SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1995
Commission file number 0-8026
__________
THE SUMMIT BANCORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2007124
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Chatham, New Jersey 07928
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 701-2666
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 .
Number of shares of Common Stock outstanding as of June 30, 1995: 33,719,524
<PAGE> 2
INDEX - FORM 10-Q
PART I FINANCIAL INFORMATION Page
Item 1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Income. . . . . . . . . . . . . . . 2
Consolidated Statement of Stockholders' Equity. . . . . . . . 3
Consolidated Statement of Cash Flows. . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . . . . . 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 6
PART II OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 2 Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 14
Item 3 Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 14
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . 14
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE> 3
PART I. FINANCIAL INFORMATION
The Summit Bancorporation and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
________ ___________
(In Thousands)
<S> <C> <C>
Assets
Cash and Due from Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285,529 $ 261,665
Federal Funds Sold and Other Short-Term Investments. . . . . . . . . . . . . . . . . . . . 58,881 8,208
Investment Securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,309 15,689
U.S. Government Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581,686 390,695
State and Municipal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,631 47,919
Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,364 253,696
--------- ---------
Total Investment Securities (Market Value of $916,748 and $669,154) . . . . . . 915,990 707,999
Securities Available for Sale:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 96,404
U.S. Government Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505,352 615,301
State and Municipal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,561 -
Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,662 211,709
--------- ---------
Total Securities Available for Sale . . . . . . . . . . . . . . . . . . . . . . 700,575 923,414
Trading Account Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,740 1,357
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,454,536 3,448,605
Less: Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,386 91,169
--------- ---------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,363,150 3,357,436
Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,585 45,034
Other Real Estate Owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,388 15,830
Accrued Interest Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,005 29,600
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,500 116,922
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,512,343 $5,467,465
========= =========
Liabilities and Stockholders' Equity
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 780,451 $ 781,244
Savings and NOW Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,507,534 1,620,081
Money Market Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 810,914 770,987
Certificates of Deposits of $100,000 and Over. . . . . . . . . . . . . . . . . . . . . 244,364 223,326
Other Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,153,930 1,013,680
--------- ---------
Total Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,497,193 4,409,318
Federal Funds Purchased and Other Short-Term Borrowings. . . . . . . . . . . . . . . . . . 172,090 231,028
Accrued Expenses and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 58,569 56,786
<PAGE> 4
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317,187 338,763
--------- ---------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,045,039 5,035,895
Stockholders' Equity:
Preferred Stock, No Par Value, Authorized 12,000 Shares
Cumulative Adjustable Rate
Issued and Outstanding 504 and 800 Shares. . . . . . . . . . . . . . . . . . . . . . 12,612 20,000
Common Stock, No Par Value, Authorized 50,000 Shares
Issued 33,804 and Issued and Outstanding 33,439 Shares . . . . . . . . . . . . . . . 49,873 49,320
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,490 305,075
Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,223 72,215
Common Stock in Treasury, at Cost, 84 Shares . . . . . . . . . . . . . . . . . . . . . (1,632) -
Net Unrealized Gains (Losses) on Securities Available for Sale . . . . . . . . . . . . 738 (15,040)
--------- ---------
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . 467,304 431,570
--------- ---------
Total Liabilities and Stockholders' Equity. . . . . . . . . . . . . . . . . . . $5,512,343 $5,467,465
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE> 5
The Summit Bancorporation and Subsidiaries
Consolidated Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
------ ------ ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans . . . . . . . . . . . . . . . . . . . . . $72,271 $58,232 $142,791 $114,842
Interest and Dividends on Investment Securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,725 12,408 25,505 23,619
Tax-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . 462 683 1,000 1,384
Interest and Dividends on Securities Available for Sale:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,794 11,108 22,795 19,061
Tax-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . 818 325 1,035 776
Interest on Trading Account Securities . . . . . . . . . . . . . . . 12 20 23 43
Interest on Federal Funds Sold and
Other Short-Term Investments . . . . . . . . . . . . . . . . . . . 1,874 478 2,450 2,509
------ ------ ------- -------
Total Interest Income. . . . . . . . . . . . . . . . . . . . 99,956 83,254 195,599 162,234
Interest Expense:
Interest on Deposits . . . . . . . . . . . . . . . . . . . . . . . . 37,773 24,745 70,529 49,296
Interest on Federal Funds Purchased and
Other Short-Term Borrowings. . . . . . . . . . . . . . . . . . . . 2,966 2,131 5,909 3,292
Interest on Long-Term Debt . . . . . . . . . . . . . . . . . . . . . 5,232 3,865 10,479 7,618
------ ------ ------- -------
Total Interest Expense . . . . . . . . . . . . . . . . . . . 45,971 30,741 86,917 60,206
------ ------ ------- -------
Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . 53,985 52,513 108,682 102,028
Provision for Loan Losses. . . . . . . . . . . . . . . . . . . . . . 1,200 2,550 2,400 5,100
------ ------ ------- -------
Net Interest Income After Provision for Loan Losses. . . . . . . . . 52,785 49,963 106,282 96,928
Noninterest Income:
Trust Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,940 2,701 5,740 5,701
Service Fees on Deposit Accounts . . . . . . . . . . . . . . . . . . 5,046 4,550 10,122 8,581
Securities Gains . . . . . . . . . . . . . . . . . . . . . . . . . . 787 38 821 180
Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,075 5,605 7,395 13,766
------ ------ ------- -------
Total Noninterest Income . . . . . . . . . . . . . . . . . . 12,848 12,894 24,078 28,228
------ ------ ------- -------
Noninterest Expense:
Salaries and Employee Benefits . . . . . . . . . . . . . . . . . . . 20,229 22,111 40,388 44,746
Net Occupancy Expense. . . . . . . . . . . . . . . . . . . . . . . . 4,423 4,800 8,786 9,831
Furniture and Equipment Expense. . . . . . . . . . . . . . . . . . . 2,449 2,401 4,729 4,571
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,982 13,299 21,879 26,118
------ ------ ------- -------
Total Noninterest Expense. . . . . . . . . . . . . . . . . . 38,083 42,611 75,782 85,266
------ ------ ------- -------
Income Before Income Taxes . . . . . . . . . . . . . . . . . . . . . 27,550 20,246 54,578 39,890
Applicable Income Tax Expense. . . . . . . . . . . . . . . . . . . . 9,616 6,778 19,364 13,567
------ ------ ------- -------
<PAGE> 6
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,934 $13,468 $ 35,214 $ 26,323
====== ====== ======= =======
Net Income Available to Common Stockholders. . . . . . . . . . . . . $17,745 $13,168 $ 34,725 $ 25,723
====== ====== ======= =======
Net Income Per Common Share. . . . . . . . . . . . . . . . . . . . . $.52 $.40 $1.03 $.78
Cash Dividends Declared Per Common Share . . . . . . . . . . . . . . .21 .19 .42 .38
Weighted Average Shares Outstanding. . . . . . . . . . . . . . . . . 33,651 32,987 33,584 32,932
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 7
The Summit Bancorporation and Subsidiaries
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Beginning Balance. . . . . . . . . . . . . . . . . . . . . . . . . $447,413 $448,731 $431,570 $439,360
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,934 13,468 35,214 26,323
Common Stock Issued Under:
Dividend Reinvestment and Stock Purchase Plan. . . . . . . . . 3,067 1,202 5,014 2,306
Stock Incentive Plans. . . . . . . . . . . . . . . . . . . . . 1,078 763 1,954 1,371
Cash Dividends Declared:
Adjustable Rate Preferred Stock. . . . . . . . . . . . . . . . (189) (300) (489) (600)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . (7,083) (5,318) (14,121) (10,620)
Change in Net Unrealized Gains (Losses)
on Securities Available for Sale . . . . . . . . . . . . . . . . 6,716 305 15,778 (789)
Purchase of Treasury Stock . . . . . . . . . . . . . . . . . . . . (1,632) - (1,632) -
Repurchase of Preferred Stock. . . . . . . . . . . . . . . . . . . - - (5,984) -
Acquisition of Lancaster Financial Ltd., Inc.. . . . . . . . . . . - - - 2,795
Adjustment for the Pooling of a Company with
a Different Fiscal Year-End. . . . . . . . . . . . . . . . . . . - - - (1,295)
------- ------- ------- -------
Balance, June 30,. . . . . . . . . . . . . . . . . . . . . . . . . $467,304 $458,851 $467,304 $458,851
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 8
The Summit Bancorporation and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------
1995 1994 1995 1994
------- ------- ------- -------
(In Thousands)
<C> <C> <C> <C> <C>
Operating Activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,934 $ 13,468 $ 35,214 $ 26,323
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation, Amortization and Accretion . . . . . . . . . . . 2,631 1,862 5,252 2,424
Provision for Loan Losses. . . . . . . . . . . . . . . . . . . 1,200 2,550 2,400 5,100
Securities Gains . . . . . . . . . . . . . . . . . . . . . . . (787) (38) (821) (180)
(Increase) Decrease in Trading Account Securities. . . . . . . (879) 890 (383) 370
Gain on Sale of Loans. . . . . . . . . . . . . . . . . . . . . (800) (373) (1,167) (1,995)
Net (Increase) Decrease in Loans Originated for Sale . . . . . (9,170) 20,727 (17,736) 80,217
Increase in Accrued Interest Receivable. . . . . . . . . . . . (6,349) (3,753) (2,405) (1,935)
(Decrease) Increase in Accrued Interest Payable. . . . . . . . (611) (249) 1,581 4
Decrease in Other Real Estate Owned. . . . . . . . . . . . . . 3,635 4,743 4,601 4,978
Decrease (Increase) in Other Assets. . . . . . . . . . . . . . 11,964 5,008 9,720 (17,288)
(Decrease) Increase in Accrued Expenses and
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . (7,232) (8,495) 202 (5,244)
------- ------- ------- -------
Net Cash Provided by Operating Activities. . . . . . . . . 11,536 36,340 36,458 92,774
Investing Activities:
Net (Increase) Decrease in Loans Made to Customers . . . . . . . . (6,870) (173,053) 7,630 (181,904)
Purchases of Investment Securities . . . . . . . . . . . . . . . . (39,719) (97,473) (293,385) (362,531)
Maturities of Investment Securities. . . . . . . . . . . . . . . . 51,021 127,162 84,944 239,286
Proceeds from Sales of Loan Securitization . . . . . . . . . . . . - 7,218 - 35,334
Purchases of Securities Available for Sale . . . . . . . . . . . . (44,348) (315,375) (119,042) (612,890)
Maturities of Securities Available for Sale. . . . . . . . . . . . 34,175 289,331 50,996 440,678
Proceeds from Sales of Securities Available for Sale . . . . . . . 21,789 308 318,491 81,306
Purchases of Premises and Equipment. . . . . . . . . . . . . . . . (1,823) (1,279) (3,544) (5,225)
Decrease (Increase) in Short-Term Investments. . . . . . . . . . . 49,054 (56,516) (50,673) 150,840
------- ------- ------- -------
Net Cash Provided (Used) by Investing Activities . . . . . 63,279 (219,677) (4,583) (215,106)
------- ------- ------- -------
Financing Activities:
Increase in Deposits . . . . . . . . . . . . . . . . . . . . . . . 21,230 38,149 87,875 8,039
(Decrease) Increase in Federal Funds Purchased . . . . . . . . . . (40,816) 213,751 (58,938) 176,157
Long-Term Debt Issued. . . . . . . . . . . . . . . . . . . . . . . 10,285 147,796 74,925 330,907
Long-Term Debt Matured or Repurchased . . . . . . . . . . . . . . (714) (162,278) (96,615) (307,574)
Adjustment Related to Acquisition . . . . . . . . . . . . . . . . - - - 2,795
Adjustment for Pooling of Interest Accounting. . . . . . . . . . . - - - (2,177)
Cash Dividends Paid. . . . . . . . . . . . . . . . . . . . . . . . (7,272) (5,618) (14,610) (11,220)
Common Stock Issued. . . . . . . . . . . . . . . . . . . . . . . . 4,145 1,965 6,968 3,677
Purchase of Treasury Stock . . . . . . . . . . . . . . . . . . . . (1,632) - (1,632) -
Repurchase of Preferred Stock. . . . . . . . . . . . . . . . . . . - - (5,984) -
------- ------- ------- -------
Net Cash (Used) Provided by Financing Activities . . . . . (14,774) 233,765 (8,011) 200,604
------- ------- ------- -------
Net Increase in Cash and Due From Banks. . . . . . . . . . . . . . 60,041 50,428 23,864 78,272
<PAGE> 9
Cash and Due from Banks at Beginning of Period . . . . . . . . . . 225,488 226,323 261,665 198,479
------- ------- ------- -------
Cash and Due from Banks at End of Period . . . . . . . . . . . . . $285,529 $276,751 $285,529 $276,751
======= ======= ======= =======
Supplemental Disclosures:
Interest Paid. . . . . . . . . . . . . . . . . . . . . . . . . . . $46,582 $30,550 $85,336 $65,559
Income Taxes Paid. . . . . . . . . . . . . . . . . . . . . . . . . 13,348 11,660 13,530 12,166
Loans Transferred to Other Real Estate Owned . . . . . . . . . . . 1,219 446 3,159 2,399
Mortgage Loans Swapped Into
Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . - 7,087 - 35,233
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 10
The Summit Bancorporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The financial statements include the accounts of The Summit Bancorporation and
its subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated in consolidation. In the opinion of the
Company, all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair statement of the results of the operations for the
interim periods have been reflected herein.
2. Allowance for Loan Losses
The allowance for loan losses is increased by provisions charged to expense
and reduced by charge-offs, net of recoveries. The provision for loan losses
is based on management's evaluation of the adequacy of the allowance for loan
losses. This evaluation encompasses consideration of past loan loss
experience, changes in the composition and volume of the credit portfolio, the
level and composition of nonperforming loans, the condition of industries
experiencing particular financial pressures, the relationship of the current
level of the allowance to the credit portfolio and to nonperforming assets,
and economic conditions. This evaluation is inherently subjective as it
requires material estimates including the amounts and timing of future cash
flows expected to be received on impaired loans that may vary significantly.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for the
Impairment of a Loan" and its subsequent amendment, SFAS No. 118, "Accounting
by Creditors for the Impairment of a Loan - Income Recognition and
Disclosures." Adoption of SFAS No. 114, as amended, prescribes the
recognition criteria for loan impairment and the measurement methods for
certain impaired loans and loans whose terms are modified in troubled debt
restructurings and amends SFAS No. 5, "Accounting for Contingencies," and SFAS
No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings."
SFAS No. 114, as amended, addresses the accounting for impaired loans and
specifies how allowances for credit losses related to these impaired loans
should be determined. SFAS No. 114 sets forth measurement methods for
estimating the portion of total loans attributable to impaired loans. It does
not address the overall adequacy of the allowance for loan losses, but focuses
instead on the allowance for estimated credit losses on impaired loans. It is
the Company's responsibility to ensure that the overall allowance for loan
losses is adequate to cover all estimated credit losses in the loan portfolio.
At June 30, 1995, impaired loans totaled $31.0 million (representing total
nonaccrual loans) and the related allowance for loan losses was $1.7 million.
Since the Company sufficiently evaluates the adequacy of the allowance for
loan losses, the impact of adopting SFAS No. 114, as amended, did not have an
effect on the amount of the allowance for loan losses or the existing income
recognition and charge-off policies for nonperforming loans.
3. Earnings Per Common Share
Earnings per common share is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding.
Shares issuable under the Stock Incentive Plan have not been included in the
calculation of earnings per share since their effect is not material.
<PAGE> 11
4. Recent Accounting Pronouncement
On May 12, 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 122, "Accounting for Mortgage Servicing Rights." This Statement requires
the recognition of mortgage servicing rights as an asset when a mortgage loan
is sold or securitized and servicing retained. Also, the Statement requires
enterprises to measure the impairment of the servicing rights based on the
difference between the carrying amount of the servicing rights and their
current value. SFAS No. 122 is to be applied prospectively in fiscal years
beginning after December 15, 1995 to transactions in which the Company sells
or securitizes mortgage loans with servicing rights retained. The provisions
of this Statement should be applied to the measurement of impairment for all
capitalized servicing rights, including servicing rights capitalized prior to
the initial adoption of this Statement. The Company does not expect the
adoption of SFAS No. 122 to have a material effect on its future financial
position or results of operations.
5
<PAGE> 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Earnings Summary
Earnings for the quarter ended June 30, 1995 were $17.9 million, an increase
of 33% over the $13.5 million earned in the second quarter of 1994. For the
six months ended June 30, 1995, the Company's net income was $35.2 million, up
34% from 1994 first-half results. On a per common share basis, the Company
earned $.52 for the second quarter of 1995, reflecting 30% rise from the same
quarter of 1994 and $1.03 for the first half of 1995, a 32% rise over the same
period of a year ago. Second-quarter earnings for 1995 grew 4% from the 1995
first-quarter net income of $17.3 million and per share earnings for the
second quarter were 2% higher than the $.51 earned in the prior quarter.
The Company's return on average assets was 1.30% for the second quarter of
1995, compared to 1.28% for the first quarter of 1995 and 1.00% for the second
quarter of 1994. The return on average assets for the first half of 1995 was
1.29% compared to .99% for the same period of a year ago. The return on
average common stockholders' equity amounted to 16.07% for the second quarter
of 1995 compared to 16.19% for the first quarter of 1995 and 12.22% for the
second quarter of 1994. For the first six months, such returns were 16.14%
for 1995 and 12.02% for 1994. The Company's continued earnings strength
coupled with a rebound in the value of its portfolio of securities available
for sale caused its book value per common share to increase 4% during the
second quarter to $13.48 at June 30, 1995 from $12.94 at March 31, 1995.
The increase in the Company's 1995 second-quarter and first-half results from
the comparable prior-year periods was attributable to declining noninterest
expenses, a lower loan loss provision and higher net interest income,
partially offset by a decline in noninterest income. The Company's second
quarter earnings for 1995 were 4% greater than the first quarter of this year
due to a rebound in noninterest revenues, partly reduced by a modest decline
in tax-equivalent net interest income and a slight rise in noninterest
expenses.
Net Interest Income
Net interest income on a tax-equivalent basis rose 3% to $55.3 million in the
second quarter of 1995 from the $53.5 million earned in the same quarter of
1994 primarily due to a similar increase in average earning assets,
principally loans. For the first half of 1995, tax-equivalent net interest
income grew 6% to $110.8 million from the first six months of 1994 for the
same factors noted for the second quarter comparison as well as to a wider net
interest margin. Tax-equivalent net interest income for the second quarter
decreased slightly from the $55.6 million earned in the preceding quarter.
The Company's net interest income for both the second quarter and the first
half of 1995 increased from the comparable periods of 1994. The net interest
margin increased by one basis point to 4.28% for the second quarter of 1995
and 15 basis points to 4.33% for the first half of 1995 over the comparable
periods in 1994. For the six-month comparison, the margin increase resulted
from the favorable impact that rising interest rates had on variable-rate
loans and securities, a more favorable mix of average earning assets and an
increased value of net noninterest bearing funds, partially offset by a less
favorable mix of average interest bearing liabilities. The net interest
margin was 4.28% for the second quarter of 1995, 4.27% for the second quarter
of 1994 and 4.39% for the first quarter of 1995. The 11 basis-point decline
in net interest margin during the second quarter of this year from the
<PAGE> 13
preceding quarter was primarily attributable to an increase in the proportion
of higher-rate time deposits.
Average total deposits for the second quarter and first half of 1995 rose
slightly from the same periods of 1994. Increases in average time deposit and
demand deposit balances were offset by declines in savings and NOW account
balances. Additional information regarding average balances, net interest
income and the net interest margin is presented on page 8 and 9 of this
report.
6
<PAGE> 14
Noninterest Income
Noninterest income for the second quarter of 1995 amounted to $12.8 million,
nearly level with 1994 second-quarter noninterest income of $12.9 million.
For the six months ended June 30, 1995, noninterest income fell 15% from the
same period of a year ago. The decline in first-half noninterest income for
1995 from the first six months of last year resulted from decreased mortgage
banking revenues and lower mutual fund and annuity commissions. These
unfavorable factors were partially offset by a rise in service fees on deposit
accounts, higher trust income and increased securities gains. Noninterest
income excluding securities gains increased 8% in the second quarter of 1995
from the preceding quarter due to a significant recovery in mortgage banking
revenues as that business began to improve spurred by greater loan demand as
interest rates on residential mortgages declined.
Noninterest Expense
Second quarter noninterest expense amounted to $38.1 million in 1995, or 11%
below the second quarter of 1994. Noninterest expense for the first half of
1995 was $75.8 million, also down 11% from the first six months of 1994. The
primary factors contributing to the expense reduction in the second quarter
and first half of 1995 from the comparable periods of last year were declines
in personnel, other real estate owned ("OREO"), external data processing and
legal expenses. Both the second-quarter and the first-half variances were
partly offset by increases in advertising and marketing expense and consulting
fees. An important overall factor contributing to the containment of
noninterest expenses in 1995 was the realization of cost savings resulting
from the acquisition of Crestmont Financial Corp. ("Crestmont") in September
1994.
Applicable Income Tax Expense
Applicable income taxes for the second quarter of 1995 increased to $9.6
million from $6.8 million a year ago. For the first six months of 1995,
applicable income taxes amounted to $19.4 million compared to $13.6 million
for the first half of 1994. Such effective tax rates were 34.9% for the
second quarter 1995 and 33.5% for the second quarter 1994 and 35.5% for the
first half of 1995 compared to 34.0% for the first half of 1994. The
increased effective tax rates for both the second-quarter and the first-half
comparisons resulted from a reduced proportion of tax-exempt income and tax
credits recognized to total income. Partially offsetting these effects were
lower state income taxes.
7
<PAGE> 15
The Summit Bancorporation and Subsidiaries
Average Consolidated Balance Sheet, Net Interest Income and Net Interest Margin
(In Thousands and on a Tax-Equivalent Basis)
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------------------------
1995 1994
----------------------------------- ------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
--------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
Short-Term Investments . . . . . . . . . . . . . . $ 122,412 $ 1,874 6.14% $ 50,989 $ 478 3.76%
Investment Securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . 14,301 240 6.73 22,399 303 5.43
U.S. Government Agency . . . . . . . . . . . . . 567,137 9,392 6.62 558,477 7,952 5.70
State and Municipal. . . . . . . . . . . . . . . 39,213 740 7.55 66,328 1,111 6.70
Other Securities . . . . . . . . . . . . . . . . 283,149 4,093 5.78 286,775 4,153 5.79
--------- ------- --------- -------
Total Investment Securities . . . . . . . . . 903,800 14,465 6.40 933,979 13,519 5.79
Securities Available For Sale:
U.S. Treasury. . . . . . . . . . . . . . . . . . 39,693 598 6.04 122,760 1,429 4.67
U.S. Government Agency . . . . . . . . . . . . . 500,591 8,457 6.76 505,650 7,182 5.68
State and Municipal. . . . . . . . . . . . . . . 6,679 119 7.14 - - -
Other Securities . . . . . . . . . . . . . . . . 140,846 2,995 8.51 271,773 3,048 4.49
--------- ------- --------- -------
Total Securities Available For Sale . . . . . 687,809 12,169 7.08 900,183 11,659 5.18
Trading Account Securities . . . . . . . . . . . . 827 12 5.82 1,467 20 5.47
Loans:
Commercial . . . . . . . . . . . . . . . . . . . 639,872 14,994 9.40 587,422 11,347 7.75
Consumer . . . . . . . . . . . . . . . . . . . . 518,184 11,791 9.13 416,981 8,924 8.58
Construction . . . . . . . . . . . . . . . . . . 83,803 2,254 10.79 94,145 1,916 8.16
Commercial Mortgage. . . . . . . . . . . . . . . 728,295 16,536 9.08 806,657 15,879 7.87
Residential Mortgage . . . . . . . . . . . . . . 1,484,333 27,135 7.31 1,212,529 20,533 6.77
--------- ------- --------- -------
Total Loans . . . . . . . . . . . . . . . . . 3,454,487 72,710 8.43 3,117,734 58,599 7.53
--------- ------- --------- -------
Total Earning Assets. . . . . . . . . . . . . 5,169,335 101,230 7.84 5,004,352 84,275 6.74
------- ---- ------- ----
Allowance for Loan Losses. . . . . . . . . . . . . (91,896) (94,829)
Cash and Due from Banks. . . . . . . . . . . . . . 227,898 240,562
Premises and Equipment . . . . . . . . . . . . . . 44,810 45,715
Other Real Estate Owned. . . . . . . . . . . . . . 16,393 33,687
Other Assets . . . . . . . . . . . . . . . . . . . 134,545 140,573
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . $5,501,085 $5,370,060
========= =========
(PAGE> 16
Liabilities and Stockholders' Equity
NOW Accounts . . . . . . . . . . . . . . . . . . . $ 629,525 2,045 1.30 $ 688,130 2,350 1.37
Money Market Accounts. . . . . . . . . . . . . . . 809,389 8,426 4.18 812,080 4,564 2.25
Savings Deposits . . . . . . . . . . . . . . . . . 892,538 8,024 3.61 1,056,515 6,619 2.51
Money Market Certificates of Deposit . . . . . . . 210,185 2,293 4.38 332,849 2,219 2.67
Certificates of Deposits of $100,000 and Over. . . 278,264 4,059 5.85 99,286 793 3.20
Other Time Deposits. . . . . . . . . . . . . . . . 926,340 12,926 5.60 734,974 8,200 4.48
--------- ------- --------- -------
Total Interest Bearing Deposits . . . . . . . 3,746,241 37,773 4.04 3,723,834 24,745 2.67
Short-Term Borrowings. . . . . . . . . . . . . . . 197,112 2,966 6.04 217,220 2,131 3.93
Long-Term Debt . . . . . . . . . . . . . . . . . . 312,964 5,232 6.69 257,276 3,865 6.01
--------- ------- --------- -------
Total Interest Bearing Liabilities. . . . . . 4,256,317 45,971 4.33 4,198,330 30,741 2.94
Demand Deposits. . . . . . . . . . . . . . . . . . 712,689 644,230
Accrued Expenses and Other Liabilities . . . . . . 77,858 76,325
--------- ---------
Total Liabilities . . . . . . . . . . . . . . 5,046,864 4,918,885
Preferred Stock. . . . . . . . . . . . . . . . . . 12,612 20,000
Common Stock . . . . . . . . . . . . . . . . . . . 441,609 431,175
--------- ---------
Total Stockholders' Equity. . . . . . . . . . 454,221 451,175
--------- ---------
Total Liabilities and Stockholders' Equity. . $5,501,085 $5,370,060
========= =========
Spread on Interest Bearing Liabilities . . . . . . 3.51 3.80
Effect of Net Noninterest Bearing Funds. . . . . . .77 .47
---- ----
Net Interest Income. . . . . . . . . . . . . . . . $55,259 $53,534
====== ======
Net Interest Margin. . . . . . . . . . . . . . . . 4.28% 4.27%
==== ====
</TABLE>
Notes:
(1) The above table includes nonaccrual loans.
(2) Fees on loans have been included in interest on loans.
8
<PAGE> 17
The Summit Bancorporation and Subsidiaries
Average Consolidated Balance Sheet, Net Interest Income and Net Interest Margin
(In Thousands and on a Tax-Equivalent Basis)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------------
1995 1994
---------------------------------- -------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
--------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
Short-Term Investments . . . . . . . . . . . . . . $ 81,866 $ 2,450 6.03% $ 153,088 $ 2,509 3.31%
Investment Securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . 14,645 486 6.69 24,027 610 5.12
U.S. Government Agency . . . . . . . . . . . . . 523,588 16,913 6.46 522,939 14,429 5.52
State and Municipal. . . . . . . . . . . . . . . 41,781 1,606 7.69 66,040 2,253 6.82
Other Securities . . . . . . . . . . . . . . . . 278,069 8,106 5.83 287,564 8,578 5.97
--------- ------- --------- -------
Total Investment Securities . . . . . . . . . 858,083 27,111 6.32 900,570 25,870 5.75
Securities Available For Sale:
U.S. Treasury. . . . . . . . . . . . . . . . . . 44,161 1,252 5.72 77,794 1,846 4.79
U.S. Government Agency . . . . . . . . . . . . . 518,394 17,922 6.91 464,428 12,291 5.29
State and Municipal. . . . . . . . . . . . . . . 3,704 134 7.26 - - -
Other Securities . . . . . . . . . . . . . . . . 150,789 5,229 6.94 275,741 6,238 4.52
--------- ------- --------- -------
Total Securities Available For Sale . . . . . 717,048 24,537 6.85 817,963 20,375 4.99
Trading Account Securities . . . . . . . . . . . . 827 23 5.61 1,611 43 5.38
Loans:
Commercial . . . . . . . . . . . . . . . . . . . 640,982 29,905 9.41 578,005 21,004 7.33
Consumer . . . . . . . . . . . . . . . . . . . . 515,068 22,939 8.98 404,802 17,336 8.64
Construction . . . . . . . . . . . . . . . . . . 83,262 4,512 10.93 96,593 3,791 7.91
Commercial Mortgage. . . . . . . . . . . . . . . 732,404 32,785 8.95 807,369 31,527 7.81
Residential Mortgage . . . . . . . . . . . . . . 1,485,593 53,482 7.20 1,212,714 41,869 6.91
--------- ------- --------- -------
Total Loans . . . . . . . . . . . . . . . . . 3,457,309 143,623 8.34 3,099,483 115,527 7.48
--------- ------- --------- -------
Total Earning Assets. . . . . . . . . . . . . 5,115,133 197,744 7.75 4,972,715 164,324 6.62
------- ----- ------- ----
Allowance for Loan Losses. . . . . . . . . . . . . (91,878) (95,138)
Cash and Due from Banks. . . . . . . . . . . . . . 226,088 227,335
Premises and Equipment . . . . . . . . . . . . . . 45,150 45,440
Other Real Estate Owned. . . . . . . . . . . . . . 16,369 35,125
Other Assets . . . . . . . . . . . . . . . . . . . 138,039 142,036
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . $5,448,901 $5,327,513
========= =========
<PAGE> 18
Liabilities and Stockholders' Equity
NOW Accounts . . . . . . . . . . . . . . . . . . . $ 641,752 4,162 1.31 $ 696,677 4,803 1.39
Money Market Accounts. . . . . . . . . . . . . . . 799,261 15,919 4.02 795,295 8,675 2.20
Savings Deposits . . . . . . . . . . . . . . . . . 907,682 15,289 3.40 1,047,750 12,869 2.48
Money Market Certificates of Deposit . . . . . . . 217,660 4,291 3.98 353,529 4,729 2.70
Certificates of Deposits of $100,000 and Over. . . 272,599 7,733 5.72 85,146 1,295 3.07
Other Time Deposits. . . . . . . . . . . . . . . . 867,167 23,135 5.38 751,069 16,925 4.54
--------- ------- --------- -------
Total Interest Bearing Deposits . . . . . . . 3,706,121 70,529 3.84 3,729,466 49,296 2.67
Short-Term Borrowings. . . . . . . . . . . . . . . 203,179 5,909 5.86 173,178 3,292 3.83
Long-Term Debt . . . . . . . . . . . . . . . . . . 314,084 10,479 6.67 258,724 7,618 5.89
--------- ------- --------- -------
Total Interest Bearing Liabilities. . . . . . 4,223,384 86,917 4.15 4,161,368 60,206 2.91
------- ---- ------- ----
Demand Deposits. . . . . . . . . . . . . . . . . . 701,933 639,566
Accrued Expenses and Other Liabilities . . . . . . 77,707 78,726
--------- ---------
Total Liabilities . . . . . . . . . . . . . . 5,003,024 4,879,660
Preferred Stock. . . . . . . . . . . . . . . . . . 15,653 20,000
Common Stock . . . . . . . . . . . . . . . . . . . 430,224 427,853
--------- ---------
Total Stockholders' Equity. . . . . . . . . . 445,877 447,853
--------- ---------
Total Liabilities and Stockholders' Equity. . $5,448,901 $5,327,513
========= =========
Spread on Interest Bearing Liabilities . . . . . . 3.60 3.71
Effect of Net Noninterest Bearing Funds. . . . . . .73 .47
---- ----
Net Interest Income. . . . . . . . . . . . . . . . $110,827 $104,118
======= =======
Net Interest Margin. . . . . . . . . . . . . . . . 4.33% 4.18%
==== ====
</TABLE>
Notes:
(1) The above table includes nonaccrual loans.
(2) Fees on loans have been included in interest on loans.
9
<PAGE> 19
Financial Condition
Asset Quality
Nonperforming assets, consisting of both nonperforming loans and OREO,
amounted to $45.3 million at June 30, 1995, reflecting an 8% decline from the
$49.5 million reported at March 31, 1995 and a 55% decline from $100.6 million
at June 30, 1994. Total nonperforming loans were $30.9 million at June 30,
1995, $32.7 million at March 31, 1995 and $69.7 million at June 30, 1994.
OREO totaled $14.4 million at June 30, 1995, $16.8 million at March 31, 1995
and $30.9 million at June 30, 1994. Contributing to the decline in
nonperforming assets from June 30, 1994 was the sale of $33.9 million of
nonperforming real estate loans and OREO in September 1994 related to the
Crestmont acquisition.
The allowance for loan losses at June 30, 1995 was $91.4 million covering 202%
of nonperforming assets and 295% of nonperforming loans. The comparable
nonperforming coverage ratios were 184% and 279% at March 31, 1995 and 94% and
135% at June 30, 1994. At June 30, 1995, nonperforming assets as a percent of
loans and OREO totaled 1.31% compared to 1.43% at March 31, 1995 and 3.10% at
June 30, 1994.
The provision for loan losses amounted to $1.2 million in both the first and
second quarters of 1995 and $2.6 million in the second quarter of last year.
Net charge-offs amounted to $1.0 million in the second quarter of 1995,
$1.2 million in the first quarter of 1995 and $1.9 million in the second
quarter of 1994. The loan loss provision was $2.4 million and $5.1 million in
the first half of 1995 and 1994, respectively, while net charge-offs totaled
$2.2 million and $5.7 million for the same periods.
Further information regarding the Company's loan portfolio, nonaccrual loans,
nonperforming assets and allowance for loan losses is presented on page 12 and
13 of this report.
Securities
The composition of the securities portfolio reflects the objective of
maximizing interest income commensurate with interest rate risk, credit risk
and liquidity considerations. Investment securities are acquired with the
intent and ability to hold the securities to maturity. Securities that may be
sold prior to maturity are designated as securities available for sale.
Trading account securities are securities held for trading purposes and are
carried at market value. Realized gains and losses and gains and losses from
marking the trading portfolio to market value are included in trading account
gains and losses. Investment strategies for each portfolio take into account
such factors as asset concentrations, interest rate risk, liquidity, credit
risk, market volatility, interest rate spreads and economic conditions.
Strategic initiatives, therefore, are subject to the interaction and relative
importance of these and other factors.
Interest Rate Sensitivity and Liquidity Management
Since the assets, liabilities and off-balance sheet instruments (e.g.,
financial derivatives) have diverse repricing characteristics that influence
net interest revenues, the Company analyzes its sensitivity to changes in
interest rates through the use of gap analysis and simulation models.
Interest rate sensitivity management seeks to enhance the long-term growth of
net interest revenues and to minimize net interest margin fluctuations caused
by changing interest rates. The Asset/Liability Management Committee (the
"ALCO") is responsible for managing interest rate risk and for evaluating the
impact of changing interest rate conditions on net interest income.
<PAGE> 20
The purpose of liquidity management is to ensure that adequate funds are
available to meet asset and liability cash flow requirements and to respond to
these needs promptly and economically. Current and future liquidity needs are
reviewed by the ALCO to determine the appropriate asset/liability mix.
Financial Derivatives
The Company uses off-balance financial instruments to augment the management
of its interest rate sensitivity risk. The notional principal amounts
associated with these instruments are not recorded as assets or liabilities,
but are used primarily to determine the amount of cash flows to be exchanged.
The notional principal amounts are not exchanged. Notional values are also
used as a basis for evaluating market risk and counterparty credit risk, but
do not represent the amount of potential gain or loss associated with these
risks. Financial derivatives are employed only after a review of the current
and prospective financial implications of such transactions by the ALCO. The
notional value of interest rate swap and cap agreements were $180 million at
June 30, 1995, $140 million at March 31, 1995 and $250 million at June 30,
1994.
10
<PAGE> 21
Capital Adequacy
The Company strives to maintain a strong capital position. Capital adequacy
is monitored in relation to the size, composition and quality of its asset
base and with consideration given to regulatory guidelines and requirements as
well as industry standards. Management seeks to maintain a capital structure
that will support anticipated asset growth and provide for favorable access to
the capital markets.
On May 9, 1995, the Company announced that its Board of Directors authorized
the repurchase of up to 7% of the total common shares outstanding or
approximately 2.3 million shares. This stock repurchase is anticipated to be
undertaken from time to time in the open market or through privately
negotiated transactions.
The Federal Reserve has established guidelines for a risk-based capital
approach to measure capital adequacy. These standards provide a method of
monitoring capital adequacy that is more sensitive to the risk factors of a
bank's asset base, including off-balance sheet risk exposures. A minimum
ratio of total capital to risk-weighted assets of 8%, of which at least 4%
should be Tier 1 capital, is required. Based on these guidelines, the
Company's Tier 1 risk-adjusted capital ratio was 12.71% at June 30, 1995 and
12.95% at June 30, 1994. The Company's total capital ratio equaled 15.34% on
June 30, 1995 and 15.65% on June 30, 1994. These ratios continue to exceed
the regulatory minimums prescribed for bank holding companies.
In addition to the risk-based capital guidelines, the Federal Reserve has
adopted a leverage standard to supplement the risk-based ratios in determining
overall capital adequacy. A minimum ratio of Tier 1 capital to total assets
of 3% was established. Under these guidelines, institutions operating at the
3% minimum are expected to have well diversified risk profiles, including no
undue interest rate risk, excellent asset quality, high liquidity, and good
earnings. Institutions not meeting these characteristics, as well as
institutions experiencing growth, would be expected to maintain capital levels
ranging from 100 to 200 basis points above the minimum. The Company's Tier 1
capital to asset ratio was 8.32% on June 30, 1995 and 8.04% on June 30, 1994.
The Federal Reserve adopted regulations effective January 17, 1995 which
identify concentration of credit risk and certain risks arising from
nontraditional activities, as well as an institution's ability to manage these
risks, as important factors in assessing an institution's overall capital
adequacy. The Federal Reserve believes that there is no currently acceptable
method to add a quantitative formula to the risk-based capital standards in
order to measure credit risk. Therefore, it is likely that institutions
identified through the examination process as having significant exposure to
concentration of credit risk or risks arising from nontraditional activities,
or identified as not adequately managing such risks, may be required to hold
capital in excess of the regulatory minimums.
Pending Acquisition
On June 14, 1995, the Company and Garden State BancShares, Inc. ("Garden
State") signed a definitive purchase agreement for the Company to acquire
Garden State in a tax-free exchange of stock. The merger is subject to
approval by Garden State shareholders, as well as by the appropriate state and
federal banking authorities. In connection with the consummation of the
Garden State transaction, the Company anticipates one-time restructuring
charges of $4.8 million after taxes. The Company expects the transaction to
be completed in the fourth quarter of 1995 and to be accretive to earnings per
share in 1996.
11
<PAGE> 22
Asset Quality Data (In Thousands)
<TABLE>
<CAPTION>
June 30,
------------------------------------------------------------------------
Nonperforming Loans as
Loans a % of Loan Category
----------------------------- --------------------------
1995 1994 1995 1994
-------- --------- ------- ------
<S> <C> <C> <C> <C>
Loan Portfolio
Commercial . . . . . . . . . . . . . . . . . . . $ 624,425 $ 608,057 1.82% 3.37%
Consumer . . . . . . . . . . . . . . . . . . . . 526,797 445,776 .64 .86
Real Estate:
Construction . . . . . . . . . . . . . . . . 86,797 84,524 3.91 7.78
Commercial . . . . . . . . . . . . . . . . . 735,404 799,382 1.05 3.36
Residential. . . . . . . . . . . . . . . . . 1,481,113 1,274,846 .35 .94
--------- ---------
Total. . . . . . . . . . . . . . . . . $3,454,536 $3,212,585 .90% 2.17%
========= ========= ==== ====
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
------------------------------ ------------
1995 1994 1994
--------- -------- ------------
<S> <C> <C> <C>
Nonperforming Assets
Nonaccrual Loans:
Commercial . . . . . . . . . . . . . . . . . $11,341 $ 20,325 $12,022
Consumer . . . . . . . . . . . . . . . . . . 3,348 3,834 3,034
Real Estate:
Construction . . . . . . . . . . . . . . 3,396 6,580 5,591
Commercial . . . . . . . . . . . . . . . 7,708 23,646 8,083
Residential. . . . . . . . . . . . . . . 5,166 11,980 5,514
------ ------- ------
Total Nonaccrual Loans . . . . . . . 30,959 66,365 34,244
Restructured Loans:
Commercial . . . . . . . . . . . . . . . . . - 185 182
Real Estate - Commercial . . . . . . . . . . - 3,186 -
------ ------- ------
Total Restructured Loans . . . . . . - 3,371 182
------ ------- ------
Total Nonperforming Loans. . . . . . 30,959 69,736 34,426
Other Real Estate Owned (OREO) . . . . . . . . . 14,388 30,869 15,830
------ ------- ------
Total Nonperforming Assets . . . . . $45,347 $100,605 $50,256
====== ======= ======
Loans Past Due 90 Days or More
and Accruing . . . . . . . . . . . . . . . . . $13,162 $ 15,939 $14,182
====== ======= ======
As a % of Loans and OREO:
Nonperforming Assets . . . . . . . . . . . . 1.31% 3.10% 1.45%
Loans Past Due 90 Days or More
and Accruing . . . . . . . . . . . . . . . .38 .49 .41
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
June 30,
---------------------------
1995 1994
------ ------
<S> <C> <C>
Change in Nonperforming Loans
Balance, January 1,. . . . . . . . . . . . . . . $34,426 $78,594
Adjustment for the Pooling of a Company
with a Different Fiscal Year-End . . . . . . . - (1,400)
Loans Placed on Nonaccrual Status . . . . . . . 11,367 16,354
Loans Sold . . . . . . . . . . . . . . . . . . . - (6,066)
Principal Repayments . . . . . . . . . . . . . . (5,867) (7,482)
Charge-Offs. . . . . . . . . . . . . . . . . . . (3,479) (7,211)
Transfers to OREO. . . . . . . . . . . . . . . . (3,159) (2,399)
Restored to Accrual Status . . . . . . . . . . . (1,696) (28)
Interest Payments Applied to Principal . . . . . (633) (626)
------ ------
Balance, June 30,. . . . . . . . . . $30,959 $69,736
</TABLE>
12
<PAGE> 24
Asset Quality Data (In Thousands) (Continued)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Allowance for Loan Losses
Balance, January 1,. . . . . . . . . . . . . . . . . . $91,169 $94,874
Balance Relating to Acquisition. . . . . . . . . . . . - 255
Adjustment for the Pooling of a Company with a
Different Fiscal Year-End. . . . . . . . . . . . . . - (178)
Charge-Offs:
Commercial . . . . . . . . . . . . . . . . . . . . (1,054) (2,965)
Consumer . . . . . . . . . . . . . . . . . . . . . (863) (716)
Real Estate:
Construction . . . . . . . . . . . . . . . . . (450) (29)
Commercial . . . . . . . . . . . . . . . . . . (621) (1,039)
Residential. . . . . . . . . . . . . . . . . . (491) (2,462)
----- -----
Total Charge-Offs. . . . . . . . . . . . . (3,479) (7,211)
----- -----
Recoveries:
Commercial . . . . . . . . . . . . . . . . . . . . 734 875
Consumer . . . . . . . . . . . . . . . . . . . . . 323 260
Real Estate:
Construction . . . . . . . . . . . . . . . . . 159 33
Commercial . . . . . . . . . . . . . . . . . . 6 45
Residential. . . . . . . . . . . . . . . . . . 74 258
----- -----
Total Recoveries . . . . . . . . . . . . . 1,296 1,471
----- -----
Net Charge-Offs. . . . . . . . . . . . . . . . . . . . (2,183) (5,740)
Provision for Loan Losses. . . . . . . . . . . . . . . 2,400 5,100
------ ------
Balance, June 30,. . . . . . . . . . . . . $91,386 $94,311
====== ======
Net Charge-Offs as a % of Average Loans. . . . . . . . .13% .37%
Allowance for Loan Losses as a % of:
Loans at Period-End. . . . . . . . . . . . . . . . 2.65 2.94
Nonperforming Loans. . . . . . . . . . . . . . . . 295 135
Nonperforming Assets . . . . . . . . . . . . . . . 202 94
</TABLE>
The Company adopted SFAS No. 114 and SFAS No. 118 effective January 1, 1995.
This did not have any impact on the Company's results of operations nor its
financial position, including the level of the allowance for loan losses.
Accordingly, the adoption of SFAS No. 114 as amended resulted in a
reallocation of the existing allowance for loan losses.
At June 30, 1995, the recorded investment in loans that are considered
impaired under SFAS No. 114 was $31.0 million and the related allowance for
loan losses was $1.7 million. The average recorded investment in impaired
loans during the three months ended June 30, 1995 was approximately $31.8
million.
13
<PAGE> 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No information is reported under this item.
Item 2. Changes in Securities
No changes have been made to the rights of holders of any class of securities
during the second quarter of 1995.
Item 3. Defaults Upon Senior Securities
No default has occurred with respect to any of the Company's securities during
the second quarter of 1995.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on Tuesday, April 18,
1995. The following matters were voted on at the Annual Meeting.
Proposal 1 - Election of Four (4) Directors, each for a Three-Year Term.
Proposal 2 - Adoption of the 1995 Directors Stock Option Plan.
Proposal 3 - Approval of an Amendment to the Stock Incentive Plan.
Proposal 4 - Ratification of the Appointment of KPMG Peat Marwick LLP as
Independent Public Accountants for the Year 1995.
The number of shares represented and eligible to vote at the meeting was
28,227,503 or 84.2% of the shares outstanding. The vote of the shareholders
was tabulated as follows:
<TABLE>
<CAPTION>
Proposal 1
Number of Votes
----------------------------------
Director For Withheld
- -------- ---------- --------
<S> <C> <C>
Allan G. Anderson. . . . . . . . . . 27,936,768 290,735
William Boyce Lum. . . . . . . . . . 27,706,079 521,424
S. Griffin McClellan III . . . . . . 27,905,502 322,001
Douglas G. Watson. . . . . . . . . . 27,751,357 476,146
Proposal 2
Votes For . . . . . . . . . . . . . 24,990,815
Votes Against . . . . . . . . . . . 2,635,897
Abstentions . . . . . . . . . . . . 507,559
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
Proposal 3
Votes For . . . . . . . . . . . . . 22,112,727
Votes Against . . . . . . . . . . . 5,308,072
Abstentions . . . . . . . . . . . . 713,473
Proposal 4
Votes For . . . . . . . . . . . . . 27,735,383
Votes Against . . . . . . . . . . . 330,222
Abstentions . . . . . . . . . . . . 161,898
</TABLE>
14
<PAGE> 27
Item 5. Other Information
No information is reported under this item.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K
The following report on Form 8-K has been filed during the quarter for which
this report is filed:
Date Subject
---- -------
May 9, 1995 Announcement of the Authorization of the Company's Common
Stock Repurchase Program.
15
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 10th day of August 1995.
THE SUMMIT BANCORPORATION
(Registrant)
By ALFRED J. SOLES
(Alfred J. Soles,
Senior Vice President and
Principal Accounting Officer)
16
<PAGE> 29
Exhibit 12
The Summit Bancorporation
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1995 1994
------- -------
(In Thousands)
<S> <C> <C>
Earnings:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,214 $ 26,323
Applicable Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,364 13,567
Fixed Charges, Excluding Interest on Deposits. . . . . . . . . . . . . . . . . . 17,584 12,388
------- -------
Total Earnings, Excluding Interest on Deposits . . . . . . . . . . . . . . 72,162 52,278
Interest on Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,529 49,296
------- -------
Total Earnings, Including Interest on Deposits . . . . . . . . . . . . . . $142,691 $101,574
======= =======
Fixed Charges:
Interest Expense, Excluding Interest on Deposits . . . . . . . . . . . . . . . . $16,388 $10,910
One Third of Appropriate Net Rental Expense* . . . . . . . . . . . . . . . . . . 1,196 1,478
------ ------
Total Fixed Charges, Excluding Interest on Deposits. . . . . . . . . . . . 17,584 12,388
Interest on Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,529 49,296
------ ------
Total Fixed Charges, Including Interest on Deposits. . . . . . . . . . . . $88,113 $61,684
====== ======
Ratio of Earnings to Fixed Charges:
Excluding Interest on Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 4.10X 4.22X
Including Interest on Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 1.62 1.65
* Represents the portion of long-term operating lease payments deemed to
be representative of the interest factor.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE> 30
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 285,529
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 58,881
<TRADING-ASSETS> 1,740
<INVESTMENTS-HELD-FOR-SALE> 700,575
<INVESTMENTS-CARRYING> 915,990
<INVESTMENTS-MARKET> 916,748
<LOANS> 3,454,536
<ALLOWANCE> 91,386
<TOTAL-ASSETS> 5,512,343
<DEPOSITS> 4,497,193
<SHORT-TERM> 172,090
<LIABILITIES-OTHER> 58,569
<LONG-TERM> 317,187
<COMMON> 49,873
0
12,612
<OTHER-SE> 404,819
<TOTAL-LIABILITIES-AND-EQUITY> 5,512,343
<INTEREST-LOAN> 142,791
<INTEREST-INVEST> 50,358
<INTEREST-OTHER> 2,450
<INTEREST-TOTAL> 195,599
<INTEREST-DEPOSIT> 70,529
<INTEREST-EXPENSE> 86,917
<INTEREST-INCOME-NET> 108,682
<LOAN-LOSSES> 2,400
<SECURITIES-GAINS> 821
<EXPENSE-OTHER> 75,782
<INCOME-PRETAX> 54,578
<INCOME-PRE-EXTRAORDINARY> 35,214
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,214
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<YIELD-ACTUAL> 4.33
<LOANS-NON> 30,959
<LOANS-PAST> 13,162
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 91,169
<CHARGE-OFFS> 3,479
<RECOVERIES> 1,296
<ALLOWANCE-CLOSE> 91,386
<ALLOWANCE-DOMESTIC> 66,792
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 24,594
