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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________ Commission
File Number: 1-6451
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SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1903313
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 Carnegie Center, P.O. Box 2066, Princeton, New Jersey 08543-2066
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(Address of principal executive offices) (Zip Code)
(609) 987-3200
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
As of July 31, 2000 there were 173,926,726 shares of common stock,
$.80 par value, outstanding.
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<PAGE>
Summit Bancorp
Form 10-Q
Index
Page No.
Part I Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets-
June 30, 2000, December 31, 1999, and June 30, 1999........... 1
Consolidated Statements of Income-
Three and Six Months Ended June 30, 2000, and 1999............ 2
Consolidated Statements of Shareholders' Equity-
Six Months Ended June 30, 2000, and 1999..................... 3
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 2000, and 1999..................... 4
Notes to Consolidated Financial Statements (unaudited)............ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 22
Part II. Other Information
Item 1. Legal Proceedings................................................. 23
Item 2. Changes in Securities and Use of Proceeds......................... 23
Item 3. Defaults Upon Senior Securities................................... 23
Item 4. Submissions of Matters to a Vote of Security Holders.............. 23
Item 5. Other Information................................................. 23
Item 6. Exhibits and Reports on Form 8-K.................................. 23
Signature......................................................... 24
Exhibit Index..................................................... 25
ii
<PAGE>
Summit Bancorp and Subsidiaries
Consolidated Balance Sheets
Unaudited
(In thousands)
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30,
2000 1999 1999
------------ ------------ ------------
Assets
<S> <C> <C> <C>
Cash and due from banks $ 1,192,496 $ 1,160,577 $ 1,009,863
Federal funds sold and securities purchased
under agreements to resell -- 5,000 16,463
Interest-bearing deposits with banks 26,845 32,870 15,297
Securities:
Trading account 26,554 20,118 18,990
Available for sale 6,226,991 5,199,121 4,375,966
Held to maturity 5,030,416 5,597,383 6,378,484
------------ ------------ ------------
Total securities 11,283,961 10,816,622 10,773,440
Loans (net of unearned discount):
Commercial 9,262,281 8,134,497 7,526,178
Commercial mortgage 3,189,847 3,174,370 2,897,752
Residential mortgage 5,795,174 5,747,927 5,488,340
Consumer 6,800,536 6,170,162 5,626,550
------------ ------------ ------------
Total loans 25,047,838 23,226,956 21,538,820
Less: Allowance for loan losses 334,851 328,828 321,700
------------ ------------ ------------
Net loans
24,712,987 22,898,128 21,217,120
------------ ------------ ------------
Goodwill and other intangibles 565,337 519,362 316,610
Premises and equipment 321,710 315,632 306,528
Accrued interest receivable 249,311 214,797 202,306
Due from customers on acceptances 20,007 22,311 20,901
Other assets 612,478 393,676 347,232
------------ ------------ ------------
Total Assets $ 38,985,132 $ 36,378,975 $ 34,225,760
============ ============ ============
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing demand deposits $ 5,296,357 $ 4,966,400 $ 4,704,062
Interest-bearing deposits:
Savings and time deposits 20,043,841 18,653,398 18,054,408
Commercial certificates of deposit $100,000 and over 736,727 1,018,848 684,430
------------ ------------ ------------
Total deposits 26,076,925 24,638,646 23,442,900
------------ ------------ ------------
Other borrowed funds 5,883,846 4,593,064 3,734,712
Accrued expenses and other liabilities 337,558 357,152 343,443
Accrued interest payable 110,937 100,845 80,413
Bank acceptances outstanding 20,007 22,311 20,901
Long-term debt 3,616,616 3,864,777 4,001,925
------------ ------------ ------------
Total liabilities 36,045,889 33,576,795 31,624,294
Shareholders' equity:
Common stock par value $ .80: Authorized 390,000 shares;
issued 177,274; 177,471; and 177,523 shares 141,819 141,977 142,018
Surplus 913,019 959,934 966,429
Retained earnings 2,084,707 1,948,985 1,859,908
Employee stock ownership plan obligation -- (1,250) (2,250)
Accumulated other comprehensive loss, net of tax (112,611) (85,841) (39,478)
Common stock held in treasury, at cost (3,137; 4,825; 7,883 shares) (87,691) (161,625) (325,161)
------------ ------------ ------------
Total shareholders' equity 2,939,243 2,802,180 2,601,466
------------ ------------ ------------
Total Liabilities and Shareholders' Equity $ 38,985,132 $ 36,378,975 $ 34,225,760
============ ============ ============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
1
<PAGE>
Summit Bancorp and Subsidiaries
Consolidated Statements of Income
Unaudited
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Interest Income
<S> <C> <C> <C> <C>
Loans $ 501,521 $ 407,045 $ 970,643 $ 810,712
Securities:
Trading account 685 135 1,080 217
Available for sale 108,166 60,069 203,041 119,630
Held to maturity 81,746 100,850 167,211 197,390
---------- ---------- ---------- ----------
Total securities 190,597 161,054 371,332 317,237
Other interest income 945 612 1,636 1,207
---------- ---------- ---------- ----------
Total interest income 693,063 568,711 1,343,611 1,129,156
---------- ---------- ---------- ----------
Interest Expense
Savings and time deposits 196,107 157,347 371,540 308,749
Commercial certificates of deposit
$100,000 and over 12,365 9,460 25,664 21,035
Borrowed funds, including long-term debt 140,709 93,313 266,618 185,437
---------- ---------- ---------- ----------
Total interest expense 349,181 260,120 663,822 515,221
---------- ---------- ---------- ----------
Net interest income 343,882 308,591 679,789 613,935
Provision for loan losses 24,500 16,500 44,500 33,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 319,382 292,091 635,289 580,935
---------- ---------- ---------- ----------
Non-Interest Income
Service charges on deposit accounts 31,862 29,567 63,407 59,643
Service and loan fee income 19,611 16,011 35,366 31,635
Insurance service fees 14,791 8,370 25,595 16,240
Trust income 13,686 12,844 27,458 24,770
Retail investment fees 10,820 10,612 23,559 20,770
Securities gains 2,761 2,094 2,846 2,311
Other 21,237 16,429 38,270 38,715
---------- ---------- ---------- ----------
Total non-interest Income 114,768 95,927 216,501 194,084
---------- ---------- ---------- ----------
Non-Interest Expenses
Salaries 93,438 82,606 181,402 162,932
Pension and other employee benefits 32,285 29,132 62,557 59,149
Furniture and equipment 25,486 22,517 50,935 44,968
Occupancy, net 21,400 19,263 43,535 39,098
Amortization of goodwill and other intangibles 9,912 6,468 18,912 12,339
Communications 9,405 9,696 18,919 19,314
Advertising and public relations 6,193 5,927 12,337 11,455
Other 39,007 31,607 77,370 63,398
---------- ---------- ---------- ----------
Total non-interest expenses 237,126 207,216 465,967 412,653
---------- ---------- ---------- ----------
Net Income before taxes 197,024 180,802 385,823 362,366
Federal and state income taxes 66,922 60,465 130,808 123,288
---------- ---------- ---------- ----------
Net Income $ 130,102 $ 120,337 $ 255,015 $ 239,078
========== ========== ========== ==========
Net Income per Common Share:
Basic $ 0.74 $ 0.71 $ 1.46 $ 1.39
Diluted 0.74 0.70 1.46 1.38
Average Common Shares Outstanding:
Basic 175,304 170,656 174,243 172,216
Diluted 176,293 172,282 175,245 173,861
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Summit Bancorp and Subsidiaries
Consolidated Statements of Shareholders' Equity
Unaudited
(In thousands)
Accum. Other Total
Common Retained ESOP Comprehensive Treasury Shareholders'
Stock Surplus Earnings Obligation Income (Loss) Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $142,106 $1,013,393 $1,728,135 $(3,394) $12,087 $(169,900) $2,722,427
Comprehensive income:
Net income -- -- 239,078 -- -- -- 239,078
Unrealized loss on securities arising
during the period (net of tax $27,350) -- -- -- -- (53,090) --
Less: Reclassification adjustment for gains
included in net income (net of tax $786) -- -- -- -- 1,525 --
--------
Net unrealized loss on securities arising
during the period (net of tax $26,564) (51,565) (51,565)
-----------
Total comprehensive income -- -- -- -- -- -- 187,513
Cash dividend declared on common stock -- -- (107,305) -- -- -- (107,305)
Employee stock plans (877 shares) (88) (48,531) -- -- -- 37,630 (10,989)
Treasury shares issued for
acquisitions (1,131 shares) -- 1,567 -- -- -- 47,079 48,646
Purchase of common stock (6,018 shares) -- -- -- -- -- (239,970) (239,970)
ESOP debt repayment -- -- -- 1,144 -- -- 1,144
-----------------------------------------------------------------------------------
Balance, June 30, 1999 $142,018 $966,429 $1,859,908 $(2,250) $(39,478) $(325,161) $2,601,466
===================================================================================
Balance, December 31, 1999 $141,977 $959,934 $1,948,985 $(1,250) $(85,841) $(161,625) $2,802,180
Comprehensive income:
Net income -- -- 255,015 -- -- -- 255,015
Unrealized loss on securities arising
during the period (net of tax $14,759) -- -- -- -- (28,648) --
Less: Reclassification adjustment for gains
included in net income (net of tax $968) -- -- -- -- 1,878 --
--------
Net unrealized loss on securities arising
during the period (net of tax $13,791) -- -- -- -- (26,770) -- (26,770)
---------
Total comprehensive income -- -- -- -- -- -- 228,245
Cash dividend declared on common stock -- -- (119,293) -- -- -- (119,293)
Shares issued for employee stock
plans (957 shares) (158) (20,757) -- -- -- 29,945 9,030
Treasury shares issued for
acquisitions (3,912 shares) -- (26,158) -- -- -- 129,903 103,745
Purchase of common stock (3,181 shares) -- -- -- -- -- (85,914) (85,914)
ESOP debt repayment -- -- -- 1,250 -- -- 1,250
-----------------------------------------------------------------------------------
Balance, June 30, 2000 $141,819 $913,019 $2,084,707 $ -- $(112,611) $(87,691) $2,939,243
===================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
Summit Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------------
Operating Activities 2000 1999
----------- -----------
<S> <C> <C>
Net income $ 255,015 $ 239,078
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 44,500 33,000
Depreciation, amortization and accretion, net 42,461 35,108
Gains on sales of securities
(2,846) (2,311)
Gains on sales of mortgages held for sale
(3,194) (10,756)
Gains on sales of other real estate owned
(1,738) (988)
Proceeds from the sales of other real estate owned 5,173
6,338
Proceeds from the sales of mortgages held for sale 173,143 463,476
Originations of mortgages held for sale
(198,822) (480,013)
Net increase in trading account securities
(6,436) (6,437)
Net change in other accrued and deferred income and expense
(44,383) (48,612)
----------- -----------
Net cash provided by operating activities 262,873 227,883
----------- -----------
Investing Activities
Purchases of securities held to maturity (760) (1,630,736)
Purchases of securities available for sale (1,461,748) (2,039,333)
Proceeds from maturities of securities held to maturity 614,493 1,273,983
Proceeds from maturities of securities available for sale 418,774 1,068,731
Proceeds from sales of securities available for sale 35,488 533,850
Net decrease in Federal funds sold, securities purchased under
agreements to resell and interest bearing deposits with banks 19,570 28,629
Net increase in loans (1,575,068) (330,514)
Purchases of premises and equipment, net (45,580) (39,799)
Purchase of corporate owned life insurance (192,376) --
----------- -----------
Net cash used in investing activities (2,187,207) (1,135,189)
----------- -----------
Financing Activities
Net increase in deposits 1,134,941 143,882
Net increase in short-term borrowings 1,303,532 544,724
Principal payments on long-term debt (813,748) (72,737)
Proceeds from the issuance of long-term debt 511,375 501,860
Dividends paid (115,181) (104,044)
Purchase of common stock (85,914) (239,970)
Proceeds from issuance of common stock under stock option plans 6,409 7,099
----------- -----------
Net cash provided by financing activities 1,941,414 780,814
----------- -----------
Increase (decrease) in cash and due from banks 17,080 (126,492)
Beginning cash balance of acquired entities 14,839 6,496
Cash and due from banks at beginning of period 1,160,577 1,129,859
----------- -----------
Cash and due from banks at end of period $ 1,192,496 $ 1,009,863
=========== ===========
Supplemental disclosure of cash flow information
Cash paid:
Interest payments $ 653,730 $ 529,238
Income tax payments 134,222 84,942
Noncash investing activities:
Net transfer of loans to other real estate owned 1,250 5,986
</TABLE>
4
<PAGE>
Summit Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1.) Basis of Presentation
The accompanying financial statements reflect, in the opinion of management, all
normal recurring adjustments necessary to present fairly the consolidated
financial position of Summit Bancorp and subsidiaries ("Summit Bancorp"), and
its consolidated results of operations, changes in shareholders' equity and
changes in cash flows. All significant intercompany accounts and transactions
have been eliminated in consolidation. In all material respects, the financial
statements presented comply with the current reporting requirements of
supervisory authorities. Certain prior period amounts have been reclassified to
conform to the financial statement presentation of 2000. For additional
information and disclosures required under generally accepted accounting
principles, reference is made to Summit Bancorp's 1999 Annual Report on Form
10-K.
2.) Acquisitions
On March 29, 2000, Summit Bancorp completed the acquisition of NMBT Corp.
("NMBT"). NMBT was headquartered in New Milford, Connecticut and operated ten
branches in western Connecticut with $430.0 million in assets. This acquisition
was accounted for as a purchase, with the issuance of 2.6 million shares of
treasury stock. The cost in excess of the fair value of net assets acquired
resulted in goodwill and other intangibles of $36.6 million which is being
amortized over a 20 year period.
On March 17, 2000, Summit Bancorp completed its acquisition of selected assets
of Patgo Insurance Agency, Inc., Patgo South, Inc., Patgo International, Inc.
and Crown Insurance Agency, Inc. These companies provide both property and
casualty insurance and group benefit services. This acquisition was accounted
for as a purchase with the cost in excess of the fair value of net assets
acquired resulting in goodwill and other intangibles of $4.3 million which is
being amortized over a 10 year period.
On February 29, 2000, Summit Bancorp completed its acquisition of Meeker Sharkey
Financial Group. Meeker Sharkey Financial Group offers an array of property and
casualty products, group health insurance benefits and retirement plan services.
This transaction was accounted for as a purchase with the issuance of 1.3
million shares of treasury stock. The cost in excess of the fair value of net
assets acquired resulted in goodwill and other intangibles of $24.1 million
which is being amortized over a 10 year period.
On August 1, 1999, Summit Bancorp completed the acquisition of Prime Bancorp
Inc. Prime Bancorp was headquartered in Fort Washington, Pennsylvania and
operated 27 branches in the greater Philadelphia area with $1.1 billion in
assets. This acquisition was accounted for as a purchase, with the issuance of
7.4 million shares of treasury stock. The cost in excess of the fair value of
net assets acquired resulted in goodwill and other intangibles of $220.5 million
which is being amortized over a 20 year period.
On March 31, 1999, Summit Bancorp completed the acquisition of New Canaan Bank
and Trust Company. New Canaan Bank and Trust Company was headquartered in New
Canaan, Connecticut and operated four branches with $182.0 million in assets.
This acquisition was accounted for as a purchase, with the issuance of 1.1
million shares of treasury stock. The cost in excess of the fair value of net
assets acquired resulted in goodwill and other intangibles of $35.1 million
which is being amortized over a 20 year period.
5
<PAGE>
3.) Net Income per Common Share
Basic net income per common share is calculated by dividing net income by the
weighted average common shares outstanding during the period. Diluted net income
per common share is computed similarly 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 share equivalents, principally stock options, were issued during
the reporting period.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $ 130,102 $ 120,337 $ 255,015 $ 239,078
=====================================================================================================================
Basic weighted-average common shares outstanding 175,304 170,656 174,243 172,216
Plus: Common stock equivalents 989 1,626 1,002 1,645
---------------------------------------------------------------------------------------------------------------------
Diluted weighted-average common shares outstanding 176,293 172,282 175,245 173,861
=====================================================================================================================
Net Income per Common Share:
Basic $ 0.74 $ 0.71 $ 1.46 $ 1.39
Diluted 0.74 0.70 1.46 1.38
=====================================================================================================================
</TABLE>
4.) Restructuring Charges
During the fourth quarter of 1999, a restructuring charge of $27.9 million
pretax, ($17.1 million, or $0.10 per diluted share after tax) was recorded in
conjunction with the realignment of key lines of business and lines of support.
The realignment eliminated approximately 260 positions. Employees affected by
the realignment were notified at the time of the restructure. The table below
displays the status of accrual reserves for business restructuring charges at
June 30, 2000. The majority of the restructuring charge is expected to be
utilized by year-end December 31, 2000.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Restructuring Charges
(In millions)
--------------------------------------------------------------------------------------------------------
Recorded Utilization Remaining
Type of cost Liability to date Liability
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Severance and benefits $ 26.1 $ 18.3 $ 7.8
Real estate and other 1.8 0.4 1.4
--------------------------------------------------------------------------------------------------------
Total $ 27.9 $ 18.7 $ 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
5.) Recent Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133." This statement delays the effective date of FASB Statement
No. 133 one year. SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
recognition of all derivative instruments as either assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. This statement is now effective for all fiscal years beginning after June
15, 2000, on a prospective basis. The adoption of SFAS No. 133 is not expected
to have a material impact on the financial position or results of operations of
Summit Bancorp.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
---------------------------------------------
Summit Bancorp is a bank holding company headquartered in Princeton, New Jersey.
Summit Bancorp owns bank subsidiaries in New Jersey, Pennsylvania, and
Connecticut and several active non-bank subsidiaries. Summit Bancorp's bank
subsidiaries provide a broad range of retail, insurance, commercial, and private
banking services as well as trust and investment services to individuals,
businesses, not-for-profit organizations, government entities, and other
financial institutions. These services are provided through an extensive branch
network, including supermarket branches and private banking facilities, as well
as through automated teller machines and the Internet.
FINANCIAL CONDITION
Total assets at June 30, 2000, were $39.0 billion, an increase of $2.6 billion,
or 7.2 percent, from year-end 1999. The growth came most notably from the loan
portfolios and was generally funded with increases in savings and time deposits
and other borrowed funds. The increase in total assets attributable to
acquisitions was approximately $430.0 million.
Total securities at June 30, 2000, were $11.3 billion, an increase of $467.3
million, or 4.3 percent, from year-end 1999. The growth in total securities due
to acquisitions was $101.8 million. Securities held to maturity, which are
carried at amortized historical cost, are investments for which there is a
positive intent and ability to hold to maturity. Securities held to maturity at
June 30, 2000, were $5.0 billion and were comprised of U.S. Government and
Federal agency securities totaling $3.3 billion, other securities, predominately
corporate collateralized mortgage obligations ("CMOs") totaling $1.6 billion,
and securities of state and political subdivisions totaling $103.2 million. Held
to maturity securities decreased $567.0 million, or 10.1 percent, from year-end
1999 due primarily to principal repayments and maturities of $614.5 million.
These funds were reinvested in securities available for sale. At June 30, 2000,
and December 31, 1999, net unrealized losses on securities held to maturity
amounted to $194.4 million and $209.3 million, respectively.
Securities available for sale are investments that may be sold in response to
changing market and interest rate conditions or for other business purposes.
Activity in this portfolio is initiated primarily to manage liquidity and
interest rate risk and to take advantage of certain market conditions. At June
30, 2000, securities available for sale amounted to $6.2 billion and were
predominately comprised of $4.6 billion of U.S. Government and Federal agency
securities and $1.3 billion of CMOs. Total available for sale securities
increased $1.0 billion, or 19.8 percent, from year-end 1999. The increase
resulted primarily from $1.5 billion in purchases partially offset by sales and
maturities of $454.3 million. These purchases were partially funded by the cash
flows from the securities held to maturity portfolio.
The loan portfolio, which represents Summit's largest asset, is a significant
source of both interest and fee income. Elements of the loan portfolio are
subject to differing levels of credit and interest rate risk. Summit's lending
strategy stresses portfolio diversification by product, geography, and industry.
At June 30, 2000, total loans amounted to $25.1 billion, an increase of $1.8
billion, or 7.8 percent, from year-end 1999. The growth in total loans due to
acquisitions was $269.3 million. The largest increases were in commercial and
consumer loans which grew $1.1 billion and $630.4 million respectively.
Additionally, residential mortgages grew $47.2 million and commercial mortgages
increased $15.5 million. The increase in commercial loans was primarily related
to loan growth in commercial and industrial, syndicated loans and the food,
media and large corporate portfolios. The increase in the consumer loan
portfolio was primarily attributed to home equity loan promotions and purchases
of home equity loans. Residential mortgages totaling $157 million were sold in
June 2000. Mortgage loans held for sale amounted to $51.1 million and $65.5
million for the periods ended June 30, 2000, and December 31, 1999,
respectively.
Other assets increased $218.8 million, or 55.6 percent, from year-end 1999. The
increase was primarily related to the purchase of $192.4 million in corporate
owned life insurance in June 2000.
Deposits, which include non-interest bearing demand deposits and
interest-bearing savings and time deposits, are a fundamental source of funding.
Summit offers a variety of products designed to attract and retain customers,
with the primary focus on building and expanding relationships. Total deposits
were $26.1 billion at June 30, 2000, an increase of $1.4 billion, or 5.8
percent, from December 31, 1999. Acquisitions during the period contributed
7
<PAGE>
$303.3 million to the increase. Savings and time deposits at $20.0 billion,
increased $1.4 billion, or 7.5 percent, from December 31, 1999. The growth came
most notably from retail certificates of deposit which increased $1.1 billion
from December 31, 1999, as a result of the introduction of several new
certificate of deposit products. In addition, Summit's cash management solution,
the Summit Navigator Account, increased $806.8 million, or 27.1 percent, from
year-end 1999. The Summit Navigator Account is a relationship sweep account that
combines banking, investment, and brokerage services into one account. These
increases more than offset the decline of $519.3 million in other deposit
products largely resulting from a shift the deposit mix. Demand deposits also
increased by $330.0 million, or 6.6 percent, from year-end 1999 to total $5.3
billion at June 30, 2000. The increase in demand deposits came mainly from
business and personal accounts. Partially offsetting these deposit increases was
a decline in commercial certificates of deposit $100,000 and over of $282.1
million, or 27.7 percent, compared to December 31, 1999, related to using
alternative funding sources to support balance sheet growth.
Other borrowed funds are mainly comprised of repurchase agreements, Federal
funds purchased, Federal Home Loan Bank borrowings ("FHLB"), and other
short-term borrowings. Other borrowed funds totaled $5.9 billion at June 30,
2000, an increase of $1.3 billion, or 28.1 percent, from December 31, 1999. The
increase in other borrowed funds is the result of asset growth and a change in
funding mix.
Total long-term debt was $3.6 billion at June 30, 2000, a decrease of $248.2
million, or 6.4 percent, from year-end 1999. The decrease was primarily due to a
shift in the funding mix.
Total shareholders' equity at June 30, 2000, was $2.9 billion, an increase of
$137.1 million, or 4.9 percent, from December 31, 1999. The increase was
primarily attributed to retained profits and the issuance of treasury stock for
acquisitions. Treasury stock at June 30, 2000, amounted to $87.7 million, a
reduction of $73.9 million, or 45.7 percent, compared to December 31, 1999, and
was comprised of 3,136,633 shares. The reduction in treasury stock was the
result of the issuance of shares for the purchase acquisitions of NMBT and
Meeker Sharkey Financial Group. Treasury shares on hand will be used for
acquisitions, employee benefit plans, and general corporate purposes. Included
in shareholders' equity at June 30, 2000, was accumulated other comprehensive
loss, net of tax, totaling $112.6 million, compared to a loss of $85.8 million
at year-end 1999. Accumulated other comprehensive loss is comprised principally
of unrealized gains and losses, net of tax, on securities available for sale.
The increase in accumulated other comprehensive loss was due to the decline in
the market value of Summit's fixed income securities caused by the rising rate
environment.
Summit Bancorp's capital ratios for June 30, 2000, compared to select prior
periods and regulatory requirements, are shown in the following table. Summit
Bancorp's bank subsidiaries met the well-capitalized requirements for each of
the periods presented. The decreases in the ratios at June 30, 2000, were
principally attributable to asset growth.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Minimum
June 30, Dec.31, June 30, Required Well
Selected Capital Ratios: 2000 1999 1999 Capital Capitalized
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity to assets 7.54 % 7.70 % 7.60 % -- % -- %
Leverage ratio 6.95 7.06 7.47 3.00 5.00
Tier I capital 9.03 9.46 9.97 4.00 6.00
Total risk-based 10.49 11.06 11.76 8.00 10.00
capital
---------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Non-performing Assets
Non-performing assets include non-performing loans and other real estate owned
("OREO") and are shown in the following table as of the dates indicated.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Non-performing Assets June 30, Dec. 31, June 30,
(In thousands) 2000 1999 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-performing loans:
Commercial and industrial $ 91,328 $ 78,303 $ 76,737
Commercial mortgage 21,846 18,480 11,764
Construction and development 2,085 3,538 6,324
---------------------------------------------------------------------------------------------------------
Non-performing loans 115,259 100,321 94,825
OREO, net 4,661 6,881 6,342
---------------------------------------------------------------------------------------------------------
Non-performing assets $119,920 $107,202 $101,167
---------------------------------------------------------------------------------------------------------
Loans, not included above, past due 90 days or more $ 46,607 $ 41,378 $ 37,674
---------------------------------------------------------------------------------------------------------
Non-performing loans to total loans 0.46% 0.43% 0.44%
Non-performing assets to total loans and OREO 0.48 0.46 0.47
---------------------------------------------------------------------------------------------------------
</TABLE>
Average non-performing loans were $103.4 million and $83.5 million for the six
months ended June 30, 2000, and June 30, 1999, respectively. Interest income
received on non-performing loans amounted to $0.6 million for the six months
ended June 30, 2000, compared to $1.2 million for the six months ended June 30,
1999.
Loans which are past due 90 days or more but are not included in non-performing
assets are primarily residential mortgage and consumer loans which are well
secured and in the process of collection.
Potential problem loans, which are excluded from non-performing assets, are
loans where information about possible credit problems of borrowers causes
management to have doubts as to the ability of such borrowers to comply with
loan repayment terms. These loans amounted to $46.7 million at June 30, 2000,
compared to $11.9 million and $64.5 million at December 31, 1999, and June 30,
1999, respectively.
Allowance for Loan Losses
The allowance for loan losses is a valuation reserve available for losses
incurred or inherent in the loan portfolio and other extensions of credit.
Credit losses arise primarily from the loan portfolio, but may also be derived
from other credit-related sources including commitments and other extensions of
credit, guarantees, and standby letters of credit. Additions are made to the
allowance through periodic provisions, which are charged to expense. All losses
of principal 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.
A process has been established to assess the appropriateness of the allowance
for loan losses and to identify the risks inherent in the loan portfolio. This
process consists of the identification of specific reserves for identified
problem loans, the calculation of general reserves, which includes a combination
of formula-driven allocations and minimum reserve levels by loan type and grade,
and the determination of the unallocated reserves.
Specific reserves are determined through assessment of the borrower's ability to
repay and the fair value of the underlying collateral, for collateral dependent
loans, for each non-performing loan. If the carrying value of a loan exceeds the
discounted expected cash flows or the value of the underlying collateral, the
excess is specifically reserved or charged off. The level of specific reserves
is generally the smallest component of the allowance for loan losses.
The calculation of the general reserve involves several steps. An historical
loss factor is applied to each loan and unused commitment by business segment
and loan grade. The historical loss factors are calculated using a trailing six
quarter loss migration analysis. Adjustments are then made to the historical
loss factors based on six quantitative objective elements (delinquency,
non-performing assets, watch lists, charge offs, concentrations of credit, and
9
<PAGE>
recoveries) and three subjective elements (economic conditions, the rating
assigned by the internal credit audit department, and other factors). This
methodology is applied to the commercial portfolio. The methodology for the
retail portfolio involves a six quarter loss migration analysis which may be
adjusted due to rising trends or charge offs. For the commercial loan
portfolios, the historical loss factor, inclusive of the adjustment, is then
compared to minimum reserve levels for each loan grade. The larger of the two
factors is used in the determination of the reserves. The reserves calculated
for the residential and consumer loans employ an historical six quarter
migration analysis.
The last component of the loan loss reserve is the unallocated reserve. The
unallocated reserve is based upon management's evaluation of the underlying
inherent risk in the loan portfolio. The analysis of the appropriate level of
reserves, in the aggregate, is based on the level of specific and general
reserves previously discussed and is also inclusive of: industry concentrations,
delinquency trends, economic trends, loan growth relative to the overall
allowance, the level of substandard assets, and the amount of allocated and
unallocated reserves relative to the total loan portfolio. The unallocated
portion of the allowance for loan losses, in excess of specific and general
reserves, was $134.1 million at June 30, 2000, compared to $119.8 million at
December 31, 1999.
The provision for loan losses for the second quarter of 2000 was $24.5 million,
a $8.0 million increase from the same period a year ago. The increase in the
provision for loan losses for the three months ended June 30, 2000, was
primarily attributed to loan growth and an increase in the level of charge offs.
The provision for loan losses is charged to expense to bring the allowance for
loan losses to a level deemed appropriate by management to cover the credit risk
inherent in the loan portfolio. The provision for loan losses may vary from
quarter to quarter due to loan growth, the level of charge offs, or an increase
in the inherent risk in the loan portfolio. The allowance as a percentage of
total loans was 1.34 percent at June 30, 2000, compared to 1.42 percent and 1.49
percent at December 31, 1999, and June 30, 1999, respectively.
The following tables show the transactions in the allowance for loan losses, by
loan category, for the three and six month periods ended June 30, 2000, and June
30, 1999, and selected loan quality ratios for the periods ended June 30, 2000,
December 31, 1999, and June 30, 1999.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Allowance for Loan Losses Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of period $332,755 $328,302 $328,828 $322,814
Allowance of acquired institutions -- -- 4,357 2,140
Provision for loan losses 24,500 16,500 44,500 33,000
----------------------------------------------------------------------------------------------------------------
357,255 344,802 377,685 357,954
----------------------------------------------------------------------------------------------------------------
Loans charged off:
Commercial and industrial 19,417 20,268 39,441 28,399
Construction and development -- -- -- 13
Commercial mortgage 235 1,070 258 2,272
Residential mortgage 895 322 1,979 2,948
Consumer 6,397 7,178 12,650 15,165
----------------------------------------------------------------------------------------------------------------
Total loans charged off 26,944 28,838 54,328 48,797
----------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial and industrial 2,637 2,348 7,344 5,865
Construction and development 38 452 38 847
Commercial mortgage 11 193 39 741
Residential mortgage 90 116 150 435
Consumer 1,764 2,627 3,923 4,655
----------------------------------------------------------------------------------------------------------------
Total recoveries 4,540 5,736 11,494 12,543
----------------------------------------------------------------------------------------------------------------
Net charge offs 22,404 23,102 42,834 36,254
----------------------------------------------------------------------------------------------------------------
Balance, end of period $334,851 $321,700 $334,851 $321,700
================================================================================================================
</TABLE>
10
<PAGE>
Selected Loan Quality Ratios
-------------------------------------------------------------------------------
June 30, Dec. 31, June 30,
2000 1999 1999
-------------------------------------------------------------------------------
Net charge offs to average loans:
Quarter-to-date 0.37 % 0.32 % 0.44 %
Year-to-date 0.36 0.61 0.34
Allowance for loan losses to:
Total loans at period end 1.34 % 1.42 % 1.49 %
Non-performing loans 290.60 327.78 339.26
Non-performing assets 279.23 306.74 317.99
-------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
<CAPTION>
Summit Bancorp and Subsidiaries
Consolidated Average Balance Sheets with Resultant Interest and Rates
Unaudited
(Tax-equivalent basis, dollars in thousands)
Three Months Ended
---------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
---------------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------------- -------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Federal funds sold and securities
purchased under agreements to resell $ 12,435 $197 6.37% $29,167 $350 4.81%
Interest-bearing deposits with banks 53,395 748 5.63 23,716 262 4.43
Securities:
Trading account 26,650 764 11.53 11,222 183 6.54
Available for sale 6,225,320 108,378 6.96 3,988,952 60,357 6.05
Held to maturity 5,202,509 82,525 6.35 6,551,577 101,871 6.22
------------- -------- --------- ----------- --------- --------
Total securities 11,454,479 191,667 6.69 10,551,751 162,411 6.16
------------- -------- --------- ----------- --------- --------
Loans, net of unearned discount:
Commercial 8,796,398 192,859 8.82 7,377,701 141,791 7.71
Commercial mortgage 3,195,807 64,462 8.07 2,895,640 58,054 8.02
Residential mortgage 5,937,077 107,466 7.24 5,536,378 98,631 7.13
Consumer 6,540,821 137,870 8.48 5,458,995 109,760 8.06
------------- -------- --------- ----------- --------- --------
Total loans 24,470,103 502,657 8.26 21,268,714 408,236 7.70
------------- -------- --------- ----------- --------- --------
Total interest-earning assets 35,990,412 695,269 7.77 31,873,348 571,259 7.19
------------- -------- --------- ----------- --------- --------
Non-interest earning assets:
Cash and due from banks 1,064,320 958,692
Allowance for loan losses (333,868) (330,913)
Other assets 1,573,712 1,175,609
------------- -----------
Total non-interest earning assets 2,304,164 1,803,388
------------- -----------
Total Assets $ 38,294,576 $ 33,676,736
============= ===========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Savings deposits $ 11,938,079 89,273 3.01 $ 11,021,772 71,216 2.59
Time deposits 7,795,202 106,834 5.51 6,948,494 86,131 4.97
Commercial certificates of
deposit $100,000 and over 831,695 12,365 5.98 797,238 9,460 4.76
------------- -------- --------- ----------- --------- --------
Total interest-bearing deposits 20,564,976 208,472 4.08 18,767,504 166,807 3.56
------------- -------- --------- ----------- --------- --------
Other borrowed funds 5,654,775 87,646 6.23 3,259,556 38,642 4.76
Long-term debt 3,676,231 53,063 5.77 3,975,757 54,671 5.50
------------- -------- --------- ----------- --------- --------
Total interest-bearing liabilities 29,895,982 349,181 4.70 26,002,817 260,120 4.01
------------- -------- --------- ----------- --------- --------
Non-interest bearing liabilities:
Demand deposits 4,992,286 4,520,254
Other liabilities 488,756 518,481
------------- -----------
Total non-interest bearing
liabilities 5,481,042 5,038,735
Shareholders' equity 2,917,552 2,635,184
------------- -----------
Total Liabilities and
Shareholders' Equity $ 38,294,576 $33,676,736
============= ===========
Net Interest Spread 346,088 3.07 % 311,139 3.18 %
========= ========
Tax-equivalent basis adjustment (2,206) (2,548)
-------- ---------
Net Interest Income $ 343,882 $ 308,591
======== =========
Net Interest Margin 3.87 % 3.92 %
========= ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Summit Bancorp and Subsidiaries
Consolidated Average Balance Sheets with Resultant Interest and Rates
Unaudited
(Tax-equivalent basis, dollars in thousands)
Six Months Ended
----------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
--------------------------------------- ------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- --------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Federal funds sold and securities
purchased under agreements
to resell $ 11,499 $ 331 5.79 % $ 19,959 $ 495 5.00 %
Interest-bearing deposits with banks 48,493 1,305 5.41 28,699 712 5.00
Securities:
Trading account 23,646 1,190 10.12 10,599 286 5.44
Available for sale 5,964,448 203,466 6.82 3,973,019 120,308 6.06
Held to maturity 5,326,216 168,806 6.34 6,389,949 199,458 6.24
----------- --------- -------- ----------- ---------- ---------
Total securities 11,314,310 373,462 6.60 10,373,567 320,052 6.17
----------- --------- -------- ----------- ---------- ---------
Loans, net of unearned discount:
Commercial 8,523,884 366,295 8.64 7,268,132 278,854 7.74
Commercial mortgage 3,174,450 127,888 8.06 2,885,058 115,567 8.01
Residential mortgage 5,842,370 210,832 7.22 5,626,686 200,478 7.13
Consumer 6,412,266 267,896 8.40 5,438,268 218,432 8.10
----------- --------- -------- ----------- ---------- ---------
Total loans 23,952,970 972,911 8.17 21,218,144 813,331 7.73
----------- --------- -------- ----------- ---------- ---------
Total interest-earning assets 35,327,272 1,348,009 7.67 31,640,369 1,134,590 7.23
----------- --------- -------- ----------- ---------- ---------
Non-interest earning assets:
Cash and due from banks 1,052,415 956,857
Allowance for loan losses (331,635) (328,133)
Other assets 1,529,430 1,149,459
----------- -----------
Total non-interest earning assets 2,250,210 1,778,183
----------- -----------
Total Assets $ 37,577,482 $ 33,418,552
=========== ===========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Savings deposits $ 11,799,439 172,984 2.95 $ 10,661,577 133,105 2.52
Time deposits 7,449,612 198,556 5.36 7,035,370 175,644 5.03
Commercial certificates of
deposit $100,000 and over 895,085 25,664 5.77 885,793 21,035 4.79
----------- --------- -------- ----------- ---------- ---------
Total interest-bearing deposits 20,144,136 397,204 3.97 18,582,740 329,784 3.58
----------- --------- -------- ----------- ---------- ---------
Other borrowed funds 5,372,636 159,997 5.99 3,335,296 80,129 4.84
Long-term debt 3,771,564 106,621 5.65 3,831,036 105,308 5.50
----------- --------- -------- ----------- ---------- ---------
Total interest-bearing liabilities 29,288,336 663,822 4.56 25,749,072 515,221 4.04
----------- --------- -------- ----------- ---------- ---------
Non-interest bearing liabilities:
Demand deposits 4,924,013 4,487,984
Other liabilities 489,890 498,354
----------- -----------
Total non-interest bearing liabilities 5,413,903 4,986,338
Shareholders' equity 2,875,243 2,683,142
----------- -----------
Total Liabilities and
Shareholders' Equity $ 37,577,482 $ 33,418,552
=========== ===========
Net Interest Spread 684,187 3.11 % 619,369 3.19 %
======== =========
Tax-equivalent basis adjustment (4,398) (5,434)
--------- ----------
Net Interest Income $ 679,789 $ 613,935
========= ==========
Net Interest Margin 3.89 % 3.95 %
======== =========
</TABLE>
13
<PAGE>
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 2000, was $130.1 million, or $0.74 per
basic share, compared to $120.3 million, or $0.71 per basic share, for the
second quarter of 1999. On a diluted per share basis, net income for the three
months ended June 30, 2000, was $0.74 per diluted share compared to $0.70 for
the same period in 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(In thousands) Three months ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial data:
Net income $ 130,102 $ 120,337 $ 255,015 $ 239,078
Per share-diluted 0.74 0.70 1.46 1.38
Return on average assets 1.37 % 1.43 % 1.36 % 1.44 %
Return on average equity 17.94 18.32 17.84 17.97
Efficiency ratio 52.02 51.20 52.00 50.88
--------------------------------------------------------------------------------------------------------------------
Cash-basis financial data*:
Net income $ 139,498 $ 126,597 $ 272,949 $ 251,000
Per share-diluted 0.79 0.73 1.56 1.44
Return on average tangible assets 1.49 % 1.52 % 1.48 % 1.53 %
Return on average tangible equity 23.60 21.87 23.32 21.24
Efficiency Ratio 49.86 49.61 49.89 49.36
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* Cash-basis financial data excludes the after tax impact of amortization of
goodwill and other intangibles.
Net Interest Income
Interest income on a tax-equivalent basis was $1.3 billion for the six months
ended June 30, 2000, an increase of $213.4 million, or 18.8 percent, compared to
a year ago. Interest-earnings assets averaged $35.3 billion, an increase of $3.7
billion, or 11.7 percent, compared to the prior year period. The growth in
interest-earning assets contributed $146.3 million to the increase in
tax-equivalent interest income while the increase in yield contributed $67.1
million. The rate earned on interest-earning assets increased 44 basis points to
7.67 percent for the six months ended June 30, 2000. The increase was the result
of a higher interest rate environment compared to last year as both the average
Prime rate and the average London Interbank Offering Rate ("LIBOR") were
significantly higher than the prior year.
Interest expense increased $148.6 million, or 28.8 percent, for the six months
ended June 30, 2000, compared to the same period a year ago. Interest-bearing
liabilities averaged $29.3 billion for the six months ended June 30, 2000, an
increase of $3.5 billion, or 13.8 percent, compared to the prior year. The
growth in interest-bearing liabilities contributed $82.3 million to the increase
in interest expense while the increase in rates paid on interest-bearing
liabilities contributed the remaining $66.3 million. The rate paid on
interest-bearing liabilities increased 52 basis points to 4.56 percent due to
the higher interest-rate environment and a shift to a more expensive deposit
mix.
Net interest income on a tax-equivalent basis was $684.2 million for the six
months ended June 30, 2000, an increase of $64.8 million, or 10.5 percent,
compared to the same period in 1999. The net interest spread percentage on a
tax-equivalent basis (the difference between the rate earned on average
interest-earning assets and the rate paid on average interest-bearing
liabilities) was 3.11 percent for the six months then ended, compared to 3.19
percent for the prior year period. Net interest margin (net interest income on a
tax-equivalent basis as a percentage of average interest-earning assets) was
3.89 percent for the six months ended June 30, 2000, compared to 3.95 percent
during the same period in 1999. The decline in net interest spread and margin
was primarily caused by rates on interest-bearing liabilities rising more
rapidly than yields on interest-earning assets.
14
<PAGE>
The rate/volume table below presents an analysis of the impact on interest
income and expense resulting from changes in average volumes and rates over the
periods. Changes that are not due to volume or rate variances have been
allocated proportionally to both, based on their relative absolute values.
<TABLE>
<CAPTION>
Rate/Volume Table Amount of Increase (Decrease)
------------------------------------------------------------------------------------
Three Months Ended June30, Six Months Ended June 30,
2000 versus 1999 2000 versus 1999
------------------------------------------------------------------------------------
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 $ 29.2 $ 21.9 $ 51.1 $ 52.3 $ 35.2 $ 87.5
Commercial mortgage 6.0 0.4 6.4 11.6 0.7 12.3
Residential mortgage 7.3 1.5 8.8 7.8 2.6 10.4
Consumer 22.5 5.6 28.1 41.2 8.2 49.4
----------------------------------------------------------------------------------------------------------------------------------
Total loans 65.0 29.4 94.4 112.9 46.7 159.6
Securities held to maturity (21.4) 2.1 (19.3) (33.8) 3.1 (30.7)
Securities available for sale 37.9 10.1 48.0 66.5 16.7 83.2
Other interest earning assets 0.4 0.5 0.9 0.7 0.6 1.3
----------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 81.9 42.1 124.0 146.3 67.1 213.4
----------------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits
Savings deposits 6.1 11.9 18.0 15.4 24.5 39.9
Time deposits 11.0 9.8 20.8 10.8 12.1 22.9
Commercial Certificates of Deposits>$100M 0.4 2.5 2.9 0.2 4.4 4.6
----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 17.5 24.2 41.7 26.4 41.0 67.4
Other borrowed funds 34.5 14.5 49.0 57.5 22.4 79.9
Long-term debt (4.2) 2.6 (1.6) (1.6) 2.9 1.3
----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 47.8 41.3 89.1 82.3 66.3 148.6
----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income (fully taxable equivalent) $ 34.1 $ 0.8 $ 34.9 $ 64.0 $ 0.8 $ 64.8
----------------------------------------------------------------------------------------------------------------------------------
Decrease in tax-equivalent adjustment 0.4 1.1
----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Interest Income $ 35.3 $ 65.9
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Non-interest Income
Non-interest income categories for the three and six month periods ended June
30, 2000, and 1999 are shown in the following table:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
(In millions) Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------------------------------------------------------
Percent Percent
2000 1999 Change 2000 1999 Change
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 31.9 $ 29.6 7.8 % $ 63.4 $ 59.6 6.3 %
Service and loan fee income 19.6 16.0 22.5 35.4 31.6 11.8
Insurance service fees 14.8 8.4 76.7 25.6 16.2 57.6
Trust income 13.7 12.8 6.6 27.5 24.8 10.9
Retail investment fees 10.8 10.6 2.0 23.5 20.8 13.4
Other 21.2 16.4 29.3 38.3 38.8 (1.1)
---------------------------------------------------------------------------------------------------------------------
Total non-interest operating income 112.0 93.8 19.4 213.7 191.8 11.4
Securities gains 2.8 2.1 31.9 2.8 2.3 23.2
---------------------------------------------------------------------------------------------------------------------
Total non-interest income $ 114.8 $ 95.9 19.6 % $ 216.5 $194.1 11.6 %
=====================================================================================================================
</TABLE>
Service charges on deposit accounts increased $2.3 million, or 7.8 percent, for
the three months ended June 30, 2000, compared with 1999 and increased $3.8
million, or 6.3 percent, for the six months then ended, compared with the same
period a year ago. This was primarily due to growth in demand deposits and
increased volume of insufficient fund fees. Partially offsetting these favorable
factors were lower minimum balance requirements on regular checking accounts,
savings accounts, and certificates of deposit resulting in lower monthly
maintenance fees. These lower minimum balance requirements were instituted in
April 1999.
Service and loan fee income increased $3.6 million, or 22.5 percent, for the
quarter ended June 30, 2000, compared with 1999, and increased $3.7 million, or
11.8 percent, for the six months ended, compared with the same period a year
ago. The increases were primarily due to increased volume of commercial loan and
credit card fees, partially offset by a decline in mortgage origination and
mortgage servicing income.
Insurance service fees increased $6.4 million, or 76.7 percent, for the quarter
ended June 30, 2000, compared to the same period a year ago and increased $9.4
million, or 57.6 percent, for the six months ended June 30, 2000, compared with
the same period a year ago. The increases were primarily due to the acquisition
of Meeker Sharkey Financial Group. In addition, fees from core insurance
business also experienced growth.
Trust income increased $0.8 million, or 6.6 percent, for the quarter ended June
30, 2000, compared with 1999 and increased $2.7 million, or 10.9 percent, for
the six months then ended, compared with the same period a year ago. This was
generally due to an increase in investment advisory fees, including advisory
fees from the Pillar Funds, Summit Bancorp's proprietary mutual funds.
Retail investment fees increased $0.2 million, or 2.0 percent, for the quarter
ended June 30, 2000, compared with 1999 and increased $2.8 million, or 13.4
percent, for the six months ended June 30, 2000, compared with the same period a
year ago. This growth was a result of increased brokerage fees resulting from
higher trading volumes, as well as increased fees from the sale of annuities.
Other income, which primarily consists of ATM fees, international fees, other
fees, and gains on sales of assets, increased $4.8 million, or 29.3 percent, for
the three months ended June 30, 2000, compared with 1999 and decreased $0.4
million, or 1.1 percent, for the six months ended June 30, 2000, compared with
the same period a year ago. The increase for the three months ended June 30,
2000 was attributable to the sale of $157.0 million in residential mortgages,
which generated a gain of $3.5 million. The decrease for the six month period
ended June 30, 2000, is primarily due to a net gain of $5.9 million from the
sale of a $33.0 million credit card portfolio, which occurred in the first
quarter of 1999.
16
<PAGE>
Non-interest Expense
Non-interest expense categories for the three and six month periods ended June
30, 2000, and 1999 are shown in the following table:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
(In millions) Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------------------------------------------------------------------------------
Percent Percent
2000 1999 Change 2000 1999 Change
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries $ 93.4 $ 82.6 13.1 % $ 181.4 $ 162.9 11.3 %
Pension and other employee benefits 32.3 29.1 10.8 62.6 59.1 5.8
Furniture and equipment 25.5 22.5 13.2 51.0 45.0 13.3
Occupancy, net 21.4 19.3 11.1 43.5 39.1 11.3
Amortization of goodwill and other 9.9 6.5 53.2 18.9 12.4 53.3
Communications 9.4 9.7 (3.0) 18.9 19.3 (2.0)
Advertising and Public Relations 6.2 5.9 4.5 12.3 11.5 7.7
Other 39.0 31.6 23.4 77.4 63.4 22.0
------------------------------------------------------------------------------------------------------------------------
Total non-interest expense $ 237.1 $ 207.2 14.4 % $ 466.0 $ 412.7 12.9 %
========================================================================================================================
</TABLE>
Salaries and benefits increased $14.0 million, or 12.5 percent, for the quarter
ended June 30, 2000, compared to the same quarter in 1999 and $21.9 million, or
9.9 percent for the six months ended June 30, 2000, compared with the same
period a year ago. In addition to the annual merit increases, salaries and
benefits rose approximately $7.6 million from acquisitions for the three months
ended June 30, 2000, and $13.0 million for the six-month period then ended.
Partially offsetting these increases was the benefit of the fourth quarter 1999
corporate realignment which resulted in a reduction of approximately 260
employees. The increase is primarily a result of acquisitions (NMBT Corp., Prime
Bancorp and Meeker Sharkey Financial Group) partially offset by the decline due
to the corporate realignment.
Furniture and equipment expenses increased $3.0 million, or 13.2 percent, for
the quarter ended June 30, 2000, compared with the same quarter in 1999 and $6.0
million, or 13.3 percent, for the six months ended June 30, 2000, compared with
the same period a year ago. This increase was primarily due to the recent bank
acquisitions and increased amortization expense relating to computer equipment
and software.
Occupancy expense increased $2.1 million, or 11.1 percent, for the quarter ended
June 30, 2000, compared with the same quarter in 1999 and $4.4 million, or 11.3
percent, for the six months ended June 30, 2000, compared with the same period a
year ago. The increase was largely a result of recent bank acquisitions.
Amortization of goodwill and intangibles increased $3.4 million, or 53.2
percent, for the three months ended June 30, 2000, compared to the same period a
year ago and $6.6 million, or 53.3 percent, for the six months ended June 30,
2000, compared with the same period a year ago. The increase was due to the
purchase acquisitions of Prime Bancorp, New Canaan Bank & Trust Company, Meeker
Sharkey Financial Group, and NMBT.
Other expenses increased $7.4 million, or 23.4 percent, for the three months
ended June 30, 2000, compared with the same quarter in 1999 and $14.0 million,
or 22.0 percent, for the six months ended June 30, 2000, compared with the same
period a year ago. This was a result of increased consultant fees, increased
second mortgage servicing fees resulting from home equity purchases, an increase
in commissions due to increased sales of insurance and retail investment
products, and an increase in charge offs. Also contributing to the increase were
higher employment agency fees due to a tight labor market and recent bank
acquisitions. Included in other expenses were legal and professional fees of
$10.7 million for the three month period ended June 30, 2000, compared to $9.0
million for the same quarter in 1999.
The effective income tax rate was 34.0 percent for the three months ended June
30, 2000, compared with 33.4 percent for the same quarter in 1999 and 33.9
percent for the six months ended June 30, 2000, compared with 34.0 percent for
the same period a year ago.
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<PAGE>
LINES OF BUSINESS
For management purposes, Summit Bancorp is segmented into the following lines of
business: Retail Banking, Corporate Banking and The Private Bank. Activities not
included in these lines are reflected in Other. The lines have been structured
according to the customer groups served. Financial performance of business lines
is monitored with an internal profitability measurement system. Line of business
information is based on management accounting practices that conform to and
support the current management structure and is not necessarily comparable with
similar information from any other financial institution. The profitability
measurement system uses internal management accounting policies that ensure
business line results reflect the underlying economics of each business line and
are compiled on a consistent basis.
Net income includes revenues and expenses directly associated with each line in
addition to allocations of revenue earned and expenses incurred by support units
such as operations and technology. Centrally provided corporate services and
general overhead are allocated on a per-unit cost basis or on an "ability to
pay" basis related to each particular business line's contribution to income. A
matched maturity funds transfer pricing methodology is employed to assign a cost
of funds to the earning assets, as well as a value of funds to the liabilities
of each business line. The provision for loan losses is allocated based on
management's assessment of the historical net charge off ratio for each business
segment. Income taxes are allocated based upon the consolidated effective tax
rates, after consideration of certain permanent differences that may be
allocated to a specific line of business.
The following tables summarize results by lines of business as if operated on a
stand-alone basis for the three months and six months ended June 30, 2000 and
1999. Certain prior period information has been restated to conform with the
current period presentation.
<TABLE>
<CAPTION>
Results of Operations
Quarter Ended June 30, Retail Banking Corporate Banking The Private Bank Other Consolidated
---------------------------------------------------------------------------------------------
(In millions) 2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $213 $203 $84 $68 $17 $15 $30 $23 $344 $309
Provision for loan losses 7 9 18 7 -- 1 -- -- 25 17
---------------------------------------------------------------------------------------------
Net interest income
after provision for
loan losses 206 194 66 61 17 14 30 23 319 292
Non-interest income 54 50 18 12 40 32 3 2 115 96
Non-interest expense 145 134 42 34 40 34 10 5 237 207
---------------------------------------------------------------------------------------------
Income before taxes 115 110 42 39 17 12 23 20 197 181
Federal and state income 39 37 14 12 6 4 8 8 67 61
---------------------------------------------------------------------------------------------
Net income $76 $73 $28 $27 $11 $8 $15 $12 $130 $120
=============================================================================================
Selected Average Balances:
Securities $ -- $55 $19 $-- $25 $11 $11,410 $10,486 $11,454 $10,552
Loans 12,942 11,596 9,990 8,384 1,538 1,272 -- 17 24,470 21,269
Assets 13,312 11,963 9,997 8,362 1,674 1,364 13,312 11,988 38,295 33,677
Deposits 22,680 20,668 1,133 1,007 900 770 844 843 25,557 23,288
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Six Months Ended June 30, Retail Banking Corporate Banking The Private Bank Other Consolidated
----------------------------------------------------------------------------------------------
(In millions) 2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $424 $402 $161 $135 $32 $29 $63 $48 $680 $614
Provision for loan losses 15 19 29 13 1 1 -- -- 45 33
----------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 409 383 132 122 31 28 63 48 635 581
Non-interest income 103 105 34 24 77 62 3 3 217 194
Non-interest expense 285 267 85 68 75 65 21 13 466 413
----------------------------------------------------------------------------------------------
Income before taxes 227 221 81 78 33 25 45 38 386 362
Federal and state income taxes 78 76 26 25 11 8 16 14 131 123
----------------------------------------------------------------------------------------------
Net income $149 $145 $55 $53 $22 $17 $29 $24 $255 $239
==============================================================================================
Selected Average Balances:
Securities $-- $55 $15 $-- $20 $11 $11,339 $10,308 $11,374 $10,374
Loans 12,702 11,708 9,745 8,246 1,506 1,253 -- 11 23,953 21,218
Assets 13,073 12,076 9,748 8,227 1,626 1,343 13,130 11,773 37,577 33,419
Deposits 22,182 20,331 1,139 1,005 868 753 879 982 25,068 23,071
</TABLE>
Retail Banking
Retail Banking sells and delivers retail banking products and services to
individuals and small businesses through more than 400 traditional and
approximately 80 supermarket branches in New Jersey, eastern Pennsylvania, and
Connecticut. In addition to traditional banking services, Retail Banking offers
its customers an expanding array of 24-hour banking services through
approximately 600 automated teller machines, telephone banking centers, and the
Internet. It also includes a broad selection of small business and consumer
loans, deposit products, and a complete range of full-service mortgage banking
activities.
Average loans for the three months ended June 30, 2000, increased $1.3 billion,
or 11.6 percent, to $12.9 billion from the same period in 1999, primarily due to
home equity loan purchases and increases in the utilization of home equity
credit lines. Total average deposits for the second quarter of 2000 increased to
$22.7 billion, up $2.0 billion from a year ago. This increase was attributable
to the growth in the Summit Navigator Account and retail certificates of
deposit. Net interest income for the quarter increased $10 million, or 4.9
percent, over last year, primarily due to loan growth. The increase in
non-interest income of $4 million is primarily attributable to loan and deposit
fee income. Non-interest expenses for the quarter increased $11 million, or 8.2
percent, over last year, primary due to salaries, other expenses, and
acquisitions. Net income for the quarter was $76 million, an increase of $3
million, or 4.1 percent, from the prior year.
Corporate Banking
Corporate Banking 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. Demand and
interest-bearing deposit accounts and services are provided through the branch
network.
Total average loans for the quarter ended June 30, 2000, were $10.0 billion, an
increase of $1.6 billion, or 19.2 percent, over the same period in 1999
primarily in commercial and industrial, syndicated loans and the food, media and
large corporate portfolios. Net interest income for the second quarter of 2000
increased $16 million, or 23.5 percent, from 1999, driven primarily by the
increase in average loans. Partially offsetting the loan increase was an $11
million increase in the provision for loan losses. This was attributed to the
increase in the level of charge offs and loan growth. Non-interest income for
the quarter ended June 30, 2000, increased $6 million, or 50.0 percent, from the
prior year due to an increase in loan and deposit fee income as well as
additional capital market fee
19
<PAGE>
income. Non-interest expense increased $8 million over the prior year to $42
million due to higher salaries and benefits expense. Net income was $28 million
for the three months ended June 30, 2000, an increase of $1 million, or 3.7
percent, from the same period a year ago.
The Private Bank
The Private Bank provides personal credit services, professional services for
lawyers and accountants as well as their firms, and business loans and lines of
credit. This segment also includes investment services that provide a full range
of trust, administrative, and custodial services to individuals and
institutions, in addition to investment products and discount brokerage. In
addition, the line markets a wide variety of insurance products for the personal
and corporate marketplace.
Net interest income for the quarter increased $3 million, or 37.5 percent, from
1999 primarily due to higher loan volumes. Non-interest income increased $8
million, or 25.0 percent, from the same period a year ago. This was primarily
due to a $5.7 million, or 68.2 percent, increase in insurance service fees, a
$0.9 million, or 8.4 percent, increase in retail investment fees, and a $0.8
million, or 6.6 percent, increase in trust income. The acquisition of the Meeker
Sharkey Financial Group contributed $5.7 million of insurance income for the
quarter. In addition, the growth in retail investment fees were primarily due to
increased brokerage fees resulting from higher trading volumes as well as
increased fees from sales of annuity products. The $6 million, or 17.7 percent,
increase in expenses is due to increases in salaries and commissions related to
the increased sale of trust, retail investment, and insurance products. Net
income for the quarter was $11 million, up $3 million, or 37.5 percent, from a
year ago.
Other
Other includes the treasury function which is responsible for managing interest
rate risk and the investment portfolios. In addition, certain revenues and
expenses not considered allocable to a line of business are reflected in this
area.
Net interest income increased $7 million, or 30.4 percent, from 1999, primarily
due to growth in the securities portfolio. Securities averaged $11.4 billion for
the second quarter of 2000, up $0.9 million, or 8.8 percent, from the prior
year. Net income was up for the quarter $3 million, or 25.0 percent, to $15
million when compared to the same quarter the prior year.
LIQUIDITY
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. Summit Bank, NJ
and Summit Bank, PA executed a distribution agreement in November 1998,
providing for the possible issuance of senior and subordinated notes to a
maximum of $3.75 billion on an underwritten or agency basis. Through June 30,
2000, no funds have been drawn from this source.
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 that can be assessed to the bank subsidiaries is subject to certain
regulatory restrictions. Lines of credit are available at the Parent Corporation
to support commercial paper borrowings and for general corporate purposes.
Interest on these lines of credit approximates the prime lending rate at the
time of borrowing. Unused lines amounted to $33.0 million at June 30, 2000.
During 1999, a shelf registration statement providing for the possible issuance,
from time to time, of senior and subordinated debt securities and preferred
stock to a maximum of $1.0 billion was declared effective by the Securities and
Exchange Commission. Terms of the securities will be set at the time of
issuance. As of June 30, 2000, none of this debt or preferred stock had been
issued.
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.
20
<PAGE>
The Consolidated Statements of Cash Flows present the change in cash and due
from banks from operating, investing and financing activities. During the first
six months of 2000, net cash provided by operating activities totaled $262.9
million. Contributing to net cash provided by operating activities were the
results of operations, plus noncash expenses, and proceeds from the sales of
mortgages held for sale. Partially offsetting the contributions to operating
cash were funds used to originate mortgage loans held for sale and noncash
revenues.
Net cash used in investing activities totaled $2.2 billion. For the six months
ended June 30, 2000, net cash used in transactions involving the investment
portfolios totaled $0.4 million, while the loan portfolio used net cash of $1.6
million.
Scheduled maturities and anticipated principal repayments of the available for
sale and held to maturity securities portfolios will approximate $886.1 million
throughout the balance of 2000. In addition, all or part of the remaining
securities available for sale could be sold, providing another source of
liquidity. These sources can also be used to meet the funding needs during
periods of loan growth.
Net cash provided by financing activities totaled $1.9 billion. During the first
six months of 2000, other borrowed funds and long-term debt increased $1.0
billion and deposits increased $1.1 billion. These increases were partially
offset by the payment of common stock dividends and the purchase of Summit
Bancorp's common stock.
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 our ability to achieve these goals.
Factors that may cause actual results to differ from those results expressed or
implied include, but are not limited to, the interest rate environment and the
overall economy, the ability of customers to repay their obligations, the
adequacy of the allowance for loan losses, including realizable collateral
valuations, charge offs and recoveries, the progress of integrating acquired
financial institutions, competition and technological changes. Although
management has taken certain steps to mitigate any negative effect of the above
mentioned items, significant unfavorable changes could severely impact the
assumptions used and have an adverse affect on profitability.
21
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Due to the nature of Summit Bancorp's business, market risk is primarily limited
to its exposure to interest rate risk, which 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 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.
Interest rate risk is 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 to 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 flows 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
the timing, magnitude, and frequency of interest rate changes, changes in cash
flow patterns and market conditions, as well as changes in management's
strategies.
Based on the results of the interest simulation model, as of June 30, 2000,
Summit Bancorp would expect a decrease of approximately $81.3 million in net
interest income and an increase of approximately $71.1 million in net interest
income if interest rates increase or decrease by 100 basis points, respectively,
from current interest rates in an immediate and parallel shock over a
twelve-month period. At December 31, 1999, Summit Bancorp expected a decrease of
$66.5 million in net interest income and an increase of $74.2 million in net
interest income if interest rates increased or decreased by 100 basis points,
respectively. The interest simulation model does not include asset and liability
strategies that could be deployed to mitigate the impact of changes in the
interest rate environment.
Interest rate risk management efforts also involve the use of certain derivative
financial instruments, primarily interest rate swaps, for the purpose of
stabilizing net interest income in a changing interest rate environment. At June
30, 2000, the notional values of these instruments totaled $205.0 million. These
derivatives resulted in a reduction in net interest income of $0.4 million for
the first six months of 2000. The cost to terminate these contracts at June 30,
2000, would have been $0.6 million.
Summit Bancorp has limited risks associated with foreign currencies, commodities
or other marketable instruments.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Based upon advice of Summit's attorneys, 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.
5. John Baker, Margaret Baker, Elaine Coopersmith, and Arnold Coopersmith on
behalf of themselves and all others similarly situated v. Summit Bank, United
States District Court for the Eastern District of Pennsylvania, Civil Action No.
CV-2010, filed April 21, 1999.
Last reported on Form 10-K for the period ended December 31, 1999. Plaintiffs
have furnished expert reports addressing the issues of Summit Bank PA, a
subsidiary of Summit Bancorp, liability and damages allegedly sustained by the
class members. Plaintiff's damages expert has opined that the loss allegedly
sustained by the class is $32.5 million, including principal and interest.
Summit Bank PA is vigorously defending this case and has retained its own
experts to address the plaintiff's expert reports.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(27) Summit Bancorp. Financial Data Schedule - June 30, 2000.
(b) Reports on Form 8-K
Not applicable.
23
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT BANCORP
Registrant
DATE: August 14, 2000 by: /s/ PAUL V. STAHLIN
PAUL V. STAHLIN
Senior Vice President, Comptroller
and Principal Accounting Officer
(Duly Authorized Officer)
24
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(27) Summit Bancorp. Financial Data Schedule - June 30, 2000.
25
