cash balance of acquired entities 21,792 24,946
Cash and due from banks at beginning of period 1,256,684 1,337,718
------------- -------------
Cash and due from banks at end of period $ 968,930 $ 1,122,977
============= =============
Supplemental disclosure of cash flow information
Cash paid:
Interest payments $ 148,332 $ 150,901
Income tax payments 10,746 395
Noncash investing activities:
Net transfer of loans to other real estate owned 4,826 9,000
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Unaudited
(dollars in thousands)
<CAPTION>
Net Total
Preferred Common Retained Unrealized Shareholders'
Stock Stock Surplus Earnings Gain (Loss) Equity
-------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 42,620 $ 106,165 $ 826,788 $ 821,579 $ 5,164 $ 1,802,316
Balances at beginning of period of immaterial
pooled acquisitions (4,353,085 shares) - 5,224 29,612 14,054 (567) 48,323
Net income (loss) - - - (2,239) - (2,239)
Cash dividends declared:
Preferred stock - - - (639) - (639)
Common stock - - - (37,807) - (37,807)
Common stock issued:
Dividend reinvestment and other stock plans
(283,457 shares) - 340 9,098 - - 9,438
Exercise of stock options, net (291,400 shares) - 350 3,809 - - 4,159
Change in unrealized gain (loss) on securities,
net of tax - - - - (6,629) (6,629)
-------- --------- --------- --------- ----------- -----------
Balance, March 31, 1996 $ 42,620 $ 112,079 $ 869,307 $ 794,948 $ (2,032) $ 1,816,922
======== ========= ========= ========= =========== ===========
Balance, December 31, 1996 $ - $ 112,755 $ 881,483 $ 927,672 $ 4,963 $ 1,926,873
Balances at beginning of period of immaterial
pooled acquisition (4,031,051 shares) - 4,837 34,705 25,562 (278) 64,826
Net income (loss) - - - 66,485 - 66,485
Cash dividends declared on common stock - - - (35,558) - (35,558)
Common stock issued:
Dividend reinvestment and other stock plans
(103,588 shares) - 124 4,450 - - 4,574
Exercise of stock options, net (353,746 shares) - 425 6,164 - - 6,589
Change in unrealized gain (loss) on securities,
net of tax - - - - (15,989) (15,989)
-------- --------- --------- --------- ----------- -----------
Balance, March 31, 1997 $ - $ 118,141 $ 926,802 $ 984,161 $ (11,304) $ 2,017,800
======== ========= ========= ========= =========== ===========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES
Unaudited
(Tax-equivalent basis, dollars in thousands)
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- --------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets:
Federal funds sold and securities purchased
under agreements to resell $ 67,791 $ 877 5.25 % $ 76,240 $ 1,115 5.88 %
Interest bearing deposits with banks 12,485 174 5.65 14,686 191 5.23
Securities:
Trading account securities 32,146 374 4.72 43,934 580 5.31
Securities available for sale 2,901,196 44,702 6.16 2,533,420 39,211 6.19
Securities held to maturity 3,235,225 51,816 6.41 3,361,155 54,062 6.43
----------- --------- ------- ----------- --------- -------
Total securities 6,168,567 96,892 6.28 5,938,509 93,853 6.32
Loans:
Commercial 5,406,368 112,934 8.47 5,321,143 111,029 8.39
Commercial mortgage 2,401,925 51,793 8.63 2,447,476 53,208 8.70
Residential mortgage 3,850,106 71,185 7.40 3,494,086 65,259 7.47
Consumer 3,592,151 74,787 8.44 3,155,019 66,884 8.53
----------- --------- ------- ----------- --------- -------
Total loans 15,250,550 310,699 8.26 14,417,724 296,380 8.27
----------- --------- ------- ----------- --------- -------
Total interest earning assets 21,499,393 408,642 7.71 20,447,159 391,539 7.70
----------- --------- ------- ----------- --------- -------
Non-interest earning assets:
Cash and due from banks 1,044,222 1,135,779
Allowance for loan losses (282,003) (293,194)
Other assets 823,777 799,279
----------- -----------
Total non-interest earning assets 1,585,996 1,641,864
----------- -----------
Total Assets $23,085,389 $22,089,023
=========== ===========
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Savings deposits $ 8,186,591 51,576 2.56 $ 8,077,351 51,276 2.55
Time deposits 5,774,208 72,832 5.12 5,634,517 72,325 5.16
Commercial certificates of deposit
$100,000 and over 655,908 8,387 5.19 778,039 10,541 5.45
----------- --------- ------- ----------- --------- -------
Total interest bearing deposits 14,616,707 132,795 3.68 14,489,907 134,142 3.72
----------- --------- ------- ----------- --------- -------
Commercial paper 47,835 622 5.27 44,265 582 5.29
Other borrowed funds 1,448,686 19,925 5.58 1,435,412 19,278 5.40
Long-term debt and Capital trust pass-through securit 709,206 12,163 6.86 410,642 7,760 7.56
----------- --------- ------- ----------- --------- -------
Total interest bearing liabilities 16,822,434 165,505 3.99 16,380,226 161,762 3.97
----------- --------- ------- ----------- --------- -------
Non-interest bearing liabilities:
Demand deposits 3,904,200 3,524,750
Other liabilities 338,963 308,185
----------- -----------
Total non-interest bearing liabilities 4,243,163 3,832,935
----------- -----------
Total Shareholders' Equity 2,019,792 1,875,862
----------- -----------
Total Liabilities and Shareholders' Equity $23,085,389 $22,089,023
=========== --------- =========== ---------
Net Interest Income (tax-equivalent basis) 243,137 3.72 % 229,777 3.73 %
--------- ======= --------- =======
Tax-equivalent basis adjustment (based on a
Federal income tax rate of 35%) (3,080) (3,786)
--------- ---------
Net Interest Income $ 240,057 $ 225,991
========= =========
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.59 % 4.52 %
======= =======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
6
<PAGE>
SUMMIT BANCORP.
Notes to Consolidated Financial Statements
(Unaudited)
1.) Basis of Presentation
The accompanying financial statements reflect, in the opinion of
management, all normal, recurring adjustments necessary to
present fairly the financial position of Summit Bancorp. (the
"Company"), the results of its operations, changes in
shareholders' equity and changes in its cash flows. In all
material respects, the financial statements presented comply
with the current reporting requirements of supervisory
authorities. Certain prior period amounts have been reclassified
for comparative purposes. The adoption of new accounting
pronouncements had an immaterial impact on the company's
financial statements. For additional information and
disclosures required under generally accepted accounting
principles, reference is made to the registrant's 1996 Annual
Report on Form 10-K.
Earnings per common share is calculated by dividing net income,
less the dividends on preferred stocks, by the average daily
number of common shares outstanding during the period. Common
stock equivalents are not included in the calculation as they
have no material dilutive effect.
2.) Acquisitions and Restructuring Charges
On March 1, 1997, the Company completed the acquisition of
B.M.J. Financial Corp. ("B.M.J."). This acquisition was
accounted for as a pooling of interests, and was recorded as an
adjustment to beginning shareholders' equity as of January 1,
1997, without restating the consolidated financial statements
for 1996 and prior years. A restructuring charge of $26.5
million, $16.7 million or $.17 per share after tax, was recorded
related to this acquisition. At December 31, 1996, B.M.J. had
total assets of $676.0 million, loans of $449.0 million and
deposits of $552.0 million.
On December 7, 1996, the Company completed the acquisition of
Central Jersey Financial Corporation ("Central Jersey"). This
acquisition was accounted for as a purchase, and the assets and
results of operations are included from that date. Central
Jersey had total assets of $446.6 million, loans of $200.5
million and deposits of $376.8 million.
Garden State Bancshares, Inc. ("Garden State") was acquired on
January 16, 1996, and The Flemington National Bank and Trust
Company ("Flemington") was acquired on February 23, 1996. Both
of these acquisitions were accounted for as poolings of interest
and were recorded as adjustments to beginning shareholders'
equity as of January 1, 1996, without restating the consolidated
financial statements for 1995 and prior years. On March 1, 1996,
the company completed its acquisition of The Summit
Bancorporation. This acquisition was accounted for as a pooling
of interests and all
7
<PAGE>
financial information has been restated to
reflect the combined results of operations. A restructuring
charge of $110.7 million, $70.0 million or $.75 per share after
tax, was recorded primarily as a result of these acquisitions as
well as a supermarket branch initiative.
On February 28, 1997, the Company announced a definitive
agreement to acquire Collective Bancorp, Inc. ("Collective").
Collective, which operates Collective Bank, has assets of $5.5
billion, loans of $2.9 billion and deposits of $3.5 billion,
with 82 branches in 15 counties located throughout New Jersey.
The transaction is intended to be accounted for as a pooling of
interests in an exchange of .895 shares of the Company's common
stock for each share of Collective common stock. At March 31,
1997, there were approximately 20.4 million of Collective shares
issued and outstanding. This transaction is expected to close
in the third quarter of 1997 and is subject to regulatory and
Collective shareholder approvals.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
-----------------------------------------------
Summit Bancorp., (the "Company"), is a bank holding company
located in Princeton, New Jersey. The Company owns three banks
("bank subsidiaries") and several active non-bank subsidiaries
and currently ranks as the largest New Jersey-based bank holding
company. The Company's bank subsidiaries provide a broad range
of retail, commercial and private banking services as well as
trust and investment services through a line of business
approach to individuals, businesses, not-for-profit
organizations, government entities and other financial
institutions. These services are provided through an extensive
branch network, including supermarket branches and private
banking facilities, as well as through automated teller machines
and personal computers.
FINANCIAL CONDITION
March 31, 1997 versus December 31, 1996
Total assets at March 31, 1997, were $23.4 billion, an increase
of $771.3 million or 3.4 percent from year-end 1996.
Approximately $676.0 million of this increase was the result of
the first quarter acquisition of B.M.J. Excluding the impact of
the B.M.J. acquisition, total assets increased $95.3 million, or
.4 percent from year-end 1996.
Securities held to maturity at March 31, 1997, were $3.1 billion
and were comprised of $1.6 billion of U.S. Government and
Federal agency securities, $219.5 million of state and political
subdivision securities and $1.2 billion of other securities.
These securities decreased $131.6 million or 4.1 percent from
year-end 1996. The decrease was the result of $163.2 million in
maturities, offset by $21.0 million in purchases and $14.4
million attributable to the B.M.J. acquisition. At March 31,
1997, the aggregate market value of the held-to-maturity
portfolio was $3.0 billion. The aggregate market value at
December 31, 1996, was $3.2 billion.
At March 31, 1997, securities available for sale amounted to
$3.1 billion and were comprised of $2.6 billion of U.S.
Government and Federal agency securities, $14.7 million of state
and political subdivision securities and $437.4 million of other
securities, predominately corporate collateralized mortgage
obligations. These securities increased $409.2 million or 15.3
percent from year-end 1996. For the first three months of 1997,
$712.7 million of securities were purchased and $163.9 million
were acquired from B.M.J. These increases were offset by
maturities of $202.5 million and sales of $235.4 million.
Currently, cash flows from maturities, calls and paydowns from
both portfolios are now being reinvested in the available for
sale portfolio to provide greater flexibility in our asset and
liability management.
9
<PAGE>
At March 31, 1997, total loans amounted to $15.5 billion and
increased $676.4 million or 4.6 percent from year-end 1996. The
acquisition of B.M.J. accounted for approximately $449.0 million
of this increase, most of which growth was in commercial and
consumer loans. Commercial loans at March 31, 1997, increased
$349.4 million or 6.6 percent from year-end 1996. Commercial
mortgage loans increased $82.0 million or 3.5 percent, and
residential mortgage loans increased $33.4 million or .9 percent
from December 31, 1996. Consumer loans increased $211.5 million
or 6.1 percent from year-end 1996 to $3.7 billion.
Total deposits were $18.8 billion at March 31, 1997, an increase
of $456.5 million or 2.5 percent from December 31, 1996, with
most of this increase due to the acquisition of B.M.J. Demand
deposits increased $199.9 million or 5.0 percent from year-end
1996 to $4.2 billion. Savings and time deposits increased
$201.6 million or 1.5 percent from December 31, 1996, to $14.0
billion. Commercial certificates of deposit $100,000 and over
were $665.9 million, an increase of $55.1 million or 9.0 percent
compared to December 31, 1996.
Borrowed funds, including long-term debt, at March 31, 1997,
increased $25.7 million or 1.3 percent from December 31, 1996,
to $2.1 billion. On March 20, 1997, the Company issued $150.0
million of 8.40 percent capital trust pass-through securities.
The Company will use the proceeds from the issuance of these
securities, which qualify as Tier I capital, for general
corporate purposes.
Total shareholders' equity increased $90.9 million or 4.7
percent from December 31, 1996, to $2.0 billion. Contributing to
this increase, in addition to earnings, was the B.M.J.
acquisition, which added $64.8 million to shareholders' equity.
As of March 31, 1997, the unrealized loss on securities, net of
tax, recorded in equity amounted to $11.3 million, compared to
an unrealized gain of $5.0 million at year-end 1996.
Capital ratios for March 31, 1997, as compared to select prior
periods are shown in the following table. The capital ratios
from year-end 1996 were benefited by the issuance of the $150.0
million in capital trust pass-through securities.
March 31, Dec. 31, March 31,
Selected Capital Ratios: 1997 1996 1996
- ------------------------- --------- --------- ---------
Equity to assets 8.61% 8.50% 8.14%
Leverage ratio 8.88 8.06 7.79
Tier I capital 11.99 11.09 10.57
Total capital 14.57 13.75 13.23
10
<PAGE>
Non-performing Loans and Other Real Estate Owned
Total non-performing loans and other real estate owned ("OREO")
as well as non-performing loan ratios are shown in the following
table as of March 31, 1997, December 31, 1996, and March 31,
1996.
<TABLE>
Non-performing assets March 31, 1997 Dec. 31, 1996 March 31, 1996
------------ ------------ ------------
Non-performing loans
<S> <C> <C> <C>
Commercial and industrial $ 49,024 $ 54,308 $ 56,722
Construction 28,252 31,901 50,883
Real estate related 40,449 45,877 81,164
--------- --------- ---------
Total non-performing loans 117,725 132,086 188,769
OREO 23,431 20,979 26,410
--------- --------- ---------
Total non-performing assets $ 141,156 $ 153,065 $ 215,179
--------- --------- ---------
Non-performing loans to total loans 0.76% 0.89% 1.30%
</TABLE>
The average balance of non-performing loans for the three months
ended March 31, 1997, was $122.8 million. Interest income
received on non-performing loans amounted to $.8 million for the
quarter ended March 31, 1997. Certain loans, primarily consumer
and residential mortgage loans, which are 90 days past due are
not included in non-performing loans because they are well
collateralized and in the process of collection. These loans
amounted to $58.9 million at March 31, 1997, compared to $60.6
million and $52.0 million at December 31, 1996, and March 31,
1996, respectively.
Allowance for Loan Losses
The allowance for loan losses at March 31, 1997, was $277.0
million, or 1.79 percent of loans, compared to $267.7 million or
1.81 percent of loans at December 31, 1996, and $280.6 million
or 1.93 percent of loans at March 31, 1996. For the three
months ended March 31, 1997, net charge offs were $13.9 million,
or .37 percent of average loans compared to $20.3 million, or
.57 percent of average loans in the first three months of 1996.
The coverage of non-performing loans at March 31, 1997, was
235.30 percent, compared to 202.69 percent and 148.64 percent at
year-end 1996 and March 31, 1996, respectively.
11
<PAGE>
Transactions in the allowance for loan losses are shown in the
following table (dollars in thousands):
Three Months Ended March 31,
----------------------------
1997 1996
--------- ---------
Balance, January 1 $ 267,719 $ 279,034
Acquisition adjustments, net 8,719 6,342
Provision charged to expense 14,500 15,500
--------- ---------
290,938 300,876
--------- ---------
Less charge offs:
Commercial and industrial 8,134 7,863
Construction and development 724 6,751
Commercial mortgage 3,029 6,835
Residential mortgage 566 547
Consumer 7,490 3,057
--------- ---------
Total charge offs 19,943 25,053
--------- ---------
Add recoveries:
Commercial and industrial 2,627 2,577
Construction and development 183 856
Commercial mortgage 753 366
Residential mortgage 492 85
Consumer 1,961 883
--------- ---------
Total recoveries 6,016 4,767
--------- ---------
Net charge offs 13,927 20,286
--------- ---------
Balance, March 31 $ 277,011 $ 280,590
========= =========
A standardized process has been established to assess the
adequacy of the allowance for loan losses and to identify the
risks inherent in the loan portfolio. This process incorporates
credit reviews and gives consideration to areas of exposure such
as concentrations of credit, economic and industry conditions,
trends in delinquencies and collections, collateral coverage,
and the composition of the performing and non-performing loan
portfolios. The allowance for loan losses is maintained at a
level that management believes to be adequate to absorb
anticipated loan losses. The unallocated portion of the
allowance for loan losses was $134.1 million at March 31, 1997,
compared to $133.2 million at December 31, 1996.
12
<PAGE>
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1997, was $66.5
million compared to a net loss of $2.2 million for the first
three months of 1996. On a per common share basis, net income
for the three months ended March 31, 1997, was $.68 compared to
a net loss of $.03 for the same period in 1996. The first
quarter of 1997 includes a non-recurring restructuring charge of
$26.5 million, $16.7 million or $.17 per share, after-tax,
related to the B.M.J. acquisition. The results for the three
months ended March 31, 1996, also include non-recurring
merger-related restructuring charges of $110.7 million, $70.0
million or $.75 per share, after-tax, primarily related to the
acquisitions of The Summit Bancorporation, Flemington, and
Garden State. Also included in these charges were expenses
recorded in conjunction with an announced agreement to open 70
in-store supermarket branches. Excluding the effects of the
non-recurring restructuring charges, net income would have been
$83.2 million or $.85 per share for the first quarter of 1997,
and $67.7 million or $.72 per share for the prior year period,
an 18.1 percent increase. Key performance indicators are as
follows:
For the three months ended,
------------------------------
March 31, Dec. 31, March 31,
1997 1996 1996
--------- -------- ---------
Before restructuring charges
Return on:
Average assets 1.46% 1.47% 1.23 %
Average common equity 16.70 17.46 14.72
Efficiency ratio 52.22 53.34 55.60
After restructuring charges
Return on:
Average assets 1.17% 1.47% (0.04)%
Average common equity 13.35 17.46 (0.63)
Net interest spread
Interest income on a tax-equivalent basis was $408.6 million for
the three months ended March 31, 1997, an increase of $17.1
million, or 4.4 percent, compared to the prior year period. For
the three months ended March 31, 1997, interest-earning assets
averaged $21.5 billion, an increase of $1.1 billion, or 5.1
percent. This increase in interest-earning assets contributed
$16.7 million to interest income.
Interest expense increased $3.7 million, or 2.3 percent, for the
three months ended March 31, 1997, compared to the same period
in 1996. For the three months ended March 31, 1997,
interest-bearing liabilities averaged $16.8 billion, an increase
of
13
<PAGE>
$442.2 million, or 2.7 percent, from the prior year period. This
increase in interest- bearing liabilities contributed $3.2
million to the increase in interest expense.
Net interest income on a tax-equivalent basis was $243.1 million
for the three months ended March 31, 1997, an increase of $13.4
million, or 5.8 percent, compared to the same period in 1996.
The net interest spread percentage on a tax-equivalent basis
(the difference between the rate earned on average interest
earning assets and the rate paid on average interest bearing
liabilities) was 3.72 percent for the three months ended March
31, 1997, compared to 3.73 percent for the prior year period.
Net interest margin (net interest income on a tax-equivalent
basis as a percentage of average interest earning assets) was
4.59 percent during the first three months of 1997 compared to
4.52 percent during the same period in 1996. The increase in net
interest margin was benefited by an increase in non-interest
bearing funds.
Asset and liability management efforts involve the use of
certain derivative financial instruments for purposes of
stabilizing net interest income in a changing interest rate
environment. At March 31, 1997, the derivative financial
instruments portfolio consisted primarily of interest rate
swaps, caps and floors with notional values of $415.0 million,
$750.0 million and $430.0 million, respectively. These
derivatives resulted in a net interest income reduction of $.5
million for the first quarter of 1997 and 1996. The cost to
terminate these contracts at March 31, 1997, would have been
$1.7 million compared to $3.7 million at March 31, 1996.
As a result of improved asset quality, the provision for loan
losses for the first quarter was $14.5 million, a decrease of
$1.0 million compared with $15.5 million for the same period a
year ago.
Non-interest income
Non-interest income for the first quarter of 1997 totaled $65.4
million, an increase of $7.2 million, or 12.3 percent, compared
with the first quarter of 1996. Excluding securities gains,
total non-interest income was $64.3 million for the first
quarter of 1997, an increase of $6.8 million, or 11.8 percent,
from the prior year period.
For the first quarter of 1997, service charges on deposits were
$26.3 million, an increase of $2.8 million or 12.0 percent
compared with the first quarter of 1996. This increase was
primarily attributable to higher fee income from business and
personal demand deposit accounts. Fee income on demand deposit
accounts increased as a result of a larger customer base in 1997
when compared to 1996.
Trust fee income for the first quarter of 1997 was $11.3
million, an increase of $2.1 million or 22.6 percent compared
with the first quarter of 1996. These increases are primarily
due to higher fees from mutual funds and investment advisory
accounts.
14
<PAGE>
For the first quarter of 1997, net gains of $1.1 million on the
sales and early redemptions of securities were realized
compared with net gains of $.8 million in the first quarter of
1996. For the three months ended March 31, 1997, other income
increased $1.3 million, or 9.4 percent as compared to the first
quarter of 1996. This increase was primarily attributable to
ATM access fees and safe deposit rental income.
Non-interest expenses
Non-interest expenses for the first quarter of 1997 totaled
$189.3 million compared to $272.7 for the first quarter of 1996.
Non-interest expenses for the first three months of 1997 and
1996 included restructuring charges of $26.5 million and $110.7
million, respectively. Excluding these restructuring charges,
non-interest expenses increased $.7 million or .4 percent for
the first quarter of 1997 when compared to the prior year
period.
Salaries expense for the first quarter of 1997 was $64.6
million, which increased $1.6 million, or 2.6 percent from the
prior year period. For the first quarter of 1997, pension and
other employee benefits decreased $.9 million, or 3.7 percent,
as compared to the first quarter of 1996.
Occupancy expenses for the first quarter of 1997 decreased $3.4
million, or 16.7 percent, compared to the prior year period.
The decrease was due in part to the lower rental and maintenance
expenses associated with the 351 full-service branches operated
during the first quarter of 1997, as compared to 361
full-service branches operated during 1996. In addition, the
decrease was partially attributable to the expenses associated
with the severe weather conditions experienced during the first
quarter of 1996 as compared to the conditions experienced in
1997. Furniture and equipment expenses rose $1.2 million, or
7.7 percent, in the first quarter of 1997 when compared with the
first quarter of 1996. This increase was due in part to
increases in lease expense on branch automation equipment
installed at acquired institutions.
Communications expense increased $.6 million, or 8.0 percent for
the three months ended March 31, 1997, as compared to the prior
year period. This increase is attributable to higher
telecommunications expenses, as a result of branch rewiring and
technology updates, partially offset by a decrease in postage
expenses.
For the first quarter of 1997, other operating expenses
increased $1.9 million, or 6.2 percent as compared to the first
quarter of 1996. This increase was partially attributable to
increases in advertising, acquisition premium amortization for
Central Jersey, and other miscellaneous expenses.
15
<PAGE>
LIQUIDITY
Liquidity is the ability to meet the borrowing needs and deposit
withdrawal requirements of customers and support asset growth.
Principal sources of liquidity are deposit generation, access to
purchased funds, maturities and repayments of loans and
investment securities and interest and fee income.
The consolidated statements of cash flows present the change in
cash and due from banks from operating, investing and financing
activities. During the first three months of 1997, net cash
provided by operating activities totaled $142.9 million.
Contributing to net cash provided by operating activities were
the results of operations adjusted for the restructuring
charges, the provisions for loan losses and other real estate
owned, and proceeds from the sales of mortgages held for sale.
Net cash used in investing activities totaled $465.4 million and
was the result of investment and loan activity. During the
first three months of 1997, there were proceeds of $365.7
million from maturities in the securities portfolios. Scheduled
maturities and anticipated principal repayments of the held to
maturity portfolio will approximate $860.2 million throughout
the balance of 1997. In addition, the securities available for
sale portfolio is another source of liquidity. These sources
can be used to meet the funding needs during periods of loan
growth. Other uses of funds included an increase in total loans
of $265.0 million, and $733.7 million of purchased securities.
Net cash provided by financing activities totaled $12.9 million.
The issuance of $150.0 million in capital trust pass-through
securities was a source of funds, offset by a decrease of $95.2
million in deposits and $19.2 million in borrowed funds.
Liquidity is also available through additional lines of credit
and the ability to incur additional debt. In addition, the
banking subsidiaries have established lines of credit with the
Federal Reserve Bank and the Federal Home Loan Bank of New York
and other correspondent banks which further support and enhance
liquidity.
16
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
- ---------------------------
1. In re Payroll Express Corporation of New York and Payroll
---------------------------------------------------------
Express Corporation, United States Bankruptcy Court for the
- -------------------
Southern District of New York. Case Nos. 92-B-43 149 (CB) and
92-B-43 150 (CB). Reported on Form 10-K for the period ended
December 31, 1996. The bankruptcy trustee's fraudulent
conveyance claim against the Bank, John E. Pereira, as Chapter
---------------------------
11 Trustee of the Estate of Payroll Express Corporation et al.
- -------------------------------------------------------------
V. United Jersey Bank, United States Bankruptcy Court for the
- ----------------------
Southern District of New York, Adversary Proceeding No.
94-8297A, has been settled in principle but the settlement
cannot be concluded until the court has approved it. Neither
the trustee's preference claim against the Bank nor the Payroll
Express customers' claims will be affected by the proposed
settlement.
2. Michael Hochman and Joan Hochman, individually and on behalf
------------------------------------------------------------
of a class of similarly situated depositors v. United Jersey
- ----------------------------------------------------------------
Bank, a New Jersey corporation and UJB Financial Corp., a New
- ----------------------------------------------------------------
Jersey Corporation, originally filed on December 7, 1995 in the
- ------------------
Superior Court of New Jersey, Law Division, Middlesex County,
Docket No. MID-L-10623-95, and removed to the United States
District Court for the District of New Jersey, Case No.96-916
(MTB). Reported on Form 10-K for the period ended December 31,
1996. On May 2, 1997, the District Court granted the bank's
motion for summary judgment as to the plaintiff's federal claims
under the Truth in Savings Act and remanded the remainder of the
plaintiffs' claims back to the state court.
3. Cushman & Wakefield of New Jersey, Inc. v. Alexander Summer
-----------------------------------------------------------
Company and United Jersey Bank. Filed December 26, 1989 in the
- -------------------------------
Superior Court of New Jersey, Bergen County, Docket No.
L-000012-90; cross-appealed to the Superior Court of New Jersey,
Appellate Division, Docket No. A-1531-94 (T1); petition to the
New Jersey Supreme Court for certification, Docket number
43,333. Reported on Form 10-K for the period ended December 31,
1996. On April 28, 1997, the New Jersey Supreme Court granted
the Bank's petition for certification.
17
<PAGE>
ITEM 2. CHANGES IN SECURITIES.
- -------------------------------
(a) At the annual meeting of shareholders of the Company held
on April 18, 1997 the shareholders of the Company approved a
proposal to amend the Restated Certificate of Incorporation of
the Company to increase authorized Common Stock, $1.20 par
value, from 130 million shares to 260 million shares.
(c) On March 20, 1997, Summit Capital Trust ("Trust"), a
statutory business trust created under the laws of the State of
Delaware and wholly-owned subsidiary of the Company, issued
$150.0 million of 8.4 percent Capital Trust Pass-through
Securities, representing undivided beneficial interests in the
assets of the Trust ("Capital Securities"), and $4.6 million of
8.4 percent Common Securities, representing undivided beneficial
interest in the assets of the Trust ("Common Securities")
(collectively, the Capital Securities and Common Securities are
referred to as the "Trust Securities"). The Trust used the
proceeds received from the sale of the Trust Securities to
purchase $154.6 million of 8.4 percent Junior Subordinated
Deferrable Interest Debentures due 2027 issued by the Company
("Subordinated Debentures"). The Trust was created solely for
the purpose of investing the proceeds received for the sale of
the Trust Securities in the Subordinated Debentures. The Trust
Securities and Subordinated Debentures were issued in reliance
on an exemption from the provisions of Section 5 of the
Securities Act of 1933 provided by Section (4)(2) thereof.
The Capital Securities were sold through Salomon Brothers, Inc.,
Citicorp Securities, Inc., Lehman Brothers, Inc. and Merrill
Lynch, Peirce, Fenner & Smith, Incorporated (The "Initial
Purchasers") to "Qualified Institutional Buyers" ("QIBs") as
defined in Rule 144A under the Securities Act. The Company paid
underwriting compensation of $1.5 million.
18
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
The annual meeting of the shareholders of Summit Bancorp. was
held April 18, 1997. The following is a brief description of
each matter voted on at the meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
- ----------------------------------
The following Directors were nominated for election to the Board
of Directors as Class I Directors for a three year term: James
C. Brady, Jr., T.J. Dermot Dunphy, Fred G. Harvey, Francis J.
Mertz, T. Joseph Semrod and Douglas G. Watson.
PROPOSAL 2 - AMENDMENT TO THE RESTATED CERTIFICATE OF
- -----------------------------------------------------
INCORPORATION OF SUMMIT BANCORP.
- --------------------------------
Shareholders were presented with a proposal to approve an
amendment to the Summit Bancorp. Restated Certificate of
Incorporation increasing authorized Common Stock from 130
million to 260 million shares.
PROPOSAL 3 - INDEPENDENT ACCOUNTANTS
- ------------------------------------
Shareholders were presented with a proposal to ratify the
selection of KPMG Peat Marwick LLP, independent certified public
accountants, to audit the consolidated financial statements of
Summit Bancorp. and its subsidiaries for the year ending
December 31, 1997.
The results of the voting at the annual meeting were as follows:
SHARES
-----------------------------
PROPOSAL FOR WITHHELD
- ----------------------------------------------------------------
1 - Election of Directors
James C. Brady, Jr. 81,355,793 955,107
T.J. Dermot Dunphy 81,415,521 895,379
Fred G. Harvey 81,416,583 894,317
Francis J. Mertz 81,437,978 872,922
T. Joseph Semrod 81,364,734 946,166
Douglas G. Watson 78,004,883 4,306,017
FOR AGAINST ABSTAIN
--------------------------------
2 - Amendment to Restated
Certificate of Incorporation
of Summit Bancorp. increasing
authorized Common Stock from
130 million to 260
million shares 77,015,248 4,634,347 661,305
3 - Independent Accountants 81,562,664 340,955 407,281
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------------------------------------------
(a) Exhibits
--------
(10) EE.(v) Amendment to form of Termination Agreement
between Summit Bancorp. and various executive officers.
(27) Summit Bancorp. financial data schedule - March 31,
1997
(b) Reports on Form 8-K
-------------------
In a current report on Form 8-K dated February 27, 1997, the
Company under Item 5, Other Events, and Item 7, Financial
Statements and Exhibits, reported the execution of an Agreement
and Plan of Merger, dated February 27, 1997, among Collective
Bancorp, Inc. and Summit Bancorp. and a meeting with investment
analysts in connection therewith.
In a current report on Form 8-K dated March 7, 1997, the Company
under Item 5, Other Events, and Item 7, Financial Statements and
Exhibits, filed certain consolidated financial statements and
other materials from the Company's 1996 Annual Report to
Shareholders.
20
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SUMMIT BANCORP.
---------------------
Registrant
DATE: May 13, 1997 BY: /s/ WILLIAM J. HEALY
----------------------
William J. Healy
Executive Vice President and Comptroller
(Duly Authorized Officer and Chief Accounting Officer)
21
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- --------------------------------------------------
(10) EE.(v) Amendment to form of Termination Agreement
between Summit Bancorp. and various executive
officers.
(27) Summit Bancorp. financial data schedule -
March 31, 1997
22
EXHIBIT (10) EE. (v)
AMENDMENT NO. 4
TO
TERMINATION AGREEMENT
THIS AMENDMENT NO. 4 dated and entered into effective as of the
20th day of March, 1996, to the TERMINATION AGREEMENT (the
Agreement) by and between United Jersey Banks (now Summit
Bancorp), a New Jersey corporation (the Company) and [executive
officer] (the Executive), as amended by Amendment No. 1 dated
December 20, 1989, Amendment No. 2 dated October 16, 1991 and
Amendment No. 3 dated December 16, 1992.
WITNESSETH:
WHEREAS, the Company and the Executive have previously entered
into the Agreement referred to above; and
WHEREAS, the Company and the Executive desire to amend the
Agreement to extend the term of the Agreement;
NOW, THEREFORE, to assure the Company of the Executive's
continued dedication and the availability of his advice and
counsel in the event of any proposed change of control of the
Company, to induce the Executive to remain in the employ of the
Company or a Subsidiary of the Company, and to reward the
Executive for his valuable, dedicated service to the Company or
a Subsidiary should his service be terminated under
circumstances described in the Agreement, and for other good and
valuable consideration, the receipt and adequacy whereof each
party acknowledges, the Company and the Executive agreed that
the Agreement is hereby amended as follows:
1.Paragraph 1.(b) of the Agreement is amended in its entirety to
read as follows:
1.(b) The Company shall be obligated to make the payments
referred to in paragraphs 3 and 4 hereof following, and the
provisions of paragraph 2 hereof shall apply to, a Change in
Control of the Company only if such Change in Control shall have
occurred prior to, or as a result of efforts designed to attain
such and known to the parties hereto to have commenced prior to,
January 11, 1999 (or such later date as the Board shall
determine).
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 4 to the Agreement as of the date set forth above.
SUMMIT BANCORP. EXECUTIVE
BY:______________________________________________________________
T. Joseph Semrod, Chairman of the Board [Name of Executive
and Chief Executive Officer Officer]
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE MARCH 31, 1997 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 968930
<INT-BEARING-DEPOSITS> 13457
<FED-FUNDS-SOLD> 188800
<TRADING-ASSETS> 33806
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<LOANS> 15495945
<ALLOWANCE> 277011
<TOTAL-ASSETS> 23439345
<DEPOSITS> 18831534
<SHORT-TERM> 1374190
<LIABILITIES-OTHER> 385564
<LONG-TERM> 830257
0
0
<COMMON> 118141
<OTHER-SE> 1899659
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<EXTRAORDINARY> 0
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<LOANS-NON> 117725
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</TABLE>
