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Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-6451
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SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1903313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 987-3200
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
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Common Stock $.80 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
8.625% Subordinated Notes Due December 10, 2002 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 17, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $8,587,663,945.
As of February 17, 1998, there were 177,202,715 shares of common stock,
$.80 par value outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
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Summit Bancorp 1997 Annual Report to Shareholders (portion) (Parts I, II and IV).
Proxy Statement dated March 6, 1998 (portion) (Parts I and III).
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SUMMIT BANCORP.
Index to Form 10-K
Part I
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Item 1. Business Page
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a) General development of business .................................. 3
b) Financial information about industry segments .................... 3
c) Narrative description of business ................................ 3
d) Financial information about foreign and domestic operations
and export sales .............................................. 11
e) Statistical information .......................................... 12
Item 2. Properties ........................................................... 14
Item 3. Legal Proceedings .................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders .................. 18
Executive Officers of the Registrant ................................. 19
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters .................................................. 20
Item 6. Selected Financial Data .............................................. 20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ........... 20
Item 8. Financial Statements and Supplementary Data .......................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ................................................. 20
Part III
Item 10. Directors and Executive Officers of the Registrant ................... 21
Item 11. Executive Compensation ............................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management ....... 21
Item 13. Certain Relationships and Related Transactions ....................... 21
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..... 22
Signatures ........................................................... 28
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PART I
Item 1. Business.
(a) General development of business.
Summit Bancorp. ("Summit" or the "Company") has its corporate office at
301 Carnegie Center, P.O. Box 2066, Princeton, New Jersey 08543-2066.
Summit, the registrant, commenced operations on October 1, 1970 as a New
Jersey corporation and as a bank holding company registered under the Bank
Holding Company Act of 1956. At December 31, 1997, the Company owned three banks
("bank subsidiaries") and several active non-bank subsidiaries and had total
consolidated assets of $30.0 billion, which ranked it as the largest New
Jersey-based bank holding company. The bank subsidiaries engage in a general
banking business, and are as follows: Summit Bank ("Summit Bank NJ") and
Collective Bank, both operating in New Jersey; Summit Bank ("Summit Bank PA"),
operating in Pennsylvania. Collective Bank was merged into Summit Bank NJ after
the close of business on March 13, 1998. The non-bank subsidiaries engage
primarily in securities brokerage, insurance brokerage, venture capital
investment, commercial finance lending, lease financing, asset-based lending
production, letter of credit issuance, data processing, and reinsuring credit
life and disability insurance policies related to consumer loans made by the
bank subsidiaries. For a discussion on the development of the Company's business
during 1997, see the "Financial Review" on pages 19 through 33 of the 1997
Annual Report to Shareholders which section is incorporated herein by reference
through Exhibit 13.
On August 1, 1997, the Company completed the acquisition of Collective
Bancorp, Inc. This acquisition was accounted for as a pooling of interests and
all financial information has been restated. Additionally, since October 1996,
the Company completed three acquisitions that affect comparisons to prior year
financial information. Two were purchase acquisitions: Continental
Bancorporation and Central Jersey Financial Corporation which were completed on
October 1, 1996, and December 7, 1996, respectively. On March 1, 1997, the
acquisition of B.M.J. Financial Corp. was completed and has been reflected in
the financial statements from January 1, 1997. For additional information on
these and other acquisitions and the related 1997 and 1996 restructuring
charges, see Note 2 of the Consolidated Financial Statements on page 41 of the
1997 Annual Report to Shareholders.
On August 20, 1997, the Board of Directors approved a three-for-two stock
split, which was paid on September 24, 1997, to shareholders of record on
September 3, 1997. All share data has been retroactively adjusted for the common
stock split. In connection with the stock split, the Company increased the
number of authorized shares of common stock from 260 million to 390 million and
preferred stock from 4 million to 6 million, and decreased the par value of the
common stock from $1.20 per share to $.80 per share.
In the first quarter of 1997, the Company, through the formation of a
wholly-owned special purpose subsidiary, Summit Capital Trust I (the "Trust"),
issued $150.0 million of capital securities. The proceeds from the issuance of
the capital securities were invested in securities that provided a yield
comparable to the 8.40% dividend on the capital securities. The capital
securities were issued as an inexpensive form of Tier I capital. For additional
information on the Trust and the subsequent issuance of securities, see Note 10
of the Consolidated Financial Statements on pages 44 and 45 of the 1997 Annual
Report to Shareholders.
The Company began taking a proactive stance regarding the Year 2000. For
additional information, see Year 2000 on page 31 in the 1997 Annual Report to
Shareholders.
(b) Financial information about industry segments.
Summit is engaged in the business of managing or controlling banks and
such other businesses related to banking as may be authorized under the Bank
Holding Company Act of 1956, as amended. The registrant is also engaged in
furnishing services to, or performing services for its present operating
subsidiaries. Reference is made below for a discussion about industry segments.
(c) (1) Narrative description of business.
Bank Subsidiaries
Summit Bank NJ (formerly United Jersey Bank) was organized in 1899 and is
the Company's largest bank subsidiary. After the merger of Collective Bank on
March 13, 1998, Summit Bank NJ accounts for 91% of the Company's assets. Based
on the latest available data concerning deposit market share, Summit Bank NJ
ranked as the largest New Jersey-based commercial bank. Summit Bank NJ operates
362 banking offices throughout 19 of the
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21 counties in New Jersey. Summit Bank PA (formerly First Valley Bank) was
organized in 1968 and is the Company's Pennsylvania bank subsidiary, accounting
for 8% of consolidated assets. Summit Bank PA operates 64 offices in 13 counties
in eastern Pennsylvania.
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.
The retail banking line of business, which includes the traditional branch
network, supermarket branches and automated teller machines, offers a full range
of checking, savings, and time deposit products; consumer lending; telephone and
personal computer banking; mortgage banking activities including originations,
servicing and selling of mortgages as well as other retail financial products.
The commercial banking line of business provides financial services to
middle-market corporate customers including: asset-based lending; foreign
exchange; leasing; term lending; private placement; correspondent banking;
treasury services; structured finance; and financing for international trade,
construction and development, equipment, commercial real estate and aircraft.
The private banking line of business responds to the financial needs of
high net-worth individuals by providing credit related products, investments,
insurance, retirement and estate planning services.
The bank and certain non-bank subsidiaries operate in the trust and
investment services line of business, providing a full range of investment
products, custodial services and insurance products for individuals and
institutions.
Non-Bank Subsidiaries
The Company owns and operates Summit Commercial/Gibraltar Corp. and Summit
Commercial Corp., which are commercial finance companies operating in the New
York-New Jersey and the New Jersey-Baltimore metropolitan areas, respectively,
and which specialize in making loans secured by accounts receivable, inventory
and equipment, as well as financing sales and leases of equipment. The Company,
through its wholly-owned bank subsidiary, Summit Bank PA, owns and operates
Summit Discount Brokerage Co., which is engaged in the stock brokerage business
and in the underwriting of municipal bonds. The Company, through its
wholly-owned bank subsidiaries, owns and operates Summit Service Corporation,
which provides data processing services to the bank subsidiaries. The Company,
through Summit Bank NJ, owns and operates Corporate Dynamics, an employee
benefits brokerage and consulting firm, and Philadelphia Benefits Corporation, a
group health insurance general agency. Corporate Dynamics and Philadelphia
Benefits Corporation operate principally in the Mid-Atlantic region. Total
revenues (excluding intercompany revenues) for all non-bank subsidiaries as a
group during the last three years accounted for less than 10% of consolidated
revenues.
Supervision and Regulation
The banking industry is highly regulated. This regulatory framework is
intended primarily for the protection of depositors and the federal deposit
insurance funds and not for the protection of securityholders. Statutory and
regulatory controls increase a bank holding company's cost of doing business and
limit the options of its management to employ assets and maximize income. Areas
subject to regulation and supervision by the bank regulatory agencies include:
nature of business activities; minimum capital levels; dividends; affiliate
transactions; expansion of locations; acquisitions and mergers; interest rates
paid on certain types of deposits; reserves against deposits; terms, amounts and
interest rates charged to various types of borrowers; and investments. For
additional information on regulatory matters, see Note 19 of the Consolidated
Financial Statements on page 51 of the 1997 Annual Report to Shareholders.
Bank Holding Company Regulation
Summit is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"). As a bank holding
company, Summit is supervised by the Board of Governors of the Federal Reserve
Bank (the "FRB") and is required to file reports with the FRB and provide such
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additional information as the FRB may require. Summit is also regulated by the
New Jersey and Pennsylvania Departments of Banking.
The Holding Company Act prohibits Summit, with certain exceptions, from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to subsidiary banks, except that it may, upon application,
engage in, and may own shares of companies engaged in, certain businesses found
by the FRB to be so closely related to banking "as to be a proper incident
thereto" if the FRB determines that such acquisitions will be, on balance,
beneficial to the public. The Holding Company Act requires prior approval by the
FRB of the acquisition by Summit of more than five percent of the voting stock
of any additional bank. Acquisitions in any state were permitted after September
29, 1995. See "Interstate Banking" below. Satisfactory financial condition,
particularly with regard to capital adequacy, and satisfactory Community
Reinvestment Act ratings are generally prerequisites to obtaining federal
regulatory approval to make acquisitions. All of Summit's subsidiary banks are
currently rated "satisfactory" or better under the Community Reinvestment Act.
In addition, Summit is subject to various requirements under both New
Jersey and Pennsylvania laws concerning future acquisitions. Such laws require
the prior approval of the relevant Department of Banking to acquire any bank
chartered by that State. Statewide branching is permitted in New Jersey and
Pennsylvania. Branch approvals are subject to statutory standards relating to
safety and soundness, competition, and public convenience. The Holding Company
Act does not place territorial restrictions on the activities of non-bank
subsidiaries of bank holding companies.
The policy of the FRB provides that Summit is expected to act as a source
of financial strength to each of its subsidiary banks and to commit resources to
support such subsidiary banks in circumstances in which it might not do so
absent such policy. In addition, any capital loans by Summit to any subsidiary
bank would be subordinate in right of payment to deposits and certain other
indebtedness of such subsidiary bank.
Summit is required by the Holding Company Act to file annual reports of
its operations with the FRB and is subject to examination by the FRB. Under
Section 106 of the 1970 amendments to the Holding Company Act and the
regulations of the FRB, bank holding companies and their subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or provision of any property or services. Regulations of the
FRB under the Federal Reserve Act require that reserves be maintained by a bank
subsidiary of Summit on deposits. They also place limits upon the amount of
Summit's equity securities which may be repurchased or redeemed by Summit.
Interstate Banking and Regulatory Relief Legislation in 1994
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Act") permits full nationwide interstate banking (e.g., bank holding
company ("BHC") acquisition of bank subsidiaries anywhere in the U.S.) and, as
of June 1, 1997, interstate branching by merger. Importantly, states retain the
right to require that out-of-state BHCs and banks comply with certain state
rules governing entry.
A brief summary of the Act's major provisions follows:
(A) Interstate Banking. Adequately capitalized and adequately managed
BHCs are permitted to acquire banks in any state. States cannot opt-out of
this provision. State laws may prohibit the purchase of banks 5 years of
age or less. Concentration limits are imposed (10% of bank and thrift
deposits nationwide/ 30% in the state; the state supervisor may waive this
30% limit). States retain existing authority to impose nondiscriminatory
deposit caps.
(B) Bank/Thrift Affiliate Agency Authority. An insured bank subsidiary
may act as agent for an affiliate bank or thrift in offering specified
banking services both within and across state lines without offices of the
agent being deemed branches of the affiliates on whose behalf they act.
Summit Bank NJ and Summit Bank PA act as agents for each other pursuant to
this authority.
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(C) Interstate Branching.
(1) Branching Through Bank Mergers. As of June 1, 1997, the
appropriate Federal regulator may approve the merger of adequately
capitalized banks across state lines, so long as the resulting
institution is adequately capitalized and adequately managed. Bank
mergers have to conform with state laws which impose age restrictions
of up to 5 years on acquisitions of new banks. Where the bank/BHC is
effectively moving into a new state as a result of the merger,
regulators must consider Community Reinvestment Act compliance of all
bank affiliates before approving the merger application. The 10%
nationwide/30% state by state deposit concentration limits discussed
above also apply to bank mergers; states retain current authority to
impose deposit caps.
(2) Direct Branching by Banks. National and state banks are
prohibited from directly acquiring an existing branch (separate from
the acquisition of a charter), or establishing a de novo branch, in a
host state unless the law of the host state permits it. New Jersey
permits the acquisition of an existing branch but prohibits de novo;
Pennsylvania permits both.
(D) Laws Applicable to State Interstate Branches. Branches of
out-of-state state chartered banks are subject to the laws of the host
state, including limits on permissible activities, as if they were
branches of a bank whose headquarters are located in that host state.
(E) Other. For financial institutions that maintain one or more
branches outside the home state, the appropriate Federal banking agency
must prepare a written evaluation of the entire institution's Community
Reinvestment Act performance and a separate evaluation of the
institution's performance for each state and metropolitan statistical
area, and for the non-metropolitan portion of the state. The Act prohibits
the use of interstate branches primarily for the purpose of deposit
production, and requires that the interstate bank's level of lending in
the host state relative to deposits from the host state (using available
information) be greater than half the average of all banks with home
offices in that state. The appropriate Federal regulator may require
closure of a branch which fails this test. In the case of an interstate
bank that proposes to close any branch in a low- or moderate-income area,
the branch closure notices must contain the mailing address of the bank's
Federal regulator, and a statement that comments regarding the closure may
be mailed to that regulator. If a person from the area in which the branch
is located submits a written request and includes a statement of specific
reasons, and the request is not frivolous, the agency must consult with
community leaders and convene a meeting with such leaders and depository
institutions to explore the feasibility of obtaining adequate alternative
facilities and services. The legislation specifically states that this
process shall not affect the authority of the bank to close the branch, or
the timing of the closing.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), which became law in December 1991, in addition to authorizing
increased funding for the Bank Insurance Fund ("BIF") by raising the FDIC's
borrowing limits and eliminating the cap on deposit insurance premiums, imposes
extensive additional statutory requirements regarding the roles,
responsibilities, and liabilities of a bank's senior management, directors,
independent auditors, and regulators in compliance, management and financial
affairs of a bank. This Act has required additional time, effort and resources
to be devoted to compliance and internal controls.
Pursuant to FDICIA, each federal banking agency has promulgated
regulations specifying the levels at which a financial institution would be
considered "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized," and when it
would take certain mandatory and discretionary supervisory actions based on the
capital level of the institution.
Insured institutions are generally prohibited from paying dividends or
management fees if after making such payments, the institution would be
"undercapitalized." An "undercapitalized" institution also is required to
develop and submit to the appropriate federal banking agency a capital
restoration plan, and each company controlling such institution must guarantee
the institution's compliance with such plan. The liability of a holding company
under any such guarantee is limited to the lesser of five percent of the
institution's total assets at the time it became undercapitalized or the amount
needed to comply with all applicable capital standards. The FDIC is accorded a
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priority over the claims of unsecured creditors in any bankruptcy proceeding of
a holding company that has guaranteed an institution's compliance with a capital
restoration plan. Further, "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized" institutions are subject to increasingly
extensive requirements and limitations, including mandatory sale of stock,
forced mergers, and ultimately receivership or conservatorship. A "critically
undercapitalized" institution, beginning 60 days after it becomes "critically
undercapitalized," generally is prohibited from making any payment of principal
or interest on the institution's subordinated debt.
FDICIA provides that the FDIC insurance assessments are to move from
flat-rate premiums to a new system of risk-based premium assessments. The
risk-based insurance assessment evaluates an institution's potential for causing
a loss to the insurance fund and bases deposit insurance premiums upon
individual bank profiles. The majority of the Company's FDIC insured deposits
are covered under the BIF. As a result of deposits acquired through the
acquisition of thrift institutions over the last several years, the Company has
approximately $4.8 billion of deposits that are insured under the Savings
Association Insurance Fund ("SAIF").
The Deposit Insurance Funds Act of 1996, which became law on September 30,
1996, included measures to address the disparity in deposit insurance assessment
rates that had developed between institutions whose deposits are insured by BIF
and those whose deposits are insured by SAIF. The SAIF was recapitalized through
a special "one time only" assessment of 0.657 percent of all deposits insured by
that Fund; the proceeds of this assessment brought SAIF to its designated
reserve ratio. As part of this legislation, the assessment basis for the
Financing Corporation ("FICO") bonds issued to finance resolution of early
stages of the savings and loan crisis, was broadened to include banks; however,
banks are assessed for this purpose at only one-fifth the rate of the assessment
on savings associations until December 31, 1999. As a result of these changes,
the deposit insurance assessment for banks and for thrifts has been nearly
equalized and will be identical for comparably rated institutions after January
1, 2000, at which time banks will share equally in the FICO assessment and the
BIF and SAIF funds will be merged.
FIRREA
Under the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), a depository institution insured by the FDIC can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default. These provisions have
commonly been referred to as FIRREA's "cross guarantee" provisions. Liability
under the "cross guarantee" provisions is subordinate to claims (other than
claims by shareholders, including bank holding companies, in their capacity as
shareholders, and affiliates of the institution) of depositors, secured
creditors, other general or senior creditors, and holders of obligations
subordinated to depositors or other creditors.
FIRREA gives the FDIC as conservator or receiver of a failed depository
institution express authority to repudiate contracts with such institution which
it determines to be burdensome or if such repudiation will promote the orderly
administration of the institution's affairs. Certain "qualified financial
contracts", defined to include securities contracts, commodity contracts,
forward contracts, repurchase agreements, and swap agreements, are generally
excluded from the repudiation powers of the FDIC. The FDIC is also given
authority to enforce contracts made by a depository institution, notwithstanding
any contractual provision providing for termination, default, acceleration, or
exercise of rights upon, or solely by reason of, insolvency or the appointment
of a conservator or receiver. Insured depository institutions are also
prohibited from entering into contracts for goods, products or services which
would adversely affect the safety and soundness of the institution.
The bank regulatory agencies have broad discretion to issue cease and
desist orders if they determine that the Company or its subsidiaries are
engaging in "unsafe or unsound banking practices." In addition, the Federal bank
regulatory authorities are empowered to impose substantial civil money penalties
for violations of certain Federal banking statutes and regulations.
Dividend Restrictions
Various federal and state statutory provisions limit the amount of
dividends Summit's subsidiary banks can pay to Summit without prior regulatory
approval. The Federal Reserve Act, which affects both Summit Bank NJ and Summit
Bank PA, restricts the payment of dividends in any calendar year to the net
profit of the current year combined with retained net profits of the preceding
two years. Further, each bank, as a state-chartered bank, may
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declare a dividend only if, after payment thereof, its capital would be
unimpaired and its remaining surplus would equal 50 percent of it's capital
stock (New Jersey) or its surplus would not be reduced (New Jersey and
Pennsylvania). In addition, under FDICIA all institutions are prohibited from
paying dividends if after doing so an institution would be undercapitalized. For
additional information on dividend restrictions and amounts available for
dividend distributions, see Note 19 of the Consolidated Financial Statements on
page 51 of the Annual Report to Shareholders.
Regulation of Subsidiaries
Various laws and the regulations thereunder applicable to the Company and
its bank subsidiaries impose restrictions and requirements in many areas,
including capital requirements, the maintenance of reserves, establishment of
new offices, the making of loans and investments, consumer protection,
employment practices and other matters. There are various legal limitations,
including Sections 23A and 23B of the Federal Reserve Act, on the extent to
which a bank subsidiary may finance or otherwise supply funds to Summit or its
non-bank subsidiaries. Under Federal law, a bank subsidiary is subject to
individual and aggregate limits with respect to loans or extensions of credit,
or investments in the securities of, its parent and the nonbank subsidiaries of
its parent. Any such loans to nonbank affiliates must be collateralized in
keeping with a sliding scale that varies in accordance with the quality of the
collateral. See Note 19 of the Consolidated Financial Statements on page 51 of
the 1997 Annual Report to Shareholders. Summit and its banking and other
subsidiaries are also subject to certain restrictions with respect to engaging
in the business of issuing, underwriting, public sale, flotation or distribution
of securities.
The two state-chartered subsidiary banks are subject to the supervision
of, and to regular examination by, the New Jersey Department of Banking and
Insurance, in the case of Summit Bank NJ, and the Pennsylvania Department of
Banking, in the case of Summit Bank PA. In addition, the subsidiary banks are
subject to review by the U.S Department of Education with respect to student
loan activity. Summit Bank NJ and Summit Bank PA are subject to examination by
the FRB. As a registered municipal securities dealer, Summit Bank NJ is subject
to the supervision of the Municipal Securities Rulemaking Board.
None of the stocks of the subsidiary banks or other subsidiaries owned or
controlled by Summit carry statutory double liability. However, Article XIV,
Section 11 of the Constitution of the State of Arizona provides that the stock
of Summit Credit Life Insurance Company may be subject to assessment to restore
impaired capital under certain circumstances as, and to the extent, provided
therein. There is no such provision in New Jersey or Pennsylvania law governing
the stock of Summit's state-chartered banks.
Summit and its non-bank subsidiaries are subject to examination by the New
Jersey and Pennsylvania state bank regulatory agencies and the FRB, and the FDIC
may, at its discretion, examine the bank subsidiaries. As a mortgagee approved
by the Department of Housing and Urban Development and a seller-servicer of
mortgages approved by the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation, and the New Jersey Housing and Mortgage Finance
Agency, Summit Bank NJ and Summit Mortgage Banking Services, Inc. are subject to
regulation or supervision by these government agencies. Summit Bank PA is a
participant in the mortgage program conducted by the Pennsylvania Housing
Finance Agency and is subject to the supervision of that agency. Summit Discount
Brokerage Co. is subject to regulation and examination by the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
securities regulatory authorities of California, Connecticut, Florida, New
Jersey, New York and Pennsylvania and, as a municipal securities dealer, to
regulation by the Municipal Securities Rulemaking Board. Summit Credit Life
Insurance Company is subject to regulation and examination by the Department of
Insurance of the State of Arizona. Beechwood Insurance Agency, Inc. is subject
to the jurisdiction of, and to regular examination by, the New Jersey Department
of Banking and Insurance. Summit Commercial Corp. is subject to the jurisdiction
of the Connecticut and Maryland Department of Banking. Corporate Dynamics and
Philadelphia Benefits Corporation are licensed as insurance brokers in over 20
states and are subject to the jurisdiction of the insurance regulatory
authorities of each state in which they are licensed to do business. Summit
Mortgage Banking Services, Inc. is subject to the jurisdiction of the banking
authorities of the states of New York and Delaware.
Summit and its subsidiaries are also subject to various reporting
requirements of Federal and state securities laws, and regulations of the
Securities and Exchange Commission and the New York Stock Exchange.
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From time to time, various bills are introduced in the United States
Congress and the New Jersey or Pennsylvania Legislature which could result in
additional regulation of the business of Summit and its subsidiaries, or further
increase competition or expense. Legislation has been proposed at the Federal
level that would provide banking organizations such as Summit with greater
flexibility to provide non-banking services of a financial nature; and
legislation has been proposed that would permit non-banking companies to provide
banking services and to acquire banks. It cannot be determined at this time
whether any of these proposals will become law, or if they do become law, what
effect they will have on the operations of Summit.
There is a continuing trend toward regulating every aspect of retail
banking through consumer protection laws, at significant expense to financial
institutions. At the same time, securities brokers, insurance companies,
retailers and other non-bank entities are being allowed to offer a variety of
traditional bank services without being subject to the same degree of regulation
as banks and bank holding companies. If these trends continue without providing
parity to the commercial banks in matters such as permissible services, taxation
and interest rates chargeable on loans, adverse effects on commercial banks
could ensue.
In its operations in other countries, Summit Bank NJ is also subject to
restrictions imposed by the laws and banking authorities of such countries.
References under this caption, Supervision and Regulation, to applicable
statutes are brief summaries of portions thereof which do not purport to be
complete and which are qualified in their entirety by reference to such
statutes.
Monetary Policy and Economic Conditions
The earnings and business of Summit and its subsidiaries are affected by
the policies of regulatory authorities, including the FRB. The monetary policies
of the FRB have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future. Because
of the changing conditions in the national and international economy and in the
money markets, as a result of actions by monetary and fiscal authorities,
interest rates, credit availability and deposit levels may change due to
circumstances beyond the control of Summit or its subsidiaries.
Effects of Inflation
A bank's asset and liability structure differs from that of an industrial
company, since its assets and liabilities fluctuate over time based upon
monetary policies and changes in interest rates. The growth in the bank's
earning assets, regardless of the effects of inflation, will increase net
interest income if the bank is able to maintain a consistent interest spread
between earning assets and supporting liabilities, of which there can be no
assurance.
A purchasing power gain or loss from holding net monetary assets during
the year represents the effect of general inflation on monetary assets and
liabilities. Almost all of the assets and liabilities of Summit are considered
monetary because they are fixed in terms of dollars and, therefore, are not
materially affected by inflation.
(c) (1) (i) Principal products and services rendered by industry segments.
Not applicable. See response to Item l (c) (1) contained elsewhere in
this report.
(c) (1) (ii) Description of new products or segments.
There were no new products or industry segments that required the
investment of a material amount of the assets of the Company or that otherwise
were material.
(c) (1) (iii) Sources and availability of raw materials.
Not applicable.
9
<PAGE> 10
(c) (1) (iv) Importance of patents, trademarks, licenses, franchises and
concessions held.
Patents and licenses, as such, are not of importance to Summit or its
subsidiaries, but operating charters (similar to licenses) - approved banking
location authorizations granted by the New Jersey Department of Banking and
Insurance and the Pennsylvania Department of Banking for state-chartered bank
subsidiaries - are vital to the operation and expansion of the bank
subsidiaries. Such charters are perpetual unless revoked by the granting
authorities. Various licenses and approvals to do business are also required by
the other regulatory agencies referred to under Supervision and Regulation
above. Most of these licenses and approvals require periodic renewal.
Summit has several registered service marks, none of which is considered
material to its business. The duration of each registration is perpetual so long
as the registrant continues to use the mark and renews the registration every
ten years.
(c) (1) (v) Seasonality of business.
Not applicable.
(c) (1) (vi) Working capital requirements related to inventory.
Not applicable.
(c) (1) (vii) Concentration of customers.
The business of the registrant and its subsidiaries is not dependent on a
single customer, nor on a small group of customers.
(c) (1) (viii) Backlog of orders.
Not applicable.
(c) (1) (ix) Government contracts.
No material portion of the business of Summit and its subsidiaries is
subject to renegotiation of profits or termination of contracts or subcontracts
at the election of the U.S. Government.
(c) (1) (x) Competition.
Each bank subsidiary faces strong competition for local business in the
communities it serves from other banking institutions as well as from other
financial institutions. Summit's banking subsidiaries compete in the national
market with other major banking and financial institutions in the New York and
Philadelphia areas, many of which are substantially larger and may have greater
financial resources. A number of these institutions offer their services
throughout New Jersey and Pennsylvania through bank and non-bank subsidiaries,
loan production offices and solicitations through broadcast and print media and
direct mail. For international business, Summit competes not only with a
substantial number of United States banks having foreign departments, but also
with agencies and branches of foreign banks located in the United States and
with other major banks throughout the world. The effect of liberalized branching
and acquisition laws has been to lower barriers to entry into the banking
business and to increase competition for banking business, as well as to
increase both competition for and opportunities to acquire other financial
institutions. Nationwide interstate banking has accelerated these trends.
For most of the services which the subsidiaries perform, there is
increasing competition from financial institutions other than commercial banks
due to the relaxation of regulatory restrictions. Money market and mutual funds
actively compete with banks for deposits. Savings banks, savings and loan
associations and credit unions also actively compete for deposits and for
various types of loans; such institutions, as well as securities brokers,
consumer finance companies, mortgage companies, factors, insurance companies and
pension trusts, are important competitors. Financial institutions such as these,
as well as retailers and other non-bank entities, have acquired so-called
"non-bank banks" permitting them to offer traditional banking services without
being subject to the same
10
<PAGE> 11
degree of regulation. Insurance companies, mutual fund investment counseling
firms and other business firms and individuals offer competition for personal
and corporate trust services and investment advisory services.
Competition for banking and permitted non-bank services is based on price,
nature of product, quality of service, and in the case of retail activities,
convenience of location.
(c) (1) (xi) Research and development.
Summit and its subsidiaries conduct research activities, from time to
time, relating to the development of new services. Expenditures for these
activities are not considered material to the financial condition of Summit and
its subsidiaries. Research expenditures during 1997 were charged directly to
expense as incurred.
(c) (1) (xii) Cost of compliance with environmental regulations.
It is not expected that compliance with Federal, state and local
provisions relating to the protection of the environment will have any material
effect on Summit or its subsidiaries.
(c) (1) (xiii) Number of persons employed.
At December 31, 1997, there were 8,566 persons, on a full-time equivalent
basis, employed by Summit and its subsidiaries.
(d) Financial information about foreign and domestic operations and export
sales.
Summit Bank NJ operates an International Banking Department principally
for the benefit of its domestic customers and an offshore banking facility on
the island of Grand Cayman in the British West Indies. UJB Trade Finance (HK),
Limited, operating under a Hong Kong charter, issues documentary letters of
credit to Asian suppliers on behalf of U.S. importers. Business at these
offshore facilities constituted less than one-half of one percent of the total
assets and income of Summit Bank NJ in 1997.
11
<PAGE> 12
(e) Statistical information
The following information sets forth, on a consolidated basis, certain
statistical information concerning Summit and its subsidiaries. The tables
should be read in conjunction with the consolidated financial statements
contained in the 1997 Annual Report to Shareholders. Average data have been
derived from daily balances except in the case of certain smaller subsidiaries
where month-end balances were used.
Distribution of Assets, Liabilities and Shareholders' Equity, Interest
Rates and Interest Differential
For information on average balances, interest and average rates earned and
paid see Average Balance Sheets With Resultant Interest and Rates on pages 32
and 33 in the 1997 Annual Report to Shareholders.
For information on the effective interest differential of volume and rate
changes for the years 1997 and 1996 on a tax-equivalent basis see Rate/Volume
Table on page 24, and for additional information on interest sensitivity see
Asset/Liability Management on pages 28 and 29 in the 1997 Annual Report to
Shareholders.
Securities
Securities available for sale are carried at fair value, and securities
held to maturity are carried at amortized cost. For information on the carrying
value at December 31, 1997, 1996 and 1995, and maturity distribution and
weighted average yields to maturity on a tax equivalent basis for securities at
December 31, 1997, see Note 3 of the Consolidated Financial Statements on page
42 of the 1997 Annual Report to Shareholders.
Loan Portfolio
For information on the loan portfolio for the five years ended December
31, 1997, see Year-End Loans on page 21 in the 1997 Annual Report to
Shareholders. Included in commercial and industrial loans are lease financing
receivables of $874.5 million in 1997, $578.8 million in 1996, $319.1 million in
1995, $317.4 million in 1994, and $204.6 million in 1993.
Unearned discount on loans and leases at December 31, 1997 and 1996 were
$108.9 million and $93.5 million, respectively. For information concerning
concentrations of credit risk, see Note 4 of the Consolidated Financial
Statements on page 43 of the 1997 Annual Report to Shareholders.
For information on the approximate maturity distribution of loans at
December 31, 1997, and the segregation of those loans into predetermined
interest rates or floating or adjustable interest rates, see Loan Maturities on
page 21 in the 1997 Annual Report to Shareholders.
For information concerning the Company's accounting policy for
non-performing loans, see Note 1 of the Consolidated Financial Statements on
pages 38 and 39 of the 1997 Annual Report to Shareholders. For information on
the principal amount of non-performing loans and loans contractually past due 90
days or more at December 31 for each of the past five years, and their resultant
impact on earnings before taxes for the years then ended, see Non-Performing
Assets on page 26 of the 1997 Annual Report to Shareholders. All loans
referenced above represent domestic loans. There are no foreign loans included
in any of the categories.
Potential problem loans are those which management believes conditions
indicate that the collection of principal and interest may be doubtful in
accordance with the original contract terms. They are not included in
non-performing loans as these loans are still performing. Potential problem
loans, predominantly commercial and industrial loans, were $12.5 million and
$11.0 million at December 31, 1997 and 1996, respectively. The risk associated
with such loans has been factored into the Company's assessment of the adequacy
of the allowance for loan losses.
12
<PAGE> 13
Summary of Loan Loss Experience
For information on the relationship over the past five years among loans,
loans charged off and loan recoveries, the provision for loan losses and the
allowance for loan losses, see Allowance for Loan Losses on page 27 and Note 4
on page 43 of the 1997 Annual Report to Shareholders.
Specific allocations as well as a need for general reserves are identified
by loan type and allocated according to the following categories of loans at
December 31 for each of the past five years. The analysis of the adequacy of the
allowance for loan losses for the year 1996 and prior was the result of
combining Collective Bancorp, Inc. and Summit's previously restated analysis as
a result of The Summit Bancorporation acquisition. The analysis for 1997
includes the effect of the merged entities under the one methodology. The
percentage of loans to total loans is based upon the classification of loans
shown as follows:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------------------- -------------------- ------------------- -------------------- --------------------
(In thousands)
Percentage Percentage Percentage Percentage Percentage
of of of of of
loans loans loans loans loans
to to to to to
total total total total total
Amount loans Amount loans Amount loans Amount loans Amount loans
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial
and
industrial $ 52,459 26.5% $ 45,922 24.9% $ 59,357 28.4% $ 68,801 29.6% $ 84,817 28.7%
Construction
and
development 7,718 2.0 36,617 1.8 44,390 2.7 61,777 4.6 87,210 6.9
Commercial
mortgage 26,480 14.3 20,690 15.1 31,754 14.8 31,943 19.0 30,814 18.0
Residential
mortgage 12,846 30.1 13,650 34.0 23,229 32.5 26,230 25.5 27,022 25.9
Consumer 28,423 22.5 22,746 20.9 21,677 19.7 25,504 19.2 21,466 19.0
Loan
commitment
and
other
loans 1,742 4.6 7,762 3.3 26,895 1.9 3,221 2.1 1,226 1.5
Unallocated 166,826 N/A 133,224 N/A 85,858 N/A 105,860 N/A 108,764 N/A
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total $296,494 100.0% $280,611 100.0% $293,160 100.0% $323,336 100.0% $361,319 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
Deposits
For information on classification of average balances for deposits, see
Average Balance Sheets with Resultant Interest and Rates on pages 32 and 33, and
for additional information on deposits at December 31, 1997, see Note 7 to the
Consolidated Financial Statements on page 44 of the 1997 Annual Report to
Shareholders.
The following table shows, by time remaining to maturity, all certificates
of deposit $100,000 and over at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Less than three months ....................... $ 947,485
Three to six months .......................... 120,307
Six to twelve months ......................... 184,649
More than twelve months ...................... 236,055
----------
Total $1,488,496
==========
</TABLE>
Return on Equity and Assets
For information on consolidated ratios, see Consolidated Summary of
Selected Financial Data on pages 54 and 55 and see Unaudited Quarterly Financial
Data on page 56 in the 1997 Annual Report to Shareholders.
13
<PAGE> 14
Short-Term Borrowings
For information relating to certain short-term borrowings for each of the
past three years, see Short-Term Borrowings on page 22 and Note 8 to the
Consolidated Financial Statements on page 44 of the 1997 Annual Report to
Shareholders.
Item 2. Properties.
The Company owns its administrative headquarters building in West Windsor
Township, New Jersey. Summit Bank NJ owns its principal banking office located
in Hackensack, New Jersey in a nine-story building. In addition to its principal
office, Summit Bank NJ also leases facilities in Cranford, Dayton, Egg Harbor
and Mays Landing, New Jersey, and owns facilities in Cologne and Egg Harbor, New
Jersey, all of which are used for various administrative and back office loan
operations. The principal banking and administrative offices of Summit Bank PA
are located in an eleven-story building in Bethlehem, Pennsylvania. Summit Bank
PA leases the building for an initial term ending in the year 2000, with renewal
options extending for an additional 38 years. Summit Bank PA occupies
approximately two-thirds of the building. The bank subsidiaries conduct business
in approximately 426 banking offices, of which approximately 49% are owned, with
the remaining leased. Office space in certain of the owned buildings is leased
to others. Summit Service Corporation, a wholly owned subsidiary of the bank
subsidiaries, leases 300,000 square feet of real property located in Ridgefield
Park, New Jersey for use as the principal data processing facility.
For additional information on properties see Note 5 and Note 9 of the
Consolidated Financial Statements on pages 43 and 44, respectively, of the 1997
Annual Report to Shareholders.
14
<PAGE> 15
Item 3. Legal Proceedings.
Management does not believe that the ultimate disposition of the
litigation discussed below will have a material adverse effect on the financial
position and results of operation of the Company and its subsidiaries, taken as
a whole.
1. Cushman & Wakefield of New Jersey, Inc. v. Alexander Summer Company and
United Jersey Bank. Filed December 26, 1989 in the Superior Court of New Jersey,
Bergen County, Docket No. L-000012-90; cross-appealed to the Superior Court of
New Jersey, Appellate Division, Docket No. A-1531-94 (T1); petition to the New
Jersey Supreme Court for certification, Docket number 43,333.
Plaintiff brought this action against Alexander Summer Company and
United Jersey Bank (now Summit Bank, a subsidiary of registrant), to recover
brokerage commissions and punitive damages. On November 7, 1994, the trial court
found in favor of the plaintiff with respect to commissions on two properties
and awarded compensatory damages of $131,250, prejudgment interest of $42,759,
and punitive damages in the amount of $400,000. The trial court held that
damages could not be awarded to the plaintiff in connection with a third
property and also that it could not consider plaintiff's legal expenses in the
award of punitive damages. The parties cross-appealed.
In a decision filed November 18, 1996, the Appellate Division affirmed
the trial court's decision in favor of plaintiff with respect to the first two
properties but, reversing the trial court, held that the plaintiff was entitled
to damages for loss of the brokerage commission on the third property, and that
the trial court should consider plaintiff's litigation expenses in the award of
punitive damages.
On April 28, 1997, the New Jersey Supreme Court granted United Jersey
Bank's petition for certification but, before it had rendered a decision on the
merits, a settlement was reached by the parties. A stipulation of dismissal was
submitted to the Supreme Court on December 17, 1997. The Bank's contribution to
the settlement was not material to the Consolidated Financial Statements.
2. Annette Loatman on behalf of herself and all others similarly situated v.
United Jersey Bank, U.S. District Court for the District of New Jersey, Civil
Action No. 95CV05258 (JBS), filed on October 4, 1995, Robert M. Gundle, III, on
behalf of himself and all others similarly situated v. Summit Bank, successor in
interest to United Jersey Bank, U.S. District Court for the District of New
Jersey, Civil Action No. 96-4477 (JBS), filed on October 14, 1996, and Annette
Loatman, on behalf of herself and all others similarly situated v. United Jersey
Bank, Superior Court of New Jersey, Camden County, Docket No. L-3527-96 ("the
State Action"), filed April 24, 1996, dismissed without prejudice pending the
outcome of the federal actions on December 9, 1996, and reinstated October 15,
1997 with Robert M. Gundle, III as an additional named plaintiff.
The plaintiffs entered into retail installment sales contracts with
United Jersey Bank/South, a predecessor of Summit Bank, a subsidiary of
registrant, but failed to keep insurance required by their contracts in force,
as a result of which the Bank obtained collateral protection insurance for them.
Plaintiffs allege that they are representatives of a class of persons who are or
were parties to consumer loan agreements with Summit Bank and/or United Jersey
Bank and/or any subsidiary of UJB Financial Corp. (the prior name of Summit
Bancorp), and from whom any of those entities collected or sought to collect
collateral protection insurance charges for the period October 4, 1989 to
October 3, 1995. Their complaints allege breach of contract and breach of the
implied covenants of good faith and fair dealing, unconscionable commercial
practices under the New Jersey Consumer Fraud Act, unjust enrichment, and breach
of fiduciary duty. Their federal court complaints also alleged violations of the
National Bank Act and Depository Institution and Monetary Control Act.
On August 28, 1997, the U.S. District Court entered an order directing
Summit Bank to compensate Loatman's attorneys for fees and costs stemming from
their efforts to enjoin the Bank and its employees from contacting plaintiff
Loatman directly. Loatman's attorneys then filed an application for a specific
amount which the Bank opposed and no decision has been rendered by the court. On
September 24, 1997, the Bank filed a notice of appeal from the August 28, 1997
order to the United States Court of Appeals for the Third Circuit. The
plaintiffs moved to dismiss the appeal and no decision has been rendered on this
motion or on the merits of the appeal.
15
<PAGE> 16
On August 29, 1997, the U.S. District Court granted the Bank's motion
for summary judgment as to all federal claims asserted in both the Loatman and
Gundle matters, and declined to exercise supplemental jurisdiction over the
remaining counts of the complaint.
On October 15, 1997, the Superior Court of New Jersey reinstated the
state court actions. On December 19, 1997, the court denied the Bank's motion
for summary judgment, without reaching its merits, holding that questions of
fact existed which precluded summary judgment at this time. The plaintiffs have
filed a motion for class certification which the Bank has opposed. The court is
expected to consider this motion at the end of March 1998.
3. In re Payroll Express Corporation et al - John S. Pereira as Chapter 11
Trustee of the Estate of Payroll Express Corporation et al v. United Jersey
Bank, United States District Court for the Southern District of New York, Civil
Action No. 94-1565 (LAP) ("the Preference Action"), filed December 29, 1993; In
re Payroll Express Corporation of New York and Payroll Express Corporation,
United States Bankruptcy Court for the Southern District of New York. Case Nos.
92-B-43 149 (CB) and 92-B-43 150 (CB), Adversary proceeding No. 94-8297A, filed
April 22, 1994 ("the Fraudulent Conveyance Action"); Beth Israel Medical Center,
et al V. United Jersey Bank and National Westminster Bank New Jersey, United
States District Court for the Southern District of New York, Civil Action No.
94-8256 (LAP), filed September 28, 1993; Frederick Goldman, Inc. V. United
Jersey Bank and National Westminster Bank New Jersey, United States District
Court for the Southern District of New York, Civil Action No, 94-8256 (LAP),
filed March 21, 1994; Towers Financial Corporation v. United Jersey Bank, United
States District Court for the District of New Jersey, Civil Action No.92-3175
(WGB), filed June 2, 1992, removed to federal court September 2, 1992; New York
City Transit Authority V. United Jersey Bank and National Westminster Bank New
Jersey, United States District Court for the Southern District of New York,
Civil Action No.95-3685 (LAP), filed May 19, 1995; and Copytone, Inc. on behalf
of itself and others similarly situated v. United Jersey Bank, National
Westminster Bank New Jersey and John Does I through 20, United States District
Court for the Southern District of New York, Civil Action No.
95-8217 (LAP), filed November 1995.
Payroll Express Corp. ("Payroll"), a former customer of United Jersey
Bank (now Summit Bank, a subsidiary of registrant), ("the Bank"), was primarily
in the business of providing on-site check cashing services. Customers of
Payroll deposited funds into a general deposit account ("Account") at the Bank
to cover their payrolls and cash was obtained by debiting the Account.
Payroll perpetrated a substantial check kiting scheme using the Account
and another account at National Westminster Bank, NJ ("NatWest"). NatWest
apparently discovered this scheme in late May 1992 and ceased honoring checks
drawn by Payroll on its account. The Bank was left with a loss of approximately
$4 million in the Account. In March 1994, Robert Felzenberg, the President of
Payroll, pled guilty to wire and tax fraud, and was sentenced to 6 1/2 years
imprisonment.
After Payroll filed a petition in bankruptcy, a trustee (the "Trustee")
was appointed by the court. In his Preference Action, the Trustee alleged that
the Account received incoming wire transfers of at least $17,013,537.54 within
the 90 days prior to the filing of bankruptcy by Payroll, that these wire
transfers were used by the Bank to reduce its losses on the check kiting scheme,
and that these moneys are recoverable by the Trustee as preferences under the
Bankruptcy Code. The Bank successfully moved to withdraw the reference to the
United States District Court for the Southern District of New York. The Bank and
the Trustee then cross-moved for summary judgment and, on October 11, 1996, the
court denied both motions.
The Fraudulent Conveyance Action was settled in 1997 for $300,000. The
settlement was approved by the Bankruptcy Court and the matter was dismissed.
A number of Payroll's customers who had deposited money into the Account
have also filed lawsuits against the Bank alleging various common law causes of
action, including unjust enrichment, restitution, conversion, fraud, negligence
and/or breach of fiduciary duty. Only the Beth Israel Medical Center, Frederick
Goldman, New York City Transit Authority, and Copytone matters, which were
consolidated by the Court, and the Towers Financial Corporation matter are still
pending. The Bank filed motions to dismiss the consolidated complaints and, on
October 11, 1996, the court granted the Bank's motion in part, dismissing the
claims which were based on negligence, aiding and abetting the wrongful conduct
of Payroll Express, breach of fiduciary duty, fraud, equitable fraud, conspiracy
to conceal check-kiting by Payroll Express, as well as a part of the conversion
claims.
16
<PAGE> 17
The court denied the remainder of the Bank's motion but stayed the proceedings
until the completion of the Trustee's Preference Action. On November 17, 1996,
an order was entered dismissing the Towers Financial Corporation matter without
prejudice, pending the resolution of the Trustee's Preference Action.
4. McAdoo CERCLA Matter. First Valley Bank ("FVB"), now known as Summit Bank
(Pa), a subsidiary of registrant, foreclosed on property in McAdoo,
Pennsylvania, taking title by a sheriff's deed in 1980. The property was later
designated by the United States Environmental Protection Agency ("EPA") as a
part of a site (the "McAdoo Site") listed on the National Priorities List of
sites to be remediated pursuant to the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA").
On June 3, 1988, the United States District Court for the Eastern
District of Pennsylvania entered a Consent Decree in United States v. Air
Products and Chemicals, Inc., Civil Action No.87-7352 (the "Air Products
litigation"), in which sixty-five potentially responsible parties ("PRPs"), not
including FVB, agreed to undertake remediation of the McAdoo Site and the United
States agreed to pay 25% of the settling PRPs' (the "Initial PRPS") cost of
remediation.
On June 11, 1988, after having made a demand upon FVB and a number of
other non-settling PRPs, the United States sued a number of the PRPs other than
FVB who did not enter into the Consent Decree in a matter entitled United States
of America v. Alcan Aluminum et al, United States District Court, Eastern
District of Pennsylvania, Civil Action No.88-4970 (the "Alcan litigation").
Although the United States did not sue FVB, on April 16, 1990, one defendant in
the Alcan Litigation, Kalama Chemical, Inc., filed a motion for leave to file a
third party complaint against FVB seeking contribution. The motion was denied
without prejudice.
FVB then participated in settlement discussions in the Alcan litigation.
Pursuant to those negotiations, FVB and certain defendants, third-party
defendants and other potential third-party defendants deposited, in a Court
registry, a sum which the United States agreed will satisfy all of its claims
against FVB. The parties also executed a Consent Decree which was approved by
the District Court by Order dated June 24, 1993. The Consent Decree gives FVB a
broad covenant not to sue and contribution protection to the extent available
under 42 U.S.C. 9622(d)(2). The Consent Decree was the subject of public notice
and comment, pursuant to 42 U.S.C. 9622(d)(2). The Initial PRPs submitted
comments to the United States, objecting to the Consent Decree, including inter
alia, the broad release provided to FVB. The Initial PRPs also filed a motion to
intervene in the Alcan litigation, which was denied by the District Court. The
Initial PRPs then appealed that denial to the United States Court of Appeals for
the Third Circuit in a matter captioned United States V. Alcan Aluminum, Inc.,
et al, Action No.93-1099 (3rd Cir.). On May 25, 1994, the Third Circuit vacated
the District Court's orders denying the motion to intervene and approving the
Consent Decree, holding that the Initial PRPS could intervene as a matter of
right in the Alcan litigation if they could prove that they have a protectable
interest in that litigation. Consequently, the case was remanded to the District
Court to determine whether the Initial PRPs have a protectable interest in the
Alcan litigation.
As a result of settlement negotiations, the parties reached an agreement
in principle for the settlement of the case and the Court suspended all
proceedings in the case. Under the agreement, the Alcan Settlors agreed to pay
an additional $190,000, upon the entry of two new Consent decrees, one for the
Alcan litigation and one for the Air Products litigation. FVB's portion of the
$190,000 amounts to $8,500.
The parties and the government then engaged in lengthy negotiations over
the specific terms of the two Consent Orders, and, in September 1996, the Alcan
Settlors and the Air Products Settlors signed the two Consent Decrees. In the
final Alcan Consent Decree, the United States again provided FVB with a very
broad release from past and future liability, similar to that contained in the
earlier Alcan Consent Decree. Further, the Air Products parties are signatories
to the new Alcan Consent Decree, and they specifically have agreed to the broad
release afforded to FVB.
The two Consent Decrees must now be signed by representatives of the
United States. Before these signatures may be obtained, the Consent Decrees must
undergo an internal governmental approval process that typically takes several
months. If the Consent Decrees are fully executed by the United States, they
will be lodged with the Court, public notice will be published and a period of
public comment will be provided. The United States will reserve the right to
withdraw its consent based on this public comment. If, following public comment,
the United States does not withdraw its consent, it must then move for Court
approval and entry of the Consent Decrees.
17
<PAGE> 18
5. Daniel Iverson, Lawrence Cohen and Terri Cohen, on behalf of themselves and
all others similarly situated v. Collective Bank, a federally chartered savings
bank organized under the laws of the United States of America (improperly named
as Collective Bancorp, Inc., a Delaware corporation), on behalf of itself and
all others similarly situated. Superior Court of New Jersey, Atlantic County,
Docket No. ATL-L-2578-95, filed on July 26, 1995.
In their complaint against Collective Bank, a subsidiary of registrant,
plaintiffs contend that, under the New Jersey Mortgage Financing Law, a lender
may not charge an attorney review fee to a borrower in connection with a
residential mortgage transaction. They contend that Collective's so doing was a
violation of that law and of the New Jersey Consumer Fraud Act. The measure of
damages sought is the total amount of review fees paid by members of the
putative (but as yet uncertified) class. Plaintiffs also seek treble damages
under the Consumer Fraud Act. On October 2, 1997, the court entered an order
granting partial summary judgment to the plaintiffs. On October 17, 1997, the
Bank filed a notice of motion for leave to appeal to the Appellate Division of
the Superior Court of New Jersey. This motion was granted and the Iverson matter
was consolidated with two other pending appeals (in which other institutional
lenders are the defendants) relating to the same or similar issues. No decision
has been rendered on the appeal.
6. Noel Hassett, on behalf of himself and all other similarly situated v. Summit
Bank. Superior Court of New Jersey, Essex County, docket No. ESX-L-11224-97,
filed on October 3, 1997.
The allegations of the complaint and the measure of damages sought in
this matter are substantially similar to those in the Iverson matter. The Bank
has not yet filed its answer to the complaint.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
18
<PAGE> 19
Executive Officers of the Registrant.
The following data is supplied as of March 12, 1998:
<TABLE>
<CAPTION>
Title (All positions and offices presently held with
Name Age Registrant) and year appointed to office(s)
-------------------------- ----- ----------------------------------------------------------
<S> <C> <C>
T. Joseph Semrod 61 Chairman of the Board and Chief Executive Officer (1981)
Robert G. Cox 57 President (1996)
John G. Collins 61 Vice Chairman (1986)
John R. Howell 64 Vice Chairman (1987)
John R. Haggerty 62 Senior Executive Vice President/Finance (1987) and
Treasurer (1981)
Sabry J. Mackoul 57 Senior Executive Vice President/ Commercial Banking (1998)
Larry L. Betsinger 60 Executive Vice President/Corporate Information Services (1990)
Alfred M. D'Augusta 56 Executive Vice President/Human Resources (1988)
John R. Feeney 48 Executive Vice President/Asset Liability Management (1996)
William J. Healy 53 Executive Vice President (1988) and Comptroller (1979) and
Assistant Secretary (1980)
Virginia Ibarra 65 Executive Vice President/Diversity (1997)
Dorinda Jenkins-Glover 40 Executive Vice President/Marketing (1997)
Joseph A. Micali, Jr. 42 Executive Vice President/Bank Operations Support (1997)
Richard F. Ober, Jr. 54 Executive Vice President (1988), General Counsel (1975)
and Secretary (1978)
Dennis Porterfield 61 Executive Vice President/Bank Investments (1991) and
Assistant Secretary (1975)
Alan N. Posencheg 56 Executive Vice President/Corporate Operations and
Information Services (1984)
George J. Soltys, Jr. 51 Executive Vice President/Corporate Planning (1996)
Edmund C. Weiss, Jr. 55 Executive Vice President (1990) and Auditor (1977)
William J. Wolverton 54 Executive Vice President/ Retail Banking (1998)
</TABLE>
The term of each of the above officers is until the next organization
meeting of the Board of Directors, which occurs immediately following the annual
meeting of shareholders, and until a successor is appointed by the Board of
Directors. Each officer may be removed at any time by the Board of Directors
without cause. Management of Summit is not aware of any family relationship
between any director or executive officer or person nominated or chosen to
become a director or executive officer. All of the executive officers named
above have been employed in executive positions by Summit, a subsidiary of
Summit or a bank holding company merged into Summit for more than the last five
years, except for Mr. Micali who joined the Company in 1997. From 1991 to 1997
Mr. Micali was employed as Senior Vice President (Operations and Systems) of
First Union Corporation and First Fidelity Bancorporation.
19
<PAGE> 20
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Portions of this item have been omitted pursuant to paragraph (2) of
General Instruction "G" - Information to be Incorporated by Reference. See the
Shareholders' Equity and Dividends section in the Financial Review on page 23
and Notes 2, 12 and 19 to the Consolidated Financial Statements on pages 41, 45
and 51, respectively, Unaudited Quarterly Financial Data on page 56, and
Quarterly Common Stock Price and Dividend Information on page 59 of the 1997
Annual Report to Shareholders. At February 28, 1998 there were 29,645 record
holders of Summit Common Stock.
On December 12, 1997 the Company, through its wholly owned subsidiary
Summit Bank, issued 495,000 shares of the Registrant's common stock to the
shareholders of Corporate Dynamics, a New Jersey corporation ("Corporate
Dynamics") and Philadelphia Benefits Corporation, a Pennsylvania corporation
("Philadelphia Benefits") in exchange for all of the outstanding shares of
Corporate Dynamics and Philadelphia Benefits Corporation. The Registrants common
stock was issued without registration under the Securities Act of 1933 (the
"Securities Act") in reliance upon the exemption from registration set forth in
Section 4(2) of the Securities Act. In making the sale, the Company relied on
representations of the shareholders of Corporate Dynamics and Philadelphia
Benefits that they had such knowledge and experience as to make an informed
investment decision.
Item 6. Selected Financial Data.
This item is omitted pursuant to paragraph (2) of General Instruction "G"
- - Information to be Incorporated by Reference. See Consolidated Summary of
Selected Financial Data on pages 54 and 55 of the 1997 Annual Report to
Shareholders. Included in non-interest income for the years 1997 through 1993
were investment securities gains of $5.6 million, $3.9 million, $8.6 million,
$5.0 million, and $12.7 million, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This item is omitted pursuant to paragraph (2) of General Instruction "G"
- - Information to be Incorporated by Reference. See Financial Review on pages 19
through 31 of the 1997 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Due to the nature of the Company's business, market risk is primarily
limited to interest rate risk. Interest rate risk is the impact that changes in
interest rates would have on future earnings. The principal objective in
managing interest rate risk is to maximize net interest income within the
acceptable levels of risk that have been previously established by policy. This
risk can be reduced by various strategies, including the administration of
liability costs, the reinvestment of asset maturities and the use of off-balance
sheet financial instruments to insulate net interest income from the effects of
changes in interest rates. The company has limited or no market risks associated
with foreign currencies, commodities or other marketable instruments. For
information on the quantitative and qualitative disclosures about market and
interest rate risk, see Asset/Liability Management on pages 28 and 29, and Notes
1, 17 and 18 to the Consolidated Financial Statements on pages 38 through 40, 49
and 50, respectively, of the 1997 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data.
This item is omitted pursuant to paragraph (2) of General Instruction "G" -
Information to be Incorporated by Reference. See Consolidated Financial
Statements and Notes to Consolidated Financial Statements on pages 34 through 52
and page 56 of the 1997 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
20
<PAGE> 21
PART III
Item 10. Directors and Executive Officers of the Registrant.
This item is omitted pursuant to paragraph (3) of General Instruction "G"
- - Information to be Incorporated by Reference, except that certain information
on Executive Officers of the Registrant is included in Part I of this report. A
definitive proxy statement, dated March 6, 1998 (the "Proxy Statement"), was
filed with the Securities and Exchange Commission on March 6, 1998. Information
required by Item 401 of Regulation S-K is provided at page 19 of this Annual
Report on Form 10-K and in the Proxy Statement at pages 2-6 under the caption
"Election of Directors", which is incorporated herein by reference. Information
required by Item 405 of Regulation S-K is provided in the Proxy Statement at
page 20 under the caption "Additional Information Regarding Directors and
Officers - Section 16(a) Beneficial Ownership Reporting Compliance" and is
incorporated herein by reference.
Item 11. Executive Compensation.
This item is omitted pursuant to paragraph (3) of General Instruction "G"
- - Information to be Incorporated by Reference. Information required by Item 402
of Regulation S-K is provided in the Proxy Statement at pages 11-24 under the
captions "Remuneration of Outside Directors", "Summary Compensation Table",
"Option/SAR Grants in Last Fiscal Year", "Aggregated Option/SAR Exercises in
Last Fiscal Year and FY-End Option/SAR Values", "Long-Term Incentive Plans -
Awards in Last Fiscal Year" and "Certain Information As To Executive Officers",
all of which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
This item has been omitted pursuant to paragraph (3) of General
Instruction "G" "Information to be Incorporated by Reference". Information
required by Item 403 of Regulation S-K is provided at pages 7-8 of the Proxy
Statement under the caption "Beneficial Ownership of Summit Common Stock by
Directors and Executive Officers", all of which is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
This item is omitted pursuant to paragraph (3) of Instruction "G" -
"Information to be Incorporated by Reference". Information required by Item 404
of Regulation S-K is provided in the Proxy Statement at page 20 under the
caption "Additional Information Regarding Directors and Officers", which is
incorporated herein by reference.
21
<PAGE> 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
a) (1) Financial statements, Summit Bancorp. and Subsidiaries:
<TABLE>
<CAPTION>
Page*
----
<S> <C> <C>
Consolidated Balance Sheets - December 31, 1997 and 1996 ................. 34
Consolidated Statements of Income - Three Years Ended December 31, 1997 .. 35
Consolidated Statements of Cash Flows - Three Years Ended
December 31, 1997 ................................................... 36
Consolidated Statements of Shareholders' Equity - Three Years Ended
December 31, 1997 ................................................... 37
Notes to Consolidated Financial Statements ............................... 38
Management's and Independent Auditors' Report ............................ 53
Unaudited Quarterly Financial Data ....................................... 56
</TABLE>
Financial statement schedules are omitted as the required information is not
applicable or the information is presented in the financial statements or
related notes thereto.
a) (2) Other Exhibits (All references to Forms 8-K, 10-K, 10-Q, 8-A, S-1,
S-3, S-4, S-8 and other Forms provided for by the Securities Act of 1933,
Securities Exchange Act of 1934 or the Trust Indenture Act of 1940 refer
to Securities and Exchange Commission File No. 1-6451 of Summit Bancorp.,
unless otherwise specifically noted below. Specific exhibits are numbered
in accordance with Item 601 of Regulation S-K):
(2) Articles of incorporation; By-Laws.
A. Restated Certificate of Incorporation of Summit Bancorp.,
as restated August 8, 1997, as amended through September
24, 1997.
B. By-Laws of Summit Bancorp., as restated October 18, 1995
(incorporated by reference to Exhibit (3)B. on Form 10-K
for the year ended December 31, 1995).
(3) Instruments defining the rights of security holders, including
indentures.
A. (i) Rights Agreement, dated as of August 16, 1989, by and
between Summit Bancorp. (under former name UJB Financial
Corp.) and First Chicago Trust Company of New York, as
Rights Agent (incorporated by reference to Exhibit 2 to
the Registration Statement on Form 8-A, filed August 28,
1989) (File No. 1-6451), and (ii) Notice to Rights Agent
dated August 20, 1997 (incorporated by reference to
Exhibit (3)(A)(i) on Form 10-Q for the quarter ended
September 30, 1997).
B. (deleted)
C. (deleted)
D. Note Agreement, dated as of August 19, 1993, between
Summit Bancorp. (under former name UJB Financial Corp.)
and The Northwestern Mutual Life Insurance Company
relating to $20,000,000 of 7.95% Senior Notes Due August
25, 2003 (incorporated by reference to Exhibit (4)D. on
Form 10-Q for the quarter ended September 30, 1993) (File
No. 1-6451).
- -----------------
*Refers to the respective page numbers of Summit Bancorp. 1997 Annual Report to
Shareholders included as Exhibit 13. Such pages are incorporated herein by
reference.
22
<PAGE> 23
E. (i) Fiscal and Paying Agency Agreement, dated as of June
30, 1993, between Summit Bank, as issuer, and Summit Bank,
as fiscal and paying agent acting through its Trust
Department, relating to $50,000,000 of 6 3/4% Subordinated
Notes due June 15, 2003 of Summit Bank (incorporated by
reference to Exhibit (4)E.(i) on Form 8-K, dated April 11,
1996), and (ii) Specimen of Global Certificate for 6 3/4%
Subordinated Notes due June 15, 2003 of Summit Bank
(incorporated by reference to Exhibit (4)E.(ii) on Form
8-K, dated April 11, 1996).
F. (deleted)
G. (i) Subordinated Indenture, dated as of December 1, 1992,
between Summit Bancorp. (under former name UJB Financial
Corp.) and Citibank, N.A., Trustee, relating to
$175,000,000 of 8 5/8% Subordinated Notes Due December 10,
2002 of Summit Bancorp. (incorporated by reference to
Exhibit (4) G. on Form 10-K for the year ended December
31, 1992) (File No. 1-6451), and (ii) Specimen of Summit
Bancorp.'s 8 5/8% Subordinated Notes Due December 10, 2002
(incorporated by reference to Exhibit 4 on Form 8-K, dated
December 10, 1992) (File No. 1-6451).
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).
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).
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).
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).
(10) Material Contracts
**A. Converted Summit Bancorporation Stock Option Plan of
Summit Bancorp. (incorporated by reference to Exhibit 10
to Registration Statement No. 333-02625 on Form S-8, filed
April 17, 1996).
B. (i) Master Agreement of Lease, dated January 26, 1982,
between Summit Bancorp. (under former name United Jersey
Banks) and Sha-Li Leasing Associates, Inc. relating to
equipment leases in excess of $10,000,000 in aggregate
lease obligations, including form of Equipment Schedule
(incorporated by referenced to Exhibit (10) B. (i) on Form
10-Q for the quarter ended September 30, 1993) (File No.
1-6451), (ii) Assignment and Assumption of Equipment
Lease, effective December 31, 1991, between Summit
Bancorp. (under former name UJB Financial Corp.) and UJB
Financial Service Corporation (relating to assignment of
Master Agreement of Lease) (incorporated by reference to
Exhibit (10) B. (ii) on Form 10-Q for the quarter ended
September 30, 1993) (File No. 1-6451), and (iii) Form of
Guaranty Agreement between Summit Bancorp. (under former
name UJB Financial Corp.) and various lenders under the
Master Agreement of Lease relating to certain equipment
leases in excess of $10,000,000 in
23
<PAGE> 24
aggregate lease obligations (incorporated by reference to
Exhibit (10) B. (iii) on Form 10-Q for the quarter ended
September 30, 1993) (File No. 1-6451).
**C. (i) Summit Bancorp. 1993 Incentive Stock and Option Plan
(incorporated by reference to Attachment A to the Proxy
Statement of Registrant dated April 12, 1996), (ii)
Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted
July 19, 1993) (incorporated by reference to Exhibit (10)
C. (ii) on Form 10-Q for the quarter ended June 30, 1993)
(File No. 1-6451), (iii) Compensation Committee
Interpretation of Section 5 (e) (ii) (F) (incorporated by
reference to Exhibit (10) C. (iii) on Form 10-Q for the
quarter ended March 31, 1994) (File No. 1-6451), (iv)
Compensation Committee Interpretation of Stock Incentive
Plans adopted June 19, 1996 (incorporated by reference to
Exhibit (10)C.(iv) on Form 10-Q for the quarter ended June
30, 1996) (File No. 1-6451) and (v) Compensation Committee
Consent adopted February 18, 1998.
**D. (i) UJB Financial Corp. (former name of Summit Bancorp.)
1990 Stock Option Plan (incorporated by reference to
Exhibit (10) to Registration Statement No. 33 -36209 on
Form S- 8, filed July 26, 1990), and (ii) Compensation
Committee Regulations for the Grant and Exercise of Stock
Options and Restricted Stock (adopted July 19, 1993)
(incorporated by reference to Exhibit (10) C. (ii) on Form
10-Q for the quarter end June 30, 1993) (File No. 1-6451).
**E. Supplemental Executive Retirement Plan of The Summit
Bancorporation (incorporated by reference to Exhibit
(10)E. on Form 8-K, dated April 11, 1996).
**F. Description of Incentive Plan approved January 20, 1982
(incorporated by reference to Exhibit (10)F. on Form 10-K
for the year ended December 31, 1994).
**G. (i) Deferred Compensation Plan for Directors, as revised
October 17, 1979, (incorporated by reference to Exhibit
(10) G. (i) on Form 10-K for the year ended December 31,
1994), and (ii) Amendment adopted April 25, 1994
(incorporated by reference to Exhibit (10) G. (ii) on Form
10-K for the year ended December 31, 1994).
**H. (i) Agreement dated April 2, 1981 between Summit Bancorp.
(under former name United Jersey Banks) and T. Joseph
Semrod (incorporated by reference to Exhibit (10) H. (i)
on Form 10-K for the year ended December 31, 1994), with
(ii) Amendment No. I dated May 5, 1981 (incorporated by
reference to Exhibit (10) H.(ii) on Form 10-K for the year
ended December 31, 1994), (iii) Amendment No. 2 dated
December 15, 1982 (incorporated by reference to Exhibit
(10) H. (iii) on Form 10-K for the year ended December 31,
1994), and (iv) Amendment No. 3 dated August 20, 1986
(incorporated by reference to Exhibit (10) H. (iv) on Form
10-K for the year ended December 31, 1994).
**I. (i) Employment Agreement, dated March 1, 1996, between
Summit Bancorp. and Robert G. Cox (incorporated by
reference to Exhibit (10)I.(i) on Form 10-K for the year
ended December 31, 1995), and (ii) Agreement, dated as of
September 1, 1995, between The Summit Bancorporation
(predecessor corporation to Summit Bancorp.) and Robert G.
Cox assumed by Summit Bancorp. (incorporated by reference
to Exhibit (10)I.(ii) on Form 10-K for the year ended
December 31, 1995).
**J. Retirement Program for Outside Directors of Franklin
State Bank (incorporated by reference to Exhibit (10)J. on
Form 10-K for the year ended December 31, 1996).
**K. Franklin State Bank Deferred Compensation Plan adopted
January 10, 1984 (incorporated by reference to Exhibit
(10)K. on Form 10-K for the year ended December 31, 1996).
24
<PAGE> 25
**L. (i) United Jersey Banks (former name of Summit Bancorp.)
1982 Stock Option Plan (incorporated by reference to
Exhibit 4 to Registration Statement No. 2-78500 on Form
S-8, filed July 21, 1982) with (ii) Amendment No. 1, dated
June 16, 1984 (incorporated by reference to Exhibit (10)
L. (ii) on Form 10-K for the year ended December 31,
1994), (iii) Amendment No. 2, dated December 19, 1990
(incorporated by reference to Exhibit (10)L.(iii) on Form
10-K for the year ended December 31, 1995), and (iv)
Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted
July 19, 1993) (incorporated by reference to Exhibit (10)
C. (ii) on Form 10-Q for the quarter ended June 30, 1993)
(File No. 1-6451).
**M. (i) Retirement Restoration Plan, adopted April 19, 1983
(incorporated by reference to Exhibit (10) M.(i) on Form
10-K for the year ended December 31, 1994), (ii)
Supplemental Retirement Plan, adopted August 16, 1989
(incorporated by reference to Exhibit (10) M. (ii) on Form
10-K for the year ended December 31, 1994), (iii) Written
Consent of UJB Financial Corp. (former name of Summit
Bancorp.) Benefits Committee interpreting the Retirement
Restoration Plan, adopted August 30, 1989 (incorporated by
reference to Exhibit (10) M. (iii) on Form 10-K for the
year ended December 31, 1994), and (iv) Amendments to the
Retirement Restoration Plan and Supplemental Retirement
Plan adopted April 25, 1994 (incorporated by reference to
Exhibit (10) M. (iv) on Form 10-K for the year ended
December 31, 1994).
N. (i) Equipment Lease Guaranty dated as of August 31, 1992
by Summit Bancorp. (under former name UJB Financial Corp.)
to Sanwa General Equipment Leasing, Inc. (incorporated by
reference to Exhibit (10) N. (i) on Form 10-Q for the
quarter ended March 31, 1993) (File No. 1-6451), and (ii)
Equipment Lease Agreement dated as of August 31, 1992 and
Equipment Schedule Nos. A-1 and A-2 dated as of August 31,
1992 between Sanwa General Equipment Leasing, Inc. and UJB
Financial Service Corporation, United Jersey Bank, United
Jersey Bank/Central, N.A. (predecessor bank to United
Jersey Bank) and United Jersey Bank/South, N.A.
(predecessor bank to United Jersey Bank), pursuant to
Equipment Lease Agreement dated as of August 31, 1992, for
five year lease of furniture, fixtures and equipment
(incorporated by reference to Exhibit (10) N. (ii) on Form
10-Q for the quarter ended March 31, 1993) (File No.
1-6451).
O. (i) Equipment Lease Guaranty dated as of August 31, 1992
by Summit Bancorp. (under former name UJB Financial Corp.)
to MetLife Capital Corporation (incorporated by reference
to Exhibit (10) O. (i) on Form 10-Q for the quarter ended
March 31, 1993) (File No. 1-6451), and (ii) Equipment
Schedule Nos. B-1 and B-2 dated as of August 31, 1992
between MetLife Capital Corporation and UJB Financial
Service Corporation, United Jersey Bank, United Jersey
Bank/Central, N.A. (predecessor bank to United Jersey
Bank) and United Jersey Bank/South, N.A. (predecessor bank
to United Jersey Bank) pursuant to Equipment Lease
Agreement dated as of August 31, 1992 between Sanwa
General Equipment Leasing, Inc. and United Jersey Bank,
United Jersey Bank/ Central, N.A. (predecessor bank to
United Jersey Bank) and United Jersey Bank/South, N.A.
(predecessor bank to United Jersey Bank), for five year
lease of furniture, fixtures and equipment (incorporated
by reference to Exhibit (10) O. (ii) on Form 10-Q for the
quarter ended March 31, 1993) (File No. 1-6451).
P. Twenty-year real estate lease executed and dated December
12, 1988 from Hartz Mountain Industries, Inc. for real
property located in Ridgefield Park, New Jersey used as a
data processing facility (incorporated by reference to
Exhibit (10) P. on Form 10-K for the year ended December
31, 1993) (File No. 1-6451).
Q. (i) Twenty-five year real property lease, dated June 5,
1990, between Summit Bancorp. (under name of predecessor
corporation The Summit Bancorporation) and Hartz Mountain
Industries, Inc. for data processing and operations center
located in Cranford, New Jersey (incorporated by reference
to Exhibit (10)Q.(i) on Form 8-K, dated April 11,
25
<PAGE> 26
1996), and (ii) Lease Modification Agreement, dated
February 22, 1995 and effective October 1, 1994, between
Summit Bancorp. (under name of predecessor corporation The
Summit Bancorporation) and Hartz Mountain Industries, Inc.
relating to the twenty-five year lease for data processing
and operations center in Cranford, New Jersey
(incorporated by reference to Exhibit (10)Q.(ii) on Form
8-K, dated April 11, 1996).
R.-V. (deleted)
**W. (i) Retirement Plan for Outside Directors of UJB
Financial Corp., (former name of Summit Bancorp.), as
amended and restated February 20, 1991 (incorporated by
reference to Exhibit (10)W.(i) on Form 10-K for the year
ended December 31, 1995), (ii) Interpretation, dated March
15, 1993, of the Retirement Plan for Outside Directors of
UJB Financial Corp. (former name of Summit Bancorp.)
(incorporated by reference to Exhibit (10) W. (ii) on Form
10-K for the year ended December 31, 1992) (File No.
1-6451), and (iii) Amendment adopted April 25, 1994
(incorporated by reference to Exhibit (10) W. (iii) on
Form 10-K for the year ended December 31, 1994).
X.-DD. (deleted)
**EE. (i) Form of Termination Agreement between Summit
Bancorp. and each of T. Joseph Semrod, John G. Collins,
John R. Howell, John R. Haggerty, Larry L. Betsinger,
Alfred M. D'Augusta, John R. Feeney, William J. Healy,
Sabry J. Mackoul, Joseph A. Micali, Jr., Richard F. Ober,
Jr., Dennis Porterfield, Alan N. Posencheg, Edmund C.
Weiss.
**FF. (i) Summit Bancorp. Executive Severance Plan, as amended
through October 15, 1997.
GG.-II. (deleted)
**JJ. (i) Retirement Plan for Outside Directors of Commercial
Bancshares, Inc. adopted May 1, 1986, (incorporated by
reference to Exhibit (10)JJ. on Form 10-K for the year
ended December 31, 1996) and (ii) Compensation Committee
Interpretation, dated July 19, 1993 (incorporated by
reference to Exhibit (10) JJ. (ii) on Form 10-Q for the
quarter ended June 30, 1993) (File No. 1-6451).
**KK. (i) Commercial Bancshares, Inc. Directors Deferred
Compensation Plan adopted May 20, 1986 (substantially
identical plans were adopted by former subsidiaries of
Commercial Bancshares, Inc.) and (ii) related Master Trust
Agreement (incorporated by reference to Exhibit (10)KK.(i)
and (ii), respectively, on Form 10-K for the year ended
December 31, 1996).
**LL. (i) United Jersey Banks (former name of Summit Bancorp.)
1987 Stock Option Plan, (incorporated by reference to
Exhibit (10)LL.(i) on Form 10-K for the year ended
December 31, 1996) with (ii) Amendment dated April 25,
1989, (incorporated by reference to Exhibit (10) LL. (ii)
on Form 10-K for the year ended December 31, 1994), (iii)
amendment dated June 30, 1990, and (iv) Compensation
Committee Regulations for the Grant and Exercise of Stock
Options and Restricted Stock (adopted July 19, 1993)
(incorporated by reference to Exhibit (10) C. (ii) on Form
10-Q for the quarter ended June 30, 1993).
**MM. Converted Collective Bancorp, Inc. Stock Option Plan of
Summit Bancorp. (incorporated by reference to Exhibit (10)
to Registration Statement No. 333-35075 on Form S-8, filed
September 5, 1997).
**NN. (i) Collective Federal Savings and Loan Association
Directors Deferred Compensation Plan with (ii) Amendment
No. 1 effective January 1, 1989, (iii) Amendment No. 2
effective July 22, 1997 and (iv) Rabbi Trust Agreement
under Collective Bancorp. Directors Deferred Compensation
Plan dated as of July 15, 1997.
26
<PAGE> 27
(13) Summit Bancorp 1997 Annual Report to Shareholders.
(21) Subsidiaries of the registrant.
(23) Consents of Experts and Counsel
A. Independent Auditors' Consent - KPMG Peat Marwick LLP
(27.1) Summit Bancorp. financial data schedule - December 31, 1997
(27.2) Summit Bancorp. financial data schedule - September 30, 1997
(27.3) Summit Bancorp. financial data schedule - June 30, 1997
(27.4) Summit Bancorp. financial data schedule - March 31, 1997
(27.5) Summit Bancorp. financial data schedule - December 31, 1996
(27.6) Summit Bancorp. financial data schedule - September 30, 1996
(27.7) Summit Bancorp. financial data schedule - June 30, 1996
(27.8) Summit Bancorp. financial data schedule - March 31, 1996
(27.9) Summit Bancorp. financial data schedule - December 31, 1995
- ------------
** Management contract or compensatory plan or arrangement.
None of the Exhibits listed above other than the Summit Bancorp 1997 Annual
Report to Shareholders are furnished herewith (other than certain copies filed
with the Securities and Exchange Commission). Any of such Exhibits will be
furnished to any requesting security holder upon payment of a fee of 15 cents
per page. Contact Lori A. Wierzbinsky, Assistant Corporate Secretary, Summit
Bancorp., P.O. Box 2066, Princeton, NJ 08543-2066 for a determination of the fee
necessary to fulfill any request.
b) Reports on Form 8-K.
None.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUMMIT BANCORP.
Dated: March 27, 1998 By: /s/ J. R. HAGGERTY
---------------------------------------
John R. Haggerty
Senior Executive Vice President/Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ T. JOSEPH SEMROD Chairman of the Board and March 27, 1998
---------------- Director (Chief Executive Officer)
T. Joseph Semrod
/s/ ROBERT G. COX President and Director March 27, 1998
-------------
Robert G. Cox
/s/ JOHN G. COLLINS Vice Chairman and Director March 27,1998
---------------
John G. Collins
/s/ JOHN R. HOWELL Vice Chairman and Director March 27, 1998
--------------
John R. Howell
/s/ J. R. HAGGERTY Senior Executive Vice March 27, 1998
-------------- President/Finance (Principal
John R. Haggerty Financial Officer)
/s/ WILLIAM J. HEALY Executive Vice President and March 27, 1998
---------------- Comptroller (Principal Accounting
William J. Healy Officer)
/s/ S. RODGERS BENJAMIN Director March 27, 1998
-------------------
S. Rodgers Benjamin
/s/ ROBERT L. BOYLE Director March 27, 1998
---------------
Robert L. Boyle
/s/ JAMES C. BRADY, JR. Director March 27, 1998
-------------------
James C. Brady, Jr.
/s/ T. J. DERMOT DUNPHY Director March 27, 1998
-------------------
T. J. Dermot Dunphy
/s/ ANNE EVANS ESTABROOK Director March 27, 1998
--------------------
Anne Evans Estabrook
/s/ ELINOR J. FERDON Director March 27, 1998
----------------
Elinor J. Ferdon
/s/ THOMAS H. HAMILTON Director March 27, 1998
------------------
Thomas H. Hamilton
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C>
/s/ FRED G. HARVEY Director March 27, 1998
--------------
Fred G. Harvey
/s/ FRANCIS J. MERTZ Director March 27, 1998
----------------
Francis J. Mertz
/s/ GEORGE L. MILES, JR. Director March 27, 1998
--------------------
George L. Miles, Jr.
/s/ WILLIAM R. MILLER Director March 27, 1998
-----------------
William R. Miller
/s/ HENRY S. PATTERSON II Director March 27, 1998
---------------------
Henry S. Patterson II
/s/ RAYMOND SILVERSTEIN Director March 27, 1998
-------------------
Raymond Silverstein
/s/ ORIN R. SMITH Director March 27, 1998
-------------
Orin R. Smith
/s/ JOSEPH M. TABAK Director March 27, 1998
---------------
Joseph M. Tabak
/s/ DOUGLAS G. WATSON Director March 27, 1998
-----------------
Douglas G. Watson
</TABLE>
29
<PAGE> 30
EXHIBIT INDEX
Exhibit No. Description
----------- --------------------------------------------------------
(2)A. Restated Certificate of Incorporation of Summit
Bancorp., as restated August 8, 1997, as amended through
September 24, 1997.
(10)C. (v) Compensation Committee Consent adopted February 18,
1998.
(10)EE. (i) Form of Termination Agreement between Summit
Bancorp. and each of T. Joseph Semrod, John G. Collins,
John R. Howell, John R. Haggerty, Larry L. Betsinger,
Alfred M. D'Augusta, John R. Feeney, William J. Healy,
Sabry J. Mackoul, Joseph A. Micali, Jr., Richard F.
Ober, Jr., Dennis Porterfield, Alan N. Posencheg, Edmund
C. Weiss.
(10)FF. (i) Summit Bancorp. Executive Severance Plan, as amended
through October 15, 1997.
(10)NN. (i) Collective Federal Savings and Loan Association
Directors Deferred Compensation Plan with (ii) Amendment
No. 1 effective January 1, 1989, (iii) Amendment No. 2
effective July 22, 1997 and (iv) Rabbi Trust Agreement
under Collective Bancorp. Directors Deferred
Compensation Plan dated as of July 15, 1997.
(13) Summit Bancorp. 1997 Annual Report to Shareholders.
(21) Subsidiaries of the Registrant.
(23)A. Independent Auditors' Consent - KPMG Peat Marwick LLP
(27.1) Summit Bancorp. financial data schedule - December 31,
1997
(27.2) Summit Bancorp. financial data schedule - September 30,
1997
(27.3) Summit Bancorp. financial data schedule - June 30, 1997
(27.4) Summit Bancorp. financial data schedule - March 31, 1997
(27.5) Summit Bancorp. financial data schedule - December 31,
1996
(27.6) Summit Bancorp. financial data schedule - September 30,
1996
(27.7) Summit Bancorp. financial data schedule - June 30, 1996
(27.8) Summit Bancorp. financial data schedule - March 31, 1996
(27.9) Summit Bancorp. financial data schedule - December 31,
1995
<PAGE> 1
Exhibit (2) A.
RESTATED
CERTIFICATE OF INCORPORATION
OF
SUMMIT BANCORP.
(as Restated August 8, 1997, as amended September 24, 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
1
<PAGE> 2
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.
2
<PAGE> 3
K. In general, to do any and all of the acts and
things herein set forth to the same extent as natural persons could do,
and in any part of the world, as principal, factor, agent, contractor
or otherwise, either alone or in company with any person, entity,
syndicate, partnership, association, corporation or others; to
establish and maintain offices and agencies within and anywhere outside
of the State of New Jersey; and to exercise all or any of its corporate
powers and rights in the State of New Jersey and in any and all other
states, territories, districts, possessions or dependencies of the
United States of America and in any other countries or places.
L. To do everything necessary, proper, advisable or
convenient for the accomplishment of any of the purposes herein set
forth and to do every other act and thing incidental thereto or
connected therewith, provided the same be not forbidden by law.
3. The total number of shares of capital stock authorized and which may
be issued by this Corporation is Three Hundred Ninety-Six Million (396,000,000)
shares, of which Three Hundred Ninety Million (390,000,000) shares of Eighty
Cents ($0.80) par value each shall be designated as Common Stock, and of which
Six Million (6,000,000) 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:
3
<PAGE> 4
(a) Dividends and Distributions.
(1) Subject to the provisions for
adjustment hereinafter set forth, the holders of
shares of Series R Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of
Directors out of funds legally available for the
purpose, (i) cash dividends in an amount per share
(rounded to the nearest cent) equal to one hundred
(100) times the aggregate per share amount of all
cash dividends declared or paid on the Common Shares,
$1.20 par value per share, of the Corporation (the
"Common Shares"), and (ii) a preferential cash
dividend (the "Preferential Dividends"), if any, on
the first business day of February, May, August and
November of each year (each a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a
share or fraction of a share of Series R Preferred
Stock in an amount equal to $1.00 per share of Series
R Preferred Stock reduced (but not to an amount less
than zero) by the per share amount of all cash
dividends declared on the Series R Preferred Stock
pursuant to clause (i) of this sentence since the
immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share
or fraction of a share of Series R Preferred Stock.
In the event the Corporation shall, at any time after
the issuance of any share or fraction of a share of
Series R Preferred Stock, make any distribution on
the Common Shares of the Corporation, whether by way
of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial
liquidation of the Corporation or otherwise, which is
payable in cash or any debt security, debt
instrument, real or personal property or any other
property (other than cash dividends subject to the
immediately preceding sentence, a distribution of
Common Shares or other capital stock of the
Corporation or a distribution of rights or warrants
to acquire any such share, including any debt
security convertible into or exchangeable for any
such share, at a price less than the Fair Market
Value (as hereinafter defined) of such share), then
and in each such event the Corporation shall
simultaneously pay on each then outstanding share of
Series R Preferred Stock of the Corporation a
distribution, in like kind, of one hundred (100)
times such distribution paid on a Common Share
(subject to the provisions for adjustment hereinafter
set forth). The dividends and distributions on the
Series R Preferred Stock to which holders thereof are
entitled pursuant to clause (i) of the first sentence
of this paragraph and pursuant to the second sentence
of this paragraph are hereinafter referred to as
"Participating Dividends" and the multiple of such
cash and non-cash dividends on the Common Shares
applicable to the determination of the Participating
Dividends, which shall be one hundred (100) initially
but shall be adjusted from time to time as
hereinafter provided, is hereinafter referred to as
the "Dividend 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
4
<PAGE> 5
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
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<PAGE> 6
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
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<PAGE> 7
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
7
<PAGE> 8
(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
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<PAGE> 9
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
9
<PAGE> 10
outstanding Common Shares), whether by way of
reclassification, recapitalization, reorganization,
dividend or other distribution or otherwise (a
"Transaction"), then and in each such event the
dividend rights, voting rights and rights upon the
liquidation, dissolution or winding up of the
Corporation of the shares of Series R Preferred Stock
shall be adjusted so that after such event the
holders of Series R Preferred Stock shall be
entitled, in respect of each share of Series R
Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled
immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple
in effect immediately prior to such Transaction
multiplied by the additional dividends which the
holder of a Common Share shall be entitled to receive
by virtue of the receipt in the Transaction of such
capital stock; (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior
to such Transaction multiplied by the additional
voting rights which the holder of a Common Share
shall be entitled to receive by virtue of the receipt
in the Transaction of such capital stock; and (iii)
such additional distributions upon liquidation,
dissolution or winding up of the Corporation as equal
the Liquidation Multiple in effect immediately prior
to such Transaction multiplied by the additional
amount which the holder of a Common Share shall be
entitled to receive upon liquidation, dissolution or
winding up of the Corporation by virtue of the
receipt in the Transaction of such capital stock, as
the case may be, all as provided by the terms of such
capital stock.
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<PAGE> 11
(2) In the event that all holders of Common
Shares of the Corporation receive after August 28,
1989 in respect of their Common Shares any right or
warrant to purchase Common Shares (including as such
a right, for all purposes of this paragraph, any
security convertible into or exchangeable for Common
Shares) at a purchase price per share less than the
Fair Market Value of a Common Share on the date of
issuance of such right or warrant, then and in each
such event the dividend rights, voting rights and
rights upon the liquidation, dissolution or winding
up of the Corporation of the shares of Series R
Preferred Stock shall each be adjusted so that after
such event the Dividend Multiple, the Vote Multiple
and the Liquidation Multiple shall each be the
product of the Dividend Multiple, the Vote Multiple
and the Liquidation Multiple, as the case may be, in
effect immediately prior to such event multiplied by
a fraction the numerator of which shall be the number
of Common Shares outstanding immediately before such
issuance of rights or warrants plus the maximum
number of Common Shares which could be acquired upon
exercise in full of all such rights or warrants and
the denominator of which shall be the number of
Common Shares outstanding immediately before such
issuance of rights or warrants plus the number of
Common Shares which could be purchased, at the Fair
Market Value of the Common Shares at the time of such
issuance, by the maximum aggregate consideration
payable upon exercise in full of all such rights or
warrants.
(3) In the event that holders of Common
Shares of the Corporation receive after August 28,
1989 in respect of their Common Shares any right or
warrant to purchase capital stock of the Corporation
(other than Common Shares of any class or series),
including as such a right, for all purposes of this
paragraph, any security convertible into or
exchangeable for capital stock of the Corporation
(other than Common Shares of any class or series), at
a purchase price per share less than the Fair Market
Value of such shares of capital stock on the date of
issuance of such right or warrant, then and in each
such event the dividend rights, voting rights and
rights upon liquidation, dissolution or winding up of
the Corporation of the shares of Series R Preferred
Stock shall each be adjusted so that after such event
each holder of a share of Series R Preferred Stock
shall be entitled, in respect of each share of Series
R Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled
immediately prior to such event, to receive (i) such
additional dividends as equal the Dividend Multiple
in effect immediately prior to such event multiplied,
first, by the additional dividends to which the
holder of a Common Share shall be entitled upon
exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such
exercise and multiplied again by the Discount
Fraction (as hereinafter defined); (ii) such
additional voting rights as equal the Vote Multiple
in effect immediately prior to such 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
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<PAGE> 12
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
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<PAGE> 13
"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
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<PAGE> 14
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
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<PAGE> 15
JOHN G. COLLINS Vice Chairman
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
ROBERT G. COX President
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
T. J. DERMOT DUNPHY President & CEO
Sealed Air Corporation
Park 80 Plaza East
Saddle Brook, NJ 07662
ANNE EVANS ESTABROOK Owner
Elberon Development Co.
P.O. Box 677
Kenilworth, NJ 07033-0677
ELINOR J. FERDON Professional Volunteer
Litchfield Way
P.O. Box 255
Alpine, NJ 07620
FRED G. HARVEY Vice President
E. & E. Corp.
225 West 2nd Street
Bethlehem, PA 18015
JOHN R. HOWELL Chairman
First Valley Corporation
One Bethlehem Plaza
Bethlehem, PA 18018
FRANCIS J. MERTZ President
Fairleigh Dickinson University
1000 River Road
Teaneck, NJ 07666
GEORGE L. MILES, JR. President & CEO
WQED Pittsburgh
4802 Fifth Avenue
Pittsburgh, PA 15213
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<PAGE> 16
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
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<PAGE> 17
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
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<PAGE> 18
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
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<PAGE> 19
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.
19
<PAGE> 1
Exhibit (10)C.(v)
SUMMIT BANCORP.
COMPENSATION COMMITTEE
FEBRUARY 18, 1998
Pursuant to Section 14A:6-7.1(5) of the New Jersey Business Corporation
Act, and Article III, Section 10 of the By-Laws of this Corporation, the
undersigned, being all of the members of the Compensation Committee of the
above-named Corporation, hereby consent and agree that in connection with the
three-for-two split up of the Corporation's capital stock effective September
24, 1997 (the "Stock Split") the following adjustments be made:
1. The 1993 Incentive Stock and Option Plan ("Plan") restrictions approved
by the Board of Directors and shareholders of the Corporation in 1996 to
bring the Plan into compliance with Section 162(m) of the Internal
Revenue Code of 1986 are amended to give effect to the Stock Split as
follows:
a) Section 2(a) of the Plan setting forth the maximum number of shares
that may be awarded as Program Stock and made subject to Options in
a fiscal year is amended to increase "1,800,000" to "2,700,000";
b) Section 2(a) of the Plan setting forth the maximum number of shares
that may be made subject to Options granted to any individual in a
fiscal year is amended to increase "175,000" to "262,500"; and
c) Section 2(a) of the Plan setting forth the maximum number of shares
of Performance Stock that may be awarded to any individual in a
fiscal year is amended increase "50,000" to "75,000".
2. The actions of officers of the Corporation to give effect to the Stock
Split by making appropriate adjustments to the number of shares and
exercise price per share of all outstanding stock options granted under
all stock option plans of the Corporation and by making appropriate
adjustments to the number of shares subject to unearned Performance Stock
awards are hereby ratified and approved.
<PAGE> 1
Exhibit (10)EE
TERMINATION AGREEMENT
THIS AGREEMENT dated and entered into effective and as of the _____
day of ______________, _____, by and between Summit Bancorp., a New Jersey
corporation (the "Company"), and ______________________________, residing at
______________________________, _____________, __________ ___________ (the
"Executive").
W I T N E S S E T H:
WHEREAS, should the Company receive a proposal from a third person,
whether solicited by the Company or unsolicited, concerning a possible business
combination with or the acquisition of a substantial share of the equity or
voting securities of, the Company, the Board of Directors of the Company (the
"Board") has deemed it imperative that it and the Company be able to rely on the
Executive to continue to serve in the Executive's position, and that the Board
and the Company be able to receive and rely upon the Executive's advice, if they
request it, as to the best interests of the Company and its shareholders,
without concern that the Executive might be distracted by the personal
uncertainties and risks that such a proposal might otherwise create; and
WHEREAS, the Company desires to enhance executive morale
and its ability to retain existing management; and
WHEREAS, the Company desires to reward the Executive for the
Executive's valuable, dedicated service to the Company or one or more of its
subsidiary corporations (each, a "Subsidiary") should the Executive's service be
terminated under circumstances hereinafter described; and
WHEREAS, the Board therefore considers it in the best interests of
the Company and its shareholders for the Company to enter into Termination
Agreements, in form similar to this Agreement, with certain key executive
officers of the Company and one or more of its Subsidiaries; and
WHEREAS, the Executive is presently the duly elected and acting
[insert title of executive] of [insert Company or name of Subsidiary] and is a
key executive with whom the Company has been authorized by the Board to enter
into this Agreement;
NOW, THEREFORE, to assure the Company of the Executive's continued
dedication and the availability of the
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<PAGE> 2
Executive's advice and counsel in the event of any such proposal, to induce the
Executive to remain in the employ of the Company or a Subsidiary, and to reward
the Executive for the Executive's valuable, dedicated service to the Company or
a Subsidiary should the Executive's service be terminated under circumstances
hereinafter described, and for other good and valuable consideration, the
receipt and adequacy whereof each party acknowledges, the Company and the
Executive agree as follows:
1. OPERATION, EFFECTIVE DATE, AND TERM OF AGREEMENT.
(a) This Agreement is effective and binding on both parties as of
the date hereof. Notwithstanding its present effectiveness, the provisions of
paragraphs 3 and 4 of this Agreement shall become operative only when, as and if
there has been a "Change in Control" of the Company. For purposes of this
Agreement, a "Change in Control" of the Company shall be deemed to occur (i)
upon a Change in Control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A or Item 1a of Form 8-K
promulgated under the Securities Exchange Act of 1934 ("Exchange Act"); or (ii)
if any "person" (including as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act, but excluding the Company and its Subsidiaries or
an employee benefit plan of the Company (or any fiduciary thereof) or a
corporation controlled by the Company's shareholders in substantially the same
character and proportions as their ownership of stock of the Company, or an
underwriter temporarily holding securities pursuant to an offering of such
securities) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's outstanding securities then entitled to
vote for the election of directors; or (iii) if during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a majority thereof
(excluding, for purposes of this calculation, any director who dies during such
period); or (iv) if the Company shall meet the delisting criteria of the New
York Stock Exchange or any successor exchange in respect of the number of
publicly-held shares or the number of stockholders holding one hundred (100)
shares or more; or (v) if the Board shall approve the sale of all or
substantially all of the assets of the
2
<PAGE> 3
Company; or (vi) if the Board shall approve any merger, consolidation, issuance
of securities or purchase of assets, the result of which would be the occurrence
of any event described in clause (i), (ii), (iii) or (iv) above or that the
stockholders of the Company receive or retain stock having less than 65%
combined voting power of the company resulting from such transaction in
substantially the same proportions as their prior ownership of the Company.
(b) The Company shall be obligated to make the payments referred to
in paragraphs 3 and 4 hereof following, and the provisions of paragraph 2 hereof
shall apply to, a Change in Control of the Company only if such Change in
Control shall have occurred prior to, or as a result of efforts designed to
attain such and known to the parties hereto to have commenced prior to, the
earliest to occur of the Executive's death, Disability (as hereinafter defined),
Normal Retirement Date (as hereinafter defined) or the fifth anniversary of the
date hereof; provided, however, that commencing on the fifth anniversary of the
date hereof and each annual anniversary of such day thereafter (such day and
each annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), the term of this Agreement shall automatically be extended for one
additional year unless at the Renewal Date the Executive is no longer employed
by the Company or a Subsidiary or has reached the Executive's Normal Retirement
Date (as hereinafter defined) or at least twelve (12) months prior to the next
Renewal Date (and prior to a Change in Control of the Company), the Company
shall have given notice to the Executive that it does not wish to extend the
term of this Agreement; provided, further, however, if a Change in Control of
the Company shall have occurred during the term of this Agreement, this
Agreement shall continue in effect for a period of not less than thirty-six (36)
months beyond the month in which each such Change in Control of the Company
occurred, and thereafter solely to the extent necessary for the Executive to
enforce the obligations of the Company or Subsidiary employing Executive
incurred prior thereto.
2. EMPLOYMENT OF EXECUTIVE.
Nothing herein shall affect any right which the Executive or the
Company or a Subsidiary may otherwise have to terminate the Executive's
employment by the Company or a Subsidiary at any time in any lawful manner,
subject always
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<PAGE> 4
to the Company's providing to the Executive the payments and benefits specified
in paragraphs 3 and 4 of this Agreement to the extent hereinbelow provided.
In the event any person commences a tender or exchange offer,
circulates a proxy statement to the Company's shareholders or takes other steps
designed to effect a Change in Control of the Company as defined in paragraph 1
of this Agreement, the Executive agrees that before the Executive's Normal
Retirement Date the Executive will not voluntarily leave the employ of the
Company or a Subsidiary, and will continue to perform the Executive's regular
duties and to render the services specified in the recitals of this Agreement,
until such person has abandoned or terminated that person's efforts to effect a
Change in Control or until a Change in Control has occurred. Should the
Executive voluntarily terminate the Executive's employment before any such
effort to effect a Change in Control of the Company has commenced, or after any
such effort has been abandoned or terminated without effecting a Change in
Control and no other such effort is then being undertaken by any other person,
this Agreement shall lapse and be of no further force or effect.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(a) If any of the events described in paragraph 1 hereof
constituting a Change in Control of the Company shall have occurred, the
Executive shall be entitled to the benefits provided in paragraph 4 hereof upon
the subsequent termination of the Executive's employment within the applicable
period set forth in paragraph 4 hereof following such Change in Control unless
such termination is (i) due to the Executive's death after the Window Period
referred to below or Retirement (other than Early Retirement during the Window
Period); or (ii) by the Company or a Subsidiary by reason of the Executive's
Disability or for Cause (as hereinafter defined); or (iii) by the Executive
other than for Good Reason (as hereinafter defined).
(b) If following a Change in Control the Executive's employment is
terminated by reason of the Executive's death after the Window Period,
Retirement (other than Early Retirement during the Window Period) or Disability,
the Executive shall be entitled to death, retirement or disability benefits, as
the case may be, from
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<PAGE> 5
the Company no less favorable than those benefits to which the Executive would
have been entitled had the death, Retirement or termination for Disability
occurred during the six (6) month period prior to the Change in Control. If
prior to any such termination for Disability, the Executive fails to perform the
Executive's duties as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive the Executive's Base Salary (as
hereinafter defined), less any benefits as may be available to the Executive
under the Company's or Subsidiary's disability plans, until the Executive's
employment is terminated for Disability.
(c) If the Executive's employment shall be terminated by the Company
or a Subsidiary for Cause or by the Executive other than for Good Reason, the
Company shall pay (subject to any applicable payroll or other taxes required to
be withheld) to the Executive the Executive's Base Salary through the Date of
Termination, and the Company or a Subsidiary shall have no further obligations
to the Executive under this Agreement. This paragraph 3(c) shall not apply to a
termination of the Executive's employment by the Company or a Subsidiary by
reason of Death, Retirement or Disability.
(d) For purposes of this Agreement:
(i) "Disability" shall mean the Executive's incapacity to perform
the Executive's duties with the Company or Subsidiary on a full-time
basis for one hundred eighty (180) consecutive days due to physical
or mental illness such that the Executive shall have become
qualified to receive benefits under the Company's or a Subsidiary's
long-term disability plans applicable to the Executive. Any question
as to the existence of Disability upon which the Executive and the
Company or Subsidiary cannot agree shall be determined by a
qualified independent physician selected by the Company or
Subsidiary employing the Executive or its insurers and acceptable to
the Executive or an adult member of the Executive's immediate
family, which acceptance shall not be unreasonably withheld. The
Executive shall be obligated to submit to such medical examinations
as may be necessary to determine whether Disability exists.
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(ii) "Retirement" shall mean that the Executive shall have reached
the normal retirement date provided in the Company's or Subsidiary's
defined benefit retirement plans applicable to such Executive (the
"Normal Retirement Date") or that the Executive shall have taken
early retirement (as defined in such retirement plans) and shall no
longer be employed by the Company or a Subsidiary ("Early
Retirement").
(iii) "Cause" shall mean:
(A) the willful commission by the Executive of an illegal act
or other act of willful misconduct that causes or will
probably cause substantial economic damage to the Company or a
Subsidiary or substantial injury to the business reputation of
the Company or a Subsidiary;
(B) the commission by the Executive of an act of fraud in the
performance of such Executive's duties on behalf of the
Company or a Subsidiary;
(C) the continuing willful failure of the Executive to perform
the duties of such Executive to the Company or a Subsidiary
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in
reasonable detail) and a reasonable opportunity to be heard
and cure such failure are given to the Executive by the
Compensation Committee of the Board; or
(D) the final order of a federal or state regulatory agency or
a court of competent jurisdiction requiring the termination of
the Executive's employment with the Company or a Subsidiary.
(iv) "Good Reason" shall mean, excluding for this purpose an
isolated, insubstantial and
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inadvertent action or failure to act, which is not in bad faith and
which is remedied by the Company or applicable Subsidiary promptly
after receipt of notice thereof given by the Executive:
(A) Without the Executive's express written consent, the
assignment by the Company or a Subsidiary to the Executive of
duties which (i) are materially different or require travel
significantly more time consuming or extensive than the
Executive's duties or business travel obligations immediately
prior to the Change in Control, or (ii) result, without the
Executive's express written consent, in either a significant
reduction in the Executive's authority and responsibility as a
senior executive of the Company or Subsidiary employing the
Executive when compared to the highest level of authority and
responsibility assigned to the Executive at any time during
the six (6) month period prior to the Change in Control, or,
(iii) the removal of the Executive from, or any failure to
reappoint or reelect the Executive to, the highest title held
since the date six (6) months before the Change in Control,
except in connection with a termination of the Executive's
employment by the Company or a Subsidiary for Cause (including
during the pendency of any Dispute), during any period of
incapacity due to physical or mental illness, or by reason of
the Executive's death, Disability or Retirement;
(B) A reduction by the Company or a Subsidiary of the
Executive's Base Salary, or the failure to grant increases in
the Executive's Base Salary on a basis at least substantially
comparable to those granted to other executives of the Company
or a Subsidiary of comparable title, salary grade and
performance ratings made in good faith;
(C) Requiring the Executive to be based anywhere other than an
executive office of the Company or a Subsidiary located in New
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Jersey or Pennsylvania within twenty-five (25) geographic (not
road) miles of the location of the Executive's office prior to
the Change in Control, except for required travel on the
Company's or a Subsidiary's business to an extent
substantially consistent with the Executive's present business
travel obligations, without the Executive's express written
consent, or in the event of any relocation of the Executive
with the Executive's express written consent, the failure by
the Company or a Subsidiary to pay (or reimburse the Executive
for) all reasonable moving expenses by the Executive relating
to a change of principal residence in connection with such
relocation and to indemnify the Executive against any loss
realized in the sale of the Executive's principal residence in
connection with any such change of residence, all to the
effect that the Executive shall incur no loss on an after tax
basis;
(D) The failure by the Company or a Subsidiary to continue to
provide the Executive with substantially the same welfare
benefits (which for purposes of this Agreement shall mean
benefits under all welfare plans as that term is defined in
Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended) and perquisites, including participation on
a comparable basis in the Company's or a Subsidiary's
retirement plans, Incentive Bonus Plan (cash bonus plan),
Savings Incentive Plan, Incentive Stock and Option Plans,
Executive Severance Plan and other plans in which executives
of the Company or a Subsidiary of comparable title and salary
grade participate, as were provided to the Executive in the
twelve (12) months immediately prior to such Change in Control
of the Company, or with a package of welfare benefits and
perquisites, that, though one or more of such benefits or
perquisites may vary from those set forth above, is
substantially
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comparable in all material respects to such welfare benefits
and perquisites, taken as a whole;
(E) The failure of the Company to obtain the express written
assumption of and agreement to perform this Agreement by any
successor as contemplated in subparagraph 6(c) hereof;
(F) A termination of employment by the Executive for any
reason other than Disability or Normal Retirement during the
thirty (30) day period immediately following the first
anniversary of a Change in Control of the Company defined in
subparagraphs 1(a)(i), (ii) (iii) or (iv) or the consummation
of a transaction described in subparagraphs 1(a)(v) or (vi)
(such thirty (30) day period being referred to herein as the
"Window Period").
(G) The giving by the Company or applicable Subsidiary of a
notice that participation by the Executive in the Company's
Executive Severance Plan or that the Executive's Termination
Agreement would not be renewed;
(H) The filing by the Company of a petition for bankruptcy or
similar insolvency of the Company or the filing by any other
party of such a petition which is not dismissed within sixty
(60) days; or
(I) Any failure by the Company or applicable Subsidiary to
comply with any provision of this Agreement.
(v) "Dispute" shall mean (A) in the case of termination of
employment of the Executive with the Company or a Subsidiary by the
Company or a Subsidiary for Disability or Cause, that the Executive
challenges the existence of Disability or Cause and (B) in the case
of termination of employment of an Executive with the Company or a
Subsidiary by the Executive for Good Reason, that
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the Company or a Subsidiary challenges the existence of Good Reason.
(vi) "Base Salary" shall mean the amount determined by multiplying
the Executive's highest semi-monthly or other periodic rate of base
pay paid to the Executive during the twelve-month period immediately
prior to the giving of the Notice of Termination by the number of
pay periods per year. The following items are not part of base pay,
as used herein: reimbursed expenses, any amount paid on account of
overtime or holiday work, payment on account of insurance premiums
or other contributions made to other welfare or benefit plans, and
any year-end or other bonuses, commissions and gifts.
(vii) "Bonus Amount" means the highest annual cash incentive bonus
earned by the Executive from the Company or a Subsidiary during the
last three (3) completed fiscal years of the Company immediately
preceding the Executive's Date of Termination (annualized in the
event the Executive was not employed by the Company or a Subsidiary
for the whole of any such fiscal year).
For purposes of this subparagraph (d), no act, or failure to act, on
the Executive's part shall be considered "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interests of the Company or a
Subsidiary.
(e) Any purported termination of employment by the Company or a
Subsidiary or by the Executive shall be communicated by written Notice of
Termination to the other party. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice given by the Executive or the Company or a
Subsidiary, as the case may be, which shall indicate the specific provision of
this Agreement applicable to such termination and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for determination
of any payments under this Agreement. The Executive shall not be entitled to
give a Notice of Termination that the Executive is terminating the Executive's
employment with the Company or a Subsidiary for
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Good Reason more than six (6) months following the occurrence of the event
alleged to constitute Good Reason.
(f) For purposes of this Agreement, except as provided below, the
"Date of Termination" shall mean the date specified in a Notice of Termination,
which shall be not more than ninety (90) days after such Notice of Termination
is given. The Date of Termination of a proposed Termination for Disability shall
be at least thirty (30) days after the giving of the Notice of Termination.
If within thirty (30) days after any Notice of Termination is given, the
party who receives such Notice of Termination notifies the other party that a
Dispute exists, the Date of Termination shall be the date on which the Dispute
is finally determined, either by mutual written agreement of the parties, or by
a final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided that the Date of Termination shall be extended by a notice of Dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such Dispute with reasonable diligence and provided
further that pending the resolution of any such Dispute, the Company or a
Subsidiary shall continue to pay the Executive the same Base Salary and to
provide the Executive with the same or substantially comparable welfare benefits
and perquisites, including participation in the Company's or a Subsidiary's
retirement plans, Savings Incentive Plan, Incentive Bonus Plan, Incentive Stock
and Option Plans and Executive Severance Plan that the Executive was paid and
provided in the twelve (12) months immediately prior to the Change in Control of
the Company.
Should it ultimately be determined that a challenged termination by the
Company or a Subsidiary by reason of the Executive's Disability or for Cause was
justified, or that a challenged termination by the Executive for Good Reason was
not justified, then all sums paid by the Company or a Subsidiary to the
Executive from the date of termination specified in the Notice of Termination
until final resolution of the Dispute pursuant hereto shall be repaid promptly
by the Executive to the Company or a Subsidiary, with interest at the base rate
charged from time to time by Summit Bank, New Jersey, all options, rights and
restricted stock granted to the Executive during such period shall be
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canceled or returned to the Company or Subsidiary, and, to the extent permitted
by law, no service as an employee shall be credited to the Executive for such
period for pension purposes. The Executive shall not be obligated to pay to the
Company or a Subsidiary the cost of providing the Executive with employee
benefits and perquisites for such period unless the final judgment, order or
decree of a court resolving the Dispute determines that the Executive acted in
bad faith in giving a notice of Dispute.
Should it ultimately be determined that a challenged termination by the
Company or a Subsidiary by reason of the Executive's Disability or for Cause was
not justified, or that a challenged termination by the Executive for Good Reason
was justified, then the Executive shall be entitled to retain all sums paid to
the Executive pending resolution of the Dispute and shall be entitled to
receive, in addition, the payments and other benefits provided for in paragraph
4 hereof.
4. PAYMENTS UPON TERMINATION.
If within three (3) years after a Change in Control of the Company,
there occurs a termination of employment of the Executive with the Company or a
Subsidiary, other than a termination of employment which is (i) due to the
Executive's death after the Window Period or Retirement other than Early
Retirement during the Window Period; or (ii) by the Company or a Subsidiary by
reason of the Executive's Disability or for Cause; or (iii) by the Executive
other than for Good Reason, then, and expressly on the condition that the
Company or Subsidiary employing the Executive receive on the Date of Termination
(as hereinafter defined) a Release, Covenant Not to Sue, Non-Disclosure and
Non-Solicitation Agreement executed by the Executive (or the Executive's legal
representative in the event of the death or Disability of the Executive), in the
form set forth in Exhibit A to this Agreement (the "Release Agreement"), and
that such Release Agreement be effective:
(a) The Company or a Subsidiary will pay to the Executive as
compensation for services rendered, promptly following the effective date of the
Release Agreement, a lump sum cash amount (subject to any applicable payroll or
other taxes required to be withheld computed at the rate for supplemental
payments) equal to (X) the sum of (i) three (3)
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times the Executive's Base Salary, plus (ii) three (3) times the Executive's
Bonus Amount, less (Y) the aggregate lump sum cash severance amount in respect
of base salary and bonus pursuant to subparagraphs 5(a)(i) and (v) of the
Company's Executive Severance Plan (or any successor provision) payable to the
Executive upon termination of employment, delivery by the Executive of the
Release, Covenant Not to Sue, Non-Disclosure and Non-Solicitation Agreement
referred to therein, and the expiration of all periods during which the
Executive may revoke any release of claims in such agreement.
(b) The Executive will be entitled to receive "Special Retirement
Benefits" as provided herein, so that the total retirement benefits the
Executive receives from the Company will approximate the total retirement
benefits the Executive would have received under all defined benefit retirement
plans (which may include non-qualified, supplemental and excess benefits
retirement plans but shall not include severance plans) and other employment
contracts of the Company and its Subsidiaries in which the Executive
participates were the Executive fully vested under such retirement plans and
entitled to all benefits payable under such other employment contracts and had
the Executive continued in the employ of the Company or a Subsidiary for one
hundred twenty (120) months following the Date of Termination or until the
Executive's Normal Retirement Date, if earlier (provided that such additional
period shall be inclusive of and shall not be in addition to any period of
service credited under any severance plan of the Company or a Subsidiary). The
benefits specified in this subparagraph will include all ancillary benefits,
such as early retirement and survivor rights and other benefits available to
full-time exempt employees of the Company or Subsidiary employing the Executive,
as applicable, at Retirement including, but not limited to, post-retirement
health and life insurance benefits. The amount payable to the Executive or the
Executive's beneficiaries under this subparagraph shall equal the excess of (1)
the retirement benefits that would be paid to the Executive or the Executive's
beneficiaries, under all retirement plans and other employment contracts of the
Company and its Subsidiaries in which the Executive participates if (A) the
Executive were fully vested under such plans and entitled to all benefits
payable under such other employment contracts, (B) the one hundred twenty (120)
month period (or the period
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until the Executive's Normal Retirement Date, if less) following the Date of
Termination were added to the Executive's credited service under such plans and
contracts, (C) the terms of such plans were those most favorable to the
Executive which were in effect at any time during the period commencing twelve
(12) months prior to the Change of Control and ending on the date of Notice of
Termination, and (D) the Executive's highest average annual base salary as
defined under such retirement plans and other employment contracts and any cash
bonus which under the terms of such plan or contract is used to calculate
benefits thereunder were calculated as if the Executive had been employed by the
Company or a Subsidiary for a one hundred and twenty (120) month period (or the
period until the Executive's Normal Retirement Date, if earlier) following the
Date of Termination and had the Executive's salary and cash bonus during such
period been equal to the Executive's Base Salary and Bonus Amount; over (2) the
retirement benefits that are payable to the Executive or the Executive's
beneficiaries under all retirement plans and other employment contracts of the
Company and its Subsidiary in which the Executive participates. These Special
Retirement Benefits are provided on an unfunded basis, are not intended to meet
the qualification requirements of Section 401 of the Internal Revenue Code of
1986, as amended (the "Code"), and shall be payable solely from the general
assets of the Company. These Special Retirement Benefits shall be payable at the
times and in the manner provided in the applicable retirement plans and other
employment contracts to which they relate, or at the election of the Executive
they shall be paid in a lump sum actuarial equivalent utilizing the actuarial
assumptions of the defined benefit pension plan applicable to the Executive.
(c) As used herein, "Welfare Plans" shall mean the medical, dental,
vision, life, dependent life, personal accident, employee banking services, and
educational matching gift plans of the Company or a Subsidiary in which the
Executive was participating at the Date of Termination, and shall not include
disability, tuition reimbursement, medical and dependent care spending plans,
and business travel accident plans. The Executive will remain an active
participant in all Welfare Plans with the Executive's Base Salary used as the
basis for determining the level of benefits, for a period of thirty-six (36)
months after the Date of Termination, but only to the extent permitted by
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applicable law or the terms (including terms and conditions related to the
Executive's death, disability or retirement, such as changes in benefits upon
retirement) of any such Welfare Plan, as interpreted by the Company; provided,
however, that if employee contributions are generally required by any such plan
the Executive pays to the Company or Subsidiary an amount equal to the required
contribution, if any, which such plans provide are to be made by employees of
status and seniority comparable to the status and seniority of the Executive at
the Date of Termination, which amounts shall be paid by the Executive at the
time or times required by such plans for employee contributions. In the event
applicable law or the terms of any such Welfare Plan do not permit continued
participation by the Executive, then the Company or a Subsidiary will arrange to
provide the Executive with benefits substantially similar to and no less
favorable than the benefits the Executive was entitled to receive under such
Welfare Plan immediately prior to the giving of the Notice of Termination for a
period terminating thirty-six (36) months after the Date of Termination;
provided, however, that if employee contributions are generally required by any
such plan the Executive pays to the Company or Subsidiary an amount equal to the
required contribution, if any, which such plans provide are to be made by
employees of status and seniority comparable to the status and seniority of the
Executive at the Date of Termination, which amounts shall be paid by the
Executive at the time or times required by such plans for employee
contributions. In lieu of continued participation in the Company or a
Subsidiary's disability plans, in the event that the Executive becomes disabled
during the period of participation in Welfare Plans provided for herein, as
determined by approval for disability benefits under the federal Social Security
program, the Company or Subsidiary shall make direct payments to the Executive
commencing upon termination of participation in the Welfare Plans hereunder and
under any Severance Plan and during the continuation of such disability, as
determined under the federal Social Security program, until the Executive's
Normal Retirement Date of the amounts the Executive would have received under
the Company or Subsidiary's long-term disability plan (after taking into account
any offsets to income under such plan) as if the Executive had qualified for
long-term disability payments under the Company or Subsidiary's long-term
disability plan immediately prior to the Date of Termination. The continuation
of welfare benefits provided
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by this subparagraph shall be inclusive of any period of welfare benefits
continuation provided by any severance plan or other contract of the Company or
a Subsidiary, it being the intention of the parties that the Executive shall
receive continuation of welfare benefits for the longest period provided by any
severance plan or contract and this Agreement, not the sum of the periods
provided in various severance plans and contracts and this Agreement. If any
benefits provided hereunder are provided outside of a Welfare Plan and would
have been tax-exempt or tax-favored to the Executive if provided under a Welfare
Plan, the Company or Subsidiary shall make additional payments to the Executive
in reimbursement of taxes in order to put the Executive in the same after tax
position as if the benefits had been provided under a Welfare Plan. In the event
the Executive becomes employed with another employer and becomes eligible to
receive welfare benefits under plans provided by such employer, the welfare
benefits provided hereunder shall be secondary to those provided under such
other plans.
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5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) In the event that any payment or benefit received or to be
received by the Executive pursuant to the terms of this Agreement (the "Contract
Payments") or of any other plan, arrangement or agreement of the Company (or any
affiliate) ("Other Payments" and, together with the Contract Payments, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to the Executive ("Tax Counsel"), be subject
to the excise tax (the "Excise Tax") imposed by section 4999 of the Code (in
whole or in part), as determined as provided below, then, unless subparagraph
5(e) below is applicable, the Company shall pay to the Executive, at the time
specified in subparagraph 5(b) hereof, an additional amount (the "Offset
Payment") such that the net amount retained by the Executive, after deduction of
the Excise Tax on the Payments and any federal, state and local income tax and
Excise Tax upon the payment provided for by this subparagraph 5(a), and any
interest, penalties or additions to tax payable by the Executive with respect
thereto, shall be equal to the total present value of the Contract Payments and
Other Payments at the time such Payments are to be made. For purposes of
determining whether any of the Payments will be subject to the Excise Tax and
the amounts of such Excise Tax, (1) the total amount of the Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to
the extent that, in the opinion of Tax Counsel, a Payment (in whole or in part)
does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, or such "excess parachute payments" (in whole or in
part) are not subject to the Excise Tax, (2) the amount of the Payments that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code (after applying
clause (1) hereof), and (3) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Offset Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal
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rates of federal income taxation applicable to individuals in the calendar year
in which the Offset Payment is to be made and state and local income taxes at
the highest marginal rates of taxation applicable to individuals as are in
effect in the state and locality of the Executive's residence in the calendar
year in which the Offset Payment is to be made, net of the maximum reduction in
federal income taxes that can be obtained from deduction of such state and local
taxes, taking into account any limitations applicable to individuals subject to
federal income tax at the highest marginal rates.
(b) The Offset Payments provided for in subparagraph 5(a) hereof
shall be made upon the earlier of (i) the payment to the Executive of any
Contract Payment or Other Payment or (ii) the imposition upon the Executive or
payment by the Executive of any Excise Tax.
(c) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax is less than the amount taken into account under
subparagraph 5(a) hereof, the Executive shall repay to the Company within five
days of the Executive's receipt of notice of such final determination or opinion
the portion of the Offset Payment attributable to such reduction (plus the
portion of the Offset Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Offset Payment being repaid by the Executive
if such repayment results in a reduction in Excise Tax or a federal, state and
local income tax deduction) plus any interest received by the Executive from the
taxing authorities on the amount of such repayment. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding or the opinion of Tax Counsel that the Excise Tax exceeds the amount
taken into account hereunder (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Offset Payment), the
Company shall make an additional Offset Payment in respect of such excess within
five days of the Company's receipt of notice of such final determination or
opinion.
(d) In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder
subsequent to a Change in
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Control, the Executive shall be entitled, by written notice to the Company, to
request an opinion of Tax Counsel regarding the application of such change to
any of the foregoing, and the Company shall use its best efforts to cause such
opinion to be rendered as promptly as practicable. All fees and expenses of Tax
Counsel incurred in connection with this Agreement shall be borne by the
Company.
(e) If in the opinion of Tax Counsel the Company would not be
required to make an Offset Payment if the Payments to the Executive that would
be treated as "parachute payments" under Section 280G of the Code were reduced
by up to $50,000, then the amounts payable to the Executive under this Agreement
shall be reduced (but not below zero) to the maximum amount that could be paid
to the Executive without giving rise to the Excise Tax (the "Safe Harbor Cap")
and no Offset Payment shall be required to be made to the Executive. The
reduction of the amounts payable under this Agreement, if applicable, shall be
made by reducing first the payments under paragraph 4(a) above, unless an
alternative method of reduction is elected by the Executive. For purposes of
reducing the Payments to the Safe Harbor Cap, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of the
amounts payable hereunder by an amount not exceeding $50,000 would not result in
a reduction of the Payments to the Safe Harbor Cap, no amounts payable under
this Agreement shall be reduced pursuant to this provision.
6. GENERAL.
(a) The Company or a Subsidiary shall pay promptly as incurred the
Executive's reasonable attorney's fees and expenses incurred in good faith by
the Executive as a result of any dispute (regardless of the outcome thereof)
with the Company or a Subsidiary or any other party regarding the validity or
enforceability of, or liability under, any provision of this Agreement or the
act of any party thereunder or any guarantee of performance thereof and pay
prejudgment interest on any delayed payment to the Executive calculated at the
Summit Bank, New Jersey base rate of interest in effect from time to time from
the date that payment should have been made under this Agreement; provided,
however, that the Executive shall not have been found by the court to have acted
in bad faith. Any finding
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of bad faith must be final with the time to appeal therefrom having expired and
no appeal having been perfected.
(b) The Company's obligation to pay the Executive (or the
Executive's dependents, beneficiaries or estate) the compensation and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the Company may have
against the Executive or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. Except as expressly provided
herein, the Company waives all rights which it may now have or may hereafter
have conferred upon it, by statute or otherwise, to terminate, cancel or rescind
this Agreement in whole or in part. Except as provided in paragraphs 3(f) and
5(c) herein, each and every payment made hereunder by the Company shall be final
and the Company will not seek to recover for any reason all or any part of such
payment from the Executive or any person entitled thereto. The Executive shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by written
agreement to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
paragraph 6 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(d) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder if the
Executive had
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continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee or other designee or, if there be no such designee, to the Executive's
estate. The obligations of the Executive hereunder shall not be assignable by
the Executive.
(e) The Executive's rights under this Agreement shall be
non-transferable except by will or by the laws of descent and distribution and
except insofar as applicable law may otherwise require. Subject to the
foregoing, no right, benefit or interest hereunder shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall,
to the full extent permitted by law, be null, void and of no effect.
7. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, or if delivered
personally or by courier, receipt requested, or by facsimile transmission,
receipt acknowledged, addressed as follows:
If to the Executive:
If to the Company:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: Secretary to the Board
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that
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notices of change of address shall be effective only upon receipt.
8. MISCELLANEOUS.
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing, signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No assurances or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the law of the State of New Jersey.
9. FINANCING.
All amounts due and benefits provided under this Agreement shall
constitute general obligations of the Company or Subsidiary employed by the
Executive in accordance with the terms of this Agreement. The Executive shall
have only an unsecured right to payment thereof out of the general assets of the
Company or such Subsidiary. Notwithstanding the foregoing, the Company or such
Subsidiary may, by agreement with one or more trustees to be selected by the
Company or such Subsidiary, create a trust on such terms as the Company or such
Subsidiary shall determine to make payments to the Executive in accordance with
the terms of this Agreement.
10. VALIDITY.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect. Any provision in
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective only to the extent of such prohibition
or
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<PAGE> 23
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
11. SUPERSEDEAS.
While this Agreement is in addition to and not in lieu of any other plan
providing for payments to or benefits for the Executive or any agreement now
existing or which hereafter may be entered into between the Company and the
Executive, this Agreement supersedes all prior agreements and understandings of
the parties hereto with respect to the Company's severance obligations to the
Executive and any other similar payments to the Executive due upon termination
of employment other than those agreements and understandings contained in the
Company's Executive Severance Plan or specifically provided for in any
employment agreement between the Company and the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date set forth above.
SUMMIT BANCORP. EXECUTIVE
By:
---------------------------- ----------------------------
Name:
Title:
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<PAGE> 24
EXHIBIT A
RELEASE, COVENANT NOT TO SUE,
NON-DISCLOSURE AND NON-SOLICITATION
AGREEMENT
This RELEASE, COVENANT NOT TO SUE, NON-DISCLOSURE AND NON-SOLICITATION
AGREEMENT (the "AGREEMENT") dated as of ______________ among (1)
__________________________________ ("Executive"), and (2) Summit Bancorp. and
all parent and subsidiary corporations, partnerships and other entities and
affiliates controlled by, controlling or under common control with Summit
Bancorp. (together with any predecessor and successor entities hereinafter being
collectively referred to as "SUB") sets forth the agreements of the parties
hereto with regard to the matters set forth herein:
1. Background. Executive is an Executive of SUB and a party to a
Participation Agreement last amended October 15, 1997 pursuant to
which Executive participates in SUB's Executive Severance Plan
and a Termination Agreement last amended October 15, 1997 (the
Plan and these Agreements together being collectively referred to
as the "Contracts"). Any capitalized terms used but not defined
herein shall have the meaning set forth in the applicable
Contract.
a. A Change of Control [has/has NOT] occurred [on (date)]. If a Change
of Control has NOT occurred, Executive is not entitled to any
benefits under the Termination Agreement.
b. Executive's employment with SUB will or has terminated on
______________, which shall be the Date of Termination for purposes
of the Contracts, notwithstanding any failure to adhere to the
provisions for giving a Notice of Termination and the method of
determining the Date of Termination set forth in the Contracts, any
such failures being hereby waived by the parties.
c. This termination shall constitute a termination "[for cause/
disability /retirement /other than for cause /by mutual agreement]"
for purposes of any stock options and restricted stock which
Executive holds, and the Termination Date shall be the termination
date for the purposes of such options. Attached hereto as Appendix A
is a list of all outstanding SUB options held by Executive on the
date hereof.
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2. Payment. Executive shall receive promptly following the EFFECTIVE DATE (as
defined in paragraph 7 hereof) $____________________, the gross amount due
to Executive under the Contracts, which shall be paid to Executive as
$_________________ by check or deposit in Executive's bank account, with
the balance withheld in respect of federal, state and local taxes and
benefits contributions, which Executive acknowledges represents all
amounts currently due Executive under the Contracts. SUB continues to be
obligated to provide certain welfare and pension benefits and perquisites,
and both parties are obligated to make certain adjustments to the Offset
Payments if required, all as more fully set forth in the Contracts.
3. Restrictive Covenants. In consideration of the payments to Executive as
specified in paragraph 2 above, Executive agrees as follows:
a. Non-Solicitation of SUB Customers. For a period of three (3) years
from the date hereof, Executive will not solicit or induce any
person, corporation, or other entity that is a customer of SUB or
that was such at any time within one year prior to the date hereof
to become a customer of any other person, firm, corporation, or
other entity which directly or indirectly competes with SUB, or
approach any such person, firm, corporation, or other entity for
such purpose or authorize or knowingly approve the taking of such
actions by other persons.
b. Non-Solicitation of SUB Employees. For a period of five (5) years
from the date hereof, Executive will not solicit or induce any
person who is an employee of SUB or was such at any time within
three months prior to the date hereof to become employed by any
other person, firm or corporation or approach any such employee for
such purpose or authorize or knowingly approve the taking of such
actions by other persons.
c. Non-Disclosure of Proprietary Information. Executive acknowledges
that during the course of Executive's employment with SUB Executive
received, obtained or became aware of or had access to proprietary
information, lists and records of customers and trade secrets which
are the property of SUB and which are not known by competitors or
generally by the public ("Proprietary Information") and recognizes
such Proprietary Information to be valuable and unique assets of
SUB. For purposes of this subparagraph: (i) Proprietary Information
is deemed to include, without limitation, (A) marketing materials,
marketing manuals, policy manuals, procedure manuals, policy and
procedure manuals, operating manuals and
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<PAGE> 26
procedures and product documentation, (B) all information about
pricing, products, procedures, practices, business methods, systems,
plans, strategies or personnel of SUB, (C) circumstances surrounding
the relationships with, knowledge of, or information about the
customers, clients, and accounts of SUB, including but not limited
to the identity of current active customers or prospects who have
been contacted by SUB, the expiration dates and other terms of loans
or deposit or other banking relationships, details or special
product provisions or special combinations of products, or special
prices, and (D) all other information about SUB which has not been
disclosed in documents filed with the U.S. Securities and Exchange
Commission or otherwise publicly disseminated by SUB, whether or not
that information is recorded and notwithstanding the method of
recordation, if any; and (ii) Proprietary Information is deemed to
exclude all information legally in the public domain. Executive
agrees to hold the Proprietary Information in the strictest
confidence and agrees not to use or disclose any Proprietary
Information, directly or indirectly, at any time for any purpose,
without the prior written consent of SUB or to use for Executive's
benefit or the benefit of any person, firm, corporation or other
entity (other than SUB), any Proprietary Information, and to use
Executive's best efforts to prevent such prohibited use or
disclosure by any other persons. Executive has returned all
Proprietary Information in Executive's possession or control to SUB.
d. Cooperation, No Detrimental Actions. Executive will cooperate with
SUB in enforcing its claims against customers and former customers
of SUB, including appearing as a witness for SUB in court or
administrative proceedings, subject to reasonable reimbursement for
Executive's time and expenses. Executive will not take actions or
make disparaging statements which are detrimental to SUB or the
RELEASEES, as defined in paragraph 5 below.
e. Remedies. Executive hereby acknowledges that Executive's duties and
responsibilities under this paragraph 3 are unique and extraordinary
and that irreparable injury may result to SUB in the event of a
breach of the terms and conditions of this paragraph 3, which may be
difficult to ascertain, and that the award of damages would not be
adequate relief to SUB and the RELEASEES. Executive therefore agrees
that in the event of Executive's breach of any of the terms or
conditions of this paragraph 3, SUB shall have the right, without
posting any bond or other security, to preliminary and permanent
injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from
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such violation, which rights shall be cumulative and in addition to
any other rights or remedies in law or equity to which SUB may be
entitled against Executive. The covenants of Executive in paragraphs
3a, 3b, 3c and 3d of this Agreement shall each be construed as an
agreement independent of any other provision in this AGREEMENT, and
the existence of any claim or cause of action of Executive against
SUB, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by SUB of paragraphs 3a, 3b,
3c and 3d.
f. Enforcement. If at the time of the enforcement of subparagraphs 3a,
3b, 3c, 3d or 3e above a court shall hold that the period or scope
of the provisions thereof are unreasonable under the circumstances
then existing, the parties hereby agree that the maximum period or
scope under the circumstances shall be substituted for the period or
scope stated in those subparagraphs.
4. Short-Swing Securities Profits. Executive acknowledges that Executive will
remain subject to the short-swing liability provisions of Section 16 of
the federal Securities Exchange Act of 1934 for six months following
termination of employment.
5. Release. In consideration of the payments to Executive as specified in
paragraph 2 above, Executive grants SUB a RELEASE of only all claims, both
known and unknown, that Executive may have that relate to the termination
of Executive's employment (hereafter a "WRONGFUL TERMINATION CLAIM").
Executive and SUB agree that a WRONGFUL TERMINATION CLAIM, specifically
and without limitation, does not include claims:
a. for indemnification as a corporate agent of SUB against claims by
third parties;
b. under employee benefit plans, including supplemental employee
retirement plans, maintained by SUB or any of the predecessor
organizations thereof, including but not limited to rights under any
workers compensation program, Section 502(a) of the Employee
Retirement Income Security Act, as amended, 29 U.S.C. ss.1001 et
seq., and under the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA");
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<PAGE> 28
c. arising out of enforcement of the Contracts or this Agreement by
Executive; or
d. constituting cross-claims against SUB as a result of claims brought
by unaffiliated third parties against Executive based on Executive's
service as an executive of SUB.
The statutes which could form the basis for a WRONGFUL TERMINATION CLAIM
include, but are not limited to, Title VII of the Civil Rights Act of
1964, as amended, 42 U.S.C. ss.1971 et seq.; the Age Discrimination in
Employment Act of 1967, as amended, 29 U.S.C. ss.621 et seq.; Section 510
of the Employee Retirement Income Security Act of 1974, as amended, 29
U.S.C. ss.1001 et seq.; the Americans With Disabilities Act, as amended,
42 U.S.C. ss.12101 et seq.; the Older Workers Benefit Protection Act, as
amended, 29 U.S.C. ss.621 et seq.; the Civil Rights Act of 1866, as
amended, 42 U.S.C. ss.1981 et seq.; the New Jersey Law Against
Discrimination, as amended, N.J.S.A. 10:5- 1 et seq.; the New Jersey
Conscientious Employee Protection Act, as amended, N.J.S.A. 34:19-1 et
seq.; the New York Human Rights Law, Executive Law ss.290 et seq.; the
Pennsylvania Human Relations Act, as amended, 43 P.S. ss.951 et seq.; and
the Pennsylvania Whistleblower Law, as amended, 43 P.S. ss.1421 et seq.
The common law (non-statutory) theories under which a WRONGFUL TERMINATION
CLAIM could be made include, but are not limited to, breach of an express
employment contract, breach of a contract implied from a personnel
handbook or manual, or commission of a civil wrong (known as a "tort")
resulting in Executive's termination, or for alleged violation of the
public policy of the United States or any state. Granting a RELEASE of any
WRONGFUL TERMINATION CLAIM pursuant to this AGREEMENT means that on behalf
of Executive and all who succeed to Executive's rights and
responsibilities, Executive releases and gives up only any and all
WRONGFUL TERMINATION CLAIMS that Executive may have against SUB, and any
of its subsidiaries, affiliates or divisions, and all of their directors,
officers, representatives, shareholders, agents, employees, and all who
succeed to their rights and responsibilities (collectively referred to as
"RELEASEES"). With respect to any charges filed concerning events or
actions relating to a WRONGFUL TERMINATION CLAIM that occurred on or
before the date of this AGREEMENT or Executive's Termination Date
(whichever is later), Executive waives and releases any right that
Executive may have to recover in any lawsuit or proceeding brought by
Executive or by an administrative agency on Executive's behalf against the
RELEASEES.
6. Covenant Not to Sue. Executive covenants not to sue the
RELEASEES over any WRONGFUL TERMINATION CLAIM. Such a covenant
not to sue the
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<PAGE> 29
RELEASEES means that Executive represents that Executive has not through
the date of execution of this Agreement filed a WRONGFUL TERMINATION
CLAIM, charge or lawsuit with any court or government agency against the
RELEASEES, and that Executive will not file such a lawsuit subsequent to
execution of this Agreement. Executive also waives any right to become,
and promises not to become, a member of any class in a case in which
WRONGFUL TERMINATION CLAIMS are asserted against any of the RELEASEES.
7. Review Period. Executive acknowledges that Executive has up to 21 days to
review this AGREEMENT and was advised to review it with an attorney of
Executive's choice. Executive also acknowledges that Executive was further
advised that Executive has seven days after Executive signs this AGREEMENT
to revoke it by notifying SUB in writing of such revocation as set forth
under Notices below. This AGREEMENT shall become effective on the tenth
(10th) day following its execution by Executive (the "EFFECTIVE DATE"),
unless revoked in accordance with the preceding sentence.
8. Revocation of Authority. Executive agrees and acknowledges that as of the
Termination Date Executive shall no longer be empowered to bind SUB in any
agreement, whether verbal or written, and that Executive shall have no
authority to execute any documents, deeds, leases, or other contracts on
behalf of SUB. To the extent not effected by termination of Executive
under the Contracts, Executive resigns from all offices and positions with
SUB.
9. Successors and Assigns. All rights and duties of SUB under this Agreement
shall be binding on and inure to the benefit of SUB, its successors and
assigns. All rights of Executive hereunder shall be binding upon and inure
to the benefit of Executive's personal or legal representatives.
10. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered personally with receipt acknowledged or sent by registered or
certified mail, postage prepaid or by reputable national overnight
delivery service, to the addresses shown below, unless changed by notices
given as herein provided, except that notice of change of address only
shall be effective upon actual receipt:
If to SUB, to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
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Attention: Executive Vice President of
Human Resources
With a copy to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: General Counsel
If to the Executive, to:
________________________________
11. Covenant Not to Challenge Enforceability. Both Executive and SUB
understand that this AGREEMENT is final and binding when executed by both
parties, subject to paragraph 7 above, and both agree not to thereafter
challenge its enforceability.
12. Applicable Law. This AGREEMENT shall be deemed to have been made within
the State of New Jersey, and it shall be interpreted, construed, and
enforced in accordance with the law of the State of New Jersey, and before
the Courts of the State of New Jersey.
13. Amendments, Modifications, Waivers. This AGREEMENT cannot be amended or
modified except by a written document signed by both SUB and Executive and
no provision can be waived except by a written document signed by the
waiving party.
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14. By signing this AGREEMENT, Executive acknowledges:
a. EXECUTIVE HAS READ THIS AGREEMENT COMPLETELY.
b. EXECUTIVE HAS HAD AN OPPORTUNITY TO CONSIDER THE TERMS OF THIS
AGREEMENT.
c. EXECUTIVE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF
EXECUTIVE'S CHOOSING PRIOR TO EXECUTING THIS AGREEMENT.
d. EXECUTIVE KNOWS THAT EXECUTIVE MAY BE GIVING UP IMPORTANT LEGAL
RIGHTS BY SIGNING THIS AGREEMENT.
e. EXECUTIVE UNDERSTANDS AND MEANS EVERYTHING THAT EXECUTIVE HAS SAID
IN THIS AGREEMENT, AND EXECUTIVE AGREES TO ALL ITS TERMS.
f. EXECUTIVE IS NOT RELYING ON SUB OR ANY REPRESENTATIVE OF SUB TO
EXPLAIN THIS AGREEMENT AND RELEASE TO EXECUTIVE. EXECUTIVE HAS HAD
AN OPPORTUNITY TO CONSULT AN ATTORNEY OR OTHER ADVISOR TO EXPLAIN
THIS AGREEMENT AND ITS CONSEQUENCES TO EXECUTIVE BEFORE EXECUTIVE
SIGNED IT, AND EXECUTIVE HAS AVAILED HIMSELF OR HERSELF OF THIS
OPPORTUNITY TO WHATEVER EXTENT EXECUTIVE DESIRED.
g. EXECUTIVE HAS SIGNED THIS AGREEMENT VOLUNTARILY AND ENTIRELY OF
EXECUTIVE'S OWN FREE WILL, WITHOUT ANY PRESSURE FROM SUB OR ANY
REPRESENTATIVE OF SUB, OR ANYONE ELSE.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, this
Agreement has been executed as of the day and year first above written.
ATTEST: SUMMIT BANCORP.
By:
- --------------------------------- ---------------------------------
Secretary Executive Vice President
- ---------------------------------
EXECUTIVE
- ---------------------------------
(Social Security Number)
STATE OF NEW JERSEY:
COUNTY OF _______________________:
I certify that on this _______ day of ____________, _______ personally
came before me __________________________ (Executive), who, being duly sworn,
acknowledged under oath to my satisfaction that such person is named in and
personally executed the foregoing Release, Covenant not to Sue, Non-Disclosure
and Non-Solicitation Agreement as such person's voluntary act and deed, for the
purposes set forth therein.
IN WITNESS WHEREOF, I have set my hand this ____ day of _____________,
______.
By------------------------------------
Notary Public of the State of New Jersey
My Commission expires __________________
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<PAGE> 1
Exhibit (10) FF
SUMMIT BANCORP.
EXECUTIVE SEVERANCE PLAN
(as Amended through October 15, 1997)
1. PURPOSES
The purposes of the Summit Bancorp. Executive Severance Plan (the "Plan")
are (a) to enhance executive morale, (b) to enhance the ability of Summit
Bancorp. (formerly known as UJB Financial Corp. and United Jersey Banks) (the
"Company") to retain existing management and, if needed, to attract new
executives, (c) to reward eligible executives for their valuable, dedicated
service to the Company or one or more of its subsidiary corporations (each, a
"Subsidiary") with reasonable compensation in the event of their termination of
employment with the Company or a Subsidiary, and (d) by providing generally
applicable terms of severance, to avoid the legal expense and reduce management
time associated with terminations.
2. EFFECTIVE DATE
This amendment and restatement of the Plan is effective as of October 15,
1997 and will determine the eligibility for benefits of all executives who are
selected to participate in the Plan (the "Participants") and who are terminated
on or after such date.
3. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), consisting
of three or more directors having full authority to act in the matter, all of
whom are Disinterested Persons. For purposes of this section, a Disinterested
Person shall mean a person who, at the time action is taken, and within the one
(1) year period prior thereto, is not, and has not been, an employee of the
Company.
The Committee shall have the power to interpret and construe the Plan and
other powers and duties as set forth in the Plan, and any such interpretation
and construction of any provisions of this Plan shall be final. The Committee
shall report any actions taken to the Board at the next meeting of the Board
following such Committee action.
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4. PARTICIPATION
The Committee shall from time to time select the Participants from among
those key executives who are determined by the Committee to be rewarded for
their valuable, dedicated service to the Company or a Subsidiary. The Company
shall provide each Participant with a letter (a "Participation Letter")
evidencing the Participant's participation in the Plan and setting forth the
payments and benefits to which the Participant may become entitled and
containing such other terms, provisions and conditions not inconsistent with the
Plan, including but not limited to provisions for the extension or renewal of
such agreement, as shall be determined by the Committee.
Without limiting the foregoing, it is an express condition to a
Participant's entitlement to the payments of amounts and the provision of
benefits provided for by paragraph 5(a) hereof that the Company receive on the
Date of Termination (as hereinafter defined) a Release, Covenant Not to Sue,
Non-Disclosure and Non- Solicitation Agreement executed by the Participant, or
the Participant's legal representative, in the event of the death or Disability
of the Participant, in the form set forth in Exhibit A to this Plan ("Release
Agreement"), and that such Release Agreement be effective. The Participation
Letter shall clearly set forth this requirement and provide that a Participant's
participation is also conditioned on the Participant's acknowledgment of the
terms of the Participation Letter by delivery to the Company of a counterpart
thereof signed by the Participant to evidence such acknowledgment.
Any purported termination of employment by the Company or a Subsidiary or
by the Participant shall be communicated by written Notice of Termination to the
other party. For purposes of this Plan, a "Notice of Termination" shall mean a
notice given by a Participant or the Company or a Subsidiary, as the case may
be, which shall indicate the specific provision of this Plan applicable to such
termination and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for determination of any payments under this Plan. A
Participant shall not be entitled to give a Notice of Termination that the
Participant is terminating the Participant's employment with the Company or a
Subsidiary for Good Reason (as hereinafter defined) more than six (6) months
following the occurrence of the event alleged to constitute Good Reason.
2
<PAGE> 3
A Participant shall cease to be a Participant in the Plan upon the
earliest to occur of the Date of Termination (as hereinafter defined), the
Participant's Retirement (as hereinafter defined) and the date set forth in the
Participation Letter as provided therein.
For purposes of this Plan, except as provided below, the "Date of
Termination" shall mean the date specified in a Notice of Termination, which
shall be not more than ninety (90) days after such Notice of Termination is
given. The Date of Termination of a proposed Termination for Disability (as
hereafter defined), shall be at least thirty (30) days after the giving of the
Notice of Termination.
If, within thirty (30) days after any Notice of Termination is given, the
party who receives such Notice of Termination notifies the other party that a
Dispute (as hereinafter defined) exists, the Date of Termination shall be the
date on which the Dispute is finally determined, either by mutual written
agreement of the parties or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); provided that the Date of Termination shall be
extended by a notice of Dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such Dispute with
reasonable diligence and provided further that pending the resolution of any
such Dispute, the Company or a Subsidiary shall continue to pay the Participant
the same Base Salary (as hereinafter defined) and to provide the Participant
with the same or substantially comparable employee benefits and perquisites,
including participation in the Company's or a Subsidiary's retirement plans and
Savings Incentive Plan (but excluding the Incentive Bonus Plan (cash bonus
plan), Incentive Stock and Option Plans, and other plans not available to
employees generally), that the Participant was paid and provided in the twelve
(12) months immediately prior to the giving of the Notice of Termination. For
purposes of this Plan, a Dispute shall mean (i) in the case of termination of
employment of a Participant with the Company or a Subsidiary by the Company or a
Subsidiary for Disability or Cause (as hereinafter defined), that the
Participant challenges the existence of Disability or Cause and (ii) in the case
of termination of employment of a Participant with the Company or a Subsidiary
by the Participant for Good Reason, that the Company or such Subsidiary
challenges the existence of Good Reason.
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<PAGE> 4
Should it ultimately be determined that a challenged termination by the
Company or a Subsidiary by reason of the Participant's Disability or for Cause
was justified, or that a challenged termination by the Participant for Good
Reason was not justified, then (1) the Participant shall promptly pay to the
Company or a Subsidiary (as the case may be) an amount equal to all sums paid by
the Company or a Subsidiary to the Participant from the date of termination
specified in the Notice of Termination until final resolution of the Dispute
pursuant hereto, with interest at the base rate charged from time to time by
Summit Bank, New Jersey, and (2) to the extent permitted by law, no service as
an employee shall be credited to the Participant for such period for pension
purposes. The Participant shall not be obligated to repay to the Company or a
Subsidiary the cost of providing the Participant with employee benefits and
perquisites for such period (which cost for purposes of health plans means the
applicable premium under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended) unless the final judgment, order or decree of a court
resolving the Dispute determines that the Participant acted in bad faith in
giving a notice of Dispute.
Should it be ultimately determined that a challenged termination by the
Company or a Subsidiary by reason of the Participant's Disability or for Cause
was not justified, or that a challenged termination by the Participant for Good
Reason was justified, then the Participant shall be entitled to retain all sums
paid to the Participant pending resolution of the Dispute and shall be entitled
to receive ,in addition, the payments and other benefits provided for in
paragraph 5 hereof.
5. PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT
(a) In the event of a termination of employment of a Participant with the
Company or a Subsidiary, other than a termination of employment which is (i) due
to the Participant's death or Retirement; or (ii) by the Company or a Subsidiary
by reason of the Participant's Disability or for Cause; or (iii) by the
Participant other than for Good Reason, the Participant shall be entitled,
subject to compliance with paragraph 7 hereof, as compensation for services
rendered (subject to any applicable payroll or other taxes required to be
withheld), until the expiration of the applicable period set forth below; to:
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<PAGE> 5
(i) receive, promptly following the effective date of the Release
Agreement, a lump sum cash amount equal to two (2) times the
Participant's Base Salary;
(ii) receive, promptly following the effective date of the Release
Agreement, but only if the Participant participates in the Savings
Investment Plan (i.e., a 401(k) plan) immediately preceding the Date
of Termination, a lump sum cash amount equal to the aggregate amount
of matching contributions that the Company or a Subsidiary would
have been required to contribute under such plan for the account of
the Participant, assuming the Participant had contributed the
maximum amount allowable by law to such plan during a period of
twenty-four (24) months after the Date of Termination.
(iii) remain an active participant in all Welfare Plans (as used herein,
"Welfare Plans" shall mean the medical, dental, vision, life,
dependent life, personal accident, employee banking services, and
educational matching gift plans of the Company or a Subsidiary in
which the Participant was participating at the Date of Termination,
and shall not include disability, tuition reimbursement, medical and
dependent care spending plans, and business travel accident plans)
with the Participant's Base Salary used as the basis for determining
the level of benefits, for a period of twenty-four (24) months after
the Date of Termination, but only to the extent permitted by
applicable law or the terms (including terms and conditions related
to the Participant's death, disability or retirement, such as
changes in benefits upon retirement) of any such Welfare Plan, as
interpreted by the Company; provided, however, that if employee
contributions are generally required by any such plan the
Participant pays to the Company or Subsidiary an amount equal to the
required contribution, if any, which such plans provide are to be
made by employees of status and seniority comparable to the status
and seniority of the Participant at the
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Date of Termination, which amounts shall be paid by the Participant
at the time or times required by such plans for employee
contributions. In the event applicable law or the terms of any such
Welfare Plan do not permit continued participation by the
Participant, then the Company or a Subsidiary will arrange to
provide the Participant with benefits substantially similar to and
no less favorable than the benefits the Participant was entitled to
receive under such Welfare Plan immediately prior to the giving of
the Notice of Termination for a period terminating twenty-four (24)
months after the Date of Termination; provided, however, that if
employee contributions are generally required by any such plan the
Participant pays to the Company or Subsidiary an amount equal to the
required contribution, if any, which such plans provide are to be
made by employees of status and seniority comparable to the status
and seniority of the Participant at the Date of Termination, which
amounts shall be paid by the Participant at the time or times
required by such plans for employee contributions. In lieu of
continued participation in the Company or a Subsidiary's disability
plans, in the event that the Participant becomes disabled during the
period of participation in Welfare Plans provided for herein, as
determined by approval for disability benefits under the federal
Social Security program, the Company or Subsidiary shall make direct
payments to the Participant commencing upon termination of
participation in the Welfare Plans hereunder and under any
Termination Agreement and during the continuation of such
disability, as determined under the federal Social Security program,
until the Participant's Normal Retirement Date (as hereinafter
defined) of the amounts the Participant would have received under
the Company or Subsidiary's long-term disability plan (after taking
into account any offsets to income under such plan) as if the
Participant had qualified for long-term disability payments under
the Company or Subsidiary's long-term disability plan immediately
prior to the Date of Termination. If any benefits provided hereunder
are provided outside of a
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Welfare Plan and would have been tax-exempt or tax-favored to the
Participant if provided under a Welfare Plan, the Company or
Subsidiary shall make additional payments to the Participant in
reimbursement of taxes in order to put the Participant in the same
after tax position as if the benefits had been provided under a
Welfare Plan. In the event the Participant becomes employed with
another employer and becomes eligible to receive welfare benefits
under plans provided by such employer, the welfare benefits provided
hereunder shall be secondary to those provided under such other
plans;
(iv) receive, promptly following the effective date of the Release
Agreement, any awards previously made to the Participant under the
Company's Incentive Bonus Plan or comparable plan, or any successor
plan, for any year of employment prior to the year which includes
the Date of Termination, payment of which had not been made prior to
the Date of Termination, and any accrued vacation or other paid time
off;
(v) receive, promptly following the effective date of the Release
Agreement, a lump sum cash amount equal to two (2) times the
Participant's Bonus Amount (as hereinafter defined);
(vi) receive "Special Retirement Benefits" as provided herein, so that
the total retirement benefits the Participant receives from the
Company will approximate the total retirement benefits the
Participant would have received under all defined benefit retirement
plans (which may include non- qualified, supplemental and excess
benefits retirement plans but shall not include severance plans) and
other employment contracts of the Company and its Subsidiaries in
which the Participant participates were the Participant fully vested
under such retirement plans and entitled to all benefits payable
under such other employment contracts and had the Participant
continued in the employ of the Company or a Subsidiary for
twenty-four (24) months following
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<PAGE> 8
the Date of Termination or until the Participant's Normal Retirement
Date, if earlier. The benefits specified in this subparagraph will
include all ancillary benefits, such as early retirement and
survivor rights and other benefits available to full-time exempt
employees of the Company or Subsidiary employing the Participant, as
applicable, at Retirement including, but not limited to,
post-retirement health and life insurance benefits. The amount
payable to the Participant or the Participant's beneficiaries under
this subparagraph shall equal the excess of (1) the retirement
benefits that would be paid to the Participant or the Participant's
beneficiaries, under all retirement plans and other employment
contracts of the Company and its Subsidiaries in which the
Participant participates if (A) the Participant were fully vested
under such plans and entitled to all benefits payable under such
other employment contracts, (B) the twenty-four (24) month period
(or the period until the Participant's Normal Retirement Date, if
less) following the Date of Termination were added to the
Participant's credited service under such plans and contracts, (C)
the terms of such plans were those most favorable to the Participant
which were in effect at any time during the period commencing twelve
(12) months prior to the Change of Control and ending on the date of
Notice of Termination, and (D) the Participant's highest average
annual base salary as defined under such retirement plans and other
employment contracts and any cash bonus which under the terms of
such plan or contract is used to calculate benefits thereunder were
calculated as if the Participant had been employed by the Company or
a Subsidiary for a twenty-four (24) month period (or the period
until the Participant's Normal Retirement Date, if earlier)
following the Date of Termination and had the Participant's salary
and cash bonus during such period been equal to the Participant's
Base Salary and Bonus Amount; over (2) the retirement benefits that
are payable to the Participant or the Participant's beneficiaries
under all retirement plans and other employment contracts of
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the Company and its Subsidiary in which the Participant participates
These Special Retirement Benefits are provided on an unfunded basis,
are not intended to meet the qualification requirements of Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"),
and shall be payable solely from the general assets of the Company.
These Special Retirement Benefits shall be payable at the times and
in the manner provided in the applicable retirement plans and other
employment contracts to which they relate, or at the election of the
Participant they shall be paid in a lump sum actuarial equivalent
utilizing the actuarial assumptions of the defined benefit pension
plan applicable to the Participant;
(vii) continued provision of perquisites, such as tax preparation
services, use of any automobile and club memberships provided by the
Company or a Subsidiary, in all cases for a period of twelve (12)
months following the Date of Termination, provided that any personal
expenses incurred by the Participant in connection with such club
memberships shall be paid by the Participant. Club dues shall not be
considered a personal expense. The Participant may elect to have any
or all of such club memberships transferred to the Participant
during or upon the expiration of such twelve (12) month period, and
the Company or such Subsidiary shall assign and transfer to the
Participant without charge the rights to any amounts which would be
recoverable upon the termination of all such club memberships which
the Participant has elected to be transferred to the Participant,
such as a bond or shares; and
(viii) senior executive level outplacement services, at least comparable
to what is being provided to senior executives on the date hereof,
for a period of up to two years.
Notwithstanding the foregoing, if the Participant's Date of Termination is
within two (2) years of the normal retirement date provided in the Company's or
Subsidiary's defined benefit
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retirement plan applicable to the Participant ( the "Normal Retirement Date"),
the sums provided for in subparagraphs 5(a)(i), (ii), and (v) shall be
multiplied by a fraction ("Adjustment Fraction"), the numerator of which is
equal to the number of full months from the Date of Termination to the Normal
Retirement Date, and the denominator of which is equal to 24.
(b) In the event of termination of employment of a Participant with the
Company or a Subsidiary due to the Participant's death, Retirement or
Disability, the Participant shall be entitled to a cash bonus for the portion of
the fiscal year in which death, Retirement or Disability occurs equal to a pro
rata (determined by dividing the number of days elapsed in such fiscal year to
such Death, Retirement or Disability by 365 or 366, as applicable) portion of
the Bonus Amount, and such death, retirement or disability benefits, as the case
may be, as are provided in the Company's or a Subsidiary's plans covering such
Participant on such events and the Company or a Subsidiary shall have no further
obligation to the Participant under this Plan.
(c) In the event of termination of employment of a Participant with the
Company or a Subsidiary by the Company or a Subsidiary for Cause or by the
Participant other than for Good Reason, the Participant shall be entitled
(subject to any applicable payroll or other taxes required to be withheld), to
receive the Participant's Base Salary through the Date of Termination and the
Company or a Subsidiary shall have no further obligation to the Participant
under this Plan. This paragraph 5(c) shall not apply to a termination of
employment by reason of Death, Retirement or Disability.
6. DEFINITIONS
For purposes of the Plan:
(a) Base Salary shall mean the amount determined by multiplying the
Participant's highest semi-monthly or other periodic rate of base pay paid to
the Participant during the twelve-month period immediately prior to the giving
of the Notice of Termination by the number of pay periods per year. The
following items are not part of base pay, as used herein: reimbursed expenses,
any amount paid on account of overtime or holiday work, payments on account of
insurance premiums or other
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contributions made to other welfare or benefit plans, and any year-end or other
bonuses, commissions and gifts.
(b) Bonus Amount means the highest annual cash incentive bonus earned by
the Participant from the Company or a Subsidiary during the last three (3)
completed fiscal years of the Company immediately preceding the Participant's
Date of Termination (annualized in the event the Participant was not employed by
the Company or a Subsidiary for the whole of any such fiscal year).
(c) Cause shall mean:
(i) the willful commission by the Participant of an illegal act or
other act of willful misconduct that causes or will probably
cause substantial economic damage to the Company or a
Subsidiary or substantial injury to the business reputation of
the Company or a Subsidiary;
(ii) the commission by the Participant of an act of fraud in the
performance of such Participant's duties on behalf of the
Company or a Subsidiary;
(iii) the continuing willful failure of the Participant to perform
the duties of such Participant to the Company or a Subsidiary
(other than any such failure resulting from the Participant's
incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in
reasonable detail) and a reasonable opportunity to be heard
and cure such failure are given to the Participant by the
Committee; or
(iv) the final order of a federal or state regulatory agency or a
court of competent jurisdiction requiring the termination of
the Participant's employment with the Company or a Subsidiary.
No act, or failure to act, on the Participant's part shall be considered
"willful" unless done or omitted to be done by the Participant not in good faith
and without reasonable belief that the Participant's action or omission was in
the best interests of the Company or a Subsidiary.
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(d) Good Reason shall mean, excluding for this purpose an isolated
insubstantial and inadvertent action or failure to act, which is not in bad
faith and which is remedied by the Company or applicable Subsidiary promptly
after receipt of notice thereof given by the Participant:
(i) Without the Participant's express written consent, the
assignment by the Company or a Subsidiary to the Participant
of duties which are inconsistent with the Participant's then
title and salary grade or a significant reduction in the
Participant's authority and responsibility as a senior
executive or the removal of the Participant from, or any
failure to reappoint or reelect the Participant to, the title
of Executive Vice President or above, except in connection
with a termination of the Participant's employment by the
Company or a Subsidiary for Cause (including during the
pendency of any Dispute), during any period of incapacity due
to physical or mental illness, or by reason of the
Participant's death, Disability or Retirement;
(ii) A reduction by the Company or a Subsidiary of the
Participant's Base Salary, or the failure to grant increases
in the Participant's Base Salary on a basis at least
substantially comparable to those granted to other executives
of the Company or a Subsidiary of comparable title, salary
grade and performance ratings made in good faith;
(iii) Requiring the Participant to be based anywhere other than an
executive office of the Company or a Subsidiary located in New
Jersey or Pennsylvania within sixty (60) geographic (not road)
miles of 301 Carnegie Center, West Windsor Township, New
Jersey, except for required travel on the Company's or a
Subsidiary's business to an extent substantially consistent
with the Participant's present business travel obligations,
without the Participant's express written consent; or in the
event of any relocation of the Participant with the
Participant's express written consent, the failure by the
Company or a Subsidiary to pay (or reimburse the Participant
for) all reasonable moving expenses by the Participant
relating to a
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change of principal residence in connection with such
relocation and to indemnify the Participant against any loss
realized in the sale of the Participant's principal residence
in connection with any such change of residence, all to the
effect that the Participant shall incur no loss on an after
tax basis;
(iv) The failure by the Company or a Subsidiary to continue to
provide the Participant with substantially the same welfare
benefits and perquisites, including participation on a
comparable basis in the Company's or a Subsidiary's retirement
plans, Incentive Bonus Plan (cash bonus plan), Savings
Incentive Plan, Incentive Stock and Option Plans, and other
plans in which executives of the Company or a Subsidiary of
comparable title and salary grade participate, as are
presently provided to the Participant, or with a package of
welfare benefits and perquisites, that, though one or more of
such benefits or perquisites may vary from those set forth
above, is substantially comparable in all material respects to
such welfare benefits and perquisites, taken as a whole;
provided, however, that a reduction, amendment or elimination
of any benefit, perquisite or plan shall not be Good Reason if
applicable to all executives of comparable title, salary grade
and performance ratings made in good faith;
(v) The giving by the Company or applicable Subsidiary of a notice
that participation by the Participant in the Company's
Executive Severance Plan or the Participant's Termination
Agreement would not be renewed;
(vi) The filing by the Company of a petition for bankruptcy or
similar insolvency of the Company or the filing by any other
party of such a petition which is not dismissed within sixty
(60) days; or
(vii) Any failure by the Company or applicable Subsidiary to comply
with any of the provisions of this Plan with respect to the
Participant.
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(e) Disability shall mean the Participant's incapacity to perform
Participant's duties with the Company or Subsidiary on a full-time basis for one
hundred eighty (180) consecutive days due to physical or mental illness such
that the Participant shall have become qualified to receive benefits under the
Company's or a Subsidiary's long-term disability plans applicable to the
Participant. Any question as to the existence of Disability upon which
Participant and the Company or Subsidiary cannot agree shall be determined by a
qualified independent physician selected by the Company or Subsidiary employing
the Participant or its insurers and acceptable to the Participant or an adult
member of the Participant's immediate family, which acceptance shall not be
unreasonably withheld. Participant shall be obligated to submit to such medical
examinations as may be necessary to determine whether Disability exists.
(f) Retirement shall mean that the Participant shall have reached the
Participant's Normal Retirement Date or that the Participant shall have taken
early retirement (as defined in the Company's or Subsidiary's defined benefit
retirement plan applicable to the Participant) and shall no longer be employed
by the Company or a Subsidiary.
7. RELEASE OF CLAIMS BY PARTICIPANT
The payment of all amounts and provision of all benefits provided for by
paragraph 5(a) shall be conditioned on the execution by the Participant and
delivery to the Company or applicable Subsidiary of a Release Agreement and the
effectiveness of such Release Agreement.
8. FINANCING
All amounts due and benefits provided under the Plan shall constitute
general obligations of the Company or Subsidiary employing the Participant in
accordance with the terms of the Plan. A Participant shall have only an
unsecured right to payment thereof out of the general assets of the Company or
such Subsidiary. Notwithstanding the foregoing, the Company or such Subsidiary
may, by agreement with one or more trustees to be selected by the Company or
such Subsidiary, create a trust on such terms as the Company or such Subsidiary
shall determine to make payments to Participants in accordance with the terms of
the Plan.
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9. TERMINATION AND AMENDMENT OF THE PLAN
The Board shall have the power at any time, in its discretion, to amend,
in whole or in part, or terminate the Plan, except that no amendment or
termination shall impair or abridge the obligations of the Company or a
Subsidiary or the rights of the Participants under any Participation Letters
previously delivered pursuant to the Plan. Any amendment or termination of the
Plan shall be adopted by the Board, by resolution of the Board at a regular
meeting of the Board or special meeting called for such purpose or by unanimous
written consent.
10. BENEFIT OF PLAN
The Plan shall be binding upon and shall inure to the benefit of the
Participant, the Participant's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees, and the
Company, its Subsidiaries and their respective Successors. The term "Successor"
shall mean any person, firm, corporation or other business entity that, at any
time, whether by merger, acquisition or otherwise, acquires all or substantially
all of the stock, assets or business of the Company or a Subsidiary, as the case
may be. If the Participant should die while any amounts would still be payable
to the Participant hereunder if the Participant had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Participant's devisee, legatee or other designee
or, if there be no such designee, to the Participant's estate.
11. NON-ASSIGNABILITY
Each Participant's rights under this Plan shall be non- transferable
except by will or by the laws of descent and distribution and except insofar as
applicable law may otherwise require. Subject to the foregoing, no right,
benefit or interest hereunder shall be subject to anticipation, alienation,
sale, assignment, encumbrance, charge, pledge, hypothecation or set-off in
respect of any claim, debt or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, and any attempt, voluntary
or involuntary, to effect any such action shall, to the full extent permitted by
law, be null, void and of no effect.
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12. EFFECT OF OTHER PLANS
Except as provided in paragraph 5, (a) nothing in the Plan shall affect
the level of benefits provided to or received by any Participant (or the
Participant's estate or beneficiaries) as part of any employee benefit plan of
the Company or a Subsidiary and (b) the Plan shall not be construed to affect in
any way a Participant's rights and obligations under any other plan maintained
by the Company or a Subsidiary on behalf of employees or any other contract
between the Company or a Subsidiary and the Participant.
The Participant shall not be required to mitigate the amount of any
payment under the Plan by seeking employment or otherwise, and there shall be no
right of setoff or counterclaim, in respect of any claim, debt or obligation,
against any payments to the Participant, the Participant's dependents,
beneficiaries or estate provided for in the Plan.
13. TERMINATION OF EMPLOYMENT
Nothing in the Plan shall be deemed to entitle a Participant to continued
employment with the Company or a Subsidiary, and the rights of the Company or a
Subsidiary to terminate the employment of a Participant in any lawful manner
shall continue as fully as though this Plan were not in effect.
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14. SEVERABILITY
In the event that any provision or portion of the Plan shall be determined
to be invalid or unenforceable for any reason, the remaining provisions and
portions of the Plan shall be unaffected thereby and shall remain in full force
and effect to the fullest extent permitted by law.
15. LEGAL COSTS
The Company or a Subsidiary shall pay promptly as incurred the
Participant's reasonable attorney's fees and expenses incurred in good faith by
the Participant as a result of any dispute (regardless of the outcome thereof)
with the Company or a Subsidiary or any other party regarding the validity or
enforceability of, or liability under, any provision of this Plan or the act of
any party thereunder or any guarantee of performance thereof and pay prejudgment
interest on any delayed payment to the Participant calculated at the Summit
Bank, New Jersey base rate of interest in effect from time to time from the date
that payment should have been made under the Plan; provided, however, that the
Participant shall not have been found by the court to have acted in bad faith.
Any finding of bad faith must be final with the time to appeal therefrom having
expired and no appeal having been perfected.
16. GOVERNING LAW
All questions pertaining to the construction, regulation, validity and
effect of the provisions of the Plan shall be determined in accordance with the
laws of the State of New Jersey.
17. OTHER IMPORTANT INFORMATION
1. Plan Sponsor:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Telephone No.: 609-987-3200
EIN: 22-1903313
(Plan I.D. #506)
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2. Plan Administrator and Agent for Service of Legal Process:
Compensation Committee
The Compensation Committee is appointed by the Board of Directors of
Summit Bancorp.
Agent for Service of Legal Process:
General Counsel
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
3. Type of Plan - Executive Severance Plan
4. Type of Administration - Employer administered
5. Plan Trustee: Not Applicable
6. Plan Year
The Plan year is January 1-December 31
7. ERISA Rights
As a Participant in the Plan you are entitled to certain
rights and protections under the Employee Retirement Income Security Act
of 1974 (ERISA). ERISA provides that all Plan Participants shall be
entitled to:
Examine, without charge, at the Plan Administrator's office
and at other locations, all Plan documents, including insurance contracts
and copies of all documents filed by the Plan with the U.S. Department of
Labor, such as annual reports and plan descriptions.
Obtain copies of all Plan documents and other Plan information
upon written request to the Plan Administrator. The Administrator may make
a reasonable charge for the copies.
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In addition to creating rights for Plan Participants, ERISA
imposes duties upon the people who are responsible for the operation of
the employee benefit plan. The people who operate your Plan, called
"fiduciaries", have a legal duty to do so prudently and in the interest of
you and the other Plan Participants and beneficiaries.
No one, including your employer or any other person, may
discriminate against you in any way to prevent you from obtaining a
severance benefit or exercising your rights under ERISA.
If your claim for a severance benefit is denied in whole or
part you must receive a written explanation of the reason for the denial.
You have the right to have the Plan Administrator review and reconsider
your claim.
Under ERISA, there are steps you can take to enforce the above
rights:
For instance, if you request materials from the Plan Administrator
and do not receive them within 30 days, you may file suit in a
federal court. In such a case, the court may require the Plan
Administrator to provide the materials and pay you up to $100 a day
until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Administrator.
If you have a claim for benefits which is denied or ignored, in
whole or in part, you may file suit in a state or federal court.
If it should happen that plan fiduciaries misuse the plan's money,
or if you are discriminated against for asserting your rights, you
may seek assistance from the U.S. Department of Labor, or you may
file suit in federal court.
The court will decide who should pay court costs and legal
fees. If you are successful the court may order the person you have sued
to pay these costs and fees. If
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you lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.
If you have any questions about your Plan, you should contact
the Plan Administrator. If you have any questions about this statement or
about your rights under ERISA, you should contact the nearest area office
of the U.S. Labor-Management Services Administration, Department of Labor.
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EXHIBIT A
RELEASE, COVENANT NOT TO SUE,
NON-DISCLOSURE AND NON-SOLICITATION
AGREEMENT
This RELEASE, COVENANT NOT TO SUE, NON-DISCLOSURE AND NON- SOLICITATION
AGREEMENT (the "AGREEMENT") dated as of ______________ among (1)
__________________________________ ("Executive"), and (2) Summit Bancorp. and
all parent and subsidiary corporations, partnerships and other entities and
affiliates controlled by, controlling or under common control with Summit
Bancorp. (together with any predecessor and successor entities hereinafter being
collectively referred to as "SUB") sets forth the agreements of the parties
hereto with regard to the matters set forth herein:
1. Background. Executive is an Executive of SUB and a party to a
Participation Agreement last amended October 15, 1997 pursuant to which
Executive participates in SUB's Executive Severance Plan and a Termination
Agreement last amended October 15, 1997 (the Plan and these Agreements
together being collectively referred to as the "Contracts"). Any
capitalized terms used but not defined herein shall have the meaning set
forth in the applicable Contract.
a. A Change of Control [has/has NOT] occurred [on (date)]. If a Change
of Control has NOT occurred, Executive is not entitled to any
benefits under the Termination Agreement.
b. Executive's employment with SUB will or has terminated on
______________, which shall be the Date of Termination for purposes
of the Contracts, notwithstanding any failure to adhere to the
provisions for giving a Notice of Termination and the method of
determining the Date of Termination set forth in the Contracts, any
such failures being hereby waived by the parties.
c. This termination shall constitute a termination "[for cause/
disability /retirement /other than for cause /by mutual agreement]"
for purposes of any stock options and restricted stock which
Executive holds, and the Termination Date shall be the termination
date for the purposes of such options. Attached hereto as Appendix A
is a list of all outstanding SUB options held by Executive on the
date hereof.
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2. Payment. Executive shall receive promptly following the EFFECTIVE DATE (as
defined in paragraph 7 hereof) $____________________, the gross amount due
to Executive under the Contracts, which shall be paid to Executive as
$_________________ by check or deposit in Executive's bank account, with
the balance withheld in respect of federal, state and local taxes and
benefits contributions, which Executive acknowledges represents all
amounts currently due Executive under the Contracts. SUB continues to be
obligated to provide certain welfare and pension benefits and perquisites,
and both parties are obligated to make certain adjustments to the Offset
Payments if required, all as more fully set forth in the Contracts.
3. Restrictive Covenants. In consideration of the payments to Executive as
specified in paragraph 2 above, Executive agrees as follows:
a. Non-Solicitation of SUB Customers. For a period of three (3) years
from the date hereof, Executive will not solicit or induce any
person, corporation, or other entity that is a customer of SUB or
that was such at any time within one year prior to the date hereof
to become a customer of any other person, firm, corporation, or
other entity which directly or indirectly competes with SUB, or
approach any such person, firm, corporation, or other entity for
such purpose or authorize or knowingly approve the taking of such
actions by other persons.
b. Non-Solicitation of SUB Employees. For a period of five (5) years
from the date hereof, Executive will not solicit or induce any
person who is an employee of SUB or was such at any time within
three months prior to the date hereof to become employed by any
other person, firm or corporation or approach any such employee for
such purpose or authorize or knowingly approve the taking of such
actions by other persons.
c. Non-Disclosure of Proprietary Information. Executive acknowledges
that during the course of Executive's employment with SUB Executive
received, obtained or became aware of or had access to proprietary
information, lists and records of customers and trade secrets which
are the property of SUB and which are not known by competitors or
generally by the public ("Proprietary Information") and recognizes
such Proprietary Information to be valuable and unique assets of
SUB. For purposes of this subparagraph: (i) Proprietary Information
is deemed to include, without limitation, (A) marketing materials,
marketing manuals, policy manuals, procedure manuals, policy and
procedure manuals, operating manuals and procedures and product
documentation, (B) all information about pricing, products,
procedures, practices, business methods, systems, plans, strategies
or
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personnel of SUB, (C) circumstances surrounding the relationships
with, knowledge of, or information about the customers, clients, and
accounts of SUB, including but not limited to the identity of
current active customers or prospects who have been contacted by
SUB, the expiration dates and other terms of loans or deposit or
other banking relationships, details or special product provisions
or special combinations of products, or special prices, and (D) all
other information about SUB which has not been disclosed in
documents filed with the U.S. Securities and Exchange Commission or
otherwise publicly disseminated by SUB, whether or not that
information is recorded and notwithstanding the method of
recordation, if any; and (ii) Proprietary Information is deemed to
exclude all information legally in the public domain. Executive
agrees to hold the Proprietary Information in the strictest
confidence and agrees not to use or disclose any Proprietary
Information, directly or indirectly, at any time for any purpose,
without the prior written consent of SUB or to use for Executive's
benefit or the benefit of any person, firm, corporation or other
entity (other than SUB), any Proprietary Information, and to use
Executive's best efforts to prevent such prohibited use or
disclosure by any other persons. Executive has returned all
Proprietary Information in Executive's possession or control to SUB.
d. Cooperation, No Detrimental Actions. Executive will cooperate with
SUB in enforcing its claims against customers and former customers
of SUB, including appearing as a witness for SUB in court or
administrative proceedings, subject to reasonable reimbursement for
Executive's time and expenses. Executive will not take actions or
make disparaging statements which are detrimental to SUB or the
RELEASEES, as defined in paragraph 5 below.
e. Remedies. Executive hereby acknowledges that Executive's duties and
responsibilities under this paragraph 3 are unique and extraordinary
and that irreparable injury may result to SUB in the event of a
breach of the terms and conditions of this paragraph 3, which may be
difficult to ascertain, and that the award of damages would not be
adequate relief to SUB and the RELEASEES. Executive therefore agrees
that in the event of Executive's breach of any of the terms or
conditions of this paragraph 3, SUB shall have the right, without
posting any bond or other security, to preliminary and permanent
injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any
other rights or remedies in law or equity to which SUB may be
entitled against Executive. The covenants of Executive in paragraphs
3a, 3b, 3c and 3d of this Agreement shall each be construed as an
agreement independent of any other provision in this AGREEMENT, and
the existence of any claim or cause of action
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of Executive against SUB, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by SUB
of paragraphs 3a, 3b, 3c and 3d.
f. Enforcement. If at the time of the enforcement of subparagraphs 3a,
3b, 3c, 3d or 3e above a court shall hold that the period or scope
of the provisions thereof are unreasonable under the circumstances
then existing, the parties hereby agree that the maximum period or
scope under the circumstances shall be substituted for the period or
scope stated in those subparagraphs.
4. Short-Swing Securities Profits. Executive acknowledges that Executive will
remain subject to the short-swing liability provisions of Section 16 of
the federal Securities Exchange Act of 1934 for six months following
termination of employment.
5. Release. In consideration of the payments to Executive as specified in
paragraph 2 above, Executive grants SUB a RELEASE of only all claims, both
known and unknown, that Executive may have that relate to the termination
of Executive's employment (hereafter a "WRONGFUL TERMINATION CLAIM").
Executive and SUB agree that a WRONGFUL TERMINATION CLAIM, specifically
and without limitation, does not include claims:
a. for indemnification as a corporate agent of SUB against claims by
third parties;
b. under employee benefit plans, including supplemental employee
retirement plans, maintained by SUB or any of the predecessor
organizations thereof, including but not limited to rights under any
workers compensation program, Section 502(a) of the Employee
Retirement Income Security Act, as amended, 29 U.S.C. ss.1001 et
seq., and under the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA");
c. arising out of enforcement of the Contracts or this Agreement by
Executive; or
d. constituting cross-claims against SUB as a result of claims brought
by unaffiliated third parties against Executive based on Executive's
service as an executive of SUB.
The statutes which could form the basis for a WRONGFUL TERMINATION CLAIM
include, but are not limited to, Title VII of the Civil Rights Act of
1964, as amended, 42 U.S.C. ss.1971 et seq.; the Age Discrimination in
Employment Act of 1967, as amended,
24
<PAGE> 25
29 U.S.C. ss.621 et seq.; Section 510 of the Employee Retirement Income
Security Act of 1974, as amended, 29 U.S.C. ss.1001 et seq.; the Americans
With Disabilities Act, as amended, 42 U.S.C. ss.12101 et seq.; the Older
Workers Benefit Protection Act, as amended, 29 U.S.C. ss.621 et seq.; the
Civil Rights Act of 1866, as amended, 42 U.S.C. ss.1981 et seq.; the New
Jersey Law Against Discrimination, as amended, N.J.S.A. 10:5- 1 et seq.;
the New Jersey Conscientious Employee Protection Act, as amended, N.J.S.A.
34:19-1 et seq.; the New York Human Rights Law, Executive Law ss.290 et
seq.; the Pennsylvania Human Relations Act, as amended, 43 P.S. ss.951 et
seq.; and the Pennsylvania Whistleblower Law, as amended, 43 P.S. ss.1421
et seq. The common law (non-statutory) theories under which a WRONGFUL
TERMINATION CLAIM could be made include, but are not limited to, breach of
an express employment contract, breach of a contract implied from a
personnel handbook or manual, or commission of a civil wrong (known as a
"tort") resulting in Executive's termination, or for alleged violation of
the public policy of the United States or any state. Granting a RELEASE of
any WRONGFUL TERMINATION CLAIM pursuant to this AGREEMENT means that on
behalf of Executive and all who succeed to Executive's rights and
responsibilities, Executive releases and gives up only any and all
WRONGFUL TERMINATION CLAIMS that Executive may have against SUB, and any
of its subsidiaries, affiliates or divisions, and all of their directors,
officers, representatives, shareholders, agents, employees, and all who
succeed to their rights and responsibilities (collectively referred to as
"RELEASEES"). With respect to any charges filed concerning events or
actions relating to a WRONGFUL TERMINATION CLAIM that occurred on or
before the date of this AGREEMENT or Executive's Termination Date
(whichever is later), Executive waives and releases any right that
Executive may have to recover in any lawsuit or proceeding brought by
Executive or by an administrative agency on Executive's behalf against the
RELEASEES.
6. Covenant Not to Sue. Executive covenants not to sue the RELEASEES over any
WRONGFUL TERMINATION CLAIM. Such a covenant not to sue the RELEASEES means
that Executive represents that Executive has not through the date of
execution of this Agreement filed a WRONGFUL TERMINATION CLAIM, charge or
lawsuit with any court or government agency against the RELEASEES, and
that Executive will not file such a lawsuit subsequent to execution of
this Agreement. Executive also waives any right to become, and promises
not to become, a member of any class in a case in which WRONGFUL
TERMINATION CLAIMS are asserted against any of the RELEASEES.
7. Review Period. Executive acknowledges that Executive has up to 21 days to
review this AGREEMENT and was advised to review it with an attorney of
Executive's choice. Executive also acknowledges that Executive was further
advised that Executive has seven
25
<PAGE> 26
days after Executive signs this AGREEMENT to revoke it by notifying SUB in
writing of such revocation as set forth under Notices below. This
AGREEMENT shall become effective on the tenth (10th) day following its
execution by Executive (the "EFFECTIVE DATE"), unless revoked in
accordance with the preceding sentence.
8. Revocation of Authority. Executive agrees and acknowledges that as of the
Termination Date Executive shall no longer be empowered to bind SUB in any
agreement, whether verbal or written, and that Executive shall have no
authority to execute any documents, deeds, leases, or other contracts on
behalf of SUB. To the extent not effected by termination of Executive
under the Contracts, Executive resigns from all offices and positions with
SUB.
9. Successors and Assigns. All rights and duties of SUB under this Agreement
shall be binding on and inure to the benefit of SUB, its successors and
assigns. All rights of Executive hereunder shall be binding upon and inure
to the benefit of Executive's personal or legal representatives.
10. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered personally with receipt acknowledged or sent by registered or
certified mail, postage prepaid or by reputable national overnight
delivery service, to the addresses shown below, unless changed by notices
given as herein provided, except that notice of change of address only
shall be effective upon actual receipt:
If to SUB, to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: Executive Vice President of Human
Resources
With a copy to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: General Counsel
If to the Executive, to:
________________________________
26
<PAGE> 27
11. Covenant Not to Challenge Enforceability. Both Executive and SUB
understand that this AGREEMENT is final and binding when executed by both
parties, subject to paragraph 7 above, and both agree not to thereafter
challenge its enforceability.
12. Applicable Law. This AGREEMENT shall be deemed to have been made within
the State of New Jersey, and it shall be interpreted, construed, and
enforced in accordance with the law of the State of New Jersey, and before
the Courts of the State of New Jersey.
13. Amendments, Modifications, Waivers. This AGREEMENT cannot be amended or
modified except by a written document signed by both SUB and Executive and
no provision can be waived except by a written document signed by the
waiving party.
27
<PAGE> 28
14. By signing this AGREEMENT, Executive acknowledges:
a. EXECUTIVE HAS READ THIS AGREEMENT COMPLETELY.
b. EXECUTIVE HAS HAD AN OPPORTUNITY TO CONSIDER THE TERMS OF THIS
AGREEMENT.
c. EXECUTIVE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF
EXECUTIVE'S CHOOSING PRIOR TO EXECUTING THIS AGREEMENT.
d. EXECUTIVE KNOWS THAT EXECUTIVE MAY BE GIVING UP IMPORTANT LEGAL
RIGHTS BY SIGNING THIS AGREEMENT.
e. EXECUTIVE UNDERSTANDS AND MEANS EVERYTHING THAT EXECUTIVE HAS SAID
IN THIS AGREEMENT, AND EXECUTIVE AGREES TO ALL ITS TERMS.
f. EXECUTIVE IS NOT RELYING ON SUB OR ANY REPRESENTATIVE OF SUB TO
EXPLAIN THIS AGREEMENT AND RELEASE TO EXECUTIVE. EXECUTIVE HAS HAD
AN OPPORTUNITY TO CONSULT AN ATTORNEY OR OTHER ADVISOR TO EXPLAIN
THIS AGREEMENT AND ITS CONSEQUENCES TO EXECUTIVE BEFORE EXECUTIVE
SIGNED IT, AND EXECUTIVE HAS AVAILED HIMSELF OR HERSELF OF THIS
OPPORTUNITY TO WHATEVER EXTENT EXECUTIVE DESIRED.
g. EXECUTIVE HAS SIGNED THIS AGREEMENT VOLUNTARILY AND ENTIRELY OF
EXECUTIVE'S OWN FREE WILL, WITHOUT ANY PRESSURE FROM SUB OR ANY
REPRESENTATIVE OF SUB, OR ANYONE ELSE.
28
<PAGE> 29
IN WITNESS WHEREOF, and intending to be legally bound hereby, this
Agreement has been executed as of the day and year first above written.
ATTEST: SUMMIT BANCORP.
By:
- ---------------------------------- ------------------------------------
Secretary Executive Vice President
------------------------------------
EXECUTIVE
------------------------------------
(Social Security Number)
STATE OF NEW JERSEY:
COUNTY OF _______________________:
I certify that on this _______ day of ____________, _______ personally
came before me __________________________ (Executive), who, being duly sworn,
acknowledged under oath to my satisfaction that such person is named in and
personally executed the foregoing Release, Covenant not to Sue, Non-Disclosure
and Non-Solicitation Agreement as such person's voluntary act and deed, for the
purposes set forth therein.
IN WITNESS WHEREOF, I have set my hand this ____ day of _____________,
______.
By:___________________________________
Notary Public of the State of New Jersey
My Commission expires __________________
29
<PAGE> 1
Exhibit (10)NN.
DIRECTORS' DEFERRED COMPENSATION PLAN
This Agreement, made this 17th day of December , 1984 by and between
Collective Federal Savings and Loan Association (the "Association") and the
Board of Directors of Collective Federal Savings and Loan Association (the
"Board").
Whereas, the parties hereto are desirous of providing a method for
deferring the payment of directors' fees to electing members of the Board; and
providing for the payment of interest on such deferred fees until the date of
distribution.
NOW THEREFORE, effective as of the date first above written, and in
consideration of the prior and continuing services of the members of the Board,
set forth below is a mutually agreed upon Directors' Deferred Compensation Plan
(the "Plan"):
1. Election to Defer Compensation
Directors' fees earned by each Board member during calendar year 1985 and
during subsequent calendar years shall be paid on a current basis, unless, at
least ten (10) days prior to the commencement of any such calendar year, the
Board member has delivered a written notice requesting that all or a designated
portion of the directors' fees to be earned in the forthcoming year by such
Board member be deferred, in which event the requested amounts shall be credited
as Deferred Compensation hereunder and shall be treated in the manner
hereinafter provided. Any such notice given by a Board member shall, unless
otherwise stated therein, be deemed to be a continuing election which shall be
effective for each subsequent calendar year until revoked.
2. Net Income Upon Deferred Compensation
Deferred Compensation which shall be accumulated under the terms of this
Plan during calendar year 1985, together with all further Deferred Compensation
accrued by a Board member hereunder in subsequent years, shall be credited with
interest (referred to herein as "Net Income") annually in the manner set forth
below.
(a) An initial Net Income calculation for any calendar year shall be made
by multiplying the aggregate amount of Deferred Compensation and Net Income
accrued thereon, if any, credited to the account of a participating Board member
prior to said year by the decimal fraction which represents a rate of return
equal to the consolidated yield, including fees, on earning assets of the
Association and its subsidiaries for that calendar year or such other rate as
the Board may hereafter select, provided that any change in rate made by the
Board shall be communicated to participating Board members and shall, except to
the extent participating Board members otherwise agree, be effective on a
prospective basis only.
(b) A second Net Income calculation for any calendar year shall be made by
multiplying the amounts of Deferred Compensation, if any, credited during such
year by the annual rate
<PAGE> 2
specified in Paragraph 2(a) above. For purposes of this second calculation, the
Deferred Compensation credited during any calendar year shall be treated as
having been credited in twelve (12) equal installments as of the last day of
each month during said calendar year, and the rate specified in Paragraph 2(a)
above shall be appropriately adjusted as to each assumed monthly credit to
reflect the foregoing assumption that such Deferred Compensation has been
credited in twelve (12) equal monthly installments.
(c) The total amount of Net Income accrued with respect to Deferred
Compensation in any calendar year shall be the sum of the amounts calculated as
provided in Paragraphs 2(a) and (b) above.
(d) Net income shall continue to be credited upon the remaining unpaid
balance of all Deferred Compensation and all Net Income therefore accrued
thereon until such date as the remaining balances are totally distributed to the
Board member as hereinafter provided; provided, that in the final calendar year
in which distributions are made to a Board member hereunder, the rate referred
to in Paragraph 2(a) above shall be the corresponding rate for the month in
which the final distribution is made.
3. Plan Committee, Distributions
(a) This Plan shall be administered by a Committee (the "Committee")
composed of three (3) members of the Board duly designated by the Board. No
member of the Committee, while serving as a Committee member, shall be eligible
to receive any form of distribution under the Plan. Decisions and determinations
by the Committee shall be final and binding upon all parties, including the
Association and the participants in this Plan. The Committee shall have the
authority to interpret this Plan, to adopt and revise rules and regulations
relating hereto and to make any other determination which it believes necessary
or advisable for the administration of this Plan. Subject to the terms and
conditions hereof, the Committee shall have exclusive jurisdiction to determine
the time or times at which and the manner in which all amounts credited to Board
members hereunder shall be paid or distributed.
(b) The Committee may from time to time enter into binding agreements with
Board members respecting the times and manner of distribution of any amounts
credited to them hereunder; provided that such agreements shall be entered into
prior to the time that the designated Board member actually terminates his
services as a member of the Board.
(c) All distributions to Board members of Deferred Compensation and Net
Income accrued thereon shall be in the form of cash and, if the Committee and a
Board member have not otherwise agreed pursuant to Paragraph 3(b) above, shall
be made in sixty (60) monthly installments commencing in the month subsequent to
the month in which the Board member actually terminates his service as a member
of the Board. In addition, within sixty (60) days after the end of each calendar
year in which distributions are made hereunder (or, in the case of the final
year in which distributions are made, within sixty (60) days of the date after
the date of such final distribution), the Association shall pay to the Board
member or other person entitled thereto, the amount of any Net Income which
accrued during such year (or final portion of a
<PAGE> 3
year) under the terms of this Plan upon the theretofore unpaid balance of the
Deferred Compensation, and Net Income accrued thereon, for the account of such
Board member.
(d) All amounts credited to a Board member hereunder shall be paid or
distributed to the Board member or, in the event of his death, to the parties
designated by such Board member pursuant to written instructions delivered by
the Board member to the Committee, which instructions may be revoked or amended
by the Board member in any manner whatsoever prior to death and without the
consent of the prior beneficiary. In the event that no such written instructions
have been given hereunder prior to the time of death, the amount credited
hereunder shall be paid or distributed to the Board member's estate.
4. Nature of Association Obligation
(a) Nothing in this Agreement shall be deemed to require the Association
to deposit, invest or set apart in trust or otherwise any amounts of cash, stock
or property equal to or reflective of any of its obligations hereunder, whether
by reason of Deferred Compensation, Net Income or otherwise. Nothing contained
herein shall be deemed to give any Board member participating in this Plan any
ownership or other proprietary, security or other rights in any funds, stock or
assets owned or possessed by the Association whether or not earmarked for the
Association's own purposes as a reserve or fund to be utilized by the
Association for the discharge of its obligations hereunder, it being understood
that the definitions of Deferred Compensation and Net Income set forth herein
are intended simply as formulae for computing benefits hereunder. To the extent
that any person acquires a right to receive payments or distributions from the
Association under this Plan, such right shall be no greater than the right of
any unsecured creditor of the Association.
(b) To the extent permitted by law, the rights of any Board member or any
beneficiary of a Board member hereunder shall not be subject in any manner to
attachment or other legal process for the debt of such Board member or
beneficiary; and any such benefit or payment shall not be subject to
anticipation, alienation, sale, transfer, assignment or encumbrance.
5. Administrative Provisions
(a) The Board may amend, alter or terminate this Plan from time to time
without the approval of any participating Board members, provided that no such
change may adversely affect vested rights hereunder without the written consent
of the affected participating Board members or their representatives. All
obligations and rights under this Plan shall be binding upon the participating
Board members, their heirs, beneficiaries, administrators, executors and
assigns, and upon the successors and assigns of the Association.
(b) Any notice required or desired to be given to the Association or a
participating Board member hereunder shall be given in writing. Any such notice
to the Association shall be addressed to the "Board of Directors Deferred
Compensation Committee" at the Association's then executive headquarters office,
and any such notice to a participating Board member may be addressed to the
address designated by such Board member from time to time. Any such notice shall
be sufficiently given by personal delivery thereof or by mailing the same
postpaid,
<PAGE> 4
addressed to the party to whom such notice is being given as herein specified,
and the date of such personal delivery or mailing shall be deemed to be the date
such notice is given.
(c) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan and the administration
thereof, and the Association shall indemnify and hold harmless each Committee
member from any action or loss incurred in connection therewith.
IN WITNESS WHEREOF, the parties hereto have affixed their hands and seals
the date first above written.
Collective Federal Savings and Loan Association
by: /s/ Thomas H. Hamilton
-----------------------------------------------
Thomas H. Hamilton, President
/s/ Scott T. Page
-----------------------------------------------
Scott T. Page, Secretary
Board of Directors
Collective Federal Savings and Loan Association
by: /s/ Thomas H. Hamilton
-----------------------------------------------
Thomas H. Hamilton, Director
/s/ George W. French
-----------------------------------------------
George W. French, Director
/s/ Walter Henschel
-----------------------------------------------
Walter Henschel, Director
/s/ Claude M. Larned
-----------------------------------------------
Claude M. Larned, Director
/s/ Robert F. Mutschler
-----------------------------------------------
Robert F. Mutschler, Director
/s/ Herman O. Wunsch
-----------------------------------------------
Herman O. Wunsch, Director
/s/ Wesley J. Bahr
-----------------------------------------------
Wesley J. Bahr, Director
<PAGE> 5
AMENDMENT NO. 1 TO DIRECTORS
DEFERRED COMPENSATION PLAN
WHEREAS, by resolution duly adopted on December 17, 1984 the board of
Directors of Collective Federal Savings and Loan Association, as predecessors to
the Board of Directors of Collective Federal Savings Bank and Collective
Bancorp, Inc. ("the Board"), adopted a deferred compensation plan (the "Plan)
providing for the deferral of payment of directors fees to electing members of
the Board: and
WHEREAS, the Plan by its terms may be amended by the Board from time to
time in such manner as the Board deems appropriate; and
WHEREAS, the Board desires to amend the Plan to reflect certain changes in
the legal structure of the institution and to provide for the inclusion of
consultants to the Board under the Plan;
NOW, THEREFORE, effective as of January 1, 1989 the Plan is hereby amended
as follows:
1. For purposes of eligibility to defer fees under the Plan, all
references to the Board shall include all members of the Board of Directors of
Collective Bancorp, Inc., the Board of Directors of Collective Federal Savings
Bank and any individual hired to act as non-voting consultant or advisor to the
Board as herein defined;
2. All references to the "Association" shall include Collective Federal
Savings Bank, together with any other insured savings institution subsidiary
which may be acquired by Collective Bancorp, Inc. from time to time;
3. Except as modified herein, all terms and conditions of the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have affixed their hands and seals
this 9th day of July, 1990.
Collective Bancorp, Inc.
by: /s/ Thomas H. Hamilton
----------------------------------------------
Thomas H. Hamilton, President
/s/ Scott T. Page
----------------------------------------------
Scott T. Page, Secretary
<PAGE> 6
Board of Directors of Collective Bancorp, Inc.
by: /s/ Thomas H. Hamilton
----------------------------------------------
Thomas H. Hamilton
/s/ Wesley J. Bahr
----------------------------------------------
Wesley J. Bahr, Director
/s/ George W. French
----------------------------------------------
George W. French, Director
/s/ Claude M. Larned
----------------------------------------------
Claude M. Larned, Director
/s/ Miles Lerman
----------------------------------------------
Miles Lerman, Director
/s/ William R. Miller
----------------------------------------------
William R. Miller, Director
/s/ Robert F. Mutschler
----------------------------------------------
Robert F. Mutschler, Director
/s/ Herman O. Wunsch
----------------------------------------------
Herman O. Wunsch, Director
<PAGE> 7
AMENDMENT NO. 2 TO DIRECTORS
DEFERRED COMPENSATION PLAN
WHEREAS, by resolution duly adopted on December 17, 1984, the Board of
Directors of Collective Federal Savings and Loan Association, as predecessors to
the Board of Directors of Collective Bank and Collective Bancorp, Inc. (the
"Board"), adopted the Directors Deferred Compensation Plan (the "Plan")
providing for the deferral of payment of directors fees to eligible
participants; and
WHEREAS, the Plan by its terms may be amended by the Board from time to
time in such manner as the Board deems appropriate; and
WHEREAS, the Board desires to amend the Plan to provide for certain
changes in the manner in which net income upon deferred compensation is
calculated for each Board member following his termination of service as a
member of the Board,
NOW THEREFORE, effective as of July 22, 1997, the Plan is hereby amended
as follows:
1. At or prior to the time which Collective Bancorp, Inc. is merged with
and into Summit Bancorp, all amounts accrued under a participant's account shall
be credited to a Rabbi Trust Agreement (the "Trust") established with Summit
Bank for the purpose of providing a mechanism for payment of benefits accrued
under the Plan.
2. Upon creation of a participant's account under the Trust, the amount
allocated thereto shall no longer be credited with Net Income as defined in
Section 2 of the Plan. Such balances shall thereafter be invested by the Trustee
in accordance with the written instructions of the participant.
3. Except as modified herein, all terms and conditions of the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have affixed their hands and seals
this 22nd day of July, 1997.
Collective Bancorp, Inc.
by: /s/ Thomas H. Hamilton
-----------------------------------------
Thomas H. Hamilton, Chairman
Attest: /s/ Scott T. Page
-----------------------------------------
Scott T. Page, Secretary
<PAGE> 8
Board of Directors of Collective Bancorp, Inc.
by: /s/ Thomas H. Hamilton
-----------------------------------------
Thomas H. Hamilton, Director
/s/ Wesley J. Bahr
-----------------------------------------
Wesley J. Bahr, Director
/s/ George W. French
-----------------------------------------
George W. French, Director
-----------------------------------------
Miles Lerman, Director
-----------------------------------------
David S. MacAllaster, Director
/s/ Edward J. McColgan
-----------------------------------------
Edward J. McColgan, Director
/s/ William R. Miller
-----------------------------------------
William R. Miller, Director
/s/ Robert F. Mutschler
-----------------------------------------
Robert F. Mutschler, Director
/s/ Herman O. Wunsch
-----------------------------------------
Herman O. Wunsch, Director
/s/ Alfred J. Hedden
-----------------------------------------
Alfred J. Hedden, Consultant
<PAGE> 9
RABBI TRUST AGREEMENT
UNDER COLLECTIVE BANCORP.
DIRECTORS DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT is made as of the 15th day of July, 1997 by and
between Collective Bancorp. (the "Company") and Summit Bank, a New Jersey
banking corporation with trust powers ("Trustee").
WHEREAS, Company has adopted the non qualified deferred compensation plan
as set forth in Exhibit I at the end hereof (the "Plan"); and
WHEREAS, Company has incurred or expects to incur liability under the
terms of the Plan with respect to the individuals participating in the Plan; and
WHEREAS, Company wishes to establish the trust (the "Trust") with the
Trustee and to contribute to the Trust funds that shall be held therein, subject
to the claims of Company's general creditors in the event of Company's
Insolvency, as herein defined, until paid to the Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not adversely affect the status of
the Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
pursuant to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); and
WHEREAS, it is also the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist in meeting its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Continuation of Trust
(a) From time to time Company shall deposit with Trustee in trust such
sums of money and other property, as the Company shall determine, in its sole
discretion, to contribute, including, without limitation all, funds transferred
from the Predecessor Trustee, which shall become the principal of the Trust, to
be held, administered and disposed of by Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established shall be revocable by the Company.
However, it shall become irrevocable upon a Change of Control, as defined in
Section 14 (d) hereof.
<PAGE> 10
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor within the meaning of subpart E. part 1, subchapter J, chapter I,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon. shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or, any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property, in trust with Trustee
to augment the principal to be held, administered and disposed of by Trustee as
provided in this Trust Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional deposits.
(f) Trustee may conclusively rely upon directions from the Plan Committee
established by the Company, in taking any action with respect to this Trust
Agreement, including the making of payments from Trust assets and the investment
of Trust assets pursuant to this Trust Agreement. Trustee shall have no
liability for actions taken, or for failure to act, on the direction of the
Committee. Moreover, Trustee shall have no liability for failure to act in the
absence of proper written directions.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Committee shall deliver to Trustee a schedule (the ("Payment
Schedule") that indicates the amounts payable in respect to each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to Trustee for determining the amount so payable, the
form in which such amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, and to the extent Trustee is in possession of
sufficient assets, Trustee shall make payments to the Plan participants and
their beneficiaries in accordance with such Payment Schedule. If Trustee is not
in possession of sufficient assets to make all payments in accordance with the
Payment Schedule, Trustee will pay each participant or beneficiary a
proportionate share of the Trust assets in its possession as directed by the
Committee. If so directed by the Committee, Trustee shall make provision for the
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan and shall pay the amounts withheld to the appropriate taxing authorities on
behalf of the Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under the Plan. and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
<PAGE> 11
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to Plan participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments in accordance with the terms of the Plan. Trustee
shall make payments in accordance with subparagraph (a) of this Section, and
Company shall make the balance of each payment as it falls due. Trustee shall
notify Company where principal and earnings are not sufficient. To the extent of
available Trust assets, and if so requested by the Committee at any time,
Trustee shall reimburse Company out of Trust assets for any Plan benefits
previously paid under the terms of the Plan directly by Company and not
previously reimbursed by Trustee, provided that after a Change of Control no
such reimbursement shall be made for any benefits paid by Company prior to the
Change of Control.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When
Company is Insolvent.
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if Company is Insolvent. Company shall be considered "Insolvent"
for purposes of this Trust Agreement if (i) Company is unable to pay its debts
as they become due, or (ii) the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section I (d) hereof. the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in writing
to Trustee that Company has become Insolvent, Trustee shall determine whether
Company is Insolvent (in accordance with the procedure set forth in subsections
(2) and (3), below) and, pending such determination, Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor alleging
that Company is Insolvent, Trustee shall have not duty to inquire whether
Company is Insolvent. Trustee may in all events rely on such evidence concerning
Company's solvency as may be furnished to Trustee and which provides Trustee
with a reasonable basis for making a determination concerning Company's
solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their Beneficiaries
and shall hold the assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any rights
as general creditors of the Company with respect to benefits of Plan
participants or their beneficiaries to pursue their rights due under the Plan or
otherwise.
<PAGE> 12
(4) Upon receipt of notice of Company's Insolvency from any person,
other than the Board of Directors and the Chief Executive Officer, Trustee shall
seek in writing a determination of the Board of Directors and Chief Executive
Officer or any appropriate court as to the Insolvency of Company. Trustee may
conclusively rely upon a determination of the Board of Directors and Chief
Executive Officer as to Company's Insolvency.
(5) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 hereof only
after Trustee has determined in accordance with subsection (b)(2) hereof that
Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plan.
Section 5. Investment Authority.
(a) The Trustee shall have the following powers and authority in the
administration of the Trust Fund to be exercised as provided in Section 8
hereof;
(1) All rights associated with assets of the Trust shall be
exercised by Trustee or Company and shall in no event be exercisable by or rest
with Plan participants;
(2) To retain any investment and property which may be received by
it for such length of time as may seem proper, without liability by reason of
such retention;
(3) To invest and reinvest all or any part of the Trust assets in
any common or preferred stocks, shares of investment trusts and investment
companies, bonds, debentures, mortgages, deeds of trust, mortgage
participations, notes, real estate or other property which the Committee, in its
discretion, may select; provided that the Trustee may not invest in its own
stock or securities or in stock or securities issued by a parent or affiliate
company of the Trustee; and further provided that the Trustee may not invest in
securities (including stock or rights to acquire stock) or obligations issued by
Company, other than a de minimis amount held in common investment vehicles in
which Trustee invests). Any such investments may be held in bearer form, or in
the name of the Trustee, or in the name of a nominee or nominees:
<PAGE> 13
(4) To retain cash or the proceeds from the sale of any assets until
such time or times as it receives direction from Company regarding the
appropriate investments of such funds;
(5) To hold uninvested cash awaiting investment or distribution, and
such additional cash balances as it shall deem reasonable or necessary, without
incurring any liability for the payment of interest thereon;
(6) Which respect to any securities forming part of the Trust
created hereunder, to exercise all voting rights, either in person or by proxy,
as directed by the Committee; to exercise conversation, subscription, option and
similar rights: to enter or refuse to enter into any dissolution, liquidation,
consolidation, recapitalization, reorganization, merger or other change in
capital structure, and in connection therewith, to make exchanges of securities
and to enter into agreements on such terms and conditions as it may deem
advisable; and to enter into voting trusts and agreements with other
stockholders, and other holders of securities, and the corporations which shall
have issued such stocks or securities, any one or more of such persons, for such
purposes and for such period of time (whether or not the same extends beyond the
actual or probable duration of the trusts created hereunder), and upon such
terms and conditions as it shall deem advisable;
(7) To enter into any lease or leases, without application to any
court of any or all real or personal property held hereunder, for such period
(whether or not the same expires prior to or extends beyond the actual or
probable duration of the trusts created hereunder), and upon such terms and
conditions as it shall deem advisable;
(8) To borrow money or property, either upon the security of any or
all of the assets of the trusts created hereunder, or without security or
otherwise, upon such terms and conditions and for such purposes in connection
with the administration of the trusts as it shall deem proper;
(9) To grant, bargain, sell, exchange, mortgage, grant options to
buy, or otherwise dispose of any or all personal property, at any time held
hereunder, either at public or private sale, for cash or on credit, or partly
for cash and partly on credit, upon such terms and conditions, in such manner
and for such purposes, and either in whole or in part, as it may deem proper:
and to make, execute, acknowledge and deliver good and sufficient instruments
for that purpose. No purchaser, upon any sale or either disposition, shall be
bound to see to the application of the moneys or property arising therefrom or
to inquire into the validity, expediency or propriety of any such sale or
disposition;
(10) to adjust, compromise or arbitrate claims or demands of, or,
against. the Trust created hereunder, whether such claims are due or shall
become due in the future, including without limitation any overpayment or refund
claim, or any deficiency, additional assessment or other liability, relating to
any federal, state, county, municipal or other tax, irrespective of the nature
thereof;
<PAGE> 14
(11) In any case where the applicable law is unclear or uncertain,
to allocate to income or to principal, or to apportion between income and
principal, receipts disbursements, depletion and depreciation in such manner as
it shall deem proper;
(12) To execute and deliver all documents, contracts, and
instruments necessary or advisable in connection with the administration of the
Trust created hereunder:
(13) To invest in any investment company for which Trustee or any
affiliate of Trustee receives a fee for investment, advisory, custodial services
or other services Trustee is permitted to perform for said investment company
and which said fee is in addition to the fees payable hereunder; and
(14) Notwithstanding anything in this Section to the contrary, if
the authority to direct Trustee as to the investment of all or any part of the
assets held in the Trust has been granted to the Plan participants, Trustee
shall not have any obligation to investigate the prudence of any such
investments and shall be indemnified and held harmless by Company for any act or
failure to act made pursuant to such direction.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting By Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within sixty (60) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued) interest
paid or receivable being shown separately) and showing all cash, securities and
other property held in the Trust at the resignation as the case may be.
(a) If objections to specific items in such account are filed with Trustee
within ninety (90) days after the account has been furnished and Trustee
believes such objections to be valid, Trustee shall adjust the account in such
manner as it deems equitable under the circumstances.
(b) Trustee shall then give written notice to the Committee of the
adjustment of the account and if no objection to specific items in such account,
as adjusted, are filed with Trustee within ninety (90) days after notice of such
adjustment has been furnished, then, the account of Trustee with respect to all
matters contained therein (as originally furnished, if no adjustment was made,
or as adjusted, if an adjustment was made), shall be deemed to have been
approved and Trustee shall to the extent permitted by applicable law, be
relieved and discharged of and
<PAGE> 15
from all liability to anyone with respect to its acts or failures to act which
are reasonably capable of identification by means of such account during the
period covered thereby. Notwithstanding anything in the foregoing to the
contrary, this Section 7 shall not operate to relieve or discharge the Trustee
from liability for any act or failure to act that involves gross negligence,
willful misconduct or fraud.
Section 8. Responsibility of Trustee.
(a) Trustee shall act in a manner that, under the circumstances then
prevailing (specifically including, but not limited to, the general economic
conditions and the anticipated needs of the Plan participants and
beneficiaries), persons of skill, prudence, and diligence, acting in a similar
capacity and familiar with those matters would use in the conduct of an
enterprise of similar character and similar aims, to attain Company's goals
under this Trust Agreement; provided, however, that Trustee shall incur no
liability to any person and shall be indemnified and held harmless for any
action taken pursuant to a direction, request or approval given by Company or
the Committee which is in conformity with the terms of this Trust Agreement and
is given in writing by Company or the Committee, except to the extent such
liability is due to the Trustee's negligence or noncompliance with the terms of
this Trust Agreement or with ERISA. Regardless of liability, Trustee shall
notify the committee if it knows of any violation of applicable law in
connection with this Trust Agreement, or discovers a mistake in the
administration of the Trust. In the event of a dispute between Company and third
party, Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
(b) If Trustee undertakes to defends any litigation arising in connection with
this Trust, company agrees to indemnify Trustee on a current basis against
Trustee's costs, expenses and liabilities (including, without limitation,
attorney's fees and expenses) relating thereto and to be primarily liable for
such payments. If Company does not pay such costs, expenses and liabilities
within sixty (60) days of presentation, Trustee may obtain payment from the
Trust. Trustee shall be under no obligation to take or defend any legal action
of whatever nature unless it is first indemnified against expenses by Company or
to the shall be sufficient property in the Trust to indemnify Trustee with
respect to the expenses or losses to which it may be subjected.
(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(d) Trustee, may hire agents, accountants, actuaries, investment advisors.
financial consultants, counsel, or other professionals to assist it in
performing any of its duties or obligations hereunder and to pay their
reasonable expenses from the Trust.
(e) Trustee shall have, without exclusion, all powers conferred on Trustee
by applicable law, unless expressly provided otherwise herein, provided,
however, that if any insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a different
form) other than to a successor trustee, or to loan to any person the proceeds
of any borrowing against such policy.
<PAGE> 16
(f) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or pursuant to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
(g) Trustee shall not be liable for making or withholding any payments as
may be required by a court order.
(h) To do all acts, whether or not expressly authorized herein, which the
Trustee may deem necessary or desirable for the protection of the Trust Fund.
Section 9. Responsibility of Committee.
(a) Until a Change of Control has occurred, this Section 9(a) shall be
effective and the Committee shall direct the Trustee as to the administration of
the Trust in accordance with the following provisions:
(1) The Committee shall be identified to the Trustee by a copy of
the resolution or resolutions adopted by the Board appointing the Committee. In
the absence of any such appointment, the Board shall be the Committee. Persons
authorized to give directions to the Trustee of behalf of the committee shall be
identified to the Trustee by written notice from the Committee, and such notice
shall contain specimens of the authorized signatures. The Trustee shall be
entitled to rely on such written notice as evidence of the identity and
authority of the persons appointed until a written cancellation of the
appointment, or the written appointment of a successor, is received by the
Trustee.
(2) Directions by the committee, or its delegate, to the Trustee
shall be in writing and signed by the Committee or persons authorized by the
Committee, or may be made by such other method as is acceptable to the Trustee.
(3) The Trustee may conclusively rely upon directions from the
committee in taking any action with respect to this Trust Agreement, including
the making of payments from the Trust and the investment of the trust assets
pursuant to this Trust Agreement. The Trustee shall have no liability for
actions taken, or for failure to act, on the direction of the committee, except
to the extent such liability is due to Trustee's own negligence or its
noncompliance with terms of this Trust Agreement or applicable law. Where the
Trustee is required to act on the direction of the committee, the Trustee shall
have no liability for failure to act in the absence of proper written
directions.
(4) With respect to actions the Trustee is required to take subject
to the instructions of the committee, the Trustee shall request instructions
from the committee in writing and upon such request shall have no duty to act or
shall have no liability for the failure to act if such instructions are not
forthcoming from the Committee. If requested instructions are not received
within a reasonable time, the Trustee may, but is under o duty to, act on its
own discretion to carry out the provisions of this Trust Agreement and the Plan.
<PAGE> 17
Section 10. Compensation and Expenses of Trustee.
Trustee shall receive reasonable compensation for its services in
accordance with its schedule of compensation, as set forth in Exhibit 2 attached
hereto. The schedule may be amended from time to time in any manner that is
agreed upon between Trustee and Company. If after a Change of Control, Trustee
and Company fail to agree upon a compensation schedule, Trustee shall be
entitled to compensation of a rate equal to the rate charged by Trustee for
similar services rendered by it for other trusts similar to the Trust. Company
shall pay all administrative and Trustee's fees and expenses, including taxes
levied upon the Trust. If not so paid, the fees and expenses shall be paid from
the Trust.
Section 11. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective thirty (30) days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on thirty (30) days notice or upon
shorter notice accepted by Trustee.
(c) Upon a Change of Control Trustee may not be removed by Company for
five (5) years.
(d) If Trustee resigns within five (5) years after a Change of Control,
Company shall apply to a court of competent jurisdiction for the appointment of
a successor trustee or for instructions.
(e) Upon resignation or removal of Trustee and appointment of a successor
trustee, all assets shall subsequently be transferred to the successor trustee.
The transfer shall be completed within sixty (60) days after receipt of notice
of resignation, removal or transfer, unless Company, in its sole discretion.
extends the time limit.
(f) If Trustee resigns or is removed and no successor trustee shall have
been appointed by the effective date of Trustee's resignation or removal,
Trustee may apply to a court of competent jurisdiction for appointment of a
successor or for instructions or may pay the assets of the Trust to Company. All
expenses of Trustee in connection with such proceeding shall be allowed as
administrative expenses of the Trust.
Section 12. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with Section I I (a) or
(b) hereof, Company may appoint any third party, such as a bank trust department
or other party that may be granted corporate trust powers under state law, as a
successor trustee. The appointment shall be effective when accepted in writing
by the new trustee, which shall have all of the rights and
<PAGE> 18
powers of the former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instruments necessary or reasonably
requested by Company or the successor trustee to evidence the transfer.
(b) The successor trustee need not examine the records and acts of any
prior trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor trustee shall not be responsible for, and
Company shall indemnify and defend the successor trustee from and against any
claim or liability resulting from any action or inaction of any prior trustee or
from any other past events or any condition existing at the time it becomes
successor trustee.
Section 13. Amendment or Termination.
(a) Subject to the prohibition set forth in subsection (e), below, this
Trust Agreement may be amended by a written instrument executed by Trustee and
Company. Notwithstanding the foregoing, no such amendment shall conflict with
the terms of the Plan or shall make the Trust revocable after it has become
irrevocable in accordance with Section 1(b) hereof
(b) Trustee is not a party to the Plan except insofar as Trustee has
assumed duties specifically provided in this Trust Agreement. Company retains,
in its sole discretion the right to amend any provisions of the Plan; provided,
however, that the allocation of responsibilities to Trustee shall not be
amended, altered or modified without the prior written consent of Trustee
(c) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan. Upon termination of the Trust any assets remaining in
the Trust shall be returned to Company.
(d) Upon written approval of all of the Plan participants or beneficiaries
then entitled to payment of benefits pursuant to the terms of the Plan, Company
may terminate this Trust prior tot he time all benefit payments under the Plan
have been made. All assets in the Trust at termination shall be returned to
Company.
(e) This Trust Agreement may not be amended by Company for five (5) years
following a Change of Control.
Section 14. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Notwithstanding any Qualified Domestic Relations Order, as that term
is defined in ERISA, and subject to any Internal Revenue Service levy, benefits
payable to Plan participants and their beneficiaries under this Trust Agreement
may not be anticipated, assigned (either at law or in equity), alienated,
pledged, encumbered or subjected to attachment, garnishment, levy, execution or
other legal or equitable process.
<PAGE> 19
(c) Except to the extent preempted by federal law, this Trust Agreement
shall be governed by and construed in accordance with the internal laws of the
State of New Jersey.
(d) For purposes of this Trust, Change of Control shall mean (i) the
purchase or other acquisition by any person, entity or group of persons, within
the meaning of section 1 3(d) or 14(d) of the Securities Exchange Act of 1934
("Act") or any comparable successor provisions, of beneficial ownership (within
the meaning of rule 13d-3 promulgated under the Act) of thirty (30) percent or
more of either the outstanding shares of common stock or the combined voting
power of Company's ten outstanding voting securities entitled to vote generally,
(ii) the approval by the stockholders of Company of a reorganization, merger or
consolidation the effect of which in each case, is that the persons who were
stockholders of Company immediately prior to such reorganization, merger or
consolidation will not, immediately thereafter, own more than fifty (50) percent
of combined voting power entitled to vote generally in the election of directors
of the reorganized, merged or consolidated company's then outstanding
securities, (iii) a liquidation or dissolution of Company or (iv) the sale of
all or substantially all of Company's assets to an unrelated third party.
(e) Any person dealing with Trustee may rely upon a copy of this Trust
Agreement and any amendments thereto certified to be true by Trustee.
(f) No notice given or representation made by Company to Trustee
pertaining to the provisions of this Trust Agreement or the Plan shall be
effective unless such notice is given or representation made in writing by the
Board of Directors or the Secretary of Company.
Section 15. Effective Date.
The effective date of this Trust Agreement shall be July 15, 1997.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be executive by their respective duly authorized officers and attested on the
date and year first above written.
Attest:
By:
Title:
Attest: SUMMIT BANK
By:
Title:
<PAGE> 1
Summit Bancorp Annual Report 1997
[PICTURE: YOUNG BOY JUMPING OFF A ROCK REACHING HIGHER]
We Reach
Higher
for Financial
Solutions
<PAGE> 2
Summit Bancorp is a leading regional financial services organization with $30
billion in assets and a market capitalization of $9.3 billion at year end.
Through our retail, commercial, investment management and private banking lines
of business, Summit bankers provide customized financial solutions to
individuals and businesses throughout New Jersey, eastern Pennsylvania and
beyond.
Contents...
page 1 Financial Highlights
page 2 Lines of Business
page 4 Chairman's Message
page 7 Reach Higher for Financial Solutions
page 16 Board of Directors
page 18 Community Development
page 19 Financial Review
page 34 Consolidated Financial Statements and Notes
page 57 Corporate Directory
page 59 Shareholder and Corporate Information
Net Income per Common Share
before non-recurring items
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1993 $1.21
1994 1.60
1995 1.89
1996 2.15
1997 2.43
</TABLE>
Annual Indicated Dividend
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1993 $0.56
1994 0.69
1995 0.85
1996 0.96
1997 1.08
</TABLE>
<PAGE> 3
FINANCIAL HIGHLIGHTS Summit Bancorp and Subsidiaries
================================================================================
<TABLE>
<CAPTION>
Percent Change
-----------------
1997 1996
vs. vs.
(Dollars in millions, except per share data) 1997 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31
Before non-recurring items:
Net income ....................................... $ 424.7 $ 360.4 $ 300.4 17.8% 20.0%
Net income per common share:
Basic .......................................... 2.43 2.15 1.89 13.0 13.8
Diluted ........................................ 2.39 2.12 1.87 12.7 13.4
After non-recurring items:
Net income ....................................... 371.0 283.7 300.4 30.8 (5.6)
Net income per common share:
Basic .......................................... 2.12 1.69 1.89 25.4 (10.6)
Diluted ........................................ 2.09 1.67 1.87 25.1 (10.7)
Per common share:
Cash dividends declared .......................... 1.02 0.90 0.79 13.3 13.9
Book value ....................................... 14.79 13.61 13.04 8.7 4.4
Market value ..................................... 52.88 29.17 23.75 81.3 22.8
=================================================================================================================
BALANCE SHEET DATA AT DECEMBER 31
Total assets ....................................... $29,964.2 $27,767.3 $26,647.5 7.9% 4.2%
Total deposits ..................................... 22,329.4 21,629.5 21,232.9 3.2 1.9
Total loans ........................................ 18,888.4 17,386.1 16,413.2 8.6 5.9
Allowance for loan losses .......................... 296.5 280.6 293.2 5.7 (4.3)
Shareholders' equity ............................... 2,612.4 2,290.8 2,130.1 14.0 7.5
=================================================================================================================
INCOME STATEMENT DATA
Net interest income ................................ $ 1,145.1 $ 1,053.3 $ 1,009.7 8.7% 4.3%
Provision for loan losses .......................... 59.1 64.0 72.1 (7.7) (11.2)
Non-interest income ................................ 301.9 260.0 235.3 16.1 10.5
Non-interest expenses, excluding non-recurring items 733.7 693.8 705.5 5.8 (1.7)
Non-recurring items, net of taxes .................. 53.7 76.7 -- (29.9) --
Net income ......................................... 371.0 283.7 300.4 30.8 (5.6)
=================================================================================================================
CONSOLIDATED RATIOS Before non-recurring items:
Return on average assets ......................... 1.47% 1.32% 1.17%
Return on average common equity .................. 17.08 16.48 15.49
After non-recurring items:
Return on average assets ......................... 1.28 1.04 1.17
Return on average common equity .................. 14.92 12.95 15.49
Efficiency ratio ................................... 50.28 52.11 55.72
Allowance for loan losses to year-end loans ........ 1.57 1.61 1.79
Non-performing loans to year-end loans ............. 0.45 0.80 1.18
=================================================================================================================
CAPITAL RATIOS
Average equity to average assets ................... 8.61% 8.12% 7.63%
Tier I capital to average assets (leverage) ........ 8.76 7.73 7.63
Tier I capital to risk-adjusted assets ............. 12.64 11.68 11.32
Total capital to risk-adjusted assets .............. 14.83 14.17 13.87
=================================================================================================================
OTHER DATA (at year end)
Number of banking offices .......................... 426 423 433
Number of employees (full-time equivalent) ......... 8,566 8,402 8,593
=================================================================================================================
</TABLE>
1
<PAGE> 4
Lines of Business
Commercial Banking
================================================================================
Overview
Provides a full array of commercial financial services including asset based
lending, international trade services, equipment leasing, real estate financing,
private placement, mezzanine financing, aircraft lending, correspondent banking,
treasury services and structured finance
- --------------------------------------------------------------------------------
Market Penetration
o N.J.'s largest commercial and industrial lender, serving 30,000 clients
and 15 major industry groups
o Leader in providing financial services to middle market companies with
annual sales of $5 to $250 million
o One of Northeast's largest asset based lenders; offices in NYC, Stamford,
Greater Philadelphia and Baltimore/ Washington, D.C. areas
- --------------------------------------------------------------------------------
Highlights of 1997
o Grew asset based lending to $1.1 billion; opened new office in the
Baltimore/ Washington, D.C. area
o Provided variety of real estate financing services through commercial real
estate sector
o Continued to offer expertise to health care industry, focusing on
relationships with hospitals and larger medical practices; expanded this
area to include long-term care facilities
- --------------------------------------------------------------------------------
Key Market Data
[The following table was depicted as a pie graph in the original]
Loan Portfolio
Middle Market 19%
International 3%
Bus. Banking 5%
Leasing 6%
Health Care 5%
Media 4%
Large Corp. 11%
Asset Based 14%
Commercial
Real Estate 33%
- --------------------------------------------------------------------------------
Reaching Higher,
Looking Ahead
o Cultivate opportunities in lower middle market, asset based lending,
international trade, health care, communications and fee-based treasury
services
o Maximize business potential through aggressive sales and marketing
o Build on asset based lending capability with small business, aircraft
related and transportation concerns
Retail Banking
================================================================================
Overview
Sells and delivers retail banking products and services to consumers and small
businesses through 385 traditional and 41 supermarket branches, as well as
telephone banking centers in N.J. and eastern Pa.
- --------------------------------------------------------------------------------
Market Penetration
o Largest deposit market share in N.J., serving 40 percent of state's three
million households
o 600 ATMs in N.J., N.Y. and Pa. including 200 off-site
o Largest N.J. issuer of Visa check cards to individuals and small
businesses; over one million debit cards outstanding
o Largest merchant bankcard processor in N.J. and among the top 40 in the
nation
- --------------------------------------------------------------------------------
Highlights of 1997
o Grew lending to small businesses over 10 percent and ranked number 22 in
nation in small business loans of up to $1 million
o Defined our trade area into six regions with regional presidents to bring
bank closer to customer base
o Processed nearly 34 million ATM transactions
o Exceeded $230 million in in-store deposits
o Launched PC Banking product, growing at approximately 2,000 PC Banking
accounts per month
- --------------------------------------------------------------------------------
Key Market Data
[The following table was depicted as a pie graph in the original]
Consumer Loan Portfolio
Auto/Leasing 22%
Unsecured Personal Loans 6%
Student Loans 2%
Credit Cards 1%
All Other 2%
Home Equity 67%
- --------------------------------------------------------------------------------
Reaching Higher,
Looking Ahead
o Increase N.J. household relationships to 50 percent
o Expand supermarket branches to 70 by year-end 1998, 100 by 2000
o Open 15 in-stores beginning in March 1998 through 1999 in Genuardi's,
upscale food retailer in Southeastern Pa. and N.J.
o Become leading small business lender in N.J. and eastern Pa.
- --------------------------------------------------------------------------------
2
<PAGE> 5
Investment Services
================================================================================
Overview
Provides investment management as well as a full range of investment products
and administrative and custodial services, including discount brokerage, to
individuals and institutions, and a wide array of insurance products for the
personal and corporate marketplace
- --------------------------------------------------------------------------------
Market Penetration
o Assets under management total $8.2 billion, $2.3 billion in 17 proprietary
Pillar Funds(R)
o Leader in Special Needs Trusts for disabled and Trust Care for seniors
o Offers life, health, disability and long-term care insurance products
o 85 Investment Counselors in Summit branches give advice on mutual funds
and annuities
- --------------------------------------------------------------------------------
Highlights of 1997
o Four star rating awarded to four Pillar Funds by Morningstar
o Introduced Summit Asset Management Account (sweeps checking account
balances into interest bearing investments)
o Acquired Corporate Dynamics, employee benefit consultant to businesses
o Upgraded 401(k) program
o Developed Women's Financial Future to build strategic relationships across
lines of business
- --------------------------------------------------------------------------------
Key Market Data
Retail Investment Sales of Mutual Funds and Annuities (In Millions)
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1993 $212
1994 197
1995 196
1996 259
1997 344
</TABLE>
- --------------------------------------------------------------------------------
Reaching Higher,
Looking Ahead
o Build trust and investment customer base in untapped Collective Bank
markets
o Merge Summit Discount Brokerage with our Investment Counselor program to
provide full-service brokerage through 100 investment counselors
o Introduce state-of-the-art asset allocation accounts
o Build mutual fund assets under management
- --------------------------------------------------------------------------------
The Private Bank
================================================================================
Overview
Offers customers a creative response to their financial needs including credit,
investments, insurance, retirement and estate planning
- --------------------------------------------------------------------------------
Market Penetration
o More private banking offices than any other bank in N.J.
o Private banking office in NYC to serve N.J., Conn. and N.Y. commuters
o Premier provider of products and services to lawyers, accountants, and
their firms; 80 percent of N.J.'s top 50 law firms bank with Summit
o Escrow control product is number one deposit product in N.J. for attorney
trust accounts
- --------------------------------------------------------------------------------
Highlights of 1997
o Opened offices in Upper Montclair and Mays Landing, N.J.
o Developed Women's Financial Future to build strategic relationships across
lines of business
o Further expanded cross-sell and referral programs with other business
lines to take advantage of large high net worth market
o Further developed "team" approach to managing private banking
relationships
- --------------------------------------------------------------------------------
Key Market Data
Private Banking
[PIE GRAPH DIVIDED INTO SIX EQUAL PARTS:
Asset Management Accounts, Escrow Control, Investment Services, Women's
Financial Future, Jumbo Mortgages, and Business & Personal Loans]
- --------------------------------------------------------------------------------
Reaching Higher,
Looking Ahead
o Open private banking and investment services offices in Ridgewood and
Edison, N.J. and Main Line area of Philadelphia
o Increase market penetration by targeting emerging affluent
o Continue to expand share of niche markets and create new ones
o Continue to team with Investment Services and other lines of business to
capitalize on cross-sell opportunities
- --------------------------------------------------------------------------------
Mortgage Banking
================================================================================
Overview
Provides complete range of full-service mortgage banking activities
- --------------------------------------------------------------------------------
Market Penetration
o Largest originator of residential mortgages in N.J. and strong presence in
eastern Pa.
o Residential mortgage asset portfolio of $5.7 billion
o In addition to own portfolio, Summit services $2.2 billion for other
investors
- --------------------------------------------------------------------------------
Highlights of 1997
o Originated over $1 billion of new residential mortgages, making Summit one
of the largest providers of home loans in our trade area
o Implemented cross-sell strategy for referrals to and from other lines of
business
o Completed the formation of an alternative delivery unit (Direct Mortgage
Group)
- --------------------------------------------------------------------------------
Key Market Data
AVERAGE RESIDENTIAL MORTGAGE LOANS (IN BILLIONS)
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1993 $3.226
1994 3.773
1995 4.805
1996 6.651
1997 5.925
</TABLE>
- --------------------------------------------------------------------------------
Reaching Higher,
Looking Ahead
o Achieve originations of $1.5 to $2.0 billion
o Expand servicing portfolio to over $9 billion
o Achieve greater market penetration by utilizing strength of Summit
franchise
o Continue to streamline mortgage process to reach goal of 24-hour approval
- --------------------------------------------------------------------------------
3
<PAGE> 6
Chairman's Message
In 1998, our challenge is to maximize the value of our existing customer
relationships by providing superior service and making cross-selling our
mandate.
"We reach higher for financial solutions" explicitly defines how we do business.
Summit Bancorp is already the leading provider of financial services to one of
the most desirable banking markets in the nation. In 1998, our challenge is to
maximize the value of our existing customer relationships by providing superior
service and making cross-selling -- increasing profitability by selling
customers additional services -- our mandate.
"Reach higher" has been a motivating theme for Summit's employees, and it
inspires our anytime, anywhere approach to customer service. Providing excellent
service is not an option in this competitive environment. It is an absolute
necessity. Building total relationships is also essential. By knowing our
customers, we can effectively cross-sell financial solutions from our broad
spectrum of retail, commercial and investment products.
Income from operations in 1997 rose 18 percent to $425 million, or $2.39
per diluted share. We achieved a return on assets of 1.47 percent and a return
on equity of 17.08 percent for the year, before non-recurring items. On December
31, 1997, we had a market capitalization of $9.3 billion and $30 billion in
assets.
Demonstrating confidence in our performance and potential for continued
success, your Board of Directors raised the cash dividend for the second time in
two years and authorized a three-for-two common stock split, effective September
24, 1997. The quarterly common stock dividend increased 12.5 percent to $.27 per
share on a post-split basis.
In another milestone, Summit was named to the S&P 500 Index. Considered a
benchmark of corporate performance, Standard & Poor's selects companies for the
Index based on strong, long-term fundamentals and viability. The compound annual
total return on your Summit Bancorp stock over the past five years was 30
percent, compared to 20 percent for the S&P.
Ten bank acquisitions since 1993 have helped us double our assets and
achieve impressive market penetration. During 1997, we completed the most recent
of these mergers: B.M.J. Financial Corp. and Collective Bancorp, with combined
assets of $6.2 billion. Marketing to these customers has already begun
contributing to revenues. We are now poised for vigorous growth in South Jersey,
particularly Atlantic County.
4
<PAGE> 7
[PICTURE: (LEFT) CHAIRMAN AND CHIEF EXECUTIVE OFFICER T. JOSEPH SEMROD AND
PRESIDENT ROBERT G. COX]
Strategic expansions in 1997 added new product capabilities and broadened
the reach of core businesses. The acquisitions of Corporate Dynamics and
Philadelphia Benefits Corp. added employee benefits consulting and brokerage
capabilities to our array of insurance services. They provide significant
opportunities to cross-sell our existing customer base and attract new business.
Our asset based lending group, under the banner of Summit Commercial, expanded
geographically with a new office in the Baltimore/Washington, D.C. area. This
extends the reach of our specialty lending capabilities and enhances our
position as one of the Northeast's largest asset based lenders.
New sales and service initiatives augment our traditional strengths. In
1997, both commercial and consumer lending benefited from aggressive selling.
Utilizing the considerable power of our branch network enabled us to realize a
23 percent increase in fee income from sales of trust and investment products.
Alternative delivery systems, such as ATMs and PC banking, are enlarging our
sales capacity and allowing customers to bank on their own terms.
Our intense focus on superior customer service has not gone unnoticed.
Commercial customers
5
<PAGE> 8
voted us "Most Admired Bank" in an independent survey of 2,000 companies
conducted recently by Business News New Jersey. Chief among the winning criteria
were: responsiveness to customers, quality of service, name recognition,
customization of services and high ethical standards.
Understanding how our customers want to bank clearly differentiates Summit
in the marketplace. Our Managing Local Markets strategy allows us to combine the
services of a major financial institution with the personal service of a local
bank. Local decision making and direct access to top management also provide
important competitive advantages.
A discussion of future strategies must include the Year 2000. Thanks to
the foresight of our technology subsidiary, we are prepared to meet the
challenges of the new millennium head on. We have maintained a single technology
platform through merger integrations. As a result, our Year 2000 costs compare
favorably with our peers, and we are ahead of regulatory deadlines.
Entering 1998, we welcome the perspective of our two new directors, Thomas
H. Hamilton and William R. Miller, who joined us from Collective Bancorp.
Formerly Chairman, President and CEO, Mr. Hamilton led Collective for 35 years.
Mr. Miller, who retired from Lenox China, Inc. as a senior vice president,
served on Collective's board since 1985. We look forward to the insights they
will provide.
It is always our goal to enhance shareholder value. In 1998, we will work
to accomplish this by:
o Aggressively seeking cross-sell opportunities both within and across
our business lines;
o Raising the perception of the Summit brand by defining us as the
region's leader in value-added financial solutions;
o Continuing to pursue new revenue streams through acquisitions and
expansion of our core businesses;
o Striving to make Summit even more responsive to the needs of an
exceptionally diverse marketplace.
In closing, we are grateful for the trust and support of our customers,
shareholders and employees as we continue to reach higher for financial
solutions in 1998.
/s/ T. Joseph Semrod
T. Joseph Semrod
Chairman and Chief Executive Officer
/s/ Robert G. Cox
Robert G. Cox
President
March 6, 1998
6
<PAGE> 9
Summit Bancorp:
The following pages describe how each of our lines of business -- commercial,
retail, investment services and private banking -- reach higher for customers'
financial solutions.
[PICTURED: SUMMIT EMPLOYEE SITTING AT A COMPUTER TAKING A CUSTOMER'S TELEPHONE
CALL.]
7
<PAGE> 10
Summit Solution:
Reaching Higher for Customers
As part of Summit's efforts to build total relationships with our customers,
investment counselors offer mutual funds, annuities, insurance and brokerage
services throughout our branch network.
Retail banking is a strong contributor to Summit's bottom line, as our 426
branches throughout New Jersey and eastern Pennsylvania closely tie us to the
region's communities. With all the advantages of a large financial institution,
we are still structured to respond like a community bank.
Retail banking targets the 450,000 companies in New Jersey and eastern
Pennsylvania with sales up to $5 million. Over 27 percent of these companies
already bank with Summit. In 1998, we'll capitalize on these existing
relationships with cross-sell initiatives. Summit has unique products tailored
to this niche including our small business line of credit, community real estate
mortgage, a check card and our newest product, the small business VISA credit
card.
Summit's Managing Local Markets (MLM) strategy focuses on selling the
right products to the right customers through the right delivery channels. Our
MLM tactics continue to fuel both consumer and small business growth.
Our market trade area is divided into six regions, each with a regional
president and senior lender. They are supported by a team of small business
lenders with authority to make loan decisions at the local level. Branches are
organized into market segments, each with distinct demographics. The result is
target marketing based on an intimate knowledge of our customer base.
We continue to shift transactional volume to more cost effective self
service channels including ATMs, PC banking, telephone banking, the Call Center
and the Internet. Summit's Internet site is both a sales and marketing tool, and
includes on-line trading through Summit's discount brokerage.
Our Customer Call Center is open 24 hours a day, seven days a week. In
1997, it handled nearly 15 million calls, a 44 percent increase over 1996, and a
100 percent increase over 1995. The significance is that customers are choosing
to do their banking remotely, and through a less expensive automated option.
Forty percent of all loan applications come through the Call Center, and our
goal is 70 percent or more by the year 2000. This drives down costs and improves
customer turn around time.
Summit is the region's largest player for in-store banking. At year end,
we had 41 in-store branches primarily in Pathmark, A&P and ShopRite stores. We
just signed an agreement with Genuardi's, an upscale food retailer in
Southeastern Pennsylvania and New Jersey, to open 15 in-stores beginning this
March through 1999. We expect to have 70 supermarket branches by year-end 1998,
100 by the year 2000.
As a result of our alternative delivery initiatives, we have closed or
sold 24 branches unrelated to mergers over the past two years. During 1998, we
expect to consolidate another 15.
One product that has been very popular with old and new Summit customers
is Preferred Banking. Customers can link deposit and loan accounts to avoid
monthly fees and receive a combined monthly statement.
Auto finance generated $600 million in new loans and leases in 1997 by
working with a network of over 400 dealers throughout our region. In retail
banking, Summit's product leadership and market differentiation will be the
driving force in achieving growth in 1998.
8
<PAGE> 11
[PICTURE: SUMMIT EMPLOYEE DISCUSSING INVESTMENT OPPORTUNITIES WITH A CUSTOMER]
[PICTURE: BUILDING AT MORAVIAN COLLEGE IN BETHLEHEM, PA]
Summit has a strong presence in eastern Pennsylvania and is proud to have a
long-term relationship with Moravian College in Bethlehem.
9
<PAGE> 12
[PICTURE: SUMMIT EMPLOYEE AT A CONSTRUCTION SITE LOOKING AT PROGRESS]
[PICTURE: SKY VIEW OF THE NEW ATLANTIC CITY CONVENTION CENTER AND ATLANTIC CITY
CONVENTION HALL]
Summit was designated the official bank of The New Atlantic City Convention
Center and Atlantic City Convention Hall where we have exclusive rights to
provide ATM and other services.
10
<PAGE> 13
Summit Solution:
Helping Our Region Grow
Summit has the knowledge and resources to help clients' businesses grow. An
example is the financing to build Raytheon Engineers & Constructors, Inc.'s new
headquarters.
Summit is recognized as the largest commercial and industrial lender
headquartered in New Jersey. A thorough understanding of our markets,
consistency in management and the ability to make loan decisions locally have
made us a leader. We have maintained that position by having the knowledge and
resources to help our clients' businesses grow. Our goal is always to build a
relationship with clients and provide complete financial solutions. What
separates Summit from the competition is our ability to customize solutions that
not only include traditional financing, but also a wide spectrum of
non-traditional approaches, previously available only from Wall Street to very
large corporations. Another Summit advantage is that our most senior officers
regularly meet with clients and share their many years of banking expertise.
We specialize in middle market companies with annual sales between $5
million and $250 million, where personal relationships and specialized services
are customary requirements. In New Jersey and eastern Pennsylvania there are
over 17,000 middle market companies. We also enjoy significant relationships
with many of the Fortune 1000 companies. Our Business Banking division serves
the unique needs of companies with annual sales of $5 million to $15 million,
providing a blend of sophisticated products, efficient services and professional
attention.
Our relationship managers provide expertise in several specialized
industries. One example is the health care industry where we focus on
relationships with hospitals, larger medical practices and long-term care
facilities. In addition, our reputation in communications -- newspapers, radio
and television -- is nationally recognized. We also continue to expand our
portfolio in the transportation/maritime, food processing and delivery
industries.
Summit is also acknowledged for its expertise in specialty lending. Summit
Commercial Corp. (SCC) is the non-bank commercial finance subsidiary of the
company, and is one of the largest asset based lenders in the Northeast with
offices in New Jersey, New York City, the Philadelphia area, Stamford,
Connecticut and, most recently, the Baltimore/ Washington, D.C. area. SCC
specializes in asset based lending, international trade finance, transportation
finance including aircraft lending, equipment leasing and structured finance. A
major portion of its business is related to mergers, acquisitions and
restructurings.
Summit has increased efforts to give value added services to our
commercial customers that also generate fee-based income. Summit's Corporate
Finance specialists provide capital raising assistance and funding for public
and private companies. These services include private placements, mezzanine
financing, and mergers and acquisitions.
Our knowledge of New Jersey and eastern Pennsylvania has helped to make
Summit the leading construction lending bank in our region. We understand the
development business, and are able to provide quick response time and expedite
credit approval. Summit's commercial real estate division provides a variety of
real estate financing services including commercial mortgages, construction
loans, bridge loans and credit lines.
11
<PAGE> 14
Summit Solution:
Partnering with Customers for Financial Results
Summit bankers help our clients realize their financial objectives. Here our
investment professionals explain 401(k) options at Merrimac Industries, Inc.
Investment Services and The Private Bank have always been important
interest and non-interest income areas for Summit. These two lines of business
continue to grow and operate as a team to capitalize on cross-sell
opportunities.
Investment Services manages over $8 billion of investment portfolios for
individuals, corporations, trusts, estates, charities, endowments, foundations
and our mutual fund family, the Pillar Funds(R). We have a broad product line
with 17 proprietary mutual funds, and four of our Pillar Funds enjoy four star
ratings from Morningstar, a national rating service.
The Pillar money market funds are also offered in Summit's Asset
Management (SAM) Account, a checking account where excess balances are swept
daily into an interest-bearing investment. In April 1998, clients will be able
to link the SAM account to a Summit brokerage account and be fully invested with
immediate liquidity.
Known for traditional trust, estate and investment services, Summit has
also focused on niches that meet customer needs. One example is our Special
Needs Trust for the disabled, where we are recognized as a leader by the legal
community. A second example is Summit's Trust Care account for seniors, where we
see demand increasing as the population ages.
In the past, Summit has offered brokerage services in two distinct ways.
This will change in 1998 when we combine our 85 investment counselors who advise
retail customers on mutual funds and annuities with our discount brokers who
execute individual security transactions at low cost.
In 1997, we expanded our insurance services with the acquisition of
Corporate Dynamics, an insurance consultant and broker that provides health and
other employee benefits to businesses.
Investment Services and The Private Bank have created a specialized unit
called Women's Financial Future (WFF) to help Summit build strategic
relationships with women. WFF is referring business throughout the company,
particularly in investment management, private banking and small business.
What differentiates The Private Bank from the competition is that it
offers our clients all the products of a large financial institution with the
total service of a community bank, including access to our most senior
executives. The Private Bank provides a host of credit products for the affluent
sector including jumbo mortgages for primary residences or vacation homes, stock
option loans, and commercial real estate loans for owner-occupied or investment
properties.
Summit is the bank of choice in the professionals market serving lawyers,
accountants and their firms. Over 80 percent of the top 50 law firms in New
Jersey bank with us. Our escrow control product is number one in the state for
attorney trust accounts. Summit proudly sponsors the Centennial Year of the New
Jersey Society of Certified Public Accountants.
During 1997 in conjunction with our Collective merger, we opened two new
private banking and investment services offices, and in 1998 three additional
sites in New Jersey and eastern Pennsylvania will be opened.
12
<PAGE> 15
[PICTURE: SUMMIT EMPLOYEES AND CUSTOMERS DISCUSSING THE SOLUTIONS TO REALIZE
THEIR FINANCIAL OBJECTIVES]
[PICTURE: TOP OF THE CAPITAL BUILDING IN TRENTON, NJ]
Summit is a recognized market leader in providing banking services to all levels
of government.
13
<PAGE> 16
[PICTURE: SUMMIT EMPLOYEE WITH A GROUP OF HIGH SCHOOL STUDENTS IN A GYM]
[PICTURE: LIBERTY SCIENCE MUSEUM]
Summit co-sponsors a program to take 3,000 students from Newark's 29 school
districts to the Liberty Science Museum.
14
<PAGE> 17
Summit Solution:
Focusing On Our Communities
People in our communities are not only our customers, they're our neighbors and
friends. We're proud of our long relationship with the Hopatcong Borough school
system.
Summit bankers develop strong relationships in the communities we serve.
We understand that healthy, prosperous communities are not only good for the
economy, but are essential components in supporting our own business growth. Our
loans and investments help create stable neighborhoods, promote new businesses
and foster economic development.
As part of the largest bank headquartered in New Jersey, Summit's
Government Banking Division is naturally a leading provider of banking products
and services to local government. In fact, we have significant deposit
relationships with over 500 local government entities throughout New Jersey and
eastern Pennsylvania. These include counties, municipalities, school districts
and local and regional authorities.
Government account relationships are a meaningful source of cost-effective
core deposits. Summit has targeted this important sector and has partnered with
all levels of government to meet the demands of the publics they serve. We
provide our local government accounts a broad array of banking products and
services.
Summit's experienced staff understands not only banking, but also
government and public administration issues. With this knowledge, they are able
to match the right financial product or service to specific needs of local
government. In addition, Government Banking can refer its customer base to each
of our lines of business and cross-sell a number of Commercial, Retail and
Investment Services to different areas of government.
We have been effectively meeting the financial needs of local governments
for many years. Through our recent strategic acquisitions, we not only expanded
our customer base, but have retained and nurtured the government relationships
of the banks we acquired. In 1998, Summit will continue to expand our government
business by meeting the changing needs and priorities of our local governments.
An important component of Government Banking is government relations.
Here, we work with the various business, trade and government organizations to
promote economic development in the state, counties and municipalities.
Another way we support our local communities and expand market share is
through mortgage financing. Summit is the largest bank mortgage originator in
New Jersey and has a strong presence in eastern Pennsylvania. In 1997, we
implemented cross-sell strategies for referrals from and to other lines of
business. During 1998, we will utilize the strength of Summit's franchise to
achieve greater market penetration, and will continue to streamline the mortgage
process toward our goal of approvals in 24 hours.
The people who live in our communities are not only our customers, they
are our neighbors and friends. We operate in a region that enjoys an
exceptionally rich multicultural population. Summit believes that our company
should reflect the global mosaic of the customers we serve, and we are committed
to creating an environment that encourages and values these differences. We
believe this makes us a better, stronger and more competitive company.
15
<PAGE> 18
Board of Directors
Summit Bancorp
S. Rodgers Benjamin
Chairman and CEO Flemington
Fur Company.
Director since 1996.
Member Executive, Compensation, Capital
and Dividend, Acquisition Committees.
Robert L. Boyle
Representative William H.
Hintelmann Firm.
Director since 1986.
Publisher Emeritus of The Dispatch.
Director Summit Bank.
Member Capital and Dividend,
Nominating, Audit Committees.
James C. Brady, Jr.
Partner Mill House Associates, L.P.
Director since 1996.
Director Summit Bank.
Chair Risk Management Committee.
Member Acquisition, Audit Committees.
John G. Collins
Vice Chairman Summit Bancorp.
Director since 1986.
Vice Chairman and Director Summit Bank.
Member Acquisition Committee.
Robert G. Cox
President Summit Bancorp.
Director since 1996.
President and Director Summit Bank.
Member Executive Committee.
T.J. Dermot Dunphy
Chairman and CEO Sealed Air Corporation.
Director since 1984.
Director Summit Bank.
Chair Executive, Compensation
Committees. Member Acquisition,
Nominating, Risk Management
Committees.
Anne Evans Estabrook
Owner Elberon Development Co.
Director since 1994.
Director Summit Bank.
Member Capital and Dividend,
Nominating, Audit Committees.
Elinor J. Ferdon
Volunteer Professional.
National President Girl Scouts of U.S.A.
Director since 1984.
Director Summit Bank.
Chair Audit Committee. Member
Executive, Compensation, Risk
Management Committees.
Thomas H. Hamilton
President and Chief Executive Officer
Collective Bank.
Director since 1997.
Director Collective Bank.
Fred G. Harvey
Vice President E&E Corporation.
Director since 1988.
Director Summit Bank, Pennsylvania.
Chair Capital and Dividend Committee.
Member Executive, Compensation, Risk
Management Committees.
John R. Howell
Vice Chairman Summit Bancorp.
Director since 1988.
Chairman, President, CEO and Director
Summit Bank, Pennsylvania.
Member Risk Management Committee.
Francis J. Mertz
President Fairleigh Dickinson University.
Director since 1986.
Director Summit Bank.
Member Nominating, Risk Management,
Audit Committees.
George L. Miles, Jr., CPA
President and CEO WQED Pittsburgh.
Director since 1994.
Director Summit Bank.
Member Executive, Compensation,
Capital and Dividend, Risk
Management Committees.
William R. Miller
Former Senior Vice President of
Manufacturing Lenox China, Inc.
Director since 1997.
Director Collective Bank.
Henry S. Patterson II
Former President E'town Corporation.
Director since 1971.
Director Summit Bank.
Member Executive, Compensation, Capital
and Dividend, Acquisition, Risk
Management, Audit Committees.
T. Joseph Semrod
Chairman and CEO Summit Bancorp.
Director since 1981.
Chairman, CEO and Director Summit Bank.
Member Executive Committee.
Raymond Silverstein, CPA
Consultant Alloy, Silverstein, Shapiro,
Adams, Mulford & Co., P.C.
Director since 1991.
Director Summit Bank.
Chair Nominating Committee. Member
Executive, Compensation, Capital and
Dividend, Acquisition Committees.
Orin R. Smith
Chairman and CEO Engelhard Corporation.
Director since 1996.
Director Summit Bank.
Member Capital and Dividend, Acquisition
Nominating, Audit Committees.
Joseph M. Tabak
President and CEO JPC Enterprises, Inc.
Director since 1987.
Director Summit Bank.
Chair Acquisition Committee. Member
Nominating, Audit Committees.
Douglas G. Watson
President and CEO Novartis Corporation.
Director since 1996.
Member Executive, Compensation,
Nominating Committees.
16
<PAGE> 19
[PICTURE: BOARD OF DIRECTORS]
Group 1 from left to right
Douglas G. Watson
Thomas H. Hamilton
George L. Miles,Jr.
T. Joseph Semrod
Group 2
Orin R. Smith
Robert L. Boyle
Group 3
William R. Miller
John R. Howell
S. Rodgers Benjamin
Group 4
Anne Evans Estabrook
Joseph M. Tabak
Group 5
Raymond Silverstein
Fred G. Harvey
T. J. Dermot Dunphy
Group 6
Robert G. Cox
Elinor J. Ferdon
James C. Brady, Jr.
Henry S. Patterson II
Group 7
John G. Collins
Francis J. Mertz
17
<PAGE> 20
Community Development
[PICTURE: SUMMIT EMPLOYEES DISCUSSING COMMUNITY DEVELOPMENT]
Community development is a major component of Summit Bank's overall business
strategy. Through our Partners in PRIDE (Programs to Initiate Development)
program, Summit has financed the construction of affordable housing, funded
community redevelopment, sponsored urban and minority business growth, and
facilitated many projects that benefit our communities.
Our partners include local and state government agencies, nonprofit groups,
faith-based organizations, community members and other banks. It is the power of
these partnerships that enables Summit to reach higher for all of its
communities.
Summit was recognized for its extensive efforts by receiving The Federal Home
Loan Bank of New York's Award for Excellence in Community Lending; Governor
Whitman's Excellence in Housing Award; The Women's Fund of New Jersey's Opening
Doors Award; and the New Jersey Corporate Counsel Association's Diversity Award.
In addition, many Summit staff members received individual recognition from a
variety of organizations for their efforts in our communities.
AFFORDABLE HOUSING
[PICTURE: HOUSE]
o Originated 1,200 purchase money mortgages totaling $111 million to
low-and-moderate-income households in N.J. and Pa.
o Funded two credit counseling offices for New Jersey Citizen Action which
resulted in over 150 successful mortgage applications
o Worked with the Lehigh County Housing Authority to provide affordable
mortgages to low-and-moderate-income households in Lehigh Valley
o Closed 15 affordable mortgages through Allentown's Neighborhood Housing
Services
SMALL BUSINESS
[PICTURE: BAKER]
o Originated 1,000 small business loans totaling $130 million in
low-and-moderate-income neighborhoods
o Participated in government sponsored loan programs such as the Small
Business Administration and New Jersey Economic Development Association
o Collaborated with the New Brunswick Micro-Loan Program, the Paterson Small
Business Loan Program and the Cooperative Business Assistance Corporation
in Camden
o Invested in the Chester and Delaware County MicroLoan Fund which addresses
business development and capital needs of new and existing businesses
HOME IMPROVEMENT
[PICTURE: PAINTER CAULKING AROUND A WINDOW]
o Originated 1,700 home improvement loans totaling $16 million to
low-and-moderate-income households
o Provided the opportunity for renters to improve their dwellings and
establish traditional credit histories through our Signature Loan Program
o Co-sponsored lead paint remediation seminars with the New Jersey
Department of Community Affairs in Irvington and Paterson
COMMUNITY DEVELOPMENT
[PICTURE: SUMMIT EMPLOYEES RECYCLING]
o Provided $60 million to support community development activities
throughout N.J. and Pa.
o Participated in the first loan under New Jersey Governor Whitman's Urban
Home Ownership Recovery Program which financed 25 two-family homes in
Newark, N.J.
o Provided rehabilitation and permanent financing for the Latin American
Economic Development Association's building in Camden, N.J. Facility
houses a Summit Bank branch, the Cooperative Business Assistance
Corporation in Camden and Mercy Health Care
o Established lending relationship with Ken-Crest Centers, a Pennsylvania
nonprofit corporation that promotes the welfare of the mentally challenged
INVESTMENTS
[PICTURE: SECURITIES]
o Provided a $2 million equity investment in a 38-unit senior citizen
apartment complex in Reading, Pa.
o Invested $2 million in New Jersey Housing Opportunity Fund II which
invests in low-income rental housing throughout N.J.
o Donated land and buildings in Franklin Township to the First Baptist
Church of Lincoln Gardens which will sponsor a charter school, offer
college courses through Raritan Valley Community College, and provide
space to social service organizations
o Contributed funds to nonprofit organizations which provide a variety of
services to low-and moderate-income communities
SPECIAL BANKING SERVICES
[PICTURE: TWO HANDS SHAKING]
o Created the Home Buyers Certificate of Deposit which provides special
benefits to first-time home buyers
o Conducted small business and home ownership seminars throughout N.J. and
Pa.
o Sponsored and administered nonprofit applications to the Federal Home Loan
Banks of New York and Pittsburgh for Affordable Housing Program grants to
obtain grant funding for affordable housing projects
o Encouraged Summit personnel to volunteer in variety of projects affecting
our communities including: Habitat for Humanity, Christmas in July, Career
Closet at the Urban Women's Center in Trenton, School Savers Program in
Pennsylvania and the Liberty Science Museum
18
<PAGE> 21
FINANCIAL REVIEW Summit Bancorp and Subsidiaries
================================================================================
Basis of Presentation
================================================================================
On August 1, 1997, Summit Bancorp (the Company) completed the acquisition of
Collective Bancorp, Inc. (Collective). This acquisition was accounted for as a
pooling of interests and all financial information has been restated. On August
20, 1997, the Board of Directors approved a three-for-two common stock split,
which was paid on September 24, 1997. All share data has been retroactively
adjusted for the common stock split.
Additionally, since October 1996, Summit Bancorp completed three acquisitions
that affect comparisons to prior year financial information. Two were purchase
acquisitions; Continental Bancorporation and Central Jersey Financial
Corporation (Central Jersey) which were completed on October 1, 1996, and
December 7, 1996, respectively. On March 1, 1997, the acquisition of B.M.J.
Financial Corp. (B.M.J.) was completed and has been reflected in the financial
statements from January 1, 1997.
The Financial Review should be read in conjunction with the Consolidated Average
Balance Sheets on pages 32 and 33, and the Consolidated Financial Statements and
Notes beginning on page 34, and the Consolidated Summary of Selected Financial
Data on pages 54 and 55.
Summary of Performance
================================================================================
For the year ended December 31, 1997, net income was $371.0 million, an increase
of $87.3 million, or 30.8%, compared to $283.7 million in 1996. On a per share
basis, net income increased $.43 to $2.12 per share compared to $1.69 per share
in 1996. Diluted net income for 1997 was $2.09 per share, compared to $1.67 per
share in 1996.
The results for 1997 include merger-related restructuring charges of $83.0
million ($53.7 million or $.31 per share, after tax) associated with the
Collective and B.M.J. acquisitions. Net income for 1996 included merger-related
restructuring charges of $110.7 million ($70.0 million or $.42 per share, after
tax) and a one-time Savings Association Insurance Fund (SAIF) assessment of
$11.1 million ($6.7 million or $.04 per share, after tax). The 1996
restructuring charges were recorded for the acquisitions of The Summit
Bancorporation, The Flemington National Bank and Trust Company, Garden State
Bancshares, Inc. and a supermarket branch initiative.
Before these non-recurring items, net income increased 17.8% to $424.7 million,
or $2.43 per share for the year ended December 31, 1997, compared to $360.4
million, or $2.15 per share for 1996. Diluted net income per share before
non-recurring items was $2.39 for 1997, compared to $2.12 the prior year.
Summit Bancorp's performance for 1997 was highlighted by loan growth, continued
success in controlling expenses while integrating recent mergers, and an
improvement in asset quality ratios. These factors contributed to increases in
key profitability measures. Excluding non-recurring items, return on average
assets increased to 1.47%, compared to 1.32% the previous year, and return on
average common equity rose to 17.08% versus 16.48% for 1996. In addition, the
efficiency ratio improved to 50.28% for 1997 from 52.11% in 1996.
The following chart illustrates the growth in net income before non-recurring
items for the past five years.
NET INCOME BEFORE NON-RECURRING ITEMS (IN MILLIONS)
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1993 $189.845
1994 249.548
1995 300.412
1996 360.419
1997 424.745
</TABLE>
Average total loans increased $1.4 billion, or 8.1%, of which $861.1 million was
core loan growth and $525.0 million was from acquisitions. The commercial and
consumer loan portfolios represented $975.6 million of the total loan growth.
Net interest income rose $91.8 million, or 8.7%, to $1.1 billion primarily as a
result of loan growth and a $274.7 million increase in non-interest bearing
deposits.
In addition, non-interest income rose $41.8 million, or 16.1%, to $301.9 million
as a result of increased fee-based income on loans, deposits, trust and other
accounts. Non-interest expenses, excluding non-recurring charges, increased
$39.9 million, or 5.7%, to $733.7 million primarily attributable to
acquisitions.
Continued improvement in asset quality ratios reflected the decline in
non-performing assets. During 1997, non-performing assets were reduced by $66.2
million, or 40.0%, to $99.3 million. Non-performing assets as a percentage of
total loans and other real estate owned declined to 0.53% at year-end 1997 from
0.95% at the prior year end. Reflecting this improvement, the provision for loan
losses was reduced $4.9 million to $59.1 million in 1997.
19
<PAGE> 22
Financial Condition
================================================================================
Interest-Earning Assets and Interest-Bearing Liabilities:
Average interest-earning assets totaled $27.2 billion in 1997, an increase of
$1.8 billion, or 7.3%, compared to 1996, reflecting an increase in loans and
securities. Total loans increased $1.4 billion, or 8.1%, to average $18.5
billion, while total investment securities increased $459.0 million, or 5.6%, to
average $8.6 billion, compared to last year.
Average interest-bearing liabilities totaled $21.9 billion in 1997, an increase
of $1.1 billion, or 5.3%, compared to 1996. This increase was attributable to a
$416.0 million increase in interest-bearing deposits, primarily due to
acquisitions, and a $695.9 million increase in total borrowed funds. This growth
funded the increase in interest-earning assets.
Securities:
Securities available for sale may be sold in response to changing market and
interest rate conditions. These securities are reported at fair value; with
unrealized gains and losses, net of tax, included as a separate component of
shareholders' equity. Securities available for sale averaged $3.8 billion during
1997 compared to $2.6 billion in 1996, an increase of $1.2 billion.
During 1997, several strategies were employed, which included reinvesting cash
flows from held-to-maturity securities into securities available for sale, and
the realignment of investment portfolios of acquired banks in accordance with
Summit's asset management approach. Approxi-mately $482.0 million of maturities
from the held-to-maturity portfolio were reinvested in securities available for
sale, and $805.9 million of Collective and B.M.J. held-to-maturity securities
were transferred to securities available for sale.
The available-for-sale portfolio consists of U.S. Government and Federal agency
securities, equity securities and other securities, primarily corporate
collateralized mortgage obligations (CMOs). During 1997, U.S. Government and
Federal agency securities averaged $3.2 billion compared with $2.1 billion in
1996. Other securities averaged $558.1 million during 1997, compared with $567.7
million in the prior year.
During 1997, $820.2 million of securities available for sale were sold for a net
gain of $5.6 million. Maturities for 1997 amounted to $1.0 billion. At December
31, 1997, there were net unrealized gains of $35.3 million on securities
available for sale compared to $11.4 million at the prior year end.
At December 31, 1997, the average estimated life of securities available for
sale, adjusted for historical prepayments on mortgage-backed securities, was 4
years, 6 months. The average yield on this portfolio increased 12 basis points
to 6.46% in 1997, compared to 6.34% in 1996. This increase is primarily
attributable to the higher interest rate environment. The average prime rate
increased approximately 17 basis points to average 8.44% in 1997, compared to
8.27% in 1996.
Securities held to maturity are carried at amortized historical cost and consist
of those securities for which there is a positive intent and ability to hold to
maturity. Securities held to maturity averaged $4.9 billion during 1997, a
decline of $711.8 million, or 12.8%, from the 1996 average of $5.6 billion. At
December 31, 1997, these securities totaled $4.2 billion, a decrease of $1.2
billion, or 23.3%, from the $5.4 billion at year-end 1996.
The held-to-maturity portfolio consists primarily of U.S. Government and Federal
agency securities which averaged $3.5 billion and other securities, principally
corporate CMOs, which averaged $1.1 billion. The average estimated life of
securities held to maturity, adjusted for historical prepayments on
mortgage-backed securities, was 2 years, 8 months at December 31, 1997. The
average yield on this portfolio increased 4 basis points during 1997 to 6.50%,
compared to 6.46% in 1996.
Loans:
The following chart illustrates the growth in average total loans for the past
five years.
TOTAL AVERAGE LOANS (IN BILLIONS)
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1993 $13.304
1994 14.120
1995 15.569
1996 17.066
1997 18.452
</TABLE>
20
<PAGE> 23
================================================================================
Total loans averaged $18.5 billion during 1997, an increase of $1.4 billion, or
8.1%, compared to $17.1 billion in 1996. On average commercial loans increased
$386.2 million, as commercial mortgage loans grew $136.5 million, residential
mortgage loans increased $274.0 million, and consumer loans rose $589.4 million.
The average yield on the total loan portfolio increased to 8.19% in 1997,
compared to 8.14% in 1996.
Commercial and industrial (C & I) loans totaled $5.9 billion at December 31,
1997, an increase of $979.5 million, or 20.0%, over 1996. Most of this growth
occurred in the last six months of 1997. During 1997, asset based, large
corporate and middle market lending contributed to the growth in C & I loans
during the year. This portfolio continued to mirror the business diversification
of the region with no industry concentrations greater than 10% of total C & I
loans. Construction and development loans amounted to $369.5 million at December
31, 1997, compared to $316.2 million at year-end 1996. The average yield on the
commercial portfolio increased 16 basis points to 8.52% in 1997 from 8.36% the
prior year.
Commercial mortgage loans averaged $2.8 billion for 1997, an increase of $136.5
million, or 5.1%, from 1996. Generally, these loans represent owner-occupied or
investment properties and complement a broader commercial lending relationship.
At December 31, 1997, these loans amounted to $2.7 billion, an increase of $79.4
million, or 3.0%, from 1996. The average yield on commercial mortgage loans was
8.76% for 1997 compared to 8.71% for 1996, an increase of 5 basis points.
During 1997, residential mortgage loans averaged $5.9 billion, up $274.0
million, or 4.8%, from 1996. Contributing to this increase were $240.0 million
of residential mortgage loans from acquired institutions that were not reflected
in 1996.
At December 31, 1997, residential mortgage loans totaled $5.7 billion, a
decrease of $233.3 million, or 4.0%, compared to the prior year end. This
decline was due, in part, to $140.5 million in loan sales, predominately
adjustable rate mortgages, during the third quarter of 1997. These loans were
sold as part of a strategy to mitigate prepayment risk within the portfolio.
Mortgage loan originations during 1997 totaled $1.0 billion, compared to $1.3
billion in 1996. Residential mortgage loans held for sale totaled $75.7 million
at December 31, 1997, versus $50.0 million at year-end 1996. Sales of loans in
the secondary market, generally fixed-rate loans, were $444.1 million compared
to $481.6 million in 1996. The average yield on residential mortgage loans was
7.42% for 1997, compared to 7.46% for 1996.
Consumer loans averaged $4.1 billion for the year, an increase of $589.4
million, or 17.0%, from 1996. The growth in this portfolio occurred primarily in
home equity loans. As a result of successful promotions, and acquisitions, home
equity loans increased $395.3 million, or 16.9%, totaling $2.7 billion at
year-end 1997. Automobile loans totaled $1.1 billion as of December 31, 1997, an
increase of $181.8 million, or 20.3%, over year-end 1996 and reflected growth in
indirect lending and leasing activity. Due to competitive pricing of these
products, the average yield earned on the consumer loan portfolio declined 1
basis point to 8.46% in 1997, compared to 8.47% earned in 1996.
The following table shows the expected life of total loans at December 31, 1997,
and segregates loans with fixed interest rates from those with floating or
adjustable interest rates.
- -------------------------------------------------------------------------------
Loan Maturities
<TABLE>
<CAPTION>
Within 1 to 5 After
(In millions) 1 Year Years 5 Years Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and industrial ................. $ 2,586 $ 3,037 $ 261 $ 5,884
Construction and development .............. 178 188 4 370
Commercial mortgages ...................... 413 1,530 761 2,704
Residential mortgages ..................... 1,329 2,209 2,133 5,671
Consumer loans ............................ 1,115 2,166 978 4,259
- -------------------------------------------------------------------------------
Total ................................ $ 5,621 $ 9,130 $ 4,137 $18,888
===============================================================================
Amount of loans based upon:
Fixed interest rates .................... $ 2,024 $ 4,610 $ 1,982 $ 8,616
Floating or adjustable interest rates ... 3,597 4,520 2,155 10,272
- -------------------------------------------------------------------------------
Total ................................ $ 5,621 $ 9,130 $ 4,137 $18,888
===============================================================================
</TABLE>
The table below presents the classification of the loan portfolio by major
category at December 31 for each of the past five years. Total loans have grown
$5.3 billion, or 39.4%, since December 31, 1993, primarily in C&I and
residential mortgage loans.
- -------------------------------------------------------------------------------
Year-End Loans
<TABLE>
<CAPTION>
(In millions) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and industrial ........ $ 5,884 $ 4,905 $ 4,978 $ 4,772 $ 4,089
Construction and development...... 370 316 437 693 933
- -------------------------------------------------------------------------------
Commercial ..................... 6,254 5,221 5,415 5,465 5,022
Commercial mortgage .............. 2,704 2,624 2,427 2,868 2,442
Residential mortgage ............. 5,671 5,905 5,331 3,833 3,516
Consumer ......................... 4,259 3,636 3,240 2,883 2,572
- -------------------------------------------------------------------------------
Total loans .................... $18,888 $17,386 $16,413 $15,049 $13,552
===============================================================================
</TABLE>
21
<PAGE> 24
================================================================================
Deposits:
During 1997, deposits continued to be impacted by the investors' desire for
higher-yielding investment alternatives such as mutual funds, annuities, and the
stock market. Average total deposits were $22.0 billion for 1997 compared to
$21.3 billion for 1996, an increase of $690.7 million, or 3.2%. This increase in
deposits was primarily due to acquisitions, with the most significant growth in
demand and savings deposits.
Average demand deposits were $4.1 billion for 1997, an increase of $274.7
million, or 7.1%, from the prior year. Demand deposit growth occurred in both
business and personal accounts.
The following chart illustrates the growth in average demand deposits for the
past five years.
AVERAGE DEMAND DEPOSITS (IN BILLIONS)
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1993 $3.071
1994 3.375
1995 3.482
1996 3.857
1997 4.131
</TABLE>
Savings deposits, which include interest-bearing checking, money-market and
savings accounts, increased $387.4 million, or 4.2%, to average $9.6 billion
during 1997. Money market accounts increased $236.7 million and interest-bearing
checking accounts increased $239.3 million, offset by a decline of $88.6 million
in other savings accounts. The average cost of savings deposits increased 7
basis points to 2.63% in 1997, compared to 2.56% in 1996.
Time deposits, which consist primarily of retail certificates of deposit,
increased $28.7 million, or 0.4%, during 1997 and averaged $7.3 billion. The
average cost of time deposits increased 7 basis points to 5.20% in 1997 from
5.13% in 1996.
Commercial certificates of deposit $100,000 and over are primarily used as a
funding source to support balance sheet growth and as an alternative to borrowed
funds. These deposits averaged $891.9 million during 1997, unchanged from a year
ago. The cost of these deposits increased 4 basis points during the year to
5.41% compared with 5.37% in 1996.
Other Borrowed Funds:
Other borrowed funds generally include securities sold under agreements to
repurchase, Federal funds purchased, commercial paper, Federal Home Loan Bank
(FHLB) borrowings, and other short-term borrowings. During 1997, other borrowed
funds increased $239.0 million, or 8.1%, to average $3.2 billion. These
borrowings are a source of funds to support growth in the loan and securities
portfolios. The average cost of other borrowed funds rose 22 basis points during
the year to 5.50% compared with 5.28% in 1996.
Commercial paper, a funding source for the Parent Corporation, averaged $45.4
million during 1997 compared with $44.5 million in 1996. The average cost of
commercial paper increased 16 basis points to 5.42% in 1997 from 5.26% in 1996.
The table below summarizes certain short-term borrowing information for each of
the past three years.
- --------------------------------------------------------------------------------
Short-Term Borrowings
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
(In millions) Amount Rate Amount Rate Amount Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities sold under agreements to repurchase:
At December 31 .............................. $2,689 5.42% $2,263 5.36% $1,694 5.76%
Average during year ......................... 2,427 5.44 2,082 5.13 1,932 5.49
Maximum month-end balance during year ....... 2,780 -- 2,299 -- 2,024 --
Federal funds purchased:
At December 31 .............................. $ 655 5.84% $ 200 6.22% $ 201 5.57%
Average during year ......................... 473 6.02 591 5.84 254 5.85
Maximum month-end balance during year ....... 699 -- 1,187 -- 443 --
=======================================================================================================
</TABLE>
22
<PAGE> 25
================================================================================
Long-Term Debt:
Long-term debt averaged $887.2 million for 1997, an increase of $456.9 million,
or 106.2%, from 1996. At year-end 1997, long-term debt totaled $1.0 billion, an
increase of $351.8 million, or 50.6%, compared to December 31, 1996. This
increase was due to additional long-term borrowings of $214.3 million from the
FHLB and a $150.0 million issuance of capital trust pass-through securities
(capital securities). The increase in long-term debt was to provide
matched-maturity funding for cetain loans and investments.
FHLB borrowings that are classified as long-term debt include borrowings with an
original maturity greater than one year. At December 31, 1997, FHLB borrowings
totaled $640.7 million, compared to $426.4 million the prior year.
In the first quarter of 1997, Summit Bancorp, through the formation of a
wholly-owned special purpose subsidiary, Summit Capital Trust I, issued $150.0
million of capital securities. The proceeds from the issuance of the capital
securities were invested in securities that provided a yield comparable to the
8.40% dividend on the capital securities. The capital securities were issued as
an inexpensive form of Tier I capital. The dividends paid to the holders of the
trust securities are deductible for income tax purposes.
Certain long-term debt agreements contain limitations on the amount of
additional funded debt that can be assumed. At December 31, 1997, under the most
restrictive debt covenants, the amount of additional funded debt that could have
been incurred was $725.4 million. At December 31, 1997, long-term debt totaling
$189.6 million qualified as Tier II capital for risk-based capital purposes. For
additional information on long-term debt, see Note 10 of the Notes to
Consolidated Financial Statements.
Shareholders' Equity and Dividends:
Summit Bancorp has a policy of maintaining a strong capital position. The
maintenance of a strong capital base promotes investor confidence, enhances the
flexibility to capitalize on business growth and acquisition opportunities and
to serve the needs of depositors and creditors.
At year-end 1997, shareholders' equity was $2.6 billion, an increase of $321.6
million, or 14.0%, compared to the prior year. Contributing to this increase
were retained profits of $194.5 million, $68.4 million of capital from the
acquisitions, and $44.0 million due to common stock issuance from stock plans.
Book value per common share rose 8.7% to $14.79, compared to $13.61 for the
prior year.
As a result of continued earnings improvement and capital levels in excess of
the "well capitalized" status under regulatory requirements, the quarterly
dividend paid on common stock was increased from $.24 per share to $.27 per
share during the third quarter of 1997. Common stock dividends declared totaled
$1.02 per share for 1997 compared to $.90 for 1996, an increase of 13.3%.
The following chart illustrates the growth in total average equity for the past
five years.
TOTAL AVERAGE EQUITY (IN BILLIONS)
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1993 $1.625
1994 1.768
1995 1.966
1996 2.212
1997 2.487
</TABLE>
On August 20, 1997, the Board of Directors approved a three-for-two common stock
split, which was paid on September 24, 1997, to shareholders of record on
September 3, 1997. In connection with the stock split, the Company increased the
number of authorized shares of common stock from 260 million to 390 million and
preferred stock from 4 million to 6 million, and decreased the par value of the
common stock from $1.20 per share to $.80 per share. Additionally, all share
data has been adjusted for the common stock split.
The market price of the common stock was $52.88 at December 31, 1997, compared
to $29.17 the prior year end. The common stock of Summit Bancorp is traded on
the New York Stock Exchange under the symbol SUB. The quarterly market price
ranges and dividends declared per common share for the last two years are shown
on page 59.
Summit Bancorp and its bank subsidiaries are subject to various regulatory
capital requirements administered by the Federal Reserve Board and Federal
Deposit Insurance Corporation. For additional information on regulatory capital,
see Note 19 of the Notes to Consolidated Financial Statements.
23
<PAGE> 26
================================================================================
Results of Operations
================================================================================
Net Interest Income:
Interest income on a tax-equivalent basis was $2.1 billion, an increase of
$157.1 million, or 8.2%, compared to 1996. This increase was primarily due to
the growth in interest-earning assets. On average, interest-earning assets
increased $1.8 billion, or 7.3%, to $27.2 billion. Growth in the loan and
investment portfolios contributed $1.4 billion and $459.0 million of this
increase, respectively. The average yield on interest-earning assets was 7.64%
for 1997 compared to 7.57% for 1996, an increase of 7 basis points attributable
to a slightly higher interest rate environment in 1997.
Interest expense was $919.6 million for 1997, an increase of $65.9 million, or
7.7%, from a year ago. On average, interest-bearing liabilities increased $1.1
billion, or 5.3%, resulting from increases in long-term debt, other borrowings
and interest-bearing deposits. The average cost of interest-bearing liabilities
was 4.20% in 1997, an increase of 10 basis points from 4.10% in 1996.
Net interest income on a tax-equivalent basis amounted to $1.2 billion, an
increase of $91.2 million, or 8.5%, from $1.1 billion earned in 1996. Net
interest spread declined 3 basis points to 3.44% for the year compared to 3.47%
in 1996. The decline was attributable to a narrowing of spreads between yields
earned on the investment and loan portfolios and rates paid on deposits and
borrowed funds during 1997. Net interest margin increased to 4.26% for 1997
compared to 4.21% in 1996. This increase was partially due to a $733.9 million
increase in interest-free funds resulting from an increase in demand deposits
and a decrease in cash balances resulting from lower reserve requirements.
The Rate/Volume Table below presents an analysis of the impact on interest
income and interest expense resulting from changes in average volumes and rates
over the past two years. Changes that are not due to volume or rate variances
have been allocated proportionally to both, based on their relative absolute
values.
Non-Interest Income:
Non-interest income, including securities gains, amounted to $301.9 million in
1997 compared to $260.0 million the prior year, an increase of $41.8 million, or
16.1%. Non-interest income categories compared to the prior year are shown in
the following table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Increase (Decrease)
- -------------------------------------------------------------------------------
(In thousands) 1997 1996 Amount Percent
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service charges on deposit
accounts ....................... $114,569 $105,967 $ 8,602 8.1%
Service and loan fee income ...... 52,205 44,577 7,628 17.1
Trust income ..................... 48,488 39,540 8,948 22.6
Other ............................ 80,986 66,096 14,890 22.5
- -------------------------------------------------------------------------------
296,248 256,180 40,068 15.6
Securities gains ................. 5,637 3,862 1,775 46.0
- -------------------------------------------------------------------------------
$301,885 $260,042 $41,843 16.1%
===============================================================================
</TABLE>
Service charges on deposit accounts amounted to $114.6 million in 1997, an
increase of $8.6 million, or 8.1%. This increase was primarily attributable to
higher fee income in both business and personal demand deposit accounts. Fee
income on demand deposit accounts increased primarily as a result of a larger
customer base resulting from acquisitions.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate/Volume Table Amount of Increase (Decrease)
--------------------------------------------------------
1997 versus 1996 1996 versus 1995
-------------------------- --------------------------
Due to Change in: Due to Change in:
----------------- -----------------
(Tax-equivalent basis, in millions) Volume Rate Total Volume Rate Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans:
Commercial ......................................... $ 32.9 $ 8.6 $ 41.5 $(16.3) $(15.7) $(32.0)
Commercial mortgage ................................ 12.1 1.3 13.4 36.7 (6.0) 30.7
Residential mortgage ............................... 20.6 (2.3) 18.3 63.1 (4.9) 58.2
Consumer ........................................... 49.9 (0.3) 49.6 35.8 (6.5) 29.3
- --------------------------------------------------------------------------------------------------------------------
Total loans ...................................... 115.5 7.3 122.8 119.3 (33.1) 86.2
Securities held to maturity ........................... (46.2) 2.2 (44.0) (93.4) (10.3) (103.7)
Securities available for sale ......................... 75.5 3.2 78.7 92.7 4.1 96.8
Other interest-earning assets ......................... -- (0.4) (0.4) (7.6) 1.1 (6.5)
- --------------------------------------------------------------------------------------------------------------------
Total interest income ............................ 144.8 12.3 157.1 111.0 (38.2) 72.8
- --------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits:
Savings deposits ................................... 9.9 6.5 16.4 4.1 (8.3) (4.2)
Time deposits ...................................... 1.4 4.9 6.3 17.1 6.5 23.6
Commercial certificates of deposit $100,000 and over -- 0.3 0.3 14.2 (4.9) 9.3
- --------------------------------------------------------------------------------------------------------------------
Total deposits ................................... 11.3 11.7 23.0 35.4 (6.7) 28.7
Other interest-bearing liabilities .................... 40.5 2.4 42.9 8.3 (5.5) 2.8
- --------------------------------------------------------------------------------------------------------------------
Total interest expense ........................... 51.8 14.1 65.9 43.7 (12.2) 31.5
- --------------------------------------------------------------------------------------------------------------------
Net interest income ..................................... $ 93.0 $ (1.8) $ 91.2 $ 67.3 $(26.0) $ 41.3
====================================================================================================================
</TABLE>
24
<PAGE> 27
================================================================================
Service and loan fee income increased $7.6 million, or 17.1%, to $52.2 million
in 1997. This increase is primarily attributable to prepayment fee income on C&I
and commercial mortgage loans, and an increase in merchant credit card and
consumer debit card fees due to higher processing volumes.
Trust income of $48.5 million increased $8.9 million, or 22.6%, over the prior
year. This increase is primarily due to an $8.4 million increase in fee income
on proprietary mutual funds, third party mutual fund commissions and investment
advisory accounts. These funds include Summit's proprietary funds, the Pillar
Funds(R), which totaled $2.3 billion at December 31, 1997. Assets under trust
administration, including corporate debt trusteeships, totaled $26.3 billion at
December 31, 1997. Assets under discretionary management were $8.2 billion at
year-end 1997.
Other income amounted to $81.0 million, an increase of $14.9 million, or 22.5%,
compared to the prior year. This increase was partially due to an $8.3 million
increase in gains recorded from the sale of certain branch assets and deposits.
Other income also benefited from a $2.7 million increase in service fees on
annuity products and a $2.7 million increase in automated teller machine fees.
For the year ended December 31, 1997, securities gains were $5.6 million, an
increase of $1.8 million, or 46.0%, above 1996. These gains were principally due
to sales of equity securities.
Non-Interest Expenses:
Non-interest expenses totaled $816.7 million in 1997, an increase of $1.1
million compared to 1996. Impacting the comparison of 1997 non-interest expenses
to 1996 are three acquisitions not included in the prior year results. As
discussed in the Summary of Performance on page 19, non-interest expenses for
1997 and 1996 included non-recurring items of $83.0 million and $121.8 million,
respectively. Excluding these non-recurring items, non-interest expenses
increased $39.9 million or 5.7 % compared to 1996.
Non-interest expense categories compared to the prior year are shown in the
following table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Increase (Decrease)
- --------------------------------------------------------------------------------
(In thousands) 1997 1996 Amount Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries .......................... $290,515 $267,854 $ 22,661 8.5%
Pension and other employee
benefits ........................ 93,711 87,718 5,993 6.8
Occupancy, net .................... 72,074 77,242 (5,168) (6.7)
Furniture and equipment ........... 78,259 69,732 8,527 12.2
Communications .................... 35,214 33,292 1,922 5.8
Other ............................. 163,918 157,994 5,924 3.7
- --------------------------------------------------------------------------------
733,691 693,832 39,859 5.7
Savings Association Insurance
Fund assessment ................. -- 11,059 (11,059) (100.0)
Restructuring charges ............. 83,000 110,700 (27,700) (25.0)
- --------------------------------------------------------------------------------
$816,691 $815,591 $ 1,100 0.1%
================================================================================
</TABLE>
Salaries totaled $290.5 million in 1997, an increase of $22.7 million, or 8.5%,
compared to 1996. The rise in salaries was due in part to increased staff levels
and annual merit increases. Total full-time equivalent employees at December 31,
1997, were 8,566, compared to 8,402 at December 31, 1996, an increase of 2.0%.
Pension and other employee benefits expense totaled $93.7 million for the year
ended December 31, 1997, and was $6.0 million, or 6.8%, greater than 1996. Most
of this increase can be attributed to higher costs for medical insurance,
unemployment taxes and other employee costs.
During 1997, net occupancy expenses decreased $5.2 million or 6.7% from the
prior year. This decline was due in part to lower rental and maintenance
expenses associated with the closing of 28 traditional full service branches
from the prior year end. Furniture and equipment totaled $78.3 million, an
increase of $8.5 million, or 12.2%, from 1996. This was primarily due to
equipment upgrades for merger support, as well as purchased central site
equipment needed to support new client-server networked applications. In
addition, part of this increase was due to new computer equipment to support
branch automation at acquired institutions.
Communications expense totaled $35.2 million in 1997, an increase of $1.9
million, or 5.8%, compared to 1996. This increase was attributable to higher
telecommunication expenses, as a result of branch rewiring and technology
upgrades.
Other expenses, which consist primarily of legal and professional fees,
advertising and public relations expenses, amortization expense for goodwill and
intangibles, and other expenses were $163.9 million in 1997, an increase of $5.9
million, or 3.7%, from 1996. This increase included an additional $6.4 million
in advertising and public relations expenses that were due to costs to promote
the Summit name and products in new markets it serves, as a result of the
acquisitions in late 1996 and 1997.
Also contributing to the rise in other expenses was a $3.5 million increase in
amortization expense for goodwill and intangibles, reflecting the prior year
purchase acquisitions. Additionally included are $4.0 million of expenses
associated with the Year 2000 conversion.
Partially offsetting the increase in other expenses were declines in deposit
insurance premiums and other real estate owned (OREO) expenses. Deposit
insurance premiums declined $4.2 million, or 42.4%, from 1996 as a result of
premium reductions. OREO expenses declined $1.9 million, or 51.3%, from 1996, to
total $1.8 million for 1997, reflecting the continued decline in the number of
OREO properties.
Income Taxes:
Federal and state income tax expenses for 1997 were $200.2 million compared to
$150.0 million in 1996. The 33.5% increase was primarily the result of the 31.7%
increase in pre-tax income. The combined Federal and state effective income tax
rate was 35.1% for 1997 compared to 34.6% for 1996. For additional information
on income taxes, see Note 16 of the Notes to Consolidated Financial Statements.
25
<PAGE> 28
================================================================================
Asset Quality
================================================================================
Non-Performing Loans:
At December 31, 1997, non-performing loans totaled $85.1 million and represented
0.45% of total loans, compared to $139.1 million, or 0.80% of total loans the
prior year. Non-performing loans declined $54.0 million, or 38.8%, in 1997.
The following chart illustrates the trend in non-performing loans for the past
five years.
NON-PERFORMING LOANS (IN MILLIONS)
<TABLE>
<CAPTION>
Year
- ----
<S> <C>
1993 $330,569
1994 306,943
1995 193,561
1996 139,131
1997 85,090
</TABLE>
The continued reduction in non-performing loans can be attributed to a
stabilized real estate market and continued aggressive loan workout strategies.
During 1997, Summit Bancorp continued to employ a strategy of selling
smaller-balance commercial non-performing loans to enhance credit quality ratios
and reduce the number of accounts under management. Since 1996, there have been
seven bulk sales (three in 1996 and four in 1997), representing over 500
accounts, which have reduced non-performing loans by $72.6 million.
During 1997, additions into non-performing loans totaled $137.9 million, a
decrease of $42.1 million, or 23.4%, compared to $180.0 million in the prior
year. As a result of the reduction in the non-performing loans, charge-offs on
non-performing loans declined $32.6 million to total $37.1 million, compared to
$69.7 million in 1996.
Loans 90 days or more past due not included in the non-performing loan category
totaled $48.6 million at year-end 1997, compared to $79.0 million at the prior
year end. These loans are comprised of residential mortgages and consumer loans
which are generally well-secured and in the process of collection. The decline
of these loans can be partially attributed to $37.1 million of bulk sales in the
fourth quarter of 1997.
Other Real Estate Owned:
OREO, net of a valuation allowance, amounted to $14.2 million at year end
compared to $26.4 million the prior year, a decline of $12.2 million, or 46.0%.
OREO is carried at the lower of cost or fair value less estimated costs to sell
with any deficiency charged against the valuation allowance. At year-end 1997,
the allowance totaled $5.7 million, compared to $9.2 million at the prior year
end.
- --------------------------------------------------------------------------------
Non-Performing Assets
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-performing loans:
Commercial and industrial ........................................... $42,644 $ 54,308 $ 52,086 $ 52,082 $ 86,842
Construction and development ........................................ 4,453 31,901 52,975 52,620 97,040
Commercial mortgage ................................................. 37,993 52,922 88,500 102,241 146,687
- ---------------------------------------------------------------------------------------------------------------------------------
Non-performing loans ............................................. 85,090 139,131 193,561 206,943 330,569
Other real estate owned, net .......................................... 14,249 26,406 30,771 55,800 135,951
- ---------------------------------------------------------------------------------------------------------------------------------
Non-performing assets $99,339 $165,537 $224,332 $262,743 $466,520
- ---------------------------------------------------------------------------------------------------------------------------------
Loans, not included above, past due 90 days or more (1) ............... $48,609 $ 79,013 $ 60,463 $ 59,780 $ 87,779
- ---------------------------------------------------------------------------------------------------------------------------------
Impact on interest income:
Interest income that would have been recorded on non-performing loans
in accordance with their original terms .......................... $ 5,340 $ 14,154 $ 20,192 $ 20,408 $ 29,646
Interest income received and recorded on non-performing loans ....... 1,040 1,817 2,833 2,642 5,332
- ---------------------------------------------------------------------------------------------------------------------------------
Lost income on non-performing loans $ 4,300 $ 12,337 $ 17,359 $ 17,766 $ 24,314
- ---------------------------------------------------------------------------------------------------------------------------------
Non-performing assets as a percentage of:
Total assets ........................................................ 0.33% 0.60% 0.84% 1.03% 2.06%
Total loans and other real estate owned ............................. 0.53 0.95 1.36 1.74 3.41
=================================================================================================================================
</TABLE>
(1) Primarily residential mortgage and consumer loans, well secured and in the
process of collection.
26
<PAGE> 29
================================================================================
Allowance for Loan Losses and Related Provision:
The allowance for loan losses at December 31, 1997, was $296.5 million, an
increase of $15.9 million, or 5.7%, compared to $280.6 million the prior year
end. The ratio of the allowance for loan losses to total loans was 1.57% at
December 31, 1997, and 1.61% at year-end 1996. The allowance for loan losses as
a percentage of non-performing loans was 348.45% at December 31, 1997, compared
to 201.69% at the end of 1996.
A standardized process has been established to assess the adequacy of the
allowance for loan losses and to identify the risks inherent in the loan
portfolio. This process incorporates credit reviews and gives consideration to
areas of exposure such as concentrations of credit, economic and industry
conditions, trends in delinquencies and collections, collateral coverage, and
the composition of the performing and non-performing loan portfolios.
Specific allocations, when required under Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan,"
are identified by individual loan, while general reserve percentages are
identified by loan category or grade and allocated accordingly. All loans,
whether performing or non-performing, are graded and incorporated in the process
of assessing the adequacy of the allowance for loan losses. The allowance is
maintained at a level considered sufficient to absorb estimated losses in the
loan portfolio.
At year-end 1997, $20.0 million of the total $296.5 million loan loss allowance
was identified for non-performing loans, while $109.7 million was allocated to
specific categories or grades of loans not considered impaired under the
assessment process. The remaining $166.8 million was considered a general
unallocated reserve for the residual inherent risk in the portfolio.
The provision for loan losses was $59.1 million for the year ended December 31,
1997, down $4.9 million, or 7.7%, from $64.0 million recorded in 1996. This
decrease resulted primarily from reductions in non-performing loans during 1997.
Net charge offs of $53.2 million were recorded in 1997, a decrease of $31.9
million, or 37.5%, compared to $85.1 million recorded in 1996. These net charge
offs represented 0.29% of average loans in 1997 compared to 0.50% of average
loans in 1996.
- --------------------------------------------------------------------------------
Allowance for Loan Losses
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period ................. $ 280,611 $ 293,160 $ 323,336 $ 361,319 $ 378,793
Acquisition adjustments, net ................. 9,994 8,492 6,131 1,910 15,991
Provision charged to operating expenses ...... 59,100 64,034 72,090 94,347 115,902
Loans charged off:
Commercial and industrial .................. 22,355 37,047 46,819 38,043 75,966
Construction and development ............... 3,319 17,036 35,451 39,542 38,382
Commercial mortgage ........................ 12,993 25,695 25,741 21,731 18,590
Residential mortgage ....................... 19,117 7,558 8,608 9,726 4,664
Consumer ................................... 28,891 20,970 13,873 10,504 29,768
- ------------------------------------------------------------------------------------------------------------------------
Total loans charged off ................. 86,675 108,306 130,492 119,546 167,370
- ------------------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial and industrial .................. 16,167 12,602 14,684 13,921 10,856
Construction and development ............... 3,686 2,427 2,072 1,320 1,657
Commercial mortgage ........................ 5,089 2,466 1,920 2,838 724
Residential mortgage ....................... 957 838 667 594 315
Consumer ................................... 7,565 4,898 2,752 3,585 4,451
- ------------------------------------------------------------------------------------------------------------------------
Total recoveries ........................ 33,464 23,231 22,095 22,258 18,003
- ------------------------------------------------------------------------------------------------------------------------
Net charge offs .............................. 53,211 85,075 108,397 97,288 149,367
Write downs on transfer to assets held
for accelerated disposition ................ -- -- -- 36,952 --
- ------------------------------------------------------------------------------------------------------------------------
Balance, end of period ....................... $ 296,494 $ 280,611 $ 293,160 $ 323,336 $ 361,319
========================================================================================================================
Loans:
At year end ................................ $18,888,366 $17,386,059 $16,413,222 $15,048,579 $13,552,381
Average during year ........................ 18,451,893 17,065,753 15,568,502 14,120,398 13,304,441
Net charge offs to average loans outstanding 0.29% 0.50% 0.70% 0.69% 1.12%
Allowance for loan losses to:
Total loans at year end .................... 1.57 1.61 1.79 2.15 2.67
Non-performing loans ....................... 348.45 201.69 151.46 156.24 109.30
Non-performing assets ...................... 298.47 169.52 130.68 123.06 77.45
Net charge offs ............................ 5.6x 3.3x 2.7x 3.3x 2.4x
========================================================================================================================
</TABLE>
27
<PAGE> 30
================================================================================
Asset/Liability Management
================================================================================
Interest Sensitivity:
Interest rate sensitivity and the repricing characteristics of assets and
liabilities are managed by the Asset/Liability Management Committee. The
principal objective of asset/liability management is to maximize net interest
income within acceptable levels of risk established by policy. Interest rate
risk is measured using financial modeling techniques, including stress tests, to
measure the impact of changes in interest rates on future earnings. Net interest
income, the primary source of earnings, is affected by interest rate movements.
To mitigate the impact of changes in interest rates, the balance sheet must be
structured so that repricing opportunities exist for both assets and liabilities
in approximately equivalent amounts at basically the same time intervals. An
imbalance in these repricing opportunities at any point in time constitutes an
interest-sensitivity gap, which is the difference between interest-sensitive
assets and interest-sensitive liabilities. These static measurements do not
reflect the results of any projected activity and are best used as early
indicators of potential interest rate exposures.
As illustrated by the interest rate sensitivity table, sensitivity to interest
rate fluctuations is measured in a number of time frames. The gap position is
presented on an adjusted basis allowing for the impact of off-balance-sheet
transactions.
An asset-sensitive gap means an excess of interest-sensitive assets over
interest-sensitive liabilities, whereas a liability-sensitive gap means an
excess of interest-sensitive liabilities over interest-sensitive assets. At
December 31, 1997, there was a thirty-day liability-sensitive gap of $73.9
million and a one-year cumulative liability-sensitive gap of $157.6 million. In
a rising rate environment, a liability-sensitive gap position generally
indicates that increases in the cost of interest bearing liabilities will
outpace increases in income from interest-earning assets. This risk can be
reduced by various strategies, including the administration of liability costs,
the re-investment of asset maturities and the use of off-balance-sheet financial
instruments to insulate net interest income from the effects of changes in
interest rates.
Interest rate sensitivities are also monitored through the use of simulation
modeling techniques which apply alternative interest rate scenarios to periodic
forecasts of future business activity and estimate the related impact on net
interest income. The use of simulation modeling assists management in its
continuing efforts to achieve earnings growth in varying interest rate
environments.
Key assumptions in the model include anticipated prepayments on mortgage-related
instruments, contractual cash flow and maturities of all financial instruments
including derivatives, anticipated future business activity, deposit sensitivity
and changes in market conditions. Selected core deposit rates have not been
changed based on the results of analysis of historical rate movements.
These assumptions are inherently uncertain, and as a result, these models cannot
precisely estimate the impact that higher or lower rate environments will have
on net interest income. Actual results will differ from simulated results due to
timing, magnitude and frequency of interest rate changes, changes in market
conditions as well as changes in management's strategies.
Based on the results of the interest simulation model as of December 31, 1997,
Summit Bancorp would expect a decrease of $10.3 million in net interest income
and an increase of $11.9 million in net interest income if interest rates
increase or decrease 100 basis points, respectively, from current rates in an
immediate and parallel shock over a twelve month period.
Asset/liability management efforts also involved the use of derivative financial
instruments, primarily interest rate swaps, interest rate caps and interest rate
floors, to modify the interest rate characteristics of designated assets and
liabilities. These interest rate swaps, caps and floors were accounted for as
hedges and not recorded on the balance
- --------------------------------------------------------------------------------
Interest Rate Sensitivity Table as of December 31, 1997
<TABLE>
<CAPTION>
(In thousands)
Interest Sensitivity Period Total
--------------------------------------------------- Within
30 Day 90 Day 180 Day 365 Day One Year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning Assets:
Total securities ................. $ 1,801,573 $ 297,638 $ 671,732 $ 1,212,507 $ 3,983,450
Loans, net ....................... 5,625,270 1,403,041 952,922 1,986,805 9,968,038
Other interest-earning assets .... 18,532 -- -- -- 18,532
- ------------------------------------------------------------------------------------------------------
7,445,375 1,700,679 1,624,654 3,199,312 13,970,020
- ------------------------------------------------------------------------------------------------------
Sources of Funds:
Savings and time deposits ........ 5,024,742 1,337,942 1,254,882 1,743,445 9,361,011
Commercial CDs ................... 613,057 218,561 43,007 9,636 884,261
Other interest-bearing liabilities 2,556,427 886,340 640 350,805 3,794,212
Non-interest-bearing sources ..... -- -- -- -- --
- ------------------------------------------------------------------------------------------------------
8,194,226 2,442,843 1,298,529 2,103,886 14,039,484
- ------------------------------------------------------------------------------------------------------
Asset (Liability) Interval Gap ..... (748,851) (742,164) 326,125 1,095,426 (69,464)
Net effect of off-balance sheet
instruments ...................... 675,000 (238,167) (675,000) 150,000 (88,167)
- ------------------------------------------------------------------------------------------------------
Asset (Liability) Sensitivity Gap:
Period gap ....................... (73,851) (980,331) (348,875) 1,245,426 (157,631)
Cumulative gap ................... $ (73,851) $(1,054,182) $(1,403,057) $ (157,631) $ (157,631)
======================================================================================================
<CAPTION>
One Year Non-Interest
to Sensitive and
Two Years Over Two Years Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Earning Assets:
Total securities ................. $ 1,631,787 $ 3,652,418 $ 9,267,655
Loans, net ....................... 2,007,496 6,616,338 18,591,872
Other interest-earning assets .... -- -- 18,532
- -----------------------------------------------------------------------------
3,639,283 10,268,756 27,878,059
- -----------------------------------------------------------------------------
Sources of Funds:
Savings and time deposits ........ 1,387,663 6,165,811 16,914,485
Commercial CDs ................... -- -- 884,261
Other interest-bearing liabilities 296,365 554,126 4,644,703
Non-interest-bearing sources ..... -- 5,434,610 5,434,610
- -----------------------------------------------------------------------------
1,684,028 12,154,547 27,878,059
- -----------------------------------------------------------------------------
Asset (Liability) Interval Gap ..... 1,955,255 (1,885,791)
Net effect of off-balance sheet
instruments ...................... 88,167
- -----------------------------------------------------------------------------
Asset (Liability) Sensitivity Gap:
Period gap ....................... 2,043,422 (1,885,791)
Cumulative gap ................... $ 1,885,791 $ --
=============================================================================
</TABLE>
28
<PAGE> 31
================================================================================
sheet. Income or expense related to these instruments was accrued monthly and
recognized as an adjustment to interest income or interest expense for those
balance sheet instruments being hedged. These derivative financial instruments
reduced net interest income by $1.0 million in 1997, compared to a $2.0 million
reduction in 1996.
The following table illustrates the aggregate notional amounts and expected
maturities of interest rate swaps, interest rate caps and interest rate floors
at December 31, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Derivative Financial Instruments Weighted
Notional Avg. Est.
(In millions) Amount Maturity
- --------------------------------------------------------------------------------
<S> <C> <C>
Interest rate swaps:
Receive fixed/pay floating .................. $ 83.2 2/99
Receive floating/pay fixed .................. 350.0 9/98
Interest rate caps ............................ 717.9 4/98
Interest rate floors .......................... 430.0 12/98
- --------------------------------------------------------------------------------
$1,581.1 8/98
================================================================================
</TABLE>
The notional values of these instruments represent the contractual balances on
which calculations of the amount of interest to be exchanged are based. At
year-end 1997, the swap agreements had an average remaining maturity of 10
months. The interest rate floors were purchased primarily to hedge adjustable
rate LIBOR based assets. The interest rate caps were purchased primarily to
hedge short-term liability positions being managed as part of the Collective
acquisition. Additionally, a portion of the caps were purchased to accommodate
customers who desire rate protection on variable rate loans.
The following table illustrates the interest rate swap activity for the past two
years.
- --------------------------------------------------------------------------------
Interest Rate Swap Activity
<TABLE>
<CAPTION>
(In millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year ........................... $ 386.3 $ 967.5
Additions .......................................... 350.0 225.0
Maturities/amortization ............................ (303.1) (673.6)
Terminations ....................................... -- (132.6)
- --------------------------------------------------------------------------------
Balance, end of year ................................. $ 433.2 $ 386.3
================================================================================
</TABLE>
At December 31, 1997, the remaining unamortized termination costs on interest
rate swaps were $1.0 million with a remaining amortization period of 19 months.
For additional information on the use of derivative financial instruments, see
Notes 1, 17 and 18 of the Notes to Consolidated Financial Statements.
Liquidity:
Liquidity management includes monitoring current and projected cash flows, as
well as economic forecasts for the industry. A liquidity contingency plan is in
place, which is designed to effectively manage potential liquidity concerns due
to changes in interest rates, credit markets, or other external risks.
Bank liquidity is the ability to support asset growth while satisfying the
borrowing needs and deposit withdrawal requirements of customers. Traditional
sources of liquidity include asset maturities, asset repayments, and deposit
growth. In addition, borrowed funds represent another major source of funding.
The bank subsidiaries have established borrowing relationships with the FHLB and
other correspondent banks which further support and enhance liquidity.
Liquidity is also important at the Parent Corporation in order to provide funds
for operations and to pay dividends to shareholders. Parent Corporation cash
requirements are met primarily through management fees and dividends from its
subsidiaries and the issuance of short and long-term debt. The amount of
dividends from bank subsidiaries is subject to certain regulatory restrictions
as detailed in Note 19 of the Notes to Consolidated Financial Statements.
The Consolidated Statements of Cash Flows on page 36 present the changes in cash
from operating, investing, and financing activities. Net cash provided by
operating activities totaled $480.4 million. This amount was primarily due to
results of operations adjusted for: provisions for loan losses, depreciation
expense, amortization of intangibles and restructuring charges. Net cash used in
investing activities totaled $1.4 billion and was the result of loan and
securities growth. Net cash provided by financing activities totaled $710.5
million, reflecting increases in short-term borrowings and long-term debt to
fund asset growth, offset by dividends paid.
The combined securities portfolios are also a source of liquidity as portfolio
assets provide cash flows through maturities and periodic repayments of
principal. During 1997, proceeds from maturities and other cash flows in the
combined securities portfolios were $2.2 billion, while proceeds from the sales
of securities available for sale were $825.9 million. Anticipated principal
payments of the combined securities portfolios are expected to approximate $2.8
billion during 1998. In addition, all or part of the $5.1 billion of securities
available for sale could be sold to provide additional liquidity.
In addition to the securities portfolios, cash flows may be derived from loan
maturities. Approximately $5.6 billion in loans, adjusted for prepayments, are
scheduled to be paid in 1998.
29
<PAGE> 32
================================================================================
Results of Operations -- 1996 Compared
with 1995
================================================================================
For the year ended December 31, 1996, net income was $283.7 million, or $1.69
per share, compared to net income of $300.4 million, or $1.89 per share, earned
in 1995. Diluted net income per common share for 1996 was $1.67 per share
compared to $1.87 per share in 1995. The results for 1996 included
merger-related restructuring charges of $110.7 million ($70.0 million or $.42
per share, after tax) and a one-time SAIF assessment of $11.1 million ($6.7
million, or $.04 per share, after tax). Excluding non-recurring items, net
income was $360.4 million or $2.15 per share for the year ended December 31,
1996, compared to $300.4 million or $1.89 per share for 1995. Diluted net income
per share before non-recurring items was $2.12 for 1996 compared to $1.87 in
1995.
Summit Bancorp's performance for 1996 was highlighted by the successful
integration of acquisitions, the realization of merger cost savings, and an
improvement in asset quality ratios. These factors contributed to increases in
key profitability measures. Excluding non-recurring items, return on average
assets improved to 1.32% compared to 1.17% the previous year and return on
average common equity rose to 16.48% versus 15.49% for 1995. In addition, the
efficiency ratio improved to 52.11% for 1996 from 55.72% in 1995.
Impacting the comparison of 1996 to the prior year was the 1995 acquisition of
Bancorp New Jersey, Inc. and the 1996 acquisitions of Garden State Bancshares,
Inc., The Flemington National Bank and Trust Company, and Central Jersey
Financial Corporation.
Interest income on a tax-equivalent basis was $1.9 billion, an increase of $72.8
million, or 3.9%, compared to 1995. This increase was primarily due to growth in
interest-earning assets. On average, interest-earning assets increased $1.4
billion, principally in loans. Partially offsetting the increase in
interest-earning assets was a $38.2 million decrease in interest income due to
the decline in interest rates during 1996. The average yield on interest-earning
assets was 7.57% for 1996 compared to 7.72% for 1995, a decrease of 15 basis
points.
Interest expense was $853.7 million for 1996, an increase of $31.5 million, or
3.8%, from the prior year. On average, interest-bearing liabilities increased
$876.3 million, primarily due to acquisitions. Interest expense rose $43.7
million from the increase in interest-bearing liabilities, partially offset by
the lower interest rate environment. The average cost of total interest-bearing
liabilities was 4.10% in 1996, compared to 4.12% in 1995.
Net interest income on a tax-equivalent basis amounted to $1.1 billion, an
increase of $41.3 million, or 4.0%, from 1995. Net interest spread on a
tax-equivalent basis declined 13 basis points to 3.47% for the year, compared to
3.60% earned in 1995. Net interest margin declined to 4.21% for 1996 compared to
4.28% in 1995. Both declines resulted as yields on interest-earning assets
declined faster than the costs paid on interest-bearing liabilities, reflecting
an increasingly competitive market for loans and deposits.
Non-interest income, including securities gains, amounted to $260.0 million in
1996 compared to $235.3 million in the prior year, an increase of $24.8 million,
or 10.5%. Service charges on deposit accounts amounted to $106.0 million in
1996, an increase of $12.2 million, or 13.0%. Service and loan fee income
increased $6.8 million, or 18.0%, to $44.6 million in 1996. Trust income of
$39.5 million increased $4.1 million, or 11.6%, over the prior year. Other
income amounted to $66.1 million, an increase of $6.4 million, or 10.8%,
compared to the prior year. For the year ended December 31, 1996, securities
gains were $3.9 million, a decrease of $4.7 million from 1995.
Excluding non-recurring items, non-interest expenses decreased $11.6 million, or
1.6%, compared to 1995 as a result of merger savings and a reduction in deposit
insurance premiums.
Salaries expense totaled $267.9 million in 1996, a decrease of $5.1 million, or
1.9%, compared to 1995, due in part to a reduced work force. Pension and other
employee benefits expense totaled $87.7 million for the year ended December 31,
1996, and was $4.3 million, or 4.6%, less than 1995.
Net occupancy expenses increased to $77.2 million for 1996 compared to $75.7
million for 1995. Furniture and equipment expenses amounted to $69.7 million, an
increase of $4.2 million, or 6.4%, from $65.6 million in 1995.
Communications expense totaled $33.3 million in 1996, an increase of $4.0
million, or 13.5%, compared to 1995. This increase was due in part to additional
expenses associated with the upgrading of communication equipment and lines to
support the branch automation network, other system improvements and an ATM
network purchased in late 1995.
Other expenses were $158.0 million in 1996, a decrease of $12.0 million, or 7.1%
from 1995. This decrease was due in part to an $18.5 million decline in deposit
premiums, as a result of rate reductions in BIF and SAIF premiums. This decline
was offset by a $6.5 million increase in miscellaneous operating expenses.
Federal and state income tax expenses for 1996 were $150.0 million compared to
$167.0 million in 1995. The decrease was primarily due to lower pre-tax income,
the reduction in valuation reserves and tax planning.
30
<PAGE> 33
================================================================================
Recent Accounting Pronouncements
================================================================================
In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities. SFAS No. 125 was effective for transfers occurring after December
31, 1996, and was applied prospectively. Subsequently, the FASB issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of SFAS No. 125,"
which deferred until January 1, 1998, the implementation of certain aspects of
the original statement that addressed secured borrowings and collateral
transactions. The adoption of SFAS No. 127 is not expected to have a material
effect on the future financial condition or results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes the standards for the reporting of total comprehensive
income in a full set of general-purpose financial statements. The Statement
defines total comprehensive income as all changes in equity during a period from
transactions and other events and circumstances from nonowner sources. Other
comprehensive income would include revenues, expenses, gains and losses that,
under generally accepted accounting principles are included in comprehensive
income but excluded from net income, such as foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on
available-for-sale securities. SFAS No. 130 is effective for both interim and
annual periods beginning after December 15, 1997. Comparative financial
statements for earlier periods are required to reflect the provisions of this
Statement.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards and
disclosure requirements for the way companies report information about operating
segments, including related product information. Operating segments are defined
based upon the way management organizes segments for making operating decisions
and evaluating performance. Information such as segment net earnings,
appropriate revenues and expense items and certain balance sheet items are
required to be presented, and such amounts are required to be reconciled to the
company's combined financial information. SFAS No. 131 is effective for
financial statements issued for annual periods ending after December 15, 1998
and interim periods beginning in 1999.
In February 1998, the FASBissued SFASNo. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This Statement standardizes the
disclosure requirements for pensions and other postretirements benefits by
requiring additional information that will facilitate financial analysis, and
eliminating certain disclosures that are considered no longer useful. SFAS No.
132 supersedes the disclosures requirements in SFAS Nos. 87, 88, and 106. This
Statement is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available.
Year 2000
================================================================================
Issues surrounding the Year 2000 arise out of the fact that many existing
computer programs use only two digits to identify a year in the date field.
Additionally, the Year 2000 is not just a computer issue; it involves
communications systems, building systems, environmental systems and office
equipment. Year 2000 readiness can be affected to the extent that other entities
such as bank customers and suppliers are unsuccessful in addressing this issue.
The Year 2000 issue affects virtually all organizations. Summit Bancorp began
taking a proactive stance regarding this issue in 1995.
A task force has been assembled, composed of two project teams - a Technology
Team and an Operations Team that report to a Year 2000 Program Management
Office. Management expects to have substantially all of the system and
application changes completed by the end of 1998 and believes that its level of
preparedness is appropriate.
The cost for the millennium conversion is estimated to be $23 million. This
estimate includes internal and external personnel costs for all aspects of the
program as well as purchasing or leasing certain hardware and software.
The cost of the project and the expected completion dates are based on
management's best estimates.
Reaching Higher -- 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.
One of Summit Bancorp's primary objectives is to achieve balanced asset and
revenue growth, and at the same time expand market presence and diversify the
line of financial products. However, it is recognized that objectives, no matter
how focused, are subject to factors beyond the control of Summit Bancorp which
can impede the ability to achieve these goals.
Factors that may cause actual results to differ from estimated 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, the progress of integrating acquired
financial institutions, competition and technological changes. Although
management has taken certain steps to mitigate any negative effect of the
aforementioned items, significant unfavorable changes could severely impact the
assumptions used and have an adverse affect on profitability.
31
<PAGE> 34
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES Summit Bancorp and Subsidiaries
=====================================================================================================
(Tax-equivalent basis, dollars in millions,
not covered by independent auditors' report) 1997
- -----------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell .................................. $ 73.2 $ 4.1 5.58%
Interest-bearing deposits with banks .................... 13.5 0.7 5.45
Trading account securities .............................. 34.0 2.5 7.39
Securities available for sale:
U.S. Government and Federal agencies .................. 3,219.5 208.9 6.49
States and political subdivisions ..................... 18.1 0.8 4.28
Other securities ...................................... 558.1 35.4 6.34
- -----------------------------------------------------------------------------------------------------
Total securities available for sale ................. 3,795.7 245.1 6.46
- -----------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government and Federal agencies .................. 3,514.8 228.3 6.49
States and political subdivisions ..................... 206.9 18.9 9.15
Other securities ...................................... 1,131.7 68.2 6.02
- -----------------------------------------------------------------------------------------------------
Total securities held to maturity ................... 4,853.4 315.4 6.50
- -----------------------------------------------------------------------------------------------------
Loans:
Commercial ............................................ 5,685.1 484.3 8.52
Commercial mortgage ................................... 2,788.7 244.3 8.76
Residential mortgage .................................. 5,925.0 439.9 7.42
Consumer .............................................. 4,053.1 342.8 8.46
- -----------------------------------------------------------------------------------------------------
Total loans ......................................... 18,451.9 1,511.3 8.19
- -----------------------------------------------------------------------------------------------------
Total interest-earning assets ....................... 27,221.7 2,079.1 7.64
- -----------------------------------------------------------------------------------------------------
Cash and due from banks ................................... 1,035.8
Allowance for loan losses ................................. (299.2)
Other assets .............................................. 924.3
- -----------------------------------------------------------------------------------------------------
Total Assets .............................................. $ 28,882.6
=====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits ........................................ $ 9,633.0 253.0 2.63
Time deposits ........................................... 7,323.0 380.8 5.20
Commercial certificates of deposit $100,000 and over .... 891.9 48.2 5.41
- -----------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 17,847.9 682.0 3.82
- -----------------------------------------------------------------------------------------------------
Other borrowed funds .................................... 3,186.0 175.2 5.50
Long-term debt .......................................... 887.2 62.4 7.03
- -----------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 21,921.1 919.6 4.20
- -----------------------------------------------------------------------------------------------------
Demand deposits ........................................... 4,131.4
Other liabilities ......................................... 343.2
Shareholders' equity ...................................... 2,486.9
- -----------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ................ $ 28,882.6
=====================================================================================================
Net interest income (tax-equivalent basis) ................ 1,159.5 3.44%
Tax-equivalent basis adjustment ........................... (14.4)
- -----------------------------------------------------------------------------------------------------
Net interest income ....................................... $ 1,145.1
=====================================================================================================
Net interest income as a percent of interest-earning assets
(tax-equivalent basis) .................................. 4.26%
=====================================================================================================
<CAPTION>
(Tax-equivalent basis, dollars in millions,
not covered by independent auditors' report) 1996
- --------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell .................................. $ 78.2 $ 5.4 6.95%
Interest-bearing deposits with banks .................... 14.4 0.8 5.72
Trading account securities .............................. 27.4 1.5 5.44
Securities available for sale:
U.S. Government and Federal agencies .................. 2,050.8 130.4 6.36
States and political subdivisions ..................... 6.4 0.3 3.77
Other securities ...................................... 567.7 35.7 6.29
- --------------------------------------------------------------------------------------------------------
Total securities available for sale ................. 2,624.9 166.4 6.34
- --------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government and Federal agencies .................. 3,850.8 248.7 6.46
States and political subdivisions ..................... 266.3 24.0 9.01
Other securities ...................................... 1,448.1 86.7 5.98
- --------------------------------------------------------------------------------------------------------
Total securities held to maturity ................... 5,565.2 359.4 6.46
- --------------------------------------------------------------------------------------------------------
Loans:
Commercial ............................................ 5,298.9 442.8 8.36
Commercial mortgage ................................... 2,652.2 230.9 8.71
Residential mortgage .................................. 5,651.0 421.6 7.46
Consumer .............................................. 3,463.7 293.2 8.47
- --------------------------------------------------------------------------------------------------------
Total loans ......................................... 17,065.8 1,388.5 8.14
- --------------------------------------------------------------------------------------------------------
Total interest-earning assets ....................... 25,375.9 1,922.0 7.57
- --------------------------------------------------------------------------------------------------------
Cash and due from banks ................................... 1,284.4
Allowance for loan losses ................................. (298.3)
Other assets .............................................. 867.5
- --------------------------------------------------------------------------------------------------------
Total Assets .............................................. $ 27,229.5
========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits ........................................ $ 9,245.6 236.6 2.56
Time deposits ........................................... 7,294.3 374.5 5.13
Commercial certificates of deposit $100,000 and over .... 892.0 47.9 5.37
- --------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 17,431.9 659.0 3.78
- --------------------------------------------------------------------------------------------------------
Other borrowed funds .................................... 2,947.0 155.5 5.28
Long-term debt .......................................... 430.3 39.2 9.10
- --------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 20,809.2 853.7 4.10
- --------------------------------------------------------------------------------------------------------
Demand deposits ........................................... 3,856.7
Other liabilities ......................................... 351.4
Shareholders' equity ...................................... 2,212.2
- --------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ................ $ 27,229.5
========================================================================================================
Net interest income (tax-equivalent basis) ................ 1,068.3 3.47%
Tax-equivalent basis adjustment ........................... (15.0)
- --------------------------------------------------------------------------------------------------------
Net interest income ....................................... $ 1,053.3
========================================================================================================
Net interest income as a percent of interest-earning assets
(tax-equivalent basis) .................................. 4.21%
========================================================================================================
<CAPTION>
(Tax-equivalent basis, dollars in millions,
not covered by independent auditors' report) 1995
- --------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell .................................. $ 191.9 $ 11.5 5.97%
Interest-bearing deposits with banks .................... 11.1 0.6 5.81
Trading account securities .............................. 34.8 2.1 5.89
Securities available for sale:
U.S. Government and Federal agencies .................. 868.3 52.8 6.08
States and political subdivisions ..................... 9.3 0.6 6.89
Other securities ...................................... 282.3 16.2 5.74
- --------------------------------------------------------------------------------------------------------
Total securities available for sale ................. 1,159.9 69.6 6.00
- --------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government and Federal agencies .................. 4,712.1 314.1 6.67
States and political subdivisions ..................... 333.8 31.8 9.55
Other securities ...................................... 1,955.7 117.2 5.99
- --------------------------------------------------------------------------------------------------------
Total securities held to maturity ................... 7,001.6 463.1 6.61
- --------------------------------------------------------------------------------------------------------
Loans:
Commercial ............................................ 5,490.4 474.8 8.65
Commercial mortgage ................................... 2,232.3 200.2 8.97
Residential mortgage .................................. 4,805.2 363.4 7.56
Consumer .............................................. 3,040.6 263.9 8.68
- --------------------------------------------------------------------------------------------------------
Total loans ......................................... 15,568.5 1,302.3 8.36
- --------------------------------------------------------------------------------------------------------
Total interest-earning assets ....................... 23,967.8 1,849.2 7.72
- --------------------------------------------------------------------------------------------------------
Cash and due from banks ................................... 1,146.1
Allowance for loan losses ................................. (316.0)
Other assets .............................................. 964.8
- --------------------------------------------------------------------------------------------------------
Total Assets .............................................. $ 25,762.7
========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits ........................................ $ 9,092.4 240.8 2.65
Time deposits ........................................... 6,967.6 350.9 5.04
Commercial certificates of deposit $100,000 and over .... 635.0 38.6 6.08
- --------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 16,695.0 630.3 3.78
- --------------------------------------------------------------------------------------------------------
Other borrowed funds .................................... 2,730.9 153.7 5.63
Long-term debt .......................................... 507.0 38.2 7.53
- --------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 19,932.9 822.2 4.12
- --------------------------------------------------------------------------------------------------------
Demand deposits ........................................... 3,482.2
Other liabilities ......................................... 381.9
Shareholders' equity ...................................... 1,965.7
- --------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ................ $ 25,762.7
========================================================================================================
Net interest income (tax-equivalent basis) ................ 1,027.0 3.60%
Tax-equivalent basis adjustment ........................... (17.3)
- --------------------------------------------------------------------------------------------------------
Net interest income ....................................... $ 1,009.7
========================================================================================================
Net interest income as a percent of interest-earning assets
(tax-equivalent basis) .................................. 4.28%
========================================================================================================
<CAPTION>
(Tax-equivalent basis, dollars in millions,
not covered by independent auditors' report) 1994
- --------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell .................................. $ 206.9 $ 8.0 3.88%
Interest-bearing deposits with banks .................... 16.9 0.6 3.72
Trading account securities .............................. 28.9 0.9 2.94
Securities available for sale:
U.S. Government and Federal agencies .................. 533.9 31.6 5.92
States and political subdivisions ..................... 536.2 30.6 5.70
Other securities ...................................... 532.3 27.6 5.19
- --------------------------------------------------------------------------------------------------------
Total securities available for sale ................. 1,602.4 89.8 5.60
- --------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government and Federal agencies .................. 4,192.9 262.2 6.25
States and political subdivisions ..................... 392.9 38.9 9.91
Other securities ...................................... 1,896.4 106.1 5.60
- --------------------------------------------------------------------------------------------------------
Total securities held to maturity ................... 6,482.2 407.2 6.28
- --------------------------------------------------------------------------------------------------------
Loans:
Commercial ............................................ 5,318.6 405.5 7.62
Commercial mortgage ................................... 2,299.3 189.8 8.25
Residential mortgage .................................. 3,773.8 269.2 7.13
Consumer .............................................. 2,728.7 220.7 8.09
- --------------------------------------------------------------------------------------------------------
Total loans ......................................... 14,120.4 1,085.2 7.69
- --------------------------------------------------------------------------------------------------------
Total interest-earning assets ....................... 22,457.7 1,591.7 7.09
- --------------------------------------------------------------------------------------------------------
Cash and due from banks ................................... 1,190.1
Allowance for loan losses ................................. (362.6)
Other assets .............................................. 989.2
- --------------------------------------------------------------------------------------------------------
Total Assets .............................................. $ 24,274.4
========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits ........................................ $ 9,578.1 213.9 2.23
Time deposits ........................................... 5,736.6 231.2 4.03
Commercial certificates of deposit $100,000 and over .... 460.1 18.9 4.10
- --------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 15,774.8 464.0 2.94
- --------------------------------------------------------------------------------------------------------
Other borrowed funds .................................... 2,436.7 99.9 4.10
Long-term debt .......................................... 501.8 35.8 7.14
- --------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 18,713.3 599.7 3.20
- --------------------------------------------------------------------------------------------------------
Demand deposits ........................................... 3,374.7
Other liabilities ......................................... 418.8
Shareholders' equity ...................................... 1,767.6
- --------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ................ $ 24,274.4
========================================================================================================
Net interest income (tax-equivalent basis) ................ 992.0 3.89%
Tax-equivalent basis adjustment ........................... (19.4)
- --------------------------------------------------------------------------------------------------------
Net interest income ....................................... $ 972.6
========================================================================================================
Net interest income as a percent of interest-earning assets
(tax-equivalent basis) .................................. 4.42%
========================================================================================================
<CAPTION>
(Tax-equivalent basis, dollars in millions,
not covered by independent auditors' report) 1993
- --------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell .................................. $ 316.2 $ 10.2 3.23%
Interest-bearing deposits with banks .................... 22.8 0.7 3.06
Trading account securities .............................. 32.7 1.5 4.44
Securities available for sale:
U.S. Government and Federal agencies .................. 440.2 19.4 4.41
States and political subdivisions ..................... 272.0 14.6 5.39
Other securities ...................................... 464.2 21.5 4.62
- --------------------------------------------------------------------------------------------------------
Total securities available for sale ................. 1,176.4 55.5 4.72
- --------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government and Federal agencies .................. 4,030.6 277.7 6.89
States and political subdivisions ..................... 416.7 43.8 10.51
Other securities ...................................... 971.8 55.6 5.72
- --------------------------------------------------------------------------------------------------------
Total securities held to maturity ................... 5,419.1 377.1 6.96
- --------------------------------------------------------------------------------------------------------
Loans:
Commercial ............................................ 5,135.6 362.1 7.05
Commercial mortgage ................................... 2,338.4 189.7 8.11
Residential mortgage .................................. 3,226.4 261.8 8.12
Consumer .............................................. 2,604.0 215.2 8.26
- --------------------------------------------------------------------------------------------------------
Total loans ......................................... 13,304.4 1,028.8 7.73
- --------------------------------------------------------------------------------------------------------
Total interest-earning assets ....................... 20,271.6 1,473.8 7.27
- --------------------------------------------------------------------------------------------------------
Cash and due from banks ................................... 1,111.0
Allowance for loan losses ................................. (368.1)
Other assets .............................................. 914.1
- --------------------------------------------------------------------------------------------------------
Total Assets .............................................. $ 21,928.6
========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits ........................................ $ 8,917.2 211.9 2.38
Time deposits ........................................... 6,119.2 266.4 4.35
Commercial certificates of deposit $100,000 and over .... 324.5 9.4 2.89
- --------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 15,360.9 487.7 3.17
- --------------------------------------------------------------------------------------------------------
Other borrowed funds .................................... 1,184.1 41.7 3.52
Long-term debt .......................................... 395.0 29.5 7.47
- --------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 16,940.0 558.9 3.30
- --------------------------------------------------------------------------------------------------------
Demand deposits ........................................... 3,071.1
Other liabilities ......................................... 292.1
Shareholders' equity ...................................... 1,625.4
- --------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ................ $ 21,928.6
========================================================================================================
Net interest income (tax-equivalent basis) ................ 914.9 3.97%
Tax-equivalent basis adjustment ........................... (21.2)
- --------------------------------------------------------------------------------------------------------
Net interest income ....................................... $ 893.7
========================================================================================================
Net interest income as a percent of interest-earning assets
(tax-equivalent basis) .................................. 4.51%
========================================================================================================
<CAPTION>
(Tax-equivalent basis, dollars in millions,
not covered by independent auditors' report) 1992
- -------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell .................................. $ 366.0 $ 15.0 4.11%
Interest-bearing deposits with banks .................... 41.7 1.9 4.50
Trading account securities .............................. 23.8 1.5 6.26
Securities available for sale:
U.S. Government and Federal agencies .................. 197.4 17.1 8.66
States and political subdivisions ..................... -- -- --
Other securities ...................................... 6.3 0.5 7.75
- -------------------------------------------------------------------------------------------------------
Total securities available for sale ................. 203.7 17.6 8.63
- -------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government and Federal agencies .................. 4,521.7 341.4 7.55
States and political subdivisions ..................... 510.4 52.5 10.28
Other securities ...................................... 509.4 33.7 6.63
- -------------------------------------------------------------------------------------------------------
Total securities held to maturity ................... 5,541.5 427.6 7.72
- -------------------------------------------------------------------------------------------------------
Loans:
Commercial ............................................ 5,345.6 388.4 7.27
Commercial mortgage ................................... 2,265.6 199.3 8.80
Residential mortgage .................................. 3,253.4 298.6 9.18
Consumer .............................................. 2,598.3 230.9 8.89
- -------------------------------------------------------------------------------------------------------
Total loans ......................................... 13,462.9 1,117.2 8.30
- -------------------------------------------------------------------------------------------------------
Total interest-earning assets ....................... 19,639.6 1,580.8 8.05
- -------------------------------------------------------------------------------------------------------
Cash and due from banks ................................... 1,007.5
Allowance for loan losses ................................. (405.8)
Other assets .............................................. 942.7
- -------------------------------------------------------------------------------------------------------
Total Assets .............................................. $ 21,184.0
=======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits ........................................ $ 7,941.0 259.0 3.26
Time deposits ........................................... 6,765.5 369.8 5.47
Commercial certificates of deposit $100,000 and over .... 517.0 20.2 3.91
- -------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 15,223.5 649.0 4.26
- -------------------------------------------------------------------------------------------------------
Other borrowed funds .................................... 1,261.0 48.7 3.86
Long-term debt .......................................... 311.9 27.7 8.87
- -------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 16,796.4 725.4 4.32
- -------------------------------------------------------------------------------------------------------
Demand deposits ........................................... 2,711.2
Other liabilities ......................................... 248.4
Shareholders' equity ...................................... 1,428.0
- -------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ................ $ 21,184.0
=======================================================================================================
Net interest income (tax-equivalent basis) ................ 855.4 3.73%
Tax-equivalent basis adjustment ........................... (23.2)
- -------------------------------------------------------------------------------------------------------
Net interest income ....................................... $ 832.2
=======================================================================================================
Net interest income as a percent of interest-earning assets
(tax-equivalent basis) .................................. 4.36%
=======================================================================================================
</TABLE>
Notes: Average loan balances and rates include non-accruing loans.
The tax-equivalent basis adjustment was computed based on a
Federal income tax rate of 35% for 1997 1993 and 34% for 1992.
32 & 33
<PAGE> 35
CONSOLIDATED BALANCE SHEETS Summit Bancorp and Subsidiaries
================================================================================
(In thousands) December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
ASSETS
Cash and due from banks ........................ $1,173,118 $1,327,507
Federal funds sold and securities purchased
under agreements to resell ................... 4,460 114,789
Interest-bearing deposits with banks ........... 14,072 24,825
Securities:
Trading account securities ................... 35,216 26,376
Securities available for sale ................ 5,074,896 2,872,051
Securities held to maturity (fair value of
$4,151,582 in 1997 and $5,321,724 in 1996) . 4,157,543 5,422,093
- --------------------------------------------------------------------------------
Total securities ......................... 9,267,655 8,320,520
- --------------------------------------------------------------------------------
Loans .......................................... 18,888,366 17,386,059
Less: Allowance for loan losses ............. 296,494 280,611
- --------------------------------------------------------------------------------
Net loans 18,591,872 17,105,448
- --------------------------------------------------------------------------------
Premises and equipment ......................... 244,913 244,193
Goodwill and other intangibles ................. 188,620 172,452
Accrued interest receivable .................... 175,170 169,236
Due from customers on acceptances .............. 15,814 15,671
Other assets ................................... 288,478 272,630
- --------------------------------------------------------------------------------
Total Assets $29,964,172 $27,767,271
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits ......... $4,530,690 $4,080,316
Interest-bearing deposits:
Savings and time deposits .................. 16,914,485 16,812,682
Commercial certificates of deposit
$100,000 and over ........................ 884,261 736,533
- --------------------------------------------------------------------------------
Total deposits 22,329,436 21,629,531
- --------------------------------------------------------------------------------
Other borrowed funds ........................... 3,597,078 2,806,367
Accrued expenses and other liabilities ......... 290,197 272,968
Accrued interest payable ....................... 71,602 56,103
Bank acceptances outstanding ................... 15,814 15,671
Long-term debt ................................. 1,047,625 695,793
- --------------------------------------------------------------------------------
Total liabilities 27,351,752 25,476,433
- --------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock par value $.80:
Authorized 390,000 shares; issued and
outstanding 176,590 in 1997 and
168,296 in 1996 .......................... 141,272 134,637
Surplus ...................................... 987,281 918,411
Retained earnings ............................ 1,467,193 1,237,892
Employee stock ownership plan obligation ..... (4,201) (5,816)
Net unrealized gain on securities, net of tax 20,875 5,714
- --------------------------------------------------------------------------------
Total shareholders' equity 2,612,420 2,290,838
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $29,964,172 $27,767,271
================================================================================
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE> 36
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME Summit Bancorp and Subsidiaries
=====================================================================================
(In thousands, except per share data) Years ended December 31,
- -------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans ....................................... $1,505,840 $1,383,150 $1,297,168
Securities:
Trading account securities ................ 2,438 1,481 1,981
Securities available for sale ............. 243,103 164,953 68,074
Securities held to maturity ............... 308,508 351,150 452,605
- -------------------------------------------------------------------------------------
Total securities ...................... 554,049 517,584 522,660
Federal funds sold and securities purchased
under agreements to resell ................ 4,084 5,441 11,459
Deposits with banks ......................... 733 821 647
- -------------------------------------------------------------------------------------
Total interest income 2,064,706 1,906,996 1,831,934
- -------------------------------------------------------------------------------------
INTEREST EXPENSE
Savings and time deposits ................... 633,774 611,142 591,716
Commercial certificates of deposit
$100,000 and over ......................... 48,245 47,892 38,587
Other borrowed funds and long-term debt ..... 237,598 194,673 191,929
- -------------------------------------------------------------------------------------
Total interest expense 919,617 853,707 822,232
- -------------------------------------------------------------------------------------
Net interest income ................... 1,145,089 1,053,289 1,009,702
Provision for loan losses ................... 59,100 64,034 72,090
- -------------------------------------------------------------------------------------
Net interest income after provision
for loan losses ..................... 1,085,989 989,255 937,612
- -------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts ......... 114,569 105,967 93,814
Service and loan fee income ................. 52,205 44,577 37,770
Trust income ................................ 48,488 39,540 35,418
Securities gains ............................ 5,637 3,862 8,595
Other ....................................... 80,986 66,096 59,655
- -------------------------------------------------------------------------------------
Total non-interest income 301,885 260,042 235,252
- -------------------------------------------------------------------------------------
NON-INTEREST EXPENSES
Salaries .................................... 290,515 267,854 272,910
Pension and other employee benefits ......... 93,711 87,718 91,971
Occupancy, net .............................. 72,074 77,242 75,689
Furniture and equipment ..................... 78,259 69,732 65,561
Communications .............................. 35,214 33,292 29,324
Savings Association Insurance Fund assessment -- 11,059 --
Restructuring charges ....................... 83,000 110,700 --
Other ....................................... 163,918 157,994 170,004
- -------------------------------------------------------------------------------------
Total non-interest expenses 816,691 815,591 705,459
- -------------------------------------------------------------------------------------
Income before taxes ................... 571,183 433,706 467,405
Federal and state income taxes .............. 200,218 150,031 166,993
- -------------------------------------------------------------------------------------
Net Income $370,965 $283,675 $300,412
=====================================================================================
Net Income per Common Share:
Basic ..................................... $2.12 $1.69 $1.89
Diluted ................................... 2.09 1.67 1.87
=====================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
35
<PAGE> 37
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Summit Bancorp and Subsidiaries
====================================================================================================
(In thousands) Years ended December 31,
- ----------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ............................................ $ 370,965 $ 283,675 $ 300,412
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and other real estate owned 60,738 66,516 78,206
Depreciation, amortization, and accretion, net ...... 76,353 36,212 50,711
Restructuring charges ............................... 83,000 110,700 --
Deferred income tax ................................. (23,318) 14,383 27,861
Gains on sales of trading account securities
and securities available for sale ................. (4,054) (4,339) (9,890)
Gains on sales of mortgages held for sale ........... (7,516) (2,995) (4,996)
Gains on the sales of other real estate owned ....... (4,663) (4,242) (6,167)
Proceeds from sales of other real estate owned ...... 34,258 36,177 38,110
Proceeds from sales of mortgages held for sale ...... 451,656 484,591 173,039
Originations of mortgages held for sale ............. (485,452) (479,467) (204,805)
Net (increase) decrease in trading account securities (10,423) 16,066 (5,800)
Net decrease (increase) in accrued interest
receivable and other assets ....................... 46,752 (28,288) 44,457
Net (decrease) increase in accrued interest
payable, accrued expenses
and other liabilities ............................. (107,854) (117,587) 1,359
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 480,442 411,402 482,497
- ----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of securities held to maturity .............. (714,874) (849,873) (888,095)
Purchases of securities available for sale ............ (3,070,103) (978,013) (281,346)
Proceeds from maturities of securities
held to maturity .................................... 1,197,368 1,174,445 1,096,206
Proceeds from maturities of securities
available for sale .................................. 1,005,560 505,112 223,510
Proceeds from sales of securities
available for sale .................................. 825,870 198,645 512,665
Net decrease (increase) in Federal
funds sold, securities purchased under
agreements to resell and interest-bearing
deposits with banks ................................. 169,630 57.407 (84,175)
Purchase acquisitions ................................. -- -- (36,273)
Net increase in loans ................................. (775,555) (405,951) (1,118,670)
Purchases of premises and equipment, net .............. (39,566) (12,374) (27,313)
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,401,670) (310,602) (603,491)
- ----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net (decrease) increase in deposits ................... (150,175) (519,648) 702,531
Net increase (decrease) in short-term borrowings ...... 666,336 300,069 (363,478)
Principal payments on long-term debt, net ............. (101,436) (34,009) (195,591)
Proceeds from issuance of long-term debt,
net of related expenses ............................. 441,300 300,200 106,425
Dividends paid ........................................ (167,663) (149,489) (106,956)
Proceeds from issuance of common stock
under dividend reinvestment and
other stock plans ................................... 44,040 30,701 33,313
Purchase of common stock for acquisitions ............. (21,859) (92,268) --
Redemptions of preferred stock ........................ -- (42,620) (5,984)
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 710,543 (207,064) 170,260
- ----------------------------------------------------------------------------------------------------
(Decrease) increase in cash and due from banks ........ (210,685) (106,264) 49,266
Beginning cash balance of acquired entities ........... 56,296 29,797 100,202
Cash and due from banks, beginning of year ............ 1,327,507 1,403,974 1,254,506
- ----------------------------------------------------------------------------------------------------
Cash and due from banks, end of year $1,173,118 $1,327,507 $1,403,974
====================================================================================================
SUPPLEMENTAL DISCLOSURE
Cash paid:
Interest payments ................................... $ 905,933 $ 850,313 $ 810,956
Income tax payments ................................. 211,163 146,657 131,090
Noncash investing activities:
Net transfer of securities held to maturity
to securities available for sale .................. 805,854 -- 1,397,526
Net transfer of loans to other real estate owned .... 20,485 25,725 42,498
====================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
36
<PAGE> 38
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Summit Bancorp and Subsidiaries
====================================================================================================================================
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Total
Preferred Common Retained ESOP Unrealized Shareholders'
Stock Stock Surplus Earnings Obligation Gain (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ....................... $50,008 $123,769 $767,188 $ 904,988 $(7,800) $(24,708) $1,813,445
Net income ..................................... -- -- -- 300,412 -- -- 300,412
Cash dividend declared:
Preferred stock .............................. -- -- -- (2,700) -- -- (2,700)
Common stock ................................. -- -- -- (109,480) -- -- (109,480)
Common stock issued:
In conjunction with an acquisition
(2,922 shares) ............................. -- 2,338 65,848 -- -- -- 68,186
Dividend reinvestment and other stock
plans (1,341 shares) ....................... -- 1,073 24,684 -- -- -- 25,757
Exercise of stock options,
net (1,060 shares) ......................... -- 848 6,708 -- -- -- 7,556
Redemption of Series C preferred stock
(296 shares) ................................. (7,388) -- -- 1,404 -- -- (5,984)
ESOP debt repayment ............................ -- -- -- -- 908 -- 908
Change in unrealized gain (loss) on
securities, net of tax ....................... -- -- -- -- -- 32,008 32,008
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 42,620 128,028 864,428 1,094,624 (6,892) 7,300 2,130,108
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning balance of immaterial pooled
acquisitions (6,530 shares) .................. -- 5,224 29,612 14,054 -- (567) 48,323
Net income ..................................... -- -- -- 283,675 -- -- 283,675
Cash dividend declared:
Preferred stock .............................. -- -- -- (2,544) -- -- (2,544)
Common stock ................................. -- -- -- (151,917) -- -- (151,917)
Common stock issued:
Dividend reinvestment and other stock
plans (424 shares) ......................... -- 339 10,204 -- -- -- 10,543
Exercise of stock options, net
(1,367 shares) ............................. -- 1,094 19,064 -- -- -- 20,158
Purchase of common stock at cost
(3,555 shares) ............................... -- (2,844) (89,424) -- -- -- (92,268)
Reissuance of common stock in conjunction
with an acquisition (3,495 shares) ........... -- 2,796 84,527 -- -- -- 87,323
Redemption of Series B preferred stock
(600 shares) and Series C preferred
stock (504 shares) ........................... (42,620) -- -- -- -- -- (42,620)
ESOP debt repayment ............................ -- -- -- -- 1,076 -- 1,076
Change in unrealized gain (loss) on
securities, net of tax ....................... -- -- -- -- -- (1,019) (1,019)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 -- 134,637 918,411 1,237,892 (5,816) 5,714 2,290,838
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning balance of immaterial pooled
acquisitions (6,047 shares) .................. -- 4,837 34,705 25,562 -- (278) 64,826
Adjustment for the pooling of a company
with different fiscal year end ............... -- (158) (4,771) 9,288 539 1,832 6,730
Net income ..................................... -- -- -- 370,965 -- -- 370,965
Cash dividend declared on common stock ......... -- -- -- (176,514 -- -- (176,514)
Common stock issued:
Dividend reinvestment and other stock plans
(174 shares) ............................... -- 140 5,405 -- -- -- 5,545
Exercise of stock options, net (2,270 shares) -- 1,816 36,679 -- -- -- 38,495
Purchase and reissuance of common stock in
conjunction with acquisitions (495 shares) ... -- -- (3,148) -- -- -- (3,148)
ESOP debt repayment ............................ -- -- -- -- 1,076 -- 1,076
Change in unrealized gain (loss) on
securities, net of tax ....................... -- -- -- -- -- 13,607 13,607
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $ -- $141,272 $987,281 $1,467,193 $(4,201) $ 20,875 $2,612,420
====================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
37
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summit Bancorp and Subsidiaries
================================================================================
Note 1 Summary of Significant
Accounting Policies
================================================================================
The Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles and prevailing industry standards. The
following is a description of the significant accounting policies used in the
preparation of the Consolidated Financial Statements.
Business
Summit Bancorp (the Company) is a bank holding company registered under the Bank
Holding Company Act of 1956. Through its bank and non-bank subsidiaries, a full
range of financial services are provided to its customers in a competitive
environment. Summit Bancorp is regulated by various Federal and state agencies
and is subject to periodic examinations by those regulatory authorities. On
March 1, 1996, UJB Financial Corp. completed its acquisition of The Summit
Bancorporation, and the Company changed its name to Summit Bancorp.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of
Summit Bancorp after elimination of all significant intercompany accounts and
transactions. Certain prior period amounts have been reclassified to conform to
the financial statement presentation of 1997. The reclassifications have no
effect on shareholders' equity or net income as previously reported.
Prior period financial statements have been restated to include the accounts and
results of operations for all material acquisitions accounted for as
pooling-of-interests combinations. For acquisitions using the purchase method of
accounting, results of operations are included from the dates of acquisition.
The assets and liabilities of companies acquired under the purchase method of
accounting have been adjusted to estimated fair values at the date of
acquisition; the resulting net discount or premium is being accreted or
amortized into non-interest expense over the estimated remaining lives of the
related assets and liabilities.
In the preparation of financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from these estimates.
On August 20, 1997, the Board of Directors of the Company approved a
three-for-two common stock split payable on September 24, 1997. All share data
has been retroactively adjusted to reflect the common stock split.
Securities
Securities are classified into one of three categories: trading account, held to
maturity, and available for sale.
Securities that are purchased specifically for short-term appreciation with the
intent of selling in the near future are classified as trading account
securities. Trading account securities are carried at fair value with realized
and unrealized gains and losses reported in non-interest income.
Debt securities purchased with the intent and ability to hold until maturity are
classified as securities held to maturity and are carried at cost, adjusted for
amortization of premiums and accretion of discounts.
All other securities, including equity securities, are classified as securities
available for sale. Securities available for sale may be sold prior to maturity
in response to changes in interest rates, changes in prepayment risk, for
asset/liability management purposes, or other factors. These securities are
carried at fair value; with unrealized gains and losses, including the effect of
hedges, reported net of tax, as a separate component of shareholders' equity.
Realized gains and losses, which are generally computed by the specific
identification method, are reported in non-interest income.
Loans
Loans are generally carried at the principal amount outstanding, net of unearned
discounts and deferred loan origination fees and costs. Interest income on loans
is accrued and credited to interest income as earned. Loan origination fees and
certain direct loan origination costs are deferred and amortized over the
estimated life of the loan in interest income as an adjustment to the yield.
Other loan fees are recognized as earned and are included in non-interest
income.
Residential mortgage loans that are serviced for others are not included in the
Consolidated Financial Statements. Fees earned for servicing loans are reported
as non-interest income primarily when the related loan payments are collected.
Loan servicing costs are charged to non-interest expense as incurred.
Loans held for sale consist of residential mortgages and are carried at the
lower of cost or market using the aggregate method. Gains and losses on loans
sold are included in non-interest income.
Non-Performing Loans
Non-performing loans consist of commercial and industrial, construction and
development, and commercial mortgage loans for which the accrual of interest has
been discontinued. These loans are classified as non-performing and are
considered impaired when they are 90 days or more past due as to principal or
interest or where reasonable doubt exists as to timely collectibility.
38
<PAGE> 40
================================================================================
At the time a loan is placed on non-accrual status, previously accrued and
uncollected interest is reversed against interest income. Interest income on
non-accrual loans is generally credited to income on a cash basis; however, if
ultimate collectibility of principal is in doubt, interest collections are
applied as principal reductions. A loan is transferred back to accrual status
when it is contractually current and its future collectibility is expected.
Smaller balance loans such as consumer loans and residential mortgages, which
are collectively evaluated, are specifically excluded from the population of
non-performing loans. Interest accruals on consumer and residential mortgages
cease at 90 days, at which time previously accrued interest is reversed.
Generally, consumer loans which are not secured by real estate are charged off
when they are 120 days past due. All other loans are charged off when deemed
uncollectible.
The impairment of a non-performing loan is measured based on the present value
of the expected future cash flows discounted at the loan's effective interest
rate or the underlying value of collateral for collateral dependent loans. The
impaired loan's carrying value in excess of the expected cash flows or
collateral value is specifically reserved or is charged to the allowance for
loans losses.
Allowance for Loan Losses
The allowance for loan losses is a valuation reserve available for losses
incurred or expected on extensions of credit. Credit losses arise primarily from
the loan portfolio, but may also be derived from other credit-related sources
including commitments to extend credit, guarantees, and standby letters of
credit. Additions are made to the allowance through periodic provisions which
are charged to expense. Principal losses are charged to the allowance when
incurred or when a determination is made that a loss is expected. Subsequent
recoveries, if any, are credited to the allowance.
The adequacy of the allowance for loan losses is determined through a quarterly
review of outstanding loans and commitments to extend credit. The impact of
economic conditions on the creditworthiness of borrowers is considered, as well
as loan loss experience, changes in the composition and volume of the loan
portfolio, and management's assessment of the risks inherent in the loan
portfolio. These and other factors are used in assessing the overall adequacy of
the allowance for loan losses and the resulting provision for loan losses.
Premises and Equipment
Premises, furniture, and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization are computed using
the straight-line method. Premises, furniture, and equipment are depreciated
over the estimated useful life of the assets or terms of the leases, as
applicable. Estimated useful lives are ten to forty years for premises and three
to ten years for furniture and equipment. Maintenance and repairs are charged to
non-interest expenses as incurred, while renewals and major improvements are
capitalized. Upon disposition, premises, furniture, and equipment are removed
from the property accounts at their carrying amount with the resulting gain or
loss credited or charged to non-interest income.
Other Real Estate Owned (OREO)
OREO is carried at the lower of cost or fair value, less estimated cost to sell.
When a property is acquired, the excess of the carrying amount over fair value,
if any, is charged to the allowance for loan losses. An allowance for OREO has
been established, through charges to OREO expense, to maintain properties at the
lower of cost or fair value less estimated cost to sell. Operating results of
OREO, including rental income, operating expenses, and gains and losses realized
from the sale of properties owned, are included in non-interest expenses.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the estimated fair
value of identifiable net assets acquired through purchase acquisitions. The
amortization of goodwill is on a straight-line basis over the estimated periods
to be benefited, ranging from ten to twenty-five years, and is included in
non-interest expenses.
Other intangible assets primarily consist of core deposit intangibles which
represent the intangible value of depositor relationships assumed in purchase
acquisitions. The amortization of these intangibles is on an accelerated basis
over their estimated periods of benefit, ranging from five to ten years, and is
included in non-interest expenses.
Mortgage Servicing Rights
Mortgage servicing rights are generally recorded when purchased or originated
mortgage loans are sold, with servicing rights retained. The cost of each
mortgage loan is allocated between the mortgage servicing right and the loan
(without the servicing right) based on their relative fair values. Mortgage
servicing rights, which are classified in other assets, are amortized over the
estimated net servicing life and are evaluated on a quarterly basis for
impairment based on their fair value. The fair value is estimated using the
present value of expected future cash flows along with numerous assumptions
including servicing income, cost of servicing, discount rates, prepayment
anticipations, and default rates. Impairment adjustments, if any, are recognized
through the use of a valuation allowance.
Derivative Financial Instruments
Off-balance-sheet financial derivatives are used as part of the overall
asset/liability management process. These instruments are used to manage risk
related to changes in interest rates. At December 31, 1997, the portfolio of
derivative financial instruments consisted of interest rate swaps, caps, and
floors.
Interest rate swaps are agreements with counterparties to exchange periodic
interest payments calculated on a notional principal amount and are accounted
for under the accrual method. To qualify for accounting under the accrual
method, the swaps must be designated to interest-bearing assets or liabilities
and must modify their interest rate characteristics over the term of the
agreement or the term of the designated instrument, whichever is shorter. The
net periodic interest payments or receipts arising from these instruments are
recognized in interest income or interest expense as yield adjustments to the
designated asset or liability.
39
<PAGE> 41
================================================================================
Interest rate caps and floors are agreements in which, for an up-front premium
and on predetermined future dates, the counterparties agree to pay an interest
amount based on the movement of specified market interest rates either above or
below a predetermined level. The payments, if applicable, are derived from the
measured rate variance multiplied by the contractual notional volume. To qualify
for accrual accounting, interest rate caps and floors must be designated to
interest-bearing assets or liabilities and must modify their interest rate
characteristics over the term of the agreement or the designated instrument,
whichever is shorter. Costs of interest rate caps and floors are deferred and
amortized in interest income or interest expense as adjustments to the yield of
the designated instrument. Unamortized costs are included in other assets.
Payments received on these caps and floors are recognized under the accrual
method as adjustments to interest income or interest expense of the designated
instruments.
If derivatives are terminated, realized gains and losses on these instruments
are deferred and amortized in interest income and interest expense as yield
adjustments to the designated assets or liabilities over the shorter of the
remaining life of the agreement or the designated assets or liabilities. If the
designated asset or liability related to a derivative matures, or is sold,
extinguished, or terminated, the amount of the previously unrecognized gain or
loss is recognized at that time in earnings.
Stock-Based Compensation
Stock-based compensation is accounted for under the intrinsic value based method
as prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees." Included in the Notes to Consolidated Financial
Statements are pro forma disclosures required by Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
which assumes the fair value based method of accounting had been adopted.
Retirement Plans
Several formal non-contributory retirement plans exist which cover substantially
all full-time employees. Annual contributions are made to the plans in amounts
at least equal to the minimum regulatory requirements and no greater than the
maximum amount that can be deducted for Federal income tax purposes. The costs
associated with these benefits are accrued based on actuarial assumptions and
included in non-interest expenses.
Restructuring Charges
Restructuring charges are recorded in conjunction with acquisitions accounted
for as poolings of interest and the integration of the acquired entities
operations into Summit Bancorp. These charges include only identified direct and
incremental costs associated with these acquisitions.
Items included in restructuring charges include the following: personnel
expenses which include severance pay and benefits for terminated employees,
including external placement costs; real estate expenses which result from the
costs incurred when branches and other operations facilities are consolidated,
including lease-termination costs, write-downs of owned properties and leasehold
improvements and other facility-related costs; professional fees, which include
costs for investment banking, accounting, and legal fees; and charges for data
processing which include costs associated with the disposal or write-off of
duplicate or non-usable software or hardware systems. Additional charges may
include costs incurred for account conversions, communications and other merger
costs.
Income Taxes
The amount provided for Federal income taxes is based on income reported for
consolidated financial statement purposes, after elimination of Federal
tax-exempt income which is derived primarily from securities of states and
political subdivisions and certain commercial and mortgage loans. The amount
provided for state income taxes is based on income reported by each subsidiary
on a stand alone basis.
Deferred Federal and state tax assets and liabilities are recognized for the
expected future tax consequences of existing differences between financial
statement and tax bases of existing assets and liabilities, as well as for
operating losses.
A consolidated Federal income tax return is filed with the amount of income tax
expense or benefit computed and allocated to each subsidiary on a separate
return basis.
Net Income per Common Share
Summit Bancorp adopted SFAS No. 128, "Earnings per Share," on December 31, 1997.
SFAS No. 128 establishes the new standard for computation and presentation of
net income per common share. Under the new requirements both basic and diluted
net income per common share are presented. All prior period net income per
common share data has been restated.
Basic net income per common share is calculated by dividing net income, less the
dividends on preferred stocks, if any, by the weighted average common shares
outstanding during the period.
Diluted net income per common share is computed similar to that of basic net
income per common share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if all
potentially dilutive common shares, principally stock options, were issued
during the reporting period.
40
<PAGE> 42
Note 2 Acquisitions and Restructuring Charges
================================================================================
Acquisitions
On August 1, 1997, Summit Bancorp completed its acquisition of Collective
Bancorp, Inc. (Collective), which operated 82 branches. This transaction was
accounted for as a pooling of interests, and all financial information has been
restated. Prior to the combination, Collective's fiscal year ended on June 30.
In recording the transaction, Collective's 1996 and prior fiscal years were
combined with Summit Bancorp's calendar years. In 1997, Collective adopted
Summit's reporting period, and a $6.7 million adjustment was made to
shareholders' equity as of January 1, 1997, to include Collective's results of
operations for the six months ended December 31, 1996.
Separate results of operations of the entities for the two years prior to
acquisition were as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Interest Income:
Summit Bancorp ............................. $ 911.5 $ 869.2
Collective Bancorp, Inc. ................... 141.8 140.5
- --------------------------------------------------------------------------------
$1,053.3 $1,009.7
================================================================================
Net Income
Summit Bancorp ............................. $ 229.2 $ 242.9
Collective Bancorp, Inc. ................... 54.5 57.5
- --------------------------------------------------------------------------------
$ 283.7 $ 300.4
================================================================================
</TABLE>
On March 1, 1997, Summit Bancorp completed its acquisition of B.M.J. Financial
Corp. (B.M.J.), which operated 21 banking offices. This transaction was
accounted for as a pooling of interests, however, it was not considered material
to Summit Bancorp's Consolidated Financial Statements, and as a result, it was
recorded as an adjustment to shareholders' equity on January 1, 1997.
On December 12, 1997, Summit Bancorp acquired Corporate Dynamics, an employee
benefits consulting firm, and Philadelphia Benefits Corp., a group health
insurance agency, with the issuance of 495 thousand shares of common stock. This
acquisition was accounted for as a purchase, and Corporate Dynamics' and
Philadelphia Benefits Corp.'s results of operations have been included since
acquisition date. The cost in excess of the fair value of net assets acquired
resulted in goodwill of $18.9 million.
A summary of completed bank acquisitions for the past three years is provided
below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Summary of Completed Bank Acquisitions Goodwill & Common
Intangibles Cash Shares Method of
(In millions) Date Assets Loans Deposits Recorded Paid Issued Accounting
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
Collective Bancorp, Inc. ..................... Aug. 1 $5,478.6 $2,910.6 $3,472.5 $ -- $ -- 27.3 Pooling
B.M.J. Financial Corp. ....................... March 1 676.0 449.0 552.0 -- -- 6.0 Pooling
1996
Central Jersey Financial Corporation ......... Dec. 7 446.6 200.5 376.8 42.4 -- 3.5 Purchase
Continental Bancorporation* .................. Oct. 1 161.3 61.4 129.5 16.9 25.7 -- Purchase
The Summit Bancorporation .................... March 1 5,654.1 3,562.2 4,693.7 -- -- 51.1 Pooling
The Flemington National Bank and Trust Company Feb. 23 285.9 190.6 257.5 -- -- 2.0 Pooling
Garden State Bancshares, Inc.** .............. Jan. 16 311.8 208.8 281.8 -- -- 4.5 Pooling
1995
Bancorp New Jersey, Inc. ..................... July 11 504.5 290.4 450.0 71.6 36.3 2.9 Purchase
=================================================================================================================================
</TABLE>
* Amounts included in the August 1, 1997, Collective Bancorp. Inc.
acquisition.
** Amounts included in the March 1, 1996, The Summit Bancorporation
acquisition.
Restructuring Charges
During 1997, Summit Bancorp recorded restructuring charges of $83.0 million, or
$.31 per share after tax, for merger-related expenses associated with the
Collective and B.M.J. acquisitions.
Restructuring charges amounted to $56.5 million for Collective and $26.5 million
for B.M.J. Charges recorded for personnel, real estate, and professional fee
expenses amounted to $26.2 million, $18.5 million and $13.6 million,
respectively. Expenses for data processing were $16.0 million and the remaining
$8.7 million was for account conversions, communications, and other merger
costs.
Approximately $27.4 million of the restructuring charge payments and $.3
million of write-offs have been realized through December 31, 1997. It is
anticipated that the remainder of the restructuring charges will be incurred
following the merger of Collective Bank into Summit Bank in March 1998.
During 1996, Summit Bancorp recorded restructuring charges of $110.7 million, or
$.42 per share after tax, for merger-related expenses associated with The Summit
Bancorporation, The Flemington National Bank and Trust Company (Flemington),
Garden State Bancshares, Inc. (Garden State), and a supermarket branch
initiative.
The Summit Bancorporation acquisition accounted for $89.0 million of the 1996
restructuring charges. Charges recorded for personnel, real estate, and
professional fee expenses amounted to $35.0 million, $26.0 million, and $12.0
million, respectively. Expenses for data processing were $8.0 million and the
remaining $8.0 million was for account conversions, communications, and other
merger costs. The restructuring charges also included $4.3 million for the
Flemington acquisition and $7.9 million for the Garden State acquisition. The
types of costs incurred for these acquisitions were similar to those of the
other acquisitions described above. The 1996 restructuring charges have
substantially all been paid during 1996 and 1997.
Funding for cash expenditures related to restructuring charges has and will be
paid out of operations. Liquidity has not been significantly impacted by these
cash outlays.
41
<PAGE> 43
Note 3 Securities
================================================================================
The following table provides the major components of investment securities at
amortized cost and fair value.
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------- -----------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized
(In thousands) Cost Gains Losses Value Cost Gains
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities Available for Sale:
U.S. Government and Federal agencies $4,419,632 $ 24,330 $ 12,893 $4,431,069 $2,282,025 $ 11,791
States and political subdivisions .. 11,087 34 -- 11,121 12,908 1
Other securities:
Mortgage-backed ................. 295,067 1,536 783 295,820 317,434 1,232
Other debt ...................... 41,706 721 2,524 39,903 30,197 923
Marketable equities, net ........ 272,068 24,928 13 296,983 218,121 15,186
- -------------------------------------------------------------------------------------------------------------
Total Other securities 608,841 27,185 3,320 632,706 565,752 17,341
- -------------------------------------------------------------------------------------------------------------
$5,039,560 $ 51,549 $ 16,213 $5,074,896 $2,860,685 $ 29,133
=============================================================================================================
Securities Held to Maturity:
U.S. Government and Federal agencies $3,022,413 $ 15,523 $ 23,174 $3,014,762 $2,345,444 $ 8,187
States and political subdivisions .. 180,715 8,597 72 189,240 227,526 9,713
Other securities:
Mortgage-backed ................. 895,177 930 8,260 887,847 2,717,237 1,766
Other debt ...................... 59,238 529 34 59,733 131,886 1,133
- -------------------------------------------------------------------------------------------------------------
Total Other securities 954,415 1,459 8,294 947,580 2,849,123 2,899
- -------------------------------------------------------------------------------------------------------------
$4,157,543 $ 25,579 $ 31,540 $4,151,582 $5,422,093 $ 20,799
=============================================================================================================
<CAPTION>
1996 1995
---------------------- ----------
Gross
Unrealized Fair Carrying
Losses Value Value
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Securities Available for Sale:
U.S. Government and Federal agencies $ 16,388 $2,277,428 $1,979,832
States and political subdivisions .. 3 12,906 --
Other securities:
Mortgage-backed ................. 997 317,669 348,733
Other debt ...................... 4 31,116 43,452
Marketable equities, net ........ 375 232,932 173,072
- ------------------------------------------------------------------------
Total Other securities 1,376 581,717 565,257
- ------------------------------------------------------------------------
$ 17,767 $2,872,051 $2,545,089
========================================================================
Securities Held to Maturity:
U.S. Government and Federal agencies $ 42,089 $2,311,542 $1,980,081
States and political subdivisions .. 119 237,120 283,848
Other securities:
Mortgage-backed ................. 78,560 2,640,443 3,065,854
Other debt ...................... 400 132,619 110,131
- ------------------------------------------------------------------------
Total Other securities 78,960 2,773,062 3,175,985
- ------------------------------------------------------------------------
$ 121,168 $5,321,724 $5,439,914
========================================================================
</TABLE>
Included in interest on securities held to maturity and securities available for
sale is tax exempt income on certain state and municipal securities which
amounted to $13.3 million, $16.6 million, and $22.3 million for 1997, 1996, and
1995, respectively.
Gross realized gains on securities available for sale amounted to $8.3 million,
$9.3 million, and $24.5 million, while gross realized losses amounted to $2.4
million, $3.9 million, and $16.4 million for the years 1997, 1996, and 1995,
respectively. These amounts are included in non-interest income as securities
gains in the Consolidated Statements of Income. Also included in securities
gains are gains and losses realized from the early redemption of securities.
The carrying value of investment securities pledged to secure public funds and
securities sold under agreements to repurchase, as well as for other purposes
required by law, was $4.2 billion at December 31, 1997.
Securities held to maturity and securities available for sale included high-risk
mortgage-backed securities as defined by the Federal Financial Institutions
Examination Council. High-risk mortgage-backed securities are those securities
that experience significant price and expected life sensitivity to changes in
interest rates. At December 31, 1997, these securities had an amortized cost of
$618.4 million and a fair value of $616.1 million.
The table below provides the remaining contractual yields of debt securities
within the investment portfolios. The carrying value of securities at December
31, 1997, is distributed by contractual maturity. Mortgage-backed securities and
other securities which may have principal prepayment provisions are distributed
based on contractual maturity adjusted for historical prepayments. These
prepayments are not scheduled over the life of the investment, but are reflected
as adjustments to the final maturity distribution.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Within After one year After five years
one year through five years through ten years
- --------------------------------------------------------------------------------------------------
(In thousands) Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Securities Available for Sale:
U.S. Government and Federal agencies $ 91,678 5.52% $ 677,942 6.03% $ 344,770 6.52%
States and political subdivisions .. 10,841 4.19 -- -- 280 9.50
Other securities:
Mortgage-backed ................. -- -- 89,875 6.76 91,320 6.63
Other debt ...................... -- -- 1,164 7.00 -- --
Marketable equities, net ........ 296,983 -- -- -- -- --
- --------------------------------------------------------------------------------------------------
Total Other securities 296,983 -- 91,039 6.76 91,320 6.63
- --------------------------------------------------------------------------------------------------
$ 399,502 5.38%* $ 768,981 6.12% $ 436,370 6.54%
==================================================================================================
Securities Held to Maturity:
U.S. Government and Federal agencies $ 38,542 5.46% $ 391,622 6.35% $ 311,481 6.34%
States and political subdivisions .. 27,107 5.91 111,336 6.19 21,121 6.07
Other securities:
Mortgage-backed ................. 124,045 6.77 640,676 6.19 1,837 6.86
Other debt ...................... 4,383 6.59 14,353 7.09 18,684 8.02
- --------------------------------------------------------------------------------------------------
Total Other securities 128,428 6.76 655,029 6.21 20,521 7.92
- --------------------------------------------------------------------------------------------------
$ 196,077 6.39% $1,157,987 6.26% $ 353,123 6.42%
==================================================================================================
<CAPTION>
- --------------------------------------------------------------------
After Total
ten years Carrying
- --------------------------------------------------------------------
Amount Yield Value
- --------------------------------------------------------------------
Securities Available for Sale:
U.S. Government and Federal agencies $3,316,679 6.69% $4,431,069
States and political subdivisions .. -- -- 11,121
Other securities:
Mortgage-backed ................. 114,625 6.63 295,820
Other debt ...................... 38,739 6.90 39,903
Marketable equities, net ........ -- -- 296,983
- --------------------------------------------------------------------
Total Other securities ....... 153,364 6.70 632,706
- --------------------------------------------------------------------
$3,470,043 6.69% $5,074,896
====================================================================
Securities Held to Maturity:
U.S. Government and Federal agencies $2,280,768 6.59% $3,022,413
States and political subdivisions .. 21,151 5.78 180,715
Other securities:
Mortgage-backed ................. 128,619 7.06 895,177
Other debt ...................... 21,818 6.42 59,238
- --------------------------------------------------------------------
Total Other securities 150,437 6.97 954,415
- --------------------------------------------------------------------
$2,452,356 6.61% $4,157,543
====================================================================
</TABLE>
* Yield excludes equity securities.
42
<PAGE> 44
================================================================================
Note 4 Loans
================================================================================
The composition of the loan portfolio, net of unearned discount and deferred
loan origination fees and costs, at December 31 was as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial and industrial .................. $ 5,884,240 $ 4,904,732
Construction and development ............... 369,500 316,207
- --------------------------------------------------------------------------------
Total commercial loans .................. 6,253,740 5,220,939
Commercial mortgage ........................ 2,703,793 2,624,427
Residential mortgage ....................... 5,671,200 5,904,490
- --------------------------------------------------------------------------------
Total mortgage loans .................... 8,374,993 8,528,917
Home equity ................................ 2,734,582 2,339,266
Automobile ................................. 1,075,487 893,703
Other consumer ............................. 449,564 403,234
- --------------------------------------------------------------------------------
Total consumer loans 4,259,633 3,636,203
- --------------------------------------------------------------------------------
$18,888,366 $17,386,059
================================================================================
</TABLE>
The Company's credit policy emphasizes diversification of risk among industries
and borrowers. Concentrations of credit risk, whether on or off the balance
sheet, exist in relation to certain groups of customers or counterparties. A
group concentration arises when a number of customers or counterparties have
similar economic characteristics that would compromise their ability to meet
contractual obligations or be similarly affected by changes in economic or other
conditions. Summit Bancorp does not have a exposure to any individual customer,
counterparty, or group concentration.
The Company's business is concentrated in New Jersey and eastern Pennsylvania. A
significant portion of the total loan portfolio is secured by real estate or
other collateral located in these states. This concentration is mitigated by the
diversification of the loan portfolio among commercial, construction, commercial
mortgage, and consumer loans. The commercial and industrial loan portfolio
represents approximately 31% of the entire loan portfolio and has no
concentration greater than 10% to any specific industry.
At December 31, 1997, the ten largest commercial and commercial mortgage loans
have outstanding balances of $419.6 million and unexercised commitments of $70.7
million.
Included in the commercial and commercial mortgage loan portfolios are loans
where the accrual of interest has been discontinued. These non-performing loans
were $85.1 million and $139.1 million at December 31, 1997 and 1996,
respectively. These loans will return to accrual status only if they become
contractually current and future collectibility of amounts due are reasonably
assured.
The average balance of non-performing loans for 1997 and 1996 was $104.1 million
and $181.7 respectively. The amount of cash basis interest income that was
received on these loans was $2.5 million in 1997 and $3.3 million in 1996.
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 ...................... $280,611 $293,160 $323,336
Acquisition adjustments, net ......... 9,994 8,492 6,131
Provision charged to expense ......... 59,100 64,034 72,090
- --------------------------------------------------------------------------------
349,705 365,686 401,557
- --------------------------------------------------------------------------------
Charge offs .......................... 86,675 108,306 130,492
Recoveries ........................... 33,464 23,231 22,095
- --------------------------------------------------------------------------------
Net charge offs ......................... 53,211 85,075 108,397
- --------------------------------------------------------------------------------
Balance, December 31 $296,494 $280,611 $293,160
================================================================================
</TABLE>
The allocation of the allowance for loan losses at December 31 was as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Allowance allocated to non-performing loans .......... $ 20,021 $ 25,575
Allowance allocated to performing loans .............. 109,647 121,812
Unallocated allowance ................................ 166,826 133,224
- --------------------------------------------------------------------------------
$296,494 $280,611
================================================================================
</TABLE>
Included in residential mortgage loans are mortgage loans held for sale, which
approximated $75.7 million at December 31, 1997, and $50.0 million at December
31, 1996. These loans are accounted for at the lower of aggregate cost or market
value.
Note 5 Premises and Equipment
================================================================================
The major components of premises and equipment at December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Land ................................................... $ 32,680 $ 33,935
Premises and leasehold improvements .................... 302,982 290,616
Furniture and equipment ................................ 248,578 231,737
- --------------------------------------------------------------------------------
584,240 556,288
Less accumulated depreciation and amortization ......... 339,327 312,095
- --------------------------------------------------------------------------------
$244,913 $244,193
================================================================================
</TABLE>
Amounts charged to non-interest expenses for depreciation and amortization
amounted to $36.2 million in 1997, $33.3 million in 1996, and $33.4 million in
1995.
Note 6 Other Assets
================================================================================
The major components of other assets at December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets, net ....................... $124,420 $110,478
Prepaid expenses ............................... 50,789 29,300
Other real estate owned, net ................... 14,248 26,406
Mortgage servicing rights, net ................. 7,908 7,238
Other .......................................... 91,113 99,208
- --------------------------------------------------------------------------------
$288,478 $272,630
================================================================================
</TABLE>
43
<PAGE> 45
================================================================================
Note 7 Deposits
================================================================================
The following is an expected maturity distribution of savings and time deposits
at December 31:
<TABLE>
<CAPTION>
(In thousands) 1997
- --------------------------------------------------------------------------------
<S> <C>
Due in one year or less ................................... $14,885,258
Due between one and two years ............................. 1,435,677
Due between two and three years ........................... 334,794
Due between three and four years .......................... 89,925
Due between four and five years ........................... 145,541
Due over five years ....................................... 23,290
- --------------------------------------------------------------------------------
$16,914,485
================================================================================
</TABLE>
As of December 31, 1997, there were $1.5 billion of time deposits greater than
$100,000, of which $884.3 million are classified as commercial certificates of
deposit. At year-end 1997 and 1996, there were $20.7 million and $36.3 million,
respectively, of overdraft deposit relationships classified as loans.
The total amount of public funds held on deposit as of December 31, 1997, was
$1.2 billion, for which $196.7 million of securities were pledged as collateral.
Note 8 Other Borrowed Funds
================================================================================
Other borrowed funds at December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Securities sold under agreements to repurchase ..... $2,689,434 $2,262,796
Federal funds purchased ............................ 655,425 199,950
Treasury tax and loan .............................. 137,819 130,348
Commercial paper ................................... 39,799 40,476
Federal Home Loan Bank advances .................... -- 90,000
Other .............................................. 74,601 82,797
- --------------------------------------------------------------------------------
$3,597,078 $2,806,367
================================================================================
</TABLE>
Lines of credit at the Parent Corporation are available to support commercial
paper borrowings and for general corporate purposes. Interest on these lines of
credit approximate the prime lending rate at the time of borrowing. Unused lines
amounted to $36.0 million at December 31, 1997.
Note 9 Commitments and Contingencies
================================================================================
Non-interest expenses include rentals for premises and equipment of $62.6
million in 1997, $55.2 million in 1996 and $52.2 million in 1995, after a
reduction for sublease rentals of $3.6 million, $3.7 million and $4.4 million in
each of the respective years. At December 31, 1997, Summit Bancorp was obligated
under a number of non-cancelable leases for premises and equipment, many of
which provide for increased rentals based upon increases in real estate taxes
and the cost of living index. These leases, most of which have renewal
provisions, are principally non-financing leases. Minimum rentals under the
terms of these leases for the years 1998 through 2002 are $32.0 million, $28.8
million, $25.5 million, $23.3 million and $20.7 million, respectively. Minimum
rentals due after 2003 are $134.4 million.
Summit Bancorp and its subsidiaries are, from time to time, defendants in legal
proceedings relating to the conduct of their businesses. In the best judgment of
management, based upon consultation with counsel, the consolidated financial
position of Summit Bancorp and its subsidiaries will not be affected materially
by the final outcome of any pending legal proceedings or other contingent
liabilities and commitments.
Note 10 Long-Term Debt
================================================================================
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
FHLB borrowings, 4.00% to 8.45%,
due 1998 through 2016 ............................ $ 640,710 $ 426,442
8.625% Subordinated notes due
December 10, 2002* ............................... 175,000 175,000
8.40% Capital Trust Pass-through
Securities due March 15, 2027* ................... 150,000 --
6.75% Subordinated notes due June 15, 2003 ......... 49,564 49,485
7.95% Senior notes due August 25, 2003* ............ 20,000 20,000
Collateralized mortgage obligations ................ 8,150 10,391
ESOP Debt due June 30, 2005* ....................... 3,750 4,500
ESOP Debt due September 30, 1998* .................. 451 1,316
7.75% Sinking fund debentures* ..................... -- 8,659
- --------------------------------------------------------------------------------
$1,047,625 $ 695,793
================================================================================
</TABLE>
* Indicates Parent Corporation obligation.
The banking subsidiaries of Summit Bancorp are members of the Federal Home Loan
Banks (FHLB) and have access to term financing from the FHLB having a maturity
of up to 30 years. The FHLB borrowings had original maturities greater than one
year and are secured by securities and residential mortgages under a blanket
collateral agreement.
The 8.625% subordinated notes were issued in 1992 and are unsecured. Interest is
payable semi-annually on June 10 and December 10 of each year. The subordinated
notes are not subject to redemption prior to maturity. As of December 31, 1997,
$140.0 million of this debt qualifies as Tier II capital.
On March 20, 1997, Summit Capital Trust I (Trust), a statutory business trust,
and a wholly owned subsidiary of Summit Bancorp, issued $150.0 million of 8.40%
Capital Trust Pass-through Securities to investors (Capital Securities) and $4.6
million of 8.40% Common Securities to Summit Bancorp (Common Securities), both
due March 15, 2027 (collectively, Trust Securities). The Capital Securities have
a preference over the Common Securities with respect to liquidation and other
distributions and qualify as Tier I capital. Proceeds from the issuance of the
Trust Securities were immediately used by the Trust to purchase $154.6 million
of 8.40% Junior Subordinated Deferrable Interest Debentures due March 15, 2027,
of Summit Bancorp (Subordinated Debentures), said Subordinated Debentures
constituting the sole assets of the Trust. The Subordinated Debentures are
redeemable in whole or in part prior to maturity after March 15, 2007, at
premiums which decline annually through the date of maturity. The Trust is
obligated to distribute all proceeds of a redemption, whether voluntary or upon
maturity, to holders of
44
<PAGE> 46
================================================================================
Trust Securities. Summit Bancorp's obligations with respect to the Capital
Securities and the Subordinated Debentures, when taken together, provide a full
and unconditional guarantee on a subordinated basis by Summit Bancorp of the
Trust's obligations to pay amounts when due on the Capital Securities.
Summit Bank issued $50 million in 6.75% subordinated notes in 1993. Unamortized
discount on the subordinated notes was $436 thousand and $515 thousand at
December 1997 and 1996, respectively, resulting in an effective interest rate of
7.00%. Interest is payable semiannually on June 15 and December 15 of each year.
The 6.75% subordinated notes are not subject to redemption prior to maturity.
This debt qualifies as Tier II capital.
The 7.95% ten-year maturity private placement senior notes were issued in 1993
with interest payable quarterly. Summit Bancorp has the option to prepay the
notes, subject to certain prepayment provisions.
The collateralized mortgage obligations are secured by investments in
mortgage-backed securities having carrying values of $9.2 million and $11.6
million at December 31, 1997, and 1996, respectively. These mortgage-backed
securities have interest rates ranging from 7.27% to 9.15%. A trustee holds the
collateral certificates, collects all principal and interest payments thereon,
and disburses all funds to the noteholders.
In November 1991, the Employee Stock Ownership Plan (ESOP) borrowed $4.1 million
maturing September 30, 1998. In June 1993, the ESOP extended an additional $5.0
million line maturing June 30, 2005. The interest rate on both borrowings is the
lesser of 265 basis points over the Federal Funds effective rate or 25 basis
points over the Company's prime rate.
Principal amounts due on long-term debt for the years 1998 through 2002 are
$246.2 million, $156.2 million, $84.5 million, $81.5 million and $186.7 million,
respectively.
Note 11 Net Income per Common Share
================================================================================
The following table summarizes the computation of basic and diluted net income
per common share for each of the three years ended December 31:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income .............................. $370,965 $283,675 $300,412
Less: Preferred dividends ............... -- 2,544 2,700
- --------------------------------------------------------------------------------
Net income available to common
shareholders $370,965 $281,131 $297,712
================================================================================
Weighted-average common shares
outstanding ........................... 175,128 166,673 157,244
Plus: Common stock equivalents .......... 2,331 2,115 2,005
- --------------------------------------------------------------------------------
Diluted weighted-average common
shares outstanding 177,459 168,788 159,249
================================================================================
Net income per common share:
Basic ................................. $ 2.12 $ 1.69 $ 1.89
Diluted ............................... 2.09 1.67 1.87
================================================================================
</TABLE>
At December 31, 1996, there were 236,925 stock options outstanding excluded from
the computation of common stock equivalents because the options' exercise price
was greater than the average market value of the common shares.
Note 12 Shareholders' Equity
================================================================================
There were 6.0 million shares of preferred stock authorized as of December 31,
1997, and 1996, with no shares issued. All previously outstanding Series B and C
preferred stocks were redeemed and retired, in whole, at their stated value on
December 15, 1996.
On April 18, 1997, the shareholders voted in favor of increasing the authorized
number of common shares from 130 million to 260 million. The authorized number
of shares has been adjusted to 390 million as a result of the September 24,
1997, three-for-two common stock split and the par value of the stock was
reduced to $.80 per share from $1.20 per share.
The following table summarizes common stock reserved, available, issued and
outstanding, and authorized as of December 31, 1997:
<TABLE>
<CAPTION>
Number
(In thousands) of Shares
- --------------------------------------------------------------------------------
<S> <C>
Unissued and reserved ...................................... 7,115
Unissued and available ..................................... 206,295
Issued and outstanding ..................................... 176,590
- --------------------------------------------------------------------------------
Total shares authorized .................................. 390,000
================================================================================
</TABLE>
The total shares unissued and reserved represent the amount of shares registered
with the Securities and Exchange Commission under current registration
statements. During 1997 and 1996, 2.4 million and 1.8 million shares of common
stock were issued, respectively, for the Dividend Reinvestment, Savings
Incentive and other stock option plans.
A Shareholder Rights plan exists which is designed to ensure fair and equal
treatment for all shareholders in the event of any proposal to acquire Summit
Bancorp. The terms of the Plan provide that each share of common stock also
represents one "right." Each right will entitle the holder to buy 1/150 of a
share of a new series of preferred stock, Series R, upon the occurrence of
certain events. In addition, upon the occurrence of certain other events,
holders of the rights will be entitled to purchase either shares of this new
preferred stock or shares in an "acquiring person" at half their fair market
value as determined under the plan.
Summit Bancorp has committed to make future contributions to service the debt of
the ESOP. As a result, the obligation is recognized as a liability in long-term
debt, and is offset by a corresponding reduction in shareholders' equity. Both
are reduced as the ESOP makes principal payments on the debt.
45
<PAGE> 47
Note 13 Benefit Plans
================================================================================
Summit Bancorp has several trusteed non-contributory defined benefit retirement
plans covering substantially all of its employees. The benefits are based on
years of service and the employees' final average compensation. The funding
policy is to contribute annually an amount that can be deducted for Federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed for service to date, but also for those expected to be earned in the
future.
The following table sets forth the qualified plan's funding status and amounts
recognized in the Consolidated Financial Statements at December 31:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$206,488 in 1997, $176,338 in 1996,
and $172,135 in 1995 .................... $(221,681) $(188,580) $(184,262)
================================================================================
Projected benefit obligation for services
rendered to date ........................ $(268,689) $(239,892) $(230,626)
Plan assets at fair value .................. 299,702 250,289 219,119
- --------------------------------------------------------------------------------
Plan assets over (under) projected
benefit obligation ...................... 31,013 10,397 (11,507)
Unrecognized transition asset .............. (2,713) (5,293) (7,758)
Unrecognized prior service cost ............ (2,840) 327 354
Unrecognized net (gain) loss from past
experience, which is different from
that assumed, and effect of change
in assumptions .......................... (6,556) 5,097 14,650
- --------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 18,904 $ 10,528 $ (4,261)
================================================================================
Net pension expense components:
Service cost ............................ $ 10,876 $ 11,226 $ 9,482
Interest cost ........................... 19,293 17,862 16,315
Actual return on plan assets ............ (43,698) (27,203) (41,635)
Net deferral and amortization ........... 19,073 6,129 22,337
- --------------------------------------------------------------------------------
Net pension expense $ 5,544 $ 8,014 $ 6,499
================================================================================
</TABLE>
The plan's assets were principally invested in equities and fixed income
instruments. The weighted average discount rate for the plan was 7.5% in 1997,
1996 and 1995. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation was
5.0% in 1997, 1996 and 1995. The expected long-term rate of return on plan
assets was 9.0% in 1997, 1996 and 1995.
Collective did not have a retirement plan, but maintained an ESOP covering all
eligible employees. The ESOP allocated 117 thousand, 126 thousand and 160
thousand shares to employees during 1997, 1996 and 1995, respectively. At
December 31, 1997, there were 304 thousand unallocated shares, of which 94
thousand shares were subject to Statement of Position 76-3 and 210 thousand
shares were subject to Statement of Position 93-6. At December 31, 1997, the
total ESOP debt outstanding was $4.2 million.
Summit Bancorp also maintains non-qualified supplemental retirement plans for
officers of the Company. The plans, which are unfunded, provide benefits in
excess of that permitted to be paid by the pension plan under provisions of the
tax law. The plan's costs were $3.2 million for 1997, $2.8 million for 1996, and
$3.2 million for 1995. At December 31, 1997, the projected benefit obligation
amounted to $18.2 million and the accrued liability amounted to $14.7 million.
In addition to pension benefits, certain health care and life insurance benefits
are made available to retired employees. The cost of such benefits is accrued
based on actuarial assumptions from the date of hire to the date the employee is
fully eligible to receive benefits.
The following table sets forth the net periodic postretirement benefit cost and
accumulated postretirement benefit obligation at December 31:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation (APBO) .......................... $(27,104) $(29,921) $(36,160)
Fair value of assets ....................... -- -- --
- --------------------------------------------------------------------------------
Projected benefit obligation funded
status ..................................... (27,104) (29,921) (36,160)
Unrecognized transition obligation ......... 15,082 16,087 20,983
Unrecognized prior service cost ............ (755) (619) 634
Unrecognized loss .......................... (5,267) (3,347) (2,695)
- --------------------------------------------------------------------------------
Accrued APBO $(18,044) $(17,800) $(17,238)
================================================================================
Net postretirement benefit cost components:
Service cost ............................... $ 303 $ 422 $ 482
Interest cost .............................. 1,997 2,191 2,670
Amortization benefit cost .................. 802 829 1,161
- --------------------------------------------------------------------------------
Net postretirement benefit cost $ 3,102 $ 3,442 $ 4,313
================================================================================
</TABLE>
For measurement purposes, the cost of medical benefits was projected to increase
at a rate of 11.0% in 1997, 12.0% in 1996, and 13.0% in 1995 and thereafter
decreasing linearly to 6% over five years. Increasing the assumed health care
cost trend by one percent in each year would increase the accumulated
postretirement benefit obligation as of January 1, 1997, by $1.4 million and the
aggregate of the service and interest components of net periodic postretirement
benefit cost for the year ended December 31, 1997, by $102 thousand. The present
value of the accumulated benefit obligation assumed a discount rate of 7.5% in
1997, 1996 and 1995. The rate of increase used in future compensation levels was
5.0% in 1997, 1996 and 1995.
Various incentive plans have been established with the intention of providing
added incentive to middle and senior management to increase the profits of the
Company. The amount of the awards are subject to limits as set forth in the
plans. Accruals for the plans amounted to $11.7 million, $9.8 million and $10.1
million in 1997, 1996 and 1995, respectively.
There is a Savings Incentive Plan which covers employees with one or more years
of service. The plan permits eligible employees to make contributions to the
plan of up to 5% of their base compensation with additional contributions of up
to 10% of their base compensation. Under the current plan, the employer matches
100% of the first 3% and 50% of the next 3% of employee contributions. Matching
contributions to the Plan amounted to $7.0 million, $5.6 million and $4.2
million in 1997, 1996 and 1995, respectively.
46
<PAGE> 48
Note 14 Stock-Based Compensation
================================================================================
At December 31, 1997, Summit Bancorp had two types of stock award programs, the
Long-Term Performance Stock Programs and Stock Option Programs. Summit Bancorp
applies APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations in accounting for its stock-based compensation.
Restricted stock awards and performance stock awards are issued under The
Long-Term Performance Stock Program to reward executives and to retain them by
distributing stock over a period of time. The nonvested stock awards granted
were 258 thousand shares in 1997, 201 thousand shares in 1996 and 153 thousand
in 1995. The fair market value per share of these grants was $29.91 in 1997,
$24.64 in 1996 and $23.82 in 1995. These shares vest over several years and are
recognized as compensation to the employee. The compensation cost charged to
non-interest expense for the nonvested stock awards was $3.4 million, $2.1
million and $3.3 million for 1997, 1996 and 1995, respectively. In 1996
compensation cost of $2.1 million was recognized in the restructuring charge due
to accelerated vesting.
The Stock Option Programs are designed with a broad scope to align the interests
of a large number of employees with shareholder interests. These options are
intended to be either incentive stock options or non-qualified options. Options
have been granted to purchase common stock principally at the fair market value
of the stock at the date of grant. Options are exercisable starting one year
after the date of grant and generally expire ten years from the date of grant.
Upon exercise of these options, proceeds received in excess of par value of the
shares are credited to surplus.
The fair value of options granted is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995 respectively: dividend yield
of 3.29%, 3.60% and 4.30%; expected volatility rate of 23%, 25% and 28%;
risk-free interest rates of 6.42%, 5.40% and 7.80%; and expected lives of 5
years.
The weighted-average fair value at grant-date for the options awarded during
1997, 1996 and 1995 were $3.79, $5.10 and $3.90, respectively.
Under APB Opinion No. 25, compensation cost for the stock options is not
recognized because the exercise price of the stock options equals the market
price of the underlying stock on the date of grant. Had compensation expense
been recorded for stock options granted as determined under SFAS No. 123, net
income would have been reduced by $3.7 million in 1997, $3.6 million in 1996 and
$3.0 million in 1995, impacting per share net income by $.02 for each respective
year.
The following is a summary of the status of the Stock Options Programs and
changes during the past three years:
<TABLE>
<CAPTION>
Weighted-Avg.
(Shares in thousands) Shares Exercise Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1994 .................... 7,031 $11.18
Granted and acquired .............................. 1,898 12.11
Exercised ......................................... 1,834 7.67
Forfeited ......................................... 43 15.98
Expired ........................................... 9 12.12
- --------------------------------------------------------------------------------
Outstanding, December 31, 1995
(5,278 exercisable shares at a
weighted-avg. exercise price of $12.01) 7,043 12.31
- --------------------------------------------------------------------------------
Granted and acquired .............................. 1,208 23.68
Exercised ......................................... 1,537 11.58
Forfeited ......................................... 24 23.66
Expired ........................................... 17 15.75
- --------------------------------------------------------------------------------
Outstanding, December 31, 1996
(5,121 exercisable shares at a
weighted-avg. exercise price of $12.92) 6,673 14.49
- --------------------------------------------------------------------------------
Granted and acquired .............................. 1,983 27.31
Exercised ......................................... 2,621 13.58
Forfeited ......................................... 103 26.53
Expired ........................................... 9 19.44
- --------------------------------------------------------------------------------
Outstanding, December 31, 1997
(4,311 exercisable shares at a
weighted-avg. exercise price of $15.00) 5,923 $18.97
================================================================================
</TABLE>
The following table summarizes information about stock options at December 31,
1997:
<TABLE>
<CAPTION>
(Shares in thousands)
- ---------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
----------------------------------------------- ---------------------------
Weighted-Avg.
Range of Options Remaining Weighted-Avg. Options Weighted-Avg.
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.37 to $ 9.97 876 2.8 years $ 6.93 876 $ 6.93
10.10 to 12.58 530 4.1 10.83 530 10.83
13.24 to 14.90 636 5.1 14.04 636 14.04
15.18 to 16.71 1,369 5.8 16.42 1,369 16.42
17.38 to 26.02 900 8.0 23.83 900 23.83
29.42 to 38.79 1,612 9.0 29.58 -- --
- ---------------------------------------------------------------------------------------------------
$ 2.37 to $38.79 5,923 6.4 years $18.97 4,311 $15.00
===================================================================================================
</TABLE>
47
<PAGE> 49
================================================================================
Note 15 Other Income and Other Expenses
================================================================================
Other income consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Automated teller access fees ........... $ 14,877 $ 12,129 $ 5,226
International fees ..................... 11,963 10,912 10,288
Insurance and annuity income ........... 11,474 8,788 5,653
Gain on sale of assets/deposits ........ 11,157 2,825 2,979
Brokerage fees ......................... 9,401 9,099 8,631
Trading account (losses) gains ......... (1,583) 477 1,295
Other .................................. 23,697 21,866 25,583
- --------------------------------------------------------------------------------
$ 80,986 $ 66,096 $ 59,655
================================================================================
</TABLE>
Other expenses consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Legal and professional fees ............. $ 30,605 $ 30,488 $ 29,841
Advertising and public relations ........ 22,718 16,274 17,300
Amortization of goodwill and
other intangibles ..................... 19,273 15,724 13,158
Printing, stationery and supplies ....... 8,758 9,583 8,402
Deposit insurance premiums .............. 5,678 9,865 28,396
Year 2000 conversion .................... 4,015 -- --
Other real estate owned ................. 1,764 3,623 6,956
Other ................................... 71,107 72,437 65,951
- --------------------------------------------------------------------------------
$163,918 $157,994 $170,004
================================================================================
</TABLE>
Note 16 Income Taxes
================================================================================
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current provisions:
Federal ........................... $ 208,080 $ 116,850 $ 113,740
State ............................. 15,456 18,798 25,392
- --------------------------------------------------------------------------------
223,536 135,648 139,132
Deferred (benefit) provision:
Federal ........................... (19,121) 13,129 23,757
State ............................. (4,197) 1,254 4,104
- --------------------------------------------------------------------------------
(23,318) 14,383 27,861
- --------------------------------------------------------------------------------
Provision for income taxes $ 200,218 $ 150,031 $ 166,993
================================================================================
</TABLE>
A summary of the differences between the actual income tax provision and the
amounts computed by applying the statutory Federal income tax rate to income is
as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax at statutory rate ........... $ 199,914 $ 151,797 $ 163,592
Increase (decrease) in taxes
resulting from:
Tax-exempt interest income ............ (7,865) (8,571) (14,099)
State taxes, net of Federal tax effect 7,318 13,034 19,172
Other, net ............................ 851 (6,229) (1,672)
- --------------------------------------------------------------------------------
$ 200,218 $ 150,031 $ 166,993
================================================================================
</TABLE>
The significant Federal and state temporary differences, which comprise the
deferred tax assets and liabilities presented at December 31, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for loan losses .................... $ 114,433 $ 102,551
Provision for other real estate owned ........ 1,020 4,625
Restructuring charges ........................ 22,550 10,325
Other ........................................ 39,387 39,053
- --------------------------------------------------------------------------------
177,390 156,554
Deferred tax liabilities:
Leasing operations ........................... (32,982) (30,420)
Net unrealized gain on securities ............ (11,629) (2,253)
Other ........................................ (8,359) (13,403)
- --------------------------------------------------------------------------------
(52,970) (46,076)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 124,420 $ 110,478
================================================================================
</TABLE>
Included in deferred tax assets "Other" is a valuation allowance which has been
established against certain Federal and state temporary differences. The
valuation allowance was $7.0 million at December 31, 1997, and $8.5 million at
December 31, 1996. At December 31, 1997, there was a deferred state tax asset of
$3.2 million resulting from operating loss carryforwards. This asset was
reserved by the valuation allowance.
Management believes, based upon current facts, that more likely than not there
will be sufficient taxable income in future years to realize the deferred tax
assets. However, there can be no assurance about the level of future earnings.
Included in shareholders' equity are income tax benefits attributable to
vested stock awards and the exercise of non-qualified stock options of $14.4
million, $4.6 million, and $1.4 million for the years ended December 31, 1997,
1996 and 1995, respectively.
48
<PAGE> 50
Note 17 Off-Balance-Sheet Financial Instruments
================================================================================
In the ordinary course of business, Summit Bancorp and its subsidiaries enter
into a variety of financial instruments that are recorded off the balance sheet.
This reporting is considered appropriate where either the exchange of the
underlying asset or liability has not yet occurred or the notional amounts are
used solely as a means to determine the cash flows to be exchanged. These
off-balance-sheet financial instruments are primarily divided into two
categories: credit-related financial instruments and derivative financial
instruments.
Credit-related financial instruments are principally customer-related, while
derivative financial instruments are acquired primarily for asset/liability
management purposes.
The following table summarizes the notional amount of off-balance-sheet
financial instruments at December 31:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Credit-related instruments:
Commitments to extend credit ............. $7,490,740 $5,304,219
Standby letters of credit ................ 339,158 302,825
Commercial letters of credit ............. 250,945 94,961
Derivative instruments:
Interest rate swaps ...................... 433,167 386,314
Interest rate floors ..................... 430,000 430,000
Interest rate caps ....................... 717,869 73,326
Foreign exchange contracts ............... 52,241 33,259
================================================================================
</TABLE>
Credit-Related Financial Instruments
Commitments to extend credit are legally binding agreements to lend to a
customer provided all established contractual conditions are met. These
commitments generally have fixed expiration dates and usually require the
payment of a fee. Summit Bancorp did not issue long-term, fixed-rate loan
commitments that can be locked in during the commitment period.
Standby letters of credit are conditional guarantees issued to ensure the
performance of a customer to a third party and are generally terminated through
the fulfillment of a specific condition or through the lapse of time.
Commercial letters of credit are conditional commitments, generally less than
180 days, issued to guarantee payment by a customer to a third party upon proof
of an international trade shipment. The short-term nature of these instruments
limits their credit risk.
Fees received from credit-related financial instruments are recognized over the
terms of the contracts and are generally included in other non-interest income.
The credit risk associated with these financial instruments is essentially the
same as that involved in extending loans to customers and is incorporated in the
assessment of the adequacy of the allowance for loan losses. Credit risk is
managed by limiting the total amount of arrangements outstanding and by applying
normal credit policies. Many of the commitments to extend credit are expected to
expire without being drawn upon and, therefore, the amounts do not necessarily
represent future cash flow requirements.
Derivative Financial Instruments
Activities involving derivative financial instruments are primarily attributed
to asset/liability risk management efforts aimed at stabilizing net interest
income through periods of changing interest rates. These financial instruments
were acquired to hedge interest rate risk on certain interest-earning assets and
interest-bearing liabilities.
Interest rate swaps are contractual agreements between two parties to exchange
interest payments at particular intervals, computed on different terms, on a
specified notional amount. The notional amounts represent the base on which
interest due each counterparty is calculated and do not represent the potential
for gains or losses associated with the market risk or credit risk of such
transactions.
Under the terms of the interest rate swaps at December 31, 1997, there were
$83.2 million of contracts to receive fixed payments of 5.60% with an expected
maturity of February 1999 and an average payout based on three-month LIBOR.
Additionally, there were $350.0 million of interest rate swaps to receive
payments at the effective Federal funds rate and make fixed payments averaging
5.68% with an expected average maturity of September 1998.
Interest rate caps and floors are agreements in which, for an upfront premium
and on predetermined future dates, the counterparties agree to pay an interest
amount based on the movement of specified market interest rates either above or
below a strike rate. The payments, if applicable, are derived from the measured
rate differential multiplied by the contractual notional volume. The interest
rate floors were purchased primarily to hedge adjustable rate LIBOR-based
assets. The interest rate caps were purchased primarily to hedge short-term
liability positions being managed as part of the Collective acquisition.
Additionally, a portion of the interest rate caps were purchased to accommodate
customers who desire interest rate protection on variable rate loans.
These derivative transactions have resulted in decreases of $1.0 million, $2.0
million and $9.8 million in net interest income during 1997, 1996, and 1995,
respectively.
Credit-related losses can occur in the event of non-performance by the
counterparties to the derivative financial instruments. The credit risk that
results from interest rate swaps, interest rate floors, and interest rate caps
is represented by the fair value of contracts that have a positive value at the
reporting date. At December 31, 1997, the total amount of credit risk was $7.0
million; however, this amount can increase or decrease if interest rates change.
To minimize the risk of credit losses, Summit Bancorp monitors the credit
standing of the counterparties and only transacts with those that have credit
ratings of AA or better.
Summit Bancorp enters into contracts to purchase or sell foreign currency to be
delivered at a future date to facilitate customer transactions. The notional
amount represents the outstanding contracts at year end.
49
<PAGE> 51
Note 18 Fair Value of Financial Instruments
================================================================================
The fair value of financial instruments is the amount at which an asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced liquidation. Fair value estimates are made at a specific
point in time based on the type of financial instrument and relevant market
information.
Because no quoted market price exists for a significant portion of these
financial instruments, the fair values of such financial instruments are derived
based on the amount and timing of future cash flows, estimated discount rates,
as well as management's best judgment with respect to current economic
conditions. Many of these estimates involve uncertainties and matters of
significant judgment and cannot be determined with precision.
The fair value information provided is indicative of the estimated fair values
of those financial instruments and should not be interpreted as an estimate of
the value of Summit Bancorp taken as a whole. The disclosures do not address the
value of recognized and unrecognized non-financial assets and liabilities or the
value of future anticipated business. The following methods and assumptions were
used to estimate the fair values of significant financial instruments at
December 31, 1997 and 1996.
Financial Assets
Cash, short-term investments and customer acceptances have relatively short
maturities or no defined maturities, but are payable on demand, with little or
no credit risk. The carrying values reported in the Consolidated Balance Sheets
approximate fair value.
Trading account securities and securities available for sale are reported at
their respective fair values in the Consolidated Balance Sheets. These values
were based on quoted market prices. The fair values of securities held to
maturity were also based upon quoted market prices.
The fair value of loans is estimated using a combination of techniques including
discounted estimated future cash flows and, where available, quoted market
prices of similar instruments. The loan portfolios are segmented based upon loan
type, credit quality, and repricing characteristics. The fair values of most
fixed-rate loans are estimated using discounted cash flow models taking into
consideration current rates that would be offered to borrowers with similar
credit risk for loans with similar remaining terms. The fair values of variable
rate loans are estimated by reducing their carrying values by their
corresponding general and specific credit reserves. Non-performing loans are
primarily valued based upon the net realizable value of each loan's underlying
collateral.
Financial Liabilities
The estimated fair values of demand and savings deposits are equal to the
amounts recognized in the Consolidated Balance Sheets. These amounts do not
recognize the fair value of core deposit intangibles, which represent the value
of a core deposit base with an expected duration. The fair values for medium- to
long-term deposit liabilities are calculated by discounting estimated future
cash flows using current rates offered for deposits of similar remaining
maturities.
The fair values for borrowed funds are calculated by discounting estimated
future cash flows using current rates offered for borrowings of similar
remaining maturities. Due to the short maturities of bank acceptances, their
carrying value approximates fair value.
The fair value of long-term debt is based upon quoted market prices. For
long-term debt issuances where quoted market prices are not available, the fair
values are determined using discounted cash flow analyses.
The estimated fair values of accrued interest receivable and accrued interest
payable are considered to be equal to the amounts recognized in the Consolidated
Balance Sheets.
Off-Balance-Sheet Instruments
The estimated fair values of derivative financial instruments are based upon
quoted market prices, without consideration of the market values related to the
hedged on-balance-sheet financial instruments. For commitments to extend credit
and letters of credit, the fair values would approximate fees currently charged
to enter into similar agreements. The following table presents the carrying
values and fair values of financial instruments at December 31:
<TABLE>
<CAPTION>
(In millions) 1997 1996
- ------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short term
investments ........................................ $ 1,191.7 $ 1,191.7 $ 1,467.1 $ 1,467.1
Trading account securities ............................ 35.2 35.2 26.4 26.4
Securities available for sale ......................... 5,074.9 5,074.9 2,872.1 2,872.1
Securities held to maturity ........................... 4,157.5 4,151.6 5,422.1 5,321.7
Loans, net ............................................ 18,591.9 18,916.7 17,105.4 17,370.0
Accrued interest receivable ........................... 175.2 175.2 169.2 169.2
Due from customers on
acceptances ........................................ 15.8 15.8 15.7 15.7
Financial liabilities:
Deposits .............................................. $22,329.4 $22,340.8 $21,629.5 $21,667.0
Other borrowed funds .................................. 3,597.1 3,610.5 2,806.4 2,810.6
Long-term debt ........................................ 1,047.6 1,076.8 695.8 710.1
Accrued interest payable .............................. 71.6 71.6 56.1 56.1
Bank acceptances outstanding .......................... 15.8 15.8 15.7 15.7
Off-balance-sheet instruments:
Interest rate swaps ................................... NA $ (.7) NA $ (1.3)
Interest rate floors and caps ......................... NA 7.0 NA 15.3
Loan commitments ...................................... NA (35.9) NA (26.9)
Standby letters of credit ............................. NA (2.4) NA (2.0)
Commercial letters of credit .......................... NA (.3) NA (.1)
============================================================================================================
</TABLE>
NA - Not applicable.
50
<PAGE> 52
Note 19 Regulatory Matters
================================================================================
Cash and Due From Banks
The subsidiary banks are required to maintain reserve balances based principally
upon transaction type deposits. These reserves are in the form of vault cash and
non-interest bearing balances with a Federal Reserve Bank. The average amount of
required reserves amounted to $508.5 million and $674.8 million in 1997 and
1996, respectively.
Loans to Affiliates
Summit Bancorp's subsidiary banks are restricted, with certain limited
exceptions, by the Federal Reserve Act, from extending credit to affiliated
companies, including the Parent Corporation. Each subsidiary bank is also
subject to collateral security requirements for any loans or extensions of
credit permitted by exception. Further, a subsidiary bank may only engage in
most transactions with other subsidiaries if terms and conditions are at least
as favorable to the bank as those prevailing for transactions with unaffiliated
companies. Such secured loans and other regulated transactions are limited in
amount to each of its affiliates, including the Parent Corporation. The
limitation is 10% of the bank's capital stock and defined surplus per affiliate,
and 20% in aggregate to all of its affiliates. At December 31, 1997, the Parent
Corporation had available credit from its subsidiary banks of approximately
$234.5 million.
Subsidiary Dividends
Certain bank regulatory limitations exist on the availability of subsidiary bank
undistributed net assets for the payment of dividends to the Parent Corporation
without prior approval of bank regulatory authorities.
The Federal Reserve Act, which affects both Summit Bank NJ and Summit Bank PA,
restricts the payment of dividends in any calendar year to the net profit of the
current year combined with retained net profits of the preceding two years. In
addition to these statutory restrictions, the subsidiary banks are required to
maintain adequate levels of capital. At December 31, 1997, the total
undistributed net assets of the subsidiary banks were $2.3 billion, of which
$224.3 million was available, under the most restrictive limitations, for the
payment of dividends to the Parent Corporation.
Capital Requirements
Summit Bancorp is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have an adverse
material impact on Summit Bancorp. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, Summit Bancorp must meet
specific capital guidelines that involve quantitative measures of assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. Summit Bancorp's capital amounts and classifications are
also subject to qualitative judgments by the regulators about components, risk
weighting and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Summit Bancorp and its subsidiary banks to maintain amounts and ratios
(set forth in the table below) of Tier I leverage to average assets and of Tier
I and Total risk-based capital to risk-weighted assets.
At December 31, 1997, Summit Bancorp and its banking subsidiaries were well
capitalized under the regulatory framework for prompt and corrective action. To
be well capitalized, Tier I leverage, Tier I risk-based capital and Total
risk-based capital must equal or exceed the well capitalized ratios set forth in
the table below. There are no conditions or events that management believes have
changed Summit Bancorp's or its subsidiary banks' well capitalized rating.
- --------------------------------------------------------------------------------
Capital Ratios for Summit Bancorp and Subsidiary Banks
<TABLE>
<CAPTION>
(In thousands)
As of December 31, Minimum Statutory
------------------- Required Well Capital as of Minimum
1997 1996 Capital Capitalized December 31, 1997 Capital
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tier I Leverage
Summit Bancorp ........ 8.76% 7.73% ) $2,556,905 $1,167,143
Summit Bank NJ* ....... 7.29 6.92 } 4.00% 5.00% 1,912,377 1,049,506
Summit Bank PA ........ 8.03 7.97 ) 223,333 111,227
Tier I Risk-Based Capital
Summit Bancorp ........ 12.64% 11.68% ) $2,556,905 $ 809,166
Summit Bank NJ* ....... 10.65 10.70 } 4.00% 6.00% 1,912,377 718,423
Summit Bank PA ........ 10.10 10.65 ) 223,333 88,414
Total Risk-Based Capital
Summit Bancorp ........ 14.83% 14.17% ) $2,999,928 $1,618,693
Summit Bank NJ* ....... 12.50 12.73 } 8.00% 10.00% 2,245,316 1,436,847
Summit Bank PA ........ 11.87 12.60 ) 262,273 176,827
====================================================================================================================
</TABLE>
* Includes the pro-forma capital ratios of Summit Bank NJ and Collective
Bank, which are scheduled to merge in March 1998.
51
<PAGE> 53
Note 20 Parent Corporation Information
================================================================================
(In thousands)
Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks .......................... $ 2,958 $ 19,612
Securities purchased under agreements
to resell ...................................... 419,148 136,585
Interest-bearing deposits with banks ............. 5,000 5,000
Securities available for sale .................... 41,627 34,861
Investment in subsidiaries ....................... 2,351,698 2,172,624
Due from subsidiaries ............................ 246,186 237,250
Premises and equipment, net ...................... 943 1,094
Other assets ..................................... 36,829 18,446
- --------------------------------------------------------------------------------
Total Assets $3,104,389 $2,625,472
================================================================================
Liabilities and Shareholders' Equity
Accrued expenses and other liabilities ........... $ 98,329 $ 84,683
Commercial paper ................................. 39,799 40,476
Long-term debt ................................... 353,841 209,475
- --------------------------------------------------------------------------------
Total liabilities .............................. 491,969 334,634
Total shareholders' equity ....................... 2,612,420 2,290,838
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $3,104,389 $2,625,472
================================================================================
</TABLE>
Condensed Statements of Income
<TABLE>
<CAPTION>
Years ended December 31,
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Income
Dividends from subsidiaries .............. $ 333,597 $ 237,003 $ 140,010
Management fees from subsidiaries ........ 34,689 34,090 32,761
Interest from subsidiaries ............... 30,964 22,063 22,925
Securities gains ......................... 5,458 5,831 18,829
Other interest ........................... 1,009 1,119 102
Other .................................... -- 616 2,564
- --------------------------------------------------------------------------------
Total operating income 405,717 300,722 217,191
- --------------------------------------------------------------------------------
Operating Expenses
Service charges by subsidiaries .......... 39,269 37,055 33,144
Interest ................................. 30,073 19,726 20,412
Salaries and employee benefits ........... 8,783 5,265 4,266
Other .................................... 2,837 1,718 867
- --------------------------------------------------------------------------------
Total operating expenses 80,962 63,764 58,689
- --------------------------------------------------------------------------------
Income before taxes and equity in
undistributed net income of
subsidiaries ........................ 324,755 236,958 158,502
Federal and state income taxes (benefits) (4,695) (7,061) 5,012
- --------------------------------------------------------------------------------
329,450 244,019 153,490
Equity in undistributed net income
of subsidiaries ........................ 41,515 39,656 146,922
- --------------------------------------------------------------------------------
Net Income $ 370,965 $ 283,675 $ 300,412
================================================================================
</TABLE>
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income .............................. $ 370,965 $ 283,675 $ 300,412
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ...... 151 150 3
Increase in other assets ........... (19,240) (3,928) (60)
(Decrease) increase in accrued
expenses and other liabilities ... (2,427) 19,299 11,821
Equity in undistributed net
income of subsidiaries ........... (41,515) (39,656) (146,922)
Securities gains ................... (5,458) (5,831) (18,829)
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 302,476 253,709 146,425
- --------------------------------------------------------------------------------
Investing Activities
Proceeds from sales of securities
available for sale .................... 13,911 27,434 28,332
Net (increase) decrease in securities
purchased under agreements to resell .. (282,563) 54,665 3,376
Purchase of securities available for sale (8,186) (17,826) --
Payments received on advances to
subsidiaries .......................... 205,510 451,776 180,278
Advances to subsidiaries ................ (214,446) (507,884) (204,588)
Purchase acquisitions ................... -- -- (36,273)
Purchases of premises and equipment,
net ................................... -- (744) --
Capital contributions to subsidiaries ... (35,455) (1,500) (10,310)
- --------------------------------------------------------------------------------
Net cash (used in) provided by
investing activities (321,229) 5,921 (39,185)
- --------------------------------------------------------------------------------
Financing Activities
Net (decrease) increase in commercial
paper ................................. (677) 1,973 (3,708)
Proceeds from issuance of long-term
debt .................................. 154,640 -- --
Principal payments on long-term debt .... (8,659) (690) (15,689)
Dividends paid .......................... (167,663) (149,489) (106,956)
Repurchase of common stock .............. (21,859) (92,268) --
Proceeds from issuance of common
stock, net ............................ 44,040 30,701 33,313
Redemption of preferred stock ........... -- (42,620) (5,984)
- --------------------------------------------------------------------------------
Net cash used in financing
activities (178) (252,393) (99,024)
- --------------------------------------------------------------------------------
(Decrease) increase in cash and due
from banks ............................ (18,931) 7,237 8,216
Cash and due from banks at
beginning of year ..................... 19,612 12,302 4,086
Beginning cash balance of acquired
entities .............................. 2,277 73 --
- --------------------------------------------------------------------------------
Cash and due from banks at end
of year $ 2,958 $ 19,612 $ 12,302
================================================================================
</TABLE>
52
<PAGE> 54
MANAGEMENT'S REPORT
================================================================================
Summit Bancorp and its subsidiaries are responsible for the preparation,
integrity, and fair presentation of the audited consolidated financial
statements and notes contained on pages 34 through 52 in this report. The
statements were prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and include amounts that are based
on management's estimates and judgments. Other financial information presented
throughout the annual report is prepared on a basis consistent with these
financial statements.
The consolidated financial statements of Summit Bancorp have been audited by
KPMG Peat Marwick LLP, independent auditors, whose selection has been ratified
by the shareholders. Their audit was made in accordance with generally accepted
auditing standards and considered the internal control structure to the extent
deemed necessary to support their independent auditors' report appearing herein.
Summit Bancorp is responsible for establishing and maintaining an internal
control structure to provide reasonable assurance that the financial statements
are presented in conformity with generally accepted accounting principles. There
are inherent limitations in the effectiveness of any internal control structure,
no matter how well designed, including the possibility of human error, the
circumvention or overriding of controls, and the consideration of cost in
relation to the benefit of the control. Accordingly, even an effective internal
control structure can provide only reasonable assurance with respect to
financial statement preparation. Furthermore, because of changes in conditions,
the effectiveness of an internal control structure may vary over time. To
monitor compliance, Summit Bancorp maintains an internal audit program. This
program includes a review for compliance with written policies and procedures
and a review of the adequacy and effectiveness of internal controls.
The Audit Committee of the Board of Directors of Summit Bancorp, composed
entirely of outside directors, meets periodically with the independent auditors,
management and internal auditors to review the work of each and ensure that each
is properly discharging its responsibilities. The independent auditors and
internal auditors have full and free access to the Committee to discuss the
results of their audit work, their evaluation of internal controls, and the
quality of financial reporting.
INDEPENDENT AUDITORS' REPORT
================================================================================
The Shareholders and Board of Directors
Summit Bancorp:
We have audited the accompanying consolidated balance sheets of Summit Bancorp
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Summit Bancorp and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
January 20, 1998
53
<PAGE> 55
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA Summit Bancorp and Subsidiaries
=========================================================================================================================
(Not covered by independent auditors' report.) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (in thousands)
Interest income ............................................................ $ 2,064,706 $ 1,906,996 $ 1,831,934
Interest expense ........................................................... 919,617 853,707 822,232
- -------------------------------------------------------------------------------------------------------------------------
Net interest income ...................................................... 1,145,089 1,053,289 1,009,702
Provision for loan losses .................................................. 59,100 64,034 72,090
- -------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses ...................... 1,085,989 989,255 937,612
Non-interest income ........................................................ 301,885 260,042 235,252
Non-interest expenses ...................................................... 733,691 693,832 705,459
Non-recurring charges ...................................................... 83,000 121,759 --
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes ........................................ 571,183 433,706 467,405
Federal and state income taxes ............................................. 200,218 150,031 166,993
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change in accounting principle 370,965 283,675 300,412
Cumulative effect of a change in accounting principle ...................... -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 370,965 $ 283,675 $ 300,412
- -------------------------------------------------------------------------------------------------------------------------
Net Income per Common Share:
Before non-recurring items:
Basic .................................................................... $ 2.43 $ 2.15 $ 1.89
Diluted .................................................................. 2.39 2.12 1.87
After non-recurring items:
Basic .................................................................... 2.12 1.69 1.89
Diluted .................................................................. 2.09 1.67 1.87
=========================================================================================================================
COMMON SHARE DATA & OPERATING RATIOS
Cash dividends declared .................................................... $ 1.02 $ 0.90 $ 0.79
Book value at year end ..................................................... 14.79 13.61 13.04
Market value at year end ................................................... 52.88 29.17 23.75
Common stock dividend payout ratio ......................................... 48.11% 53.25% 41.80%
Average common shares outstanding (basic, in thousands) .................... 175,128 166,673 157,244
Before non-recurring items:
Return on average assets ................................................. 1.47% 1.32% 1.17%
Return on average common equity .......................................... 17.08 16.48 15.49
After non-recurring items:
Return on average assets ................................................. 1.28 1.04 1.17
Return on average common equity .......................................... 14.92 12.95 15.49
Net interest margin ........................................................ 4.26 4.21 4.28
Efficiency ratio ........................................................... 50.28 52.11 55.72
=========================================================================================================================
BALANCE SHEET DATA (at year end, in thousands)
Assets ..................................................................... $29,964,172 $27,767,271 $26,647,452
Deposits ................................................................... 22,329,436 21,629,531 21,232,926
Loans ...................................................................... 18,888,366 17,386,059 16,413,222
Shareholders' equity ....................................................... 2,612,420 2,290,838 2,130,108
Long-term debt ............................................................. 1,047,625 695,793 431,754
Allowance for loan losses .................................................. 296,494 280,611 293,160
=========================================================================================================================
LOAN QUALITY RATIOS & CAPITAL RATIOS
Allowance for loan losses to year-end loans ................................ 1.57% 1.61% 1.79%
Net charge offs to average loans ........................................... 0.29 0.50 0.70
Non-performing loans to year-end loans ..................................... 0.45 0.80 1.18
Total equity to assets ..................................................... 8.72 8.25 7.99
Tier I capital to average assets (leverage) ................................ 8.76 7.73 7.63
Tier I capital to risk-adjusted assets ..................................... 12.64 11.68 11.32
Total capital to risk-adjusted assets ...................................... 14.83 14.17 13.87
=========================================================================================================================
OTHER DATA (at year end)
Number of banking offices .................................................. 426 423 433
Number of employees (full-time equivalent) ................................. 8,566 8,402 8,593
=========================================================================================================================
<CAPTION>
CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA Summit Bancorp and Subsidiaries
=========================================================================================================================
(Not covered by independent auditors' report.) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (in thousands)
Interest income ............................................................ $ 1,572,370 $ 1,452,643 $ 1,557,627
Interest expense ........................................................... 599,732 558,889 725,422
- -------------------------------------------------------------------------------------------------------------------------
Net interest income ...................................................... 972,638 893,754 832,205
Provision for loan losses .................................................. 94,347 115,902 167,006
- -------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses ...................... 878,291 777,852 665,199
Non-interest income ........................................................ 217,726 224,187 222,826
Non-interest expenses ...................................................... 709,400 734,756 709,352
Non-recurring charges ...................................................... 48,955 21,500 --
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes ........................................ 337,662 245,783 178,673
Federal and state income taxes ............................................. 122,014 74,861 56,002
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change in accounting principle 215,648 170,922 122,671
Cumulative effect of a change in accounting principle ...................... (1,731) 11,761 --
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 213,917 $ 182,683 $ 122,671
- -------------------------------------------------------------------------------------------------------------------------
Net Income per Common Share:
Before non-recurring items:
Basic .................................................................... $ 1.60 $ 1.21 $ 0.84
Diluted .................................................................. 1.59 1.19 0.83
After non-recurring items:
Basic .................................................................... 1.37 1.19 0.84
Diluted .................................................................. 1.36 1.17 0.83
=========================================================================================================================
COMMON SHARE DATA & OPERATING RATIOS
Cash dividends declared .................................................... $ 0.63 $ 0.46 $ 0.40
Book value at year end ..................................................... 11.40 10.80 9.99
Market value at year end ................................................... 16.09 16.00 16.17
Common stock dividend payout ratio ......................................... 45.99% 38.66% 47.62%
Average common shares outstanding (basic, in thousands) .................... 153,698 151,080 141,859
Before non-recurring items:
Return on average assets ................................................. 1.03% 0.85% 0.58%
Return on average common equity .......................................... 14.35 11.63 8.68
After non-recurring items:
Return on average assets ................................................. 0.88 0.83 0.58
Return on average common equity .......................................... 12.28 11.41 8.68
Net interest margin ........................................................ 4.42 4.51 4.36
Efficiency ratio ........................................................... 57.07 60.91 62.91
=========================================================================================================================
BALANCE SHEET DATA (at year end, in thousands)
Assets ..................................................................... $25,484,073 $22,605,545 $21,703,789
Deposits ................................................................... 19,981,071 18,956,204 18,576,238
Loans ...................................................................... 15,048,579 13,552,381 13,325,622
Shareholders' equity ....................................................... 1,813,445 1,691,108 1,548,832
Long-term debt ............................................................. 552,736 492,052 389,267
Allowance for loan losses .................................................. 323,336 361,319 378,793
=========================================================================================================================
LOAN QUALITY RATIOS & CAPITAL RATIOS
Allowance for loan losses to year-end loans ................................ 2.15% 2.67% 2.84%
Net charge offs to average loans ........................................... 0.69 1.12 1.35
Non-performing loans to year-end loans ..................................... 1.38 2.44 3.45
Total equity to assets ..................................................... 7.12 7.48 7.14
Tier I capital to average assets (leverage) ................................ 7.13 7.50 6.98
Tier I capital to risk-adjusted assets ..................................... 10.51 10.90 10.13
Total capital to risk-adjusted assets ...................................... 13.10 13.73 12.70
=========================================================================================================================
OTHER DATA (at year end)
Number of banking offices .................................................. 439 435 419
Number of employees (full-time equivalent) ................................. 8,800 9,049 8,986
=========================================================================================================================
<CAPTION>
CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA Summit Bancorp and Subsidiaries
=========================================================================================================================
(Not covered by independent auditors' report.) 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS (in thousands)
Interest income ............................................................ $ 1,795,491 $ 1,918,257 $ 1,856,435
Interest expense ........................................................... 1,051,193 1,204,203 1,151,157
- -------------------------------------------------------------------------------------------------------------------------
Net interest income ...................................................... 744,298 714,054 705,278
Provision for loan losses .................................................. 193,825 337,011 98,446
- -------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses ...................... 550,473 377,043 606,832
Non-interest income ........................................................ 184,930 210,922 203,921
Non-interest expenses ...................................................... 647,456 618,572 575,478
Non-recurring charges ...................................................... -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes ........................................ 87,947 (30,607) 235,275
Federal and state income taxes ............................................. 23,613 (16,101) 70,527
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change in accounting principle 64,334 (14,506) 164,748
Cumulative effect of a change in accounting principle ...................... -- -- (10,730)
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 64,334 $ (14,506) $ 154,018
- -------------------------------------------------------------------------------------------------------------------------
Net Income per Common Share:
Before non-recurring items:
Basic .................................................................... $ 0.46 $ (0.14) $ 1.28
Diluted .................................................................. 0.46 (0.14) 1.27
After non-recurring items:
Basic .................................................................... 0.46 (0.14) 1.19
Diluted .................................................................. 0.46 (0.14) 1.19
=========================================================================================================================
COMMON SHARE DATA & OPERATING RATIOS
Cash dividends declared .................................................... $ 0.40 $ 0.68 $ 0.74
Book value at year end ..................................................... 9.52 9.38 10.09
Market value at year end ................................................... 9.75 4.75 12.59
Common stock dividend payout ratio ......................................... 86.96% NA 62.18%
Average common shares outstanding (basic, in thousands) .................... 132,059 130,103 124,667
Before non-recurring items:
Return on average assets ................................................. 0.31% (0.07)% 0.86%
Return on average common equity .......................................... 4.90 (1.35) 12.56
After non-recurring items:
Return on average assets ................................................. 0.31 (0.07) 0.81
Return on average common equity .......................................... 4.90 (1.35) 11.72
Net interest margin ........................................................ 3.96 3.90 4.19
Efficiency ratio ........................................................... 65.29 61.79 61.68
=========================================================================================================================
BALANCE SHEET DATA (at year end, in thousands)
Assets ..................................................................... $21,141,670 $20,484,690 $20,186,099
Deposits ................................................................... 17,766,920 16,599,532 15,441,669
Loans ...................................................................... 13,620,423 13,787,122 13,956,994
Shareholders' equity ....................................................... 1,317,495 1,277,819 1,359,933
Long-term debt ............................................................. 271,062 395,432 450,541
Allowance for loan losses .................................................. 393,246 361,423 185,441
=========================================================================================================================
LOAN QUALITY RATIOS & CAPITAL RATIOS
Allowance for loan losses to year-end loans ................................ 2.89% 2.62% 1.33%
Net charge offs to average loans ........................................... 1.19 1.14 0.47
Non-performing loans to year-end loans ..................................... 4.30 4.33 1.93
Total equity to assets ..................................................... 6.23 6.24 6.74
Tier I capital to average assets (leverage) ................................ 6.03 5.89 6.68
Tier I capital to risk-adjusted assets ..................................... 8.82 8.44 NA
Total capital to risk-adjusted assets ...................................... 10.31 10.07 NA
=========================================================================================================================
OTHER DATA (at year end)
Number of banking offices .................................................. 417 413 402
Number of employees (full-time equivalent) ................................. 9,216 9,173 9,173
=========================================================================================================================
<CAPTION>
CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA Summit Bancorp and Subsidiaries
==========================================================================================================
(Not covered by independent auditors' report.) 1988 1987
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUMMARY OF OPERATIONS (in thousands)
Interest income ............................................................ $ 1,563,822 $ 1,343,005
Interest expense ........................................................... 915,814 752,791
- ----------------------------------------------------------------------------------------------------------
Net interest income ...................................................... 648,008 590,214
Provision for loan losses .................................................. 50,349 41,446
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses ...................... 597,659 548,768
Non-interest income ........................................................ 165,336 171,626
Non-interest expenses ...................................................... 519,259 476,447
Non-recurring charges ...................................................... -- --
- ----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes ........................................ 243,736 243,947
Federal and state income taxes ............................................. 67,290 71,454
- ----------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change in accounting principle 176,446 172,493
Cumulative effect of a change in accounting principle ...................... -- --
- ----------------------------------------------------------------------------------------------------------
Net income (loss) $ 176,446 $ 172,493
- ----------------------------------------------------------------------------------------------------------
Net Income per Common Share:
Before non-recurring items:
Basic .................................................................... $ 1.38 $ 1.36
Diluted .................................................................. 1.37 1.35
After non-recurring items:
Basic .................................................................... 1.38 1.36
Diluted .................................................................. 1.37 1.35
==========================================================================================================
COMMON SHARE DATA & OPERATING RATIOS
Cash dividends declared .................................................... $ 0.67 $ 0.61
Book value at year end ..................................................... 9.43 8.80
Market value at year end ................................................... 13.83 14.83
Common stock dividend payout ratio ......................................... 48.55% 44.85%
Average common shares outstanding (basic, in thousands) .................... 123,014 121,502
Before non-recurring items:
Return on average assets ................................................. 1.01% 1.11%
Return on average common equity .......................................... 15.07 16.51
After non-recurring items:
Return on average assets ................................................. 1.01 1.11
Return on average common equity .......................................... 15.07 16.51
Net interest margin ........................................................ 4.26 4.48
Efficiency ratio ........................................................... 60.86 58.88
==========================================================================================================
BALANCE SHEET DATA (at year end, in thousands)
Assets ..................................................................... $18,555,497 $16,827,149
Deposits ................................................................... 14,710,661 12,968,074
Loans ...................................................................... 12,637,375 11,060,654
Shareholders' equity ....................................................... 1,267,943 1,178,848
Long-term debt ............................................................. 503,250 431,284
Allowance for loan losses .................................................. 144,359 127,959
==========================================================================================================
LOAN QUALITY RATIOS & CAPITAL RATIOS
Allowance for loan losses to year-end loans ................................ 1.14% 1.16%
Net charge offs to average loans ........................................... 0.29 0.23
Non-performing loans to year-end loans ..................................... 1.09 0.68
Total equity to assets ..................................................... 6.83 7.01
Tier I capital to average assets (leverage) ................................ 6.80 6.95
Tier I capital to risk-adjusted assets ..................................... NA NA
Total capital to risk-adjusted assets ...................................... NA NA
==========================================================================================================
OTHER DATA (at year end)
Number of banking offices .................................................. 393 380
Number of employees (full-time equivalent) ................................. 9,154 8,845
==========================================================================================================
</TABLE>
NA - Not applicable.
54 & 55
<PAGE> 56
<TABLE>
<CAPTION>
UNAUDITED QUARTERLY FINANCIAL DATA Summit Bancorp and Subsidiaries
============================================================================================
(In thousands, except per share data) 1997
- --------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income ............................ $ 529,060 $ 517,501 $ 516,831 $ 501,314
Interest expense ........................... 238,583 229,719 230,016 221,299
- --------------------------------------------------------------------------------------------------------
Net interest income .................... 290,477 287,782 286,815 280,015
Provision for loan losses .................. 14,000 14,500 15,090 15,510
- --------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses ........... 276,477 273,282 271,725 264,505
Non-interest income ........................ 86,785 74,172 71,528 69,400
Non-interest expenses ...................... 191,130 180,786 181,333 180,442
Non-recurring charges ...................... -- 56,500 -- 26,500
- --------------------------------------------------------------------------------------------------------
Income before income taxes ............. 172,132 110,168 161,920 126,963
Federal and state income taxes ............. 59,919 38,956 56,862 44,481
- --------------------------------------------------------------------------------------------------------
Net income $ 112,213 $ 71,212 $ 105,058 $ 82,482
- --------------------------------------------------------------------------------------------------------
Net Income per Common Share:
Before non-recurring items:
Basic ............................... $ 0.64 $ 0.62 $ 0.60 $ 0.57
Diluted ............................. 0.63 0.61 0.59 0.56
After non-recurring items:
Basic ............................... 0.64 0.41 0.60 0.47
Diluted ............................. 0.63 0.40 0.59 0.47
========================================================================================================
COMMON SHARE DATA
Cash dividends declared .................... $ 0.27 $ 0.27 $ 0.24 $ 0.24
Book value at quarter end .................. 14.79 14.33 14.17 13.71
Market value at quarter end ................ 52.88 44.00 33.42 29.17
Common stock dividend payout ............... 42.19% 43.55% 40.00% 42.11%
Average common shares outstanding:
Basic .................................. 175,816 175,396 174,905 174,377
Diluted ................................ 178,126 177,864 177,123 176,706
========================================================================================================
OPERATING RATIOS
Before non-recurring items:
Return on average assets ............... 1.51% 1.50% 1.46% 1.41%
Return on average common equity ........ 17.34 17.02 17.16 16.77
Efficiency ratio ........................... 50.74 49.64 50.03 50.70
After non-recurring items:
Return on average assets ............... 1.51 0.98 1.46 1.17
Return on average common equity ........ 17.34 11.19 17.16 13.95
========================================================================================================
BALANCE SHEET DATA
Assets ..................................... $29,964,172 $29,091,106 $29,224,687 $28,907,850
Deposits ................................... 22,329,436 21,938,028 22,167,140 22,330,582
Loans ...................................... 18,888,366 18,630,663 18,597,663 18,376,154
Shareholders' equity ....................... 2,612,420 2,517,439 2,484,062 2,398,015
Long-term debt ............................. 1,047,625 1,001,617 910,766 835,744
Allowance for loan losses .................. 296,494 294,114 294,066 290,471
========================================================================================================
TAX-EQUIVALENT YIELDS
AND RATES
Interest-earning assets .................... 7.62% 7.63% 7.66% 7.64%
Interest-bearing liabilities ............... 4.27 4.20 4.19 4.12
Net interest spread ........................ 3.35 3.43 3.47 3.52
Net interest margin ........................ 4.21 4.26 4.28 4.29
========================================================================================================
LOAN QUALITY RATIOS &
CAPITAL RATIOS
Allowance for loan losses
to quarter-end loans ................... 1.57% 1.58% 1.58% 1.58%
Net charge offs to average loans ........... 0.25 0.31 0.25 0.35
Non-performing loans to
quarter end loans ...................... 0.45 0.48 0.59 0.68
Total equity to assets ..................... 8.72 8.65 8.50 8.30
Tier I capital to avg. assets (leverage) ... 8.76 8.72 8.54 8.41
Tier I capital to risk-adjusted assets ..... 12.64 12.73 12.63 12.41
Total capital to risk-adjusted assets ...... 14.83 15.13 15.04 14.84
========================================================================================================
<CAPTION>
UNAUDITED QUARTERLY FINANCIAL DATA Summit Bancorp and Subsidiaries
========================================================================================================
(In thousands, except per share data) 1996
- --------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income ............................ $ 480,406 $ 474,969 $ 474,931 $ 476,690
Interest expense ........................... 214,588 209,824 212,302 216,993
- --------------------------------------------------------------------------------------------------------
Net interest income .................... 265,818 265,145 262,629 259,697
Provision for loan losses .................. 16,435 15,910 15,903 15,786
- --------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses ........... 249,383 249,235 246,726 243,911
Non-interest income ........................ 68,519 63,815 65,996 61,712
Non-interest expenses ...................... 172,132 166,866 176,543 178,291
Non-recurring charges ...................... -- 11,059 -- 110,700
- --------------------------------------------------------------------------------------------------------
Income before income taxes ............. 145,770 135,125 136,179 16,632
Federal and state income taxes ............. 49,039 47,624 47,694 5,674
- --------------------------------------------------------------------------------------------------------
Net income $ 96,731 $ 87,501 $ 88,485 $ 10,958
- --------------------------------------------------------------------------------------------------------
Net Income per Common Share:
Before non-recurring items:
Basic ............................... $ 0.58 $ 0.56 $ 0.53 $ 0.48
Diluted ............................. 0.57 0.56 0.52 0.47
After non-recurring items:
Basic ............................... 0.58 0.52 0.53 0.06
Diluted ............................. 0.57 0.52 0.52 0.06
========================================================================================================
COMMON SHARE DATA
Cash dividends declared .................... $ 0.24 $ 0.24 $ 0.21 $ 0.21
Book value at quarter end .................. 13.61 13.05 12.89 12.61
Market value at quarter end ................ 29.17 26.50 23.42 24.67
Common stock dividend payout ............... 41.38% 42.86% 39.62% 43.75%
Average common shares outstanding:
Basic .................................. 165,628 166,908 167,423 166,743
Diluted ................................ 167,790 168,938 169,471 168,964
========================================================================================================
OPERATING RATIOS
Before non-recurring items:
Return on average assets ............... 1.41% 1.38% 1.30% 1.20%
Return on average common equity ........ 17.24 17.20 16.52 14.92
Efficiency ratio ........................... 51.78 49.91 52.69 54.11
After non-recurring items:
Return on average assets ............... 1.41 1.29 1.30 0.16
Return on average common equity ........ 17.24 15.96 16.52 1.92
========================================================================================================
BALANCE SHEET DATA
Assets ..................................... $27,767,271 $27,405,016 $27,344,440 $27,283,200
Deposits ................................... 21,629,531 21,453,638 21,387,587 21,279,147
Loans ...................................... 17,386,059 17,277,746 17,204,620 16,989,945
Shareholders' equity ....................... 2,290,838 2,194,300 2,207,476 2,154,427
Long-term debt ............................. 695,793 397,862 399,217 405,228
Allowance for loan losses .................. 280,611 284,223 289,247 294,165
========================================================================================================
TAX-EQUIVALENT YIELDS
AND RATES
Interest-earning assets .................... 7.56% 7.54% 7.57% 7.63%
Interest-bearing liabilities ............... 4.12 4.06 4.08 4.16
Net interest spread ........................ 3.44 3.48 3.49 3.47
Net interest margin ........................ 4.21 4.23 4.21 4.19
========================================================================================================
LOAN QUALITY RATIOS &
CAPITAL RATIOS
Allowance for loan losses
to quarter-end loans ................... 1.61% 1.65% 1.68% 1.73%
Net charge offs to average loans ........... 0.51 0.48 0.49 0.50
Non-performing loans to
quarter end loans ...................... 0.80 0.97 1.05 1.15
Total equity to assets ..................... 8.25 8.01 8.07 7.90
Tier I capital to avg. assets (leverage) ... 7.73 7.57 7.72 7.48
Tier I capital to risk-adjusted assets ..... 11.68 11.30 11.37 11.17
Total capital to risk-adjusted assets ...... 14.17 13.84 13.90 13.68
========================================================================================================
</TABLE>
56
<PAGE> 57
CORPORATE DIRECTORY Summit Bancorp and Subsidiaries
================================================================================
Summit Bancorp
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey
08543-2066
609-987-3200
Corporate Management
Chairman and
Chief Executive Officer
T. Joseph Semrod
President
Robert G. Cox
Vice Chairmen
John G. Collins
John R. Howell
Senior Executive Vice Presidents
John R. Haggerty
Sabry J. Mackoul
Stephen H. Paneyko
Executive Vice Presidents
Larry L. Betsinger
Alfred M. D'Augusta
John R. Feeney
William J. Healy
Virginia Ibarra
Dorinda Jenkins-Glover
Joseph A. Micali, Jr.
Richard F. Ober, Jr.
Dennis Porterfield
Alan N. Posencheg
George J. Soltys, Jr.
Edmund C. Weiss, Jr.
Senior Vice Presidents
Susan U. Bredehoft
Kerry K. Calaiaro
Barry S. Duerk
Peter J. Gindin
Faith P. Goldstein
Robert A. Gunther
James J. Kreig
Katherine Piell
Paul V. Stahlin
Robert Steinberg
Timothy S. Tracey
Dennis A. Williams
Board of Directors
S. Rodgers Benjamin
Chairman and
Chief Executive Officer
Flemington Fur Company
Robert L. Boyle
Representative
William H. Hintelmann Firm
James C. Brady, Jr.
Partner
Mill House Associates, L.P.
John G. Collins
Vice Chairman
Summit Bancorp
Robert G. Cox
President
Summit Bancorp
T.J. Dermot Dunphy
Chairman and
Chief Executive Officer
Sealed Air Corporation
Anne Evans Estabrook
Owner
Elberon Development Co.
Elinor J. Ferdon
Volunteer Professional
National President
Girl Scouts of U.S.A.
Thomas H. Hamilton
Chairman and
Chief Executive Officer
Collective Bank
Fred G. Harvey
Vice President
E&E Corporation
John R. Howell
Vice Chairman
Summit Bancorp
Francis J. Mertz
President
Fairleigh Dickinson University
George L. Miles, Jr., CPA
President and
Chief Executive Officer
WQED Pittsburgh
William R. Miller
Former
Senior Vice President
Lenox China, Inc.
Henry S. Patterson II
Former President
E'town Corporation
T. Joseph Semrod
Chairman and
Chief Executive Officer
Summit Bancorp
Raymond Silverstein, CPA
Consultant
Alloy, Silverstein, Shapiro,
Adams, Mulford & Co., P.C.
Orin R. Smith
Chairman and
Chief Executive Officer
Engelhard Corporation
Joseph M. Tabak
President and
Chief Executive Officer
JPC Enterprises, Inc.
Douglas G. Watson
President and
Chief Executive Officer
Novartis Corporation
Summit Bank
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey
08543-2066
609-987-3200
Senior Management
Chairman and
Chief Executive Officer
T. Joseph Semrod
President
Robert G. Cox
Vice Chairman
John G. Collins
Senior Executive Vice Presidents
John R. Haggerty
Sabry J. Mackoul
Stephen H. Paneyko
Executive Vice Presidents
Anthony J. Allora
Alfred M. D'Augusta
Robert Eberhardt, Jr.
Gerald L. Facciani
John R. Feeney
Peter D. Halstead
William J. Healy
Virginia Ibarra
Dorinda Jenkins-Glover
James S. Little
Stewart E. McClure, Jr.
H. Richard Minette
Richard F. Ober, Jr.
Robert J. Peters
Dennis Porterfield
Christophe-Pierre Terlizzi
Timothy S. Tracey
William J. Wolverton
Regional Presidents
Stephen T. Emr
J. Michael Feeks
Michael J. Giacobello
Laura Gilardini
Kevin Gillen
Senior Vice Presidents
John P. Babcock
John D. Battaglia
Bette A. Bauer
Donald W. Blum
Marion Brady
Susan U. Bredehoft
Peter J. Brehm
Arthur J. Brown
Thomas B. Butler
Jennifer Calenda
Richard O. Carmichael
Paul J. Cavaliere
Stephen Chaberski
Carol R. Coles
J. Michael Cunnane
Jack Cussen
James F. Deutsch
Margaret L. Domber
Barry S. Duerk
Kermit Dyke
Anne Ferguson
James N. Ferrier
Thomas M. Finn
Walter Horsting
Hilton M. Jervey
57
<PAGE> 58
CORPORATE DIRECTORY (continued) Summit Bancorp and Subsidiaries
================================================================================
Raymond Kirschner
Jeffrey J. Kraft
James B. Kurdek
Christopher Lahoda
Peter Lillard
George B. Littlejohn
Michael J. Maiorino, Jr.
Charles A. Maraziti
Simone Marino
Stephen Mauger
Richard J. Morbee
Kathleen Muldoon
George L. Nichols
Douglas Oliver
N. Lee Parks
William C. Pasko
Patricia Patriarca
Ronald Phillips
Peter C. Platt
Edward E. Poor IV
Bindigana Ramaprasad
Richard D. Rein
Mary Reither
Garrett W. Roberts
Irwin Schwartz
Thomas P. Smyth
Alfred J. Soles
Paul V. Stahlin
Frank J. Stanziola
J. Page Stiger, Jr.
Mark Stoll
Margaret Stone
Francis P. Testa
Paul A. Towers
Roger M. Tully
Harold W. Ullmann
Joseph Verbaro, Jr.
Thomas M. Wick
Arty C. Zulawski
Senior Regional Managers
Michael Alicea
Barbara Baldino
Thomas J. D'Angelo
Walter Fillmore
Barbara Oldt
Jorge Rojas
Daniel Slocum
Gregory M. Smith
Maurice J. Spagnoletti
Mary White-Przybyla
Board of Directors
Bjorn Ahlstrom
Robert L. Boyle
James C. Brady, Jr.
Barry D. Brown
John G. Collins
Robert G. Cox
T.J. Dermot Dunphy
Anne Evans Estabrook
Elinor J. Ferdon
Samuel Gerstein, Esq.
Richard H. Goldberger
Robert S. Hekemian
Thomas C. Jamieson, Jr., Esq.
Vincent P. Langone
Francis J. Mertz
George L. Miles, Jr., CPA
Bertram B. Miller
Henry S. Patterson II
T. Joseph Semrod
Raymond Silverstein, CPA
Orin R. Smith
Sylvester L. Sullivan
Joseph M. Tabak
Robert A. Woodruff, Sr.
Summit Bank
One Bethlehem Plaza
Bethlehem, Pennsylvania 18018
610-865-8411
Senior Management
Chairman, President
and Chief Executive Officer
John R. Howell
Regional President
Fredric B. Cort
Senior Vice Presidents
Philip D. Beck
Michael L. Brown
Thomas L. Burns
Donald H. McCarty
Francis P. Testa
Senior Regional Managers
Benjamin F. Gilbert
Gary F. Lamont
Elizabeth Wilson
Board of Directors
Charles J. Bufalino, Esq.
Walter J. Dealtrey
Ronald D. Ertley
Alfred M. Giannangeli
Henry A. Giuliani, Esq.
Allan L. Goodman
John R. Haggerty
Fred G. Harvey
John R. Howell
William L. Morse, Jr.
Donald M. Pachence
Richard H. Penske
Robert J. Tunnessen
John W. Woltjen
Summit Service Corporation
55 Challenger Road
Ridgefield Park, New Jersey
07660
201-296-3000
Senior Management
Chairman of the Board
John G. Collins
President and
Chief Executive Officer
Alan N. Posencheg
Executive Vice Presidents
Larry L. Betsinger
Joseph A. Micali, Jr.
Senior Vice Presidents
Hubert P. Clarke
Elaine Fettig
Louise Germinario
Frank J. Litterio
Ray W. Mead
Santiago Patino
Eugene E. Schwarzenbek
John J. Smith
Summit Discount Brokerage Co.
305 Route 17 South
P.O. Box 929
Paramus, New Jersey 07652
201-262-8400
1-800-631-1635
Senior Management
Chairman and Chief
Executive Officer
Jack Cussen
President and
Chief Operating Officer
Joseph J. McCaffrey
Executive Vice President
Jack R. Ader
Senior Vice Presidents
Gerard Hallman
Loretta Kane
Summit Venture Capital, Inc.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543
609-987-3200
President and
Chief Executive Officer
Stephen H. Paneyko
Summit Commercial/
Gibraltar Corp.
546 Fifth Avenue
New York, New York 10036
212-997-3350
Senior Management
Chairman of the Board
Robert J. Peters
President and
Chief Executive Officer
Irwin Schwartz
Executive Vice President
Harvey Friedman
Senior Vice President
Robert A. Schnitzer
Design: Bloch Graulich Whelan Inc. / New York
58
<PAGE> 59
Summit Bancorp and Subsidiaries
Shareholder and Corporate Information
Headquarters
Summit Bancorp
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey
08543-2066
(609) 987-3200
www.summitbank.com
Annual Shareholders Meeting
Friday, April 7, 1998 at 10 a.m.
Hyatt Regency Princeton
Route 1 and Alexander Road
Princeton, New Jersey
Common Stock Data
Common stock is traded on the
New York Stock Exchange under
the symbol SUB. Daily stock
quotes:
The New York Times -- SumtBc
The Wall Street Journal --
SummitBcp
Dividend Reinvestment and
Stock Purchase Plan
Stockholders may have quarterly dividends automatically reinvested in additional
shares without service charges. Optional cash payments, up to $25,000 per
quarter, toward the purchase of shares are permitted. Plan prospectus and
enrollment card: First Chicago Trust Company of New York, (201) 324-0498.
Transfer and Dividend Paying Agent/Registrar
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey
070303-2500
(201) 324-0498
Co-Transfer Agent:
Summit Bank
Other Reports
Copies of Form 10-K are available without charge. Write:
Summit Bancorp
Corporate Comptroller
P.O. Box 2066
Princeton, New Jersey
08543-2066
Contacts
Security analysts, portfolio managers and others seeking financial information:
(609) 987-3226.
News media: (609) 514-7872.
Shareholder inquiries:
(609) 987-3452.
Stock records: First Chicago Trust Company of New York
(201) 324-0498.
Hours: Representatives
8:30 a.m. - 7 p.m. EST weekdays;
Automated response
24 hours daily.
[The following table was depicted as a line graph in the printed material.]
Summit Bancorp Five-Year
Cumulative Total Return
<TABLE>
<CAPTION>
Year Summit Bancorp S&P 500 S&P Regional Banks
- ---- -------------- ------- ------------------
<S> <C> <C> <C>
1993 101.77 110.04 106.02
1994 106.02 111.49 100.18
1995 160.97 153.33 157.75
1996 204.87 188.51 215.50
1997 382.02 251.39 324.16
</TABLE>
Quarterly Common Stock Price and Dividend Information
<TABLE>
<CAPTION>
1997 1996
------------------------------------ -------------------------------------
Dividends Dividends
High Low Close Declared High Low Close Declared
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4th Quarter $53.38 $38.38 $52.88 $.27 $30.08 $26.33 $29.17 $.24
3rd Quarter 45.31 33.58 44.00 .27 27.42 21.75 26.50 .24
2nd Quarter 35.08 28.58 33.42 .24 26.33 22.67 23.42 .21
1st Quarter 33.33 28.50 29.17 .24 26.75 22.92 24.67 .21
==========================================================================================
</TABLE>
59
<PAGE> 60
SUMMIT
Bancorp [LOGO]
301 Carnegie Center
P.O. Box 2066
Princeton,
New Jersey 08543-2066
<PAGE> 1
Exhibit (21)
SUMMIT BANCORP. SUBSIDIARY STRUCTURE
AS OF MARCH 20, 1998
<TABLE>
<CAPTION>
NAME INCORP./(AUTH)
- ---- --------------
<S> <C>
Summit Bancorp. New Jersey
Asset Management Corp. New Jersey
First Valley Corporation Pennsylvania
FirstVal Properties, Inc. Pennsylvania
Summit Bank Pennsylvania
Ninth North-Val, Inc. Pennsylvania
Eighth North-Val, Inc. Pennsylvania
Sixth North-Val, Inc. Pennsylvania
Summit Discount Brokerage Co. Pennsylvania(NJ)(NY)
UJB Financial Service Corp.(DBA
Summit Service Corp.)(19.4%) New Jersey
India, Inc. Delaware(NJ)
Summit Bank New Jersey
34 West - Rte. 22/523 Corporation New Jersey
Beechwood Insurance Agency, Inc. New Jersey
Collective Financial Services, Inc. New Jersey
Collective Mortgage Services, Inc. (DBA Harbor
Mortgage Company) Delaware
Colts Neck Orchard Construction Service Corporation New Jersey
Continental Investment Corporation New Jersey
Corporate Dynamics New Jersey(PA)
Flemington National Investment Co. New Jersey
Glen Ridge Business Corporation New Jersey
GLP, Inc. New Jersey
GS Holdings (NJ), Inc. Delaware
GS Holdings (NJ), Inc. New Jersey
Hopkinson Corp. New Jersey
MJD Asset Corporation New Jersey
New Jersey Affiliated Financial Services, Inc. New Jersey
One Main Properties - Atlantic Highlands, Inc. New Jersey
One Main Properties - Berkeley Heights, Inc. New Jersey
One Main Properties - Millburn, Inc. New Jersey
Palisade Financial Services, Inc. New Jersey
Palservco, Inc. New Jersey
Philadelphia Benefits Corporation Pennsylvania(NJ)
Pipco-On-The-Hudson, Inc. New Jersey
Alternative Financial Group, Inc. New Jersey
Alternative Financial Group, Inc. Pennsylvania
NewPip Properties Co., Ltd. New Jersey
Pipco Parsippany, Inc. New Jersey
Pipco/Spring Hill, Inc. New Jersey
Pipco/TM8, Inc. New Jersey
PipHyde Park, Limited New York
PipQuarryCo, Inc. New Jersey
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
NAME INCORP./(AUTH)
- ---- --------------
<S> <C>
[Summit Bancorp. (cont.)]
[Summit Bank (cont.)]
Pro Five, Inc. New Jersey
SJK Asset Corporation New Jersey
Securitization Subsidiary I, Inc. New Jersey
Pro One, Inc. New Jersey
Rockof Corp. New York
CTC Investment Co. Delaware
STC Investment Holding Company New Jersey
S.A.R. Realty Holding Corporation New Jersey
Sethmark Holding Corp. New York
Sethmark Capital Corporation New York
Smithcrest Realty, Inc. New Jersey
Somerset Investment Company, Inc. New Jersey
Summit International Trade Finance Corp. New Jersey
UJB Trade Finance (HK), Limited Hong Kong
Summit Leasing Corporation New Jersey(several)
Summit Mortgage Banking Services, Inc. New Jersey(NY)
The Old Reliable Corporation, Inc. New Jersey
UJB Financial Service Corporation (DBA Summit
Service Corp.)(80.6%) New Jersey
United Jersey Hackensack Investment Corporation New Jersey
Ver Valen, Inc. New Jersey
Summit Capital Trust I Delaware
Summit Commercial Corp. New Jersey(MD)
Summit Commercial/Gibraltar Corp. New York
Summit Credit Life Insurance Company Arizona
Summit Financial Payment Systems, Inc. New Jersey
Summit Corporate Secretary, Inc. New Jersey
Summit Venture Capital, Inc. New Jersey
The Summit Mortgage Company, Inc. New Jersey(NY)
United Jersey Financial Corp. New Jersey
</TABLE>
Note: Summit Bancorp. holds 9.2% of the issued and outstanding
shares of the Class A Common Stock of NYCE Corporation.
Note: NewGib Corp. is an unorganized (w/o shareholder) New
York business corporation shelved until such time as it is needed.
2
<PAGE> 1
Exhibit (23)A.
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Summit Bancorp:
We consent to incorporation by reference in registration statement no. 33-13930
on Form S-8, registration statement no. 33-36209 on Form S-8, registration no.
33-38172 on Form S-8, registration statement no. 33-53870 on Form S-3,
registration statement no. 33-58152 on Form S-3, registration statement no.
33-62972 on Form S-8, registration statement no. 33-54667 on Form S-8,
registration statement no. 33-61353 on Form S-8, registration statement no.
333-02625 on Form S-8, registration statement no. 333-24159 on Form S-8 and
registration statement no. 333-35075 on Form S-8 of Summit Bancorp of our
report dated January 20, 1998, relating to the consolidated balance sheets of
Summit Bancorp and subsidiaries as of December 31, 1997, and 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1997 which
report is incorporated by reference in the December 31, 1997 Annual Report on
Form 10-K of Summit Bancorp.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1997 10-K FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,173,118
<INT-BEARING-DEPOSITS> 14,072
<FED-FUNDS-SOLD> 4,460
<TRADING-ASSETS> 35,216
<INVESTMENTS-HELD-FOR-SALE> 5,074,896
<INVESTMENTS-CARRYING> 4,157,543
<INVESTMENTS-MARKET> 4,151,582
<LOANS> 18,888,366
<ALLOWANCE> 296,494
<TOTAL-ASSETS> 29,964,172
<DEPOSITS> 22,329,436
<SHORT-TERM> 3,597,078
<LIABILITIES-OTHER> 377,613
<LONG-TERM> 1,047,625
0
0
<COMMON> 141,272
<OTHER-SE> 2,471,148
<TOTAL-LIABILITIES-AND-EQUITY> 29,964,172
<INTEREST-LOAN> 1,505,840
<INTEREST-INVEST> 554,049
<INTEREST-OTHER> 4,817
<INTEREST-TOTAL> 2,064,706
<INTEREST-DEPOSIT> 682,019
<INTEREST-EXPENSE> 919,617
<INTEREST-INCOME-NET> 1,145,089
<LOAN-LOSSES> 59,100
<SECURITIES-GAINS> 5,637
<EXPENSE-OTHER> 816,691
<INCOME-PRETAX> 571,183
<INCOME-PRE-EXTRAORDINARY> 370,965
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370,965
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.09
<YIELD-ACTUAL> 4.26
<LOANS-NON> 85,090
<LOANS-PAST> 48,609
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,533
<ALLOWANCE-OPEN> 290,605
<CHARGE-OFFS> 86,675
<RECOVERIES> 33,464
<ALLOWANCE-CLOSE> 296,494
<ALLOWANCE-DOMESTIC> 129,668
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 166,826
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,117,347
<INT-BEARING-DEPOSITS> 4,309
<FED-FUNDS-SOLD> 14,359
<TRADING-ASSETS> 29,808
<INVESTMENTS-HELD-FOR-SALE> 4,596,923
<INVESTMENTS-CARRYING> 4,078,729
<INVESTMENTS-MARKET> 4,061,421
<LOANS> 18,630,663
<ALLOWANCE> 294,114
<TOTAL-ASSETS> 29,091,106
<DEPOSITS> 21,938,028
<SHORT-TERM> 3,256,136
<LIABILITIES-OTHER> 377,886
<LONG-TERM> 1,001,617
0
0
<COMMON> 140,588
<OTHER-SE> 2,376,851
<TOTAL-LIABILITIES-AND-EQUITY> 29,091,106
<INTEREST-LOAN> 1,121,321
<INTEREST-INVEST> 410,226
<INTEREST-OTHER> 4,099
<INTEREST-TOTAL> 1,535,646
<INTEREST-DEPOSIT> 508,614
<INTEREST-EXPENSE> 681,034
<INTEREST-INCOME-NET> 854,612
<LOAN-LOSSES> 45,100
<SECURITIES-GAINS> 3,471
<EXPENSE-OTHER> 625,561
<INCOME-PRETAX> 399,051
<INCOME-PRE-EXTRAORDINARY> 258,752
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258,752
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.46
<YIELD-ACTUAL> 4.28
<LOANS-NON> 88,957
<LOANS-PAST> 67,496
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 19,174
<ALLOWANCE-OPEN> 290,605
<CHARGE-OFFS> 64,846
<RECOVERIES> 23,255
<ALLOWANCE-CLOSE> 294,114
<ALLOWANCE-DOMESTIC> 138,581
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 155,533
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,153,517
<INT-BEARING-DEPOSITS> 6,879
<FED-FUNDS-SOLD> 143,497
<TRADING-ASSETS> 43,407
<INVESTMENTS-HELD-FOR-SALE> 3,513,390
<INVESTMENTS-CARRYING> 5,138,227
<INVESTMENTS-MARKET> 5,072,035
<LOANS> 18,597,663
<ALLOWANCE> 294,066
<TOTAL-ASSETS> 29,224,687
<DEPOSITS> 22,167,140
<SHORT-TERM> 3,332,234
<LIABILITIES-OTHER> 330,485
<LONG-TERM> 910,766
0
0
<COMMON> 140,291
<OTHER-SE> 2,343,771
<TOTAL-LIABILITIES-AND-EQUITY> 29,224,687
<INTEREST-LOAN> 741,321
<INTEREST-INVEST> 273,836
<INTEREST-OTHER> 2,988
<INTEREST-TOTAL> 1,018,145
<INTEREST-DEPOSIT> 338,221
<INTEREST-EXPENSE> 451,315
<INTEREST-INCOME-NET> 566,830
<LOAN-LOSSES> 30,600
<SECURITIES-GAINS> 2,206
<EXPENSE-OTHER> 388,275
<INCOME-PRETAX> 288,883
<INCOME-PRE-EXTRAORDINARY> 187,540
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187,540
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 4.28
<LOANS-NON> 110,177
<LOANS-PAST> 71,510
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 18,745
<ALLOWANCE-OPEN> 290,605
<CHARGE-OFFS> 42,782
<RECOVERIES> 15,643
<ALLOWANCE-CLOSE> 294,066
<ALLOWANCE-DOMESTIC> 147,366
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 146,700
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,034,857
<INT-BEARING-DEPOSITS> 13,457
<FED-FUNDS-SOLD> 243,395
<TRADING-ASSETS> 33,806
<INVESTMENTS-HELD-FOR-SALE> 3,366,770
<INVESTMENTS-CARRYING> 5,196,227
<INVESTMENTS-MARKET> 5,015,456
<LOANS> 18,376,154
<ALLOWANCE> 290,471
<TOTAL-ASSETS> 28,907,850
<DEPOSITS> 22,330,582
<SHORT-TERM> 2,948,117
<LIABILITIES-OTHER> 395,392
<LONG-TERM> 835,744
0
0
<COMMON> 139,925
<OTHER-SE> 2,258,090
<TOTAL-LIABILITIES-AND-EQUITY> 28,907,850
<INTEREST-LOAN> 365,230
<INTEREST-INVEST> 134,658
<INTEREST-OTHER> 1,426
<INTEREST-TOTAL> 501,314
<INTEREST-DEPOSIT> 168,314
<INTEREST-EXPENSE> 221,299
<INTEREST-INCOME-NET> 280,015
<LOAN-LOSSES> 15,510
<SECURITIES-GAINS> 1,431
<EXPENSE-OTHER> 206,942
<INCOME-PRETAX> 126,963
<INCOME-PRE-EXTRAORDINARY> 82,482
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,482
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<YIELD-ACTUAL> 4.29
<LOANS-NON> 125,583
<LOANS-PAST> 76,429
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,502
<ALLOWANCE-OPEN> 290,605
<CHARGE-OFFS> 21,658
<RECOVERIES> 6,014
<ALLOWANCE-CLOSE> 290,471
<ALLOWANCE-DOMESTIC> 156,350
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 134,121
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,327,507
<INT-BEARING-DEPOSITS> 24,825
<FED-FUNDS-SOLD> 114,789
<TRADING-ASSETS> 26,376
<INVESTMENTS-HELD-FOR-SALE> 2,872,051
<INVESTMENTS-CARRYING> 5,422,093
<INVESTMENTS-MARKET> 5,321,724
<LOANS> 17,386,059
<ALLOWANCE> 280,611
<TOTAL-ASSETS> 27,767,271
<DEPOSITS> 21,629,531
<SHORT-TERM> 2,806,367
<LIABILITIES-OTHER> 344,742
<LONG-TERM> 695,793
0
0
<COMMON> 134,637
<OTHER-SE> 2,156,201
<TOTAL-LIABILITIES-AND-EQUITY> 27,767,271
<INTEREST-LOAN> 1,383,150
<INTEREST-INVEST> 517,584
<INTEREST-OTHER> 6,262
<INTEREST-TOTAL> 1,906,996
<INTEREST-DEPOSIT> 659,034
<INTEREST-EXPENSE> 853,707
<INTEREST-INCOME-NET> 1,053,289
<LOAN-LOSSES> 64,034
<SECURITIES-GAINS> 3,862
<EXPENSE-OTHER> 815,591
<INCOME-PRETAX> 433,706
<INCOME-PRE-EXTRAORDINARY> 283,675
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 283,675
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.67
<YIELD-ACTUAL> 4.21
<LOANS-NON> 139,131
<LOANS-PAST> 79,013
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 11,048
<ALLOWANCE-OPEN> 299,502
<CHARGE-OFFS> 108,306
<RECOVERIES> 23,231
<ALLOWANCE-CLOSE> 280,611
<ALLOWANCE-DOMESTIC> 147,387
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 133,224
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,407,284
<INT-BEARING-DEPOSITS> 9,136
<FED-FUNDS-SOLD> 4,052
<TRADING-ASSETS> 20,049
<INVESTMENTS-HELD-FOR-SALE> 2,643,827
<INVESTMENTS-CARRYING> 5,492,568
<INVESTMENTS-MARKET> 5,369,211
<LOANS> 17,277,746
<ALLOWANCE> 284,223
<TOTAL-ASSETS> 27,405,016
<DEPOSITS> 21,453,638
<SHORT-TERM> 3,013,320
<LIABILITIES-OTHER> 345,896
<LONG-TERM> 397,862
0
42,620
<COMMON> 134,527
<OTHER-SE> 2,017,153
<TOTAL-LIABILITIES-AND-EQUITY> 27,405,016
<INTEREST-LOAN> 1,034,325
<INTEREST-INVEST> 387,998
<INTEREST-OTHER> 4,267
<INTEREST-TOTAL> 1,426,590
<INTEREST-DEPOSIT> 494,484
<INTEREST-EXPENSE> 639,119
<INTEREST-INCOME-NET> 787,471
<LOAN-LOSSES> 47,599
<SECURITIES-GAINS> 1,268
<EXPENSE-OTHER> 643,459
<INCOME-PRETAX> 287,936
<INCOME-PRE-EXTRAORDINARY> 186,944
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,944
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.10
<YIELD-ACTUAL> 4.21
<LOANS-NON> 167,466
<LOANS-PAST> 85,090
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 20,631
<ALLOWANCE-OPEN> 299,502
<CHARGE-OFFS> 80,340
<RECOVERIES> 17,462
<ALLOWANCE-CLOSE> 284,223
<ALLOWANCE-DOMESTIC> 156,377
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 127,846
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,368,091
<INT-BEARING-DEPOSITS> 21,269
<FED-FUNDS-SOLD> 86,198
<TRADING-ASSETS> 16,271
<INVESTMENTS-HELD-FOR-SALE> 2,550,083
<INVESTMENTS-CARRYING> 5,485,108
<INVESTMENTS-MARKET> 5,380,832
<LOANS> 17,204,620
<ALLOWANCE> 289,247
<TOTAL-ASSETS> 27,344,440
<DEPOSITS> 21,387,587
<SHORT-TERM> 2,966,396
<LIABILITIES-OTHER> 383,764
<LONG-TERM> 399,217
0
42,620
<COMMON> 134,334
<OTHER-SE> 2,030,522
<TOTAL-LIABILITIES-AND-EQUITY> 27,344,440
<INTEREST-LOAN> 686,311
<INTEREST-INVEST> 262,329
<INTEREST-OTHER> 2,981
<INTEREST-TOTAL> 951,621
<INTEREST-DEPOSIT> 330,852
<INTEREST-EXPENSE> 429,295
<INTEREST-INCOME-NET> 522,326
<LOAN-LOSSES> 31,689
<SECURITIES-GAINS> 1,505
<EXPENSE-OTHER> 465,534
<INCOME-PRETAX> 152,811
<INCOME-PRE-EXTRAORDINARY> 99,443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99,443
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 4.20
<LOANS-NON> 181,243
<LOANS-PAST> 13,321
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 11,272
<ALLOWANCE-OPEN> 299,502
<CHARGE-OFFS> 53,455
<RECOVERIES> 11,511
<ALLOWANCE-CLOSE> 289,247
<ALLOWANCE-DOMESTIC> 208,045
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 81,202
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,178,126
<INT-BEARING-DEPOSITS> 36,338
<FED-FUNDS-SOLD> 45,662
<TRADING-ASSETS> 49,755
<INVESTMENTS-HELD-FOR-SALE> 2,611,210
<INVESTMENTS-CARRYING> 5,757,611
<INVESTMENTS-MARKET> 5,657,124
<LOANS> 16,989,945
<ALLOWANCE> 294,165
<TOTAL-ASSETS> 27,283,200
<DEPOSITS> 21,279,147
<SHORT-TERM> 3,012,594
<LIABILITIES-OTHER> 431,804
<LONG-TERM> 405,228
0
42,620
<COMMON> 133,947
<OTHER-SE> 1,977,860
<TOTAL-LIABILITIES-AND-EQUITY> 27,283,200
<INTEREST-LOAN> 342,145
<INTEREST-INVEST> 132,958
<INTEREST-OTHER> 1,587
<INTEREST-TOTAL> 476,690
<INTEREST-DEPOSIT> 167,420
<INTEREST-EXPENSE> 216,993
<INTEREST-INCOME-NET> 259,697
<LOAN-LOSSES> 15,786
<SECURITIES-GAINS> 235
<EXPENSE-OTHER> 288,991
<INCOME-PRETAX> 16,632
<INCOME-PRE-EXTRAORDINARY> 10,958
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,958
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
<YIELD-ACTUAL> 4.19
<LOANS-NON> 195,681
<LOANS-PAST> 6,009
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 23,620
<ALLOWANCE-OPEN> 299,502
<CHARGE-OFFS> 25,890
<RECOVERIES> 4,767
<ALLOWANCE-CLOSE> 294,165
<ALLOWANCE-DOMESTIC> 212,467
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 81,698
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
SUMMIT BANCORP. ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO.
128, "EARNINGS PER SHARE," ON DECEMBER 31, 1997. SFAS NO. 128 ESTABLISHES THE
NEW STANDARD FOR COMPUTATION AND PRESENTATION OF NET INCOME PER COMMON SHARE.
UNDER THE NEW REQUIREMENTS BOTH BASIC (PRESENTED IN THE (EPS-PRIMARY) TAG) AND
DILUTED NET INCOME PER COMMON SHARE ARE PRESENTED AND HAVE BEEN RESTATED IN
ACCORDANCE WITH SFAS NO. 128.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,403,974
<INT-BEARING-DEPOSITS> 18,329
<FED-FUNDS-SOLD> 165,367
<TRADING-ASSETS> 41,965
<INVESTMENTS-HELD-FOR-SALE> 2,545,089
<INVESTMENTS-CARRYING> 5,439,914
<INVESTMENTS-MARKET> 5,362,441
<LOANS> 16,413,222
<ALLOWANCE> 293,160
<TOTAL-ASSETS> 26,647,452
<DEPOSITS> 21,232,926
<SHORT-TERM> 2,491,184
<LIABILITIES-OTHER> 361,480
<LONG-TERM> 431,754
0
42,620
<COMMON> 128,028
<OTHER-SE> 1,959,460
<TOTAL-LIABILITIES-AND-EQUITY> 26,647,452
<INTEREST-LOAN> 1,297,168
<INTEREST-INVEST> 522,660
<INTEREST-OTHER> 12,106
<INTEREST-TOTAL> 1,831,934
<INTEREST-DEPOSIT> 630,303
<INTEREST-EXPENSE> 822,232
<INTEREST-INCOME-NET> 1,009,702
<LOAN-LOSSES> 72,090
<SECURITIES-GAINS> 8,595
<EXPENSE-OTHER> 705,459
<INCOME-PRETAX> 467,405
<INCOME-PRE-EXTRAORDINARY> 300,412
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300,412
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.87
<YIELD-ACTUAL> 4.28
<LOANS-NON> 193,561
<LOANS-PAST> 60,463
<LOANS-TROUBLED> 199
<LOANS-PROBLEM> 18,708
<ALLOWANCE-OPEN> 329,467
<CHARGE-OFFS> 130,492
<RECOVERIES> 22,095
<ALLOWANCE-CLOSE> 293,160
<ALLOWANCE-DOMESTIC> 207,302
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 85,858
</TABLE>
