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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 June 30, 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
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SUMMIT BANCORP.
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1903313
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(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
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(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 July 31, 1997 there were 98,804,001 shares of common
stock, $1.20 par value, outstanding.
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<PAGE>
SUMMIT BANCORP.
FORM 10-Q
INDEX
Page No.
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1997, December 31, 1996 and June 30, 1996.... 2
Consolidated Statements of Income -
Three and Six Months Ended June 30, 1997 and 1996..... 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996............... 4
Consolidated Statements of Shareholders' Equity -
Six Months Ended June 30, 1997 and 1996............... 5
Consolidated Average Balance Sheets With Resultant
Interest and Rates - Six Months Ended
June 30, 1997 and 1996................................ 6
Notes to Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............. 10
Part II. Other Information.
Item 1. Legal Proceedings................................. 20
Item 2. Changes in Securities............................. 20
Item 3. Defaults Upon Senior Securities................... 20
Item 4. Submission of Matters to a Vote of Security
Holders........................................... 20
Item 5. Other Information................................. 20
Item 6. Exhibits and Reports on Form 8-K.................. 20
Signature......................................... 22
Exhibit Index..................................... 23
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<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED BALANCE SHEETS
Unaudited
(dollars in thousands)
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
------------- ------------ ------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 1,071,612 $ 1,256,684 $ 1,317,647
Federal funds sold and securities purchased
under agreements to resell 127,900 111,143 62,517
Interest bearing deposits with banks 6,879 24,825 21,269
Securities:
Trading account securities 43,407 26,376 16,271
Securities available for sale 3,244,827 2,670,414 2,370,337
Securities held to maturity 3,056,667 3,217,384 3,309,518
------------- ------------ ------------
Total securities 6,344,901 5,914,174 5,696,126
Loans (net of unearned discount):
Commercial 5,699,602 5,266,665 5,402,011
Commercial mortgage 2,379,701 2,313,610 2,391,417
Residential mortgage 3,832,131 3,795,752 3,633,411
Consumer 3,775,424 3,443,568 3,322,828
------------- ------------ ------------
Total loans 15,686,858 14,819,595 14,749,667
Less: Allowance for loan losses 280,913 267,719 276,017
------------- ------------ ------------
Net loans 15,405,945 14,551,876 14,473,650
------------- ------------ ------------
Premises and equipment 199,767 204,953 212,337
Accrued interest receivable 144,806 140,368 106,252
Due from customers on acceptances 13,852 15,671 17,799
Other assets 482,458 448,318 479,190
------------- ------------ ------------
Total Assets $ 23,798,120 $ 22,668,012 $ 22,386,787
============= ============ ============
Deposits:
Non-interest bearing demand deposits $ 4,163,859 $ 3,984,366 $ 3,817,786
Interest bearing deposits:
Savings and time deposits 13,847,540 13,779,803 13,590,365
Commercial certificates of deposit $100,000 and over 663,712 610,817 790,315
------------- ------------ ------------
Total deposits 18,675,111 18,374,986 18,198,466
------------- ------------ ------------
Other borrowed funds 1,795,725 1,338,734 1,561,358
Accrued expenses and other liabilities 258,232 271,510 309,013
Accrued interest payable 57,931 50,261 47,507
Bank acceptances outstanding 13,852 15,671 17,799
Long-term debt 905,557 689,977 392,863
------------- ------------ ------------
Total liabilities 21,706,408 20,741,139 20,527,006
Shareholders' equity:
Preferred stock: Series B and C - - 42,620
Common stock par value $1.20: Authorized 260,000,000 shares;
issued and outstanding 98,722,561 at June 30, 1997; 93,962,565
at December 31, 1996 and 93,712,791 at June 30, 1996 118,467 112,755 112,455
Surplus 932,461 881,483 874,976
Retained earnings 1,037,551 927,672 838,416
Net unrealized gain (loss) on securities, net of tax 3,233 4,963 (8,686)
------------- ------------ ------------
Total shareholders' equity 2,091,712 1,926,873 1,859,781
------------- ------------ ------------
Total Liabilities and Shareholders' Equity $ 23,798,120 $ 22,668,012 $ 22,386,787
============= ============ ============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(dollars in thousands, except per share data)
<CAPTION> Six Months Ended Three Months Ended
June 30, June 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
Loans $ 629,188 $ 591,315 $ 319,850 $ 296,186
Securities:
Trading account securities 1,104 919 731 351
Securities available for sale 94,672 76,535 49,970 37,324
Securities held to maturity 98,953 102,805 48,855 51,266
----------- ----------- ----------- -----------
Total securities 194,729 180,259 99,556 88,941
Federal funds sold and securities purchased under agreements to resell 1,525 1,613 648 498
Deposits with banks 392 412 218 221
----------- ----------- ----------- -----------
Total interest income 825,834 773,599 420,272 385,846
----------- ----------- ----------- -----------
Interest Expense
Savings and time deposits 248,903 242,920 124,495 119,319
Commercial certificates of deposit $100,000 and over 17,884 20,901 9,497 10,360
Borrowed funds, including long-term debt 71,462 55,677 38,752 28,057
----------- ----------- ----------- -----------
Total interest expense 338,249 319,498 172,744 157,736
----------- ----------- ----------- -----------
Net interest income 487,585 454,101 247,528 228,110
Provision for loan losses 29,000 31,000 14,500 15,500
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 458,585 423,101 233,028 212,610
----------- ----------- ----------- -----------
Non-Interest Income
Service charges on deposit accounts 52,656 47,837 26,385 24,381
Service and loan fee income 22,698 20,695 11,980 10,126
Trust income 22,697 18,812 11,368 9,569
Securities gains 2,217 2,263 1,077 1,506
Other 32,571 31,494 16,593 17,256
----------- ----------- ----------- -----------
Total non-interest income 132,839 121,101 67,403 62,838
Non-Interest Expenses
Salaries 130,749 125,022 66,139 62,030
Pension and other employee benefits 43,897 44,044 20,848 20,117
Occupancy, net 33,177 38,474 16,322 18,233
Furniture and equipment 35,316 31,672 18,480 16,039
Communications 15,704 14,854 7,870 7,602
Advertising and public relations 9,972 7,932 5,400 4,200
Deposit insurance premiums 1,789 2,465 884 1,239
Restructuring charges 26,500 110,700 - -
Other 55,948 57,196 27,857 30,164
----------- ----------- ----------- -----------
Total non-interest expenses 353,052 432,359 163,800 159,624
----------- ----------- ----------- -----------
Income before income taxes 238,372 111,843 136,631 115,824
Federal and state income taxes 83,012 38,718 47,756 40,460
----------- ----------- ----------- -----------
Net Income $ 155,360 $ 73,125 $ 88,875 $ 75,364
=========== =========== =========== ===========
Net Income per Common Share $ 1.58 $ 0.77 $ 0.90 $ 0.80
=========== =========== =========== ===========
Average Common Shares Outstanding (in thousands) 98,433 93,354 98,593 93,574
=========== =========== =========== ===========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
SUMMIT BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1997 1996
------------- -------------
<S> <C> <C>
Operating activities
Net income $ 155,360 $ 73,125
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and other real estate owned 29,500 33,204
Depreciation, amortization and accretion, net 31,965 19,502
Restructuring charges 26,500 110,700
Gains on sales of trading account securities and securities available for sale (1,243) (2,369)
Gains on sales of mortgages held for sale (2,939) (1,935)
Gains on sales of other real estate owned (1,094) (869)
Proceeds from sales of other real estate owned 10,247 13,265
Proceeds from sales of mortgages held for sale 172,826 55,298
Originations of mortgages held for sale (168,763) (84,034)
(Increase) decrease in trading account securities (18,005) 12,472
(Increase) decrease in accrued interest receivable and other assets (24,613) 1,866
Decrease in accrued interest payable, accrued
expenses and other liabilities (42,704) (53,760)
------------- -------------
Net cash provided by operating activities 167,037 176,465
------------- -------------
Investing activities
Purchases of securities held to maturity (176,182) (502,679)
Purchases of securities available for sale (1,201,203) (279,430)
Proceeds from maturities of securities held to maturity 346,917 344,080
Proceeds from maturities of securities available for sale 342,766 246,999
Proceeds from sales of securities available for sale 442,898 86,806
Net (increase) decrease in Federal funds sold and securities purchased under
agreements to resell (16,757) 112,458
Net decrease (increase) in interest bearing deposits with banks 18,044 (2,940)
Net increase in loans (447,753) (349,151)
Purchases of premises and equipment, net (6,384) (13,025)
------------- -------------
Net cash used in investing activities (697,654) (356,882)
------------- -------------
Financing activities
Net decrease in deposits (251,586) (295,960)
Net increase in short-term borrowings 424,243 513,665
Principal payments on long-term debt (28,274) (31,999)
Proceeds from issuance of long-term debt 81,500 -
Proceeds from issuance of capital trust pass-through securities 150,000 -
Dividends paid (69,278) (69,948)
Proceeds from issuance of common stock under dividend
reinvestment and other stock plans 17,148 19,642
------------- -------------
Net cash provided by financing activities 323,753 135,400
------------- -------------
Decrease in cash and due from banks (206,864) (45,017)
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 $ 1,071,612 $ 1,317,647
============= =============
Supplemental disclosure of cash flow information
Cash paid:
Interest payments $ 330,579 $ 317,558
Income tax payments 100,870 73,545
Noncash investing activities:
Net transfer of loans to other real estate owned 7,157 17,240
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<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 - - - 73,125 - 73,125
Cash dividends declared:
Preferred stock - - - (1,278) - (1,278)
Common stock - - - (69,064) - (69,064)
Common stock issued:
Dividend reinvestment and other stock plans
(280,657 shares) - 337 10,011 - - 10,348
Exercise of stock options, net (608,021 shares) - 729 8,565 - - 9,294
Change in unrealized gain (loss) on securities,
net of tax - - - - (13,283) (13,283)
-------- --------- --------- --------- ----------- -----------
Balance, June 30, 1996 $ 42,620 $ 112,455 $ 874,976 $ 838,416 $ (8,686) $ 1,859,781
======== ========= ========= ========= =========== ===========
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 - - - 155,360 - 155,360
Cash dividends declared on common stock - - - (71,043) - (71,043)
Common stock issued:
Dividend reinvestment and other stock plans
(120,671 shares) - 145 5,290 - - 5,435
Exercise of stock options, net (608,274 shares) - 730 10,983 - - 11,713
Change in unrealized gain (loss) on securities,
net of tax - - - - (1,452) (1,452)
-------- --------- --------- ---------- ----------- -----------
Balance, June 30, 1997 $ - $ 118,467 $ 932,461 $1,037,551 $ 3,233 $ 2,091,712
======== ========= ========= ========== =========== ===========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
SUMMIT BANCORP.
CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES
Unaudited
(Tax-equivalent basis, dollars in thousands)
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------
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 $ 56,944 $ 1,525 5.40 % $ 51,465 $ 1,613 6.30 %
Interest bearing deposits with banks 14,163 392 5.58 15,937 412 5.20
Securities:
Trading account securities 34,623 1,138 6.63 34,400 935 5.47
Securities available for sale 3,021,464 94,836 6.28 2,480,825 76,535 6.17
Securities held to maturity 3,184,005 102,288 6.43 3,386,768 107,564 6.35
----------- --------- ------- ----------- --------- -------
Total securities 6,240,092 198,262 6.35 5,901,993 185,034 6.27
----------- --------- ------- ----------- --------- -------
Loans:
Commercial 5,516,401 232,944 8.52 5,340,008 221,965 8.36
Commercial mortgage 2,391,376 103,683 8.67 2,434,095 104,440 8.58
Residential mortgage 3,841,489 142,499 7.42 3,545,999 131,933 7.44
Consumer 3,652,623 152,828 8.44 3,206,077 135,319 8.49
----------- --------- ------- ----------- --------- -------
Total loans 15,401,889 631,954 8.27 14,526,179 593,657 8.22
----------- --------- ------- ----------- --------- -------
Total interest earning assets 21,713,088 832,133 7.73 20,495,574 780,716 7.66
----------- --------- ------- ----------- --------- -------
Non-interest earning assets:
Cash and due from banks 985,385 1,141,418
Allowance for loan losses (284,104) (290,257)
Other assets 841,586 799,831
----------- -----------
Total non-interest earning assets 1,542,867 1,650,992
----------- -----------
Total Assets $23,255,955 $22,146,566
=========== ===========
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Savings deposits $ 8,210,872 104,070 2.56 $ 8,061,975 100,581 2.51
Time deposits 5,702,569 144,833 5.12 5,590,660 142,339 5.12
Commercial certificates of deposit
$100,000 and over 680,197 17,884 5.30 789,150 20,901 5.33
----------- --------- ------- ----------- --------- -------
Total interest bearing deposits 14,593,638 266,787 3.69 14,441,785 263,821 3.67
----------- --------- ------- ----------- --------- -------
Commercial paper 44,076 1,165 5.33 42,858 1,108 5.20
Other borrowed funds 1,534,318 42,587 5.60 1,481,996 39,206 5.32
Long-term debt 792,666 27,710 6.99 403,056 15,363 7.62
----------- --------- ------- ----------- --------- -------
Total interest bearing liabilities 16,964,698 338,249 4.02 16,369,695 319,498 3.92
----------- --------- ------- ----------- --------- -------
Non-interest bearing liabilities:
Demand deposits 3,909,928 3,574,698
Other liabilities 337,248 344,049
----------- -----------
Total non-interest bearing liabilities 4,247,176 3,918,747
----------- -----------
Total Shareholders' Equity 2,044,081 1,858,124
----------- -----------
Total Liabilities and Shareholders' Equity $23,255,955 $22,146,566
=========== --------- =========== ---------
Net Interest Income (tax-equivalent basis) 493,884 3.71 % 461,218 3.74 %
--------- ======= --------- =======
Tax-equivalent basis adjustment (based on a
Federal income tax rate of 35%) (6,299) (7,117)
--------- ---------
Net Interest Income $ 487,585 $ 454,101
========= =========
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.59 % 4.53 %
======= =======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<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. For additional
information and disclosures required under generally accepted
accounting principles ("GAAP"), reference is made to the
registrant's 1996 Annual Report on Form 10-K.
The Company currently calculates earnings per share in
accordance with Accounting Principles Board ("APB") Opinion No.
15, "Earnings Per Share." Earnings per 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 financial information has been restated to
reflect the combined results of operations. A restructuring
charge of $110.7 million, $70.0
-7-
<PAGE>
million or $.75 per share after
tax, was recorded primarily as a result of these acquisitions as
well as a supermarket branch initiative.
On August 1, 1997, the Company completed the acquisition of
Collective Bancorp, Inc. ("Collective") in an exchange of .895
shares of the Company's common stock for each share of
Collective common stock. As of June 30, 1997, Collective, which
operated Collective Bank, had assets of $5.5 billion, loans of
$2.9 billion and deposits of $3.5 billion, with over 80 branches
in 15 counties located throughout New Jersey. The transaction
will be accounted for as a pooling of interests. At June 30,
1997, there were approximately 20.5 million of Collective shares
issued and outstanding. Combined condensed consolidated results
of operations, which are based upon unaudited consolidated
financial statements of the Company and Collective for the six
and three months ended June 30, 1997, were as follows:
Six Months Ended Three Months Ended
June 30, 1997 June 30, 1997
----------------- -------------------
Net Interest Income:
Summit Bancorp. $487,585 $247,528
Collective 79,244 39,286
-------- --------
Combined $566,829 $286,814
======== ========
Net Income:
Historical:
Summit Bancorp.(1) $155,360 $ 88,87
Collective 32,180 16,183
-------- --------
Combined (2) $187,540 $105,058
======== ========
Earnings per share
Historical:
Summit Bancorp (1). $ 1.58 $ 0.90
Collective (fully diluted) 1.57 0.79
Combined (2) 1.61 0.90
(1) On March 1, 1997, Summit completed the acquisition of
B.M.J. Financial Corp. This acquisition was accounted for as a
pooling of interests, and was included in the financial
statements as of January 1, 1997. In conjuntion with this
acquisition, a restructuring charge of $26.5 million ($16.7
million or $.17 per common share after tax ) was recorded.
(2) Net income and earnings per share do not give effect to
anticipated expenses and non-recurring charges related to the
merger and the estimated effect of revenue enhancements and
expense savings associated with the consolidation of
operations of Summit Bancorp and Collective.
The combined condensed consolidated results of operations are
not necessarily indicative of the results that would have
occurred had the acquisition been consummated in the past or
which may be attained in the future.
-8-
<PAGE>
3.) Recent Accounting Pronouncements
On March 3, 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earning Per Share." SFAS No. 128 establishes
new standards for the computation and presentation of earnings
per share ("EPS") by simplifying the standards prescribed in APB
Opinion No. 15. Under the new requirements, the Company will be
required to present both basic and diluted EPS on the face of
the income statement. Basic EPS will replace the current EPS
terminology and continue to be computed by dividing income
available to common shareholders by the weighted-average number
of common shares outstanding. Diluted EPS will include any
additional common shares as if all potentially dilutive common
shares were issued. The Company will be required to adopt SFAS
No. 128 for the period ended December 31, 1997. All
prior-period EPS data is required to be restated. The impact of
adopting SFAS No. 128 is not expected to be material.
-9-
<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. Effective August 1, 1997, the
Company completed its acquisition of Collective Bancorp, Inc. a
unitary savings and loan holding company and the sole
shareholder of Collective Bank, a federally chartered savings
bank. See Note 2 to the financial statements. Including the
August 1, 1997, acquisition of Collective, 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
June 30, 1997 versus December 31, 1996
Total assets at June 30, 1997, were $23.8 billion, an increase
of $1.1 billion or 5.0 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 $454.1 million,
or 2.0 percent from year-end 1996 due to growth in
interest-earning assets such as securities available for sale
and commercial and consumer loans.
Securities held to maturity at June 30, 1997, were $3.1 billion
and were comprised of $1.7 billion of U.S. Government and
Federal agency securities, $205.6 million of state and political
subdivision securities and $1.1 billion of other securities,
predominately corporate collateralized mortgage obligations.
These securities decreased $160.7 million or 5.0 percent from
year-end 1996. The decrease was the result of $346.9 million in
maturities, offset by $176.2 million in purchases and $14.4
million attributable to the B.M.J. acquisition. At June 30,
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 June 30, 1997, securities available for sale amounted to $3.2
billion and were comprised of $2.8 billion of U.S. Government
and Federal agency securities, $13.7 million of state and
political subdivision securities and $424.8 million of other
securities. These securities increased $574.4 million or 21.5
percent from year-end 1996. For the first six months of 1997,
$1.2 billion of securities were purchased and $163.9 million
were acquired from B.M.J. These increases were offset by
maturities of $342.8 million and sales of $442.9 million.
-10-
<PAGE>
At June 30, 1997, total loans amounted to $15.7 billion and
increased $867.3 million or 5.9 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 June 30, 1997, increased
$432.9 million or 8.2 percent from year-end 1996 due to growth
in both the middle market and asset based lending areas.
Commercial mortgage loans increased $66.1 million or 2.9
percent, and residential mortgage loans increased $36.4 million
or 1.0 percent from December 31, 1996. Consumer loans increased
$331.9 million or 9.6 percent from year-end 1996 to $3.8
billion, due to growth in home equity lending and automobile
financing.
Total deposits were $18.7 billion at June 30, 1997, an increase
of $300.1 million or 1.6 percent from December 31, 1996, with
most of this increase due to the acquisition of B.M.J. Demand
deposits increased $179.5 million or 4.5 percent from year-end
1996 to $4.2 billion. Savings and time deposits increased $67.7
million or .5 percent from December 31, 1996, and remained at
$13.8 billion. Commercial certificates of deposit $100,000 and
over were $663.7 million, an increase of $52.9 million or 8.7
percent compared to December 31, 1996.
Borrowed funds, including long-term debt, at June 30, 1997,
increased $672.6 million or 33.2 percent from December 31, 1996,
to $2.7 billion. In the first quarter of 1997, the Company
issued $150.0 million of 8.40 percent capital trust pass-through
securities. The Company has used the proceeds from the issuance
of these securities, which qualify as Tier I capital, for
general corporate purposes. Most of the remaining increase in
borrowed funds was in short-term borrowings which were used to
fund growth in interest-earning assets, particularly in the
commercial and consumer loan categories and securities available
for sale.
Total shareholders' equity increased $164.8 million or 8.6
percent from December 31, 1996, to $2.1 billion. In addition to
earnings, contributing to this increase in shareholders' equity
was the B.M.J. acquisition, which added $64.8 million. As of
June 30, 1997, the unrealized gain on securities, net of tax,
recorded in equity amounted to $3.2 million, compared to an
unrealized gain of $5.0 million at year-end 1996.
Capital ratios for June 30, 1997, as compared to select prior
periods, are shown in the following table. The capital ratios
from year-end 1996 were benefited by the first quarter issuance
of the $150.0 million in capital trust pass-through securities.
June 30, Dec. 31, June 30,
Selected Capital Ratios: 1997 1996 1996
------- ------- -------
Equity to assets 8.79% 8.50% 8.31%
Leverage ratio 9.01 8.06 8.01
Tier I capital 12.26 11.09 10.75
Total capital 14.83 13.75 13.42
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<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 June 30, 1997, December 31, 1996, and June 30, 1996.
Non-performing assets June 30, 1997 Dec. 31, 1996 June 30,
1996
Non-performing loans:
Commercial and industrial $ 46,675 $ 54,308 $ 54,992
Construction 15,571 31,901 43,888
Real estate related 38,980 45,877 74,872
--------- --------- ---------
Total non-performing loans 101,226 132,086 173,752
OREO 18,088 20,979 23,262
--------- --------- ---------
Total non-performing assets $119,314 $153,065 $197,014
========= ========= =========
Non-performing loans to total loans 0.65% 0.89% 1.18%
Non-performing assets to total
loans and OREO 0.76 1.03 1.33
The average balance of non-performing loans for the six months
ended June 30, 1997, was $114.9 million. Interest income
received on non-performing loans amounted to $1.3 million for
the six months ended June 30, 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 $52.5 million at June 30, 1997, compared to
$60.6 million and $53.8 million at December 31, 1996, and June
30, 1996, respectively.
Allowance for Loan Losses
The allowance for loan losses at June 30, 1997, was $280.9
million, or 1.79 percent of loans, compared to $267.7 million or
1.81 percent of loans at December 31, 1996, and $276.0 million
or 1.87 percent of loans at June 30, 1996. For the six months
ended June 30, 1997, net charge offs were $24.5 million, or .32
percent of average loans compared to $40.4 million, or .56
percent of average loans in the first six months of 1996. For
the quarter ended June 30, 1997, net charge offs amounted to
$10.6 million, or .27 percent of average loans compared to $20.1
million, or .55 percent of average loans for the second quarter
of 1996. The coverage of non-performing loans at June 30, 1997,
was 277.51 percent, compared to 202.69 percent and 158.86
percent at year-end 1996 and June 30, 1996, respectively.
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<PAGE>
Transactions in the allowance for loan losses are shown in the
following table (dollars in thousands):
Six Months Ended June 30,
1997 1996
Balance, January 1 $ 267,719 $279,034
Acquisition adjustments, net 8,719 6,342
Provision charged to expense 29,000 31,000
------- -------
305,438 316,376
------- -------
Less charge offs:
Commercial and industrial 14,430 21,998
Construction and development 2,871 6,895
Commercial mortgage 4,454 13,208
Residential mortgage 1,312 2,309
Consumer 17,102 7,460
------ ------
Total charge offs 40,169 51,870
------ ------
Add recoveries:
Commercial and industrial 7,534 6,726
Construction and development 3,225 1,856
Commercial mortgage 832 605
Residential mortgage 593 375
Consumer 3,460 1,949
------ ------
Total recoveries 15,644 11,511
------ ------
Net charge offs 24,525 40,359
------ ------
Balance, June 30 $ 280,913 $276,017
======= =======
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, in excess of specific and general
reserves, was $146.7 million at June 30, 1997, compared to
$133.2 million at December 31, 1996.
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<PAGE>
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1997, was $88.9
million compared to $75.4 million for the second quarter of
1996. On a per share basis, net income for the three months
ended June 30, 1997, was $.90 compared to $.80 for the same
period in 1996.
For the six months ended June 30, 1997, net income amounted to
$155.4 million, or $1.58 per share compared to $73.1 million, or
$.77 per share for the six months ended June 30, 1996. The six
months ended June 30, 1997, includes a first quarter
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 six months ended June 30,
1996, also include first quarter 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.
Included in the 1996 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
$172.0 million or $1.75 per share for the first six months of
1997, and $143.1 million or $1.52 per share for the prior year
period, a 15.1 percent increase. Key performance indicators are
as follows:
June 30, 1997 June 30, 1996
------------- -------------
FOR THE THREE MONTHS ENDED:
Earnings per share $ 0.90 $ 0.80
Return on:
Average assets 1.52% 1.37%
Average common equity 17.24 16.72
Efficiency ratio 51.49 53.86
FOR THE SIX MONTHS ENDED:
Before restructuring charges
Earnings per share $ 1.75 $ 1.52
Return on:
Average assets 1.49% 1.30%
Average common equity 16.97 15.71
Efficiency ratio 51.84 54.72
After restructuring charges
Earnings per share $ 1.58 $ 0.77
Return on:
Average assets 1.35% 0.66%
Average common equity 15.33 7.96
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<PAGE>
Net interest spread
Interest income on a tax-equivalent basis was $832.1 million for
the six months ended June 30, 1997, an increase of $51.4
million, or 6.6 percent, compared to the prior year period.
Interest-earning assets averaged $21.7 billion, an increase of
$1.2 billion, or 5.9 percent compared to the prior year period.
This increase in interest-earning assets contributed $44.6
million to interest income.
Interest expense increased $18.8 million, or 5.9 percent, for
the six months ended June 30, 1997, compared to the same period
in 1996. Interest-bearing liabilities averaged $17.0 billion,
an increase of $595.0 million, or 3.6 percent, from the prior
year period. This increase in interest-bearing liabilities
contributed $11.0 million to the increase in interest expense.
Net interest income on a tax-equivalent basis was $493.9 million
for the six months ended June 30, 1997, an increase of $32.7
million, or 7.1 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 3.71 percent for the six months ended June 30,
1997, compared to 3.74 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 six months of 1997 compared to 4.53
percent during the same period in 1996. The increase in net
interest margin was attributable to 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 June 30, 1997, the derivative financial
instruments portfolio consisted primarily of interest rate
swaps, caps and floors with notional values of $396.0 million,
$950.0 million and $430.0 million, respectively. These
derivatives resulted in a net interest income reduction of $1.0
million for the first six months of 1997 compared to a reduction
of $1.6 million through the first two quarters of 1996. The
cost to terminate these contracts at June 30, 1997, would have
been $1.2 million compared to $3.7 million at June 30, 1996.
As a result of continued improvement in asset quality, the
quarterly provision for loan losses for 1997 was $14.5 million,
a decrease of $1.0 million compared with $15.5 million for the
same period a year ago.
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<PAGE>
Non-interest income
Non-interest income for the second quarter of 1997 totaled $67.4
million, an increase of $4.6 million, or 7.3 percent, compared
with the second quarter of 1996. Excluding securities gains,
total non-interest income was $66.3 million for the second
quarter of 1997, an increase of $5.0 million, or 8.1 percent,
from the prior year quarter. For the six months ended June 30,
1997, non-interest income totaled $132.8 million, an increase of
$11.7 million, or 9.7 percent from the prior year period.
Excluding securities gains, total non-interest income was $130.6
million for the six months ended June 30, 1997, an increase of
$11.8 million, or 9.9 percent, from the prior year period.
For the second quarter of 1997, service charges on deposits were
$26.4 million, an increase of $2.0 million or 8.2 percent
compared with the second quarter of 1996. On a year-to-date
basis, 1997 service charges on deposit accounts have increased
$4.8 million, or 10.1 percent as compared to the same period in
1996. These increases were primarily attributable to higher fee
income from business and personal demand deposit accounts. Fee
income on demand deposit accounts increased primarily as a
result of a larger customer base in 1997 when compared to 1996.
Service and loan fee income for the second quarter of 1997 was
$12.0 million, an increase of $1.9 million or 18.3 percent
compared with the second quarter of 1996. On a year-to-date
basis, 1997 service and loan fee income has increased $2.0
million, or 9.7 percent as compared to the same period in 1996.
These increases are attributable to higher fee income on
commercial loans, merchant credit card and consumer debit card
processing, partially offset by a decline in mortgage
origination fees.
Trust fee income for the second quarter of 1997 was $11.4
million, an increase of $1.8 million or 18.8 percent compared
with the second quarter of 1996. For the six months ended June
30, 1997, trust fee income amounted to $22.7 million, an
increase of $3.9 million or 20.7 percent compared to the prior
year period. These increases are primarily due to higher fee
income from mutual funds.
For the second quarter of 1997, net gains of $1.1 million on the
sales and early redemptions of securities were realized
compared with net gains of $1.5 million in the second quarter of
1996. On a year-to-date basis, securities gains were $2.2
million, compared to $2.3 million during the first six months of
1996.
For the three months ended June 30, 1997, other income decreased
$.7 million, or 3.8 percent as compared to the second quarter of
1996. For the six months ended June 30, 1997, other income
amounted to $32.6 million, an increase of $1.1 million, or 3.4
percent as compared to the prior year period. The year-to-date
increase was primarily attributable to ATM access fees,
international fees and gains on the disposition of assets,
partially offset by declines in brokerage, ATM service and
official check fee income.
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<PAGE>
Non-interest expenses
Non-interest expenses for the second quarter of 1997 totaled
$163.8 million compared to $159.6 for the second quarter of
1996, representing an increase of $4.2 million, or 2.6 percent.
For the first six months of 1997, non-interest expenses amounted
to $353.1 million, compared to $432.4 million for the prior year
period. Non-interest expenses for the first six 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 $4.9 million, or 1.5
percent for the first six months of 1997 when compared to the
prior year period.
Salaries expense for the second quarter of 1997 was $66.1
million, which increased $4.1 million, or 6.6 percent from the
prior year period. On a year-to-date basis, salaries expense
for 1997 amounted to $130.7 million, an increase of $5.7
million, or 4.6 percent from a year ago. For the second quarter
of 1997, pension and other employee benefits increased $.7
million, or 3.6 percent, as compared to the second quarter of
1996. For the first six months of 1997, pension and other
employee benefits decreased $.1 million, or .3 percent, as
compared to the prior year period.
Occupancy expenses for the second quarter of 1997 decreased $1.9
million, or 10.5 percent, compared to the prior year period. On
a year-to-date basis, occupancy expenses for 1997 decreased $5.3
million, or 13.8 percent as compared to 1996. These decreases
were due in part to the lower rental and maintenance expenses
associated with the 343 full-service branches operated at June
30, 1997, as compared to 357 full-service branches operated at
June 30, 1996. In addition, the year-to-date 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 $2.4 million, or 15.2
percent, in the second quarter of 1997 when compared with the
second quarter of 1996. For the six months ended June 30, 1997,
furniture and equipment expenses increased $3.6 million, or 11.5
percent as compared to the prior year period. These increase
were due in part to increases in computer equipment lease
expense on branch automation equipment installed at acquired
institutions.
Communications expense increased $.3 million, or 3.5 percent for
the three months ended June 30, 1997, as compared to the prior
year quarter. On a year-to-date basis, communications expense
increased $.9 million, or 5.7 percent when compared to the first
six months of 1996. These increases were attributable to higher
telecommunications expenses, as a result of branch rewiring and
technology updates, partially offset by a decrease in postage
expenses.
Advertising expense increased $1.2 million, or 28.6 percent for
the three months ended June 30, 1997, as compared to the prior
year quarter. On a year-to-date basis, advertising expense
increased $2.0 million, or 25.7 percent when compared to the
first six months of 1996.
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<PAGE>
For the second quarter of 1997, other operating expenses
decreased $2.3 million, or 7.6 percent as compared to the second
quarter of 1996. For the six months ended June 30, 1997, other
operating expenses decreased $1.2 million, or 2.2 percent as
compared to the prior year period. These decreases can be
partially attributable to declines in OREO expenses and other
miscellaneous expenses offset by an increase in acquisition
premium amortization for Central Jersey and employment agency
fees.
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 six months of 1997, net cash
provided by operating activities totaled $167.0 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 $697.7 million and
was the result of investment and loan activity. During the
first six months of 1997, there were proceeds of $689.7 million
from maturities in the securities portfolios. Scheduled
maturities and anticipated principal repayments of the held to
maturity portfolio will approximate $332.8 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 $447.8 million, and $1.4 billion of purchased securities.
Net cash provided by financing activities totaled $323.8
million. The issuance of $150.0 million in capital trust
pass-through securities and an increase of $505.7 million in
other borrowings were sources of funds. During the first six
months of 1997, deposits decreased $251.6 million and principal
payments on long-term debt amounted to $28.3 million. 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.
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<PAGE>
LOOKING AHEAD
This report contains certain forward-looking statements, either
expressed or implied, which are provided to assist the reader to
understand anticipated future financial performance. These
forward-looking statements involve certain risks, uncertainties,
estimates and assumptions made by management. Factors that may
cause actual results to differ from those results expressed or
implied include, but are not limited to, the interest rate
environment and the overall economy, the ability of customers to
repay their obligations, the adequacy of the allowance for loan
losses, competition and technological changes. Although
management has taken certain steps to mitigate the negative
effect of the above mentioned items, significant unfavorable
changes could severely impact the assumptions used and have an
adverse affect on profitability.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
1. 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. Reported on Form 10-K for the period
ended December 31, 1996 and on Form 10-Q for the period ended
March 31, 1997. On May 28, 1997, the Bank filed a motion for
summary judgment as to the remaining claims against it in this
matter. No decision has yet been rendered on the motion.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(2) A. Restated Certificate of Incorporation of Summit Bancorp.
(3) H. Indenture, dated as of March 20, 1997, between Summit
Bancorp. and the First National Bank of Chicago, as Trustee,
for Subordinated Debt Securities (incorporated by reference to
Exhibit 4.1 to Registration Statement No. 333-29019 on Form
S-4 filed June 12, 1997).
(3) I. First Supplemental Indenture, dated as of March 20,
1997, between Summit Bancorp. and the First National Bank of
Chicago, as Trustee for $154,640,000 8.40% Junior Subordinated
Deferrable Interest Debentures due 2027 (incorporated by
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<PAGE>
reference to Exhibit 4.2 to Registration Statement No.
333-29019 on Form S-4 filed June 12, 1997).
(3) J. Amended and restated Declaration of Trust for Summit
Capital Trust I dated March 20, 1997 (incorporated by
reference to Exhibit 4.5 to Registration Statement No.
333-29019 on Form S-4 filed June 12, 1997).
(3) K. Capital Securities Guarantee Agreement for Summit
Capital Trust I dated as of March 20, 1997
(incorporated by reference to Exhibit 4.7 to
Registration Statement No. 333-29019 on Form S-4 filed
June 12, 1997).
(27) Summit Bancorp. financial data schedule - June 30, 1997
(b) Reports on Form 8-K
During the second quarter of 1997, the Company filed a current
report on Form 8-K dated April 30, 1997, which included
consolidated balance sheets at March 31, 1997, December 31,
1996, and March 31, 1996 and consolidated statements of income
for the three months ended March 31, 1997 and 1996, with the
related notes.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SUMMIT BANCORP.
---------------
Registrant
DATE: August 14, 1997 BY: /s/ WILLIAM J. HEALY
--------------------
William J. Healy
Executive Vice President
and Comptroller
(Duly Authorized Officer and
Chief Accounting Officer)
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- ----------------
(2) A. Restated Certificate of Incorporation of Summit Bancorp.
(3) H. Indenture, dated as of March 20, 1997, between Summit
Bancorp. and the First National Bank of Chicago, as Trustee,
for Subordinated Debt Securities (incorporated by reference to
Exhibit 4.1 to Registration Statement No. 333-29019 on Form
S-4 filed June 12,1997).
(3) I. First Supplemental Indenture, dated as of March 20,
1997, between Summit Bancorp. and the First National Bank of
Chicago, as Trustee for $154,640,000 8.40% Junior Subordinated
Deferrable Interest Debentures due 2027 (incorporated by
reference to Exhibit 4.2 to Registration Statement No.
333-29019 on Form S-4 filed June 12,1997).
(3) J. Amended and restated Declaration of Trust for Summit
Capital Trust I dated March 20, 1997 (incorporated by
reference to Exhibit 4.5 to Registration Statement No.
333-29019 on Form S-4 filed June 12, 1997).
(3) K. Capital Securities Guarantee Agreement for Summit
Capital Trust I dated as of March 20, 1997
(incorporated by reference to Exhibit 4.7 to
Registration Statement No. 333-29019 on Form S-4 filed
June 12, 1997).
(27) Summit Bancorp. financial data schedule - June 30, 1997
-23-
RESTATED
CERTIFICATE OF INCORPORATION
OF
SUMMIT BANCORP.
(Restated June 18, 1997)
SUMMIT BANCORP., a corporation formed pursuant to the provisions of
the New Jersey Business Corporation Act (N.J.S.A. 14A: 1-1 et. seq.), hereby
restates its Certificate of Incorporation pursuant to the provisions of the
New Jersey Business Corporation Act (N.J.S.A. 14A:9-5).
1. The name of the Corporation is SUMMIT BANCORP.
2. The purposes for which the corporation is formed are:
A. To engage in and carry on the business of a
registered bank holding company.
B. To acquire, by purchase, subscription or
otherwise, own, hold for investment or otherwise, use, sell, exchange,
mortgage, pledge, hypothecate, create a security interest in, or
otherwise deal with and dispose of, any and all securities, as
hereinafter defined, and to possess and exercise any and all rights,
powers and privileges of ownership of any and all such securities,
including the right to vote thereon and to consent, assent or dissent
with respect thereto for any and all purposes, and to issue or deliver
its own securities in payment or exchange, in whole or in part, for
any securities or to make payment therefor by any other lawful means;
to aid by loan, subsidy or in any other lawful manner any corporation,
firm, organization, association or other entity in which the
Corporation may be or become interested through the direct or indirect
holding of securities or in any other manner; to do any and all acts
and things for the enhancement, protection or preservation of
any securities which are in any manner, directly or indirectly, held
or guaranteed by the Corporation, and to do any and all acts and
things designed to accomplish any such purpose.
The term "securities", as used in this article,
shall mean any and all shares, stocks, bonds, debentures, notes,
acceptances, voting trust certificates, certificates of deposit,
evidences of indebtedness, other obligations, certificates of any
interest in or of the deposit of any of the foregoing, scrip, interim
or other receipts, warrants or rights to subscribe for or purchase, or
guarantees of, any of the foregoing, or any other interests or
instruments commonly known as securities.
C. To the extent permitted by law, to cause to be
formed, organized, reorganized, consolidated, merged or liquidated and
to take charge of, any corporation, firm, organization, association or
other entity, foreign or domestic.
D. To the extent permitted by law, to furnish
services to and perform services for, and to act in any representative
capacity for, any corporation, firm, organization, association, or
other entity in which the Corporation may be or become interested
through the direct or indirect holding of securities or in any other
manner, whether in the development, exploitation, promotion, operation,
management, liquidation, or otherwise, of any of the business or
property thereof or of any lawful enterprise related thereto.
E. To make loans and give other forms of credit
with or without security.
F. To borrow money for its corporate purposes; to
draw, make, accept, endorse, execute, issue, deliver and negotiate
bonds, debentures, promissory notes, drafts, bills of exchange and
other negotiable or transferable instruments and to secure the payment
thereof and the interest thereon by a deed or deeds of trust or by
mortgage or pledge of or upon, or by the creation of a security
interest in, all or any part of the property of the Corporation, real
or personal, or any interest therein, wherever situated, whether at
the time owned or thereafter acquired, and to sell, pledge, create a
security interest in or otherwise dispose of such bonds, debentures,
notes or other obligations.
G. To purchase, lease or otherwise acquire, take,
hold, own, use, improve, maintain, develop, complete, extend, manage,
operate, mortgage or otherwise impose a lien upon or create a security
interest in, sell, exchange, lease or otherwise dispose of or convey
or transfer in any manner, buildings, storage and other facilities,
real and personal property of all kinds, and any and all rights,
interests or easements therein, without limit as to amount and
wherever situated.
H. To engage in any such activity directly or
through a subsidiary or subsidiaries, and to take all acts deemed
appropriate to promote the interest of such subsidiary or
subsidiaries, including without limiting the foregoing, making
contracts and incurring liabilities for the benefit of such
subsidiary or subsidiaries; and transferring or causing to be
transferred to any such subsidiary or subsidiaries assets of the
Corporation.
I. To guarantee the bonds, debentures, notes or
other evidences of indebtedness issued, or obligations incurred by
subsidiary companies in which the Corporation holds, directly or
indirectly, at least a majority of the voting stock, or by any
corporation, partnership, limited partnership, joint venture or other
association where the Corporation has or may acquire a substantial
interest in such corporation, partnership, limited partnership,
joint venture or other association or where such guarantee is
otherwise in furtherance of the interest of the Corporation.
J. To provide that the obligations of such
subsidiary companies may be convertible into, or exchangeable for,
or carry rights or options to purchase or subscribe to, or both,
shares of the Corporation of any class.
K. In general, to do any and all of the acts
and things herein set forth to the same extent as natural persons
could do, and in any part of the world, as principal, factor, agent,
contractor or otherwise, either alone or in company with any person,
entity, syndicate, partnership, association, corporation or others;
to establish and maintain offices and agencies within and anywhere
outside of the State of New Jersey; and to exercise all or any of its
corporate powers and rights in the State of New Jersey and in any and
all other states, territories, districts, possessions or dependencies
of the United States of America and in any other countries or places.
L. To do everything necessary, proper, advisable
or convenient for the accomplishment of any of the purposes herein
set forth and to do every other act and thing incidental thereto or
connected therewith, provided the same be not forbidden by law.
3. The total number of shares of capital stock authorized and
which may be issued by this Corporation is Two Hundred Sixty-Four Million
(264,000,000) shares, of which Two Hundred Sixty Million (260,000,000) shares
of One and 20/100 Dollars ($1.20) par value each shall be designated as Common
Stock, and of which Four Million (4,000,000) shares without par value shall
be designed as Preferred Stock. All or any part of such authorized Common
Stock and Preferred Stock may be issued by the Corporation from time to time
and for such consideration as may be determined upon and fixed by the Board
of Directors as provided by law.
No holders of shares of Common Stock or Preferred Stock of the
Corporation shall be entitled, as such, as a matter of preemptive or
preferential right, to subscribe for or purchase any part of any new or
additional issue of shares of Common Stock or Preferred Stock, or any
treasury shares of Common Stock or Preferred Stock, or of securities of the
Corporation or of any subsidiary of the Corporation convertible into or
exchangeable for, or carrying rights or options to purchase or subscribe to,
or both, shares of any class whatsoever, whether now or hereafter authorized,
and whether issued for cash, property, services or otherwise.
The Board of Directors of the Corporation is, pursuant to the New
Jersey Business Corporation Law (N.J.S.A. 14A:7-2), authorized to amend this
Restated Certificate of Incorporation of the Corporation so as (a) to divide
the authorized shares of Preferred Stock of the Corporation into series
within such class, (b) to determine the designation and the number of shares
of any such series, and (c) to determine the relative voting, dividend,
conversion, redemption, liquidation and other rights, preferences and
limitations of the authorized shares of Preferred Stock of the Corporation.
A. Creation of Preferred Stock, Series R.
--------------------------------------
A series of Preferred Stock of the Corporation, consisting of
1,500,000 Shares, is hereby created and designated as "Series R
Preferred Stock" (the "Series R Preferred Stock") which series of
Preferred Stock shall have a stated value of $100 per share and the
following rights and preferences:
(a) Dividends and Distributions.
----------------------------
(1) Subject to the provisions for
adjustment hereinafter set forth, the holders of shares of Series R
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the
purpose, (i) cash dividends in an amount per share (rounded to the
nearest cent) equal to one hundred (100) times the aggregate per share
amount of all cash dividends declared or paid on the Common Shares,
$1.20 par value per share, of the Corporation (the "Common Shares"),
and (ii) a preferential cash dividend (the "Preferential Dividends"),
if any, on the first business day of February, May, August and
November of each year (each a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series R Preferred
Stock in an amount equal to $1.00 per share of Series R Preferred
Stock reduced (but not to an amount less than zero) by the per
share amount of all cash dividends declared on the Series R Preferred
Stock pursuant to clause (i) of this sentence since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Series R Preferred Stock. In
the event the Corporation shall, at any time after the issuance of
any share or fraction of a share of Series R Preferred Stock, make
any distribution on the Common Shares of the Corporation, whether by
way of a dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Corporation or otherwise,
which is payable in cash or any debt security, debt instrument, real
or personal property or any other property (other than cash dividends
subject to the immediately preceding sentence, a distribution of
Common Shares or other capital stock of the Corporation or a
distribution of rights or warrants to acquire any such share,
including any debt security convertible into or exchangeable
for any such share, at a price less than the Fair Market Value
(as hereinafter defined) of such share), then and in each such event
the Corporation shall simultaneously pay on each then outstanding
share of Series R Preferred Stock of the Corporation a distribution,
in like kind, of one hundred (100) times such distribution paid on a
Common Share (subject to the provisions for adjustment hereinafter set
forth). The dividends and distributions on the Series R Preferred
Stock to which holders thereof are entitled pursuant to clause (i)
of the first sentence of this paragraph and pursuant to the second
sentence of this paragraph are hereinafter referred to as
"Participating Dividends" and the multiple of such cash and non-cash
dividends on the Common Shares applicable to the determination of the
Participating Dividends, which shall be one hundred (100) initially
but shall be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Dividend Multiple". In the event the
Corporation shall at any time after August 28, 1989 declare or pay
any dividend or make any distribution on Common Shares payable in
Common Shares or any class or series thereof, or effect a
subdivision or split or a combination, consolidation or reverse split
of the outstanding Common Shares into a greater or lesser number of
Common Shares, then in each such case the Dividend Multiple thereafter
applicable to the determination of the amount of Participating
Dividends which holders of shares of Series R Preferred Stock shall
be entitled to receive shall be the Dividend Multiple applicable
immediately prior to such event multiplied by a fraction the numerator
of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
(2) The Corporation shall declare
each Participating Dividend at the same time it declares any cash or
non-cash dividend or distribution on the Common Shares in respect of
which a Participating Dividend is required to be paid. No cash or
non-cash dividend or distribution on the Common Shares in respect of
which a Participating Dividend is required to be paid shall be paid or
set aside for payment on the Common Shares unless a Participating
Dividend in respect of such dividend or distribution on the Common
Shares shall be simultaneously paid, or set aside for payment, on the
Series R Preferred Stock.
(3) Preferential Dividends shall
begin to accrue on outstanding shares of Series R Preferred Stock
commencing with the Quarterly Dividend Payment Date next following the
date of issuance of any shares of Series R Preferred Stock and shall
accrue on and as of such date and each successive Quarterly Dividend
Payment Date thereafter. Accrued but unpaid Preferential Dividends
shall cumulate but shall not bear interest. Preferential Dividends
paid on the shares of Series R Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(b) Voting Rights. The holders of shares
--------------
of Series R Preferred Stock shall have the following voting rights:
(1) Subject to the provisions for
adjustment hereinafter set forth, each share of Series R Preferred
Stock shall entitle the holder thereof to one hundred (100) votes on
all matters submitted to a vote of the shareholders of the Corporation.
The number of votes which a holder of Series R Preferred Stock is
entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after
August 28, 1989 declare or pay any dividend on Common Stock payable
in Common Shares, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding Common Shares into
a greater or lesser number of Common Shares, then in each such case
the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Series R
Preferred Stock shall be entitled after such event shall be the Vote
Multiple immediately prior to such event multiplied by a fraction
the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to
such event.
(2) Except as otherwise provided
herein, or by law, the Certificate of Incorporation or the By-laws,
the holders of shares of Series R Preferred Stock and the holders
of Common Shares shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(3) If at the time of any annual
meeting of shareholders of the Corporation for the election of
directors, the Corporation shall have failed to pay the Preferential
Dividends on the shares of the Series R Preferred Stock for six
dividend payment periods, whether or not consecutive, or shall
fail to pay in full such dividends, if any, as may accumulate on
any other series of Preferred Stock for a period of 18 months
(referred to herein as a "Dividend Payment Default"), the number
of directors of the Corporation shall be increased by two and the
holders of the all outstanding series of Preferred Stock in respect
of which such a default in payment of dividends as described
hereinabove exists, voting as a single class without regard to series,
will be entitled to elect such additional two directors until full
cumulative dividends for all past dividend periods upon all series
of Preferred Stock have been paid or declared and set apart for
payment. If and when the full cumulative dividends on all
series of Preferred Stock for all past dividend payment periods
shall have been paid or declared and set apart for payment, the
holders of Preferred Stock shall be divested of the foregoing special
voting right, subject to revesting in the event of each and every
subsequent Dividend Payment Default. Upon the termination of each
such special voting right, the term of office of each director
elected by the holders of shares of Preferred Stock in respect of
which a default exists in the payment of dividends as described
hereinabove (herein referred to as a "Preferred Director") pursuant
to such special voting right shall forthwith terminate and the number
of directors constituting the Board of Directors shall be reduced by
two. Any Preferred Director may be removed by, and shall not be
removed except by, the vote of the holders of record of the
outstanding shares of Preferred Stock in respect of which such a
default exists, voting together as a single class without regard to
series, at a meeting of the shareholders, or of the holders of shares
of such Preferred Stock, called for the purpose. As long as a
Dividend Payment Default shall continue (A) any vacancy in the
office of a Preferred Director may be filled (except as provided
in the following clause (B)) by an instrument in writing signed by
the remaining Preferred Director and filed with the Corporation and
(B) in the case of the removal of any Preferred Director, the vacancy
may be filled by the vote of the holders of the outstanding shares of
Preferred Stock in respect of which such a default exists, voting
together as a single class without regard to series, at the same
meeting at which such removal shall be voted or a subsequent meeting.
Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred
Director.
(4) Except as otherwise set forth
herein or required by law, the Certificate of Incorporation or the
By-laws, holders of Series R Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Shares as set
forth herein) for the taking of any corporate action.
(c) Certain Restrictions.
---------------------
(1) Whenever Preferential
Dividends or Participating Dividends are in arrears or the Corporation
shall be in default of payment thereof, thereafter and until all
accrued and unpaid Preferential Dividends and Participating Dividends,
whether or not declared, on shares of Series R Preferred Stock
outstanding shall have been paid or declared and a sum sufficient for
the payment thereof set apart for payment, and in addition to any and
all other rights which any holder of shares of Series R Preferred
Stock may have in such circumstances, the Corporation shall not:
(i) declare or pay or set
apart for payment dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for
consideration, any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series R Preferred Stock;
(ii) declare or pay or set
apart for payment dividends on or make any other distributions
on any shares of stock ranking on a parity as to dividends
with the Series R Preferred Stock, unless dividends are paid
ratably on the Series R Preferred Stock and all such parity
stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of
all such shares are then entitled if the full dividends
accrued thereon were to be paid;
(iii) except as permitted
by subparagraph (iv) of this paragraph (c)(1), redeem or
purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series
R Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) to the Series R
Preferred Stock; or
(iv) purchase or otherwise
acquire for consideration any shares of Series R Preferred
Stock, or any shares of stock ranking on a parity with the
Series R Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up), except in accordance
with a purchase offer made to all holders of such shares upon
such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(2) The Corporation shall not
permit any Subsidiary (as hereinafter defined) of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (1) of
this Section (c), purchase or otherwise acquire such shares at such
time and in such manner. A "Subsidiary" of the Corporation shall mean
any corporation or other entity of which securities or other ownership
interests having ordinary voting power sufficient to elect a majority
of the board of directors or other persons performing similar
functions are beneficially owned, directly or indirectly, by the
Corporation or by any corporation or other entity that is otherwise
controlled by the Corporation.
(3) The Corporation shall not
issue any shares of Series R Preferred Stock except upon exercise of
rights issued pursuant to that certain Rights Agreement dated as of
August 16, 1989 between the Corporation and First Chicago Trust
Company of New York, as Rights Agent, a copy of which is on file with
the Secretary of the Corporation at its principal executive office and
shall be made available to shareholders of record without charge upon
written request therefor addressed to said Secretary. Notwithstanding
the foregoing sentence, nothing contained in the provisions hereof
shall prohibit or restrict the Corporation from issuing for any
purpose any series of Preferred Stock with rights and privileges
similar to, different from, or greater than, those of the Series R
Preferred Stock.
(d) Reacquired Shares. Any shares of
------------------
Series R Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares upon their retirement and cancellation
shall become authorized but unissued shares of Preferred Stock, without
designation as to series, and such shares may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors.
(e) Liquidation, Dissolution or Winding Up.
---------------------------------------
Upon the dissolution, liquidation or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series R Preferred Stock unless the holders of shares of Series R
Preferred Stock shall have received, subject to adjustment as hereinafter
provided, (1) $1.00 per one-hundredth share ($100 per share) plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, or (2) if greater than the amount
specified in clause (i)(1) of this sentence, an amount equal to one hundred
(100) times the aggregate amount to be distributed per share to holders of
Common Shares, as the same may be adjusted as hereinafter provided, and (ii)
to the holders of stock ranking on a parity upon liquidation, dissolution
or winding up with the Series R Preferred Stock, unless simultaneously
therewith distributions are made ratably on the Series R Preferred Stock
and all other shares of such parity stock in proportion to the total amounts
to which the holders of shares of Series R Preferred Stock are entitled under
clause (i)(1) of this sentence and to which the holders of such parity shares
are entitled, in each case upon such liquidation, dissolution or winding up.
The amount to which holders of Series R Preferred Stock may be entitled upon
liquidation, dissolution or winding up of the Corporation pursuant to clause
(i)(2) of the foregoing sentence is hereinafter referred to as the
"Participating Liquidation Amount" and the multiple of the amount to be
distributed to holders of Common Shares upon the liquidation, dissolution
or winding up of the Corporation applicable, pursuant to said clause, to the
determination of the Participating Liquidation Amount, as said multiple may
be adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Liquidation Multiple". In the event the Corporation shall at
any time after August 28, 1989 declare or pay any dividend on Common Shares
payable in Common Shares or any class or series thereof, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding Common Shares into a greater or lesser number of Common Shares,
then in each such case the Liquidation Multiple thereafter applicable to the
determination of the Participating Liquidation Amount to which holders of
Series R Preferred Stock shall be entitled after such event shall be the
Liquidation Multiple applicable immediately prior to such event multiplied
by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
The sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the property
and assets of the Corporation shall not be deemed a dissolution, liquidation
or winding up of the Corporation for the purposes of this Section (e), nor
shall the merger or consolidation of the Corporation into or with any other
corporation or association or the merger or consolidation of any other
corporation or association into or with the Corporation, be deemed to be a
dissolution, liquidation or winding up of the Corporation for the purposes
of this Section (e).
(f) Certain Reclassifications and Other Events.
-------------------------------------------
(1) In the event that holders of
Common Shares of the Corporation receive after August 28, 1989 in
respect of their Common Shares any share of capital stock of the
Corporation (other than any Common Shares of the Corporation of the
same class and series as such outstanding Common Shares), whether
by way of reclassification, recapitalization, reorganization,
dividend or other distribution or otherwise (a "Transaction"), then
and in each such event the dividend rights, voting rights and rights
upon the liquidation, dissolution or winding up of the Corporation
of the shares of Series R Preferred Stock shall be adjusted so that
after such event the holders of Series R Preferred Stock shall be
entitled, in respect of each share of Series R Preferred Stock held,
in addition to such rights in respect thereof to which such holder
was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect
immediately prior to such Transaction multiplied by the additional
dividends which the holder of a Common Share shall be entitled to
receive by virtue of the receipt in the Transaction of such capital
stock; (ii) such additional voting rights as equal the Vote Multiple
in effect immediately prior to such Transaction multiplied by the
additional voting rights which the holder of a Common Share shall
be entitled to receive by virtue of the receipt in the Transaction
of such capital stock; and (iii) such additional distributions upon
liquidation, dissolution or winding up of the Corporation as equal
the Liquidation Multiple in effect immediately prior to such
Transaction multiplied by the additional amount which the holder of
a Common Share shall be entitled to receive upon liquidation,
dissolution or winding up of the Corporation by virtue of the
receipt in the Transaction of such capital stock, as the case may be,
all as provided by the terms of such capital stock.
(2) In the event that all holders
of Common Shares of the Corporation receive after August 28, 1989 in
respect of their Common Shares any right or warrant to purchase
Common Shares (including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for Common
Shares) at a purchase price per share less than the Fair Market
Value of a Common Share on the date of issuance of such right or
warrant, then and in each such event the dividend rights, voting
rights and rights upon the liquidation, dissolution or winding up of
the Corporation of the shares of Series R Preferred Stock shall each
be adjusted so that after such event the Dividend Multiple, the Vote
Multiple and the Liquidation Multiple shall each be the product of
the Dividend Multiple, the Vote Multiple and the Liquidation
Multiple, as the case may be, in effect immediately prior to such
event multiplied by a fraction the numerator of which shall be the
number of Common Shares outstanding immediately before such issuance
of rights or warrants plus the maximum number of Common Shares which
could be acquired upon exercise in full of all such rights or
warrants and the denominator of which shall be the number of Common
Shares outstanding immediately before such issuance of rights or
warrants plus the number of Common Shares which could be purchased,
at the Fair Market Value of the Common Shares at the time of such
issuance, by the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants.
(3) In the event that holders
of Common Shares of the Corporation receive after August 28, 1989 in
respect of their Common Shares any right or warrant to purchase
capital stock of the Corporation (other than Common Shares of any
class or series), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for capital
stock of the Corporation (other than Common Shares of any class or
series), at a purchase price per share less than the Fair Market
Value of such shares of capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights,
voting rights and rights upon liquidation, dissolution or winding up
of the Corporation of the shares of Series R Preferred Stock shall
each be adjusted so that after such event each holder of a share of
Series R Preferred Stock shall be entitled, in respect of each share
of Series R Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately
prior to such event, to receive (i) such additional dividends as
equal the Dividend Multiple in effect immediately prior to such
event multiplied, first, by the additional dividends to which the
holder of a Common Share shall be entitled upon exercise of such
right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount
Fraction (as hereinafter defined); (ii) such additional voting
rights as equal the Vote Multiple in effect immediately prior to
such event multiplied, first, by the additional voting rights to
which the holder of a Common Share shall be entitled upon exercise
of such right or warrant by virtue of the capital stock which could
be acquired upon such exercise and multiplied again by the Discount
Fraction; and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Corporation as equal the Liquidation
Multiple in effect immediately prior to such event multiplied,
first, by the additional amount which the holder of a Common Share
shall be entitled to receive upon liquidation, dissolution or winding
up of the Corporation upon exercise of such right or warrant by
virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction. For purposes
of this paragraph, the "Discount Fraction" shall be a fraction the
numerator of which shall be the difference between the Fair Market
Value of a share of the capital stock subject to a right or warrant
distributed to holders of Common Shares of the Corporation as
contemplated by this paragraph immediately after the distribution
thereof and the purchase price per share for such share of capital
stock pursuant to such right or warrant and the denominator of which
shall be the Fair Market Value of a share of such capital stock
immediately after the distribution of such right or warrant.
(4) For purposes hereof, the
"Fair Market Value" of a share of capital stock of the Corporation
(including a Common Share) on any date shall be deemed to be the
average of the daily closing price per share thereof over the 30
consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that, in the event
that such Fair Market Value of any such share of capital stock is
determined during a period which includes any date that is within 30
Trading Days after (i) the ex-dividend date for a dividend or
distribution on stock payable in shares of such stock or securities
convertible into shares of such stock, or (ii) the effective date of
any subdivision, split, combination, consolidation, reverse stock
split or reclassification of such stock, then, and in each such case,
the Fair Market Value shall be appropriately adjusted by the Board of
Directors of the Corporation to take into account ex-dividend or
post-effective date trading. The closing price for any day shall be
the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices,
regular way (in either case, as reported in the applicable
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange), or, if the
shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the applicable transaction reporting system
with respect to securities listed on the principal national
securities exchange on which the shares are listed or admitted to
trading or, if the shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use, or if on any such date the
shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market
maker making a market in the shares selected by the Board of
Directors of the Corporation. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the
shares are listed or admitted to trading is open for the transaction
of business or, if the shares are not listed or admitted to trading
on any national securities exchange, on which the New York Stock
Exchange or such other national securities exchange as may be
selected by the Board of Directors of the Corporation is open. If
the shares are not publicly held or not so listed or traded on any
day within the period of 30 Trading Days applicable to the
determination of Fair Market Value thereof as aforesaid, "Fair Market
Value" shall mean the fair market value thereof per share as
determined in good faith by the Board of Directors of the
Corporation. In either case referred to in the foregoing sentence,
the determination of Fair Market Value shall be described in a
statement filed with the Secretary of the Corporation.
(g) Consolidation, Merger, etc. In case
---------------------------
the Corporation shall enter into any consolidation, merger, combination or
other transaction in which the Common Shares are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case each outstanding share of Series R Preferred Stock shall at the
same time be similarly exchanged for or changed into the aggregate amount
of stock, securities, cash and/or other property (payable in like kind), as
the case may be, for which or into which each Common Share is changed or
exchanged multiplied by the highest of the Dividend Multiple, the Vote
Multiple or the Liquidation Multiple in effect immediately prior to such
event.
(h) Effective Time of Adjustments.
------------------------------
(1) Adjustments to the Series R
Preferred Stock required by the provisions hereof shall be effective
as of the time at which the event requiring such adjustments occurs.
(2) The Corporation shall give
prompt written notice to each holder of a share of Series R Preferred
Stock of the effect of any adjustment to the voting rights, dividend
rights or rights upon liquidation, dissolution or winding up of the
Corporation of such shares required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Corporation
to give such notice shall not affect the validity of or the force or
effect of or the requirement for such adjustment.
(i) No Redemption. The shares of Series
--------------
R Preferred Stock shall not be redeemable at the option of the Corporation or
any holder thereof. Notwithstanding the foregoing sentence of this Section,
the Corporation may acquire shares of Series R Preferred Stock in any other
manner permitted by law, the provisions hereof and the Certificate of
Incorporation of the Corporation.
(j) Ranking. Unless otherwise provided
--------
in the Certificate of Incorporation of the Corporation or a Certificate of
Amendment relating to a subsequent series of preferred stock of the
Corporation, the Series R Preferred Stock shall rank junior to all other
series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up and
senior to the Common Shares.
(k) Conversion or Exchange. The holders
-----------------------
of shares of Series R Preferred Stock shall not have any rights to convert
such shares into or exchange such shares for Common Shares of the Corporation
or any other stock of the Corporation.
(l) Preemptive Rights. Shares of the
------------------
Series R Preferred Stock are not entitled to any preemptive rights.
(m) Amendment. Unless the vote or
----------
consent of the holders of a greater number of shares shall then be required
by law, the consent of the holders of at least 66-2/3% of all of the shares
of this Series R Preferred Stock at the time outstanding given in person or
by proxy, either in writing or by a vote at a meeting called for the purpose,
on which matter the holders of shares of this Series R Preferred Stock shall
vote together as a separate class, shall be necessary to authorize, effect or
validate any amendment, alteration or repeal of any of the provisions of the
Restated Certificate of Incorporation of the Corporation or of any
certificate amendatory or supplemental thereto which amendment, alteration
or repeal would, if effected, adversely affect the preferences, rights,
powers or privileges of this Series R Preferred Stock.
4. The location of the current registered office of the
Corporation in this State is 301 Carnegie Center, P. O. Box 2066, Princeton,
New Jersey 08543-2066, and the name of the current agent therein and in
charge thereof upon whom process against this Corporation may be served is
Richard F. Ober, Jr.
5. The current Board of Directors consists of eighteen persons
whose names and addresses are as follows:
S. RODGERS BENJAMIN Chairman
Flemington Fur Company
8 Spring Street
Flemington, NJ 08822
ROBERT L. BOYLE Publisher Emeritus
of the Dispatch
7 Orchard Lane
Rumson, NJ 07760
JAMES C. BRADY, JR. Partner
Mill House Associates, Inc.
Box 351
Gladstone, NJ 07934
JOHN G. COLLINS Vice Chairman
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
ROBERT G. COX President
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
T. J. DERMOT DUNPHY President & CEO
Sealed Air Corporation
Park 80 Plaza East
Saddle Brook, NJ 07662
ANNE EVANS ESTABROOK Owner
Elberon Development Co.
P.O. Box 677
Kenilworth, NJ 07033-0677
ELINOR J. FERDON Professional Volunteer
Litchfield Way
P.O. Box 255
Alpine, NJ 07620
FRED G. HARVEY Vice President
E. & E. Corp.
225 West 2nd Street
Bethlehem, PA 18015
JOHN R. HOWELL Chairman
First Valley Corporation
One Bethlehem Plaza
Bethlehem, PA 18018
FRANCIS J. MERTZ President
Fairleigh Dickinson University
1000 River Road
Teaneck, NJ 07666
GEORGE L. MILES, JR. President & CEO
WQED Pittsburgh
4802 Fifth Avenue
Pittsburgh, PA 15213
HENRY S. PATTERSON II President
E'town Corporation
P.O. Box 788
Westfield, NJ 07091
T. JOSEPH SEMROD Chairman and CEO
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
RAYMOND SILVERSTEIN Consultant
Alloy, Silverstein, Shapiro, Adams
Mulford & Co.
900 North Kings Highway
Cherry Hill, NJ 08034
ORIN R. SMITH Chairman and CEO
Engelhard Corporation
101 Wood Avenue
Iselin, NJ 08830
JOSEPH M. TABAK President and CEO
JPC Enterprises, Inc.
30 South Adelaide Avenue
Penthouse F
Highland Park, NJ 08904
DOUGLAS G. WATSON President
Pharmaceuticals Division
Ciba-Geigy Corporation
556 Morris Avenue
Summit, NJ 07901
The Board of Directors shall consist of not less than five (5)
persons and not more than forty (40) persons, as may be determined from time
to time in the discretion of the Board of Directors.
Except as otherwise provided by statute, by this Restated
Certificate of Incorporation as the same may be amended from time to time,
or by By-Laws as the same may be amended from time to time, all corporate
powers may be exercised by the Board of Directors. Without limiting the
foregoing, the Board of Directors shall have power, without shareholders'
action:
A. To authorize and cause to be executed and/or
issued mortgages, liens, bonds, debentures or other obligations
including bonds, debentures or other obligations convertible into,
or exchangeable for stock of any class, or bearing, warrants or other
evidences of optional rights to purchase or subscribe to, or both,
stock of any class, upon the terms, in the manner and under the
condition fixed by resolution of the Board of Directors prior to the
issue thereof, secured or not secured, upon the real and personal or
other property of the Corporation, or any part thereof, provided that
a majority of the whole Board of Directors concur therein by
resolution or in writing.
B. With the sanction of a resolution passed by
the holders of two-thirds of the shares issued and outstanding at
any annual or special meeting of shareholders duly called for that
purpose, to sell, assign, transfer or otherwise dispose of all the
rights, franchises and property of the Corporation as an entirety;
and any such sale may be wholly or partly in consideration of the
bonds, mortgages, debenture obligations, securities or evidences of
indebtedness, or shares of the capital stock, of any corporation or
corporations of any state, territory or foreign country, formed or
to be formed for the purpose of purchasing the same.
C. To loan money to, or guarantee an obligation
of, or otherwise assist any officer or other employee of the
Corporation or of any subsidiary, including an officer or employee
who is also a director of the Corporation, whenever, in the judgment
of the Board of Directors, such loan, guarantee, or assistance may
reasonably be expected to benefit the Corporation.
D. To designate three (3) or more of their number
to constitute an executive committee, which committee shall for the
time being and subject to the control and direction of the Board of
Directors have and exercise all the powers of the Board of Directors
which may be lawfully delegated for the management of the business
and affairs of the Corporation, and shall have power to authorize the
seal of the Corporation to be affixed to all papers which may require
it.
6. Except to the extent prohibited by law, no Director or officer
of the Corporation shall be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation or
its shareholders, provided that a Director or officer shall not be relieved
from liability for any breach of duty based upon an act or omission (a) in
breach of such person's duty of loyalty to the Corporation or its
shareholders, (b) not in good faith or involving a knowing violation of law
or (c) resulting in receipt by such person of an improper personal benefit.
Neither the amendment or repeal of this Article 7, nor the adoption of any
provision of this Restated Certificate of Incorporation inconsistent with
this Article 7, shall eliminate or reduce the effect of this Article 7 in
respect of any matter which occurred, or any cause of action, suit or claim
which but for this Article 7 would have accrued or arisen, prior to such
amendment, repeal or adoption.
7. Except as may be otherwise provided in respect of directors
to be elected by the holders of Preferred Stock, or any series thereof, by
the terms of any resolution or resolutions of the Board of Directors
providing for any series of Preferred Stock adopted pursuant to the
provisions of Article 3 hereof, the Board of Directors shall be classified,
with respect to the time for which directors shall hold office, into three
classes, as determined by the Board of Directors, each as nearly equal in
number as possible. At the annual meeting of the shareholders of the
Corporation at which this Article 8 is adopted, the first such class of
directors shall be elected for a term expiring upon the next following
annual meeting of shareholders and upon the election and qualification of
their respective successors, the second such class of directors shall be
elected for a term expiring upon the second following annual meeting of
shareholders and upon the election and qualification of their respective
successors, and the third such class of directors shall be elected
for a term expiring upon the third following annual meeting of shareholders
and upon the election and qualification of their respective successors. At
each annual meeting of shareholders following the annual meeting at which
this Article 8 is adopted, directors of the class of directors whose term
expires at such annual meeting shall be elected for a term expiring upon the
third following annual meeting of shareholders and upon the election and
qualification of their respective successors. Whenever the number of
directors constituting the whole Board of Directors is changed, except as
may be otherwise provided in respect of directors to be elected by the
holders of Preferred Stock, or any series thereof, by the terms of any
resolution or resolutions of the Board of Directors providing for any series
of Preferred Stock adopted pursuant to the provisions of Article 3 hereof,
any increase or decrease in the number of directors shall be apportioned
by the Board of Directors among the three classes so as to maintain all the
classes as equal in number as possible, and each such director shall hold
office until the next annual meeting of shareholders and until such
director's successor shall have been elected and qualified; provided,
however, that no decrease in the number of directors shall effect the
then-current term of any director then in office.
A director may be disqualified from office as required by
law or under any applicable rules, regulations or orders of any federal or
state regulatory authority or by provisions of general applicability in the
Restated Certificate of Incorporation or By-Laws adopted prior to such
director's election.
Any action by the Board of Directors or shareholders creating
one or more vacancies on the Board of Directors by increasing the authorized
number of directors shall be effective only if such action has received the
affirmative vote, in the case of the Board of Directors, of eighty percent
(80%) or more of the directors then holding office or, in the case of the
shareholders, of eighty percent (80%) or more of the combined voting power
of the then outstanding shares of all classes and series of stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
8. Subject to the rights of the holders of shares of any series
of Preferred Stock or any other class of stock or series thereof having a
preference over the Common Stock as to dividends or upon liquidation, any
action required or permitted to be taken by the shareholders of the
Corporation must be effected exclusively either at a duly called annual or
special meeting of shareholders of the Corporation or by the unanimous (but
no less than unanimous) written consent of the shareholders.
9. In addition to any requirements of law and any other
provision of the Restated Certificate of Incorporation of the Corporation or
any resolution or resolutions of the Board of Directors providing for any
series of Preferred Stock adopted pursuant to Article 3 hereof (and
notwithstanding the fact that approval by a lesser vote may be permitted by
law, any other Article, or other provisions hereof or any such resolution or
resolutions), the affirmative vote of the holders of eighty percent (80%) or
more of the combined voting power of the then outstanding shares of all
classes and series of stock of the Corporation entitled to vote generally in
the election of directors, voting together as a single class, shall be
required to amend, alter or repeal, or adopted any provision or take action
inconsistent with, this Article 10 or Articles 8 or 9 hereof.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE JUNE 30, 1997 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1071612
<INT-BEARING-DEPOSITS> 6879
<FED-FUNDS-SOLD> 127900
<TRADING-ASSETS> 43407
<INVESTMENTS-HELD-FOR-SALE> 3244827
<INVESTMENTS-CARRYING> 3056667
<INVESTMENTS-MARKET> 3045653
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<ALLOWANCE> 280913
<TOTAL-ASSETS> 23798120
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<SHORT-TERM> 1795725
<LIABILITIES-OTHER> 330015
<LONG-TERM> 905557
0
0
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<INTEREST-INVEST> 194729
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<EXPENSE-OTHER> 353052
<INCOME-PRETAX> 238372
<INCOME-PRE-EXTRAORDINARY> 155360
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155360
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 4.59
<LOANS-NON> 101226
<LOANS-PAST> 52524
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 18745
<ALLOWANCE-OPEN> 276438
<CHARGE-OFFS> 40169
<RECOVERIES> 15644
<ALLOWANCE-CLOSE> 280913
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<ALLOWANCE-UNALLOCATED> 146700
</TABLE>
