<PAGE>1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from................ to ................
Commission file number 0-15870
MIDLANTIC CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2699903
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Metro Park Plaza, P.O. Box 600, Edison, New Jersey 08818
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 321-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
___________________
Common Stock, par value $3.00 per share; 8 1/4% Convertible Subordinated
Debentures Due 2010; 9.875% Subordinated Capital Notes Due 1999; 9.20%
Subordinated Capital Notes Due 2001.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Aggregate market value of voting shares of Midlantic Corporation as of
February 24, 1995 (net of voting shares held by the trust department of the
subsidiary bank and by the officers and directors of Midlantic Corporation*):
$1,594,924,095.
SHARES OUTSTANDING ON FEBRUARY 24, 1995
_______________________________________
Common Stock, par value $3.00 per share - 52,639,027 shares
DOCUMENTS INCORPORATED BY REFERENCE
___________________________________
Definitive proxy statement for the 1995 Annual Shareholders' Meeting filed
with the Commission pursuant to Regulation 14A - incorporated by reference in
Part III.
Annual Report to Shareholders for fiscal year ended December 31, 1994 -
incorporated by reference in Part I, Item 1; Part II, Items 5, 6, 7 and 8 and
Part IV, Item 14(a) 1
*Midlantic Corporation does not admit by virtue of the foregoing that its
officers and directors are "affiliates" as defined in Item 405 of Regulation
S-K and does not admit that it controls the shares of its voting stock held by
the trust department of its bank subsidiary.
<PAGE>2
MIDLANTIC CORPORATION
FORM 10-K INDEX
PART I PAGE
______ _____
ITEM 1 - BUSINESS
a) Description of Business 3-9
b) Statistical Information and Analysis 10-14
ITEM 2 - PROPERTIES 15
ITEM 3 - LEGAL PROCEEDINGS 15-16
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
EXECUTIVE OFFICERS OF THE REGISTRANT 17-18
PART II
_______
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 19
ITEM 6 - SELECTED FINANCIAL DATA 19
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 20
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 20
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 20
PART III
________
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 21
ITEM 11 - EXECUTIVE COMPENSATION 21
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 21
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 21
PART IV
_______
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 22-24
SIGNATURES 25-26
<PAGE>3
PART I
______
ITEM 1 - BUSINESS
__________________
a) DESCRIPTION OF BUSINESS
INTRODUCTION
Midlantic Corporation ("MC") is a regional bank holding company headquartered
in Edison, New Jersey. MC's principal activity consists of managing,
controlling and providing services and capital funds to its direct and
indirect subsidiaries. MC directly owns Midlantic Bank, National Association
("MB"), headquartered in Newark, New Jersey. The activities of MC and certain
of its subsidiaries are significantly restricted by law (see "Supervision and
Regulation").
DIVESTITURES AND INTERNAL MERGERS
On August 27, 1994, MC's two subsidiary banks, Continental Bank ("CB") and
Midlantic National Bank ("MNB") were merged, with MNB surviving the merger as
Midlantic Bank, National Association. Prior to the bank merger, in August
1994, MNB's direct parent, Midlantic Banks Inc., was merged into MC.
During 1992, MC completed the following transactions pursuant to a
restructuring program initiated during 1991 which encompassed a strategy to
sell assets and subsidiaries located outside of New Jersey and southeastern
Pennsylvania and consolidate operations in New Jersey in order to strengthen
MC's capital position and focus on its core market:
- On March 24, 1992, Midlantic Home Mortgage Corporation, a mortgage
banking subsidiary, was sold for $44.6 million.
- On July 1, 1992, MC sold Central Trust Company and Endicott Trust Company
for an aggregate sales price of $114.8 million of cash and other consideration
and on December 31, 1992, MC sold the Merchants National Bank & Trust Company
of Syracuse and Union National Bank of Albany for an aggregate sales price of
$93.3 million of cash and other consideration.
MIDLANTIC BANK, NATIONAL ASSOCIATION
As of December 31, 1994, MB operated 261 bank offices in twenty counties of
New Jersey and 63 bank offices in Bucks, Chester, Delaware, Montgomery and
Philadelphia counties in Pennsylvania . MB has an offshore branch in Grand
Cayman, British West Indies. Its main office is in Newark, New Jersey and its
principal executive offices are in Edison, New Jersey. MB operates eight
regional trust offices (six in New Jersey and two in Pennsylvania).
Based upon pro forma total assets, at December 31, 1994, MB was the fourth
largest commercial bank conducting business in New Jersey and the fifth
largest commercial bank conducting business in the southeastern area of
Pennsylvania.
The following table provides information about MB as of December 31, 1994
Midlantic
(In thousands) Bank, N.A.
__________________________________________________________________________
Total assets $12,950,928
Loans, net of unearned income 8,654,993
Total deposits 10,819,632
__________________________________________________________________________
<PAGE>4
MB is engaged in commercial and retail banking activities. Banking services
are extended to individual, business, governmental and institutional
customers. Such services include all the usual deposit functions of
commercial banks with demand and time account services; the making of
commercial, industrial, real estate and consumer loans; the furnishing of
collection and foreign exchange services; and rental of safe deposit boxes.
In addition, MB furnishes financial and data processing services to customers
and other banks and provides cash management facilities to commercial
customers. Offshore deposit acceptances and placements are conducted by MB at
facilities in Grand Cayman. MB provides complete personal and corporate trust
services, including administration of estates and trusts, pension and other
employee benefit plans, investment advisory and agency accounts, and a full
range of other fiduciary, corporate fiduciary, and agency services.
NONBANK ACTIVITIES
MC's major nonbank activities are conducted through the following direct or
indirect subsidiaries: Midlantic Securities Corp., a discount broker/dealer
located in Philadelphia, Pennsylvania; Lenders Life Insurance Co., an Arizona-
based affiliate, which acts as a reinsurer in connection with credit-related
insurance; and Lease and Go, Inc., which engages in the leasing of motor
vehicles.
At December 31, 1994, less than five percent of the consolidated assets of MC
was employed in nonbank activities.
EMPLOYEES
As of December 31, 1994, 6,174 persons were employed full-time or part-time by
MC and its subsidiaries. Management of MC considers relations with its
employees to be satisfactory.
COMPETITION
The banking business is highly competitive and MB competes not only with New
Jersey, New York and Pennsylvania commercial banks, but also with savings
banks, savings and loan associations, money market and mutual funds, insurance
companies, consumer finance companies, credit unions and other lending and
deposit-gathering institutions.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of MC and MB are affected by domestic and foreign economic
conditions and by the monetary and fiscal policies of the United States
government and its agencies.
The monetary policies of the Board of Governors of the Federal Reserve System
(the "FRB") have had, and will probably continue to have, an important impact
on the operating results of commercial banks through the FRB's power to
implement national monetary policy in order to, among other things, curb
inflation or combat a recession. The policies of the FRB have a major effect
upon the levels of bank loans, investments and deposits through the FRB's open
market operations in United States government securities and through its
regulation of, among other things, the discount rate on borrowings of
depository institutions and the reserve requirements against depository
institution deposits. Recently, higher interest rates resulting from the
FRB's monetary policies have generally had a mixed impact on depository
institutions. It is not possible to predict the nature and impact of future
changes in monetary and fiscal policies and their impact on MC and MB.
<PAGE>5
SUPERVISION AND REGULATION
General - As a bank holding company registered under the Bank Holding Act of
1956, as amended (the "Act"), MC is subject to substantial regulation and
supervision by the FRB. MB is subject to regulation and supervision by the
Office of the Comptroller of the Currency ("OCC"). Federal banking and other
laws impose a number of requirements and restrictions on the operations and
activities of depository institutions. In addition, the federal banking
agencies periodically take regulatory actions to implement legislation and
regulatory initiatives that might result in additional substantial
restrictions on operations and activities and increase operating costs.
Holding Company Activities - Under the Act, bank holding companies may engage
directly, or indirectly through subsidiaries, in activities which the FRB
determines to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. Acquisitions of existing companies
and engaging in activities which the FRB has not theretofore determined to be
permissible for bank holding companies normally require specific FRB approval.
MC, as well as its subsidiaries, is prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or provision of
any property or services.
Dividends - The principal sources of income for MC are dividends and
management fees from MB. The limitations on MB's ability to pay dividends to
MC are described under the consolidated financial note caption "26. Lending
and Dividend Limitations" and the consolidated financial note caption "27.
Regulatory Matters" on page 69 of MC's Annual Report to Shareholders for the
fiscal year ended December 31, 1994, which consolidated financial notes are
incorporated herein by reference. Regulatory agreements with the FRB and OCC
that restricted MC's and MB's ability to declare and pay dividends were
terminated in March 1994.
Capital Requirements - Federal law currently requires MC and MB to meet
certain minimum leverage and risk-based capital ratios, and empowers the bank
regulatory agencies to take a number of enforcement actions against MC or
MB if they fail to achieve the mandated ratios. MC and MB currently exceed
the minimum regulatory capital standards.
The federal bank regulatory agencies have proposed incorporating an interest
rate risk component and concentrations of credit and nontraditional activities
risk components into existing risk-based capital standards. Under the
proposals, banks and bank holding companies with greater than "normal" levels
of such risks would be required to hold additional capital. Such proposals,
if adopted, are not expected to have a material impact on MC or MB.
Holding Company Liability - FRB policy requires bank holding companies to
serve as a source of strength to their subsidiary banks by standing ready to
use available resources to provide adequate capital funds to subsidiary banks
during periods of financial stress or adversity. A bank holding company also
could be liable under certain provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") for the capital deficiencies of
an undercapitalized bank subsidiary. In the event of a bank holding company's
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee will be
deemed to have assumed and is required to cure immediately any deficit under
any commitment by the debtor to any of the federal banking agencies to
maintain the capital of an insured depository institution, and any claim for a
breach of such obligation will generally have priority over most other
unsecured claims.
Transactions with MB - MB is subject to certain restrictions imposed by law on
extensions of credit to, and certain other transactions with, MC and certain
other subsidiaries, as described under the consolidated financial note caption
"26. Lending and Dividend Limitations" on page 69 of MC's Annual Report to
Shareholders for the fiscal year ended December 31, 1994, which consolidated
<PAGE>6
financial note is incorporated herein by reference. A regulatory agreement
with the OCC that restricted MB's ability to declare and pay dividends was
terminated in March 1994. MB is also subject to certain restrictions on
investments in MC securities and on the taking of such securities as
collateral for loans to any borrower.
Unsafe or Unsound Practices - The appropriate federal bank regulatory
authorities also have authority to prohibit a bank or bank holding company
from engaging in any activity or transaction deemed by the federal bank
regulatory authority to be an unsafe or unsound practice. The payment of
dividends could, depending upon the financial condition of the bank or bank
holding company, be such an unsafe or unsound practice. The amount of other
payments by MB to MC (including management fees) is subject to review by bank
regulatory authorities. Federal law also grants to federal banking agencies
the power to issue cease and desist orders when a depository institution or a
bank holding company or an officer or director thereof is engaged in or is
about to engage in unsafe and unsound practices. The FRB may require a bank
holding company to discontinue certain of its activities or activities of its
nonbank subsidiaries or divest itself of such nonbank subsidiaries if such
activities cause serious risk to a bank subsidiary and are inconsistent with
the Act or other applicable federal banking laws. Under certain
circumstances, engaging in an unsafe or unsound practice could be grounds for
the appointment of a receiver or conservator for an insured bank.
Other Regulatory Matters - MB is also subject to other laws and regulations
relating to required reserves, investments, loans, the opening and closing of
branches and other aspects of its operations. Certain other regulatory
matters that had affected MC and MB in recent years are described under the
consolidated financial note caption "27. Regulatory Matters" on page 69 of
MC's Annual Report to Shareholders for the fiscal year ended December 31,
1994, which is incorporated herein by reference. In March 1994, the FRB and
OCC terminated the regulatory agreements under which MC and MB had been
operating in recent years.
New Banking Regulations - Pursuant to the provisions of FDICIA, which was
enacted in late 1991 and which provides for significant changes in the bank
regulatory system, the bank regulatory agencies have adopted or proposed for
adoption regulations that impose significant restrictions on the activities of
insured financial institutions and their holding companies. Among other
things, such regulations impose uniform standards for real estate lending,
adopt truth-in-savings disclosure requirements and prohibit or limit the
acceptance of brokered deposits by insured financial institutions that do not
meet the banking agencies' definition of "well-capitalized." The bank
regulatory agencies are also actively considering proposals that affect a wide
range of operational and managerial matters, including asset quality,
earnings, stock valuation and employee compensation, limitations on activities
of state-chartered banks, and new reporting and audit requirements.
Deposit Insurance - The deposits of MB are insured by the Federal Deposit
Insurance Corporation ("FDIC") through the Bank Insurance Fund ("BIF") to the
extent provided by law. Effective January 1, 1993, the FDIC implemented a
risk-based insurance system that assesses premiums of between 23 and 31 basis
points per $100 of deposits depending upon the capital and supervisory group
within which the institution falls. MB initially paid premiums at the higher
end of this range. However, premiums were reduced somewhat during both 1993
and 1994 and are expected to decline again in 1995.
In a January 1995 proposal, the FDIC presented a revised and lower assessment
fee schedule. The new risk-based assessment fee schedule would range from 4
basis points to 31 basis points. Such change would be effective in the fourth
quarter of 1995. Management believes that if the revised fees are enacted, as
proposed, the Corporation will benefit, although the extent of such benefit is
not presently determinable.
<PAGE>7
Community Reinvestment and Fair Lending - Pursuant to federal law, federal
regulatory authorities review the performance of MC and MB in meeting the
credit needs of the communities served by MB. The applicable federal
regulatory authority considers compliance with this law in connection with
applications for, among other things, approval of branches, branch relocations
and acquisitions of banks and bank holding companies. Federal regulatory
authorities also review the performance of MC and MB with respect to
compliance with laws prohibiting discriminatory practices in lending including
the Equal Credit Opportunity Act and the Fair Housing Act. Under current law,
federal regulators that have reason to believe that a bank has engaged in a
pattern or practice of violating the Equal Credit Opportunity Act are required
to refer the matter to the United States Department of Justice.
Prompt Corrective Action - FDICIA prescribes the supervisory and regulatory
actions that will be taken against undercapitalized insured depository
institutions for the purposes of promptly resolving problems at such
institutions at the least possible long-term loss to the FDIC. Five
categories of depository institutions have been established by FDICIA in
accordance with their capital levels: "well-capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." The federal banking agencies have adopted
uniform regulations to implement the prompt regulatory action provision of
FDICIA.
Under the uniform regulations, a well-capitalized institution has a minimum
tier 1 capital-to-total risk-based assets ratio of 6 percent, a minimum total
capital-to-total risk-based assets ratio of 10 percent and a minimum tier 1
leverage ratio of 5 percent and is not subject to any written capital order or
directive. An adequately capitalized institution meets all of its minimum
capital requirements under the existing capital adequacy guidelines. An
undercapitalized institution is one that fails to meet any one of the three
minimum capital requirements. A significantly undercapitalized institution
has a tier 1 capital-to-total risk-based assets ratio of less than 3 percent,
a tier 1 leverage ratio of less than 3 percent or a total capital-to-total
risk-based assets ratio of less than 6 percent. A critically undercapitalized
institution has a tier 1 leverage ratio of 2 percent or less. An institution
whose capital ratios meet the criteria for a well-capitalized institution may
be classified as an adequately capitalized institution due to qualitative
and/or quantitative factors other than capital adequacy. An adequately
capitalized institution or undercapitalized institution, may under certain
circumstances, be required to comply with supervisory actions as if it were in
the next lower category.
Based upon MC's understanding of the uniform regulations and of publicly
available interpretations thereof by the bank regulatory agencies, MC believes
that MB currently qualifies as a "well-capitalized" institution. The
categorization of depository institutions under the uniform regulations is
solely for the purpose of applying the prompt corrective action provision of
FDICIA and is not intended to be, and should not be interpreted as, a
representation of the depository institution's overall financial condition or
prospects.
An undercapitalized institution is required to submit a capital restoration
plan for acceptance by the appropriate federal banking agency and will be
subject to close monitoring of both its condition and compliance with, and
progress made pursuant to, its capital restoration plan. The capital
restoration plan will be accepted only if (i) it specifies the steps that will
be taken to become adequately capitalized and the activities in which the
institution will engage, (ii) it is based upon realistic assumptions and is
likely to succeed in restoring the institution's capital, (iii) it does not
appreciably increase the institution's risk exposure and (iv) each holding
company that controls the institution provides appropriate assurances of
performance and guarantees that the institution will comply with the plan
until the institution is adequately capitalized on an average basis for each
<PAGE>8
of four consecutive quarters. Liability under the guaranty is the lesser of
(i) five percent of the institution's total assets at the time it became
undercapitalized and (ii) the amount necessary to bring the institution into
compliance with all applicable capital standards as of the time the
institution fails to comply with the plan. An institution that fails to
submit an acceptable plan may be placed into conservatorship or receivership
unless its capital restoration plan is accepted. An undercapitalized
institution will also be subject to restrictions on asset growth,
acquisitions, branching, new activities, capital distributions and the payment
of management fees.
FDICIA requires the appropriate regulatory agencies to take one or more
specific actions against significantly undercapitalized institutions and
undercapitalized institutions that fail to submit capital restoration plans or
fail to implement in a material respect their capital restoration plans, which
actions include but are not limited to (i) requiring the institution to sell
shares or other obligations to raise capital, (ii) limiting deposit interest
rates, (iii) requiring the election of a new board of directors and/or
dismissing senior executive officers and directors who held such positions for
more than 180 days before the institution became undercapitalized, (iv)
prohibiting receipt of deposits from correspondent banks, (v) requiring
divestiture or liquidation of one or more subsidiaries and (vi) requiring the
parent company to divest the institution if such divestiture will improve the
institution's financial condition and future prospects. In addition, an
insured institution that receives a less-than-satisfactory rating for asset
quality, management, earnings or liquidity may be deemed by its appropriate
federal banking regulator to be engaging in an unsafe or unsound practice for
purposes of issuing an order to cease and desist or to take certain
affirmative actions. If the unsafe or unsound practice is likely to weaken
the institution, cause insolvency or substantial dissipation of assets or
earnings or otherwise seriously prejudice the interest of depositors or the
FDIC, a receiver or conservator could be appointed. Finally, subject to
certain exceptions, FDICIA requires critically undercapitalized institutions
to be placed into receivership or conservatorship within 90 days after
becoming critically undercapitalized.
The FRB has indicated that it will consult with each federal banking agency
regulating the bank subsidiaries of a holding company to monitor required
supervisory actions and, based on an assessment of these developments, will
take appropriate action at the holding company level.
Conservatorship and Receivership Powers of Federal Banking Agencies - FDICIA
significantly expanded the authority of the federal banking regulators to
place depository institutions into conservatorship or receivership to include,
among other things, appointment of the FDIC as conservator or receiver of an
undercapitalized institution under certain circumstances. In the event a bank
is placed into conservatorship or receivership, the FDIC is required, subject
to certain exceptions, to choose the method for resolving the institution that
is least costly to the BIF, such as liquidation. In any event, if MB were
placed into conservatorship or receivership, because of the cross-guarantee
provisions of the Federal Deposit Insurance Act, as amended, MC as the sole
stockholder of MB would likely lose its investment in MB.
The FDIC may provide federal assistance to a "troubled institution" without
placing the institution into conservatorship or receivership. In such case,
pre-existing debtholders and stockholders may be required to make substantial
concessions and, insofar as practical, the FDIC will succeed to their
interests in proportion to the amount of federal assistance provided.
Enforcement Actions and Administrative Sanctions - Failure to comply with
applicable laws, regulations and supervisory agreements could subject MC, MB
and officers, directors and institution-affiliated parties to administrative
sanctions and potentially substantial civil money penalties.
<PAGE>9
RECENT LEGISLATION
Two important pieces of banking legislation were enacted in 1994 that
significantly impact the banking industry. The Riegle-Neal Interstate Banking
and Branching Act (the "Interstate Act") amends federal banking law to provide
for interstate banking and branching, while the Riegle Community Development
and Regulatory Improvement Act of 1994 (the "Improvement Act") reduces
financial institutions' regulatory burden and paperwork requirements.
The Interstate Act generally allows bank holding companies to acquire banks in
any state one year after the date of enactment of the Interstate Act and will
permit a bank to merge with an out-of-state bank and convert any of its
offices to branches of the resulting bank beginning June 1, 1997, provided
that both states have not "opted out" of interstate branching between date of
enactment and May 31, 1997. Interstate mergers could occur before June 1,
1997 if both affected states have "opted in" as provided by the Interstate
Act. Additionally, the Interstate Act will permit a bank to establish a de
novo branch in a state in which the bank does not maintain a branch if the
state affirmatively permits de novo interstate branching.
The Improvement Act provides for the streamlining and simplification of
federal banking regulations and includes more than 50 provisions designed to
alleviate banks' regulatory burdens and eliminate paperwork requirements.
PROPOSED LEGISLATION
From time to time various proposals are made in the United States Congress as
well as state legislatures which would alter the powers of, and place
restrictions on, different types of bank organizations as well as bank and
nonbank activities. Such legislative proposals include expansion of bank
powers, amendment of the Community Reinvestment Act, restrictions on banks'
derivatives activities and regulation of bank sales of mutual funds. It is
impossible to predict whether any of the proposals will be adopted.
Therefore, it is not practical to predict the impact of such adoption on the
business of MC or its subsidiaries.
<PAGE>10
b) STATISTICAL INFORMATION AND ANALYSIS
_________________________________________
The following tables set forth on a consolidated basis certain statistical
data concerning MC and its wholly-owned subsidiaries ("Midlantic").
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
A. Average Balances
MC responds to this segment by incorporating by reference the
material for the years 1992 through 1994 under the heading
"Comparative Consolidated Average Balance Sheet with Resultant
Interest and Average Rates" on pages 72 and 73 of MC's Annual
Report to Shareholders for the fiscal year ended December 31,
1994.
B. Average Rates Earned and Paid
MC responds to this segment by incorporating by reference the
material for the years 1992 through 1994 under the caption
"Comparative Consolidated Average Balance Sheet with Resultant
Interest and Average Rates" on pages 72 and 73 of MC's Annual
Report to Shareholders for the fiscal year ended December 31,
1994.
C. Analysis of Year-to-Year Changes in Net Interest Earnings
MC responds to this segment by incorporating by reference the
material in "Table IV - Analysis of Changes in Net Interest
Income" on page 20 of MC's Annual Report to Shareholders for the
fiscal year ended December 31, 1994
II. INVESTMENT PORTFOLIO
A. Book Values
The following table shows the book value of Midlantic's investment
portfolio at the end of each of the past three years:
<TABLE>
<CAPTION>
Obligations
U.S. Obligations of of States
Treasury U.S. Government and Political Other
(In thousands) Securities Agencies Subdivisions Securities Total
__________________________________________________________________________________________
<S> <C> <C> <C> <C>
1994
Held-to-maturity $1,522,562 $ 874,446 $12,137 $ 6,490 $2,415,635
Available-for-sale 269,817 -- 5,410 58,068 333,295
Trading -- -- 7,613 -- 7,613
---------- ---------- ------- ------- ----------
Total 1,792,379 874,446 25,160 64,558 2,756,543
---------- ---------- ------- ------- ----------
1993 1,278,711 1,083,674 24,665 68,360 2,455,410
---------- ---------- ------- ------- ----------
1992 1,341,531* 679,316 15,002 78,963 2,114,812
---------- ---------- ------- ------- ----------
<FN>
* Includes $779.144 million in the permanent portfolio and $562.387 million identified for
sale.
</TABLE>
<PAGE>11
B. Maturities and Weighted Average Interest Yields
MC responds to this item by incorporating by reference the
material contained in the maturity distribution tables for both
available-for-sale and held-to-maturity securities under the
consolidated financial note caption "4. Investment Securities" on
pages 50 and 51 of MC's Annual Report to Shareholders for the
fiscal year ended December 31, 1994.
C. Securities of a Single Issuer Exceeding Ten Percent of
Shareholders' Equity
At December 31, 1994, Midlantic did not have any investments
(excluding investments with the United States government or its
agencies) which comprised more than ten percent of shareholders'
equity.
III. LOAN PORTFOLIO
A. Types of Loans
The following table shows the amount of each type of loan of
Midlantic at the end of each of the past five years:
<TABLE>
<CAPTION>
LOAN PORTFOLIO
(In thousands)
DECEMBER 31 1994 1993 1992 1991 1990
________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Commercial and financial $3,018,972 $2,992,653 $3,563,486 $ 4,946,282 $ 6,972,956
Real estate
Construction and
development 591,701 834,013 1,497,447 1,993,229 2,597,501
Mortgage 2,108,228 2,301,389 2,369,792 3,342,243 3,876,335
Loans to individuals 2,663,908 2,415,391 1,635,493 2,422,728 3,714,989
Foreign -- 3,492 80,274 92,838 107,821
---------- ---------- ---------- ----------- -----------
Total loans $8,382,809 8,546,938 9,146,492 12,797,320 17,269,602
Less: unearned income 144,850 137,241 96,015 210,576 375,073
---------- ---------- ---------- ----------- -----------
Total loans, net
of unearned income $8,237,959 $8,409,697 $9,050,477 $12,586,744 $16,894,529
========== ========== ========== =========== ===========
</TABLE>
B. Maturities and Sensitivities of Loans to Changes in Interest Rates
MC responds to this segment by incorporating by reference the
material in "Table XXVI Loan Portfolio - Maturities and
Sensitivity to Changes in Interest Rates" on page 38 of MC's
Annual Report to Shareholders for the fiscal year ended December
31, 1994.
C. Risk Elements
1. Nonaccrual, Past Due and Restructured Loans
MC responds to this item by incorporating by reference the
material under the subcaptions "Nonaccrual Loans," "Renegotiated
Loans" and "Accruing Past Due Loans" including the material for
the years 1990 through 1994 in "Table XVII - Nonaccrual Loans,
Other Real Estate Owned, Net and Past Due Loans" on pages 30
through 32 of MC's Annual Report to Shareholders for the fiscal
year ended December 31, 1994.
<PAGE>12
2. Potential Problem Loans
MC responds to this item by incorporating by reference the
material under the subcaption "Potential Problem Loans" on page 32
of MC's Annual Report to Shareholders for the fiscal year ended
December 31, 1994.
3. Foreign Outstandings
At December 31, 1994, Midlantic's foreign outstandings (dollar
denominated credits owed or guaranteed by foreign countries,
foreign banks and other foreign persons) amounted to $151.2
million or 1.1 percent of total consolidated assets as compared
with $637.9 million or 4.6 percent of total assets at year-end
1993 and $753.1 million or 5.2 percent of total assets at
year-end 1992.
The following table presents those individual country exposures
that exceeded .75 percent of total assets at December 31, 1993 and
1992. At December 31, 1994, no individual county exposure
exceeded .75 percent of total assets.
Percent Percent
December 31 of Total December 31 of Total
(Dollars in thousands) 1993 Assets 1992 Assets
__________________________________________________________________________
France $151,041 1.09% $165,136 1.15%
Japan 120,116 .86 204,087 1.42
Switzerland 120,343 .86 N/A N/A
__________________________________________________________________________
N/A - indicates outstandings were less than .75 percent of total assets at
year-end.
4. Loan Concentrations
At December 31, 1994, there were no additional significant loan
concentrations other than those disclosed pursuant to section
III.A. of this report.
D. Other Interest-bearing Assets
At December 31, 1994, Midlantic held $5.4 million of obligations
of states and political subdivisions in its available-for-sale
investment portfolio for which it had suspended interest accruals.
MC also responds to this item by incorporating by reference the
material under the subcaption "Other Real Estate Owned" on pages
32 and 33 and the material relating to other real estate owned for
the years 1990 through 1994 reported in "Table XVII - Nonaccrual
Loans, Other Real Estate Owned, Net and Past Due Loans" on page 31
of MC's Annual Report to Shareholders for the fiscal year ended
December 31, 1994.
<PAGE>13
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. Analysis of Loan Loss Experience
MC responds to this item by incorporating by reference the
material under the subcaption "Allowance for Loan Losses (ALL)"
including the material for the years 1990 through 1994 in "Table
XVI - Summary of Loan Loss Experience" on pages 28 through 30 of
MC's Annual Report to Shareholders for the fiscal year ended
December 31, 1994.
B. Distribution of Allowance for Loan Losses and the Percentage of
Loans to Total Loans
The ALL is regarded as a general reserve and is available to
absorb losses from the entire loan portfolio. To comply with the
disclosure requirements of the Securities and Exchange Commission,
the table below distributes the balances in the allowance for loan
losses ("ALL") for each of the past five year ends to certain
segments of the loan portfolio. The distribution shown in the
following table should not be interpreted as an indication of
future charge-offs nor does it indicate that charge-offs will
necessarily occur in the amounts or proportions disclosed.
Midlantic has designed a loan loss methodology to provide
procedural discipline in assessing the adequacy of the ALL. The
distributions in the table below are partly based on this
methodology.
DISTRIBUTION OF ALLOWANCE FOR LOAN LOSSES
(In thousands)
DECEMBER 31 1994 1993 1992 1991 1990
_____________________________________________________________________________
Commercial and financial $ 53,453 $ 80,854 $151,153 $342,548 $357,637
Real estate
Construction and
development 50,228 106,391 302,716 188,685 211,939
Mortgage 79,293 97,619 45,797 47,747 76,195
Loans to individuals 27,700 22,688 15,396 25,338 42,986
Foreign -- 2,176 3,274 3,236 22,236
Undistributed 138,846 90,583 152,209 240,444 31,179
_____________________________________________________________________________
$349,520 $400,311 $670,545 $847,998 $742,172
=============================================================================
At December 31, 1994, 1993, 1992, 1991 and 1990, Midlantic distributed $38.3
million, $29.5 million, $55.6 million, $40.8 million and $29.8 million,
respectively, of its "undistributed" portion of the ALL to unused commitments
to extend credit. Amounts distributed to standby letters of credit at
December 31, 1994, 1993, 1992, 1991, and 1990 amounted to $1.8 million, $6.3
million, $5.9 million, $7.1 million and $4.6 million, respectively.
<PAGE>14
The following table provides the percentage of loans to total loans of
Midlantic at the end of each of the past five years:
PERCENTAGE OF LOANS TO TOTAL LOANS
DECEMBER 31 1994 1993 1992 1991 1990
_____________________________________________________________________________
Commercial and financial 36.0% 35.0% 39.0% 38.7% 40.4%
Real estate
Construction and development 7.1 9.8 16.4 15.6 15.0
Mortgage 25.1 26.9 25.9 26.1 22.5
Loans to individuals 31.8 28.3 17.9 18.9 21.5
Foreign -- -- .8 .7 .6
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
V. DEPOSITS
MC responds to this item by incorporating by reference the material for
the years 1992 through 1994 in "Table XXIV - Average Funding Sources -
Balances and Rates Paid" and under the consolidated financial note
caption "13. Deposits" on pages 35 and 53, respectively, of MC's Annual
Report to Shareholders for the fiscal year ended December 31, 1994.
VI. RETURN ON EQUITY AND ASSETS
MC responds to this item by incorporating by reference the return on
average assets, return on average total equity, and average
shareholders' equity to average assets ratio as well as other key
information presented for the years 1992 through 1994 under the caption
"Consolidated Statistical Information" on page 75 of MC's Annual Report
to Shareholders for the fiscal year ended December 31, 1994.
The dividend payout ratio on common stock was 7.7% for 1994. During
1993 and 1992, MC did not pay dividends to its common shareholders and
consequently had no dividend payout ratio on its common stock.
VII. SHORT-TERM BORROWINGS
MC responds to this item by incorporating by reference the material
under the consolidated financial note caption "14. Short-term
Borrowings" on page 53 of MC's Annual Report to Shareholders for the
fiscal year ended December 31, 1994.
<PAGE>15
ITEM 2 - PROPERTIES
___________________
The corporate headquarters of MC are located in the Metro Park commercial
complex in Edison, New Jersey. MB's principal executive offices are also
located in the Metro Park complex.
MC, through its subsidiary, Parkway Management Inc., in a joint venture with
an unaffiliated party, has a 50 percent interest in the ownership and
operation of a 12-story 264,000 square foot building on land leased from an
unaffiliated third party under a long-term lease at the Metro Park commercial
complex in Edison, New Jersey. Approximately 213,000 square feet of the
building have been rented by MB for its use and the use of MC, at a minimum
annual rental of $3.2 million. The building is encumbered by a mortgage
securing a nonrecourse 32-year loan made by an unrelated third party (which
loan may be called in 1996).
MB owns a computer and operations center comprising approximately 110,000
square feet in West Orange, New Jersey and, through its wholly-owned
subsidiary, Iron Investments Corp., in a joint venture with an unaffiliated
party, owns and operates a 70,500 square foot building in Morris County, New
Jersey, of which approximately 36,000 square feet are utilized by MB primarily
for certain data processing operations. MB also owns a 10-story office
building in West Paterson, New Jersey with approximately 200,000 square feet
of space and a four-story office building in Edison, New Jersey (located in
the Metro Park commercial complex) with approximately 40,000 square feet of
space, portions of which are utilized for operational functions.
MB utilizes two buildings in Norristown, Pennsylvania, which are owned in fee
and encompass approximately 87,000 square feet, for certain operations and
administrative functions. A portion of MB's accounting and data processing is
conducted in three buildings, owned in fee, comprising approximately 123,000
square feet in Fort Washington, Pennsylvania.
MB utilizes a leased building in Pennsauken, New Jersey of approximately
139,000 square feet for various operations. The minimum annual rental amounts
to $1.1 million. The lease, which expires on February 28, 1997, contains
three five-year renewal options. MB also leases approximately 101,000 square
feet of a building in Centre Square Philadelphia, Pennslyvania, of which
approximately 10,000 square feet are utilized as a branch facility, with the
remainder housing executive offices and certain operations. The Centre Square
lease is in the 21st year of an initial 30-year lease, of which the minimum
annual rental amounts to $963 thousand. Such lease contains five ten-year
renewal options which commence at the initial expiration date of March 31,
2004.
At December 31, 1994, MB occupied 324 bank offices (201 were owned in fee and
123 were leased) in 20 counties of New Jersey, and 5 counties of Pennsylvania.
MB also leases additional office space from various unrelated firms.
At December 31, 1994, the nonbank subsidiaries of MC had four offices, all of
which were leased.
Total consolidated occupancy rental expense of Midlantic, net of rental income
and intercompany leasing arrangements, was $17.7 million in 1994.
ITEM 3 - LEGAL PROCEEDINGS
__________________________
As MC reported in "Item 1 - Legal Proceedings" of its quarterly reports on
Form 10-Q for the quarters ended March 31, 1994, June 30, 1994 and September
30, 1994, MC and various directors and former officers of MC are defendants in
a consolidated action, initially commenced in March 1990, pending in Federal
District Court in New Jersey (the "Action"). The Action had been instituted
<PAGE>16
by shareholders of MC, either on behalf of MC against various directors and
former officers of MC, or directly against MC and various directors and former
officers of MC. In general, the Action seeks damages payable either to MC or
to the shareholders and holders of certain debt securities because of alleged
discrepancies between certain public statements made by MC and later results
of MC's operations. In their pleadings, plaintiffs do not seek damages in a
stated dollar amount. The Action includes claims that certain actions of MC
are void. The claims are based upon alleged violations of the United States
securities laws and New Jersey common law.
The parties to the Action have entered into a Stipulation of Settlement of the
Action providing for the payment by the defendants of an aggregate sum of $6.2
million, 60 percent of which is payable by insurance carriers. Settlement of
the Action is subject to certain conditions, including court approval.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
____________________________________________________________
There were no matters submitted to a vote of security holders during the
fourth quarter of 1994.
<PAGE>17
EXECUTIVE OFFICERS OF THE REGISTRANT
____________________________________
The following is a list of all the executive officers of MC who serve as such
at the pleasure of the Board of Directors of MC as of January 1, 1995:
AGE AT
1/1/95 POSITION
------ --------
GARRY J. SCHEURING 55 Chairman of the
Chairman of the Board, President and Chief Board, President
Executive Officer of MC since 1991; and Chief
Chairman of the Board, President and Chief Executive
Executive Officer of MB since 1992; Officer
Chairman of the Board and Chief Executive
Officer 1992-1994 of Continental Bank;
Vice Chairman (1988-1991) of Continental Bank
Corporation
HOWARD I. ATKINS 43 Executive Vice
Executive Vice President and Chief Financial President and
Officer of MC since 1991; Corporate Treasurer Chief Financial
and Treasury Executive (1988-1991) of Officer
Chase Manhattan Bank, N.A.
DONALD W. EBBERT, JR. 49 Senior Vice
Senior Vice President and Treasurer President and
(since 1992) and Senior Vice President Treasurer
and Director of Investor Relations
(1990-1992) of MC; Senior Vice President
and Treasurer (1988-1989) of Southeast
Banking Corporation
MARY ELLEN GRAY 46 Executive Vice
Executive Vice President and Director of Real President and
Estate Lending of MC since 1992; Executive Vice Director of
President for Real Estate (1989-1992) of Real Estate
Chemical Bank New Jersey, N.A. Lending
JEFFREY S. GRIFFIE 50 Executive Vice
Executive Vice President and Director of President and
Corporate Operations of MC since 1992; Director of
Executive Vice President of MB since 1985 Corporate
Operations
JAMES E. KELLY 50 Controller
Controller of MC since 1992; Executive Vice
President (1988-1994) of CB
JOSEPH H. KOTT 46 Executive Vice
Executive Vice President and General Counsel President and
since 1993 and Senior Vice President and General Counsel
General Counsel (1991-1993) of MC; Partner,
Pitney, Hardin, Kipp & Szuch (1982-1991)
R. RAY LOCKHART 55 Senior Vice
Senior Vice President and Auditor of MC President and
since 1987 Auditor
JAMES J. LYNCH 44 Executive Vice
Executive Vice President and Director of President and
Commercial Banking-Pennsylvania of MC since Director of
1992; President (1992-1994) and Vice Chairman Commercial
(1986-1992) of CB Banking-
Pennsylvania
<PAGE>18
Age at
1/1/95 Position
------ --------
EUGENE J. MCNAMARA 62 SENIOR VICE
Senior Vice President and Director of Human President and
Resources of MC since 1992; Senior Vice Director of
President and Northern Region Senior Operations Human Resources
Officer (1991-1992) of MNB; Executive Vice
President and Senior Operations Officer
(1984-1991) of Midlantic National Bank/North
BARBARA Z. PARKER 45 EXECUTIVE VICE
Executive Vice President and Director of Trust President and
and Investment Management since 1993 and Director of
Senior Vice President and Director of Trust Trust and
and Investment Management (1992-1993) of MC; Investment
Senior Vice President, Corporate Banking Management
(1991-1992) and Vice President, Corporate
Banking (1985-1991) of MNB
ALFRED J. SCHIAVETTI, JR. 55 EXECUTIVE VICE
Executive Vice President and Chief Credit President and
Officer of MC since 1991; Managing Director, Chief Credit
Realty Group (1987-1991) of Chemical Bank Officer
ALAN M. SILBERSTEIN 47 EXECUTIVE VICE
Executive Vice President and Director of Retail President and
Banking of MC since 1992; Executive Vice Director of
President, Consumer Banking Group (1990-1991) Retail Banking
and Senior Vice President, Consumer Banking
(1986-1990) of Chemical Bank
FRANK T. VAN GROFSKI 50 EXECUTIVE VICE
Executive Vice President and Director of President and
Corporate Banking and Commercial Banking- Director of
New Jersey of MC since 1992; Senior Vice Corporate
President, Corporate Banking (1987-1992) Banking and
of MNB Commercial
Banking-
New Jersey
<PAGE>19
PART II
_______
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
______________________________________________________________________________
The table below sets forth for the periods indicated the range of highest and
lowest actual transactions per share and the closing price of Midlantic
Corporation common stock, as reported by the Nasdaq Stock Marketsm and
dividends declared per share on Midlantic common stock in 1994. The price
quotations set forth herein do not include retail markups, markdowns or
commissions.
Range of Common Stock Prices
(Per Nasdaq Stock Market sm)
________________________________________________________________________
Dividends
Declared
Per Share
High Low Close Common Stock
________________________________________________________________________
1993
First Quarter $22.38 $18.13 $21.88 $--
Second Quarter 25.13 17.50 21.13 --
Third Quarter 27.75 21.13 27.50 --
Fourth Quarter 28.63 22.25 25.50 --
1994
First Quarter 30.88 24.25 28.13 --
Second Quarter 31.88 27.50 29.25 .10
Third Quarter 30.63 27.63 27.63 .13
Fourth Quarter 28.63 24.00 26.50 .17
________________________________________________________________________
The number of common shareholders of record at January 31, 1995 was 23,555.
MC also responds to this item by incorporating by reference the information
under the following consolidated financial notes of MC's Annual Report to
Shareholders for the fiscal year ended December 31, 1994: Consolidated
financial note caption "16. Capital Stock - Preferred stock," on pages 54 and
55; the consolidated financial note caption "26. Lending and Dividend
Limitations" on page 69; and the consolidated financial note caption "27.
Regulatory Matters" on page 69. (See also "Supervision and Regulation").
ITEM 6 - SELECTED FINANCIAL DATA
________________________________
MC responds to this item by incorporating by reference the material appearing
in the columns 1990 through 1994 under the caption "Selected Supplemental
Financial Data" on page 41 of MC's Annual Report to Shareholders for the
fiscal year ended December 31, 1994.
<PAGE>20
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
________________________________________________________________________
RESULTS OF OPERATIONS
_____________________
MC responds to this item by incorporating by reference the material under the
section heading "Management's Analysis of the Results of Operations and
Financial Condition" and the consolidated supplementary financial and
statistical information on pages 16 through 41 and pages 71 through 75,
respectively, (and related Appendices included in Midlantic's EDGAR filing, in
respect to the descriptions of graphical data) of MC's Annual Report to
Shareholders for the fiscal year ended December 31, 1994.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
____________________________________________________
MC responds to this item by incorporating by reference the material on pages
42 through 70 of MC's Annual Report to Shareholders for the fiscal year ended
December 31, 1994.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
________________________________________________________________________
FINANCIAL DISCLOSURE
____________________
During the past two fiscal years, there was neither a change in independent
accountants nor any disagreements with independent accountants on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
<PAGE>21
PART III
________
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
____________________________________________________________
MC responds to this item by incorporating by reference the material on pages 2
through 4 under the caption "Information About Nominees For Directors of the
Company" in MC's definitive proxy statement respecting its 1995 Annual
Shareholders' Meeting. Information regarding executive officers is included
in this report under the caption "Executive Officers of the Registrant."
ITEM 11 - EXECUTIVE COMPENSATION
________________________________
MC responds to this item by incorporating by reference the material under the
caption "Executive Compensation and Other Information" on pages 6 through 15
in MC's definitive proxy statement respecting its 1995 Annual Shareholders'
Meeting. Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
________________________________________________________________________
MC responds to this item by incorporating by reference the material under the
captions "Principal Shareholders" on page 25 and "Securities Ownership of
Management" on pages 4 and 5 in MC's definitive proxy statement respecting
its 1995 Annual Shareholders' Meeting.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
________________________________________________________
MC responds to this item by incorporating by reference the material under the
captions "Compensation Committee Interlocks and Insider Participation" on page
10 and "Interest of Management in Certain Transactions" on page 15 in MC's
definitive proxy statement respecting its 1995 Annual Shareholders' Meeting.
<PAGE>22
PART IV
_______
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
__________________________________________________________________________
a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
_______________________________________________
1. FINANCIAL STATEMENTS
_______________________
Midlantic Corporation and Subsidiaries Consolidated Financial
Statements*
Consolidated Statement of Income for each of the Three Years in the
Period Ended December 31, 1994
Consolidated Balance Sheet at December 31, 1994 and 1993
Consolidated Statement of Changes in Shareholders' Equity for each of
the Three Years in the Period Ended December 31, 1994
Consolidated Statement of Cash Flows for each of the Three Years in
the Period Ended December 31, 1994
Notes to Consolidated Financial Statements
Independent Accountant's Report
*Incorporated by reference to pages 42 through 70 of Midlantic
Corporation's Annual Report to Shareholders for the fiscal year
ended December 31, 1994.
2. SCHEDULES
____________
Schedules are omitted because they are not required or are not
applicable.
3. EXHIBITS
___________
(3) (a) Amended and restated Certificate of Incorporation of
Midlantic Corporation
(b) By-Laws of Midlantic Corporation as restated through
September 16, 1992 and as further amended on February
16, 1995
(4) (a) Agreement to file instruments regarding long-term debt
(b) Rights Agreement dated as of February 23, 1990 between
Midlantic Corporation and Midlantic National Bank (including
as Exhibit A thereto Midlantic Corporation's Certificate of
Amendment of Certificate of Incorporation covering its
Series B Junior Participating Preferred Stock and including
as Exhibit B thereto the form of Rights Certificate)
incorporated by reference to Exhibit 2 to the Registration
Statement on Form 8-A of Midlantic Corporation dated
February 26, 1990
(10) (a) Purchase Agreement dated as of June 5, 1990 among Midlantic
National Bank, Midlantic Corporation, Midlantic National
Bank/Delaware and Manufacturers Hanover Trust Company
incorporated by reference to Exhibit 28(b) to Form 8-K of
Midlantic Corporation dated June 30, 1990
<PAGE>23
(b) Acquisition Agreement dated as of September 25, 1991 among
Midlantic Corporation, United Penn Bank and Mellon Bank, N.A.
incorporated by reference to Exhibit 28 to Form 8-K of
Midlantic Corporation dated October 1, 1991
(c) Amendment and Supplement dated December 18, 1991 to
Acquisition Agreement dated as of September 25, 1991 among
Midlantic Corporation, United Penn Bank and Mellon Bank, N.A.
incorporated by reference to Exhibit 28(d) to Form 8-K of
Midlantic Corporation dated December 31, 1991
(d) Stock Purchase Agreement dated as of February 21, 1992
between Midlantic Corporation and ONBANCORP, Inc.
incorporated by reference to Exhibit 28(b) to Form 8-K of
Midlantic Corporation dated February 21, 1992
(e) Stock Purchase Agreement dated as of March 23, 1992 by and
among CHMC Mortgage Company Acquisition, Inc., Midlantic
Banks Inc. and Midlantic Corporation incorporated by
reference to Exhibit 10 to Form 10-K of Midlantic Corporation
for the year ended December 31, 1991
(f) Agreement dated as of July 21, 1992 between Midlantic
Corporation and The Bank of New York Company, Inc.
incorporated by reference to Exhibit 28 to Form 8-K of
Midlantic Corporation dated July 22, 1992
Executive Compensation Plans and Arrangements
_____________________________________________
(g) Midlantic Incentive Stock and Stock Option Plan (1986), as
amended, incorporated by reference to Exhibit 4 to Midlantic
Corporation's Registration Statement on Form S-8, No.
33-50952
(h) Midlantic Incentive Plan, as amended, incorporated by
reference to Exhibit 4(c) to Midlantic Corporation's Post-
Effective Amendment No. 1 to Registration Statement on Form
S-8, No. 33-16256
(i) Continental Bancorp, Inc. 1982 Stock Option Plan, as amended,
incorporated by reference to Exhibit 4(f) to Midlantic
Corporation's Post-Effective Amendment No. 1 to Registration
Statement on Form S-8, No. 33-16256
(j) Rules and Regulations Relating to the Payment in Shares of
Common Stock for the Exercise Price of Stock Options
incorporated by reference to Exhibit 10(o) to Form 10-K of
Midlantic Corporation for the fiscal year ended December 31,
1992
(k) Rules and Regulations - Stock Awards incorporated by
reference to Exhibit 10(p) to Form 10-K of Midlantic
Corporation for the fiscal year ended December 31, 1992
(l) Rules and Regulations Relating to the Exercise of Stock
Appreciation Rights incorporated by reference to Exhibit
10(q) to Form 10-K of Midlantic Corporation for the fiscal
year ended December 31, 1992
(m) Rules and Regulations Relating to the Payment in Shares of
Common Stock of Taxes in Connection with the Vesting of an
Award incorporated by reference to Exhibit 10(r) to Form 10-K
of Midlantic Corporation for the fiscal year ended December
31, 1992
(n) Rules and Regulations Relating to the Payment in Shares of
Common Stock of Taxes in Connection with the Exercise of a
Non-Qualified Stock Option incorporated by reference to
Exhibit 10(s) to Form 10-K of Midlantic Corporation for the
fiscal year ended December 31, 1992
(o) Continental Bancorp, Inc. Survivor Benefit Plan incorporated
by reference to Exhibit 10(t) to Form 10-K of Midlantic
Corporation for the fiscal year ended December 31, 1992
(p) Midlantic Corporation Executive Supplemental Retirement Plan
(q) Midlantic Corporation Excess Benefit Plan and Amendment No. 1
dated March 20, 1991 thereto incorporated by reference to
Exhibit 19(a) to Form 10-Q of Midlantic Corporation for the
quarter ended March 31, 1991
(r) Midlantic Corporation Severance Pay Policy as amended
September 21, 1994
<PAGE>24
(s) Form of Change of Control Agreement of Midlantic Corporation
incorporated by reference to Exhibit 10(y) to Form 10-K of
Midlantic Corporation for the fiscal year ended December 31,
1992
(t) Employment Agreement dated and effective as of April 23, 1991
between Midlantic Corporation and Garry J. Scheuring
incorporated by reference to Exhibit 28 to Form 8-K of
Midlantic Corporation dated April 11, 1991
(u) Employment Agreement dated as of July 1, 1991 between
Midlantic Corporation and Alfred J. Schiavetti, Jr.
incorporated by reference to Exhibit 19(g) to Form 10-Q of
Midlantic Corporation for the quarter ended June 30, 1991
(v) Employment Agreement dated as of September 12, 1991 between
Midlantic Corporation and Howard I. Atkins incorporated by
reference to Exhibit 19(a) to Form 10-Q of Midlantic
Corporation for the quarter ended September 30, 1991
(w) Employment Agreement dated as of January 27, 1992 between
Midlantic Corporation and Alan M. Silberstein incorporated by
reference to Exhibit 10 to Form 10-K of Midlantic Corporation
for the year ended December 31, 1991
(x) Change of Control Agreement dated as of January 1, 1993
between Midlantic Corporation and James J. Lynch incorporated
by reference to Exhibit 10(dd) to Form 10-K of Midlantic
Corporation for the fiscal year ended December 31, 1992
(y) Description of tax consultation plan of Midlantic Banks Inc.
incorporated by reference to Exhibit 10(ee) to Form 10-K of
Midlantic Corporation for the fiscal year ended December 31,
1992
(z) Midlantic Annual Incentive and Bonus Plan, as amended
December 21, 1994
(aa) Midlantic Corporation Executive Severance Plan, as amended
(bb) Midlantic Incentive Stock and Stock Option Plan (1995)
(cc) Retirement Plan for Directors of Midlantic Corporation
(11) Statement regarding computation of income (loss) per common share
(13) Annual Report to Shareholders for the fiscal year ended December
31, 1994
(21) Subsidiaries of Midlantic Corporation
(23) Consent of Independent Accountants
(24) Powers of Attorney
Copies of the foregoing Exhibits will be furnished upon request and payment.
b) REPORTS ON FORM 8-K
_______________________
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
<PAGE>25
SIGNATURES
__________
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MIDLANTIC CORPORATION
_____________________
(Registrant)
Signature Title Date
___________________________ _____________________ ______________
By Garry J. Scheuring Chairman of the Board, March 24, 1995
___________________________
Garry J. Scheuring President and Chief
Executive Officer
By Howard I. Atkins Executive Vice President March 24, 1995
___________________________
Howard I. Atkins and Chief Financial
Officer
By James E. Kelly Controller March 24, 1995
______________________________
James E. Kelly
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
___________________________ _____________________ ______________
....Garry J. Scheuring ....... Chairman of the Board, March 24, 1995
______________________________
(Garry J. Scheuring) President and Chief
Executive Officer
*
.............................. Director March 24, 1995
(Charles E. Ehinger)
*
.............................. Director March 24, 1995
(David F. Girard-diCarlo)
*
.............................. Director March 24, 1995
(Frederick C. Haab)
*
.............................. Director March 24, 1995
(Kevork S. Hovnanian)
*
.............................. Director March 24, 1995
(Arthur J. Kania)
*
.............................. Director March 24, 1995
(Aubrey C. Lewis)
<PAGE>26
Signature Title Date
___________________________ _____________________ ______________
*
.............................. Director March 24, 1995
(David F. McBride)
*
.............................. Director March 24, 1995
(Desmond P. McDonald)
*
.............................. Director March 24, 1995
(William E. McKenna)
*
.............................. Director March 24, 1995
(Marcy Syms Merns)
*
.............................. Director March 24, 1995
(Roy T. Peraino)
*
.............................. Director March 24, 1995
(Ernest L. Ransome, III)
*
.............................. Director March 24, 1995
(B. P. Russell)
*
.............................. Director March 24, 1995
(Fred R. Sullivan)
*
.............................. Director March 24, 1995
(Harold L. Yoh, Jr.)
*Joseph H. Kott by signing his name hereto, does sign this document on behalf
of each of the persons named above pursuant to powers of attorney duly
executed by such persons which are filed with the Securities and Exchange
Commission.
By Joseph H. Kott
__________________________
Joseph H. Kott
Attorney-in-fact
<PAGE 1>
EXHIBIT 3(a)
____________
RESTATED CERTIFICATE OF INCORPORATION
OF
MIDLANTIC CORPORATION
Pursuant to Section 14A:9-5 of the New Jersey Business
Corporation Act, Midlantic Corporation hereby restates its
Certificate of Incorporation as follows:
FIRST: The name of the corporation is MIDLANTIC
CORPORATION.
SECOND: The purposes for which the corporation is
organized are:
(a) To engage in the business of a bank holding company;
and
(b) Without in any way being limited by the foregoing
specifically enumerated purpose, to engage in any activity
within the purposes for which corporations may be organized
under the New Jersey Business Corporation Act, Title 14A.
THIRD:
A. The aggregate number of shares which the corporation
shall have authority to issue is 190,000,000, divided into
40,000,000 shares of preferred stock without par value
(hereinafter called "Preferred Stock") and 150,000,000
shares of common stock of the par value of $3.00 per share
(hereinafter called "Common Stock").
B. The Board of Directors shall have authority at any
time or from time to time (i) to divide any or all of the
Preferred Stock into series; (ii) to determine for any such
series its designation, number of shares, relative rights,
preferences and limitations; (iii) to increase the number of
shares of any such series previously determined by it and to
decrease such previously determined number of shares to a
number not less than that of the shares of such series then
outstanding; (iv) to change the designation or number of
shares, or the relative rights, preferences and limitations
of the shares, of any theretofore established series no
shares of which have been issued; (v) to determine relative
rights and preferences which are subordinate to, or equal
with, the shares of any other series, whether or not such
shares of such other series are issued and outstanding when
such determination is made; and (vi) to cause to be executed
and filed without further approval of the shareholders such
amendment or amendments to the Certificate of Incorporation
as may be required in order to accomplish any of the
foregoing. In particular, but without limiting the
<PAGE 2>
generality of the foregoing, the Board of Directors shall
have authority to determine with respect to any such series
of Preferred Stock:
(1) The dividend rate or rates on shares of such
series and any restrictions, limitations or conditions
upon the payment of such dividends, and whether
dividends shall be cumulative and, if so, the date or
dates from which dividends shall cumulate, and the
dates on which dividends, if declared, shall be
payable;
(2) Whether the shares of such series shall be
redeemable and, if so, the time or times and the price
or prices at which and the other terms and conditions
on which the shares may be redeemed;
(3) The rights of the holders of shares of such
series in the event of the liquidation, dissolution or
winding up of the corporation, whether voluntary or
involuntary, or any other distribution of its assets;
(4) Whether the shares of such series shall be
subject to the operation of a purchase, retirement or
sinking fund and, if so, the terms and conditions
thereof;
(5) Whether the shares of such series shall be
convertible into shares of any other class or classes
or of any series of the same or any other class or
classes, and if so convertible, the price or prices or
the rate or rates of conversion and the method, if any,
of adjusting the same, and the other terms and
conditions, if any, on which shares shall be so
convertible; and
(6) The extent of voting powers, if any, of the
shares of such series.
C. Each share of Common Stock shall be equal to every
other share of Common Stock, and, subject to the prior
rights of the Preferred Stock, shall be entitled to share
equally upon all distributions of earnings and assets of the
corporation. After all accrued dividends on all Preferred
Stock having cumulative dividend rights have been declared
and paid, or funds set apart for the payment thereof, the
holders of Common Stock shall be entitled to receive
dividends at such rates and at such times as may be
determined by the Board of Directors. Upon the dissolution,
liquidation or winding up of the corporation, or upon any
distribution of its capital assets, subject to the prior
rights of the Preferred Stock, all the remaining assets of
the corporation shall be distributed ratably among the
holders of Common Stock.
D.(a) Designation. There is created a series of
Preferred Stock the designation of which shall be "Term
Adjustable Rate
<PAGE 3>
Cumulative Preferred Stock-Series A" (hereinafter referred
to as this "Series") and the number of shares constituting
this Series for the purpose of determining dividends
hereunder shall be Five Hundred Thousand (500,000). Shares
of this Series, for the purpose of determining dividends
hereunder, shall have a stated value of $100 per share. The
number of authorized shares of this Series may be reduced by
further resolution duly adopted by the Board of Directors of
the Corporation or any duly authorized committee thereof and
by the filing of a certificate pursuant to the provisions of
the New Jersey Business Corporation Act stating that such
reduction has been so authorized, but the number of
authorized shares of this Series shall not be increased.
(b) Dividends.
(1) Dividend periods ("Dividend Periods") shall
commence on January 1, April 1, July 1 and October 1 in each
year and shall end on and include the day next preceding the
first day of the next Dividend Period. The dividends shall
be cumulative, at the rate hereinafter referred to in
Section (c), from the date of original issue of shares of
this Series and shall be payable, when, as and if declared
by the Board of Directors of the Corporation or any duly
authorized committee thereof out of assets legally available
therefor, on or before the twentieth day immediately
following the end of each Dividend Period, commencing
October 20, 1989. Each such dividend shall be paid to the
holders of record of shares of this Series as they appear on
the stock register of the Corporation on such record date,
not exceeding 30 days preceding the payment date thereof, as
shall be fixed by the Board of Directors for the Corporation
or by any duly authorized committee thereof. Dividends on
account of arrears for any past Dividend Periods may be
declared and paid at any time, without reference to any such
dividend payment date, to holders of record on such date,
not exceeding 45 days preceding the payment date thereof, as
may be fixed by the Board of Directors of the Corporation or
any duly authorized committee thereof.
(2) No dividends shall be declared or paid or set
apart for payment on any shares of any class of stock or
series thereof ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative
dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment
thereof set apart for such payment on this Series for all
dividend payment periods terminating on or prior to the date
of payment of such full cumulative dividends. When dividends
are not paid in full, as aforesaid, upon shares of this
Series and any other shares of any class of stock or series
thereof ranking on a parity as to dividends with this
Series, all dividends declared upon shares of this Series
and any other shares of any class of stock or series thereof
ranking on a parity as to dividends with this Series shall
be declared pro rata so that the amount of dividends
declared per share on this
<PAGE 4>
Series and such other class or series shall in all cases
bear to each other the same ratio that accrued dividends per
share on this Series and such other class or series bear to
each other. Holders of shares of this Series shall not be
entitled to any dividend, whether payable in cash, property
or stock, in excess of full cumulative dividends, as herein
provided, on this Series. No interest, or sum of money in
lieu of interest, shall be payable in respect of any
dividend payment or payments which may be in arrears.
(3) Unless full cumulative dividends on all outstanding
shares of this Series shall have been paid or declared and
set aside for payment for all past Dividend Periods, no
Common Stock or any other stock of the Corporation ranking
junior to or on a parity with this Series as to dividends or
upon liquidation shall be redeemed, purchased or otherwise
acquired for any consideration (or moneys be paid to or made
available for a sinking fund for the redemption of any such
shares) by the Corporation except by conversion into or
exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation and except for
any redemption, purchase or other acquisition pursuant to
any present or future plan applicable to former, present or
future directors, officers or employees of the Corporation
or any of its direct or indirect subsidiaries (including,
but not limited to any stock option plan, stock option
agreement, stock purchase plan, employees' savings or profit
sharing plan or other incentive or benefit plan providing
for the sale or other issuance of any stock by the
Corporation) or pursuant to any present or future dividend
reinvestment plan of the Corporation, or any acquisition by
the Corporation of any debt or Preferred Stock of the
Corporation convertible into Common Stock, or any
acquisition of any Common Stock or Preferred Stock by any
subsidiary of the Corporation in the ordinary course of its
business.
(4) Dividends payable on this Series for each full
Dividend Period shall be computed by annualizing the
applicable dividend rate and dividing by four (regardless of
the actual number of days in such Dividend Period).
Dividends payable on this Series for any period less than a
full Dividend Period, including the Initial Dividend Period
(as defined in Section (c) below), shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.
(c) Dividend Rate.
(1) The dividend rate payable on the shares of this
Series for the period from the date of the original issuance
thereof to March 31, 1990 and for Dividend Periods
thereafter commencing prior to April 1, 1992 shall be
7.625%.
(2) The rate of dividends payable on the Shares of this
Series for all Dividend Periods beginning on or after April 1,
<PAGE 5>
1992 and commencing prior to April 1, 1994 shall be equal to
the "Average Rate" for the Dividend Period commencing April
1, 1992. The Average Rate will be equal to the sum of .25%
and the arithmetic average, rounded to the nearest five
hundredths of a percentage point, of the Two Year Constant
Maturity Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate (each as hereinafter
defined) for the Dividend Period commencing April 1, 1992,
subject to a maximum dividend rate per annum and a minimum
dividend rate per annum set forth in Paragraph 9 below. If
the Corporation determines in good faith that for any reason
one or more of such rates cannot be determined for the
Dividend Period, then the Average Rate for all such Dividend
Periods will be equal to the sum of .25% and the arithmetic
average, rounded to the nearest five hundredths of a
percentage point, of such rates that can be determined. If
the Corporation determines in good faith that none of such
rates can be determined for the Dividend Period commencing
April 1, 1992, then the Average Rate in effect for the
immediately preceding Dividend Period will be continued for
all such Dividend Periods, provided that if a rate can be so
determined, the rate applicable for the first Dividend
Period commencing after April 1, 1992 for which such rate
can be determined shall be payable for all remaining
Dividend Periods commencing prior to April l, 1994.
(3) The rate of dividends payable on the shares of
this Series for Dividend Periods beginning on or after April
1, 1994 shall be equal to the "Applicable Rate" for such
Dividend Period. The Applicable Rate will be equal to the
sum of 2.00% and the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate (each as hereinafter defined), rounded to the
nearest five hundredths of a percentage point, for such
Dividend Period, subject to a maximum dividend rate per
annum and a minimum dividend rate per annum set forth in
Paragraph 9 below. If the Corporation determines in good
faith that if for any reason one or more of such rates
cannot be determined for any Dividend Period, then the
Applicable Rate for such Dividend Period will be equal to
the sum of 2.00% and the highest of such rates that can be
determined, rounded to the nearest five hundredths of a
percentage point. If the Corporation determines in good
faith that none of such rates can be determined for any
Dividend Period, then the Applicable Rate in effect for the
immediately preceding Dividend Period will be continued for
such Dividend Period.
(4) Except as provided below in this Paragraph, the
"Treasury Bill Rate" for each Dividend Period will be the
arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market
discount rate, if only one such rate is published during the
relevant Calendar Period (as defined below)) for three-month
U.S. Treasury bills, as published by the Board of Governors
of the Federal Reserve System during the Calendar Period
immediately prior to the ten calendar days immediately
preceding the Dividend Period for which
<PAGE 6>
the dividend rate on this Series is being determined. If
the Board of Governors of the Federal Reserve System does
not publish such a weekly per annum market discount rate
during any such Calendar Period, then the Treasury Bill Rate
for such Dividend Period will be the arithmetic average of
the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only
one such rate is published during the relevant Calendar
Period) for three-month U.S. Treasury bills, as published
during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the
Corporation. If a weekly per annum market discount rate for
three-month U.S. Treasury bills is not published by the
Board of Governors of the Federal Reserve System or by any
Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period will be the arithmetic average
of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if
only one such rate is published during the relevant Calendar
Period) for all of the U.S. Treasury bills then having
maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Board of
Governors of the Federal Reserve System or, if the Board of
Governors or the Federal Reserve System does not publish
such rates, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation.
If the Corporation determines in good faith that for any
reason no such U.S. Treasury bill rates are published as
provided above during such Calendar Period, then the
Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing U.S.
Treasury securities with a maturity of not less than 80 nor
more than 100 days from the date of each such quotation, as
chosen and quoted daily for each business day in New York
City (or less frequently if daily quotations shall not be
generally available to the Corporation by at least two
recognized dealers in U.S. Government securities selected by
the Corporation). If the Corporation determines in good
faith that for any reason the Corporation cannot determine
the Treasury Bill Rate for any Dividend Period as provided
above in this Paragraph, the Treasury Bill Rate for such
Dividend Period will be the arithmetic average of the per
annum market discount rates based upon the closing bids
during such Calendar Period for each of the issues of
marketable interest bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily
quotations are not generally available) to the Corporation
by at least two recognized dealers in U.S. Government
securities selected by the Corporation.
(5) Except as hereinafter provided in this Paragraph,
the "Two Year Constant Maturity Rate" for each Dividend
Period will
<PAGE 7>
be the arithmetic average of the two most recent weekly per
annum Two Year Average Yields (or the one weekly per annum
Two Year Average Yield, if only one such Yield is published
during the relevant Calendar Period), as published by the
Board of Governors of the Federal Reserve System during the
Calendar Period immediately prior to the ten calendar days
immediately preceding the Dividend Period for which the
dividend rate on this Series is being determined. If the
Board of Governors of the Federal Reserve System does not
publish such a weekly per annum Two Year Average Yield
during any such Calendar Period, then the Two Year Constant
Maturity Rate for such Dividend Period will be the
arithmetic average of the two most recent weekly per annum
Two Year Average Yields (or the one weekly per annum Two
Year Average Yield, if only one such Yield is published
during the relevant Calendar Period), as published during
such Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the
Corporation. If a per annum Two Year Average Yield is not
published by the Board of Governors of the Federal Reserve
System or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period,
then the Two Year Constant Maturity Rate for such Dividend
Period will be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one
weekly average yield to maturity, if only one such yield is
published during the relevant Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) then having
maturities of not less than 1.5 years nor more than 2.5
years, as published during such Calendar Period by the Board
of Governors of the Federal Reserve System or, if the Board
of Governors of the Federal Reserve System does not publish
such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation.
If the Corporation determines in good faith that for any
reason the Corporation cannot determine the Two Year
Constant Maturity Rate for any Dividend Period as provided
above in this Paragraph, the Two Year Constant Maturity Rate
for such Dividend Period will be the arithmetic average of
the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities)
with a final maturity date not less than 1.5 years nor more
than 2.5 years from the date of such quotation, as quoted
daily for each business day in New York City (or less
frequently if daily quotations are not generally available)
to the Corporation by at least two recognized dealers in
U.S. Government securities selected by the Corporation.
(6) Except as hereinafter provided in this Paragraph,
the "Ten Year Constant Maturity Rate" for each Dividend
Period will be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one weekly
per annum Ten Year Average Yield, if only one such Yield is
published during the relevant Calendar Period), as published
by the Board of Governors
<PAGE 8>
of the Federal Reserve System during the Calendar Period
immediately prior to the ten calendar days immediately
preceding the Dividend Period for which the dividend rate on
this Series is being determined. If the Board of Governors
of the Federal Reserve System does not publish such a weekly
per annum Ten Year Average Yield during any such Calendar
Period, then the Ten Year Constant Maturity Rate for such
Dividend Period will be the arithmetic average of the two
most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one
such Yield is published during the relevant Calendar
Period), as published during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. If a per annum Ten Year
Average Yield is not published by the Board of Governors of
the Federal Reserve System or by any Federal Reserve Bank or
by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate
for such Dividend Period will be the arithmetic average of
the two most recent weekly per annum average yields to
maturity (or the one weekly average yield to maturity, if
only one such yield is published during the relevant
Calendar Period) for all of the actively traded marketable
U.S. Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less than
eight nor more than twelve years, as published during such
Calendar Period by the Board of Governors of the Federal
Reserve System or, if the Board of Governors of the Federal
Reserve System does not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. If the Corporation determines
in good faith that for any reason the Corporation cannot
determine the Ten Year Constant Maturity Rate for any
Dividend Period as provided above in this Paragraph, the Ten
Year Constant Maturity Rate for such Dividend Period will be
the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable
U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than
eight nor more than twelve years from the date of such
quotation, as quoted daily for each business day in New York
City (or less frequently if daily quotations are not
generally available) to the Corporation by at least two
recognized dealers in U.S. Government securities selected by
the Corporation.
(7) Except as provided below in this Paragraph, the
"Thirty Year Constant Maturity Rate" for each Dividend
Period will be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields (or the one
weekly per annum Thirty Year Average Yield, if only one such
Yield is published during the relevant Calendar Period), as
published by the Board of Governors of the Federal Reserve
System during the Calendar Period immediately prior to the
ten calendar days immediately preceding the Dividend Period
for which the dividend rate on this Series is being
determined. If the Board of Governors of
<PAGE 9>
the Federal Reserve System does not publish such a weekly
per annum Thirty Year Average Yield during any such Calendar
Period, then the Thirty Year Constant Maturity Rate for such
Dividend Period will be the arithmetic average of the two
most recent weekly per annum Thirty Year Average Yields (or
the one weekly per annum Thirty Year Average Yield, if only
one such Yield is published during the relevant Calendar
Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. If a per
annum Thirty Year Average Yield is not published by the
Board of Governors of the Federal Reserve System or by any
Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Thirty Year
Constant Maturity Rate for such dividend period will be the
arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield
to maturity, if only one such yield is published during the
relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) then having maturities of
not less than twenty-eight nor more than thirty-two years,
as published during such Calendar Period by the Board of
Governors of the Federal Reserve System or, if the Board of
Governors of the Federal Reserve System does not publish
such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation.
If the Corporation determines in good faith that for any
reason the Corporation cannot determine the Thirty Year
Constant Maturity Rate for any Dividend Period as provided
above in this Paragraph, then the Thirty Year Constant
Maturity Rate for such Dividend Period will be the
arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable
U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than
twenty-eight nor more than thirty-two years from the date of
each such quotation, as quoted daily for each business day
in New York City (or less frequently if daily quotations are
not generally available) to the Corporation by at least two
recognized dealers in U.S. Government securities selected by
the Corporation.
(8) As used herein, the term "Calendar Period" means a
period of fourteen calendar days; the term "Special
Securities" means securities which can, at the option of the
holder, be surrendered at face value in payment of any
federal estate tax or which provide tax benefits to the
holder and are priced to reflect such tax benefits or which
were originally issued at a deep or substantial discount;
the term "Two Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of
two years); the term "Ten Year Average Yield" means the
average yield to maturity for actively traded marketable
U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years); and the term "Thirty Year
<PAGE 10>
Average Yield" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of thirty
years).
(9) Notwithstanding the provisions of Paragraphs l, 2
and 3 above, in no event shall the dividend rate be less
than 6% or more than 12%.
(10) The dividend rate payable pursuant to Section (c),
Paragraph (1), is based upon the assumptions that for
federal income tax purposes the dividends received deduction
("DRD") provided by Section 243(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code") for domestic
corporations (including without limitation, a "bank" within
the meaning of Section 581 of the Code or a domestic
corporation which is a "bank holding company" within the
meaning of the Bank Holding Company Act of 1956, as amended
and in effect on May 12, 1989) receiving dividends from
certain domestic corporations, will remain in effect at 70%
through March 31, 1992 (the "Termination Date"). If there
is an amendment to the Code that would result in the
assumptions set forth in the preceding sentence being
inaccurate, the otherwise applicable annualized dividend
rate on this Series payable to any holder of this Series
will, with respect to each dividend paid on this Series for
any Dividend Period commencing prior to the Termination
Date, be increased by .026% for each 1% decrease in the DRD
rate and decreased by .026% for each 1% increase in the DRD
rate applicable to the Dividend Period for the dividend in
question in each case in comparison to the 70% DRD rate in
effect on May 12, 1989.
(d) Redemption.
(1) The Corporation, at its option, may redeem shares of
this Series, as a whole or in part, on the date of the
second anniversary of the date of original issuance and from
time to time thereafter, at a redemption price of $100 per
share, plus accrued and unpaid dividends thereon to the date
fixed for redemption.
(2) In the event that fewer than all the outstanding
shares of this Series are to be redeemed, the number of
shares to be redeemed shall be determined by the Board of
Directors of the Corporation or by any duly authorized
committee thereof and the shares to be redeemed shall be
determined by lot or pro rata as may be determined by the
Board of Directors of the Corporation or by any duly
authorized committee thereof or by any other method as may
be determined by the Board of Directors of the Corporation
or by any duly authorized committee thereof in its sole
discretion to be equitable, provided that such method
satisfies any applicable requirements of any securities
exchange on which this Series is listed.
(3) In the event the Corporation shall redeem shares of
<PAGE 11>
this Series, notice of such redemption shall be given by
first class mail, postage prepaid, mailed not less than 30
nor more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock register
of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares of this Series to
be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv)
the place or places where certificates for such shares are
to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease
to accrue on the redemption date.
(4) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by
the Corporation in providing money for the payment of the
redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares
shall no longer be deemed to be outstanding, and all rights
of the holders thereof as shareholders of the Corporation
(except the right to receive from the Corporation the
redemption price plus any accrued and unpaid dividends)
shall cease. Upon surrender in accordance with said notice
of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors
of the Corporation or any duly authorized committee thereof
shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the redemption price
aforesaid plus any accrued and unpaid dividends. In case
fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the
holder thereof.
(5) Any shares of this Series which shall at any time
have been redeemed shall, after such redemption, have the
status of authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once
more designated as part of a particular series by the Board
of Directors of the Corporation or any duly authorized
committee thereof.
(6) Notwithstanding the foregoing provisions of this
Section (d), if any dividends on this Series are in arrears,
no shares of this Series shall be redeemed unless all
outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or
otherwise acquire any shares of this Series; provided,
however, that the foregoing shall not prevent the purchase
or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders
of all outstanding shares of this Series.
(e) Conversion. The holders of shares of this Series
shall
<PAGE 12>
not have any rights to convert such shares into shares of
any other class or series of capital stock of the
Corporation.
(f) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, the
holders of the shares of this Series shall be entitled to
receive and to be paid out of the assets of the Corporation
available for distribution to its stockholders, before any
payment or distribution shall be made on the Common Stock or
on any other class of stock or series thereof ranking junior
to this Series upon liquidation, the amount of $100 per
share, plus a sum equal to all dividends (whether or not
earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) After the payment to the holders of the shares of
this Series of the amounts provided for in Paragraph (1) of
this Section (f), the holders of this Series as such shall
have no right or claim to any of the remaining assets of the
Corporation.
(3) In the event the assets of the Corporation
available for distribution to the holders of the shares of
this Series upon any dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary, shall
be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Paragraph (1) of this
Section (f), no such distribution shall be made on account
of any shares of any other class or series of Preferred
Stock ranking on a parity with the shares of this Series
upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account
of the shares of this Series, ratably, in proportion to the
full distributable amounts for which holders of all such
parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(4) The sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of
all or substantially all the property or assets of the
Corporation shall be deemed a voluntary dissolution,
liquidation or winding up of the Corporation for the
purposes of this Section (f); provided, however, that the
merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any
other corporation into or with the Corporation or the
transfer by the Corporation of all or substantially all
assets of the Corporation to any directly or indirectly
wholly owned subsidiary of the Corporation shall not be deemed
to be a dissolution, liquidation or winding up, voluntary
or involuntary, for the purposes of this Section (f).
(5) Upon the dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, the
holders of shares of this Series then outstanding shall be
entitled to be
<PAGE 13>
paid out of the assets of the Corporation available for
distribution to its stockholders all amounts to which such
holders are entitled pursuant to Paragraph (1) of this
Section (f) before any payment shall be made to the holders
of any class of capital stock of the Corporation ranking
junior to this Series upon liquidation.
(g) Ranking. For purposes hereof, any stock of any
class or series of the Corporation shall be deemed to rank:
(1) Prior to the shares of this Series, either as to
dividends or upon dissolution, liquidation or winding up, if
the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation,
as the case may be, in preference or priority to the holders
of shares of this Series;
(2) on a parity with shares of this Series, either as
to dividends or upon dissolution, liquidation or winding up,
whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or stated value
or sinking fund provisions, if any, be different from those
of this Series, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of
the Corporation, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this
Series; and
(3) junior to shares of this Series, either as to
dividends or upon dissolution, liquidation or winding up if
such class or series shall be Common Stock or if the holders
of shares of this Series shall be entitled to receipt of
dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case
may be, in preference or priority to the holders of shares
of such class or series.
(h) Voting Rights. The shares of this Series, except as
otherwise required by law, shall not have any voting powers
either general or special. The authorization of any action
by shares of this Series, if so entitled to vote, shall be
by a majority of votes cast at a meeting by the holders of
this Series entitled to vote thereon.
E.(a) Designation and Amount. There is created a
series of Preferred Stock the description of which shall be
"Series B Junior Participating Preferred Stock" (hereinafter
sometimes referred to as this "Series B Preferred Stock")
and the number of shares constituting such Series B
Preferred Stock shall be Five Hundred Thousand (500,000).
The number of authorized shares of this Series B Preferred
Stock may be reduced or increased by
<PAGE 14>
further resolution duly adopted by the Board of Directors of
the Corporation or any duly authorized committee thereof and
by the filing of a certificate pursuant to the provisions of
the New Jersey Business Corporation Act stating that such
reduction or increase has been so authorized.
(b) Dividends and Distributions.
(1) Dividend periods ("Dividend Periods") shall
commence on January 1, April 1, July 1 and October 1 in each
year and shall end on and include the day next preceding the
first day of the next Dividend Period. Subject to the prior
and superior rights of the holders of any shares of any
series of Preferred Stock ranking prior and superior to the
shares of this Series B Preferred Stock with respect to
dividends, the holders of shares of this Series B Preferred
Stock shall be entitled to receive quarterly dividends,
which shall be payable, when, as and if declared by the
Board of Directors out of funds legally available for such
purpose, on such date (the "Quarterly Dividend Payment
Date") as is no later than the twentieth day immediately
following the end of each Dividend Period commencing on the
first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of this Series B
Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10.00 (the
"Series B Minimum Quarterly Dividend") or (b) subject to the
provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions other than
a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or
fraction of a share of Series B Preferred Stock. In the
event the Corporation shall at any time after February 23,
1990 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which
holders of shares of this Series B Preferred Stock were
entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event. The Board of Directors may fix a record date
for the determination of holders of shares of this Series B
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no
more than 30 days prior to the date fixed for the payment
thereof. Dividends on account of arrears for any
<PAGE 15>
past Dividend Periods may be declared and paid at any time,
without reference to any such Dividend Payment Date, to
holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the
Board of Directors of the Corporation or any duly authorized
committee thereof.
(2) The Corporation shall declare a dividend or
distribution on this Series B Preferred Stock as provided in
paragraph (b)(l) above immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10.00 per
share on the Series B Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on
outstanding shares of this Series B Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares of this Series B Preferred Stock,
unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of
shares of this Series B Preferred Stock entitled to receive
a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of this
Series B Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding.
(c) Voting. Except as otherwise required by law, this
Series B Preferred Stock shall not have any voting powers
either general or special. The authorization of any action
by shares of this Series B Preferred Stock, if so entitled
to vote, shall be by a majority of votes cast at a meeting
by the holders of this Series B Preferred Stock entitled to
vote thereon.
(d) Certain Restrictions.
(1) No dividends shall be declared or paid or set
apart for payment on any shares of any class of stock or
series thereof ranking, as to dividends, on a parity with or
junior to this Series B Preferred Stock for any period
unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart
<PAGE 16>
for such payment on this Series B Preferred Stock for all
dividend payment periods terminating on or prior to the date
of payment of such full cumulative dividends. When
dividends are not paid in full, as aforesaid, upon shares of
this Series B Preferred Stock and any other shares of any
class of stock or series thereof ranking on a parity as to
dividends with this Series B Preferred Stock, all dividends
declared upon shares of this Series B Preferred Stock and
any other shares of any class of stock or series thereof
ranking on a parity as to dividends with this Series B
Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on this Series B
Preferred Stock and such other class or series shall in all
cases bear to each other the same ratio that accrued
dividends per share on this Series B Preferred Stock and
such other class or series bear to each other. Holders of
shares of this Series B Preferred Stock shall not be
entitled to any dividend whether payable in cash, property
or stock, in excess of full cumulative dividends, as herein
provided, on this Series B Preferred Stock. No interest, or
sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments which may be in
arrears.
(2) Unless full cumulative dividends on all
outstanding shares of this Series B Preferred Stock shall
have been paid or declared and set aside for payment for all
past Dividend Periods, no Common Stock or any other stock of
the Corporation ranking junior to or on a parity with this
Series B Preferred Stock as to dividends or upon liquidation
shall be redeemed, purchased or otherwise acquired for any
consideration (or moneys be paid to or made available for a
sinking fund for the redemption of any such shares) by the
Corporation except by conversion into or exchange for stock
of the Corporation ranking junior to this Series B Preferred
Stock as to dividends and upon liquidation and except for
any redemption, purchase or other acquisition pursuant to
any present or future plan applicable to former, present or
future directors, officers or employees of the Corporation
or any of its direct or indirect subsidiaries (including,
but not limited to any stock option plan, stock option
agreement, stock purchase plan, employees' savings or profit
sharing plan or other incentive or benefit plan providing
for the sale or other issuance of any stock by the
Corporation) or pursuant to any present or future dividend
reinvestment plan of the Corporation, or any acquisition by
the Corporation of any debt or Preferred Stock of the
Corporation convertible into Common Stock, or any
acquisition of any Common Stock or Preferred Stock by any
subsidiary of the Corporation in the ordinary course of its
business.
(e) Reacquired Shares. Any shares of this Series B
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation have the status of
<PAGE 17>
authorized but unissued shares of Preferred Stock, without
designation as to series, until such shares are once more
designated by the Board of Directors of the Corporation or
any duly authorized committee thereof, subject to the
conditions and restrictions on issuance set forth herein.
(f) Liquidation, Dissolution or Winding Up.
(1) Upon the dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, the
holders of the shares of this Series B Preferred Stock shall
be entitled to receive and to be paid out of the assets of
the Corporation available for distribution to its
stockholders, before any payment or distribution shall be
made on the Common Stock or on any other class of stock or
series ranking junior to this Series B Preferred Stock upon
liquidation, the amount of $100 per share, plus a sum equal
to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final
distribution (the "Series B Liquidation Preference").
Following the payment of the full amount of the Series B
Liquidation Preference, no additional distributions shall be
made to the holders of shares of this Series B Preferred
Stock unless, prior to any such additional distribution, the
holders of shares of Common Stock shall have received an
amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series B Liquidation
Preference by (ii) 100 (as appropriately adjusted as set
forth in subparagraph 5 below to reflect such events as
stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full
amount of the Series B Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of this
Series B Preferred Stock and Common Stock, respectively,
holders of this Series B Preferred Stock and holders of
shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with
respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(2) In the event the assets of the Corporation available
for distribution to the holders of the shares of this Series
B Preferred Stock upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all
amounts to which such holders are entitled pursuant to
Paragraph (1) of this Section (f), no such distribution
shall be made on account of any shares of any other class or
series of Preferred Stock ranking on a parity with the
shares of this Series B Preferred Stock upon such
dissolution, liquidation or winding up unless proportionate
distributive amounts shall be paid on account of the shares
of this Series B Preferred Stock, ratably, in proportion to
the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such
dissolution, liquidation or
<PAGE 18>
winding up.
(3) The sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of
all or substantially all the property or assets of the
Corporation shall be deemed a voluntary dissolution,
liquidation or winding up of the Corporation for the
purposes of this Section (f); provided, however, that the
merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any
other corporation into or with the Corporation or the
transfer by the Corporation of all or substantially all
assets of the Corporation to any directly or indirectly
wholly owned subsidiary of the Corporation shall not be
deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section (f).
(4) Upon the dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, the
holders of shares of this Series B Preferred Stock then
outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its
stockholders an amount equal to the Series B Liquidation
Preference before any payment shall be made to the holders
of any class of capital stock of the Corporation ranking
junior to this Series upon liquidation.
(5) In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(g) Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case the shares of this Series B Preferred Stock shall
at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the amount set
<PAGE 19>
forth in the preceding sentence with respect to the exchange
or change of shares of this Series B Preferred Stock shall
be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(h) No Redemption. The shares of this Series B
Preferred Stock shall not be redeemable.
(i) Ranking. This Series B Preferred Stock shall rank
junior to the Series A Preferred Stock and to all other
series of the Corporation's Preferred Stock as to the
receipt of dividends and of amounts distributable upon
dissolution, liquidation or winding up of the Corporation,
as the case may be, unless the terms of any such series
shall provide otherwise. This Series B Preferred Stock
shall rank prior to the Common Stock as to the receipt of
dividends and of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case
may be, with respect to the Series B Minimum Quarterly
Dividend and the Series B Liquidation Preference, and
otherwise shall rank on a parity with the Common Stock.
(j) Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which
would materially alter or change the powers, preferences or
special rights of this Series B Preferred Stock so as to
affect them adversely without the affirmative vote of the
holders of a majority or more of the outstanding shares of
this Series B Preferred Stock, voting separately as a class.
(k) Fractional Shares. This Series B Preferred Stock
may be issued in fractions of a share which shall entitle
the holder, in proportion to such holders fractional shares,
to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of this Series B Preferred Stock.
FOURTH: The corporation shall indemnify to the full
extent from time to time permitted by law any person made,
or threatened to be made, a party to, or a witness or other
participant in, any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal,
administrative, arbitrative, legislative, investigative or
of any other kind, by reason of the fact that such person is
or was a director, officer, employee or other agent of the
corporation or any subsidiary of the corporation or serves
or served any other enterprise at the request of the
corporation (including service as a fiduciary with respect
to any employee benefit plan) against expenses, judgments,
fines, penalties and amounts paid in settlement (including
amounts paid pursuant to judgments or settlements in
derivative actions), actually and reasonably incurred by
such
<PAGE 20>
person in connection with such action, suit or proceeding,
or any appeal therein. The rights provided by this Article
FOURTH to any person shall inure to the benefit of such
person's legal representative. Neither the amendment or
repeal of this Article FOURTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent
with this Article FOURTH, shall deprive any person of rights
hereunder arising out of any matter which occurred prior to
such amendment, repeal or adoption.
FIFTH: The address of the corporation's registered
office is Metro Park Plaza, P.O. Box 600, 499 Thornall
Street, Edison, New Jersey 08818, and the name of the
corporation's registered agent at such address is Joseph H.
Kott.
SIXTH: The current Board of Directors of the
corporation consists of sixteen persons and the names and
addresses of the persons who currently serve as the
directors of the corporation are as follows:
Charles E. Ehinger
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
David F. Girard-diCarlo
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Frederick C. Haab
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Kevork S. Hovnanian
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Arthur J. Kania
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
<PAGE 21>
Aubrey C. Lewis
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
David F. McBride
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Desmond P. McDonald
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
William E. McKenna
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Roy T. Peraino
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Ernest L. Ransome, III
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
B. P. Russell
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
<PAGE 22>
Garry J. Scheuring
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Fred R. Sullivan
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Marcy Syms
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Harold L. Yoh, Jr.
c/o Secretary
Midlantic Corporation
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
The by-laws shall specify the number of directors other than
the number constituting the first board, and any directorship
to be filled by reason of an increase in the number of
directors may be filled by the board.
The board of directors, by resolution adopted by a majority of
the entire board, may appoint from among its members an
executive committee which shall have and may exercise all the
authority of the board except as otherwise expressly provided
by law, and one or more other committees which shall have such
authority as may be delegated by the board.
SEVENTH:
A. The merger or consolidation of this corporation with
any other corporation or the sale, lease, exchange or other
disposition of all or substantially all the assets of this
corporation may be effected only if, in addition to any
affirmative vote required by law or otherwise, such transaction
shall have been approved by the affirmative vote of not less
than eighty percent (80%) of the votes entitled to be cast by
the holders of all then outstanding shares of Voting Stock,
voting together as a single class; provided, however, that such
additional voting requirement shall not be applicable in the
event that the transaction shall have been approved by not less
than the greater of (a) three-fourths of the Disinterested
<PAGE 23>
Directors or (b) three Disinterested Directors; and provided,
further, that this Article SEVENTH shall not be applicable to a
Business Combination, as defined in Article EIGHTH hereof.
B. For purposes of this Article SEVENTH:
1. The term "Disinterested Director" means any member of
the Board of Directors of this corporation, while such person
is a member of the Board, who is not an Affiliate, Associate or
Representative of any party to the transaction (other than this
corporation or a corporation all of the capital stock of which,
except for directors' qualifying shares, is beneficially owned
directly or indirectly by this corporation) and either was
named as a director in the Certificate of Incorporation filed
in the office of the Secretary of State of New Jersey on March
20, 1986 or was recommended for election to the Board, or
elected to fill a vacancy on the Board, by a majority of the
then Disinterested Directors.
2. The terms "Voting Stock", "Affiliate" and "Associate"
have the meanings set forth in Article EIGHTH hereof.
C. A majority of the Disinterested Directors shall have
the power and duty to determine for the purposes of this
Article SEVENTH, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine
compliance with this Article SEVENTH.
D. The affirmative vote of not less than eighty percent
(80%) of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock, voting together as a
single class, shall be required to amend or repeal, or adopt
any provisions inconsistent with, this Article SEVENTH.
EIGHTH: Business Combinations.
A. Higher Vote for Business Combinations. In addition to
any affirmative vote required by law or otherwise, and except
as otherwise expressly provided in Section B of this Article
EIGHTH, a Business Combination (as hereinafter defined) shall
require the affirmative vote of not less than eighty percent
(80%) of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock (as hereinafter
defined), voting together as a single class. Such affirmative
vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage or separate class
vote may be specified, by law or otherwise.
B. When Higher Vote Not Required. The provisions of
Section A of this Article EIGHTH shall not be applicable to a
particular Business Combination if the conditions specified in
either of the following paragraphs 1 or 2 are met:
<PAGE 24>
1. Approval by Continuing Directors. The Business
Combination shall have been approved by not less than three-
fourths of the Continuing Directors (as hereinafter defined).
2. Price, Form of Consideration and Procedural
Requirements. All of the following conditions shall have been
met:
(a) The transaction constituting the Business Combination
shall provide for a consideration to be received by all holders
of Common Stock in exchange for all of their shares of Common
Stock, and the aggregate amount of cash and the Fair Market
Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration other
than cash to be received per share in such Business Combination
by holders of Common Stock shall be at least equal to the
highest amount determined under clauses (i), (ii) and (iii)
below:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealer's fees) paid by or on behalf of the
Interested Shareholder for any share of Common Stock in
connection with the acquisition by the Interested Shareholder
of beneficial ownership of Common Stock (x) within the two-year
period immediately prior to the date of the first public
announcement of the proposed Business Combination (the
"Announcement Date") or (y) in the transaction in which it
became an Interested Shareholder, whichever is higher, in
either case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to
Common Stock;
(ii) the Fair Market Value per share of Common Stock
on the second business day after the Announcement Date or on
the date on which an Interested Shareholder became an
Interested Shareholder (the "Determination Date"), whichever is
higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to
Common Stock; or
(iii) the highest Fair Market Value per share of
Common Stock on any date during the period from (x) a date 30
days after the later of the Announcement Date and the
Determination Date to (y) the date on which the proxy or
information statement referred to in Paragraph 2(f) is mailed
to the shareholders of this corporation, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock.
(b) If the transaction constituting the Business
Combination shall provide for a consideration to be received by
holders of any class or series of outstanding Capital Stock (as
hereinafter defined) other than Common Stock, the aggregate
amount of cash and the Fair Market Value as of the date of the
consummation of the Business Combination of consideration other
<PAGE 25>
than cash to be received per share in such Business Combination
by holders of such class or series of Capital Stock shall be at
least equal to the highest amount determined under clauses (i),
(ii), (iii) and (iv) below:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the
Interested Shareholder for any share of such class or series of
Capital Stock in connection with the acquisition by the
Interested Shareholder of beneficial ownership of such class or
series of Capital Stock (x) within the two-year period
immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Shareholder,
whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of
Capital Stock;
(ii) the Fair Market Value per share of such class
or series of Capital Stock on the second business day after the
Announcement Date or on the Determination Date, whichever is
higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such
class or series of Capital Stock;
(iii) the highest Fair Market Value per share of
such class or series of Capital Stock on any date during the
period from (x) a date 30 days after the later of the
Announcement Date and the Determination Date to (y) the date on
which the proxy or information statement referred to in
Paragraph 2(f) is mailed to the shareholders of this
corporation, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such
class or series of Capital Stock; or
(iv) (if applicable) the highest preferential amount
per share to which the holders of shares of such class or
series of Capital Stock would be entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of this corporation, regardless of whether the
Business Combination to be consummated constitutes such an
event.
The provisions of this Paragraph 2(b) shall be required to be
met with respect to every class or series of outstanding
Capital Stock other than Common Stock, whether or not the
Interested Shareholder has previously acquired beneficial
ownership of any shares of a particular class or series of
Capital Stock.
(c) The consideration to be received by holders of a
particular class or series of outstanding Capital Stock shall
be in cash or in the same form as previously has been paid by
or on behalf of the Interested Shareholder in connection with
its direct or indirect acquisition of beneficial ownership of
shares
<PAGE 26>
of such class or series of Capital Stock. If the consideration
so paid for shares of any class or series of Capital Stock
varied as to form, the form of consideration for such class or
series of Capital Stock shall be either cash or the form used
to acquire beneficial ownership of the largest number of shares
of such class or series of Capital Stock previously acquired by
the Interested Shareholder.
(d) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination: (i) except as approved by a majority of
the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) payable in accordance
with the terms of any outstanding Capital Stock; (ii) there
shall have been (x) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to
reflect any stock dividend or subdivision of the Common Stock)
other than as approved by a majority of the Continuing
Directors and (y) an increase in such annual rate of dividends
as necessary to prevent any such reduction in the event of any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding
shares of Common Stock, unless the failure so to increase such
annual rate is approved by a majority of the Continuing
Directors; (iii) such Interested Shareholder shall not have
become the beneficial owner of any additional shares of Capital
Stock except as part of the transaction that results in such
Interested Shareholder becoming an Interested Shareholder and
except in a transaction that, after giving effect thereto,
would not result in any increase in the Interested
Shareholder's percentage beneficial ownership of any class or
series of Capital Stock.
(e) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder of this corporation), of any
loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided
by this corporation or any Subsidiary, whether in anticipation
of or in connection with such Business Combination or
otherwise.
(f) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (the "Act") (or any subsequent
provisions replacing such Act, rules or regulations) shall be
mailed to all shareholders of this corporation at least 30 days
prior to the consummation of such Business Combination (whether
or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions). The
proxy or information statement shall contain on the first page
thereof, in a prominent
<PAGE 27>
place, any statement as to the advisability (or inadvisability)
of the Business Combination that the Continuing Directors, or
any of them, may choose to make and, if deemed advisable by a
majority of the Continuing Directors, the opinion of an
investment banking firm selected by a majority of the
Continuing Directors as to the fairness (or not) of the terms
of the Business Combination from a financial point of view to
the holders of the outstanding shares of Capital Stock of this
corporation other than the Interested Shareholder and its
Affiliates or Associates (as hereinafter defined), such
investment banking firm to be paid a reasonable fee for its
services by this corporation.
(g) Such Interested Shareholder shall not have made any
major change in the business or equity capital structure of
this corporation or any Subsidiary without the approval of a
majority of the Continuing Directors.
(h) The Business Combination shall have been approved by
not less than a majority of the entire Board of Directors.
(i) The Board of Directors of this corporation shall at
all times include not less than four Continuing Directors.
C. Certain Definitions. For the purposes of this Article
EIGHTH:
1. "Business Combination". The term "Business
Combination" shall mean:
(a) any merger or consolidation of this corporation or
any Subsidiary (as hereinafter defined) with (i) any Interested
Shareholder or (ii) any other corporation (whether or not
itself an Interested Shareholder) which is or after such merger
or consolidation would be an Affiliate or Associate of an
Interested Shareholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of
transactions) to, with or by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder involving
any assets (including cash) or securities of this corporation,
any Subsidiary or any Interested Shareholder or any Affiliate
or Associate of any Interested Shareholder having an aggregate
Fair Market Value of $20,000,000 or more; or
(c) the adoption of any plan or proposal for the
liquidation or dissolution of this corporation proposed by or
on behalf of an Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder; or
(d) any reclassification of securities (including any
reverse stock split), or recapitalization of this corporation,
or
<PAGE 28>
any merger or consolidation of this corporation with any of its
Subsidiaries or any other transaction (whether or not with or
otherwise involving an Interested Shareholder) that has the
effect, directly or indirectly, of increasing the proportionate
share of any class or series of Capital Stock, or any
securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder; or
(e) any agreement, contract or other arrangement
providing for any one or more of the actions specified in the
foregoing clauses (a) to (d).
2. "Capital Stock"; "Voting Stock". The term "Capital
Stock" shall mean all capital stock of this corporation
authorized to be issued from time to time under Article THIRD
of this Certificate of Incorporation, and the term "Voting
Stock" shall mean all Capital Stock which by its terms may be
voted on all matters submitted to shareholders of this
corporation generally.
3. "Person". The term "person" shall mean any
individual, firm, corporation or other entity and shall include
any group comprised of any person and any other person with
whom such person or any Affiliate or Associate of such person
has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or
disposing of Capital Stock.
4. "Interested Shareholder". The term "Interested
Shareholder" shall mean any person (other than this
corporation, the incorporator of this corporation or any
Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of this corporation or
any Subsidiary or any trustee of or fiduciary with respect to
any such plan when acting in such capacity) who (a) is the
beneficial owner of Voting Stock representing ten percent (10%)
or more of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock, or (b) is an Affiliate
or Associate of this corporation and at any time within the
two-year period immediately prior to the date in question was
the beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock or the then
outstanding voting Common Stock of the incorporator of this
corporation or (c) is an assignee of or has otherwise succeeded
to the beneficial ownership of any shares of Voting Stock which
were at any time within the two-year period immediately prior
to the date in question beneficially owned by an Interested
Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
<PAGE 29>
5. "Beneficial Owner". A person shall be a "beneficial
owner" of any Capital Stock (a) which such person or any of its
Affiliates or Associates owns, directly or indirectly; (b)
which such person or any of its Affiliates or Associates has,
directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the passage
of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (ii) the
right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are owned, directly or indirectly,
by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Shareholder
pursuant to Paragraph 4 of this Section C, the number of shares
of Capital Stock deemed to be outstanding shall include shares
deemed beneficially owned by such person through application of
this Paragraph 5, but shall not include any other shares of
Capital Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
6. "Affiliate"; "Associate". The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 under the Act as in effect on December 31,
1985 (the term "registrant" in said Rule 12b-2 meaning in this
case this corporation).
7. "Subsidiary". The term "Subsidiary" means any
corporation of which a majority of any class of equity security
is beneficially owned by this corporation; provided, however,
that for the purposes of the definition of Interested
Shareholder set forth in Paragraph 4 of this Section C, the
term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is beneficially owned
by this corporation.
8. "Continuing Director". The term "Continuing Director"
means any member of the Board of Directors of this corporation,
while such person is a member of the Board, who is not an
Affiliate or Associate or representative of the Interested
Shareholder and either was named as a director in the
Certificate of Incorporation filed in the office of the
Secretary of State of New Jersey on March 20, 1986 or was
recommended for election to the Board, or elected to fill a
vacancy on the Board, by a majority of the then Continuing
Directors.
9. "Fair Market Value". The term "Fair Market Value"
means (a) in the case of cash, the amount of such cash; (b) in
the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange-Listed
<PAGE 30>
Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed
on such Exchange, on the principal United States securities
exchange registered under the Act on which such stock is
listed, or, if such stock is not listed on any such exchange,
the highest sale price, or if not available the highest closing
bid quotation, with respect to a share of such stock during the
30-day period preceding the date in question, in each case on
the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or if no
such prices or quotations are available, the fair market value
on the date in question of a share of such stock as determined
by a majority of the Continuing Directors in good faith; and
(c) in the case of property other than cash or stock, the fair
market value of such property on the date in question as
determined in good faith by a majority of the Continuing
Directors.
10. "Consideration Other than Cash to be Received". In
the event of any Business Combination described in Paragraph
1(a) of Section C of this Article EIGHTH in which this
corporation survives, the phrase "consideration other than cash
to be received" as used in Paragraphs 2(a) and 2(b) of Section
B of this Article EIGHTH shall include the shares of Common
Stock and/or the shares of any other class or series of Capital
Stock retained by the holders of such shares.
D. Powers and Duties of Continuing Directors. A majority
of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article EIGHTH, on the basis
of information known to them after reasonable inquiry, all
facts necessary to determine compliance with this Article
EIGHTH, including: (a) whether a person is an Interested
Shareholder, (b) the number of shares of Capital Stock or other
securities beneficially owned by any person, (c) whether a
person is an Affiliate, Associate or representative of another,
(d) whether the assets that are the subject of any Business
Combination have, or the consideration to be received for the
issuance or transfer of securities by this corporation or any
Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $20,000,000 or more, (e) whether the
requirements of Section B of this Article EIGHTH have been met
and (f) such other matters with respect to which a
determination is required under this Article EIGHTH. Any such
determination made in good faith shall be binding and
conclusive on all parties.
E. No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article EIGHTH shall
be construed to relieve any Interested Shareholder from any
fiduciary obligation imposed by law.
F. Effect on Obligations of Board of Directors. The fact
that any Business Combination complies with the provisions of
Section B of this Article EIGHTH shall not be construed to
impose
<PAGE 31>
any fiduciary duty, obligation or responsibility on the Board
of Directors, or any member thereof, to approve such Business
Combination or recommend its adoption or approval to the
shareholders of this corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board,
or any member thereof, with respect to evaluations of or
actions and responses taken with respect to such Business
Combination.
G. Amendment, Repeal, etc. The affirmative vote of not
less than eighty percent (80%) of the votes entitled to be cast
by the holders of all then outstanding shares of Voting Stock,
voting together as a single class, shall be required to amend
or repeal, or adopt any provisions inconsistent with, this
Article EIGHTH; provided, however, that, this Section G shall
not apply to, and such eighty percent (80%) vote shall not be
required for, any amendment, repeal or adoption unanimously
recommended by the Board if all of such directors are persons
who would be eligible to serve as Continuing Directors within
the meaning of Section C, Paragraph 8 of this Article EIGHTH.
NINTH: To the full extent from time to time permitted by
law, no director or officer of the corporation shall be
personally liable to the corporation or its shareholders for
damages for breach of any duty owed to the corporation or its
shareholders. Neither the amendment or repeal of this Article
NINTH, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article NINTH, shall
eliminate or reduce the protection afforded by this Article
NINTH to a director or officer of the corporation in respect to
any matter which occurred, or any cause of action, suit or
claim which but for this Article NINTH would have accrued or
arisen, prior to such amendment, repeal or adoption.
IN WITNESS WHEREOF, Midlantic Corporation has caused this
Restated Certificate of Incorporation to be executed on its
behalf by the undersigned duly authorized officer as of the
22nd day of March, 1995.
MIDLANTIC CORPORATION
By: /s/ John M. Sperger
_________________________
John M. Sperger
Senior Vice President &
Secretary
<PAGE 1>
EXHIBIT 3(b)
____________
BY-LAWS
of
MIDLANTIC CORPORATION
As Amended and Restated through September 16, 1992
As Amended February 16, 1995
<PAGE 2>
TABLE OF CONTENTS
Page
ARTICLE I
SHAREHOLDERS
Section 1 Annual Meeting; Notice of
Shareholder Business 1
Section 2 Special Meetings 2
Section 3 Record Date for Meetings
and Other Purposes 3
Section 4 Notice of Meetings 4
Section 5 Quorum at Meetings 4
Section 6 Presiding Officer and Secretary 5
Section 7 Inspectors 5
Section 8 Voting 7
Section 9 Nominations 8
ARTICLE II
BOARD OF DIRECTORS
Section 1 General Powers 9
Section 2 Number of Directors 10
Section 3 Election and Term of Directors 10
Section 4 Vacancies and Newly Created
Directorships 11
Section 5 Resignations 11
Section 6 Meetings 11
Section 7 Quorum and Voting 13
Section 8 Committees of the Board 13
Section 9 Notices and Meetings of Committees 14
Section 10 Quorum and Actions by Committee 15
Section 11 Resignations from Committees 16
Section 12 Compensation of Directors 16
Section 13 Action of Board or Committees
without a Meeting 16
Section 14 Telephone Conference Meetings
of the Board of Directors 17
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
Section 1 General Provisions 17
Section 2 Powers and Duties of the
Chairman of the Board 19
Section 3 Powers and Duties of the
Vice Chairman of the Board 19
Section 4 Powers and Duties of the President 19
Section 5 Powers and Duties of the
Chief Executive Officer 20
Section 6 Powers and Duties of Vice Presidents 20
<PAGE 3>
Section 7 Powers and Duties of the Secretary 21
Section 8 Powers and Duties of the Treasurer 21
Section 9 Powers and Duties of Assistant
Secretaries 22
Section 10 Powers and Duties of Assistant
Treasurers 22
Section 11 Powers and Duties of Other Officers 22
ARTICLE IV
SHARES OF THE CORPORATION
Section 1 Certificates for Shares 23
Section 2 Transfer Agents and Registrars 23
Section 3 Record of Shareholders 24
ARTICLE V
SEAL
24
ARTICLE VI
CHECKS, NOTES, DRAFTS, ETC.
25
ARTICLE VII
FISCAL YEAR
25
ARTICLE VIII
ACTION BY CORPORATION AS SHAREHOLDER
25
ARTICLE IX
AMENDMENTS
26
- (ii) -
<PAGE 4>
BY-LAWS
of
MIDLANTIC CORPORATION
ARTICLE I
Shareholders
Section 1. Annual Meeting; Notice of Shareholder
Business. The annual meeting of the shareholders of
the Corporation for the election of directors and the
transaction of such other business as may be properly
brought before the meeting shall be held at such time
and place, within or without the State of New Jersey,
as may be fixed by the Board and specified in the
notice of the meeting. At an annual meeting of the
shareholders, only such business shall be conducted as
shall have been properly brought before the meeting.
To be properly brought before an annual meeting
business must be (a) specified in the notice of meeting
(or any supplement thereto) given by or at the
direction of the Board, (b) otherwise properly brought
before the meeting by or at the direction of the Board,
or (c) otherwise properly brought before the meeting by
a shareholder. For business to be properly brought
before an annual meeting by a shareholder, the
shareholder must give timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a
shareholder's notice must be given either by personal
delivery or by United States mail, postage prepaid, to
the Secretary not later than 90 days prior to the
anniversary date of the immediately preceding annual
meeting. All such notices (except a notice to nominate
directors pursuant to Section 9 of this Article I)
shall set forth as to each matter the shareholder
proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought
before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as
they appear on the Corporation's books, of the
shareholder proposing such business, (c) the class and
number of shares of the Corporation's stock which are
beneficially owned by the shareholder and (d) any
material interest of the shareholder in such business.
No business shall be transacted at an annual meeting
except in accordance with the procedures set forth in
this Section 1.
Section 2. Special Meetings. Special meetings of
the shareholders may be called by the Board or the
Chief Executive Officer, and shall be called by the
Chief
<PAGE 5>
Executive Officer or the Secretary at the written
demand of the holders of at least 25% of all
outstanding shares entitled to vote on the action
proposed to be taken at such meeting, which demand
shall state the purpose or purposes of the proposed
meeting. Special meetings shall be held at such place
within or without the State of New Jersey as may be
specified in the notice thereof. At any special
meeting only such business may be transacted which is
related to the purpose or purposes set forth in the
notice thereof, but any special meeting may be called
and held in conjunction with an annual meeting of the
shareholders.
Section 3. Record Date for Meetings and Other
Purposes. For the purpose of determining the
shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or
to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any
dividend or allotment of any right, or for the purpose
of any other action, the Board may fix, in advance, a
date as the record date for any such determination of
shareholders. Such date shall not be more than sixty
nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
When a determination of shareholders of record
entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this Section,
such determination shall apply to any adjournment
thereof, unless the Board fixes a new record date under
this Section for the adjourned meeting.
Section 4. Notice of Meetings. Except as otherwise
provided by law, written notice of the time, place and
purpose or purposes of every meeting of shareholders
shall be given not less than ten nor more than sixty
days before the date of the meeting, either personally
or by mail, to each shareholder entitled to vote at the
meeting.
When a meeting is adjourned to another time or
place, it shall not be necessary to give notice of the
adjourned meeting if the time and place to which the
meeting is adjourned are announced at the meeting at
which the adjournment is taken and at the adjourned
meeting only such business is transacted as might have
been transacted at the original meeting. However, if
after the adjournment the Board fixes a new record date
for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record on
the new record date entitled to notice under this
Section.
<PAGE 6>
Section 5. Quorum at Meetings. Except as otherwise
provided by law or in the Certificate of Incorporation,
the holders of shares entitled to cast a majority of
the votes at a meeting of shareholders shall constitute
a quorum at such meeting for the transaction of
business, but the shareholders present may adjourn any
meeting to another time or place despite the absence of
a quorum. The shareholders present in person or by
proxy at a duly organized meeting may continue to do
business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a
quorum.
Whenever the holders of any class or series of
shares are entitled to vote separately on a specified
item of business, the provisions of this Section shall
apply in determining the presence of a quorum of such
class or series for the transaction of such specified
item of business.
Section 6. Presiding Officer and Secretary. At any
meeting of the shareholders, if neither the Chairman of
the Board, if there be one, nor the President nor a
Vice President nor a person designated by the Board to
preside at the meeting shall be present, the
shareholders shall appoint a presiding officer for the
meeting. If neither the Secretary nor an Assistant
Secretary shall be present, the appointee of the person
presiding at the meeting shall act as Secretary of the
meeting.
Section 7. Inspectors. The Board may, in advance
of any shareholders' meeting, appoint one or more
inspectors to act at the meeting or any adjournment
thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on
the request of any shareholder entitled to vote
thereat, shall make such appointment. In case any
person appointed as inspector fails to appear or act,
the vacancy may be filled by appointment made by the
Board in advance of the meeting or at the meeting by
the person presiding at the meeting. Each inspector,
before entering upon the discharge of the duties of
inspector, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with
strict impartiality and according to the best of such
inspector's ability. No person shall be elected a
director at a meeting at which such person has served
as an inspector.
The inspectors shall determine the number of shares
outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum
and the validity and effect of proxies, and shall
receive votes, hear and determine all challenges and
questions
<PAGE 7>
arising in connection with the right to vote, count and
tabulate all votes, determine the result, and do such
acts as are proper to conduct the election or vote with
fairness to all shareholders. If there are three or
more inspectors, the act of a majority shall govern.
On request of the person presiding at the meeting or
any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any
challenge, question or matter determined by them. Any
report made by them shall be prima facie evidence of
the facts therein stated, and such report shall be
filed with the minutes of the meeting.
Section 8. Voting. Whenever directors are to be
elected by the shareholders, they shall be elected by a
plurality of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote
for such directors. Whenever any action, other than
the election of directors, is to be taken by vote of
the shareholders, it shall, except as otherwise
required by law or in the Certificate of Incorporation,
be authorized by a majority of the votes cast at a
meeting of shareholders by the holders of shares
entitled to vote thereon.
Except as otherwise provided by the Certificate of
Incorporation, every holder of record of shares of the
Corporation entitled to vote on any matter at any
meeting of shareholders shall be entitled to one vote
for every such share standing in such shareholder's
name on the record of shareholders of the Corporation
on the record date for the determination of the
shareholders entitled to notice of or to vote at the
meeting. Elections of directors need not be by ballot
unless a shareholder demands election by ballot at the
election and before the voting begins; and otherwise
the method of voting at any election of directors or
upon any question before a meeting shall be
discretionary with the person presiding at the meeting.
Section 9. Nominations. Subject to any rights of
holders of stock having a preference over the Common
Stock as to dividends or upon liquidation, nominations
for the election of directors may be made by the Board,
by a committee appointed by the Board or by any
shareholder entitled to vote in the election of
directors generally. Any shareholder entitled to vote
in the election of directors generally may nominate one
or more persons for election as directors at a
shareholders' meeting only if written notice of such
shareholder's intent to make such nomination or
nominations has been given, either by personal delivery
or by United States mail, postage prepaid, to the
Secretary of the Corporation not later than (i) with
respect to an
<PAGE 8>
election to be held at an annual meeting of
shareholders, 90 days prior to the anniversary date of
the immediately preceding annual meeting, and (ii) with
respect to an election to be held at a special meeting
of shareholders for the election of directors, the
close of business on the tenth day following the date
on which notice of such meeting is first given to the
shareholders. Each such notice shall set forth: (a)
the name and address of the shareholder who intends to
make the nominations and of the person or persons to be
nominated; (b) each nominee's age and principal
occupation or employment; (c) the number of shares of
equity securities of the Corporation beneficially owned
by each nominee; (d) a representation that the
shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the
notice; (e) a description of all arrangements or
understandings between the shareholders and each
nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (f) such
other information regarding each nominee proposed by
such shareholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission; and (g) the
consent of each nominee to serve as a director of the
Corporation if so elected. A shareholder who does not
comply with the foregoing procedures may be precluded
from nominating a candidate for election as a director
at a meeting of shareholders.
ARTICLE II
Board of Directors
Section 1. General Powers. The business and affairs
of the Corporation shall be managed by or under the
direction of its Board of Directors (herein referred to
as the "Board").
Section 2. Number of Directors. The entire Board
shall consist of that number of directors, not less
than three nor more than twenty-five, as may from time
to time be prescribed by the Board. Directors shall be
at least twenty-one years of age and need not be United
States citizens or residents of New Jersey or
shareholders of the Corporation. No person shall be
eligible for election or reelection as a director after
such person has attained the age of seventy-five (75)
years.
Section 3. Election and Term of Directors. At each
annual meeting of shareholders, directors shall be
elected to hold office until the next succeeding annual
meeting. The term of office of each director shall be
<PAGE 9>
from the time of such director's election and
qualification until the annual meeting of shareholders
next succeeding such director's election and until such
director's successor shall have been elected and shall
have qualified.
Section 4. Vacancies and Newly Created
Directorships. Any directorship not filled at the
annual meeting and any vacancy, however caused
(including any directorship to be filled by reason of
any increase in the number of directors), occurring in
the Board may be filled by the affirmative vote of a
majority of the remaining directors even though less
than a quorum of the Board, or by a sole remaining
director. If one or more directors shall resign from
the Board effective at a future date, a majority of the
directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or
vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective.
Section 5. Resignations. Any director may resign
by written notice to the Corporation. A resignation
shall be effective upon receipt thereof by the
Corporation or at such subsequent time as shall be
specified in the notice of resignation.
Section 6. Meetings. Meetings of the Board,
regular or special, may be held at any place within or
without the State of New Jersey as the Board from time
to time may fix or as shall be specified in the
respective notice or waivers of notice thereof. An
annual organizational meeting of the Board shall be
held on the day on which the annual meeting of the
shareholders shall have been held, or as soon after the
holding of such meeting of shareholders as is
practicable. The Board may fix times and places for
regular meetings of the Board and no notice of such
meetings need be given. Special meetings of the Board
shall be held whenever called by the Chief Executive
Officer orthe lesser of three directors or onethird of
the members of the Board. Notice of each such meeting
shall be given by the Secretary or by a person calling
the meeting to each director by mailing the same not
later than the third day before the meeting, or
personally, or by telegraphing, cabling, telephoning or
telefaxing the same, not later than the day before the
meeting. Notice of a meeting need not be given to any
director who signs a waiver of notice whether before or
after the meeting, or who attends the meeting without
protesting, prior to the conclusion of the meeting, the
lack of notice to such director. Neither the business
to be transacted at, nor the purpose of, any meeting of
the Board need be specified in the notice or waiver of
notice
<PAGE 10>
of such meeting. Notice of an adjourned meeting need
not be given if the time and place are fixed at the
meeting adjourning and if the period of adjournment
does not exceed ten days in any one adjournment.
Section 7. Quorum and Voting. A majority of the
entire Board shall constitute a quorum for the
transaction of business. Except as otherwise provided
by law, the Certificate of Incorporation or these By-
Laws, the act of the majority of the directors present
at a meeting at which a quorum is present, shall be the
act of the Board.
Section 8. Committees of the Board. The Board, by
resolution adopted by a majority of the entire Board,
may appoint from among its members an Executive
Committee and one or more other committees, each of
which shall have one or more members.
The Board, by resolution adopted by a majority of the
entire Board, may
(a) fill any vacancy in any such committee;
(b) appoint one or more directors to serve as
alternate members of any such committee, to act
in the absence or disability of members of any
such committee with all the powers of such
absent or disabled members;
(c) abolish any such committee at its pleasure; and
(d) remove any director from membership on such
committee at any time, with or without cause.
Actions taken at a meeting of any such committee shall
be kept in a record of its proceedings which shall be
reported to the Board at its next meeting following such
committee meeting; except that, when the meeting of the
Board is held within two days after the committee
meeting, such report shall, if not made at the first
meeting, be made to the Board at its second meeting
following such committee meeting.
Section 9. Notices and Meetings of Committees.
Meetings of any committee of the Board, regular or
special, may be held at any place within or without
the State of New Jersey as the Board or such committee
from time to time may fix or as shall be specified in
the respective notice or waivers of notice thereof,
but no notice of regular meetings need be given.
Special meetings of any committee shall be held
whenever called by the chairman of the committee, by
the Chief Executive
<PAGE 11>
Officer or by one-third of the members of the
committee; provided that meetings of the Executive
Committee may be called only by the Chief Executive
Officer. Notice of each special meeting shall be given
to each member of such committee by mailing the same
not later than the second day before the meeting, or
personally, or by telegraphing, cabling, telephoning or
telefaxing the same, not later than the day before the
meeting. Notice of a meeting need not be given to any
member who signs a waiver of notice whether before or
after the meeting, or who attends the meeting without
protesting, prior to the conclusion of the meeting, the
lack of notice to such member. Neither the business to
be transacted at, nor the purpose of, any meeting of a
committee need be specified in the notice or waiver of
notice of such meeting.
Section 10. Quorum and Actions by Committee. A
majority of each committee shall constitute a quorum
for the transaction of business. The act of the
majority of the members present at a meeting at which a
quorum is present shall be the act of any such
committee. Except as otherwise provided by law, the
Executive Committee shall have and may exercise all the
authority of the Board, provided there is a quorum.
Each other committee shall have and may exercise such
authority as is provided in the resolution creating
such committee. No committee shall
(a) make, alter or repeal any by-law of the
Corporation;
(b) elect or appoint any director, or remove any
officer or director;
(c) submit to shareholders any action that
requires shareholders' approval; or
(d) amend or repeal any resolution theretofore
adopted by the Board which by its terms is
amendable or repealable only by the Board.
Section 11. Resignations from Committees. Any member
of a committee may resign by written notice to the Board.
A resignation shall be effective upon receipt thereof by
the Board or such subsequent time as shall be specified
in the notice of resignation.
Section 12. Compensation of Directors. The Board,
by the affirmative vote of a majority of directors in
office and irrespective of any personal interest of any
of them, may establish reasonable compensation of
directors for services to the Corporation as directors,
members of any
<PAGE 12>
committee of the Board, officers or otherwise.
Section 13. Action of Board or Committee without a
Meeting. Any action required or permitted to be taken
pursuant to authorization voted at a meeting of the
Board or any committee thereof, may be taken without a
meeting if, prior or subsequent to such action, all
members of the Board or of such committee, as the case
may be, consent thereto in writing and such written
consents are filed with the minutes of the proceedings
of the Board or such committee; and any such action
shall be reported to the Board at its next meeting
following any such action.
Section 14. Telephone Conference Meetings of the
Board of Directors. Any or all directors may
participate in any meeting of the Board or any
committee of the Board by means of conference telephone
or any other means of communication by which all
persons participating in the meeting are able to hear
each other.
ARTICLE III
Officers, Agents and Employees
Section 1. General Provisions. The officers of the
Corporation shall consist of a President, a Secretary,
a Treasurer, and if desired, a Chairman of the Board,
one or more Vice Chairmen of the Board, one or more
Vice Presidents, one or more Assistant Secretaries, one
or more Assistant Treasurers and such other officers as
the Board may determine. Any one or more Vice
Presidents may be designated as a Senior Vice
President, as an Administrative Vice President or as an
Executive Vice President. The Board may also delegate
to the Chief Executive Officer the authority to appoint
any officers (other than the Chairman of the Board, any
Vice Chairman of the Board, the President, the
Secretary or the Treasurer) and to designate the titles
of such officers; provided that any Vice President so
appointed shall serve only until the next regular
meeting of the Board unless elected by the Board at
such meeting. Each officer shall hold office for the
term for which such officer is elected or appointed and
has qualified.
Any two or more offices may be held by the same
person but no officer shall execute, acknowledge, or
verify any instrument in more than one capacity if such
instrument is required by law or by these By-Laws to be
executed, acknowledged, or verified by two or more
officers. Any officer, agent or employee of the
Corporation may be removed by the Board with or without
cause. Such removal without cause shall be without
prejudice to such person's contract rights, if any, but
the election or appointment of an officer, agent or
employee of the Corporation shall
<PAGE 13>
not of itself create contract rights.
The compensation of officers, agents and employees
who are not also directors shall be fixed by the Board,
by a duly authorized committee of the Board or by the
Chief Executive Officer, except that the Chief
Executive Officer's compensation may not be fixed by
the Chief Executive Officer. The Board may require any
officer, agent or employee to give security for the
faithful performance of such person's duties.
Section 2. Powers and Duties of the Chairman of the
Board. The Chairman of the Board shall be the Chief
Executive Officer of the Corporation, unless a Vice
Chairman of the Board or the President is so designated
by the Board, and shall preside at all meetings of the
shareholders and the Board at which the Chairman of the
Board is present. The Chairman of the Board shall, in
addition, perform such other duties as the Board may
designate.
Section 3. Powers and Duties of the Vice Chairman
of the Board. Any Vice Chairman of the Board shall, in
the absence of the Chairman of the Board, preside at
all meetings of the shareholders and the Board at which
such Vice Chairman is present and each Vice Chairman of
the Board shall, in addition, perform such other duties
as the Board may designate.
Section 4. Powers and Duties of the President. The
President shall, in the absence of the Chairman of the
Board or a Vice Chairman of the Board, preside at all
meetings of the shareholders and the Board at which the
President is present and shall, in addition, perform
such other duties as the Board may designate.
Section 5. Powers and Duties of the Chief Executive
Officer. Subject to the directions of the Board, the
Chief Executive Officer shall have general charge of
the business and affairs of the Corporation and shall,
in addition, perform such other duties as the Board may
designate. The Chief Executive Officer may employ and
discharge employees and agents of the Corporation and
.may vote the shares or other securities of any other
domestic or foreign corporation of any type or kind
which may at any time be owned by the Corporation. The
Board, by resolution from time to time, may confer like
powers upon any other person or persons. The Chief
Executive Officer may delegate any powers granted to
the Chief Executive Officer by this Article III, unless
otherwise directed by the Board.
<PAGE 14>
Section 6. Powers and Duties of Vice Presidents.
Each Vice President shall have such powers and perform
such duties as the Board or the Chief Executive Officer
may prescribe. In the absence or inability to act of
the President, unless the Board shall otherwise
provide, any Vice President may perform all the duties
and may exercise any of the powers of the President.
The performance of any such duty by a Vice President
shall be conclusive evidence of such Vice President's
power to act.
Section 7. Powers and Duties of the Secretary. The
Secretary shall have charge of the minutes of all
proceedings of the shareholders and of the Board. The
Secretary shall attend to the giving of all notices to
shareholders and directors, shall have charge of the
seal of the Corporation and shall attest the same by
signature whenever required. The Secretary shall have
charge of the record of shareholders of the
Corporation, and of such other books and papers as the
Board may direct. The Secretary shall have all such
powers and duties as generally are incident to the
position of Secretary or as may be assigned to the
Secretary by the Chief Executive Officer or the Board.
Section 8. Powers and Duties of the Treasurer. The
Treasurer shall have charge of all funds and securities
of the Corporation, shall endorse the same for deposit
or collection when necessary and deposit the same to
the credit of the Corporation in such banks or
depositories as the Board of Directors may authorize.
The Treasurer may endorse all commercial documents
requiring endorsements for or on behalf of the
Corporation and may sign all receipts and vouchers for
payments made to the Corporation. The Treasurer shall
have all such powers and duties as generally are
incident to the position of Treasurer or as may be
assigned to the Treasurer by the Chief Executive
Officer or by the Board.
Section 9. Powers and Duties of Assistant
Secretaries. In the absence or inability of the
Secretary to act, any Assistant Secretary may perform
all the duties and exercise all the powers of the
Secretary. The performance of any such duty shall be
conclusive evidence of the Assistant Secretary's power
to act. An Assistant Secretary shall also perform such
other duties as the Secretary or the Board may assign.
Section 10. Powers and Duties of Assistant
Treasurers. In the absence or inability of the
Treasurer to act, an Assistant Treasurer may perform
all the duties and exercise all the powers of the
Treasurer. The performance of any such duty shall be
conclusive evidence
<PAGE 15>
of the Assistant Treasurer's power to act. An
Assistant Treasurer shall also perform such other
duties as the Treasurer or the Board may assign.
Section 11. Powers and Duties of Other Officers.
Other officers may perform such duties and exercise
such powers as the Board or the Chief Executive Officer
may assign.
ARTICLE IV
Shares of the Corporation
Section 1. Certificates for Shares. The shares of
the Corporation may be represented by certificates or,
if and to the extent that the Board so provides, may be
uncertificated shares. Share certificates shall be
signed by, or in the name of the Corporation by, the
Chairman or any Vice Chairman of the Board, or the
President or any Vice President, may be countersigned
by the Treasurer or any Assistant Treasurer, or the
Secretary or any Assistant Secretary of the Corporation
and may be sealed with the seal of the Corporation or a
facsimile thereof, and shall contain such information
as is required by law to be stated thereon. Any or all
signatures upon a certificate may be a facsimile. In
case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such
officer, transfer agent or registrar before such
certificate is issued, it may be issued by the
Corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date
of its issue.
Section 2. Transfer Agents and Registrars. The
Board may appoint one or more transfer agents and one
or more registrars with respect to the certificates
representing shares of stock of the Corporation, and
may require all such certificates to bear the signature
of either or both.
Section 3. Record of Shareholders. The Corporation
shall keep at its registered office in the State of
New Jersey, or at the office of its transfer agent
within or without the State of New Jersey a record
containing the names and addresses of all shareholders,
the number, class and series of shares held by each
and the dates when they respectively became the owners
of record thereof. The Corporation shall be entitled
to treat the persons in whose names shares stand on the
record of shareholders as the owners hereof for all
purposes.
<PAGE 16>
ARTICLE V
Seal
The seal of the Corporation shall be in such form as
shall be approved from time to time by the Board. The
Corporation may use the seal by causing it or a
facsimile to be affixed or impressed or reproduced in
any manner.
ARTICLE VI
Checks, Notes, Drafts, etc.
Checks, notes, drafts, acceptances, bills of
exchange and other orders or obligations for the
payment of money shall be signed by such officer or
officers or person or persons as the Board shall from
time to time determine.
ARTICLE VII
Fiscal Year
The fiscal year of the Corporation shall be the
calendar year.
ARTICLE VIII
Action by Corporation as Shareholder
Whenever any action is required or permitted to be
taken by the Corporation as a securityholder, such
action may be taken by written consent executed by, or
pursuant to proxy executed by, any one of the Chairman
of the Board, any Vice Chairman of the Board, the
President, any Executive Vice President, any Senior
Vice President or the Secretary.
ARTICLE IX
Amendments
These By-Laws may be altered or repealed and new By-
Laws may be adopted by the Board, but By-Laws adopted
by the Board may be altered or repealed, and new By-
Laws made, by the shareholders entitled to vote
thereon.
<PAGE 1>
EXHIBIT 10(p)
_____________
MIDLANTIC CORPORATION EXECUTIVE
SUPPLEMENTAL RETIREMENT PLAN
Effective as of January 1, 1989, Midlantic Corporation
hereby establishes the Midlantic Corporation Executive
Supplemental Retirement Plan (the "Plan"). The Plan is
intended to constitute an unfunded pension plan maintained
primarily for a select group of management or highly
compensated employees which such Plan is exempt from Parts
2, 3 and 4 of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The Plan is not
a qualified plan under the Internal Revenue Code of 1986, as
amended (the "Code") and benefits are paid to participants
directly by the Company.
ARTICLE I
Definitions
1.1 "Accrued Benefit" means a participant's pension
benefit computed in accordance with the terms of the
Retirement Plan as of the participant's Normal Retirement
Date.
1.2 "Board of Directors" means the Board of Directors
of Midlantic Corporation.
1.3 "Company" means Midlantic Corporation and any
member of the controlled group of corporations of which it
is a part which adopts this Plan with the approval of the
Board of Directors.
1.4 "Committee" means the Committee appointed in
accordance with Article IV hereunder.
1.5 "Eligible Employee" means any person employed by
the Company who is a participant in a Retirement Plan and
whose compensation exceeds the limitation set forth in
Section 401(a)(17) of the Code. The Board of Directors may
exclude any Eligible Employee from participation in this
Plan.
1.6 "Excess Benefit Plan" means that portion of a plan
maintained by a Company pursuant to Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended,
to provide Retirement Income in excess of the Section 415
limitations of the Code applicable to the Retirement Plan.
1.7 "Normal Retirement Date" means the Normal
Retirement Date defined in the Retirement Plan.
1.8 "Participant" means an Eligible Employee who has
<PAGE 2>
become a Participant in accordance with Article II.
1.9 "Retirement Income" means the annual amount
payable in accordance with the Retirement Plan.
1.10 "Retirement Plan" means the defined benefit plan
maintained by the Company which such defined benefit plan is
qualified under Section 4Ol(a) of the Code.
1.11 "Supplemental Retirement Benefit" means the
annual amount payable under this Plan.
1.12 For purposes of this Plan, unless the context
requires otherwise, the masculine includes the feminine, the
singular the plural, and vice-versa. Any reference to
"Section" or "Article" shall mean the indicated section or
article of this Plan unless otherwise specified.
ARTICLE II
Participation
An Eligible Employee, unless excluded by the Board of
Directors, shall become a Participant hereunder on the later
of (i) the effective date of the Plan; or (2) the first day
of the calendar year coincident with or next following the
date his Accrued Benefit under the Retirement Plan would be
limited by the restrictions on includable compensation under
Section 401(a)(17) of the Code.
ARTICLE III
Retirement Income
The Company shall pay to each Participant whose Accrued
Benefit under the Retirement Plan is reduced as a result of
the limitation under Section 401(a)(17) of the Code on
includable compensation, a Supplemental Retirement Benefit
equal to (a) the Retirement Income which would have been
payable to him under the Retirement Plan without regard to
such limitation; and (b) with respect to any Participant
covered by an Excess Benefit Plan, the additional amount
payable under subsection (a) if the limitations of Section
415 of the Code were inapplicable; less (c) the actual
amount of Retirement Income payable under the Retirement
Plan and any amount payable under an Excess Plan. The
Supplemental Retirement Benefit payable hereunder shall be
paid in the same form, subject to the same reductions for
early commencement and actuarial equivalence, as the
Retirement Income payable from the Plan. Commencement of
the Supplemental Retirement Benefit shall be contemporaneous
with commencement of Retirement Income. If the Participant
dies before the commencement of his Supplemental Retirement
<PAGE 3>
Benefit, his designated beneficiary under the Retirement
Plan shall be entitled to a death benefit hereunder in the
same form, commencing at the same time, as any death benefit
payable under the Retirement Plan.
ARTICLE IV
Administration
4.1 The Board of Directors shall appoint a Committee
to supervise the daily management and administration of the
Plan.
4.2 (a) It shall be the duty of the Committee:
(1) To administer the Plan in accordance with the
terms hereof, and to exercise all powers specifically
conferred upon the Committee hereby or necessary to carry
out the provisions thereof.
(2) To construe this Plan, which construction
shall be conclusive, correct any defects, supply omissions,
and reconcile inconsistencies to the extent necessary to
effectuate the Plan.
(3) To keep all records relating to Participants
of the Plan and such other records as are necessary for
proper operation of the Plan.
(b) In carrying out the Committee's functions
hereunder:
(1) The Committee may adopt rules and regulations
necessary for the administration of the Plan and which are
consistent with the provisions hereof.
(2) All acts and decisions of the Committee shall
be approved by a majority of the Committee and shall apply
uniformly to all members of the Committee in like
circumstances. Written records shall be kept of all acts
and decisions.
(3) The Committee may authorize one or more of
its members, or other representatives, to act on its behalf.
(4) The Committee shall have the right to hire,
at the expense of the Company, such professional assistants
and consultants as it, in its sole discretion, deems
necessary or advisable, including, but not limited to,
accountants, actuaries, consultants, counsel and such
clerical assistance as is necessary for proper discharge of
duties.
<PAGE 4>
4.3 With respect to any Participant in this Plan who
also is covered by an Excess Benefit Plan, if necessary the
Committee shall allocate the accrual of benefits between the
two plans so that no duplication of benefits occurs.
ARTICLE V
Miscellaneous
5.1 All benefits payable under this Plan constitute an
unfunded obligation of the Company. Payments shall be made,
as due, from the general funds of the Company. The Company,
at its option, may maintain one or more bookkeeping reserve
accounts to reflect its obligations under the Plan and may
make such investments as it may deems desirable to assist it
in meeting with obligations. No person eligible for a
benefit under this Plan shall have any right, title to
interest in any such investments.
5.2 Midlantic Corporation reserves the right to amend,
modify, restate or terminate the Plan; provided, however,
that no such action by Midlantic Corporation shall reduce a
Participant's Supplemental Retirement Benefit accrued as of
the effective date of such action. If the Plan is
terminated, a determination shall be made of the amount of
each Participant's Supplemental Retirement Benefit as of the
Plan termination date. The amount of such benefits shall be
payable to the Participant at the time it would have been
payable under Article III if the Plan had not been
terminated, based on years of service for benefit accrual
purposes and compensation as of the date of termination as
determined under the Retirement Plan, and assuming that the
Participant would retire as of the later of the Plan
termination date or the date the Participant attained age 55
and completed the minimum number of years of service for
vesting purposes required for vesting in accordance with the
Retirement Plan. Midlantic Corporation, in its sole
discretion, may accelerate payment hereunder based on the
present value of the accrued Supplemental Retirement Benefit
as determined above.
5.3 Nothing herein contained shall be construed as
conferring any rights upon any Participant or any person for
a continuation of employment, nor shall it be construed as
limiting in any way the right of the Company to discharge
any Participant or to treat him without regard to the effect
which such treatment might have upon him as a Participant of
the Plan.
5.4 If a Participant or beneficiary entitled to
receive any benefits hereunder is a minor or is deemed by
the Committee or is adjudged to be incapable of giving valid
<PAGE 5>
receipt and discharge for such benefits they will be paid to
the duly appointed guardian of such minor or incompetent or
to such other legally appointed person as the Committee
might designate. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such
payment under the Plan.
5.5 The right of any person to any benefit or payment
under the Plan shall not be subject to voluntary or
involuntary transfer, alienation or assignment, and, to the
fullest extent permitted by law, shall not be subject to
attachment, execution, garnishment, sequestration or other
legal or equitable process. In the event a person who is
receiving or is entitled to receive benefits under the Plan
attempts to assign, transfer or dispose of such right, or if
an attempt said right to such process, such assignment,
transfer or disposition shall be null and void.
5.6 Except to the extent preempted by federal law, the
provisions of the Plan will be construed according to the
laws of the State of New Jersey.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed effective as of January 1, 1989.
ATTEST: MIDLANTIC CORPORATION
(Seal)
/s/ Frank E. Lawatsch, Jr. /s/ Robert Van Buren
_________________________ ______________________________
By: Chairman of the Board
<PAGE 1>
EXHIBIT 10(r)
_____________
(Conformed copy as of
September 21, 1994)
MIDLANTIC CORPORATION
SEVERANCE PAY POLICY
Adopted February 25, 1992;
Amended September 21, 1994
<PAGE 2>
MIDLANTIC CORPORATION
SEVERANCE PAY POLICY
TABLE OF CONTENTS
Page
PURPOSE OF THE POLICY 3
DEFINITIONS 3-5
SEVERANCE PAY - ELIGIBILITY; JOB ELIMINATION;
AND DISCHARGE
Eligibility 5
Conditions of Non-Eligibility 6
Non-Eligibility Following Sale 6
Denial of Severance Pay 6
AMOUNT OF SEVERANCE PAY
Basic Severance Pay 7
Supplemental Severance Pay 7
Calculation of Severance Pay
for Part-Time Employees 7
Supplemental Severance Minimums 8
Maximum Severance Pay 8
Timing of Severance Pay 8
Discontinuance of Severance Pay 8
Repayment of Severance Pay 9
Conditions of Re-employment 9
Employee Benefit Plan Coverage 9
Funding 9
Administration 9
No Right to Employment 10
Alienation of Benefits 10
Termination or Amendment 11
Exclusivity and Enforceability 11
Taxes 11
<PAGE 3>
MIDLANTIC CORPORATION SEVERANCE PAY POLICY
1. Purpose of the Policy
As of the Effective Date, the Company hereby establishes
a severance policy known as the Midlantic Corporation
Severance Pay Policy as set forth in this document.
The Policy has been adopted by the Company to provide
Severance Pay to Employees whose employment with
the Company terminates under the conditions provided for
by this Policy.
There shall be no duplication of Severance Pay under
the Policy. This Policy supersedes all oral and written
severance policies or plans of the Company except
Exception Agreements. An Employee who receives
severance benefits under an Exception Agreement shall
not be entitled to Severance Pay hereunder unless
the Committee determines otherwise with respect to such
Employee.
2. Definitions
The following terms when used herein shall have
the following meanings unless a different meaning is
plainly required by the context:
a. "Base Salary" shall mean the amount an Employee is
entitled to receive as wages or salary on an
annualized basis, excluding all bonus,
overtime, shift differential, or incentive
compensation, payable by the Company as
consideration for the Employee's
services, as determined on the date
immediately preceding Termination.
b. "Board of Directors" shall mean the Board of Directors
of Midlantic Corporation.
c. "Committee" shall mean the Midlantic Benefit Plans
Committee.
d. "Company" shall mean Midlantic Corporation or any
member of the controlled group of corporations of
which it is a part which, with the approval of the
Board of Directors, adopts the Policy.
e. "Effective Date" shall mean February 25, 1992.
f. "Employee" for purposes of the Policy shall mean any
person who is employed by the Company on a full-
time basis or a part-time basis. Employee does not
include any person on Long Term Disability. If any
individual is employed by more than one entity which
is a Company,
<PAGE 4>
the Company is the employer which issues the
individual's paychecks.
g. "Exception Agreement" for purposes of the Policy shall
mean a written severance arrangement or
agreement executed by the Company with a specific
Employee and/or a written post-employment agreement
between the Company and a specific Employee which
are identified by the Committee.
h. "Misconduct" shall mean:
(i) fraud, misappropriation, embezzlement or
criminal conduct;
(ii) neglect of duties or responsibilities as an
Employee;
(iii) insubordination; or
(iv) violation of the Company's policies and
procedures.
i. "Plan Year" shall mean the calendar year.
j. "Policy" shall mean this Midlantic Corporation
Severance Policy as amended from time to time.
k. "Reasonable Commuting Distance" for purposes of the
Policy shall mean:
Officers - the greater of 45 miles each way
or the equivalent of the employee's
current commute.
Non-Officers - the greater of 25 miles
each way or the equivalent of the
employee's current commute.
A Reasonable Commuting Distance must include
the continued availability of public transportation
if an employee is currently dependent upon
public transportation to get to their job.
l. "Reassignment" for purposes of the Policy shall mean
placement in another job at the same or greater
salary at the request of the Company. It does
not include placement in another job at the
request of the Employee.
m. "Severance Pay" shall mean any lump sum payment or
periodic payments made to an Employee solely on
account of eligibility to receive such payment under this
<PAGE 5>
Policy. Severance Pay may, where applicable, include
both Basic Severance Pay and Supplemental
Severance Pay, as defined in paragraph 4(a) and (b).
n. "Termination" for the purposes of the Policy shall mean
the discontinuance of employment by an Employee
with the Company for the reasons listed in
paragraph 3(a). For Employees on an approved unpaid
leave of absence including a military or family
leave, Termination for purposes of the Policy
occurs only if and when the Employee seeks to
return to active status upon expiration of the
leave and is not reinstated for the reasons listed
in paragraph 3(a). Termination does not include
voluntary resignation, death or retirement of an
Employee; provided, however, that retirement, upon
the occurrence of, and not prior to, an event
described in paragraph 3(a) shall be deemed
a Termination. For purposes of this Policy, the
date of Termination shall mean the day prior to
date that the Employee discontinues reporting for
work or the date that the Employee is notified
that he or she will not be reinstated from an
approved unpaid leave.
o. "Years of Completed Service" shall mean the period of
service with the Company commencing on the
Employee's most recent employment date and
ending on the Employee's date of Termination,
rounded to the nearest year. Past service which
has been bridged for
retirement purposes under the Midlantic Retirement
Plan will not be bridged for severance purposes.
p. "Management Committee Member" shall mean the Chief
Executive Officer of the Company and such
other officers designated from time to time by the
Board of Directors to have overall responsibility at
the Company for a line of business or support staff
area. [Added September 21, 1994]
3. Severance Pay - Eligibility; Job Elimination; and Discharge
a. Eligibility
Except as provided in paragraph 1, an Employee
shall become eligible to receive the amount of
Severance Pay set forth in paragraph 4(a) if the
Employee meets any one of the following three
conditions:
(i) Termination occurred because the Employee's
job was eliminated for business reasons
or because the business at which the
Employee was working at the time of
Termination or prior to an approved
unpaid leave was shut down or moved to
a new location by the
<PAGE 6>
Company and, in any such case, the
Employee was not offered a Reassignment
with the Company which is within a Reasonable
Commuting Distance.
(ii) Termination occurred because the business at
which the Employee was working at the time
of Termination or prior to an approved
unpaid leave was sold by the Company to
another entity (the "Buyer") and the
Employee was not offered employment by the
Buyer.
(iii) Termination occurred for any reason other
than the reasons set forth in paragraph 3(b).
b. Conditions of Non-Eligibility
An Employee is not eligible to receive Severance
Pay, if the reason for Termination was:
(i) The Employee declined a Reassignment with the
Company which is within a Reasonable
Commuting Distance or declined
employment with a Buyer; or
(ii) The Employee resigns from employment with the
Company, including resignation either
prior to or subsequent to the
announcement of a business
reorganization, closing or sale; or
(iii) The Employee dies prior to termination; or
(iv) The Employee was terminated for cause
including, but not limited to,
conduct constituting Misconduct and/or
unsatisfactory job performance.
c. Non-Eligibility Following Sale
No Employee shall be eligible to receive Severance
Pay under this Policy following the sale to any
Buyer of the business at which the Employee
was working. Following such a sale, the Employee's
entitlement to severance payments upon termination
of employment with the Buyer shall be governed
solely by the severance plan or policy, if any, of
the Buyer.
d. Denial of Severance Pay
Notwithstanding any other provision of the Policy
to the contrary, an Employee may be denied Severance
Pay, in whole or in part, for any reason which, in
the sole discretion of the Company, warrants the
denial of
<PAGE 7>
Severance Pay.
4. Amount of Severance Pay
a. Basic Severance Pay
Each Employee with six full months of service who
is determined to be eligible for Severance Pay
shall receive Severance Pay in an amount equal to
one week Base Salary.
b. Supplemental Severance Pay
Each Employee who is determined to be eligible
for Basic Severance Pay may also receive
Supplemental Severance Pay upon signing an Agreement
and Release to be provided by the Company in which
among other things the Employee releases all
claims, if any, relating to the Employee's
employment with the Company including but not
limited to all claims, if any, relating to the
termination of that employment. Such Supplemental
Severance Pay will be calculated pursuant to the
following schedule:
Years of Completed Number of Weeks
Service of Base Salary
1 1
2 3
3 5
4 7
5 9
6 11
7 13
8 15
9 17
10 19
11 21
12 23
13 or More 25
Employees who have less than 6 months of
service, although not eligible for Basic Severance
Pay, may receive 1 week of Supplemental
Severance Pay in exchange for signing an Agreement
and Release.
c. Calculation of Severance Pay for Part-Time Employees
Part-time employees' weekly Base Salary will be
based on the current calendar year-to-date hours
employed as a part-time employee, divided by the
number of weeks for which pay was received to
determine the average number of hours worked per
week. The average hours per
<PAGE 8>
week is multiplied by the current hourly rate of pay
to determine weekly Base Salary. Prior to March 1
of the current year, the calculation will be based
on the prior calendar year data.
d. Supplemental Severance Minimums
Officers and exempt non-officer employees with six
full months of service receiving Supplemental
Severance will be provided with minimum
Supplemental Severance based on the schedule listed
below unless their years of completed service
would provide a greater benefit.
Minimum Weeks
Status of Base Salary
Exempt Non-Officer 3 weeks
Officer (excluding Management
Committee Member) 11 weeks
Management Committee Member 51 weeks
[Amended September 21, 1994]
e. Maximum Severance Pay
Severance Pay under the Policy is subject to
the following maximums notwithstanding anything
in the Policy to the contrary. (1) If an
Employee is a "disqualified individual" at the
time of Termination, the "aggregate present value"
of Severance Pay under the Policy and of payments
to such Employee or for his/her benefit which are
"parachute payments", shall in no event exceed 295%
of his/her "base amount", within those terms'
meanings under Section 280G of the Internal Revenue
Code ("the Code"). No Severance Pay hereunder will
be paid to the extent that such benefits (either
alone or when aggregated with other benefits) paid
to such Employee or for his/her benefit constitute
"excess parachute payments" within the meaning
of Section 280G of the Code. (2) No severance
pay benefits hereunder will be paid to the extent
such benefits are prohibited by law, regulation, or
order or by any agreement between the Company and any
regulatory agency having jurisdiction over the Company.
5. Timing of Severance Pay
Severance Pay benefits will be paid either in a lump
sum payment or periodic payments to the Employee as
determined by the Committee at its sole discretion.
6. Discontinuance of Severance Pay
Any Severance Pay being paid on a periodic basis shall cease
<PAGE 9>
upon the death of the Employee receiving such Severance
Pay. The Company reserves the right to discontinue any
or all remaining severance payments in the event
that the terminated Employee is subsequently found to
have engaged in Misconduct while employed by the Company.
7. Repayment of Severance Pay
The Company reserves the right to require repayment,
in whole or in part, of Severance Pay in the event
that the terminated Employee is subsequently found to have
engaged in Misconduct while employed by the Company.
8. Condition of Re-employment
In the event the Employee is re-employed by the Company
or is hired by the Buyer of the business at which the
employee was working, any remaining severance
payments will be discontinued. For those employees
who received their severance pay in a lump sum payment,
it may be necessary to repay a portion of their
severance pay on a pro-rata basis upon rehire. Such
rehires will need written approval of the Corporate Human
Resources Department.
9. Employee Benefit Plan Coverage
Except as provided in paragraph 1, the Severance
Pay described in paragraph 4 above shall be payable in
addition to, and not in lieu of, all other accrued or
vested or earned benefits which may be owed to an
Employee following termination including, but not limited
to, accrued vacation pay, amounts or benefits payable
under any bonus or other compensation plan, life
insurance plan, health plan, disability plan or
similar or successor plan.
There will be no payment for unused personal days.
There will be no payment for unused sick days. There
will be no payment for unused compensatory time.
10. Funding
There shall be no special fund out of which payments
shall be paid, nor shall Employees be required to
make a contribution as a condition of receiving payments.
Payments shall be made from the general funds of the
Company from which the Employee receives his/her
compensation.
11. Administration
a. The Policy shall be administered by the Committee, as
the named fiduciary of the Policy under
Section 3(16)(A) of ERISA. The provisions of Part 4
of Title I of ERISA are incorporated by reference
as part of the
<PAGE 10>
Policy to define and govern the actions of
Midlantic and other fiduciaries hereunder.
b. The Committee will have full power to administer the
Policy in all of its details, subject to
applicable requirements of law. For this purpose,
the Committee powers will include, but will not be
limited to, the following authority, in addition to
all other powers provided by this Policy:
(i) To make and enforce such rules and
regulations as it deems necessary or
proper for the efficient administration of the
Policy;
(ii) To interpret the Policy, its interpretation
thereof in good faith to be final
and conclusive on all persons claiming
benefits under the Policy;
(iii) To decide all questions concerning the Policy
and the eligibility of any person to
participate in the Policy;
(iv) To appoint such agents, counsel, accountants,
consultants and other persons as may
be required to assist in administering
the Policy; and
(v) To allocate and delegate its responsibilities
under the Policy and to designate
other persons to carry out any of its
responsibilities under the Policy.
c. The Committee shall adopt such procedures and rules as
it deems necessary or advisable to administer
the Policy and comply with all ERISA requirements
including without limitation providing a claims
procedure to provide adequate notice to any person
whose claim is denied setting forth the specific
reasons for denial, written in a manner calculated to
be understood by such person and offering a
reasonable opportunity for full and fair review of
such denial by the Committee. The Company shall
bear all costs and expenses incurred in
administering the Policy.
12. No Right to Employment
This Policy does not give any Employee the right to
be employed by the Company. The Company expressly
reserves the right to discharge any Employee for
any reason not prohibited by law.
<PAGE 11>
13. Alienation of Benefits
Except as otherwise provided by law and by
contract governing any benefit offered under this Policy,
no benefit under the Policy may be voluntarily or
involuntarily assigned or alienated.
14. Termination or Amendment
Although the Company (on the Effective Date) intends
to maintain the Policy for an indefinite period, the
Company or any of its controlled group of
corporations, its subsidiaries or divisions, or its
lines of business, reserves the right to amend any of
the Policy terms or terminate the Policy at any time,
for any reason. Any termination or partial
termination of the Policy shall not adversely affect the
payment of benefits to which Employees or their covered
dependents were entitled under the terms of the Policy
prior to the date of termination or partial
termination.
15. Exclusivity and Enforceability
The Policy is maintained for the exclusive benefit
of Employees and their covered dependents. The rights
conferred upon Employees and their covered dependents
under this Policy, including such materials as may be
incorporated herein by reference, shall be legally
enforceable.
16. Taxes
The Company may withhold from any payment due under
this Policy any taxes required to be withheld under
applicable federal, state or local tax laws or
regulations.
<PAGE 1>
EXHIBIT 10(Z)
MIDLANTIC CORPORATION
MIDLANTIC ANNUAL INCENTIVE AND BONUS PLAN
(Approved July 21, 1993, amended December 21, 1994, amended
March 13, 1995)
1. The purpose of the Midlantic Annual Incentive and Bonus
Plan (the "Plan") is to promote the success of Midlantic
Corporation and its affiliated companies (collectively, the
"Company") by providing an incentive, through the allocation
and payment of cash bonuses and other incentive compensation
on an annual basis ("incentive compensation"), to key
employees of the Company, to encourage key employees to
remain in the employ of the Company and to increase the
personal interest of key employees in the continued success
and progress of the Company.
2. The following definitions are applicable to the Plan:
"Committee" means the Executive Compensation Committee of the Board of
Directors of the Company.
"Covered Employee" means, with respect to any Plan Year, (i) the Company's
Chief Executive Officer (or an individual acting in such capacity) and (ii)
the four highest compensated officers of the Company (other than the Chief
Executive Officer) as of the last day of such Plan Year, as determined
pursuant to the executive compensation disclosure rules under the
Securities Exchange Act of 1934.
"Incentive Fund" means the amount available for incentive compensation awards
under the Plan with respect to each Plan Year.
"Net Income" means the net income of the Company for the applicable Plan
Year as determined under Generally Accepted Accounting Principles, excluding
(a) extraordinary items (net of applicable taxes); (b) cumulative effects
of changes in accounting principles; (c) securities gains and losses (net
of applicable taxes); and (d) nonrecurring items (net of applicable taxes)
including, but not limited to, gains or losses on asset dispositions and
sales of subsidiaries, restructuring charges, gains and losses from qualified
benefit plan curtailments and settlements, and income or expenses related to
deferred tax assets valuation reserve adjustments.
"Plan Year" means the calendar year.
3. The Plan shall be administered by the Committee. In
administering the Plan, the Committee shall have the duties,
responsibilities and powers set forth in the Plan.
<PAGE 2>
4. Subject to the express provisions of the Plan, the
Committee shall determine from time to time
the key employees for the purposes of the Plan, the amount of the Incentive
Fund, if any, that shall be available for allocation and payment under the
Plan to key employees,
the performance criteria that should be achieved in order for incentive
compensation to be paid,
whether such performance criteria have been achieved,
the allocation of incentive compensation among key
employees,
the manner and terms and conditions, if any, of payment of the incentive
compensation, and
all other matters with respect to the Plan.
In so doing, the Committee shall make determinations with
respect to the Company as a whole, and it may, to the extent
the Committee deems it advisable, make determinations with
respect to individual business units or functional areas of
the Company, whether or not the business unit or functional
area is constituted as a separate legal entity.
5. Notwithstanding anything in the Plan to the contrary, to
the extent that the Committee determines that any incentive
compensation is to be paid in stock awards, recognition
shares or stock options ("stock based compensation"), such
stock based compensation shall be paid under, subject to,
and in all respects consistent with, the Midlantic Incentive
Stock and Stock Option Plan (1986), the Midlantic Incentive
Stock and Stock Option Plan (1995) or any other similar plan
of the Company (a "Company stock plan") and any decision of
the Committee with respect to stock based compensation shall
be deemed to be made only under a Company stock plan and not
pursuant to the Plan.
6. Notwithstanding anything in the Plan to the contrary, the
award under the Plan for any Plan Year to any participant
who is a Covered Employee shall be determined on the basis
of the achievement by the Company of a threshold level of
Net Income ("performance target"). Notwithstanding the
foregoing, the Committee may, in its sole discretion,
determine to apply the performance target for any Plan Year
to one or more participants who are not Covered Employees.
The Committee shall establish any such performance target in
writing prior to the beginning of the Plan Year with respect
to which the award will be made (or prior to such later date
as may be prescribed by the Internal Revenue Service for
purposes of section 162(m) of the Internal Revenue
<PAGE 3>
Code). The award to each Covered Employee for each Plan
Year will be limited to a maximum of 1.0% of the Company's
Net Income. The Committee may, in its discretion, reduce or
eliminate an award for a Covered Employee, notwithstanding
the achievement of a specified performance target. An award
for a Plan Year to a Covered Employee may, in the discretion
of the Committee, provide that in the event of the Covered
Employee's termination of employment during the Plan Year
for any reason, such award will be payable only (X) if the
applicable performance target is achieved, and (Y) to the
extent, if any, as the Committee shall determine. The
Committee shall certify in writing prior to payment of any
award pursuant to this paragraph 6 that the performance
target established by the Committee was satisfied. Any award
paid with respect to a Plan Year pursuant to this paragraph
shall reduce the amount of the Incentive Fund available for
distribution for such Plan Year.
7. The Committee may delegate to a specified officer or
officers of the Company any of its duties, responsibilities
and powers under the Plan, provided that the Committee may
not delegate to any officer any determination (i) with
respect to such officer's own incentive compensation under
the Plan or (ii) to be made pursuant to paragraph 6 of the
Plan.
8. All determinations under the Plan by the Committee (or
by an officer or officers to whom the determination has been
duly delegated) shall be conclusive and binding on all
affected employees of the Company.
9. The Plan may be amended, suspended or discontinued at
any time by the Board or the Committee.
10. The Plan and any action or determination taken
hereunder shall not confer upon any employee the right to be
retained in the employ of the Company or to continue to be a
key employee for the purposes of the Plan.
11. The Plan shall not be deemed an exclusive method of
providing incentive compensation for the officers and
employees of the Company, nor shall it preclude the Board of
Directors of the Company or a duly authorized committee or
officers from authorizing or approving other forms of
incentive compensation. In addition, to the extent other
Company compensation plans or resolutions of the Board of
Directors of Midlantic Corporation or of a board of
directors of an affiliated company require additional
authorizations and approvals for the payment of
compensation, nothing in the Plan is intended to supersede
those requirements.
<PAGE 1>
EXHIBIT 10(aa)
[CONFORMED COPY a/o January 18, 1995]
Midlantic Corporation
Executive Severance Plan
(Adopted by Executive Compensation
Committee on September 21, 1994,
amended on December 21, 1994 and
amended on January 18, 1995)
The following is the Midlantic Corporation Executive
Severance Plan:
PREAMBLE
The Executive Compensation Committee of the Board of
Directors of Midlantic Corporation has determined that:
It is in the best interests of Midlantic and its
shareholders to enhance the ability to attract and
retain key members of management;
It is in the best interests of Midlantic and its
shareholders to provide compensation arrangements that will
tend to eliminate distractions to certain key executives
related to personal uncertainties and risks arising out of
termination of employment; and
It is in the best interests of Midlantic and its
shareholders to provide the compensation arrangements in the
Plan for certain key executives of the Company to recognize
the value to the Company and its shareholders of the
services such executives have provided to Midlantic and are
expected in the future to provide to the Company.
1.Definitions
Exhibit A contains definitions of certain terms for purposes
of the Plan.
2. Participation
(a) The Committee shall from time to time select the key
executives of the Company or Subsidiaries who shall
participate in the Plan. An executive so selected shall be
provided with a Notice of Participation, signed by the Chief
Executive Officer of the Company. The Notice of
Participation shall describe all determinations made by the
Committee under the Plan with respect to the executive and
shall contain such other provisions not inconsistent with
the Plan as the Committee shall determine.
<PAGE 2>
(b) An executive shall become a Participating Executive
upon the executive's execution and delivery of a copy of the
Notice of Participation, and shall remain a Participating
Executive for the period indicated in the Notice of
Participation, provided, however, that termination of an
executive's status as a Participating Executive shall not
affect the Company's obligations under the Plan to the
Participating Executive after a termination of employment
which shall occur during the Severance Protection Period.
3. The Committee
The Committee shall have the sole authority to make all
determinations with respect to participation in the Plan and
to make such other determinations as are expressly
contemplated by the Plan.
4. Participating Executive Agreements
As a condition to participation in the Plan:
(a) A Participating Executive shall agree to the following:
During the period of participation in the Plan and for two
years after the termination of the Participating Executive's
employment with the Company and/or Subsidiaries, the
Participating Executive shall not, without the written
consent of the Board or a person authorized thereby,
disclose to any person, other than
an employee of the Company or a Subsidiary or a person to
whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Participating
Executive of his or her duties as an executive of the
Company or a Subsidiary, any material confidential
information obtained by the Participating Executive while in
the employ of the Company or any Subsidiary with respect to
any of the Company's or any Subsidiary's products,
customers, methods or future plans, the disclosure of which
the Participating Executive knows will be materially
damaging to the Company or the Subsidiary; provided,
however, that, for the purposes of the Plan, "confidential
information" does not include (i) any information known
generally to the public (other than as a result of
unauthorized disclosure by or at the direction of the
Participating Executive), (ii) any information which becomes
available to the Participating Executive after termination
of employment from a source not believed by the
Participating Executive to be bound by any obligation of
confidentiality to the Company or a Subsidiary or (iii) any
information of a type not otherwise generally considered
confidential by persons
<PAGE 3>
engaged in the same business or a business similar to that
conducted by the Company. This confidentiality obligation
is in addition to and not in lieu of any other obligation of
confidentiality the Participating Executive may have under
any other agreement, plan, common law, statute or otherwise.
(b) a Participating Executive shall agree to all of the
other obligations that he or she would have as a
Participating Executive under the Plan.
5. Severance Protection Period
The Committee shall determine the period of time during
which termination of a Participating Executive's employment
would entitle him or her to receive Severance Benefits under
the Plan, provided, however, that the Severance Protection
Period shall include a period of not more than three years
after any Change in Control that shall have occurred during
the Participating Executive's participation in the Plan.
The Committee's determination shall be indicated in the
Notice of Participation.
6. Severance Benefits
If a Participating Executive's employment with the
Designated Employer is terminated during the Severance
Protection Period by the Designated Employer other than by
reason of the Participating Executive's death, Disability,
Retirement or for Cause
or
if a Participating Executive shall terminate his or her
employment for Good Reason,
then, subject to Paragraph 7 of the Plan:
(a) The Company shall pay the Participating Executive Base
Salary through the Date of Termination.
(b) As compensation for services rendered to Midlantic, the
Company shall pay the Participating Executive an amount
equal to two times Base Salary in equal monthly installments
over a period of 24 consecutive months following the Date of
Termination, commencing with the first calendar month after
the Date of Termination.
(c) The Company shall pay to the Participating Executive a
lump sum amount equal to the sum of (i) any Incentive
Compensation which has been allocated or awarded to the
Participating Executive but which has not yet been paid,
(ii) a pro rata portion of the Participating Executive's
Incentive Compensation (determined by multiplying such
Incentive Compensation by a fraction, the numerator of which
<PAGE 4>
is the number of days the Participating Executive is
employed by the Designated Employer in the calendar year in
which the Participating Executive's Date of Termination
occurs and the denominator of which is 365); and (iii) the
amount of all cash awards and deferred cash compensation
(other than such compensation deferred at the election of
the Participating Executive) payable but not theretofore
paid to the Participating Executive, assuming all conditions
precedent to such payments shall have been met as of the
date the Notice of Termination is given.
(d) For a period of two years after the Date of
Termination, the Company shall provide the Participating
Executive with life insurance and health benefits
substantially similar to those which the Participating
Executive shall be receiving immediately prior to the date a
Change in Control shall have occurred or Notice of
Termination shall have been given, whichever is earlier.
The Company may, in its discretion, satisfy its obligation
to provide coverage pursuant to this subparagraph (d) by
purchasing an individual or group insurance policy covering
the Participating Executive. The Participating Executive
agrees to apply for any such individual or group policy as
directed by the Company and to cooperate with the Company in
its efforts to obtain such a policy, including submitting to
any physical examination which may be a prerequisite to the
issuance of a policy. To the extent a purchase of an
individual or group policy is not made or to the extent the
individual or group policy does not provide substantially
similar benefits, the Company will otherwise meet its
obligation to provide substantially similar benefits by
whatever other method it may select.
(e) The Participating Executive will be entitled to receive
Adjusted Retirement Benefits from the Company in order to
provide the Participating Executive with approximately the
same total retirement benefits the Participating Executive
would have received under all retirement plans of the
Company and Subsidiaries in which the Participating
Executive participates as if the Participating Executive
were fully vested under such retirement plans and had
continued in the employ of the Company or a Subsidiary for
twenty four months following the Date of Termination or
until his or her Retirement, if earlier. Adjusted
Retirement Benefits will be provided on an unfunded basis,
are not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code, shall be payable
solely from the general assets of the Company and shall be
payable at the times and in the manner that pension benefits
are generally payable under the applicable retirement plans,
disregarding any amendment(s) to such retirement plans
occurring after a Change in Control shall have occurred, or
Notice of Termination shall have been given, whichever is
earlier, if such amendment(s) adversely affect the
<PAGE 5>
Participating Executive.
(f) The payments provided for in subparagraph (b) shall be
made not later than the fifth day of the month when due; the
payment provided for in subparagraph (c) shall be made not
later than the fifth day following the Date of Termination.
(g) In the event that any Severance Benefits are not paid
or provided when due, the Company shall also pay to the
Participating Executive Interest on the overdue amount (or
on the amount expended by the Participating Executive to
purchase a Severance Benefit not provided).
(h) The Participating Executive shall not be required to
mitigate the amount of any Severance Benefit by seeking
other employment or otherwise, nor shall the amount of any
Severance Benefit be reduced by any compensation earned by
the Participating Executive as the result of employment by
another employer after the Date of Termination, or
otherwise.
7. Reduction of Severance Benefits
The Severance Benefits shall be subject to reduction as
follows:
(a) The amount of Severance Benefits payable under
Paragraph 6(b) shall be reduced on a dollar for dollar basis
by the cash amount actually paid to the Participating
Executive with respect to termination of employment under
the Midlantic Severance Pay Policy. Any cash amount so
received shall reduce the amounts payable under Paragraph
6(b) in the order in which they are payable.
(b) If the Participating Executive shall at any time within
24 months after the Date of Termination be engaged in
Covered Employment, the Participating Executive shall
promptly provide notice of such Covered Employment to the
Company (including the date the Participating Executive
became engaged in such Covered Employment) and the Company's
obligation to make monthly payments under Paragraph 6(b)
shall immediately cease as of the date the Participating
Executive became so engaged; in lieu of any further such
monthly payments to the Participating Executive under
Paragraph 6(b), the Company shall pay the Executive a lump
sum payment equal to 50% of the aggregate amount of the
payments so subject to cessation (subject to a maximum lump
sum payment of $1,000,000) reduced by any monthly payments
under Paragraph 6(b) made after the date the Participating
Executive became engaged in such Covered Employment; such
lump sum payment shall be made within 30 days after the date
the Company receives notice of such Covered Employment.
<PAGE 6>
(c) Health benefits to be provided to a Participating
Executive pursuant to Paragraph 6(d) of the Plan shall be
terminated or reduced, to the extent that the Participating
Executive receives Alternative Health Benefits, as follows:
If the Alternative Health Benefits are comparable or
superior to the coverage to be provided pursuant to
Paragraph 6(d), the Company's obligation to provide health
benefits shall terminate. Otherwise, to the extent not
inconsistent with law, health benefits provided under
Paragraph 6(d) shall be secondary to any Alternative Health
Benefits received by the Participating Executive. Life
insurance benefits provided to a Participating Executive
pursuant to Paragraph 6(d) shall be reduced to the extent
comparable life insurance coverage is received by the
Participating Executive in connection with subsequent
employment. The Participating Executive shall give notice
to the Company of any Alternative Health Benefits or any
life insurance coverage so actually received by him or her.
(d) If a Participating Executive (or any other person or
entity on behalf of the Participating Executive) shall have
received or shall be entitled to receive "payments in the
nature of compensation" treated as "parachute payments",
within the meaning of Section 280G of the Internal Revenue
Code (whether such payments in the nature of compensation
are payable under the Plan or otherwise), the Severance
Benefits (but not, unless otherwise agreed or waived by the
Participating Executive, other payments in the nature of
compensation) shall be reduced to the extent required to
cause the Participating Executive not to be receiving
Severance Benefits that would not be deductible under
Section 280G of the Internal Revenue Code, subject to the
following:
(i) Notwithstanding anything in the Plan to the
contrary, the Severance Benefit referred to in Paragraph
6(b) of the Plan shall not be reduced to less than an amount
equal to one times Base Salary payable in equal monthly
installments over a period of 12 months following the Date
of Termination, less cash amounts actually paid to the
Participating Executive with respect to termination of
employment under the Midlantic Severance Pay Policy as
contemplated under subparagraph (a) of this Paragraph 7.
(ii) The terms "reduce" and "reduction" as used in this
subparagraph (d) shall include, but shall not be limited to,
elimination of, reduction in, and extension of the date(s)
of payment of, the Severance Benefit.
(iii) The Company shall determine which Severance
Benefit(s) shall be reduced to effect the reduction
contemplated by this subparagraph (d), but only after
<PAGE 7>
(A) giving effect to the effective waiver by the
Participating Executive of receipt or enjoyment of a payment
in the nature of compensation within the meaning of Section
280G, and (B) giving the Participating Executive a
reasonable opportunity to request a method of reduction, and
good faith consideration by the Company of compliance with
any such request.
(iv) If Severance Benefits are reduced to a
Participating Executive under this subparagraph (d), and
Severance Benefits are also reduced or terminated pursuant
to subparagraphs (b) or (c) of this Paragraph 7, the Company
shall pay to the Participating Executive the lesser of (A)
the amount of such decrease in the Severance Benefit under
subparagraphs (b) or (c) or (B) the maximum amount which can
be paid to the Participating Executive without being, or
causing any other payment to be, not deductible under
Section 280G of the Internal Revenue Code; such amount shall
be paid to the Participating Executive on or before the 15th
day after the Participating Executive shall have given the
notice required under subparagraph (b) or (c), whichever is
applicable.
(v) If the amount of any reduction of Severance
Benefits as provided in this subparagraph (d) cannot be
finally determined on or before the date such Severance
Benefit is to be provided under the Plan, the Company shall
pay the Participating Executive on such date an estimate of
the minimum amount of such Severance Benefit which the
Company in good faith has determined would not be so subject
to reduction and shall provide the remainder of such
Severance Benefit (together with Interest from the date such
Severance Benefit would otherwise have been due) as soon as
the amount thereof can be determined, but in no event later
than the thirtieth day after the Date of Termination. In
the event that the amount of the estimate so provided
exceeds the Severance Benefit subsequently determined to
have been due, such excess shall constitute a loan by the
Company to the Participating Executive, payable on the 10th
day after demand by the Company (together with Interest from
the date such estimated Severance Benefit was provided to
the Participating Executive).
(vi) If a Participating Executive's Severance Benefits
are reduced under this subparagraph (d), the Company,
promptly after it has made a calculation of the amount of
the estimated or final reduction, shall provide to the
Participating Executive a statement of the basis for such
reduction which identifies in reasonable detail the
Participating Executive's
<PAGE 8>
parachute payments (within the meaning of Section 280G of
the Internal Revenue Code) and which includes a calculation
in reasonable detail of the amount and basis of the
reduction; if a payment is due to or from the Participating
Executive under subparagraph (d)(v), a payment to the
Participating Executive and any demand for repayment made on
the Participating Executive by the Company shall be
accompanied by a calculation in reasonable detail of the
basis for such payment.
(vii) Notwithstanding subparagraph (d)(iii) of this
Paragraph 7, if the Participating Executive provides to the
Company a reasoned opinion of legal counsel who is
reasonably acceptable to the Company's independent auditors
that all or any portion of the amount of Severance Benefits
or other payments under this Plan are likely to be
deductible under Section 280G of the Internal Revenue Code,
the Company shall not reduce the Severance Benefits by any
amount which such legal counsel so opines is so deductible
and shall pay or provide such amount to the Participating
Executive, when due, or within 5 days after the receipt of
such legal opinion, whichever is later. In the event it is
ultimately determined by a court of competent jurisdiction
or in a compromise, settlement or other final resolution of
a proceeding which shall bind the Participating Executive
pursuant to Paragraph 11 of the Plan, that all or any
portion of the Severance Benefit which is not so reduced is
not deductible, the Participating Executive shall pay the
amount which is not so deductible to the Company (together
with Interest from the date such amount(s) was paid to the
Participating Executive).
8. Additional Payments to a Participating Executive in
Certain Circumstances
If after giving effect to Paragraph 7 of the Plan, as a
result of the payment to the Participating Executive of any
Severance Benefit, any amount under this Paragraph 8, or any
amount pending resolution of a Dispute, the Participating
Executive shall be obligated to pay any excise tax under
Section 4999 of the Internal Revenue Code, or any similar
federal, state or local tax law, the Company shall pay to
the Participating Executive within ten days after a written
demand therefore, the amount of such excise tax (whether
such excise tax is payable with respect to the Severance
Benefit, any amount under this Paragraph 8, any amount paid
pending resolution of a Dispute, or otherwise), plus the
amount of all federal, state and local income taxes payable
on such excise tax(es) and on such income taxes, applying
the Participating Executive's marginal income tax rates.
If, as a result of the operation of subparagraphs (d)(iv) or
(d)(v) of Paragraph 7 or of subparagraph (c) of Paragraph 9,
the
<PAGE 9>
Participating Executive shall become entitled to a refund of
any excise taxes, or income taxes payable with respect to
such excise taxes (or income taxes on such income taxes),
the Participating Executive shall pay, within 10 days after
receipt of such refund, the amount of such refund to the
Company (together with Interest from the date of receipt of
such refund).
9. Notice of Termination and Disputes
(a) Any purported termination of employment of a
Participating Executive by a Designated Employer by reason
of Disability or for Cause, or by a Participating Executive
for Good Reason shall be communicated by written Notice of
Termination to the other party. A Notice of Termination
shall state the date the Participating Executive's
employment is to be terminated, the specific basis for
termination and the facts and circumstances claimed to
support such basis (set forth in reasonable detail). A
Participating Executive shall be entitled to give a Notice
of Termination that his or her employment is being
terminated for Good Reason at any time not later than
eighteen months after any occurrence of an event alleged to
constitute Good Reason.
(b) If there shall be a Dispute as to the basis for the
Participating Executive's termination, until the Dispute is
finally determined or until the Participating Executive
shall be engaged in Covered Employment, whichever is
earlier, the Company shall pay the Participating Executive
Base Salary and provide the Participating Executive with the
same or substantially comparable welfare benefits and
perquisites (including participation in the Company's or a
Subsidiary's retirement plans, profit sharing plans,
incentive plans, stock option plans and stock and cash award
plans) that the Participating Executive was paid or provided
immediately prior to the date Notice of Termination was
given.
(c) Should a Dispute ultimately be determined in favor of
the Designated Employer, (i) all cash amounts paid by the
Company or a Subsidiary to the Participating Executive under
subparagraph (b) of this Paragraph 9 from the date of
termination specified in the Notice of Termination until the
obligation of the Company under subparagraph (b) shall have
terminated shall be repaid promptly by the Participating
Executive to the Company (with Interest from the date
received by the Participating Executive), (ii) all stock
options, stock awards and rights granted to the
Participating Executive pursuant to subparagraph (b) of this
Paragraph 9 shall be cancelled or returned to the Company
and (iii) no service as an employee shall be credited to the
Participating Executive for such period for pension
purposes. The Participating Executive shall not be
<PAGE 10>
obligated to pay the Company or a Subsidiary the cost of
providing the Participating Executive with other welfare
benefits and perquisites for such period unless the final
judgment, order or decree of a court or other body resolving
the Dispute determines that the Participating Executive
acted in bad faith in giving a notice of Dispute.
(d) Should a Dispute ultimately be determined in favor of
the Participating Executive, (i) the Participating Executive
shall be entitled to retain all cash amounts, welfare
benefits and perquisites paid to the Participating Executive
under subparagraph (b) of this Paragraph 9 pending
resolution of the Dispute and shall be entitled to receive
the Severance Benefits and other payments or benefits to
which he or she is entitled under the Plan.
10. Reimbursement of Legal Fees
The Company shall pay to a Participating Executive the
amount of Termination Related Legal Fees, subject to the
following:
(a) The Company shall pay all Termination Related Legal
Fees incurred by the Participating Executive (i) in
connection with a Dispute, (ii) in seeking to obtain any
amount or benefit under the Plan which the Participating
Executive in good faith shall believe the Company has not
paid or provided, or shall not be intending to pay or
provide, when due (including, without limitation, any amount
payable to the Participating Executive under subparagraph
(d)(vii) of Paragraph 7), (iii) in seeking to enforce or
obtain any right under the Plan which the Participating
Executive in good faith shall believe he or she has under
the Plan or the Notice of Participation but which the
Company has not provided or is not intending to provide,
(iv) in seeking to enforce any other obligation which the
Participating Executive in good faith shall believe the
Company has to the Participating Executive under the Plan or
the Notice of Participation or (v) in monitoring and
understanding the legal issues raised in any proceeding of
the type referred to in Paragraph 11 and the status of such
proceeding. Such Termination Related Legal Fees shall be
paid by the Company whether or not the Participating
Executive shall have commenced litigation or any other
proceedings.
(b) The Company's aggregate obligation for all Termination
Related Legal Fees other than those referred to in
subparagraph (a) of this Paragraph 10 shall be limited to
$5,000.
(c) Notwithstanding the foregoing, the Company shall have
no obligation under this Paragraph 10 if it shall be
determined by final judgment, order or decree of a court of
competent jurisdiction that Termination Related Legal Fees
were
<PAGE 11>
incurred in a proceeding brought in bad faith by or on
behalf of the Participating Executive.
11. Certain Tax Matters.
The Participating Executive and the Company shall each
promptly notify the other upon receipt of a notice of the
institution of a judicial or administrative proceeding,
whether formal or informal (including an audit), in which
the federal or state tax treatment of, deductibility of, or
excise or income tax paid or payable with respect to, any
amount paid or payable under the Plan is being reviewed or
is in dispute. The Company will assume control at its sole
expense over all legal matters pertaining to such
proceeding. The Participating Executive shall cooperate
fully with the Company in any such proceeding and the
Company shall keep the Participating Executive fully
informed about such proceeding and the issues raised therein
(inasmuch as they relate to such tax treatment,
deductibility or tax paid or payable). The Participating
Executive shall not enter into any compromise or settlement,
or otherwise prejudice any rights the Company may have, in
connection with such proceeding, without the prior consent
of the Company. The Participating Executive shall not be
bound by, nor shall any payments or benefits provided under
the Plan be affected by, any final resolution of such
proceeding (whether by compromise, settlement or otherwise),
unless (i) the Participating Executive shall have consented
thereto or (ii) the Company shall have diligently provided a
defense in such a proceeding to all claims in connection
with amounts paid or payable under the Plan, including
diligently pursuing and exhausting all appeals except
appeals on such issues which in the opinion of legal counsel
to the Company reasonably acceptable to the Participating
Executive, would be frivolous.
12. Additional Provisions
(a) The Company's obligation to pay and provide the
Participating Executive the Severance Benefits and other
payments or benefits under the Plan shall be absolute and
unconditional and shall not be affected by any circumstance,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company may
have against the Participating Executive or anyone else.
(b) All amounts payable by the Company hereunder shall be
due without notice or demand.
(c) Except as provided in Paragraphs 7 and 9 of this Plan,
each and every Severance Benefit or other payment made under
the Plan by the Company shall be final and the Company will
not seek to recover for any reason all or any part of such
Severance Benefit or payment from the Participating
Executive or any other person entitled to receive such
Severance Benefit or payment.
<PAGE 12>
(d) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise, but excluding a successor in a transaction
pursuant to which the Federal Deposit Insurance Corporation
provides assistance under Section 13 of the Federal Deposit
Insurance Act) to all or substantially all of the business
and/or assets of the Company, by written agreement in form
and substance satisfactory to the Participating Executive,
to expressly assume and agree to perform all of the
Company's obligations to the Participating Executive under
the Plan.
(e) The obligations of the Company under the Plan to a
Participating Executive shall inure to the benefit of, and
be enforceable by, the Participating Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If
a Participating Executive should die while any amounts
remain payable to the Participating Executive under the
Plan, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Plan to
the Participating Executive's designee or, if the
Participating Executive or his or her legal representative,
executor or administrator shall not have given notice to the
Company of such designee, to the Participating Executive's
estate. Subject to the foregoing, the rights of the
Participating Executive under the Plan shall not be
assignable.
(f) Nothing in the Plan or a Notice of Participation shall
be deemed to entitle a Participating Executive to continued
employment with the Company or a Subsidiary, and the rights
of the Company or a Subsidiary to terminate the employment
of the Participating Executive shall continue as fully as
though this Plan were not in effect.
(g) For purposes of the Plan and a Notice of Participation,
notices and all other communications provided for in the
Plan or in the Notice of Participation shall be in writing
and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as provided in the
Notice of Participation; provided, that notices given to
effect a change of address shall be deemed given only when
received.
(h) No waiver by the Company, the Participating Executive
or the Designated Employer of any breach by any other party
of, or compliance with, any condition or provision of the
Plan or the Notice of Participation shall be effective
unless in writing nor shall such a waiver be deemed a waiver
at any other time of the same provision or condition or at
any time of any other provision or condition.
<PAGE 13>
(i) The rights provided to the Participating Executive in
the Plan are in addition to, and not in lieu of, any other
rights in any plan providing for payments to or benefits for
the Participating Executive or in any agreement now
existing, or which hereafter may be entered into, between
the Company and the Participating Executive.
(j) The validity, interpretation, construction and
performance of the Plan and each Notice of Participation
shall be governed by the laws of the State of New Jersey.
(k) All amounts due and benefits provided under the Plan
shall constitute general obligations of the Company. The
Participating Executive shall have only an unsecured right
to payment thereof out of the general assets of the Company.
(l) The invalidity or unenforceability of any provisions of
the Plan or a Notice of Participation shall not affect the
validity or enforceability of any other provision of the
Plan or of a Notice of Participation. Any provision in the
Plan or a Notice of Participation which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or
affecting the remaining provisions, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other
jurisdiction.
(m) All Severance Benefits and other payments and benefits
provided for in the Plan shall be provided net of any
applicable withholding required under any federal, state or
local law.
(n) The Company shall be deemed to be the named fiduciary
under ERISA for the purposes of the Plan.
13. Amendment, Suspension and Termination of the Plan
The Plan may be amended, suspended or discontinued at any
time by resolution approved by the Committee and reflected
in its minutes, but any such amendment, suspension or
discontinuance which shall adversely affect any rights of a
Participating Executive shall not be effective as to such
Participating Executive without his or her express written
consent. In the absence of such consent, notwithstanding
anything in the Plan or the Participating Executive's Notice
of Participation to the contrary, all references to the Plan
in the Participating Executive's Notice of Participation
shall be deemed to be references to the Plan without giving
effect to such amendment, suspension or discontinuance.
<PAGE 14>
Exhibit A
Midlantic Corporation
Executive Severance Plan
Definitions
The following terms shall have the following meanings for
the purposes of the Plan:
"Adjusted Retirement Benefits" means the amount payable to
the Participating Executive or his or her beneficiaries
which is equal to the excess of (1) the benefits that would
be paid to the Participating Executive or his or her
beneficiaries, under all retirement plans of the Company and
Subsidiaries in which the Participating Executive shall have
participated at the date a Change in Control shall have
occurred or Notice of Termination shall have been given,
whichever is earlier, assuming (A) the Participating
Executive were fully vested under such retirement plans, (B)
the twenty-four (24) month period (or the period until
Retirement, if less) following the Date of Termination were
added to credited service under such retirement plans, (C)
such retirement plans were not amended after the date a
Change in Control shall have occurred or Notice of
Termination shall have been given, whichever is earlier, in
a way that adversely affects the Participating Executive,
and (D) the Participating Executive's highest average annual
compensation as defined under such retirement plans were
calculated as if the Participating Executive were employed
by the Company or a Subsidiary for a twenty-four (24) month
period (or the period until Retirement, if earlier)
following the Date of Termination and as if the
Participating Executive's compensation for purposes of such
retirement plans during such period were equal to the
Participating Executive's Base Salary and Incentive
Compensation; over (2) the benefits that are payable to the
Participating Executive or his beneficiaries under all such
retirement plans; Adjusted Retirement Benefits also include
all ancillary benefits, such as early retirement and
survivor rights and benefits, under such retirement plans,
disregarding any such amendments; for the purposes of the
definition of "Adjusted Retirement Benefits" only, the term
"retirement plans" includes all plans and employment
contracts which provide for benefits payable on or following
retirement (including excess benefit or "high hat" plans and
any other plans or employment contracts that provide for the
payment of defined benefits on retirement) but does not
include the Midlantic Savings & Investment Plan, or any
successor thereto.
"Alternative Health Benefits" means health care coverage
received by a Participating Executive after the termination
of employment in connection with employment of the
Participating Executive other than by the Company or a
Subsidiary, or as a result of medicare entitlement or
coverage as a dependant under a group health plan of the
Participating Executive's
<PAGE 15>
spouse.
"Base Salary" means the amount determined by multiplying the
Participating Executive's highest bi-weekly or other
periodic rate of gross base pay payable to the Participating
Executive during the twelve-month period immediately prior
to the date a Change in Control shall have occurred or
Notice of Termination shall have been given, whichever is
earlier, by the number of pay periods in the calendar year
in which such highest rate of gross base pay was payable to
the Participating Executive. The following items are not
part of base pay, as used herein: reimbursed expenses, any
amount paid on account of overtime or holiday work, payment
by the Company or a Subsidiary on account of either
insurance premiums or other contributions made to other
welfare or benefit plans, any Incentive Compensation or
other year-end or other bonuses, commissions and gifts.
"Board" means the Board of Directors of the Company.
"Cause" means:
(A) the conviction of the Participating Executive
for commission of a felony or equivalent offense, or the
willful commission by the Participating Executive of a
criminal or other act that in the judgment of the Board
causes or will probably cause substantial economic damage to
the Company or a Subsidiary or substantial injury to the
business reputation of the Company or a Subsidiary;
(B) the commission by the Participating Executive of an act
of fraud in the performance of such Participating
Executive's duties on behalf of the Company or a Subsidiary;
(C) the continuing willful failure of the Participating
Executive to perform his or her duties to the Company or a
Subsidiary (other than any such failure resulting from the
Participating Executive's incapacity due to physical or
mental illness and other than termination by the
Participating Executive of his or her employment for Good
Reason or based upon an event or circumstance which the
Participating Executive in good faith believes would
constitute Good Reason) after written notice thereof
(specifying the particulars thereof in reasonable detail)
and a reasonable opportunity to be heard and cure such
failure are given to the Participating Executive by the
Committee; or
(D) the order of a federal or state bank regulatory agency
or a court of competent jurisdiction
<PAGE 16>
requiring the termination of the Participating Executive's
employment.
No act, or failure to act, by the Participating Executive
shall be considered "willful" if the Participating Executive
acted or failed to act (i) other than in bad faith and (ii)
other than with a reasonable belief that the action or
failure to act was not in the best interests of the Company
or a Subsidiary.
"Change in Control" means (1) the ownership or acquisition,
directly or indirectly, by any person (as defined below),
other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a
Subsidiary, of beneficial ownership (as determined below) of
securities of Midlantic representing 25% or more of the
combined voting power of Midlantic's then outstanding
securities; or (2) during any period of two consecutive
years, a change in composition of the Board of Directors of
Midlantic so that 50% or less of the members of such Board
are Continuing Directors; or (3) approval by the
shareholders of Midlantic (or, if no such shareholder
approval is required, consummation) of a merger,
consolidation, sale or similar transaction of Midlantic or
any Principal Subsidiary with, into or to any other business
entity, or a binding share exchange involving Midlantic's
securities, other than any such transaction under this
clause (3) as a result of which the voting securities of
Midlantic outstanding immediately prior thereto continue to
represent at least 75% of the combined voting power of the
voting securities of Midlantic outstanding immediately after
such transaction, or (4) approval by the shareholders of
Midlantic of a plan of complete liquidation of Midlantic or
of an agreement for the sale or disposition by Midlantic of
all or substantially all Midlantic's assets. A "Change in
Control" shall not include, however, (A) any transaction
pursuant to which the Federal Deposit Insurance Corporation
provides assistance under Section 13 of the Federal Deposit
Insurance Act or (B) any acquisition of an option or warrant
to purchase Midlantic voting securities approved by the vote
of more than 50% of the Continuing Directors in connection
with a transaction referred to in clause (3) above. For the
purposes of the definition of "Change in Control" only,
"person" shall have the meaning used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended,
and "beneficial ownership" shall be determined pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
"Committee" means the Executive Compensation Committee of
the Board, or such other committee of the Board, however
designated, as shall be duly delegated responsibility with
respect to matters of executive compensation, or if no
committee is so delegated, the Board.
<PAGE 17>
"Company" means Midlantic Corporation, a New Jersey
corporation, its successors and assigns and such other
successors to its business and/or assets, as referred to in
Subparagraph (d) of Paragraph 12 of the Plan.
"Continuing Director" means an individual who (1) at the
beginning of the period for determining whether a Change in
Control shall have occurred, was a member of the Board of
Directors of Midlantic, (2) was elected by such Board of
Directors or (3) was nominated by such Board of Directors
for election by Midlantic shareholders, provided, that in
the case of clauses (2) and (3), such election or nomination
occurred by a vote of at not less than two-thirds (2/3) of
the Continuing Directors.
"Covered Employment" means full-time employment by an
employer or self-employment, provided, that the business of
such employer or self-employed Participating Executive shall
have been in existence for more than two years. A person
shall be "engaged" in Covered Employment at such time as the
applicable business shall have been in existence for more
than two years.
"Date of Termination" means the date of termination of the
Participating Executive's employment specified in the Notice
of Termination, which shall not be more than ninety (90)
days after such Notice of Termination is given, subject to
the following: If within thirty (30) days after any Notice
of Termination is given, the party who receives such Notice
of Termination notifies the other party in writing that a
Dispute exists, the Date of Termination shall be extended to
either the date on which the Dispute is finally determined
or the date the Participating Executive shall be engaged in
Covered Employment, whichever is earlier; provided, that the
Date of Termination shall be extended by a notice of Dispute
only if such notice is given in good faith and the party
giving such notice pursues the resolution of such Dispute
with reasonable diligence.
"Designated Employer" means the Company, unless otherwise
indicated in the Notice of Participation.
"Disability" means the Participating Executive's incapacity
due to physical or mental illness such that the
Participating Executive shall have become qualified to
receive benefits under the Company's or a Subsidiary's long-
term disability plan, if any.
"Dispute" means (i) in the case of termination of employment
of a Participating Executive by the Designated Employer for
Disability or Cause, that the Participating Executive
challenges the existence of Disability or Cause and (ii) in
the case of termination of employment of a Participating
Executive by the Participating Executive for Good Reason,
that
<PAGE 18>
the Designated Employer challenges the existence of Good
Reason. A Dispute is "finally determined" when it is
resolved by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefore having expired
and no appeal having been perfected).
"ERISA" means Employee Retirement Income Security Act of
1974, as amended.
"Good Reason" means:
(a) at or following the occurrence of a Change in Control
(applicable to all Participating Executives)
(i) (A) The assignment to the Participating
Executive of duties without the Participating
Executive's express written consent, which (I) are
materially different or require travel significantly more
time consuming or extensive than the Participating
Executive's duties or business travel obligations
immediately prior to the Change in Control, or (II) result
in either a significant reduction in the Participating
Executive's authority and responsibility as a senior
executive of the Designated Employer when compared to the
highest level of authority and responsibility assigned to
the Participating Executive at any time during the six (6)
month period prior to the Change in Control, or, (B) without
the Participating Executive's express written consent, the
removal of the Participating Executive from, or any failure
to reappoint or reelect the Participating Executive to, the
highest title held at the Designated Employer within the six
(6) month period prior to the Change in Control, except in
connection with a termination of the Participating
Executive's employment for Cause, or by reason of the
Participating Executive's death, Disability or Retirement;
(ii) A reduction of the Participating Executive's Base
Salary, or the failure to grant increases in the
Participating Executive's Base Salary on a basis at least
substantially comparable to those granted to other senior
executives of the Company;
(iii) The Participating Executive being required to be based
at a location which is more than a Reasonable Commuting
Distance between the location at which the Participating
Executive was based immediately prior to the Change in
Control and the Participating Executive's residence (and, if
so indicated in the Notice of Participation, the
<PAGE 19>
Participating Executive being required to be based anywhere
other than the principal office of the Company) except for
required travel on the Company's or a Subsidiary's business
to an extent substantially consistent with the Participating
Executive's business travel obligations immediately prior to
the Change in Control; or in the event of any relocation of
the Participating Executive with the Participating
Executive's express written consent, the failure by the
Company or a Subsidiary to pay (or reimburse the
Participating Executive for) all reasonable moving expenses
by the Participating Executive relating to a change of
principal residence in connection with such relocation and
to indemnify the Participating Executive against any loss
realized in the sale of the Participating Executive's
principal residence in connection with any such change of
residence, all to the effect that the Participating
Executive shall incur no loss upon such sale on an after-tax
basis;
(iv) The failure by the Company or a Subsidiary to continue
to provide the Participating Executive with either (A)
substantially the same welfare benefits (which for purposes
of the Plan shall mean benefits under all welfare plans as
that term is defined in Section 3(1) of ERISA, and
perquisites, (which for the purposes of the Plan shall
include participation on a comparable basis in the Company's
or a Subsidiary's retirement plans (including the Midlantic
Savings & Investment Plan), incentive plans, stock option
plans, stock award plans, and other plans in which senior
executives of the Company participate and as were provided
to the Participating Executive immediately prior to such
Change in Control), or (B) a package of welfare benefits and
perquisites, that, taken as a whole, is substantially
comparable in all material respects to the welfare benefits
and perquisites in which senior executives of the Company
participate and as were provided to the Participating
Executive immediately prior to such Change in Control; or
(v) The failure of the Company to obtain the express written
assumption of and agreement to perform its obligations to
the Participating Executive under the Plan by any successor,
as contemplated in Subparagraph (d) of Paragraph 12 of the
Plan; and
(b) prior to the occurrence of a Change in Control
(applicable only to Participating Executives whose Severance
Protection Period includes periods prior to such occurrence)
<PAGE 20>
(i) without the Participating Executive's consent, (A)
any assignment to the Participating Executive during the
Severance Protection Period of duties other than those set
forth in the Notice of Participation, (B) any limitation
during the Severance Protection Period of the Participating
Executive's responsibilities set forth in the Notice of
Participation, or (C) any removal during the Severance
Protection Period of the Participating Executive from, or
failure to reelect the Participating Executive during the
Severance Protection Period to, any of the positions set
forth in the Notice of Participation, except in connection
with the termination of the Participating Executive's
employment for Cause, or by reason of death, Disability or
Retirement.
(ii) A reduction of the Participating Executive's
Base Salary, or the failure to grant increases in the
Participating Executive's Base Salary on a basis at least
substantially comparable to those granted to other senior
executives of the Company;
(iii) The failure by the Company or a Subsidiary to continue
to provide the Participating Executive with either (A)
substantially the same welfare benefits (which for purposes
of the Plan shall mean benefits under all welfare plans as
that term is defined in Section 3(1) of ERISA, and
perquisites, (which for the purposes of the Plan shall
include participation on a comparable basis in the Company's
or a Subsidiary's retirement plans (including the Midlantic
Savings & Investment Plan), incentive plans, stock option
plans, stock award plans, and other plans in which senior
executives of the Company participate, or (B) a package of
welfare benefits and perquisites, that, taken as a whole, is
substantially comparable in all material respects to the
welfare benefits and perquisites in which senior executives
of the Company participate; or
(iv) The failure of the Company to obtain the express
written assumption of and agreement to perform its
obligations to the Participating Executive under the Plan by
any successor, as contemplated in Subparagraph (d) of
Paragraph 12 of the Plan.
"Incentive Compensation" means the total of (1) the amount
of the cash award paid to the Participating Executive under
the Incentive Plan with respect to the calendar year
immediately prior to the date a Change in Control shall
occur, or Notice of Termination shall have been given,
whichever is earlier, and (2) the value, as of the date of
grant, of stock awards granted as a short-term incentive in
lieu of cash with respect to such calendar year.
<PAGE 21>
"Incentive Plan" means the Midlantic Annual Incentive and
Bonus Plan, as amended, and any successor plan(s) thereto.
"Interest" means interest determined under Section 1274(d)
of the Internal Revenue Code (calculated on a fixed basis on
the applicable determination date as if the following were
the term of a debt instrument: the period from the date
from which Interest is payable under the Plan to the date
payment is actually made).
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
"Midlantic" means Midlantic Corporation, a New Jersey
corporation, and its successors and assigns prior to a
Change in Control having occurred.
"Midlantic Severance Pay Policy" means the Midlantic
Severance Pay Policy, as in effect from time to time, or as
it may be amended (or any successor severance plan or policy
providing cash severance payments to employees generally).
"Notice of Participation" means the notice provided to a
Participating Executive under Paragraph 2 of the Plan, as
such Notice of Participation may from time to time be
amended with the consent of the Participating Executive.
"Notice of Termination" means the notice given by the
Designated Employer or the Participating Executive as
contemplated under Paragraph 9 of the Plan.
"Participating Executive" means an executive employed by the
Company or a Subsidiary who has become a Participating
Executive under Paragraph 2 of the Plan.
"Plan" means the Executive Severance Plan as adopted by the
Committee on September 21, 1994, as from time to time
amended pursuant to the Plan. The Plan includes the
definitions in this Exhibit A.
"Principal Subsidiary" means Midlantic Bank, National
Association, its successors and assigns and any other
Subsidiary designated by the Committee as a "Principal
Subsidiary" for the purposes of the Plan.
"Reasonable Commuting Distance" means the greater of (1) 45
miles or (2) the distance between the Participating
Executive's residence and the location at which the
Participating Executive was based immediately prior to the
Change in Control of the Company.
"Retirement" means that the Participating Executive shall
have
<PAGE 22>
voluntarily retired under all of the Company's and a
Subsidiary's retirement plans applicable to such Executive.
"Severance Benefits" means the amounts payable, and benefits
to be made available, to a Participating Executive under
Paragraph 6 of the Plan and for the purposes of Paragraph 8
of the Plan shall include any amounts paid by the Company
pursuant to Paragraph 7 of the Plan.
"Severance Protection Period" means the period determined by
the Committee, under Paragraph 5 of the Plan.
"Subsidiary" means (1) Midlantic Bank, National
Association, (2) any other company (including without
limitation a bank, a business corporation, a partnership, a
limited liability company or a joint venture) 50% or more of
the voting securities or other voting interests of which are
directly or indirectly owned by Midlantic Corporation, (3)
such other companies, if any, as are designated as
Subsidiaries by the Committee and (4) the respective
successors and assigns of Subsidiaries under clauses (1),
(2) and (3).
"Termination Related Legal Fees" means legal fees and
disbursements incurred by the Participating Executive from
time to time in connection with his or her termination of
employment by the Designated Company, in connection with
termination of employment by the Participating Executive for
Good Reason or in connection with a judicial or
administrative proceeding of the type referred to in
Paragraph 11 of the Plan.
<PAGE 1>
EXHIBIT 10(bb)
MIDLANTIC CORPORATION
INCENTIVE STOCK AND STOCK OPTION PLAN (1995)
ARTICLE 1. GENERAL
1.1 Purpose. The purpose of the Midlantic Incentive
Stock and Stock Option Plan (1995) (the "Plan") is to
provide to key employees of Midlantic Corporation (the
"Company") and its Subsidiaries an equity-based incentive to
maintain and enhance the performance and profitability of
the Company and, through the payment of equity-based
compensation, to align the interests of the recipients of
the compensation with the interests of the shareholders of
the Company. It is the further purpose of this Plan to
permit the granting of certain awards that will constitute
performance-based compensation for certain executive
officers, as described in section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder.
1.2 Administration.
(a) The Plan shall be administered by the Executive
Compensation Committee (the "Committee") of the Board of
Directors of the Company (the "Board"), which Committee
shall consist of two or more directors. It is intended that
the directors who serve on the Committee shall meet the
definition of "disinterested persons" (within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of
1934 (the "Act")) and "outside directors" (within the
meaning of Code section 162(m)) at the time of appointment
and during the period of Committee service; however, the
mere fact that a Committee member shall fail to qualify
under either of these requirements shall not invalidate any
award made by the Committee which award is otherwise validly
made under the Plan. The members of the Committee shall be
appointed by, and may be changed at any time and from time
to time in the discretion of, the Board.
(b) The Committee shall have the authority (i) to
exercise all of the powers granted to it under the Plan,
(ii) to construe, interpret and implement the Plan and any
Award agreements executed pursuant to the Plan, (iii) to
prescribe, amend and rescind rules relating to the Plan,
(iv) to make any determination necessary or advisable in
administering the Plan, and (v) to correct any defect,
supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters
relating to the Plan or any Award agreement shall be
conclusive.
(d) No member of the Committee shall be liable for any
action or determination made in good faith with respect to
the Plan or any award hereunder.
<PAGE 2>
1.3 Persons Eligible for Awards. Awards under the
Plan may be made to such officers and other employees ("key
personnel") of the Company or its Subsidiaries as the
Committee shall select from time to time in its sole
discretion.
1.4 Types of Awards Under Plan.
(a) Awards may be made under the Plan in the form of
(I) stock options ("options"), (ii) restricted stock awards,
(iii) recognition shares (including but not limited to
unrestricted stock awards), and (iv) deferred cash incentive
awards, all as more fully set forth in Articles 2 and 3.
(b) Options granted under the Plan may be either (i)
"nonqualified" stock options subject to the provisions of
Code section 83 or (ii) options intended to qualify for
incentive stock option treatment described in Code section
422.
(c) All options when granted are intended to be
nonqualified stock options, unless the applicable Award
agreement explicitly states that the option is intended to
be an incentive stock option. If an option is intended to
be an incentive stock option, and if for any reason such
option (or any portion thereof) shall not qualify as an
incentive stock option, then, to the extent of such
nonqualification, such option (or portion thereof) shall be
regarded as a nonqualified stock option appropriately
granted under the Plan provided that such option (or portion
thereof) otherwise meets the Plan's requirements relating to
nonqualified stock options.
1.5 Shares Available for Awards.
(a) Subject to Section 4.5 (relating to adjustments
upon changes in capitalization), the total number of shares
of Common Stock issued under the Plan, including shares
issued upon exercise of stock options shall not at any time
exceed 3,000,000 shares.
(b) In any twenty-four (24) month period, an
individual eligible for awards under the Plan may not be
granted options under the Plan covering a total of more than
300,000 shares of Common Stock.
(c) The total number of shares of Common Stock issued
under the Plan as restricted stock and recognition share
awards shall not at any time exceed 600,000 shares, subject
to adjustments under Section 4.5.
(d) Shares of Common Stock that shall be subject to
issuance pursuant to the Plan shall be authorized and
unissued or treasury shares of Common Stock.
<PAGE 3>
(e) Without limiting the generality of the foregoing,
the Committee may, with the award recipient's consent,
cancel any award under the Plan and issue a new award in
substitution therefor upon such terms as the Committee may
in its sole discretion determine; provided that the
substituted award shall satisfy all applicable Plan
requirements as of the date such new award is made.
1.6 Definitions of Certain Terms.
(a) "Change in Control" means (i) the ownership or
acquisition, directly or indirectly, by any person (as
defined below), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or a Subsidiary, of beneficial ownership (as
determined below) of securities of Midlantic representing
25% or more of the combined voting power of Midlantic's then
outstanding securities; or (ii) during any period of two
consecutive years, a change in composition of the Board of
Directors of Midlantic so that 50% or less of the members of
such Board are Continuing Directors; or (iii) approval by
the shareholders of Midlantic (or, if no such shareholder
approval is required, consummation) of a merger,
consolidation, sale or similar transaction of Midlantic or
any Principal Subsidiary with, into or to any other business
entity, or a binding share exchange involving Midlantic's
securities, other than any such transaction under this
clause (iii) as a result of which the voting securities of
Midlantic outstanding immediately prior thereto continue to
represent at least 75% of the combined voting power of the
voting securities of Midlantic outstanding immediately after
such transaction, or (iv) approval by the shareholders of
Midlantic of a plan of complete liquidation of Midlantic or
of an agreement for the sale or disposition by Midlantic of
all or substantially all of Midlantic's assets. A "Change
in Control" shall not include, however, (A) any transaction
pursuant to which the Federal Deposit Insurance Corporation
provides assistance under Section 13 of the Federal Deposit
Insurance Act or (B) any acquisition of an option or warrant
to purchase Midlantic voting securities approved by the vote
of more than 50% of the Continuing Directors in connection
with a transaction referred to in clause (iii) above. For
the purposes of the definition of "Change in Control" only,
"person" shall have the meaning used in Sections 13(d) and
14(d) of the Act and "beneficial ownership" shall be
determined pursuant to Rule 13d-3 under the Act.
(b) The term "Common Stock" as used herein means the
shares of common stock of the Company as constituted on the
effective date of the Plan, and any other shares into which
such common stock shall thereafter be changed by reason of a
recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.
(c) "Continuing Director" means an individual who (i)
at
<PAGE 4>
the beginning of the period for determining whether a Change
in Control shall have occurred, was a member of the Board of
Directors of Midlantic, (ii) was elected by such Board of
Directors or (iii) was nominated by such Board of Directors
for election by Midlantic shareholders, provided, that in
the case of clauses (ii) and (iii), such election or
nomination occurred by a vote of not less than two-thirds
(2/3) of the Continuing Directors.
(d) Except as otherwise determined by the Committee in
its sole discretion, the "Fair Market Value" as of any date
and in respect of any share of Common Stock shall be:
(i) if the Common Stock is authorized for
quotation on the National Market System of The Nasdaq Stock
MarketSM ("NASDAQ/NMS") or is listed for trading on a
national securities exchange other than the New York Stock
Exchange, the closing price, regular way, of the Common
Stock on NASDAQ/NMS or such exchange, as the case may be, or
if no such reported sale of the Stock shall have occurred on
such date on NASDAQ/NMS or such exchange, as the case may
be, on the preceding date on which there was such a reported
sale on NASDAQ/NMS or such exchange, as the case may be; or
(ii) if the Common Stock is listed for trading on
the New York Stock Exchange, the closing price, regular way,
of the Common Stock as reported on the New York Stock
Exchange Composite Tape, or if no such reported sale of the
Common Stock shall have occurred on such date, on the next
preceding date on which there was such a reported sale; or
(iii) if the Common Stock is not authorized for
quotation on NASDAQ/NMS or listed for trading on a national
securities exchange, the average of the closing bid and
asked prices as reported by The Nasdaq Stock MarketSM
("NASDAQ") or, if no such prices shall have been so reported
for such date, on the next preceding date for which such
prices were so reported; or
(iv) if not quoted as described in clause (iii),
the mean between the high bid and low asked quotations for
the Common Stock as reported by the National Quotation
Bureau Incorporated or such other source as the Committee
shall select.
(e) "Midlantic" means Midlantic Corporation, a New
Jersey corporation, and its successors and assigns prior to
a Change in Control having occurred.
(f) "Net Income" means the net income of the Company
for the applicable period as determined under generally
accepted accounting principles, excluding (a) extraordinary
items (net of applicable taxes); (b) cumulative effects of
changes in accounting principles; (c) securities gains and
losses (net of applicable taxes); and (d) nonrecurring items
(net of applicable
<PAGE 5>
taxes) including, but not limited to, gains or losses on
asset dispositions and sales of subsidiaries, restructuring
charges, gains and losses from qualified benefit plan
curtailments and settlements, and income or expenses related
to deferred tax assets valuation reserve adjustments.
(g) "Principal Subsidiary" means Midlantic Bank,
National Association, its successors and assigns and any
other Subsidiary designated by the Committee as a "Principal
Subsidiary" for the purposes of the Plan.
(h) "Subsidiary" means (i) Midlantic Bank, National
Association, (ii) any other company (including without
limitation a bank, a business corporation, a partnership, a
limited liability company or a joint venture) 50% or more of
the voting securities or other voting interests of which are
directly or indirectly owned by Midlantic Corporation, (iii)
such other companies, if any, as are designated as
Subsidiaries by the Committee and (iv) the respective
successors and assigns of Subsidiaries under clauses (i),
(ii) and (iii).
1.7 Agreements Evidencing Awards.
(a) Options and restricted stock awards granted under
the Plan shall be evidenced by written agreements. Other
awards granted under the Plan shall be evidenced by written
agreements to the extent the Committee may in its sole
discretion deem necessary or desirable. Any such written
agreements (i) shall contain such provisions not
inconsistent with the terms of the Plan as the Committee may
in its sole discretion deem necessary or desirable and (ii)
are referred to herein as "Award agreements."
(b) Each Award agreement shall, to the extent
applicable, set forth the number of shares of Common Stock
subject to the award granted thereby.
(c) Each Award agreement with respect to the granting
of an option shall set forth the amount (the "option
exercise price") payable by the optionee to the Company in
connection with the exercise of the option evidenced
thereby. The option exercise price per share shall not be
less than the Fair Market Value of a share of Common Stock
on the date the option is granted.
ARTICLE 2. STOCK OPTIONS
2.1 Grant of Stock Options. The Committee may grant
options to purchase shares of Common Stock in such amounts
and subject to such terms and conditions as the Committee
shall from time to time in its sole discretion determine,
subject to the terms of the Plan.
<PAGE 6>
2.2 Exercisability of Options. Subject to the other
provisions of the Plan:
(a) Exercisability Determined by Award Agreement.
Each Award agreement shall set forth the period during which
and the conditions subject to which the option evidenced
thereby shall be exercisable, as determined by the Committee
in its discretion.
(b) Partial Exercise Permitted. Unless the applicable
Award agreement otherwise provides, and subject to any
minimum amounts established by the Committee, an option
granted under the Plan may be exercised from time to time as
to all or part of the number of whole shares as to which
such option shall then be exercisable.
(c) Notice of Exercise; Exercise Date.
(i) An option shall be exercisable by the filing
of a written notice of exercise with the Company, on such
form and in such manner as the Committee shall in its sole
discretion prescribe, and by payment of the option exercise
price in accordance with Section 2.4.
(ii) Unless the applicable Award agreement
otherwise provides, or the Committee in its sole discretion
otherwise determines, the date of exercise of an option
shall be the date the Company receives such written notice
of exercise and payment in full of the option exercise
price.
2.3 Limitation on Exercise. Notwithstanding any other
provision of the Plan, no Award agreement shall permit an
option to be exercisable more than 10 years after the date
of grant.
2.4 Payment of Option Price.
(a) Tender Due Upon Notice of Exercise. Unless the
applicable Award agreement otherwise provides or the
Committee in its sole discretion otherwise determines, any
written notice of exercise of an option shall be accompanied
by payment of the full option exercise price for the shares
being purchased.
(b) Manner of Payment. Payment of the option exercise
price shall be made in any combination of the following:
(i) by certified or official bank check payable
to the Company (or the equivalent thereof acceptable to the
Committee);
(ii) by personal check (subject to collection),
which may in the Committee's discretion be deemed
conditional;
(iii) by the optionee's written authorization to
charge a deposit account maintained by the optionee with a
banking institution subsidiary of the Company, provided that
such
<PAGE 7>
account contains sufficient available funds therefor;
(iv) if and to the extent provided in the
applicable Award agreement or the rules and regulations of
the Committee relating to the exercise of options, by
delivery of previously acquired shares of Common Stock,
owned by the optionee for at least six months, having a Fair
Market Value (determined as of the option exercise date)
equal to the portion of the option exercise price being paid
thereby, provided that the Committee may, by rules and
regulations, require the optionee to furnish an opinion of
counsel acceptable to the Committee to the effect that such
delivery would not result in the optionee incurring any
liability under Section 16(b) of the Act and does not
require any Consent (as defined in Section 4.2); and
(v) by delivery to the Company of an assignment
of a sufficient amount of the proceeds from the sale by the
optionee (through a broker or selling agent other than the
Company) of the Common Stock acquired upon exercise to pay
for all of the Common Stock acquired upon exercise and an
authorization to the broker or selling agent to pay that
amount to the Company, provided that the Committee may, by
rules and regulations, require the optionee to furnish an
opinion of counsel acceptable to the Committee to the effect
that such delivery would not result in the optionee
incurring any liability under Section 16(b) of the Act and
does not require any Consent (as defined in Section 4.2).
(c) Issuance of Shares. As soon as practicable after
receipt of full payment of the option exercise price, the
Company shall, subject to the provisions of Sections 4.2 and
4.4 hereof, deliver to the optionee one or more certificates
for the shares of Common Stock so purchased, which
certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of
the shares in accordance with applicable securities laws,
rules and regulations or otherwise.
2.5 Default Rules Concerning Termination of
Employment.
Subject to the other provisions of the Plan and unless the
applicable Award agreement otherwise provides:
(a) General Rule. All options granted to an optionee
shall terminate upon the optionee's termination of
employment for any reason except to the extent post-
employment exercise of the option is permitted in accordance
with this Section 2.5.
(b) Termination for Cause. All options granted to an
optionee shall terminate and expire on the day an optionee's
employment is terminated for cause.
(c) Termination other than for Cause, Disability or
Death; Leaves of Absence. Except as otherwise provided in
subsection (h) of this Section 2.5, if the optionee's
employment terminates for reasons other than as provided in
subsections (b), (d), (e)
<PAGE 8>
or (f) of this Section 2.5, the portion of options granted
to such optionee which were exercisable immediately prior to
such termination of employment may be exercised until the
earlier of (i) 60 days after the optionee's termination of
employment or (ii) the date on which such options terminate
or expire in accordance with the provisions of the Plan
(other than this Section 2.5) and the Award agreement;
provided, that the Committee may, in its sole discretion,
determine such other period for exercise in the case of an
optionee whose employment terminates solely because the
optionee's employer ceases to be the Company or a Subsidiary
or the optionee transfers employment with the Company's
consent to a purchaser of a business disposed of by the
Company. The Committee may, in its sole discretion,
determine (x) whether any leave of absence shall constitute
a termination of employment for purposes of the Plan, and
(y) the impact, if any, of any such leave on outstanding
awards under the Plan.
(d) Disability. If an optionee's employment
terminates by reason of disability (as determined by the
Committee), all options held by the optionee on the date of
termination, whether or not then exercisable, shall
immediately become and be exercisable by the optionee until
the earlier of (i) one year after the date on which the
optionee's employment terminated or (ii) the date on which
such options terminate or expire in accordance with the
provisions of the Plan (other than this Section 2.5) and the
Award agreement.
(e) Retirement. If an optionee's employment
terminates by reason of retirement (as defined in any
pension plan maintained by the Company or any Subsidiary in
which the optionee participates), the options exercisable by
the optionee immediately prior to the optionee's retirement
shall be exercisable by the optionee until the earlier of
(i) three years after the optionee's retirement or (ii) the
date on which such options terminate or expire in accordance
with the provisions of the Plan (other than this Section
2.5) and the Award agreement.
(f) Death Before Termination. If an optionee dies
while
employed by the Company or any Subsidiary, all options held
by the optionee on the date of death, whether or not then
exercisable, shall immediately become and be exercisable by
the personal representative of the optionee's estate or by
the person to whom such options pass under the optionee's
will (or, if applicable, pursuant to the laws of descent and
distribution) until the earlier of (i) one year after the
optionee's death or (ii) the date on which such options
terminate or expire in accordance with the provisions of the
Plan (other than this Section 2.5) and the Award agreement.
(g) Death After Termination. If an optionee's
employment terminates in the manner described in subsections
(c), (d), (e) or (h) of this Section 2.5 and the optionee
dies within the
<PAGE 9>
period for exercise provided for therein, the options
exercisable by the optionee immediately prior to the
optionee's death shall be exercisable by the personal
representative of the optionee's estate or by the person to
whom such options pass under the optionee's will (or, if
applicable, pursuant to the laws of descent and
distribution) until the earlier of one year after the
optionee's death, or the date on which such options
terminate or expire in accordance with the provisions of
subsections (c), (d), (e) or (h) of this Section 2.5.
(h) Termination Following a Change in Control. If an
optionee's employment terminates for reasons other than as
provided in subsections (b), (d), (e) or (f) of this Section
2.5 within three years following a Change in Control, that
portion of options granted to such optionee which were
exercisable immediately prior to such termination of
employment may be exercised until the later of (i) 60 days
after the optionee's termination of employment, (ii) ten
days after the date on which the optionee could sell the
shares of Common Stock to be acquired upon exercise of such
option without liability pursuant to Section 16(b) of the
Act, and (iii) 200 days after the Change in Control shall
have occurred, but in no event later than the date on which
such options terminate or expire in accordance with the
provisions of the Plan (other than this Section 2.5) and the
Award agreement.
2.6 Acceleration of Vesting Upon a Change in Control.
Notwithstanding anything to the contrary contained in the
Plan or any Award agreement, all outstanding and unexercised
stock options shall become immediately exercisable upon and
after a Change in Control.
ARTICLE 3. AWARDS OTHER THAN STOCK OPTIONS
3.1 Restricted Stock Awards.
(a) Grant of Awards. The Committee may grant
restricted stock awards, alone or in tandem with other
awards under the Plan or any other incentive plan maintained
by the Company, in such amounts and subject to such terms
and conditions as the Committee shall from time to time in
its sole discretion determine, subject to the limitations
set forth in Section 1.5(c). The vesting of a restricted
stock award granted under the Plan may be conditioned upon
the completion of a specified period of employment with the
Company or any Subsidiary, and/or upon such other criteria
as the Committee may determine in its sole discretion.
(b) Payment. Each Award agreement with respect to a
restricted stock award shall set forth the amount (if any)
to be paid by the award recipient with respect to such
award. If an award recipient makes any payment for a
restricted stock award which does not vest, appropriate
payment may be made to the award
<PAGE 10>
recipient following the forfeiture of such award on such
terms and conditions as the Committee may determine.
(c) Forfeiture upon Termination of Employment. Unless
the applicable Award agreement otherwise provides or the
Committee otherwise determines (which determination may be
made at or after the date of grant and may apply
retroactively to the date of termination), if an award
recipient's employment terminates for any reason (including
death) before all of his or her restricted stock awards have
vested, such awards shall terminate and expire upon such
termination of employment.
(d) Issuance of Shares. The Committee may provide
that one or more certificates representing restricted stock
awards shall be registered in the award recipient's name and
bear an appropriate legend specifying that such shares are
not transferable and are subject to the terms and conditions
of the Plan and the applicable Award agreement, or that such
certificate or certificates shall be held in escrow by the
Company on behalf of the award recipient until such shares
vest or are forfeited, all on such terms and conditions as
the Committee may determine. Unless the applicable Award
agreement otherwise provides, no share of restricted stock
may be assigned, transferred, otherwise encumbered or
disposed of by the award recipient until such share has
vested in accordance with the terms of such award. Subject
to the provisions of Sections 4.2 and 4.4, as soon as
practicable after any restricted stock award shall vest, the
Company shall issue or reissue to the award recipient one or
more certificates for the Common Stock represented by such
restricted stock award.
(e) Award Recipients' Rights Regarding Restricted
Stock. Unless the applicable Award agreement otherwise
provides: (i) an award recipient may vote and receive
dividends on restricted stock awarded under the Plan; and
(ii) any stock received as a distribution with respect to a
restricted stock award shall be subject to the same
restrictions as such restricted stock.
3.2 Recognition Shares. The Committee may issue stock
under the Plan, alone or in tandem with other awards under
the Plan or any other incentive plan maintained by the
Company, in such amounts and subject to such terms and
conditions as the Committee shall from time to time in its
sole discretion determine, subject to the limitations set
forth in Section 1.5(c). Recognition shares may be granted
as, or in payment of, a bonus, or to provide incentives or
recognize special achievements or contributions. If
recognition shares are granted as, or in payment of, all or
a portion of a bonus under another incentive plan maintained
by the Company or in connection with any such bonus, the
performance-based criteria, if any, established with respect
to such other incentive plan shall apply to the recognition
shares and shall be satisfied prior to any such grant of
recognition shares.
<PAGE 11>
3.3 Deferred Cash Incentive Awards.
(a) Grant of Awards. Subject to the provisions of
subsection (b) of this Section 3.3, the Committee may grant
a deferred cash incentive award in tandem with all or any
part of an option granted under the Plan, either at the time
the related option is granted or any time thereafter prior
to the exercise, termination or cancellation of such option,
upon such terms and conditions as the Committee shall from
time to time determine, subject to the terms of the Plan.
The recipient of a deferred cash incentive award shall,
subject to the terms of the Plan and the applicable Award
agreement, have the right to receive from the Company, upon
the exercise of the related option, an amount of cash equal
to the exercise price of the related option plus all
federal, state and local taxes, computed at the highest
applicable tax rates, attributable to the exercise of the
related option but not more than any limit on such award
determined by the Committee on the date of grant. In no
circumstances may a deferred cash incentive award be applied
to any purpose other than payment to the Company of the
exercise price of a properly exercised related option or the
payment of taxes attributable to the exercise of the related
option or the receipt of the deferred cash incentive award.
(b) Limitations on Awards. Each deferred cash
incentive award shall be subject to the Company's
achievement of a minimum targeted level of fully diluted Net
Income per share, which target shall be established by the
Committee prior to the date on which the deferred cash
incentive award is granted and shall be otherwise in
accordance with the requirements of Code section 162(m).
Each deferred cash incentive award shall also be subject to
the further condition that the Fair Market Value per share
of the Common Stock is greater than the option exercise
price per share of the related option (i) at the end of the
applicable period over which Net Income is to be measured or
(ii) if the condition is not satisfied on the date specified
in clause (i), on the first anniversary of the date
specified in clause (i). Notwithstanding anything in this
Section 3.3 to the contrary, the total of any deferred cash
incentive award(s) payable in any given calendar year under
the Plan to an award recipient shall not exceed the lesser
of 200% of the recipient's highest base salary in effect
during said year or $1,500,000.
(c) Effect of Termination of Employment. Unless the
applicable Award agreement otherwise provides or the
Committee otherwise determines (which determination may be
made at or after the date of grant), if an award recipient's
employment terminates for any reason (including death)
before all of his or her deferred cash incentive awards have
vested, such awards shall terminate and expire upon such
termination of employment.
<PAGE 12>
ARTICLE 4. MISCELLANEOUS
4.1 Amendment of the Plan; Modification of Awards.
(a) Plan Amendments. The Board may, without
shareholder approval, at any time and from time to time
suspend, discontinue or amend the Plan in any respect
whatsoever, except that no such amendment shall impair any
rights under any award theretofore made under the Plan
without the consent of the recipient of such award.
Furthermore, except as and to the extent otherwise permitted
by Section 4.5, no such amendment shall, without shareholder
approval:
(i) materially increase the benefits accruing to
award recipients under the Plan;
(ii) increase the maximum number of shares which
may be made subject to awards to an individual as options in
any 24month period;
(iii) increase, beyond the amounts set forth in
Section 4.5, the number of shares of Common Stock in respect
of which awards may be issued under the Plan;
(iv) materially increase the maximum number of
shares which may be made subject to restricted stock awards
or recognition shares;
(v) materially modify the designation in Section
1.3 of the class of persons eligible to receive awards under
the Plan;
(vi) provide for the grant of stock options
having an option exercise price per share of Common Stock
less than 100 percent of the Fair Market Value of a share of
Common Stock on the date of grant;
(vii) extend the term of the Plan beyond the period
set forth in Section 4.11; or
(viii) change the performance criteria for, or
increase the maximum amount of, deferred cash incentive
awards set forth in Section 3.3(b).
(b) Award Modifications. Subject to the terms and
conditions of the Plan (including Section 4.1(a)) and except
as otherwise provided below, the Committee may amend
outstanding Award agreements with any award recipient,
including, without limitation, any amendment which would (i)
accelerate the time or times at which an award may vest or
become exercisable, provided that Award agreements
evidencing deferred cash incentive awards or recognition
shares granted subject to performance-based criteria, shall
not be amended to change any such performance-
<PAGE 13>
based criteria stated therein, and/or (ii) extend the
scheduled termination or expiration date of the award;
provided, however, that no modification having a material
adverse effect upon the interest of an award recipient in an
award shall be made without the consent of such award
recipient.
4.2 Restrictions.
(a) Consent Requirements. If the Committee shall at
any time determine that any Consent (as hereinafter defined)
is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan,
the acquisition, issuance or purchase of shares or other
rights hereunder or the taking of any other action hereunder
(each such action being hereinafter referred to as a "Plan
Action"), then such Plan Action shall not be taken, in whole
or in part, unless and until such Consent shall have been
effected or obtained to the full satisfaction of the
Committee. Without limiting the generality of the
foregoing, the Committee shall be entitled to determine not
to make any payment whatsoever until Consent has been given
if (i) the Committee may make any payment under the Plan in
cash, Common Stock or both, and (ii) the Committee
determines that Consent is necessary or desirable as a
condition of, or in connection with, payment in any one or
more of such forms.
(b) Consent Defined. The term "Consent" as used
herein with respect to any Plan Action means (i) any and all
listings, registrations or qualifications in respect thereof
upon any securities exchange or other self-regulatory
organization or under any federal, state or local law, rule
or regulation, (ii) the expiration, elimination or
satisfaction of any prohibitions, restrictions or
limitations under any federal, state or local law, rule or
regulation or the rules of any securities exchange or other
self-regulatory organization, (iii) any and all written
agreements and representations by the award recipient with
respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from
the requirement that any such listing, qualification or
registration be made, and (iv) any and all consents,
clearances and approvals in respect of a Plan Action by any
governmental or other regulatory bodies or any parties to
any loan agreements or other contractual obligations of the
Company or any Subsidiary.
4.3 Nontransferability. No award granted to any award
recipient under the Plan shall be assignable or transferable
by the award recipient other than by will or by the laws of
descent and distribution. During the lifetime of the award
recipient, all rights with respect to any award granted to
the award recipient under the Plan or under any Award
agreement shall be exercisable only by the award recipient.
<PAGE 14>
4.4 Withholding Taxes.
(a) Whenever shares of Common Stock are to be
delivered pursuant to an award, the Committee may require as
a condition of delivery that the award recipient remit an
amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto.
Whenever a deferred cash incentive award is exercised by a
recipient, the Committee may, as a condition of its
exercise, deduct therefrom, or from any salary or other
payments due to the recipient, an amount sufficient to
satisfy all federal, state and other governmental
withholding tax requirements related thereto.
(b) Without limiting the generality of the foregoing,
(i) an award recipient may elect to satisfy all or part of
the foregoing withholding requirements by delivery of
unrestricted shares of Common Stock owned by the award
recipient having a Fair Market Value (determined as of the
date of such delivery by the award recipient) equal to all
or part of the amount to be so withheld, provided that the
Committee may, by rules and regulations, require, as a
condition of accepting any such delivery, the award
recipient to furnish an opinion of counsel acceptable to the
Committee to the effect that such delivery would not result
in the award recipient incurring any liability under Section
16(b) of the Act and (ii) the Committee may permit any such
delivery to be made by withholding shares of Common Stock
from the shares otherwise issuable pursuant to the award
giving rise to the tax withholding obligation (in which
event the date of delivery shall be deemed the date such
award was exercised).
4.5 Adjustments Upon Changes in Capitalization. If
and to the extent specified by the Committee, the number of
shares of Common Stock which may be issued pursuant to
awards under the Plan, the maximum number of options which
may be granted to any one person in any year, the number of
shares of Common Stock subject to awards, the number of
shares of Common Stock that may be granted as restricted
stock awards or recognition shares, the option exercise
price of options theretofore granted under the Plan, and the
amount payable, if any, by an award recipient in respect of
an award, shall be appropriately adjusted (as the Committee
may determine) for any change in the number of issued shares
of Common Stock resulting from the subdivision or
combination of shares of Common Stock or other capital
adjustments, or the payment of a stock dividend after the
effective date of the Plan, or other change in such shares
of Common Stock effected without receipt of consideration by
the Company; provided that any awards covering fractional
shares of Common Stock resulting from any such adjustment
shall be eliminated and provided further, that each
incentive stock option granted under the Plan shall not be
adjusted in a manner that causes such option to fail to
continue to qualify as an "incentive stock option" within
the meaning of Code section 422.
<PAGE 15>
Adjustments under this Section shall be made by the
Committee, whose determination as to what adjustments shall
be made, and the extent thereof, shall be final, binding and
conclusive.
4.6 Right of Discharge Reserved. Nothing in the Plan
or in any Award agreement shall confer upon any person the
right to continue in the employment of the Company or a
Subsidiary or affect any right which the Company or a
Subsidiary may have to terminate the employment of such
person.
4.7 No Rights as a Shareholder. Except as otherwise
provided below, no award recipient or other person shall
have any of the rights of a shareholder of the Company with
respect to shares subject to an award until the issuance of
a stock certificate to him or her for such shares. Except
as otherwise provided in Section 4.5, no adjustment shall be
made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities
or other property) for which the record date is prior to the
date such stock certificate is issued. In the case of a
recipient of an award which has not yet vested, the
recipient shall have the rights of a shareholder of the
Company if and only to the extent provided in the Plan or
the applicable Award agreement.
4.8 Non-Uniform Determinations. The Committee's
determinations under the Plan need not be uniform and may be
made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan (whether or not
such persons are similarly situated). Without limiting the
generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and
selective Award agreements, as to (a) the persons to receive
awards under the Plan, (b) the terms and provisions of
awards under the Plan, (c) the treatment of leaves of
absence pursuant to Section 2.5(c), and (d) the acceleration
of vesting requirements associated with awards.
4.9 Other Payments or Awards. Nothing contained in
the Plan shall be deemed in any way to limit or restrict the
Company, any Subsidiary or the Committee from making any
award or payment to any person under any other plan,
arrangement or understanding, whether now existing or
hereafter in effect.
4.10 Section Headings. The section headings contained
herein are for the purposes of convenience only and are not
intended to define or limit the contents of said sections.
4.11 Effective Date and Term of Plan.
(a) The Plan shall be deemed adopted and become
effective upon the approval thereof by the shareholders of
the Company.
(b) The Plan shall terminate on December 31, 2004.
<PAGE 16>
Notwithstanding the foregoing, all awards made under the
Plan prior to such termination date shall remain in effect
until such awards have been satisfied or terminated in
accordance with the terms and provisions of the Plan and the
applicable Award agreement.
4.12 Governing Law. The Plan shall be governed by the
laws of the State of New Jersey.
<PAGE 1>
EXHIBIT 10(cc)
RETIREMENT PLAN FOR DIRECTORS
OF
MIDLANTIC CORPORATION
1. Purpose. The Retirement Plan for Directors of
Midlantic Corporation (the "Plan") is designed to enhance
the ability of Midlantic Corporation ("the Company") to
attract and retain competent and experienced directors by
providing retirement benefits for directors of the Company.
The Plan is intended to constitute an unfunded pension plan
maintained solely for the directors of the Company which
qualifies for exemptions from the Employee Retirement Income
Security Act of 1974, as amended. The Plan is not a
qualified plan under the Internal Revenue Code of 1986, as
amended, and benefits are paid to participants directly by
the Company.
2. Definitions. The following terms shall have the
meanings indicated below for all purposes of the Plan:
(a) "Board Service" means service as a director of the
Company and service prior to March 1987 as a director of
Midlantic Banks Inc. ("MBI") or Continental Bancorp, Inc.
("CBI"). "Board Service" shall not include any period
during which a Director serves as a director emeritus nor
shall it include any service on the board of directors of
any predecessor of the Company other than as expressly set
forth above or service during any period in which the
director was a paid employee of the Company, MBI, CBI or any
of their subsidiaries.
(b) A "Break in Board Service" shall mean any period
of time following a Director's Board Service during which
the Director (i) did not serve as a director of the Company,
MBI or CBI or (ii) was a paid employee of the Company, MBI,
CBI or any of their subsidiaries.
(c) "Continuous Board Service" means a Director's
Board Service subsequent to the Director's most recent Break
in Board Service, if any. Board Service prior to any such
Break in Board Service shall not qualify in determining
"Continuous Board Service".
(d) "Director" means any individual serving as a
member of the Board of Directors of the Company on the
Effective Date and any individual elected by the
shareholders or the Board of Directors of the Company to
serve as a director of the Company at any time after the
Effective Date.
(e) "Effective Date" means March 22, 1995.
(f) "Eligible Director" shall have the meaning
specified in
<PAGE 2>
Section 3 of the Plan.
(g) "Retainer" means the annual retainer paid to a
Director as compensation for service as a Director of the
Company, excluding any retainer paid with respect to service
on any committee of the Board of Directors and any fees paid
for attendance at meetings of the Board of Directors or any
committee thereof.
(h) For purposes of the Plan, a "year" shall mean any
period of twelve (12) consecutive months.
3. Eligibility. Any Director who (a) has completed
five (5) or more years of Continuous Board Service, (b) has
not been removed for cause, (c) has attained the age of 65
years while serving as a Director, and (d) whose service as
a Director terminates, either through retirement or death,
on or after the Effective Date and after satisfying the
eligibility criteria specified in clauses (a) through (c) of
this Section 3 (an "Eligible Director") shall be eligible to
receive retirement benefits as provided herein.
4. Retirement Benefit. The aggregate amount of
benefits payable to an Eligible Director hereunder (the
"Retirement Benefit") shall be that amount equal to (i) the
Retainer in effect on the date on which the Eligible
Director's service as a Director terminates, times (ii) the
number of full years of Continuous Board Service completed
by the Eligible Director immediately prior to the date on
which his or her service as a Director terminates, up to a
maximum of ten (10) years.
5. Payment of Retirement Benefit.
(a) The Retirement Benefit shall be paid over a period
of nine (9) years (the "Payment Period") as follows: (i)
during the first year of the Payment Period, the Eligible
Director shall receive an amount equal to one-fifth of the
total Retirement Benefit, payable in equal semiannual
installments on January 1 and July 1 of such year, and (ii)
in each of the second through ninth years of the Payment
Period, the Eligible Director shall receive an amount equal
to one-tenth of the total Retirement Benefit, payable in
equal semiannual installments on January 1 and July 1 of
each such year.
(b) If an Eligible Director's service as a Director
terminates by reason of death or if an Eligible Director
dies after termination of service as a Director but prior to
receipt in full of the Retirement Benefit payable hereunder,
any unpaid portion of the Retirement Benefit shall be paid
to (i) the beneficiary designated by the Eligible Director
in writing, which beneficiary designation may be delivered
to the Company at any time prior to the Eligible Director's
death or, (ii) if no such designation is made, to the person
or persons specifically named
<PAGE 3>
in the Director's will as the beneficiary or beneficiaries
of the Retirement Benefit or, (iii) if no such person or
persons are so named, to the personal representative of such
deceased Eligible Director.
6. Administration. The Plan shall be administered by
the Executive Compensation Committee of the Board of
Directors of the Company (the "Committee"). The Committee
shall have the authority to construe the Plan (which
construction shall be conclusive), to correct any defects,
to supply any omissions and to reconcile inconsistencies to
the extent necessary to effectuate the Plan.
7. No Rights to Benefits. No Director shall have any
rights to benefits under the Plan until such Director
becomes an Eligible Director as provided in Section 3
hereof.
8. Amendment or Termination of Plan. The Company
reserves the right to amend, modify, restate or terminate
the Plan at any time; provided, however, that no such action
shall reduce the benefits of any Eligible Director who had
previously retired or died.
9. Miscellaneous.
(a) The adoption and maintenance of this Plan shall
not constitute a contract between the Company and any
Director. Nothing contained herein shall be deemed to give
any Director the right to be retained as a Director, nor
shall it interfere with the Director's right to terminate
his or her membership on the Board of Directors at any time.
(b) All benefits payable under the Plan constitute an
unfunded, unsecured obligation of the Company. Payments
shall be made, when due, from the general funds of the
Company. The Company, at its option, may maintain one or
more bookkeeping accounts to reflect its obligations under
the Plan and may make such investments or establish such
trust(s) as it may deem desirable to assist it in meeting
its obligations hereunder. No Director shall have any
right, title or interest in any such accounts, investments
or trusts.
(c) The right of any person to any benefit or payment
under the Plan shall not be subject to voluntary or
involuntary transfer, alienation or assignment and, to the
fullest extent permitted by law, shall not be subject to
attachment, execution, garnishment, sequestration or other
legal or equitable process. Except as otherwise required by
law, any attempt to assign, transfer or dispose of any right
to receive benefits under the Plan shall be null and void.
(d) The Plan shall be governed by and construed in
accordance with the laws of the State of New Jersey.
<PAGE>
ITEM 14(a)3 - EXHIBIT 11
________________________
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(In thousands, except share and per share data)
<CAPTION>
1994 1993 1992 1991 1990
______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
EARNINGS APPLICABLE TO PRIMARY COMMON SHARES
Income (loss) before cumulative
effect of accounting changes $279,105 $131,396 $ 7,028 $(543,303) $(195,005)
Preferred stock dividends (4,531) (3,626) (3,672) (3,812) (3,812)
-------- -------- ------- --------- ---------
Income (loss) before cumulative
effect of accounting changes
applicable to primary common shares 274,574 127,770 3,356 (547,115) (198,817)
Cumulative effect of the changes
in accounting for postemployment
benefits in 1994 and for
income taxes in 1993 (7,528) 38,962 -- -- --
-------- -------- ------- --------- ---------
Net income (loss) applicable
to primary common shares $267,046 $166,732 $ 3,356 $(547,115) $(198,817)
======== ======== ======= ========= =========
EARNINGS APPLICABLE TO FULLY
DILUTED COMMON SHARES
Income (loss) before cumulative
effect of accounting changes
applicable to primary
common shares $274,574 $127,770 $ 3,356 $(547,115) $(198,817)
Interest expense on convertible
subordinated debentures, net of
federal income taxes 3,962 4,084 N/A N/A N/A
-------- -------- ------- --------- ---------
Income (loss) before cumulative
effect of accounting changes
applicable to fully diluted
common shares 278,536 131,854 3,356 (547,115) (198,817)
Cumulative effect of the changes in
accounting for postemployment
benefits in 1994 and for income
taxes in 1993 (7,528) 38,962 -- -- --
-------- -------- ------- --------- ---------
Net income (loss) applicable to
fully diluted common shares $271,008 $170,816 $ 3,356 $(547,115) $(198,817)
======== ======== ======= ========= =========
NUMBER OF AVERAGE SHARES
Primary
Average common shares outstanding 52,365,028 50,098,667 41,176,415 38,094,934 38,097,294
Average common share equivalents 613,013 844,657 392,671 N/A N/A
---------- ---------- ---------- ---------- ----------
Average primary common shares 52,978,041 50,943,324 41,569,086 38,094,934 38,097,294
========== ========== ========== ========== ==========
<PAGE>2
ITEM 14(a)3 - EXHIBIT 11
________________________
</TABLE>
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(In thousands, except share and per share data)
(continued)
<CAPTION>
1994 1993 1992 1991 1990
_____________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Fully diluted
Average common shares outstanding 52,365,028 50,098,667 41,176,415 38,094,934 38,097,294
Average common share equivalents 617,953 907,372 777,390 N/A N/A
Average convertible subordinated
debentures converted to common
shares 1,538,870 1,562,500 N/A N/A N/A
---------- ---------- ---------- ---------- ----------
Average fully diluted common
shares 54,521,851 52,568,539 41,953,805 38,094,934 38,097,294
========== ========== ========== ========== ==========
INCOME (LOSS) PER COMMON SHARE
Income (loss) before cumulative
effect of accounting changes
Primary $5.18 $2.51 $.08 $(14.36) $(5.22)
Fully diluted 5.11 2.51 .08 (14.36) (5.22)
Cumulative effect of the changes
in accounting for postemployment
benefits in 1994 and for income
taxes in 1993
Primary (.14) .76 -- -- --
Fully diluted (.14) .74 -- -- --
Net income (loss)
Primary 5.04 3.27 .08 (14.36) (5.22)
Fully diluted 4.97 3.25 .08 (14.36) (5.22)
========== ========== ========== ========== ==========
<FN>
N/A- Not Applicable
For 1991 and 1990, average common share equivalents were anti-dilutive and have been excluded from the per share computations.
Convertible subordinated debentures were anti-dilutive in 1992, 1991 and 1990 and have been excluded from the per share
computations for those periods.
</TABLE>
<PAGE>16
MANAGEMENT'S ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
____________
Midlantic Corporation ("MC"), is a bank holding company whose principal
subsidiary is Midlantic Bank, National Association ("MB"). MB operates 324
domestic offices, of which 261 are located in New Jersey and 63 are located in
a contiguous area in and around the city of Philadelphia, in southeastern
Pennsylvania. MB provides banking and other financial services to consumer
and commercial clients primarily in its New Jersey and Pennsylvania core
market area.
ABOUT THE FINANCIAL INFORMATION PRESENTED IN THIS ANALYSIS
The following financial analysis provides an in-depth discussion of the
results of operations for each of the past three years and financial
condition for each of the past two years of MC and its subsidiaries on a
consolidated basis (referred to herein as "Midlantic" or the "Corporation").
Certain tabular data, relevant to the analyses, is presented within the
discussion; additional tabular data may be found on pages 71 through 75.
The Corporation is presently composed of the parent company (MC), its bank
subsidiary (MB) and several smaller nonbank subsidiaries. In order to assist
the reader in better understanding differences between data of the past two
years (which substantially reflects the results of operations and financial
condition of the Corporation's present constituent entities) and data of 1992,
the discussion in many instances refers to Midlantic's "Continuing Entities"
which treats the effect of several subsidiaries that were sold during 1992 as
if those subsidiaries had all been sold on January 1, 1992. In those tables
for which five-year historical data have been shown, any data for the
Continuing Entities is presented as if subsidiaries divested during the period
from 1990 through 1992 had all been sold on January 1, 1990. Gains or losses
recognized on the sales of subsidiaries have been shown, where applicable, as
nonrecurring transactions of the Continuing Entities for the periods in which
the gains or losses actually occurred.
The results of operations for the Continuing Entities are not necessarily
indicative of the results of operations that would have been attained if
subsidiaries sold during 1992 had all been sold on January 1, 1992, or in the
case of five-year tables, if subsidiaries sold during 1990 through 1992 had
all been sold on January 1, 1990.
FINANCIAL HIGHLIGHTS
____________________
For the calendar year 1994, the Corporation reported a $101.2 million or 59.4
percent increase in net income from $170.4 million or $3.25 per fully diluted
common share in 1993 to $271.6 million or $4.97 per fully diluted common share
in 1994. Excluding certain tax benefits recognized in both years, net income
in 1994 was $175.9 million or $3.22 per fully diluted share compared to $53.7
million or $1.03 per fully diluted share in 1993. The return on average
assets was 2.02 percent in 1994 (1.31 percent excluding tax benefits) compared
to 1.24 percent in 1993 (.39 percent excluding tax benefits). The return on
average equity was 21.95 percent in 1994 (14.22 percent excluding tax
benefits) compared to 17.50 percent in 1993 (5.51 percent excluding tax
benefits).
The financial reorganization that management supervised beginning in 1991 and
largely completed in early 1994 is outlined in the section "Midlantic In
Transition 1990-1994" on page 18. The financial results achieved in the past
two years were significantly affected by the events described in that section.
The Corporation's core earnings (income before credit provisions, expenses for
other real estate owned ("OREO"), securities gains and losses, certain
nonrecurring items, income taxes and the cumulative effect of changes in
accounting principle) has improved in each of the past three years, amounting
to $308.8 million or 2.30 percent of average assets in 1994, $232.9 million or
1.70 percent of average assets in 1993 and $154.0 million or 1.05 percent of
average assets (on a Continuing Entity basis) in 1992. The successive
improvement in core earnings primarily resulted from higher levels of net
interest income, reflecting a widening spread between asset yields and funding
costs, which was partially attributable to declining levels of nonaccrual
assets. Core earnings also benefitted from stable operating expense levels in
1994 compared to 1993 and lower expense levels in 1993 compared to 1992.
<PAGE>17
<TABLE>
TABLE I - MAJOR COMPONENTS OF THE RESULTS OF OPERATIONS FOR 1994, 1993 AND 1992
<CAPTION>
1992
1994 1993 1992 Continuing
(In thousands) ACTUAL Actual Actual Entities
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME BEFORE CREDIT PROVISIONS, OREO EXPENSES,
SECURITIES GAINS OR LOSSES, CERTAIN NONRECURRING ITEMS,
INCOME TAXES AND THE CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLE ("CORE EARNINGS")
Net interest income $584,537 $514,690 $520,195 $449,799
Noninterest income 186,073 179,448 202,404 180,044
Noninterest expenses:
Salaries and benefits 226,676 219,332 257,221 224,785
Other 235,129 241,922 280,643 251,014
-------- -------- -------- --------
CORE EARNINGS 308,805 232,884 184,735 154,044
-------- -------- -------- --------
ADDITIONS:
Investment securities (losses) gains (6,663) 7,005 52,753 52,753
Net gains on bulk sales of assets 32,300 -- -- --
Net gains on sales of OREO 9,006 2,468 2,148 2,148
Gains on the sale of subsidiaries and loans
and other nonrecurring income 2,500 -- 35,208 35,208
DEDUCTIONS:
Provision for loan losses 21,625 81,343 140,580 118,868
Provision for OREO valuations 7,500 130,545 77,132 74,624
Other OREO expenses 6,718 6,260 24,760 23,831
Restructuring charges and other nonrecurring expenses 6,100 3,856 22,500 22,500
-------- -------- -------- --------
Income before income taxes and
cumulative effect of accounting changes 304,005 20,353 9,872 4,330
Income tax expense (benefit) 24,900 (111,043) 2,844 2,844
-------- -------- -------- --------
Income before cumulative effect of
accounting changes 279,105 131,396 7,028 1,486
Cumulative effect of the changes in accounting
for postemployment benefits in 1994
and for income taxes in 1993 (7,528) 38,962 -- --
-------- -------- -------- --------
NET INCOME $271,577 $170,358 $ 7,028 $ 1,486
======== ======== ======== ========
</TABLE>
CORE EARNINGS
See Appendix 1 for explanation of graphic image inserted here.
In each of the past two years, the Corporation realized certain income tax
benefits, net of required deferred tax balance adjustments, amounting to $95.6
million in 1994 and $113.6 million in 1993 allowable under Financial
Accounting Standards ("FAS") No. 109 "Accounting for Income Taxes," which was
adopted by Midlantic on January 1, 1993, and in 1993 recognized a $39.0
million income credit reflecting the cumulative effect of adoption of FAS No.
109. As of December 31, 1994, the Corporation had fully recognized all of
its available tax benefits. Consequently, income tax expense in 1995 should
represent the tax provision associated with Midlantic's 1995 results of
operations (see "Income Taxes").
In 1994, the Corporation adopted FAS No. 112 "Employers' Accounting for
Postemployment Benefits" and recorded a $7.5 million charge, net of taxes, as
the cumulative effect of the change in accounting principle (see
"Postemployment And Postretirement Benefit Expenses").
<PAGE>18
MIDLANTIC IN TRANSITION 1990-1994
_________________________________
During the past three years, the Corporation's profitability has steadily
improved with net income amounting to $271.6 million in 1994, $170.4 million
in 1993 and $7.0 million in 1992. This followed two years (1990 and 1991) in
which the Corporation recorded net losses aggregating $738.3 million. These
losses primarily resulted from the adverse impact on the Corporation in those
two years of a national and regional downturn in overall economic conditions
and a collapse in regional real estate markets. Since Midlantic had
historically been a significant servicer of the financial needs of the real
estate industry, the collapse in that industry and the corresponding impact on
related industries severely impaired the Corporation's loan quality. As loan
quality deteriorated, high provisions for possible losses became necessary
and, as a result, earnings were negatively affected. Earnings were also
impaired by the rise in nonaccrual assets (nonaccrual loans and OREO), which
grew by $1.5 billion from year-end 1989 to the third quarter of 1992 when they
reached a peak level of $1.9 billion.
In an effort to reposition its balance sheet, in 1990, Midlantic sold its
credit card accounts and receivables and substantially all of its lease
financing receivables. In mid-1991, Midlantic instituted a multi-phase
restructuring program in which the Corporation redirected its business focus
to its core market area of New Jersey and southeastern Pennsylvania. During
the restructuring phase, the Corporation divested its banks and certain
nonbank assets located outside of its market area. Midlantic also identified
and implemented a significant expense reduction initiative (FOCUS '92) and
unified company-wide management along its principal lines of business. The
divestiture of subsidiaries and assets since 1990 provided proceeds to the
Corporation of over $800 million, most of which were contributed as capital
into the Corporation's remaining bank subsidiaries, and reduced consolidated
assets by approximately $6 billion. These divestitures, along with the
identification of approximately $100 million of annualized expense savings
following the mid-1993 completion of FOCUS '92, were key to the Corporation's
ability to improve the financial condition of its core subsidiaries, stabilize
its losses and eventually return to profitability.
In an effort to resolve and reduce the elevated level of problem credits
during the early 1990's, the Corporation devoted significant resources to an
expanded loan workout effort. Such efforts contributed to the resolution of
nonaccrual loans, as payments and payoffs and returns to accrual or
renegotiated status totalled nearly $1 billion since year-end 1991. During
1993 and 1994, the Corporation also initiated and completed two major bulk
sales programs of distressed real estate assets. The Corporation sold
commercial real estate loans and OREO with an aggregate gross book value of
nearly $650 million. Prior to the sales, these assets were transferred to
"assets held for accelerated disposition" and carried at net realizable value
(fair value less the costs of disposing of the properties). The first bulk
sales program was initiated and completed in 1993 and the second, initiated in
late 1993, was completed in 1994. Substantially as a result of workout efforts
and the bulk sales actions, nonaccrual assets have fallen by $1.7 billion from
their peak level at September 30, 1991, amounting to only $247.8 million or
1.9 percent of total assets at year-end 1994. In 1994, the Corporation
realized a net gain of $32.3 million on the sale of those assets identified
for accelerated disposition in the second bulk sales program. No gains or
losses were realized on bulk sales transactions in 1993.
In addition to enhanced profitability through reductions in nonaccrual assets
and reduced leverage through asset sales, the Corporation significantly
improved its capital ratios and its liquidity through issuances of common
stock in both 1992 and 1993. In August 1992, the Corporation issued an
aggregate 7.7 million common shares for net proceeds of $109.5 million in a
European offering and in a domestic private placement, and in May 1993, in a
domestic public offering, issued 5.8 million common shares for net proceeds of
$107.1 million.
Following Midlantic's significant improvements in financial condition and
performance, asset quality and capital ratios, the Federal Reserve Bank of New
York and the Office of the Comptroller of the Currency, in March 1994,
terminated the written agreements under which the Corporation and
its then lead bank, Midlantic National Bank ("MNB"), operated. In addition,
in April 1994, the Corporation's Board of Directors (the "Corporation's
Board") declared the first cash dividend to common shareholders (amounting to
$.10 per common share) since the third quarter of 1990. In the two subsequent
quarters of 1994 and in the first quarter of 1995, common dividends of $.13
per share, $.17 per share and $.22 per share were also declared by the
Corporation's Board.
TABLE II - BULK SALES
Bulk Sales Bulk Sales
Finalized Finalized
(In thousands) During 1993 During 1994
___________________________________________________________________________
Book value of assets sold in bulk sales (1)
Loans $219,482 $277,315
OREO 74,115 70,819
---------------------------------------------------------------------------
Total 293,597 348,134
---------------------------------------------------------------------------
Charge-offs on assets sold in bulk sales or
held for accelerated disposition 84,456 146,277(2)
---------------------------------------------------------------------------
Net realizable value $209,141(3) $201,857(3)
===========================================================================
Loss provisions recognized during 1993 in
order to carry assets held for accelerated
disposition at net realizable value $ 34,000 $ 44,000
===========================================================================
(1) Amounts are net of prior charge-offs (if any) on these assets.
(2) Includes additional writedowns on OREO properties of $36.7 million.
(3) In 1993, cash proceeds from the sale of these assets were not substantially
different. In 1994, a $32.3 million gain was realized on bulk sales
completed during the year.
<PAGE>19
On August 27, 1994, Midlantic consolidated its two bank subsidiaries by
merging Continental Bank into MNB. The combined bank was renamed Midlantic
Bank, National Association. Also in August 1994, MNB's direct parent,
Midlantic Banks Inc., was merged into MC.
NET INTEREST INCOME
___________________
Net interest income ("NII") improved to $584.5 million in 1994, up from $514.7
million in 1993 and $449.8 million for the Continuing Entities in 1992. The
rise in NII during each of the past two years has been primarily driven by the
favorable effect of changes in market interest rates on Midlantic's funding
and investment yields along with a sizable decline in nonaccrual assets.
Average interest-earning assets decreased to $12.2 billion in 1994 from $12.5
billion in 1993 and $13.4 billion for the Continuing Entities in 1992. This
primarily reflected a decline in deposits, particularly retail certificates of
deposits ("CDs") bearing relatively higher rates of interest, which is largely
a result of an industry-wide movement of depositors' funds to non-deposit
instruments. The decline in deposit funding was accompanied by a decrease in
average loans of $330.0 million or 3.8 percent in 1994 and $1.3 billion or
13.1 percent in 1993. The contraction in average loans during the past two
years was comprised of: (i) principal paydowns or payoffs; (ii) loans sold in
bulk sales; (iii) charge-offs; and (iv) the transfer of loans to OREO, all of
which more than offset loan originations during the period. Declining loan
volume was evidenced in commercial real estate loans and, to a lesser extent,
commercial and financial loans. On average, consumer loans (loans to
individuals and long-term mortgage financing on 1-4 family residential
properties) have grown during the past two years. As part of its business
strategy, the Corporation has undertaken focused efforts to increase loans to
small and medium-sized businesses and to consumers.
Net interest margin (net interest income as a percent of average interest-
earning assets) rose to 4.79 percent in 1994 as compared with levels of 4.12
percent in 1993 and 3.36 percent for the Continuing Entities in 1992. The
rise in net interest margin reflects the widening gap between the yields
earned on average interest-earning assets and the rates paid on average
interest-bearing funding sources. The rise in net interest margin was
partially due to the significant reduction in nonaccrual assets and the
Corporation's success in obtaining the benefits from core deposit funding to
support its earning-asset base.
<TABLE>
TABLE III - SUMMARY OF AVERAGE BALANCES WITH RESULTANT INTEREST AND AVERAGE RATES
<CAPTION>
1994 1993 1992
--------------------------- ------------------------ ---------------------------
INTEREST Interest Interest
AVERAGE INCOME/ AVERAGE Average Income/ Average Average Income/ Average
(In millions) BALANCE EXPENSE RATE Balance Expense Rate Balance Expense Rate
------- ---- ---- ------- ---- ---- ------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOANS
Actual $ 8,279 $677 8.17% $ 8,609 $664 7.71% $11,121 $ 844 7.59%
Continuing Entities 8,279 677 8.17 8,609 664 7.71 9,905 734 7.41
------- ---- ---- ------- ---- ---- ------- ------ ----
ALL OTHER INTEREST-EARNING
ASSETS
Actual 3,935 186 4.73 3,880 162 4.18 3,753 218 5.81
Continuing Entities 3,935 186 4.73 3,880 162 4.18 3,496 199 5.69
------- ---- ---- ------- ---- ---- ------- ------ ----
TOTAL INTEREST-EARNING ASSETS
Actual 12,214 863 7.07 12,489 826 6.61 14,874 1,062 7.14
Continuing Entities 12,214 863 7.07 12,489 826 6.61 13,401 933 6.96
------- ---- ---- ------- ---- ---- ------- ------ ----
INTEREST-BEARING DEPOSITS
Actual 8,381 223 2.67 9,166 263 2.87 11,538 483 4.19
Continuing Entities 8,381 223 2.67 9,166 263 2.87 10,218 424 4.15
------- ---- ---- ------- ---- ---- ------- ------ ----
ALL OTHER INTEREST-BEARING
SOURCES OF FUNDS
Actual 959 55 5.84 791 48 6.07 968 59 6.08
Continuing Entities 959 55 5.84 791 48 6.07 953 59 6.15
------- ---- ---- ------- ---- ---- ------- ------ ----
INTEREST-FREE SOURCES OF FUNDS
Actual 2,874 -- -- 2,532 -- -- 2,368 -- --
Continuing Entities 2,874 -- -- 2,532 -- -- 2,230 -- --
------- ---- ---- ------- ---- ---- ------- ------ ----
NET INTEREST INCOME/NET INTEREST
MARGIN
Actual $585 4.79% $515 4.12% $ 520 3.50%
Continuing Entities 585 4.79 515 4.12 450 3.36
======= ==== ==== ======= ==== ==== ======= ===== ====
</TABLE>
<PAGE>20
<TABLE>
TABLE IV- ANALYSIS OF CHANGES IN NET INTEREST INCOME(1)
<CAPTION>
1994 VS. 1993 1993 vs. 1992
------------------------------- -----------------------------------
(In thousands) VOLUME(2) RATE(2) TOTAL Volume(2) Rate(2) Total
-------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN INTEREST INCOME
Interest-bearing deposits $ (3,573) $ 2,840 $ (733) $ 13,393 $ (943) $ 12,450
Other short-term investments (6,620) 7,120 500 20,161 932 21,093
Investment securities 17,637 7,202 24,839 (41,955) (47,418) (89,373)
Commercial, financial and
foreign loans (3)(4) (15,248) 7,467 (7,781) (92,881) 31,622 (61,259)
Real estate loans (3)(4) (46,272) 33,141 (13,131) (86,912) 353 (86,559)
Loans to individuals (3)(4) 37,579 (3,336) 34,243 (9,595) (23,417) (33,012)
-------- -------- -------- --------- --------- ---------
Total interest-earning assets (16,497) 54,434 37,937 (197,789) (38,871) (236,660)
-------- -------- -------- --------- --------- ---------
INCREASE (DECREASE) IN INTEREST EXPENSE
Domestic savings and time deposits (21,671) (17,951) (39,622) (86,890) (133,241) (220,131)
Overseas branch deposits 36 66 102 (55) (82) (137)
Short-term borrowings 6,461 3,081 9,542 (3,989) (1,766) (5,755)
Long-term debt (2,022) 90 (1,932) (4,329) (803) (5,132)
-------- -------- -------- --------- --------- ---------
Total interest-bearing sources of funds
used to finance interest-earning assets (17,196) (14,714) (31,910) (95,263) (135,892) (231,155)
-------- -------- -------- --------- --------- ---------
CHANGE IN NET INTEREST INCOME $ 699 $ 69,148 $ 69,847 $(102,526) $ 97,021 $ (5,505)
======== ======== ======== ========= ========= =========
CONTINUING ENTITIES (5)
INCREASE (DECREASE) IN
Total interest-earning assets $(16,497) $ 54,434 $ 37,937 $ (86,300) $ (20,842) $(107,142)
Total interest-bearing sources of funds
used to finance interest-earning assets (17,196) (14,714) (31,910) (47,978) (124,055) (172,033)
-------- -------- -------- --------- --------- ---------
CHANGE IN NET INTEREST INCOME $ 699 $ 69,148 $ 69,847 $ (38,322) $ 103,213 $ 64,891
======== ======== ======== ========= ========= =========
<FN>
(1) For average balances and average rates earned and paid see "Comparative Consolidated Average Balance Sheet with Resultant
Interest and Average Rates" on pages 72 and 73.
(2) The changes which cannot be attributed solely to changes in balances (volume) or to changes in rates are allocated to
these categories on the basis of their respective percentage changes.
(3) Includes income from loan fees which is not significant.
(4) Includes nonaccrual loans.
(5) Data for Continuing Entities has been presented consistant with actual data (see footnotes 2 through 4 above).
</TABLE>
PROVISION FOR LOAN LOSSES
_________________________
The provision for loan losses represents a charge to earnings for the purpose
of maintaining an adequate allowance for loan losses ("ALL"). The provision
for loan losses has declined in each of the past two years, amounting to $21.6
million in 1994, $81.3 million in 1993 (which included $20.0 million provided
in connection with writedowns on loans identified for bulk sale) and $118.9
million for the Continuing Entities in 1992. Lower provisioning levels are
principally attributable to the Corporation's substantial improvement in loan
quality. Management believes that provisioning levels in the near-term will
continue to remain low. The Corporation uses a methodology which assists in
the establishment of the level of the provision for loan losses that is
required to maintain an adequate ALL (see "The Lending Function - Allowance
for Loan Losses (ALL)"). Midlantic believes that its ALL was adequate at
December 31, 1994 to absorb estimated losses in its credit portfolios,
including unfunded commitments, outstanding at that date.
NONINTEREST INCOME AND NONINTEREST EXPENSES
___________________________________________
The discussion under this heading, unless otherwise stated, addresses the data
appearing in Tables V and VI for 1994 and 1993 and for the Continuing Entities
in 1992.
NONINTEREST INCOME
Noninterest income, excluding securities transactions and certain nonrecurring
gains ("adjusted noninterest income"), amounted to $186.1 million in 1994,
$179.4 million in 1993 and $180.0 million in 1992. The Corporation continues
to analyze possible new sources of fee revenue and attempts to maximize fee-
based cross-selling opportunities to its customer base, while seeking to
ensure that such services remain cost-effective and competitive.
Trust income increased to $43.3 million in 1994 compared to $41.5 million in
1993 and $41.6 million in 1992. Trust income benefitted primarily from higher
levels of fees from the "Compass Capital Group," Midlantic's proprietary
mutual fund group. The favorable impact of such fees was partially offset by
the termination of a small number of employee benefit accounts. Total trust
assets under management amounted to $9.0 billion at the end of 1994, of which
$5.0 billion were under discretionary management. This compares with total
trust assets under management of $9.7 billion at year-end 1993, of which $5.6
billion were under discretionary management.
<PAGE>21
<TABLE>
TABLE V - NONINTEREST INCOME
<CAPTION>
1992
1994 1993 1992 Continuing
(In thousands) ACTUAL Actual Actual Entities
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Trust income $ 43,263 $ 41,459 $ 46,776 $ 41,554
Service charges on deposit accounts 77,337 78,815 79,478 72,418
Mortgage banking fees -- -- 6,361 --
Other
Factoring commissions and fees 7,458 7,183 6,174 6,174
International and foreign exchange fees 6,493 7,393 9,441 9,175
Automated teller fees 7,113 6,518 5,601 5,531
Safe deposit fees 4,229 4,311 4,867 4,437
Commitment fees on revolving lines of credit 6,681 4,583 5,432 5,287
Merchant discount and other credit card-related fees 3,004 3,163 5,401 4,861
Other (primarily fees and nonbank income) 30,495 26,023 32,873 30,607
-------- -------- -------- --------
Total other 65,473 59,174 69,789 66,072
-------- -------- -------- --------
Noninterest income before securities transactions
and other nonrecurring income 186,073 179,448 202,404 180,044
Investment securities (losses) gains (6,663) 7,005 52,753 52,753
Net gains on disposition of assets and other
nonrecurring income 34,800 -- 35,208 35,208
-------- -------- -------- --------
Total noninterest income $214,210 $186,453 $290,365 $268,005
======== ======== ======== ========
</TABLE>
Service charge income amounted to $77.3 million in 1994, $78.8 million in 1993
and $72.4 million in 1992. Higher income in 1993 primarily resulted from the
repricing of certain services. The decline in 1994 reflects, in part, the
maintaining by certain customers of higher deposit balances in lieu of payment
for services rendered by the bank.
During 1994, the Corporation recorded $32.3 million of net gains on the sale
of loans and OREO that had previously been identified for accelerated
disposition (see "Midlantic In Transition 1990-1994"). The Corporation also
realized $1.5 million representing interest on a federal income tax refund and
a $1.0 million gain on the sale of a loan. In 1992, Midlantic realized
nonrecurring income totalling $35.2 million, which included an aggregate net
gain of $15.5 million on the sale of the Corporation's mortgage banking
subsidiary, Midlantic Home Mortgage Corporation ("MHMC") and four bank
subsidiaries located in New York state. Also in 1992, the Corporation
realized $19.7 million of other gains including those earned on the
securitization and/or sale of automobile and certain other loans. As a result
of the sale of MHMC, the realization of mortgage banking income temporarily
ceased. However, as part of Midlantic's efforts to offer its customers a full
line of banking services, the Corporation began originating residential
mortgage loans in early 1993. Fees earned on the origination of these loans
are recorded as interest income.
Other noninterest fee income (sources of which include letters of credit,
foreign exchange and other international trade-service fee income, factoring
commissions and fees, credit card merchant discount income, automated teller
fees, computer service fees and certain revenue from assets held for
accelerated disposition) advanced by $6.3 million or 10.6 percent in 1994
after declining by $6.9 million or 10.4 percent in 1993. The increase in
income in 1994 reflected revenue of $7.2 million received from assets held for
accelerated disposition prior to their sale. With respect to all other
noninterest fee income sources, in 1994, higher levels of commitment fees on
revolving lines of credit and automated teller fees were more than offset by
lower international and foreign exchange fees and computer fee income. The
decline in 1993 primarily resulted from a lower level of business activity
affecting many fee income sources, which was partially offset by increases in
factoring commissions and automated teller fees.
Net investment security losses amounted to $6.7 million in 1994 following net
gains of $7.0 million in 1993 and $52.8 million in 1992 (see Table X). Losses
in 1994 were realized primarily from the sale of $1.0 billion of U.S. Treasury
securities in the Corporation's available-for-sale portfolio, the proceeds of
which were then available for reinvestment at higher yields. Gains on the
sale of securities in the prior two year period resulted from a balance sheet
repositioning program whereby investment securities, principally U.S. Treasury
obligations aggregating over $2.8 billion, were sold.
NONINTEREST EXPENSES
Noninterest expenses declined to $473.1 million in 1994 from $599.4 million in
1993 and $594.6 million in 1992. Excluding OREO and certain nonrecurring
expenses, noninterest expenses remained level during 1994 and 1993 amounting
to approximately $461 million in both years, compared to $475.8 million in
1992.
Through FOCUS '92, the Corporation identified opportunities to eliminate
redundant activities, streamline processes and consolidate operations. As
FOCUS '92 was fully implemented by mid-1993, a major portion of the cost
reductions resulting from that initiative were realized during that year and
fully realized in 1994. Midlantic's core efficiency ratio (total noninterest
expenses exclusive of OREO expenses and certain nonrecurring charges as a
percent of net interest income plus adjusted noninterest income), improved to
59.9 percent in 1994 from 66.5 percent in 1993 and 75.5 percent in 1992. The
favorable trend in this ratio during the past two years reflects the
Corporation's success in containing expenses coupled with the realization of
higher levels of net interest revenue.
<PAGE>22
<TABLE>
TABLE VI - NONINTEREST EXPENSES
<CAPTION>
1992
1994 1993 1992 Continuing
(In thousands) ACTUAL Actual Actual Entities
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Salaries and benefits $226,676 $219,332 $257,221 $224,785
Net occupancy 44,354 44,622 51,410 45,028
Equipment rental and expense 23,542 26,881 35,776 31,686
OREO, net
Provision for OREO 7,500 130,545 77,132 74,624
Other (2,288) 3,792 22,612 21,683
-------- -------- -------- --------
Total OREO expense 5,212 134,337 99,744 96,307
-------- -------- -------- --------
FDIC assessment charges 28,407 33,841 34,090 30,509
Legal and professional fees 45,174 51,511* 51,403 49,294
Other
Amortization of goodwill and other intangibles 6,460 6,334 7,696 6,581
Courier services, moving and postage 13,911 13,627 16,748 14,551
Advertising 5,894 5,694 9,147 7,118
Printing, stationery and supplies 7,398 5,988 10,300 9,388
Telephone 8,084 8,388 10,296 8,893
Other (recurring) 51,905 48,892 53,777 47,966
Other (nonrecurring) 6,100 -- 22,500 22,500
-------- -------- -------- --------
Total other 99,752 88,923 130,464 116,997
-------- -------- -------- --------
Total noninterest expenses $473,117 $599,447 $660,108 $594,606
======== ======== ======== ========
<FN>
*Includes $3.9 million of nonrecurring fees incurred for the implementation of a security lending program.
</TABLE>
CORE EFFICIENCY RATIO
See Appendix 2 for explanation of graphic image inserted here.
During the past two years, salaries and benefits expense has been affected by
both the significant downsizing of staff levels following FOCUS '92 and the
Corporation's efforts to retain a highly professional staff through
competitive compensation policies. Salaries and benefits increased by $7.3
million or 3.3 percent in 1994 following a $5.5 million or 2.4 percent
decrease in 1993. Since the beginning of 1992, total full-time equivalent
staff levels contracted by 27.3 percent from 7,325 at January 1, 1992 to 5,327
at December 31, 1994. Partially offsetting the favorable effect of staff
reductions were performance-based salary increases granted employees in each
of the past two years and contributions to profit sharing and incentive bonus
plans including Midlantic's 401(k) employee savings plan, instituted in mid-
1993.
Net occupancy and equipment-related expenses decreased by $3.6 million or 5.0
percent in 1994 and $5.2 million or 6.8 percent in 1993. Midlantic reduced
these expenses partly through the renegotiation of leases and equipment
rental contracts as well as through a lower overall volume of equipment
rentals. Lower depreciation costs also contributed to declining expense
levels. In 1994, these benefits were partially offset by heavier than normal
snow and ice removal costs incurred early in the year.
OREO expenses of $5.2 million in 1994 fell significantly from levels of $134.3
million in 1993 and $96.3 million in 1992. Included in OREO expenses were
adjustments to the carrying value of certain OREO properties to approximate
net realizable value. These adjustments amounted to $7.5 million in 1994 as
compared with levels of $130.5 million in 1993 and $74.6 million in 1992. The
decline in such adjustments in 1994 was due to lower levels of OREO holdings
and to an apparent price stabilization in many real estate markets as
reflected by appraisals received on OREO properties. Included in 1993
expenses was $58.0 million specially provided against those OREO properties
that were subsequently sold in bulk sales. Such special provisions
represented adjustments to carrying values necessary in the Corporation's
judgment at that time to reflect the net realizable value of those assets when
liquidated in an accelerated manner in bulk sales transactions. OREO expenses
also include operating costs on OREO properties, net of rental income, and net
gains or losses on OREO sold in the normal course of business. In 1994,
rental income and net gains on the sale of OREO, in the aggregate, exceeded
total operating costs.
<PAGE>23
The Federal Deposit Insurance Corporation ("FDIC") assessment declined by $5.4
million or 16.1 percent in 1994 following an increase of $3.3 million or 10.9
percent in 1993. Effective January 1, 1993, the FDIC imposed a new risk-based
assessment system, which initially imposed substantially higher assessment
rates on Midlantic's bank subsidiaries. The assessment rates were reduced
later in 1993 and again as of January 1, 1994. A further decrease in the
assessment rate is expected to benefit the Corporation in 1995.
Legal and professional fees declined $6.3 million or 12.3 percent in 1994
following a $2.2 million or 4.5 percent increase in 1993. The decrease in
expenses in 1994 was primarily due to a reduction in loan workout expenses
reflecting the Corporation's lower level of problem assets. In 1993, a modest
decline in loan workout costs was more than offset by certain commissions
relating to consumer loan originations, administrative expenses related to the
implementation of the 401(k) employee savings plan and the implementation of a
security lending program (see "The Lending Function - Loans"). During the
fourth quarter of 1994, Midlantic discontinued utilizing the services of an
outside third party to assist in the origination of loans to automobile
purchasers that are originated through the selling dealer. Midlantic now
originates such loans directly through various automobile retailers with which
it has a customer relationship. In 1994 and 1993, commissions paid or accrued
to third parties for automobile loan originations amounted to $2.5 million and
$2.7 million, respectively.
All other noninterest expenses increased $4.7 million or 5.3 percent in 1994
following a decline of $5.6 million or 5.9 percent in 1993. These variances
do not include $6.1 million of expenses in 1994 in conjunction with the merger
of two bank subsidiaries resulting in major changes in branch signage, forms,
supplies, advertising materials, communications and certain other expenses,
and $22.5 million of restructuring expenses in 1992 incurred for the
implementation of FOCUS '92. Excluding these nonrecurring costs, lower or
substantially stable expense levels were reported in many categories
reflecting Midlantic's continuing attention to expense management. This was
partially offset by a $6.1 million increase in other losses reflecting the
Corporation's actual or expected liability in certain legal actions, including
the tentative settlement of the pending class action lawsuit brought by
shareholders of MC, and certain lenders' liability actions against MB. See
"Notes to Consolidated Financial Statements, Note No. 19" on page 61.
INCOME TAXES
____________
ADOPTION OF FAS NO. 109
Midlantic adopted FAS No. 109 in the first quarter of 1993. FAS No. 109
required a change from the "deferred tax method," utilized by the Corporation
prior to 1993, to the "liability method of accounting for income taxes and the
establishment, where applicable, of a valuation allowance for deferred tax
assets. Midlantic recognized the effect of adoption of FAS No. 109 as a
cumulative change in accounting principle. The adoption of FAS No. 109
provided the Corporation with an income credit, realized in the first quarter
of 1993, of $39.0 million or $.74 per fully diluted common share. As of the
date of adoption, the Corporation had $216.8 million of FAS No. 109 valuation
reserves, which at that time represented currently unrecognized federal and
state income tax benefits. During the past two years, the Corporation
periodically analyzed the adequacy of the FAS No. 109 valuation reserve based
upon management's estimation of continuing profitability and projected future
taxable income. As a result, during 1993 and 1994, the Corporation adjusted
its valuation allowance and recognized current period income tax benefits. As
of December 31, 1994, the Corporation determined that the valuation allowance
was no longer necessary.
OTHER INCOME TAX MATTERS
Midlantic recorded an income tax expense of $24.9 million in 1994, an income
tax benefit of $111.0 million in 1993 and an income tax expense of $2.8
million in 1992. The tax expense recorded in 1994 was comprised of federal
and state income tax expenses on operating earnings of $120.5 million offset
in part by tax benefits of $95.6 million primarily related to the reduction in
the FAS No. 109 tax valuation reserve. The tax benefits recorded in 1993
primarily represented benefits related to the reduction in the tax valuation
reserve. Based upon the accounting principles that existed prior to the
effective date of the Corporation's adoption of FAS No. 109, income tax
expenses in 1992 reflected state and local income taxes, as no federal income
tax expenses or benefits were recognized.
Due to the determination that the FAS No. 109 tax valuation reserve is no
longer necessary, income tax expenses in 1995 should represent the tax
provision associated with Midlantic's 1995 results of operations.
POSTEMPLOYMENT AND POSTRETIREMENT BENEFIT EXPENSES
__________________________________________________
In the first quarter of 1994, Midlantic adopted FAS No. 112 "Employers'
Accounting for Postemployment Benefits" resulting in a cumulative effect of a
change in accounting principle amounting to a charge of $7.5 million, net of
income taxes, or $.14 per fully diluted common share. Under FAS No. 112,
accrual accounting is required for certain postemployment benefits (benefits
such as disability and health coverage to inactive or former employees after
employment but before retirement) under the following circumstances: if the
employees' rights to those benefits are attributable to services already
rendered; the rights to those benefits accumulate or vest; if payment of the
benefits is probable; and, if the amount of the benefits can be reasonably
estimated. If the four criteria mentioned cannot be met, the employer must
nevertheless accrue for any benefits when payment is both probable and
estimable. Prior to adoption of FAS No. 112, Midlantic previously accounted
for postemployment benefits on a pay-as-you-go basis.
<PAGE>24
In the first quarter of 1993, the Corporation adopted FAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" which requires
that the projected future cost of providing postretirement health care and
other benefits be recognized on an accrual basis during the periods employees
provide services to earn those benefits. The transition obligation, which is
the unfunded and unrecognized accumulated postretirement benefit obligation
for all plan participants at the time of adoption, is being amortized by the
Corporation on a straight-line basis over a period of 20 years, beginning in
1993 and is included as a component of net periodic postretirement cost. The
change in accounting for postretirement benefits from a cash basis to an
accrual basis subsequent to the adoption of FAS No. 106, has had a minimal
impact on the Corporation's earnings.
MONEY MARKET INVESTMENTS
________________________
Midlantic invests a sizable portion of its available funds into shorter-term,
highly-liquid, money market investments that include interest-bearing deposits
with other banks, federal funds sold, term federal funds sold and to a lesser
extent, reverse repurchase agreements and commercial paper. On average, money
market investments amounted to $1.7 billion or 13.8 percent of interest-
earning assets in 1994, which compares with $1.9 billion or 15.6 percent in
1993 and $1.0 billion or 6.8 percent in 1992. The Corporation anticipates
that over time a portion of these funds will be diverted to support loan
demand and other longer-term investments.
<TABLE>
TABLE VII - AVERAGE INVESTMENT SECURITIES AND MONEY MARKET INVESTMENTS
<CAPTION>
INCREASE (DECREASE)
----------------------------------------------
(In millions) 1994 1993 1992 1994 1993
------ ------ ------ ---- -----
<S> <C> <C> <C> <C> <C>
AVERAGE INVESTMENT SECURITIES
Actual $2,255 $1,935 $2,744 $320 $(809)
Continuing Entities 2,255 1,935 2,423 320 (488)
------ ------ ------ ---- -----
AVERAGE MONEY MARKET INVESTMENTS
Actual 1,680 1,945 1,009 (265) 936
Continuing Entities 1,680 1,945 1,073 (265) 872
------ ------ ------ ---- -----
</TABLE>
INVESTMENT SECURITIES
_____________________
The Corporation's investment securities are primarily comprised of obligations
of the U.S. government and its agencies and to a lesser extent, obligations of
states and political subdivisions, stocks, bonds and notes of corporations and
Federal Reserve Bank stock. The accounting and resultant classification of
Midlantic's investment securities portfolio were modified in 1994 as a result
of Midlantic's adoption in the first quarter of FAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." FAS No. 115 established
the accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securities.
Under the provisions of FAS No. 115, those investments have been classified
and accounted for in three categories: (1) securities which the Corporation
has both the positive intent and ability to hold until maturity ("held-to-
maturity securities"), are reported at amortized/accreted cost; (2) securities
which are purchased and held principally for the purpose of selling in the
near-term ("trading securities"), are reported at fair value with unrealized
gains and losses included in earnings, (which is consistent with Midlantic's
prior accounting policy for such securities); and (3) available-for-sale
securities ("AFS securities"), which do not meet the criteria of the other two
categories, are reported at fair value with unrealized gains or losses, net of
applicable income taxes, reported as "net unrealized holding gains (losses) on
available-for-sale securities, net of taxes," a separate category of
shareholders' equity.
At December 31, 1994, investment securities totalled $2.8 billion, as compared
with $2.5 billion and $2.1 billion recorded at December 31, 1993 and 1992,
respectively. The investment securities portfolio at December 31, 1994
included $2.4 billion of held-to-maturity securities, $333.3 million of AFS
securities and $7.6 million of trading securities. On December 31, 1994,
Midlantic recorded as a component of shareholders' equity, a net unrealized
holding loss on AFS securities of $3.1 million, compared to a $1.9 million net
gain recorded at the beginning of the year, when FAS No. 115 was adopted.
Increasing interest rates, particularly on U.S. government securities,
resulted in the unrealized holding loss.
Net unrealized depreciation on Midlantic's held-to-maturity portfolio, which
in management's judgement represented only a decline caused by recent
increases in market interest rates (and are not considered as other than
temporary), amounted to $89.7 million at December 31, 1994, comprised of gross
unrealized losses of $90.7 million and gross unrealized gains of $974
thousand. At December 31, 1993, the Corporation had net unrealized
appreciation of $12.4 million on its total investment securities portfolio,
which was comprised of gross unrealized gains of $13.9 million and gross
unrealized losses of $1.5 million (see Table IX).
<PAGE>25
TABLE VIII - INVESTMENT SECURITIES OUTSTANDING AT DECEMBER 31, 1994
(In thousands)
__________________________________________________________________
Held-to-maturity $2,415,635
Available-for-sale 333,295
Trading 7,613
------------------------------------------------------------------
$2,756,543
==================================================================
TABLE IX - INVESTMENT SECURITIES-AMORTIZED COST, FAIR VALUES AND
GROSS UNREALIZED GAINS AND LOSSES*
Gross Gross
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
_________________________________________________________________________
1994
Held-to-maturity $2,415,635 $ 974 $(90,705) $2,325,904
Available-for-sale 338,481 539 (5,725) 333,295
1993 2,436,026 13,947 (1,564) 2,448,409
1992 2,108,148 19,679 (8,733) 2,119,094
=========================================================================
*Excludes trading securities of $7.6 million, $19.4 million and $6.7
million at December 31, 1994, 1993 and 1992, respectively.
TABLE X - INVESTMENT SECURITIES-GROSS REALIZED GAINS AND LOSSES
Gross Gross Net
Realized Realized Realized
(In thousands) Gains Losses Gains/(Losses)
________________________________________________________________
1994* $ 3,031 $(9,694) $(6,663)
1993 7,469 (464) 7,005
1992 56,977 (4,224) 52,753
================================================================
*All gains/losses were on available-for-sale securities.
At year-end 1994, the Corporation held an aggregate $874.4 million of
mortgage-backed securities (all in the held-to-maturity portfolio). Mortgage-
backed securities with the Federal Home Loan Mortgage Corporation and the
Federal National Mortgage Association amounted to $562.9 million and
$295.1 million, respectively. These mortgage-backed securities are sponsored
by agencies of the United States government and management believes that they
have little or no inherent credit risk. At December 31, 1994, the Corporation
did not have any mortgage-backed securities that met the regulatory definition
for classification as high-risk collateralized mortgage obligations, nor were
there any mortgage-backed securities that contained imbedded options.
At December 31, 1994, the AFS portfolio consisted of $269.8 million of U.S.
Treasury obligations with a remaining maturity of approximately three months
and other debt, equity and state and municipal securities totalling $63.5
million. The held-to-maturity portfolio is primarily comprised of the
previously mentioned $874.4 million of federal agency mortgage-backed
securities (with a weighted average maturity of approximately six years) and
$1.5 billion of U.S. Treasury securities (with a weighted average maturity of
2.6 years). The average maturity of the investment portfolio outstanding on
December 31, 1993 was approximately three years.
THE LENDING FUNCTION
____________________
One of the Corporation's principal business activities is providing extensions
of credit to its diverse customer base. As a result of the severe downturn in
economic conditions in the early 1990's, followed by a restrained economic
recovery, loan demand has been relatively modest as compared with the demand
experienced during the prolonged expansionary period of the mid-to-late
1980's. Furthermore, reflecting Midlantic's present customer base, the
Corporation's lending strategy places less emphasis on commercial real estate
lending (particularly loans to investors and developers) and more emphasis on
the consumer and small to medium-sized businesses.
The following is a discussion of Midlantic's lending function, including the
trends in its loan portfolio, credit administration, allowance for loan losses
and loan quality.
LOANS
Total loans amounted to $8.2 billion at December 31, 1994 as compared with
$8.4 billion at December 31, 1993 and $9.1 billion at December 31, 1992. At
the end of 1994, Midlantic's loan portfolio was comprised of commercial,
financial and foreign loans ("commercial loans"), 36.0 percent; consumer
loans, 38.3 percent; and long-term commercial mortgage loans and construction
and development loans ("commercial real estate loans"), 25.7 percent. Since
year-end 1992, the composition of the loan portfolio has changed, with
increasing emphasis on the Corporation's consumer loan portfolio and a
decrease in the percentage of commercial real estate outstandings. The
decline in loan volume since year-end 1992 reflected loan payments and
maturities, the bulk sale of $496.8 million, charge-offs of $308.5 million and
transfers to OREO of $150.4 million, the aggregate of which exceeded loan
originations and advances during this period.
<PAGE>26
Commercial loans totalled $3.0 billion at both December 31, 1994 and 1993 and
$3.6 billion at December 31, 1992. The composition of the Corporation's
commercial loan portfolio mirrors the diverse industrial makeup of the
urbanized New Jersey and Philadelphia markets (see Table XII). Through the
Business Value Bankingsm program, Midlantic has pursued full-service banking
relationships, including extensions of credit to small and medium-sized
businesses. Growth in the commercial loan portfolio will continue to be
dependent upon the economic and business climate in the Corporation's market
area.
<TABLE>
TABLE XI - AVERAGE LOAN PORTFOLIO
<CAPTION>
PERCENT Percent Percent
(In millions) 1994 OF TOTAL 1993 of Total 1992 of Total
------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL, FINANCIAL AND
FOREIGN
Actual $3,008 36.3% $3,196 37.1% $ 4,378 39.4%
Continuing Entities 3,008 36.3 3,196 37.1 3,995 40.3
------ ----- ------ ----- ------- -----
CONSTRUCTION AND DEVELOPMENT
Actual 705 8.5 1,154 13.4 1,772 15.9
Continuing Entities 705 8.5 1,154 13.4 1,746 17.6
------ ----- ------ ----- ------- -----
LONG-TERM COMMERCIAL MORTGAGE
Actual 1,604 19.4 1,838 21.3 2,219 20.0
Continuing Entities 1,604 19.4 1,838 21.3 1,914 19.3
------ ----- ------ ----- ------- -----
LONG-TERM 1-4 FAMILY RESIDENTIAL
Actual 552 6.7 471 5.5 697 6.3
Continuing Entities 552 6.7 471 5.5 494 5.0
------ ----- ------ ----- ------- -----
LOANS TO INDIVIDUALS
Actual 2,410 29.1 1,950 22.7 2,055 18.4
Continuing Entities 2,410 29.1 1,950 22.7 1,756 17.8
------ ----- ------ ----- ------- -----
TOTAL LOANS
Actual $8,279 100.0% $8,609 100.0% $11,121 100.0%
Continuing Entities 8,279 100.0 8,609 100.0 9,905 100.0
====== ===== ====== ===== ======= =====
</TABLE>
<TABLE>
TABLE XII - COMMERCIAL LOANS BY INDUSTRY CLASSIFICATION AT
DECEMBER 31, 1994
<CAPTION>
PERCENT
AMOUNT OF
(In thousands) OUTSTANDING TOTAL
---------- -----
<S> <C> <C>
Manufacturing
Chemicals, fabricated metals and allied products $ 176,382 5.8%
Printing and publishing, paper, lumber
and wood products 179,812 5.9
Machinery and equipment, instruments,
rubber and plastics 153,102 5.1
Other manufacturing 203,663 6.7
Transportation and communications 259,002 8.6
Wholesale trade
Durable 223,157 7.4
Nondurable 130,556 4.3
Retail trade
Auto retailers/service 139,989 4.6
Other retail trade 186,644 6.2
Finance, insurance and real estate
Real estate 217,412 7.2
Holding and investment companies and
depository and nondepository institutions 128,099 4.3
Other finance, insurance and real estate 26,482 .9
Services
Business services (including auto
repair and services) 268,067 8.9
Health services 123,266 4.1
Hotels and lodging places 88,731 2.9
Amusement and recreation 77,768 2.6
Other services 204,995 6.8
Factoring receivables 104,991 3.5
Other
New loans in process at December 31 30,968 1.0
All other 95,886 3.2
---------- -----
Total $3,018,972 100.0%
========== =====
</TABLE>
COMPOSITION OF LOAN PORTFOLIO
See Appendix 3 for explanation of graphic image inserted here.
Included in commercial loans are highly leveraged transactions ("HLTs") which
represent extensions of credit for the buyout, acquisition or recapitalization
of an existing business resulting in a significant increase in the leverage of
the borrower. HLTs, as previously defined by bank regulators, have declined
in each of the past two years. At December 31, 1994, the Corporation had 13
HLTs totalling $84.5 million and unfunded commitments of $52.1 million. This
compares with 22 HLTs totalling $198.9 million and unfunded commitments of
$107.6 million at December 31, 1993 and 43 HLTs totalling $354.7 million and
unfunded commitments of $200.0 million at year-end 1992. As a percentage of
total loans, HLTs amounted to 1.0 percent, 2.4 percent and 3.9 percent at the
end of 1994, 1993 and 1992, respectively. HLTs have historically comprised a
modest percent of Midlantic's total revenue.
<PAGE>27
Commercial real estate outstandings fell to $2.2 billion at December 31, 1994
as compared with levels of $2.5 billion at December 31, 1993 and $3.4 billion
at December 31, 1992. While long-term commercial mortgage loans have declined
moderately during the period, construction and development financing has
dropped significantly. Long-term commercial mortgage loans totalled $1.6
billion, $1.7 billion and $1.9 billion at the end of each of the past three
years, respectively, while construction and development loans, which totalled
$591.7 million at December 31, 1994, declined by $905.7 million or 60.5
percent since year-end 1992. At December 31, 1994, financing on owner-
occupied properties comprised approximately 57 percent of the Corporation's
long-term commercial mortgage portfolio. The volume of both the long-term
commercial mortgage and the construction and development loan portfolios has
been impacted by the bulk sale of certain loans, charge-offs and transfers to
OREO. Construction and development lending has also been affected by a
significant drop-off in viable projects with only residential tract
development showing any notable amount of financing activity. The composition
of Midlantic's commercial real estate portfolio is shown in Tables XIII and
XIV.
<TABLE>
TABLE XIII - CONSTRUCTION AND DEVELOPMENT LOANS - PROPERTY TYPE BY STATE AT
DECEMBER 31, 1994
<CAPTION>
(In thousands) New Jersey Pennsylvania New York Florida Other Total
-------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO
Office buildings $ 56,974 $ 55,596 $14,200 $ -- $ 8,782 $135,552
Residential 71,001 33,677 -- 7,910 3,742 116,330
Shopping centers 35,525 48,003 -- 4,000 20,530 108,058
Land 34,768 22,093 3,237 1,744 3,138 64,980
Hotels/motels 15,964 1,637 269 13,200 15,560 46,630
Industrial/warehouse 25,425 11,593 6,968 -- 1,168 45,154
All other 62,323 2,604 4,629 -- 5,441 74,997
-------- -------- ------- ------- ------- --------
Total $301,980 $175,203 $29,303 $26,854 $58,361 $591,701
======== ======== ======= ======= ======= ========
NONACCRUAL SEGMENT
Office buildings $ 1,084 $ 291 $ -- $ -- $ -- $ 1,375
Residential 6,532 531 -- -- -- 7,063
Shopping centers 873 -- -- -- -- 873
Land 7,178 -- -- -- 623 7,801
Hotels/motels 1,278 -- -- -- -- 1,278
Industrial/warehouse -- -- -- -- -- --
All other 1,520 -- 174 -- 2,150 3,844
-------- -------- ------- ------- ------- --------
Total $ 18,465 $ 822 $ 174 $ -- $ 2,773 $ 22,234
======== ======== ======= ======= ======= ========
PERCENT OF NONACCRUAL
TO PORTFOLIO 6.11% .47% .59% --% 4.75% 3.76%
======== ======== ======= ======= ======= ========
</TABLE>
<TABLE>
TABLE XIV - LONG-TERM COMMERCIAL MORTGAGE LOANS - PROPERTY TYPE BY STATE AT
DECEMBER 31, 1994
<CAPTION>
(In thousands) New Jersey Pennsylvania New York Other Total
-------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
PORTFOLIO
Industrial/warehouse $255,860 $156,689 $27,716 $ 7,875 $ 448,140
Office buildings 196,320 132,328 5,016 -- 333,664
Shopping centers 75,755 62,080 241 9,813 147,889
Retail businesses 82,954 51,052 6,717 380 141,103
Apartment houses and
other rental
properties 67,587 56,287 1,484 8,345 133,703
Hospitals, medical
centers and nursing
homes 89,542 35,131 1,000 -- 125,673
Automobile and truck
sales 52,538 15,806 86 -- 68,430
Hotels/motels 41,812 2,094 2,412 292 46,610
All other 58,318 46,372 3,895 10,003 118,588
-------- -------- ------- ------- ----------
Total $920,686 $557,839 $48,567 $36,708 $1,563,800
======== ======== ======= ======= ==========
NONACCRUAL SEGMENT
Industrial/warehouse $ 10,594 $ 3,991 $ 311 $ -- $ 14,896
Office buildings 3,683 1,182 -- -- 4,865
Shopping centers -- 528 -- -- 528
Retail businesses 5,365 109 70 -- 5,544
Apartment houses and
other rental
properties 6,511 2,091 30 17 8,649
Hospitals, medical
centers and nursing
homes -- 1,477 -- -- 1,477
Automobile and truck
sales 2,752 471 -- -- 3,223
Hotels/motels 1,000 2,094 -- -- 3,094
All other 1,461 2,909 345 -- 4,715
-------- -------- ------- ------- ----------
Total $ 31,366 $ 14,852 $ 756 $ 17 $ 46,991
======== ======== ======= ======= ==========
PERCENT OF NONACCRUAL
TO PORTFOLIO 3.41% 2.66% 1.56% .05% 3.00%
======== ======== ======= ======= ==========
</TABLE>
Midlantic remains strategically committed to continue extending credit on
owner-occupied properties and to well-capitalized, established real estate
developers. Loans to other real estate investors and developers may be
considered for origination if such loans can be sold pursuant to previously
established arrangements. However, in the near-term, it is anticipated that
construction and development outstandings will continue to contract and growth
in long-term commercial mortgage loans will be modest as economic indicators
in Midlantic's market area do not project any significant expansion in most
real estate markets.
<PAGE>28
<TABLE>
TABLE XV - CONSUMER LOANS
<CAPTION>
DECEMBER 31
---------------------------------------------
(In thousands) 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
LOANS TO INDIVIDUALS
Home equity and secondary mortgages $1,270,554 $1,230,604 $ 788,841
Automobile 974,453 806,612 409,259*
Personal loans 249,497 182,775 212,904
Student loans 52,986 57,959 56,663
Recreational vehicles 39,312 40,367 33,639
Marine 38,583 53,681 79,839
Overdraft checking 20,972 21,389 23,721
New loans in process at December 31 11,128 18,048 26,909
All other loans to individuals 6,423 3,956 3,718
---------- ---------- ----------
Total loans to individuals 2,663,908 2,415,391 1,635,493
---------- ---------- ----------
LONG-TERM 1-4 FAMILY RESIDENTIAL
MORTGAGES 544,428 636,632 454,347
---------- ---------- ----------
Total consumer loans $3,208,336 $3,052,023 $2,089,840
========== ========== ==========
<FN>
* Includes the impact of the securitization and sale of $411.0 million of automobile loans in
late 1992. Excluding the securitization, automobile loans would have amounted to
$820.2 million. Total loans to individuals and total consumer loans would also be
adjusted accordingly.
</TABLE>
Consumer lending has experienced growth in each of the past two years. By
December 31, 1994, consumer loans of $3.2 billion had increased by $156.3
million or 5.1 percent over year-end 1993. This followed a $962.2 million or
46.0 percent growth rate of consumer loans in 1993 over 1992. The 1993 growth
rate was skewed by the securitization and sale in late 1992 of $411.0 million
of automobile loans. The most significant component of the rise in consumer
loans during the past two years was home equity loans (first or second liens
on 1-4 family owner-occupied properties), which increased $481.7 million or
61.1 percent since year-end 1992. Automobile loans (excluding the 1992
securitization) and personal loans also grew during the two-year period ending
December 31, 1994, each showing increases in excess of 15 percent. The
expansion in consumer outstandings is in-line with the Corporation's present
lending strategy. Midlantic will continue to pursue consumer lending
opportunities and anticipates further growth in this portfolio if consumer
spending continues to rise.
At both December 31, 1994 and 1993, unfunded loan commitments totalled $2.7
billion. Excluding home equity lines of credit, a substantial amount of
Midlantic's loan commitments (52.9 percent) have original maturities of less
than one year. Takedowns on commitments have been occurring during the normal
course of business at levels that have not historically affected the
Corporation's liquidity.
In the fourth quarter of 1993, the Corporation placed $244.1 million of tax-
exempt loans in a security lending program ("SL Program"). The SL Program
resulted in tax-exempt income from such loans, which was not currently
advantageous to the Corporation given its tax position at that time, being
made available to an unaffiliated third party. The Corporation invested the
proceeds of the SL Program in higher-yielding taxable securities. Under
generally accepted accounting principles, the transaction was reported as a
borrowing with the tax-exempt loans remaining on Midlantic's balance sheet and
the proceeds from the program reported in short-term borrowings. The SL
Program was structured to allow Midlantic to continue to utilize the tax
benefits of the loans upon their return. As a result of changes in the
Corporation's tax position during 1994, the SL Program was terminated and
Midlantic's right to recognize the tax-exempt income on the loans was re-
established upon their return on October 20, 1994.
ALLOWANCE FOR LOAN LOSSES (ALL)
The ALL is maintained at a level which the Corporation considers adequate to
absorb estimated charge-offs in the credit portfolio. Additions to the ALL
are made through provisions which are charged against current operations and
through recoveries on loans, or portions of loans, previously charged off.
The ALL amounted to $349.5 million or 4.24 percent of total loans at year-end
1994, $400.3 million or 4.76 percent of total loans at year-end 1993 and
$670.5 million or 7.41 percent of total loans at year-end 1992. Since
December 31, 1991, when the ALL reached a level of $848.0 million, the ALL has
declined by $498.5 million (see Table XVI). During the earlier years of the
1990's the magnitude of the ALL reflected growing levels of nonaccrual and
other problem loans. The ALL was reduced as losses were recognized during the
past three years and the levels of nonaccrual and other problem loans
decreased. As a result, the ratio of the ALL to nonaccrual loans has
increased from 82.8 percent at year-end 1992 to 211.8 percent at the end of
1994.
The Corporation uses an ALL methodology in connection with its determination
of the level of its ALL. The ALL methodology takes into consideration several
informational sources which are reviewed by senior management. These include
an assessment of the financial condition of individual borrowers, a
determination of the value and adequacy of underlying collateral (based on
appraisals, where appropriate or required), the composition and balance of the
credit portfolio, a review of historical loss experience and an analysis of
the levels and trends of delinquencies, charge-offs and the risk ratings of
the various loan categories. Such factors as the condition of the national
and regional economies and the level and trend of interest rates are also
considered. A detailed analysis of the ALL is made on a quarterly basis and
is reviewed by the Corporation's executive management and ratified by the
Corporation's Board.
As part of its process for assessing asset quality and the ALL, Midlantic
refers to third party sources for data concerning economic trends. In the
early 1990's this information indicated that the economies of Midlantic's
primary markets were adversely affected by overall corporate downsizing, high
unemployment and bankruptcy levels, declin-
<PAGE>29
ing real estate values, diminishing consumer confidence levels and relatively
high debt levels. While regional economic conditions began to show improvement
beginning in late 1992 and have continued to improve from that time through the
end of 1994, this followed two years (1990 and 1991) of significant
deterioration in asset quality as most industries, particularly real estate,
and many consumers in Midlantic's market area suffered.
<TABLE>
TABLE XVI - SUMMARY OF LOAN LOSS EXPERIENCE
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AVERAGE LOANS, NET OF UNEARNED INCOME $8,278,536 $8,608,540 $11,120,829 $15,677,536 $17,935,071
---------- ---------- ----------- ----------- -----------
TOTAL LOANS, NET OF UNEARNED INCOME $8,237,959 $8,409,697 $ 9,050,477 $12,586,744 $16,894,529
========== ========== =========== =========== ===========
ALLOWANCE AT BEGINNING OF YEAR $ 400,311 $ 670,545 $ 847,998 $ 742,172 $ 393,038
---------- ---------- ----------- ----------- -----------
ALLOWANCES RELATED TO SUBSIDIARIES
SOLD -- (712) (41,413) (57,237) (7,500)
---------- ---------- ----------- ----------- -----------
NET CHARGE-OFFS ON LOANS SOLD IN BULK SALES OR
TRANSFERRED TO ASSETS HELD FOR ACCELERATED
DISPOSITION (7,901) (181,863) -- -- --
---------- ---------- ----------- ----------- -----------
PROVISION CHARGED TO OPERATING EXPENSE 21,625 81,343 140,580 643,940 701,489
---------- ---------- ----------- ----------- -----------
LOANS CHARGED OFF
Commercial, financial and foreign 54,583 76,020 115,444 269,865 228,517
Real estate-construction and development 15,212 77,219 155,396 156,023 87,096
Real estate-long-term commercial mortgage 9,377 25,285 20,271 47,602 {
Real estate-long-term 1-4 family residential 1,128 954 2,276 3,454 { 19,758
Loans to individuals 24,702 24,009 28,956 39,608 35,133
---------- ---------- ----------- ----------- -----------
Total 105,002 203,487 322,343 516,552 370,504
---------- ---------- ----------- ----------- -----------
RECOVERIES ON LOANS
Commercial, financial and foreign 20,510 18,634 28,596 23,154 17,321
Real estate-construction and development 8,147 6,075 6,512 1,196 174
Real estate-long-term commercial mortgage 2,422 2,402 1,085 848 {
Real estate-long-term 1-4 family residential 5 26 101 86 { 564
Loans to individuals 9,403 7,348 9,429 10,391 7,590
---------- ---------- ----------- ----------- -----------
Total 40,487 34,485 45,723 35,675 25,649
---------- ---------- ----------- ----------- -----------
NET LOANS CHARGED OFF 64,515 169,002 276,620 480,877 344,855
---------- ---------- ----------- ----------- -----------
ALLOWANCE FOR LOAN LOSSES AT END OF YEAR $ 349,520 $ 400,311 $ 670,545 $ 847,998 $ 742,172
========== ========== =========== =========== ===========
NET CHARGE-OFFS AS A % OF AVERAGE
RELATED LOAN PORTFOLIO*
Commercial, financial and foreign 1.13% 1.80% 1.98% 3.87% 2.80%
Real estate-construction and development 1.00 6.16 8.40 6.50 3.04
Real estate-long-term commercial mortgage .43 1.24 .86 1.59 {
Real estate-long-term 1-4 family residential .20 .20 .31 .30 { .46
Loans to individuals .63 .85 .95 1.02 .82
---------- ---------- ----------- ----------- -----------
TOTAL NET CHARGE-OFFS AS A % OF AVERAGE
LOANS, NET OF UNEARNED INCOME .78% 1.96% 2.49% 3.07% 1.92%
---------- ---------- ----------- ----------- -----------
ALLOWANCE FOR LOAN LOSSES AS A % OF TOTAL
LOANS, NET OF UNEARNED INCOME 4.24% 4.76% 7.41% 6.74% 4.39%
========== ========== =========== =========== ===========
CONTINUING ENTITIES
Allowance at beginning of year $ 400,311 $ 670,545 $ 815,644 $ 679,567 $ 339,531
Allowance related to assets/subsidiaries sold
or held for sale (7,901) (182,575) -- -- --
Provision charged to operating expense 21,625 81,343 118,868 582,625 666,377
Loans charged off 105,002 203,487 307,787 478,645 347,164
Recoveries on loans 40,487 34,485 43,820 32,097 20,823
---------- ---------- ----------- ----------- -----------
Allowance for loan losses at end of year $ 349,520 $ 400,311 $ 670,545 $ 815,644 $ 679,567
========== ========== =========== =========== ===========
<FN>
* Charge-off ratios for 1994 and 1993 do not include charge-offs on loans sold in bulk sales or loans identified for
accelerated disposition.
</TABLE>
In connection with the bulk sale of distressed real estate loans, in 1993 and
1994, the Corporation charged off a net $181.9 million and $7.9 million of
loans, respectively. Excluding charge-offs relating to bulk sales, net
charge-offs amounted to $64.5 million or .78 percent of average loans in 1994,
$169.0 million or 1.96 percent of average loans in 1993 and $276.6 million or
2.49 percent of average loans in 1992. Charge-offs are generally made when
any loans or portions of loans are determined to be uncollectible, primarily
due to the financial deterioration of the borrower and/or a decline in the net
realizable value of the underlying collateral supporting a loan. Midlantic
continues to pursue collection of amounts charged-off to the extent management
believes appropriate. The loan recovery ratio (current year loan loss
recoveries as a percent of prior year charge-offs) amounted to 19.9 percent,
10.7 percent and 8.9 percent in 1994, 1993 and 1992, respectively. Table XVI
provides a detail of the activity in the Corporation's ALL for each of the
past five years.
<PAGE>30
In May 1993, the Financial Accounting Standards Board issued FAS No. 114
"Accounting by Creditors for Impairment of a Loan," and in October 1994,
issued FAS No. 118 "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure," both of which are effective for fiscal years
beginning after December 15, 1994. Under FAS No. 114, an impaired loan is
defined as a loan for which it is probable, based on current information, that
the lender will not collect all amounts due under the contractual terms of the
loan agreement. FAS No. 114 requires that impaired loans be measured based
upon the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's observable market price or the fair value
of the collateral if the loan is collateral dependent. If the calculated
measurement of the impaired loan is less than the recorded investment in the
loan, the deficiency is required to be recognized through a provision to the
ALL. FAS No. 118 amends the provisions of FAS No. 114 regarding the
recognition of interest income on impaired loans, allowing banks to
substantially use the methods of income recognition presently in effect. The
adoption of FAS No. 114 and FAS No. 118 in the first quarter of 1995 will not
have a material impact on the Corporation's financial condition or results of
operations at the time of adoption.
Midlantic considers its ALL to be adequate based upon the size and risk
characteristics of the credit portfolio outstanding at December 31, 1994, and
the uncertainties that prevail in the economy.
CREDIT ADMINISTRATION
Credit administration, which is a centralized function of the Corporation,
encompasses the balancing of Midlantic's lending strategies with the
objectives of sound underwriting policies and continual oversight of existing
borrowing relationships.
In order to minimize credit risk, Midlantic attempts to diversify its loan
portfolios, has underwriting policies that require adherence to a standardized
approval process and monitors outstandings to individual and related
borrowers. In addition, loan to value guidelines are established for each
loan type that is collateralized by real estate.
The loan administration function monitors, on an on-going basis, weakening
credits through the use of a system that assigns a numerical rating to each
loan based upon an assessment of the degree of risk inherent in the loan.
Detailed reviews of loans with high risk ratings are conducted periodically.
The originating loan officer and department head have the primary
responsibilities for early recognition and proper risk rating of a
deteriorating loan. Risk ratings are also independently reviewed by credit
management and loan review personnel.
ASSET QUALITY
The following analysis of asset quality comprises nonaccrual loans,
renegotiated loans, accruing loans past due more then ninety days, potential
problem loans and other real estate owned.
Nonaccrual Loans
The Corporation generally reports loans as nonaccrual if they are past due as
to maturity or payment of principal and/or interest for a period of more than
ninety days. In certain cases, loans that are past due for a period of more
than ninety days may still accrue interest if they are both well-secured and
in the process of collection ("accruing past due loans"), while loans that are
contractually current or past due less than ninety days may be placed in
nonaccrual if repayment in full of principal and/or interest is determined to
be in jeopardy. While a loan is classified as nonaccrual and the future
collectibility of the full recorded loan balance remains doubtful, both
interest and principal payments, if any, are generally applied as a reduction
to principal outstanding. However, when the future collectibility of the full
recorded loan balance is expected, the Corporation may elect to recognize
interest payments, if any, on a cash basis.
Nonaccrual loans amounted to $165.0 million at year-end 1994, $100.3 million
below the $265.3 million reported at December 31, 1993 and $644.7 million
below the $809.7 million reported at December 31, 1992. Since reaching a peak
level of $1.4 billion at June 30, 1991, nonaccrual loans have declined by $1.2
billion or 87.9 percent. The significant fall in nonaccrual loans during the
past two years was due to:
. Concerted loan workout efforts by an expanded professional staff, aided by
improving economic conditions and individual borrower performance,
contributing to $435.0 million of loans being removed from nonaccrual as a
result of returns to accrual status, payments and payoffs.
. The bulk sale of nonaccrual loans aggregating $154.4 million, net of
charge-offs.
. The charge-off of loans or portions thereof totalling $384.0 million.
. The foreclosure of the collateral supporting certain loans or classification
of loans as in-substance foreclosures aggregating $139.4 million.
These factors were partially offset by additions to nonaccrual loans of $474.3
million.
Table XVII shows the composition of the Corporation's nonaccrual loans during
each of the past five years. Since year-end 1992, nonaccrual construction and
development loans fell by $351.1 million or 94.0 percent, representing the
most significant decline in any single category of nonaccrual loans. During
that same period, nonaccrual long-term mortgage loans declined by $131.4
million or 73.7 percent, while nonaccrual commercial loans fell by $129.2
million or 61.4 percent. Further declines in the level of nonaccrual loans
during the remainder of the present economic recovery may occur but management
expects that the rate of improvement may be less rapid than in the preceding
two years.
<PAGE>31
<TABLE>
TABLE XVII - NONACCRUAL LOANS, OTHER REAL ESTATE OWNED, NET AND PAST DUE LOANS
<CAPTION>
DECEMBER 31
------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS
Commercial, financial and foreign $ 81,304 $114,632 $ 210,455 $ 432,146 $ 484,058
Real estate
Construction and development 22,234 50,143 373,344 569,117 407,628
Long-term mortgage 46,991 67,920 178,370 191,094 186,366
Loans to individuals 14,473 32,604 47,500 60,683 54,135
-------- -------- ---------- ---------- ----------
Total nonaccrual loans $165,002 $265,299 $ 809,669 $1,253,040 $1,132,187
======== ======== ========== ========== ==========
ALLOWANCE FOR LOAN LOSSES AS A % OF NONACCRUAL LOANS 211.8% 150.9% 82.8% 67.7% 65.6%
======== ======== ========== ========== ==========
OREO, NET
Acquired OREO properties $ 64,388 $ 97,238 $ 169,862 $ 120,342 $ 35,817
In-substance foreclosures 18,416 35,432 281,017 438,301 314,075
-------- -------- ---------- ---------- ----------
OREO, net $ 82,804 $132,670 $ 450,879 $ 558,643 $ 349,892
======== ======== ========== ========== ==========
TOTAL NONACCRUAL LOANS AND OREO, NET $247,806 $397,969 $1,260,548 $1,811,683 $1,482,079
======== ======== ========== ========== ==========
ACCRUING LOANS PAST DUE 90 DAYS OR MORE AS TO
INTEREST OR PRINCIPAL PAYMENTS $ 30,369 $ 36,161 $ 44,697 $ 132,544 $ 185,821
======== ======== ========== ========== ==========
CONTINUING ENTITITES
Total nonaccrual loans $165,002 $265,299 $ 809,669 $1,220,285 $1,065,551
OREO, net 82,804 132,670 450,879 551,922 337,525
-------- -------- ---------- ---------- ----------
Total nonaccrual loans and OREO, net $247,806 $397,969 $1,260,548 $1,772,207 $1,403,076
-------- -------- ---------- ---------- ----------
Accruing loans past due 90 days or more
as to interest or principal payments $ 30,369 $ 36,161 $ 44,697 $ 125,413 $ 176,884
======== ======== ========== ========== ==========
</TABLE>
TABLE XVIII - NONACCRUAL LOANS - ACTIVITY DURING 1994 AND 1993
(In thousands) 1994 1993
--------- ---------
Balance at beginning of year $ 265,299 $ 809,669
Additions 164,300 310,032
Payments (121,584) (207,699)
Returned to accrual status (39,679) (58,778)
Transfers to renegotiated status -- (7,295)
Loans sold in bulk sales or transferred
to assets held for accelerated
disposition, net of charge-offs (884) (153,551)
Charge-offs (82,789) (301,172)
Transfers to OREO (16,548) (122,857)
Other (3,113) (3,050)
--------- ---------
Balance at end of year $ 165,002 $ 265,299
========= =========
<TABLE>
TABLE XIX - YEAR-TO-DATE LOSS OF INTEREST INCOME ON NONACCRUAL LOANS OUTSTANDING
AT END OF PERIOD
<CAPTION>
(In thousands) 1994 1993 1992 1991 1990
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest income that would have been
recorded on nonaccrual loans in
accordance with original terms $16,384 $27,904 $68,130 $133,030 $105,855
Interest income actually recorded on
nonaccrual loans 3,983 4,933 7,304 19,799 24,629
------- ------- ------- -------- --------
Loss of interest income on
nonaccrual loans $12,401 $22,971 $60,826 $113,231 $ 81,226
======= ======= ======= ======== ========
</TABLE>
Renegotiated Loans
Renegotiated loans are loans that have been restructured in conformity with
the requirements of FAS No. 15 "Accounting by Debtors and Creditors for
Troubled Debt Restructurings" and have evidenced demonstrated performance in
accordance with specific criteria. The Corporation may restructure a loan in
certain instances when a determination is made that greater economic value
will be realized under new terms than through other means. Prior to
demonstrating performance, Midlantic classifies restructured loans as
nonaccrual; upon demonstration of performance and consequently, upon
classification as a renegotiated loan, the accrual of interest is resumed.
Renegotiated loans that have demonstrated performance and have an effective
yield greater than or equal to a market interest rate at the date of closing
may be classified as accruing loans in the reporting period following the year
they were disclosed as renegotiated and were so reported in the annual
financial statements for that year. Renegotiated loans declined to $59.8
million at December 31, 1994 as compared with $172.1 million at December 31,
1993 and $159.7 million at year-end 1992 (see Table XX). The decrease in the
level of renegotiated loans in 1994 primarily reflected payments and sales
totalling $96.6 million and the classification of $29.8 million as accruing
loans (pursuant to the requirements for classification as accruing loans
referred to above). This was partially offset by additions to renegotiated
loans of $14.1 million.
<PAGE>32
The effective interest rate on renegotiated loans at year-end 1994 was 8.90
percent. In those cases in which average current yield differs from the
effective yield, management has elected to recognize income prospectively on
the more conservative average current yield basis until certain contingencies
are met. At year-end 1994, the average current yield and the effective rate on
renegotiated loans were substantially the same.
<TABLE>
TABLE XX - RENEGOTIATED LOANS AND YEAR-TO-DATE LOSS OF INTEREST INCOME ON RENEGOTIATED
LOANS OUTSTANDING AT END OF PERIOD
<CAPTION>
(In thousands) 1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Renegotiated loans $59,821 $172,058 $159,685
======= ======== ========
Interest income that would have been
recorded on renegotiated loans in
accordance with original terms $ 4,683 $ 9,970 $ 8,258
Interest income actually recorded on
renegotiated loans 3,887 8,092 5,506
------- -------- --------
Loss of interest income on
renegotiated loans $ 796 $ 1,878 $ 2,752
======= ======== ========
<FN>
The loans presented in the above table are performing in accordance with their new terms.
Troubled debt restructurings prior to 1992 were reclassified to nonaccrual loans in accordance
with Midlantic's renegotiated loans policy adopted in 1992.
</TABLE>
Accruing Past Due Loans
At December 31, 1994, 1993 and 1992, the Corporation identified accruing past
due loans of $30.4 million, $36.2 million and $44.7 million, respectively.
Potential Problem Loans
At December 31, 1994, Midlantic identified an additional $22.7 million of
currently performing loans outstanding for which there is serious doubt as to
whether the borrowers will be able to fully comply with the present repayment
terms of the loans.
Other Real Estate Owned
OREO includes real estate collateral of defaulted loans, the title to which
has been acquired by the Corporation through foreclosure or through the
voluntary surrender of title by the borrower ("acquired OREO") and in-
substance foreclosures ("ISFs"), which are loans secured by real estate that
meet certain criteria, pursuant to generally accepted accounting principles,
for classification as ISF.
Total OREO, which amounted to $82.8 million at December 31, 1994, declined
$49.9 million from the December 31, 1993 level. This followed a decline of
$318.2 million in 1993 from the year-end 1992 level of $450.9 million. At
year-end 1994, 1993 and 1992, acquired OREO amounted to $64.4 million, $97.2
million and $169.9 million, respectively, while ISFs totalled $18.4 million,
$35.4 million and $281.0 million at the end of each of the past three year-
ends, respectively.
<TABLE>
TABLE XXI - OTHER REAL ESTATE OWNED (OREO) - ACTIVITY DURING 1994 AND 1993
<CAPTION>
1994 1993
------------------------------------- -----------------------------------
In-substance Acquired OREO In-substance Acquired OREO
(In thousands) Foreclosures Properties Total OREO Foreclosures Properties Total OREO
------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year $35,432 $ 97,238 $132,670 $281,017 $ 169,862 $ 450,879
Transfers from loans -- 23,997 23,997 26,425 99,928 126,353
Advances 893 153 1,046 11,707 378 12,085
Transfers from ISFs to acquired
OREO properties (7,349) 7,349 -- (71,559) 71,559 --
Provision (1,693) (5,807) (7,500) (64,962) (65,583) (130,545)
Sales and payments (7,812) (57,719) (65,531) (51,729) (140,160) (191,889)
OREO sold in bulk sales or
transferred to assets held
for accelerated disposition -- (876) (876) (72,299) (39,183) (111,482)
Transfer to renegotiated loans
or accruing loans (368) -- (368) (24,222) -- (24,222)
Other (687) 53 (634) 1,054 437 1,491
------- -------- -------- -------- --------- ---------
Balance at end of year $18,416 $ 64,388 $ 82,804 $ 35,432 $ 97,238 $ 132,670
======= ======== ======== ======== ========= =========
</TABLE>
<PAGE>33
<TABLE>
TABLE XXII - IN-SUBSTANCE FORECLOSURES - PROPERTY TYPE BY STATE AT DECEMBER 31, 1994
<CAPTION>
(In thousands) New Jersey New York Total
------- ---- -------
<S> <C> <C> <C>
Office buildings $10,627 $ -- $10,627
Land 6,084 447 6,531
Industrial/warehouse 578 -- 578
Residential tracts 368 -- 368
All other 312 -- 312
------- ---- -------
Total $17,969 $447 $18,416
======= ==== =======
</TABLE>
<TABLE>
TABLE XXIII - ACQUIRED OREO PROPERTIES - PROPERTY TYPE BY STATE AT DECEMBER 31, 1994
<CAPTION>
(In thousands) New Jersey Pennsylvania Other Total
------- ------ ------ -------
<S> <C> <C> <C> <C>
Hotels/motels $20,764 $ -- $ -- $20,764
Land 12,593 2,372 692 15,657
Residential tracts 6,908 1,287 2,269 10,464
Industrial/warehouse 1,735 1,582 -- 3,317
Office buildings 3,033 238 -- 3,271
Shopping centers 2,183 80 -- 2,263
All other 7,241 1,411 -- 8,652
------- ------ ------ -------
Total $54,457 $6,970 $2,961 $64,388
======= ====== ====== =======
</TABLE>
The majority of properties acquired by the Corporation is placed immediately
for sale. Occasionally, Midlantic may contract for completion of partially
finished construction projects or arrange for refurbishing of existing
properties prior to sale. While holding OREO properties, the Corporation must
pay the customary expenses associated with holding real property. In some
cases, cash flows from rented or leased properties offset such operating
expenses.
A loan is classified as an ISF under the following criteria: the borrower has
little or no equity in the collateral (considering its current fair value);
repayment can only be expected to come from the operation or sale of the
collateral; and the debtor has either formally or effectively abandoned
control of the collateral or it is doubtful that the borrower will be able to
rebuild equity in the collateral. The title to a substantial portion of ISFs
is eventually acquired by Midlantic. Such acquisitions aggregated $168.2
million during the past three years.
OREO activity during each of the past two years is shown in Table XXI. During
1994, the acquisition of real property by the Corporation declined
significantly. In 1992 and 1993, the Corporation acquired real property
(including the title to ISFs) of $189.2 million and $171.5 million,
respectively, while in 1994, additions to acquired OREO fell to $31.3 million.
The decline in acquired properties reflects the Corporation's lower volume of
nonaccrual and other problem loans and the resultant decrease of properties in
the foreclosure process. This trend is expected to continue in the
foreseeable future.
Acquired OREO properties are carried at net realizable value, while ISFs are
carried at the lower of the recorded investment in the loan or net realizable
value. Upon transfer of a loan to acquired OREO an appraisal is made of the
acquired property (or the underlying collateral in the case of an ISF) and any
excess of the loan balance over net realizable value is charged against the
ALL. Any subsequent depreciation in value is charged against operating
earnings. OREO properties are generally reappraised every 18 months as
measured from the date of the previous appraisal, unless evidence suggests
that market conditions may be rapidly deteriorating. In such cases,
reappraisals are required to be made promptly, even if 18 months have not
elapsed from the date of the previous appraisal.
FAS No. 114, which will be adopted by the Corporation on January 1, 1995 (see
"The Lending Function - Allowance for Loan Losses (ALL)"), provides for the
reclassification of all ISFs outstanding from OREO to the loan portfolio as
nonaccrual loans at their current carrying value. The Corporation will no
longer be required to identify and isolate future loans that may meet the
former criteria for ISF classification.
<PAGE>34
CAPITAL ASSETS
______________
Capital assets represent the premises, land, equipment and furniture that are
owned and utilized by the Corporation. Capital assets, net of accumulated
depreciation, totalled $146.5 million at year-end 1994 as compared with $155.1
million at the end of 1993. Of Midlantic's 324 branch locations in New Jersey
and Pennsylvania, 201 are owned. The Corporation also owns a substantial
amount of its data processing and automated teller equipment.
Capital expenditures, which amounted to $15.7 million, $16.1 million and $12.7
million during each of the past three years, have been utilized largely to
maintain and/or update the Corporation's data processing capabilities and to
expand the automated teller network. Capital expenditures are presently
projected to approximate $45 million in 1995. Expenditures will be made for
technological investments and to fund certain projects that were deferred in
earlier years due to other priorities. Anticipated capital outlays include
enhancements to systems automation and communications, purchases of automated
teller equipment, renovations of certain branches and other operating
locations and expenditures for new signs to reflect the Corporation's new
logo.
FUNDING SOURCES
_______________
DEPOSITS
The Corporation's primary source of funds, supporting longer-term interest-
earning assets, is its deposit base. Total deposits averaged $11.1 billion
in 1994, $11.8 billion in 1993 and $12.7 billion for the Continuing Entities
in 1992. Midlantic's deposits are principally derived from retail sources.
The decline in deposits during much of the past two years reflects, in part,
CD customers seeking higher yields in non-deposit alternatives such as mutual
funds or equity investments. With the rising interest rate environment
experienced since the end of the first quarter of 1994, competition for
deposits among banking institutions has also increased. To serve customers
who seek higher returns, Midlantic also offers the several funds of the
Compass Capital Group, the Corporation's proprietary mutual fund group and
more recently, annuity contracts. Despite the decline in the volume of retail
deposits, the Corporation's ratio of core deposits (total deposits excluding
CDs over $100,000 and overseas branch deposits) to total loans (a key
liquidity indicator) remained strong, exceeding 125 percent for each of the
past three years.
At December 31, 1994, core deposits were stratified as follows: noninterest-
bearing demand deposits, 27.5 percent; interest-bearing demand deposits (NOW
and Super NOW accounts) and savings deposits, 29.0 percent; insured money
market accounts, 18.6 percent; and other time deposits (CDs in denominations
of less than $100,000), 24.9 percent. Beginning in 1992 through the early part
of 1994, the composition of the Corporation's core deposits evidenced a shift
away from CDs to deposits without contractual maturities, such as savings
deposits and interest-bearing demand deposits. The low interest rate
environment had significantly reduced the difference in rates between these
products, particularly the difference between the rates paid on deposits
without contractual maturities and CDs with maturities of six months or less.
The percentage of noninterest-bearing demand deposits to total core deposits
has also trended upward reflecting an expansion in commercial and business
account balances. Management believes that if interest rates continue to
rise, and consequently as the rates paid on shorter and intermediate term CDs
increase, CDs will again become an attractive investment vehicle to
depositors.
COMPOSITION OF CORE DEPOSITS
See Appendix 4 for explanation of graphic image inserted here.
<PAGE>35
<TABLE>
TABLE XXIV - AVERAGE FUNDING SOURCES - BALANCES AND RATES PAID
<CAPTION>
(In thousands) 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCES
DEPOSITS
Noninterest-bearing demand $ 2,704,249 $ 2,616,243 $ 2,759,284 $ 3,047,091 $ 3,414,732
Interest-bearing demand 1,379,078 1,383,764 1,479,906 1,537,567 1,453,798
Savings 1,649,145 1,504,561 1,453,083 1,781,976 1,838,717
Retail money market accounts 2,085,960 2,324,327 3,190,586 3,833,633 4,132,198
CDs over $100,000 445,074 582,687 898,166 1,954,012 2,844,282
Other time 2,809,491 3,359,778 4,503,076 6,898,761 5,926,697
Overseas branch deposits 12,274 11,243 12,739 20,371 97,518
----------- ----------- ----------- ----------- -----------
Total average deposits $11,085,271 $11,782,603 $14,296,840 $19,073,411 $19,707,942
=========== =========== =========== =========== ===========
SHORT-TERM BORROWINGS
Commercial paper $ -- $ -- $ -- $ 2,274 $ 153,734
Federal funds purchased 35,458 46,726 65,584 138,245 637,153
Repurchase agreements 522,714 318,985 408,755 583,957 830,674
Other short-term borrowings 26,500 28,680 50,861 183,689 304,621
----------- ----------- ----------- ----------- -----------
Total average short-term borrowings $ 584,672 $ 394,391 $ 525,200 $ 908,165 $ 1,926,182
=========== =========== =========== =========== ===========
LONG-TERM DEBT $ 374,251 $ 396,217 $ 443,213 $ 461,013 $ 448,946
=========== =========== =========== =========== ===========
AVERAGE RATES
DEPOSITS
Interest-bearing demand 1.18% 1.70% 2.84% 4.68% 4.78%
Savings 2.10 2.28 3.43 4.87 5.13
Retail money market accounts 2.51 2.55 3.56 5.52 6.80
CDs over $100,000 4.13 3.67 4.65 6.76 8.20
Other time 3.61 3.69 5.23 7.36 8.26
Overseas branch deposits 3.84 3.28 3.97 6.75 8.60
----------- ----------- ----------- ----------- -----------
Total average rate paid on deposits 2.67% 2.87% 4.19% 6.31% 7.22%
=========== =========== =========== =========== ===========
SHORT-TERM BORROWINGS
Commercial paper --% --% --% 7.30% 8.57%
Federal funds purchased 4.19 2.99 3.52 6.65 8.46
Repurchase agreements 3.56 2.91 3.22 5.55 7.74
Other short-term borrowings 3.97 3.12 3.72 4.91 7.08
----------- ----------- ----------- ----------- -----------
Total average rate paid on short-term borrowings 3.61% 2.94% 3.30% 5.59% 7.94%
=========== =========== =========== =========== ===========
LONG-TERM DEBT 9.21% 9.18% 9.37% 9.16% 9.39%
=========== =========== =========== =========== ===========
CONTINUING ENTITIES
AVERAGE BALANCES
Total average deposits $11,085,271 $11,782,603 $12,692,146 $14,310,883 $15,274,694
----------- ----------- ----------- ----------- -----------
Total average short-term borrowings 584,672 394,391 512,403 645,801 1,551,575
----------- ----------- ----------- ----------- -----------
Long-term debt 374,251 396,217 439,880 443,450 443,480
=========== =========== =========== =========== ===========
AVERAGE RATES
Total average rate paid on deposits 2.67% 2.87% 4.15% 6.31% 7.26%
----------- ----------- ----------- ----------- -----------
Total average rate paid on short-term borrowings 3.61 2.94 3.35 5.85 8.35
----------- ----------- ----------- ----------- -----------
Long-term debt 9.21 9.18 9.41 9.38 9.40
=========== =========== =========== =========== ===========
</TABLE>
CDs over $100,000 and foreign branch deposits ("large CDs") totalled $463.3
million at December 31, 1994 compared to $432.4 million and $773.2 million at
year-end 1993 and 1992, respectively. The level of these instruments as a
percentage of total deposits remains low resulting from the Corporation's
efforts, beginning in 1990, to significantly reduce its reliance upon such
volatile funding sources. All large CDs are being sold directly by Midlantic
to its customers.
<PAGE>36
SHORT-TERM BORROWINGS
Short-term borrowings primarily consist of repurchase agreements, federal
funds purchased and treasury, tax and loan deposits. Also included in short-
term borrowings at December 31, 1993 was $244.1 million of repurchase
agreements representing the proceeds from the SL Program, which was
established in late 1993 and terminated during the fourth quarter of 1994 (see
"The Lending Function - Loans"). Short-term borrowings averaged $584.7
million in 1994 (of which approximately $186 million represented repurchase
agreements stemming from the SL Program), $394.4 million in 1993 and $512.4
million (on a Continuing Entity basis) in 1992.
A significant source of short-term borrowings is in the form of repurchase
agreements which Midlantic provides as an investment vehicle for local
customers, including those who utilize the Corporation's cash management
services. The proceeds from this activity are placed in short-term money
market assets or securities.
LONG-TERM DEBT
Long-term debt amounted to $373.0 million at December 31, 1994, as compared
with levels of $386.8 million and $437.1 million at year-end 1993 and 1992,
respectively. The decline in the Corporation's long-term obligations was due
to principal payments, both contractual and accelerated. In March 1993, the
Corporation paid at maturity its $50 million 11.35% Notes, while in January
1994, the remaining outstanding 7 3/4% Debentures due March 1, 1998 were
redeemed at par value ($11.8 million). Also, in 1992, the Corporation
redeemed its remaining outstanding 9% Senior Notes due in 1998 for $3.8
million (reflecting a small premium) and in 1994 repurchased $2 million of
its 8 1/4% Convertible Subordinated Debentures Due July 1, 2010. As a result
of lower levels of long-term debt and growing levels of shareholders' equity,
the Corporation's debt to equity ratio (ratio of long-term debt to
shareholders' equity plus long-term debt) improved from 34.1 percent at
December 31, 1992 to a level of 21.3 percent at year-end 1994.
Presently, the Corporation's long-term obligations, both senior and
subordinated, are rated at or above investment grade by all major national
rating agencies.
ASSET/LIABILITY MANAGEMENT
__________________________
Midlantic, through its Asset/Liability Committee ("ALCO"), continually
monitors, plans and adjusts, where necessary, its sources and uses of funds
for the purpose of limiting interest rate risk, while maintaining adequate
liquidity and a strong capital base. ALCO attempts to balance these
objectives with Midlantic's business strategy in an efficient and cost-
effective manner.
INTEREST SENSITIVITY MANAGEMENT
Interest rate risk refers to the periodic and cumulative exposure from changes
in interest rates on earnings and capital. While Midlantic, like any
financial institution, will typically incur some amount of interest rate risk
in the normal course of providing services to its borrowing customers and
depositors, the Corporation's policy is to protect its earnings and capital
from undue exposure to interest rate volatility. ALCO assesses the degree of
this risk by simulating the Corporation's earnings under alternative balance
sheet structures and under a variety of interest rate scenarios, with the
actual amount of such risk typically maintained at a manageable percent of NII
(generally less than five percent) and capital.
Earnings exposure to interest rates arises primarily from mismatches in the
maturity and repricing distribution of the Corporation's assets and
liabilities including hedging positions created by interest rate swaps. For
example, at any point in time, if more of the Corporation's outstanding assets
are scheduled to mature or to reprice earlier than its liabilities, the
Corporation's earnings may be vulnerable to a decline in the general level of
interest rates because in this circumstance the Corporation's asset yields
would decline sooner than its funding costs. Conversely, if more of the
Corporation's liabilities reprice or mature earlier than its assets, earnings
may be exposed to an increase in the general level of interest rates since
funding costs would tend to rise before asset yields. This type of risk is
approximately illustrated in the "static gap" calculation (Table XXV) which
expresses the excess of assets or liabilities (including interest rate swaps)
outstanding at December 31, 1994, due to mature, to be repriced, or assumed to
be repriced in various time intervals. On December 31, 1994, Midlantic
estimated that more assets than liabilities were repricing or maturing during
the subsequent one-year period. This estimate includes certain assumptions
about the timing of rate changes on liabilities without stated maturities and
the effect on NII of changing levels of noninterest-bearing funding, such as
demand deposits. The actual or assumed amount of assets in excess of
liabilities subject to maturing or repricing within one year of December 31,
1994 was $351.4 million (which includes the effect of interest rate swaps), an
amount which management believes would result in a negligible change in NII if
interest rates were to rise or fall by amounts similar to recent years. On
the other hand, greater market interest rate volatility will tend to have a
more significant impact on prospective NII. Midlantic manages its interest
sensitivity position with an objective of avoiding material mismatching of the
amounts of assets and liabilities subject to rate changes within certain time
intervals. Midlantic's policy is to avoid mismatches that might lead to a
reduction in NII amounting to five percent or more.
In order to maintain earnings and capital exposure to interest rate changes
within prudent bounds, Midlantic utilizes interest rate swaps to hedge existing
balance sheet items that have a high degree of inverse rate correlation to the
swap. For a discussion of derivative financial instruments, including interest
rate swaps, see "Notes to Consolidated Financial Statements, Note No. 18" on
pages 55 through 60.
<PAGE>37
<TABLE>
TABLE XXV - INTEREST-SENSITIVITY STATIC GAP ANALYSIS*
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------------------------
Due to Mature Due to Mature Due to Mature
Daily Floating or Reprice or Reprice or Reprice
and due to After Three After Six After
Mature or Months but Months One Year or
Reprice Within Within but Within Noninterest
(In thousands) Three Months Six Months One Year sensitive Total
----------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Money market investments $ 1,113,600 $ 100 $ -- $ -- $ 1,113,700
Investment securities 208,300 145,900 512,500 1,889,800 2,756,500
Loans 4,762,500 261,700 347,800 2,866,000 8,238,000
----------- --------- ---------- ---------- -----------
Total interest-earning assets $ 6,084,400 $ 407,700 $ 860,300 $4,755,800 $12,108,200
----------- --------- ---------- ---------- -----------
SOURCES OF FUNDS SUPPORTING
INTEREST-EARNING ASSETS
Savings and time deposits $ 4,293,100 $ 561,400 $ 534,800 $2,570,300 $ 7,959,600
Short-term borrowings 584,500 -- -- -- 584,500
Long-term debt -- -- -- 373,000 373,000
Noninterest-bearing sources of funds 339,800 45,300 90,600 2,715,400 3,191,100
----------- --------- ---------- ---------- -----------
Total sources of funds supporting
interest-earning assets $ 5,217,400 $ 606,700 $ 625,400 $5,658,700 $12,108,200
----------- --------- ---------- ---------- -----------
NET ASSETS (LIABILITIES) BEFORE NET
INTEREST RATE SWAPS $ 867,000 $(199,000) $ 234,900 $ (902,900) $ --
----------- --------- ---------- ---------- -----------
NET INTEREST RATE SWAPS $(1,551,500) $ -- $1,000,000 $ 551,500 $ --
----------- --------- ---------- ---------- -----------
INTEREST-SENSITIVITY GAP $ (684,500) $(199,000) $1,234,900 $ (351,400) $ --
----------- --------- ---------- ---------- -----------
CUMULATIVE INTEREST-SENSITIVITY GAP $ (684,500) $(883,500) $ 351,400 $ -- $ --
----------- --------- ---------- ---------- -----------
INTEREST-SENSITIVE ASSETS TO
INTEREST-SENSITIVE LIABILITIES .90:1 .67:1 2.97:1 .94:1 1:1
----------- --------- ---------- ---------- -----------
CUMULATIVE RATIO OF INTEREST-SENSITIVE
ASSETS TO INTEREST-SENSITIVE
LIABILITIES .90:1 .88:1 1.04:1 1:1 1:1
----------- --------- ---------- ---------- -----------
CUMULATIVE RATIO OF INTEREST-SENSITIVE
ASSETS TO INTEREST-SENSITIVE
LIABILITIES (EXCLUDING NET INTEREST RATE SWAPS) 1.17:1 1.11:1 1.14:1 1:1 1:1
----------- --------- ---------- ---------- -----------
<FN>
* CERTAIN ASSUMPTIONS USED IN COMPUTING THE STATIC GAP ANALYSIS:
Noninterest-bearing demand deposits (included in noninterest-bearing sources of funds) are allocated over an approximate
ten-year period which reflects an average life of approximately five years.
Interest-bearing deposits with no contractual maturities are generally spread equally over a six-year period which
reflects an average life of three years.
Prepayment estimates have been factored in for asset-backed securities and 1-4 family residential mortgage loans. Such
estimates are based upon the prepayment characteristics of similar instruments as published by outside sources.
Nonaccrual loans are all reflected in the "Daily Floating and Due to Mature or Reprice Within Three Months" interval.
</TABLE>
LIQUIDITY
General
Liquidity is the Corporation's ability to meet contractual as well as
unforeseen obligations in a manner that is both efficient and as cost
effective as possible.
Major sources of liquidity include the Corporation's portfolio of short-term
money market investments, maturing investment securities and proceeds on the
possible sale of AFS securities, principal payments on loans, core deposit
generation and access to large liability funding sources if the need arises.
Normal liquidity requirements principally include loan originations and
depositor withdrawals.
<PAGE>38
<TABLE>
TABLE XXVI - LOAN PORTFOLIO - MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES(1)(2)
<CAPTION>
DECEMBER 31, 1994
---------------------------------------
Due in Due After Due
One Year One Year After
or Less or Through Five
(In thousands) on Demand Five Years Years
---------- ---------- ----------
<S> <C> <C> <C>
Commercial, financial and foreign $1,975,898 $ 873,277 $ 169,797
Real estate - construction and development 183,463 312,197 96,041
Real estate - mortgage 329,453 412,126 1,366,649
Loans to individuals 133,103 1,211,011 1,319,794
---------- ---------- ----------
Total loans $2,621,917 $2,808,611 $2,952,281
========== ========== ==========
Loans due after one year which have
predetermined interest rates $1,793,961 $1,590,305
Loans due after one year which have
floating or adjustable interest rates 1,014,650 1,361,976
---------- ---------- ----------
Total loans due after one year $2,808,611 $2,952,281
========== ========== ==========
<FN>
(1) Loans are stated gross of unearned income.
(2) The actual maturities of Midlantic's loan portfolio are subject to market developments
and the unpredictable aging of demand loans.
</TABLE>
<TABLE>
TABLE XXVII - LIQUIDITY AND FUNDING RATIOS
<CAPTION>
DECEMBER 31
----------------------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Liquidity ratio (1) 30.7% 31.6% 29.8% 20.9% 17.3%
Funding ratio (2) (7.8) (14.3) (15.8) (1.0) 5.4
Total loans, net of unearned income, as a
% of total deposits 76.2 72.6 72.1 78.2 83.6
Core deposits as a % of total loans,
net of unearned income 125.6 132.6 130.2 118.3 106.6
Unfunded loan commitments as a % of
loans outstanding 33.1 32.0 30.5 31.2 30.0
===== ===== ===== ===== =====
<FN>
(1) Ratio of net short-term assets to net funding liabilities.
(2) Total purchased funds less investment securities due in one year and money market
investments as a percent of investment securities due in more than one year and
total loans, net of unearned income.
</TABLE>
Through its ALCO, Midlantic addresses the liquidity requirements of the parent
company and its subsidiaries on both a short-term and long-term basis using a
variety of operating scenarios that take into account the effect of both
quantitative and qualitative influences. These influences include national
and regional economic conditions, the interest rate environment, loan quality,
unfunded commitments, projections of deposit and loan growth and key ratio
analyses. On a longer-term basis, liquidity is projected using investment and
funding alternatives that take into consideration the Corporation's strategic
objectives.
Table XXVII presents several liquidity-related ratios for each of the past
five years. The Corporation has accumulated a highly liquid position partly
as a result of management's efforts to increase liquidity during the early
1990's coupled with a softening in loan demand. To fund possible future loan
originations as well as depositor withdrawals and other demands on the
Corporation's liquid resources, Midlantic will first rely upon its readily
available portfolio of money market investments, the possible sale and/or
securitization of certain assets and the generation of core deposits to the
extent available under market conditions.
Parent Company Liquidity
Liquidity is required at the parent company (MC) to fund such outlays as
contractual debt servicing, cash dividends on common and preferred stock and
normal operating expenses. Parent company liquidity, which is managed in
conjunction with the short-term resources of Midlantic's nonbank subsidiaries,
exceeded $230 million at both December 31, 1994 and 1993. Management fees and
dividends, which are paid to the parent company from MB, generally on a
quarterly basis, are presently sufficient to cover all normal parent company
expenses, debt servicing and dividends to shareholders.
Following several successive quarters of financial progress, in April 1994,
the MNB Board of Directors ("MNB's Board") approved a cash dividend from MNB
to MC. Prior to 1994, the last dividend paid by MNB was in the first quarter
of 1990. Cash dividends were also approved by MNB's Board in July 1994 and by
the Board of Directors of MB in October 1994 and January 1995. Based upon its
present capital position and projected earnings potential and in the absence
of unexpected events which could adversely affect its dividend paying
capacity, MB is expected to continue to pay quarterly cash dividends to MC for
the foreseeable future.
Management expects that the parent company will have sufficient liquid assets
to meet its presently anticipated cash obligations in the near future. The
parent company does not have any long-term debt maturing until 1999. However,
the Corporation may, from time-to-time, consider retiring or refinancing
certain debt issues or portions thereof, prior to the actual maturity of such
issues. The Corporation may also consider reducing outstanding common shares
through the possible purchase of shares of Midlantic common stock. In
connection with a recently signed definitive agreement to acquire Old York
Road Bancorp, Inc., the Corporation will purchase, in the open market, and
reissue Midlantic common stock to fund a portion of the purchase price (see
"Recent Events").
CAPITAL
The foundation of a banking organization's financial condition is the strength
of its capital base. Midlantic strives to maintain a capital base that not
only exceeds all minimum regulatory ratios but solidly positions the
organization toward its growth objectives.
<PAGE>39
CAPITAL RATIOS
See Appendix 5 for explanation of graphic image inserted here.
Shareholders' equity, the basis of all regulatory capital ratio requirements,
has increased by $530.7 million to a level of $1.4 billion at year-end 1994 as
compared with $843.5 million at December 31, 1992. The significant rise in
shareholders' equity during this period resulted from net earnings retention
aggregating $412.8 million and proceeds of $107.1 million from the issuance of
5.8 million common shares in 1993.
Bank regulators utilize risk-based and leverage ratio guidelines to assess
capital adequacy. Risk-based capital is divided into the tier 1 component,
which generally consists of shareholders' equity less goodwill, certain
intangibles and, in 1993 and 1994, a disallowed portion of the deferred tax
asset. The tier 2 component includes a portion of the allowance for loan
losses limited to 1.25 percent of gross risk-weighted assets and certain long-
term debt. Balance sheet and off-balance sheet credit risk are determined
through the utilization of risk-weights assigned to such instruments, which
are grouped according to degree of risk. The leverage ratio represents tier 1
capital as a percentage of total assets exclusive of goodwill, disallowed
intangibles and the disallowed portion of the deferred tax asset. At December
31, 1994, tier 1 capital as a percent of risk-weighted assets amounted to
13.07 percent, total capital (tier 1 capital plus tier 2 capital) as a percent
of risk-weighted assets was 17.22 percent and the leverage ratio was 9.43
percent. Midlantic's capital ratios compared favorably to the regulatory
minimums of 4.00 percent for tier 1 capital, 8.00 percent for total capital
and 3.00 percent for leverage.
<TABLE>
TABLE XXVIII - CAPITAL
<CAPTION>
December 31
--------------------------------------------
(In thousands) 1994 1993 1992
---------- ----------- -----------
<S> <C> <C> <C>
RISK-BASED CAPITAL
Tier 1 capital
Total shareholders' equity $1,374,186 $ 1,122,564 $ 843,462
Less: Goodwill and disallowed
intangibles 89,581 103,601 99,891
Disallowed portion of deferred
tax asset and other applicable
adjustments to tier 1 capital 42,986 81,568 N/A
---------- ----------- -----------
Total tier 1 capital $1,241,619 $ 937,395 $ 743,571
========== =========== ===========
Tier 2 capital
Qualifying allowance for loan losses $ 121,633 $ 129,559 $ 142,623
Qualifying long-term debt 273,000 275,000 285,862
---------- ----------- -----------
Total tier 2 capital $ 394,633 $ 404,559 $ 428,485
---------- ----------- -----------
Total capital (tier 1 + tier 2) $1,636,252 $ 1,341,954 $ 1,172,056
========== =========== ===========
Risk-adjusted assets $9,502,734 $10,099,816 $10,888,565
========== =========== ===========
RATIO OF TIER 1 CAPITAL TO
RISK-ADJUSTED ASSETS 13.07% 9.28% 6.83%
========== =========== ===========
RATIO OF TOTAL CAPITAL TO
RISK-ADJUSTED ASSETS 17.22% 13.29% 10.76%
========== =========== ===========
LEVERAGE RATIO 9.43% 6.81% 5.19%
========== =========== ===========
<FN>
N/A - Not Applicable
</TABLE>
<PAGE>40
At December 31, 1994, MB also exceeded all regulatory capital ratio minimums
with a tier 1 risk-based capital ratio of 14.12 percent, a total risk-based
capital ratio of 15.40 percent and a leverage ratio of 10.39 percent.
In late 1992, the federal banking regulators established several uniform
capital ratio categories which are designed to implement the prompt resolution
of under-capitalized institutions. As required by the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), under the
regulations issued by the federal banking regulators, an insured depository
institution whose tier 1 and total risk-based capital ratios exceeded 6.00
percent and 10.00 percent, respectively, and whose leverage ratio exceeded
5.00 percent, would generally be categorized as "well-capitalized." Based
upon MC's understanding of such regulations and of publicly available
interpretations thereof by the bank regulatory agencies, management believes
that MB currently qualifies as a "well-capitalized" institution. The
categorization of depository institutions under such regulations is solely
for the purpose of applying the prompt corrective action provision of FDICIA
and is not intended to be, and should not be interpreted as, a representation
of the depository institution's overall financial condition or prospects.
As indicated in "Midlantic In Transition 1990-1994," during each of the last
three quarters of 1994, the Corporation's Board declared cash dividends to
common shareholders cumulatively amounting to $.40 per share. Furthermore,
the Corporation's Board also approved the payment of the dividend requirement
on MC's Term Adjustable Rate Cumulative Preferred Stock - Series A (the
"Preferred Stock") in cash during each quarter of 1994. Based on a July 22,
1992 agreement between Midlantic and the holder of the Preferred Stock,
dividends on the Preferred Stock for the second half of 1992 (as well as
payments in arrears) and for all of 1993 were paid through the issuance of
shares of Midlantic's common stock in lieu of a cash payment. Pursuant to
that agreement, Midlantic, at its discretion, may pay dividends in cash or in
shares of common stock or in any combination thereof, so long as any such
issuance of common stock would not result in the holder of the Preferred Stock
being the beneficial owner of more than 4.99 percent of the outstanding shares
of Midlantic's common stock.
At December 31, 1994, the market capitalization of Midlantic's common stock
was approximately $1.4 billion, based on a closing price of $26.50 on 52.564
million common shares outstanding. This compares with market capitalization
of $1.3 billion at December 31, 1993, based on a closing price of $25.50 on
52.174 million common shares outstanding.
RESULTS OF OPERATIONS FOURTH QUARTER 1994 VS. FOURTH QUARTER 1993
_________________________________________________________________
Net income amounted to $77.2 million or $1.40 per fully diluted common share
in the fourth quarter of 1994 as compared with $59.1 million or $1.08 per
fully diluted common share in the corresponding period of 1993. Excluding
certain tax benefits recognized during both quarters, net income for the
fourth quarter of 1994 was $50.8 million or $.92 per fully diluted share
compared to a net loss of $3.9 million or $.07 per fully diluted share in the
same quarter of 1993. Included in fourth quarter 1994 income was $6.2
million of gains realized on the disposition of certain assets in bulk sales
transactions. In the fourth quarter of 1993, $44.0 million was provided in
connection with charge-offs on loans and OREO identified at that time for bulk
sale in 1994. Excluding loss provisions and certain nonrecurring gains and
losses, core earnings increased by $15.9 million or 24.6 percent. The rise in
core earnings primarily reflected a $17.3 million or 12.9 percent increase in
NII which resulted from a 73 basis point rise in the net interest margin.
Noninterest income and noninterest expenses both remained substantially level
during the periods under analysis. Income tax expense amounted to $5.0
million in the fourth quarter of 1994 while in the fourth quarter of 1993 an
income tax benefit of $65.6 million was recorded. Income taxes in the fourth
quarters of 1994 and 1993 included $26.4 million and $63.0 million of tax
benefits, respectively, which primarily represented benefits related to the
reduction in the FAS No. 109 tax valuation reserve, that partially offset
income taxes on operating earnings. The "Summary of Consolidated Quarterly
Information" on page 74 provides certain data for each of the past five
quarters for the Corporation.
EFFECTS OF INFLATION
____________________
Inflation, as measured by the Consumer Price Index, has been relatively steady
during the past three years, advancing 2.7 percent in both 1994 and 1993 and
2.9 percent in 1992. Since Midlantic's assets and liabilities are
predominantly monetary, the effects of inflation on Midlantic's performance
are primarily measured by the level and volatility of interest rates earned
and paid. During the past three years, the prime rate changed six times
ranging from 6.0 percent to 8.5 percent. Throughout this period, Midlantic
was able to control interest rate risk, as a result of its continuing policy
of managing its interest-sensitive assets and liabilities (see
"Asset/Liability Management - Interest Sensitivity Management").
<PAGE>41
RECENT EVENTS
_____________
On December 30, 1994, Midlantic announced it had entered into a definitive
agreement to acquire Old York Road Bancorp, Inc. ("Old York"), headquartered
in Willow Grove, Pennsylvania for an approximate purchase price of $28.3
million, based on the December 31, 1994 closing price of Midlantic's common
stock. Old York's principle subsidiary is Bank and Trust Company of Old York
Road. As of December 31, 1994, Old York had total assets of $231.2 million
and shareholders' equity of $12.8 million. The acquisition will be accounted
for as a purchase and is expected to be consummated by the end of the second
quarter of 1995. Under the terms of the agreement, a maximum of 49 percent of
Old York's common stock will be exchanged for cash. Old York shares not
exchanged for cash will be exchanged for Midlantic common stock (.3721 shares
of Midlantic common stock for each share of Old York common stock, subject to
adjustment under certain circumstances). Midlantic currently expects to
repurchase from time-to-time in the open market, outstanding Midlantic common
shares equal to the approximate number of Midlantic common shares estimated to
be issued in the acquisition.
On January 20, 1995, Midlantic acquired from the Resolution Trust Corporation
approximately $126 million in deposits of three branches of Carteret Federal
Savings Bank of New Jersey, located in Newark and Dover, New Jersey, for a
premium of $12.5 million.
SELECTED SUPPLEMENTAL FINANCIAL DATA
____________________________________
The following table presents certain statistical data for Midlantic for each of
the past five years. During 1990, 1991 and 1992, the Corporation sold several
bank and nonbank subsidiaries as well as certain assets which, in the
aggregate, reduced total assets by nearly $6 billion. To facilitate a
meaningful comparison of the present constituency of the Corporation over the
five year period ended December 31, 1994, data for 1992, 1991 and 1990 has been
shown for both actual and for the Continuing Entities, which excludes the
operations of the divested subsidiaries and assets (see "Midlantic In Transition
1990-1994"). This table should be reviewed in conjunction with the financial
analysis.
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------------------------
1992 1991 1990
(In thousands, except per share 1994 1993 1992 Continuing 1991 Continuing 1990 Continuing
data and total assets) ACTUAL Actual Actual Entities Actual Entities Actual Entities
-------- -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $863,484 $825,547 $1,062,207 $ 932,689 $1,742,380 $1,286,681 $2,208,119 $1,729,665
Interest expense 278,947 310,857 542,012 482,890 1,104,779 823,627 1,370,822 1,072,253
Net interest income 584,537 514,690 520,195 449,799 637,601 463,054 837,297 657,412
Income (loss) before cumulative
effect of accounting changes 279,105 131,396 7,028 1,486 (543,303) (549,656) (195,005) (235,576)
Cumulative effect of accounting
changes (7,528) 38,962 -- -- -- -- -- --
Net income (loss) 271,577 170,358 7,028 1,486 (543,303) (549,656) (195,005) (235,576)
Income (loss) per common
share - fully diluted
Before cumulative effect of
accounting changes 5.11 2.51 .08 (.05) (14.36) (14.53) (5.22) (6.28)
Cumulative effect of
accounting changes (.14) .74 -- -- -- -- -- --
Net income (loss) 4.97 3.25 .08 (.05) (14.36) (14.53) (5.22) (6.28)
Cash dividends declared per
common share .40 -- -- -- -- -- 1.19 1.19
Obligations under capital leases 8,473 8,861 9,386 9,386 9,627 9,627 9,814 9,814
Long-term debt 373,000 386,752 437,112 437,112 463,989 441,989 448,178 443,255
Total assets (in millions) 13,294 13,909 14,397 14,397 18,132 15,694 23,530 18,545
======== ======== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>41(a)
APPENDIX
APPENDIX 1 - Description of "Core Earnings" Chart on Page 17
The Corporation reported core earnings (in millions) for 1990 through 1994 as
follows: $323.6 in 1990; $119.0 in 1991; $154.0 in 1992; $232.9 in 1993; and
$308.8 in 1994. Core earnings is defined as income before credit provisions,
OREO expenses, securities gains and losses, certain nonrecurring items, income
taxes and the cumulative effect of changes in accounting principle. Also,
core earnings reported for 1990 through 1992 reflect Continuing Entity data.
It is noted on the chart that the Restructuring program was announced in July
of 1991.
APPENDIX 2 - Description of "Core Efficiency Ratio" Chart on Page 22
The Corporation reported a core efficiency ratio for 1990 through 1994 as
follows: 60.5% in 1990; 81.1% in 1991; 75.5% in 1992; 66.5% in 1993; and
59.9% in 1994. The core efficiency ratio is defined as noninterest expenses
(excluding OREO expenses and certain nonrecurring items) as a percentage of
the sum of net interest income plus noninterest income (excluding securities
gains or losses and certain nonrecurring items). Also, the core efficiency
ratios reported for 1990 through 1992 reflect Continuing Entity data. It is
noted on the chart that the Restructuring program was announced in July of
1991.
APPENDIX 3 - Description of "Composition of Loan Portfolio" Chart on Page 26
The composition of the Corporation's loan portfolio at December 31, 1994,
consists of the following: Commercial, Financial and Foreign loans, 36.0%;
Construction and Land development loans, 7.1%; Long-term Commercial Mortgage
loans, 18.6%; and Consumer loans, 38.3%.
APPENDIX 4 - Description of "Composition of Core Deposits" Chart on Page 34
The composition of the Corporation's core deposits on a percentage basis at
December 31, 1994 compared to December 31, 1991 is as follows: Noninterest-
bearing Demand deposits for 1994 is 27.5% vs. 20.0% in 1991; Interest-bearing
Demand and Savings deposits for 1994 is 29.0% vs. 19.4% in 1991; Insured Money
Market deposits for 1994 is 18.6% vs. 24.1% in 1991 and Other Time deposits
for 1994 is 24.9% vs. 36.5% in 1991.
APPENDIX 5 - Description of "Capital Ratios" Chart on Page 39
The Corporation reported capital ratios at December 31, 1990 through 1994 as
follows: Tier 1 Risk based, 5.9% in 1990, 4.3% in 1991, 6.8% in 1992, 9.3% in
1993 and 13.1% in 1994; Total Risk-based, 8.9% in 1990, 7.7% in 1991, 10.8% in
1992, 13.3% in 1993 and 17.2% in 1994; and Leverage, 4.8% in 1990, 3.4% in
1991, 5.2% in 1992, 6.8% in 1993 and 9.4% in 1994. It is noted on the chart
that minimum regulatory standards are 4% for Tier 1 Risk-based, 8% for Total
Risk- based and 3% for Leverage. It is also noted on the chart that the
Restructuring program was announced in July, 1991.
<PAGE>42
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992
____________________________________________________________________________________________________
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $676,741 $ 663,410 $ 844,240
Interest on investment securities
Taxable interest income 116,082 91,036 171,188
Tax-exempt interest income 805 1,012 10,233
Interest on deposits in other banks 17,586 18,319 5,869
Interest on other short-term investments 52,270 51,770 30,677
-------- --------- ----------
Total interest income 863,484 825,547 1,062,207
-------- --------- ----------
INTEREST EXPENSE
Interest on deposits 223,366 262,886 483,154
Interest on short-term borrowings 21,128 11,586 17,341
Interest on long-term debt 34,453 36,385 41,517
-------- --------- ----------
Total interest expense 278,947 310,857 542,012
-------- --------- ----------
Net interest income 584,537 514,690 520,195
Provision for loan losses 21,625 81,343 140,580
-------- --------- ----------
Net interest income after
provision for loan losses 562,912 433,347 379,615
NONINTEREST INCOME
Trust income 43,263 41,459 46,776
Service charges on deposits 77,337 78,815 79,478
Investment securities (losses) gains (6,663) 7,005 52,753
Net gains on disposition of assets 32,300 -- 35,208
Other 67,973 59,174 76,150
-------- --------- ----------
Total noninterest income 214,210 186,453 290,365
-------- --------- ----------
777,122 619,800 669,980
-------- --------- ----------
NONINTEREST EXPENSES
Salaries and benefits 226,676 219,332 257,221
Net occupancy 44,354 44,622 51,410
Equipment rental and expense 23,542 26,881 35,776
Other real estate owned, net 5,212 134,337 99,744
FDIC assessment charges 28,407 33,841 34,090
Legal and professional fees 45,174 51,511 51,403
Restructuring charges -- -- 22,500
Other 99,752 88,923 107,964
-------- --------- ----------
Total noninterest expenses 473,117 599,447 660,108
-------- --------- ----------
Income before income taxes and cumulative effect of
accounting changes 304,005 20,353 9,872
Income tax expense (benefit) 24,900 (111,043) 2,844
-------- --------- ----------
Income before cumulative effect of accounting changes 279,105 131,396 7,028
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993 (7,528) 38,962 --
-------- --------- ----------
NET INCOME $271,577 $ 170,358 $ 7,028
======== ========= ==========
INCOME PER COMMON SHARE
Income before cumulative effect of accounting changes
Primary $5.18 $2.51 $.08
Fully diluted 5.11 2.51 .08
Cumulative effect of the change in accounting for
postemployment benefits in 1994 and for income taxes in 1993
Primary (.14) .76 --
Fully diluted (.14) .74 --
Net income
Primary 5.04 3.27 .08
Fully diluted 4.97 3.25 .08
===== ===== ====
<FN>See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>43
Midlantic Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31 1994 1993
________________________________________________________________________________________
<S> <C> <C>
ASSETS
Cash and due from banks $ 819,928 $ 712,960
Interest-bearing deposits in other banks 242,659 488,821
Other short-term investments 871,000 1,290,000
Investment securities (market value 1994,
$2,666,812; 1993, $2,467,793) 2,756,543 2,455,410
Loans (net of unearned income of $144,850
in 1994 and $137,241 in 1993) 8,237,959 8,409,697
Less: allowance for loan losses 349,520 400,311
----------- -----------
Net loans 7,888,439 8,009,386
----------- -----------
Premises and equipment, net 146,523 155,129
Due from customers on acceptances 17,546 11,084
Other assets 550,900 786,388
----------- -----------
Total assets $13,293,538 $13,909,178
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Domestic deposits
Noninterest-bearing demand $ 2,847,782 $ 2,839,885
Interest-bearing demand 1,361,287 1,433,690
Savings 1,636,908 1,582,614
Retail money market accounts 1,920,175 2,193,582
CDs over $100,000 447,590 423,134
Other time 2,577,893 3,105,623
Overseas branch deposits 15,699 9,273
----------- -----------
Total deposits 10,807,334 11,587,801
----------- -----------
Short-term borrowings 584,489 674,497
Bank acceptances outstanding 17,546 11,084
Other liabilities 136,983 126,480
Long-term debt 373,000 386,752
----------- -----------
Total liabilities 11,919,352 12,786,614
----------- -----------
Commitments and contingent liabilities
Shareholders' equity
Capital stock
Preferred stock: no par value
Authorized 40,000,000 shares
Issued 500,000 shares in 1994 and 1993 50,000 50,000
Common stock: par value $3 per share
Authorized 150,000,000 shares
Issued 52,564,346 shares in 1994 and
52,173,999 shares in 1993 157,693 156,522
Surplus 611,205 603,732
Retained earnings 558,385 312,310
Net unrealized holding losses on available-
for-sale securities, net of taxes (3,097) --
----------- -----------
Total shareholders' equity 1,374,186 1,122,564
----------- -----------
Total liabilities and shareholders' equity $13,293,538 $13,909,178
=========== ===========
<FN>See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>44
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992
__________________________________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 271,577 $ 170,358 $ 7,028
Adjustments to reconcile net income
to net cash provided by operating activities
Provisions for loan and OREO losses 29,125 211,888 217,712
Depreciation of premises and equipment 21,638 23,909 30,323
Amortization of goodwill and other intangibles 6,460 6,334 7,696
Deferred income tax (benefit) expense (26,784) (74,023) 97,390
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993 7,528 (38,962) --
Net (accretion) amortization of investment securities (8,842) (26,460) 34,535
Accretion of net deferred loan fees (9,358) (9,324) (9,093)
Restructuring charges (net of cash payments of $11,708) -- -- 10,792
Net gains on the sales of assets (36,121) (11,107) (74,965)
Net decrease (increase) in trading account assets 11,771 (12,720) 17,382
Net decrease in other real estate owned, net 7,460 33,697 56,534
Net (increase) decrease in accrued interest receivable (15,502) 3,191 43,447
Net decrease in accrued interest payable (4,161) (16,876) (76,592)
Net decrease in taxes receivable
and net deferred tax asset 38,685 49,409 71,153
Net decrease (increase) in other assets 55,657 26,365 (18,139)
Net (decrease) increase in other liabilities (114) (23,649) 29,336
Other (4,220) (4,415) (14,752)
---------- ----------- -----------
Net cash provided by operating activities 344,799 307,615 429,787
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of subsidiaries (exclusive of cash and due from banks of
$682 in 1993 and $139,425 in 1992 and net of disposition
costs paid of $2,860 in 1993) -- 15,322 46,283
Bulk sales of loans and OREO 234,981 220,802 --
Sales/securitizations of loans 7,184 -- 383,745
Sales of other real estate owned 66,127 145,340 99,668
Net decrease (increase) in money market investments with an
original maturity of 3 months or less 309,187 155,225 (314,566)
Proceeds from money market investments with
an original maturity greater than 3 months 1,433,952 2,272,097 226,000
Purchases of money market investments with an
original maturity greater than 3 months (1,077,977) (2,165,040) (869,097)
Proceeds from sales of available-for-sale securities 1,036,224 580,255 2,328,315
Proceeds from matured investment securities:
Held-to-maturity 461,731 { 1,493,930 { 774,128
Available-for-sale 645,672 { {
Purchases of investment securities:
Held-to-maturity (959,999) {(2,369,924) {(3,011,470)
Available-for-sale (1,499,574) { {
Net decrease (increase) in loans 18,855 (120,828) 959,802
Purchases of premises and equipment (15,723) (16,087) (12,723)
Sales of premises and equipment 1,633 1,533 2,944
---------- ----------- -----------
Net cash provided by investing activities 662,273 212,625 613,029
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (780,467) (968,732) (1,317,632)
Net (decrease) increase in short-term borrowings (90,008) 303,779 (125,903)
Payments on long-term debt (13,752) (50,360) (4,877)
Proceeds from issuance of common stock 7,813 108,839 109,990
Dividends paid (23,690) -- --
---------- ----------- -----------
Net cash used by financing activities (900,104) (606,474) (1,338,422)
---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 106,968 $ (86,234) $ (295,606)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 712,960 799,194 1,094,800
---------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 819,928 $ 712,960 $ 799,194
========== =========== ===========
<FN>See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>45
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED DECEMBER 31 1994 1993 1992
_________________________________________________________________________________________________________
<S> <C> <C> <C>
PREFERRED STOCK AT JANUARY 1 AND DECEMBER 31 $ 50,000 $ 50,000 $ 50,000
========== ========== ========
COMMON STOCK
Balance at January 1 $ 156,522 $ 138,443 $114,308
Issuance of 5,750,000 common shares in a public offering
in 1993 and an aggregate 7,650,000 common shares in an
overseas offering and a private placement in 1992 -- 17,250 22,950
Issuance of 35,776 common shares in 1994, 163,556 common
shares in 1993 and 288,941 common shares in 1992 for
preferred stock dividend 107 491 867
Issuance of 265,780 common shares and 2,790 common treasury shares
in 1994, 97,498 common shares and 4,981 common treasury shares
in 1993 and 106,312 common shares and 48,188 common treasury
shares in 1992 for stock options and stock awards 798 293 318
Issuance of 88,791 common shares in 1994 and 15,127 common shares
in 1993 purchased by Midlantic's 401(k) plan and Dividend
Reinvestment and Stock Purchase Plan 266 45 --
---------- ---------- --------
Balance at December 31 $ 157,693 $ 156,522 $138,443
========== ========== ========
SURPLUS
Balance at January 1 $ 603,732 $ 509,464 $420,125
Issuance of common shares in public, overseas and
private offerings -- 89,890 86,534
Issuance of common shares for preferred stock dividend 799 3,135 3,810
Issuance of common shares and common treasury shares for
stock options and stock awards 4,488 918 (1,005)
Issuance of common shares purchased by Midlantic's 401(k) plan
and Dividend Reinvestment and Stock Purchase Plan 2,186 325 --
---------- ---------- --------
Balance at December 31 $ 611,205 $ 603,732 $509,464
========== ========== ========
RETAINED EARNINGS
Balance at January 1 $ 312,310 $ 145,578 $143,227
Net income 271,577 170,358 7,028
Cash dividends declared in 1994
Preferred stock (3,625) -- --
Common stock (20,971) -- --
Issuance of common shares for preferred stock dividend (906) (3,626) (4,677)
---------- ---------- --------
Balance at December 31 $ 558,385 $ 312,310 $145,578
========== ========== ========
NET UNREALIZED HOLDING GAINS (LOSSES) ON
AVAILABLE-FOR-SALE SECURITIES
Net unrealized holding gain recognized on adoption of
change in accounting for investment securities $ 1,859 $ -- $ --
Change in unrealized holding gains (losses) (4,956) -- --
---------- ---------- --------
Balance at December 31 $ (3,097) $ -- $ --
========== ========== ========
TREASURY STOCK
Balance at January 1 $ -- $ (23) $ (361)
Addition of 2,790 common shares in 1994, 4,081 common shares
in 1993 and 38,612 common shares in 1992 (75) (95) (1,037)
Issuance of 2,790 common treasury shares in 1994, 4,981
common treasury shares in 1993 and 48,188 common treasury
shares in 1992 for stock options 75 118 1,375
---------- ---------- --------
Balance at December 31 $ -- $ -- $ (23)
========== ========== ========
TOTAL SHAREHOLDERS' EQUITY
Balance at January 1 $1,122,564 $ 843,462 727,299
Net changes during period 251,622 279,102 116,163
---------- ---------- --------
Balance at December 31 $1,374,186 $1,122,564 $843,462
========== ========== ========
<FN>See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>46
Midlantic Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
_____________________________________________
The accounting and reporting policies of Midlantic Corporation and
Subsidiaries follow generally accepted accounting principles and general
practices applicable to both the banking and bank-related industries. The
policies which materially affect the determination of results of operations,
financial position and cash flows are summarized below.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements of
Midlantic Corporation ("MC") and its wholly-owned subsidiaries ("Midlantic" or
the "Corporation") include the accounts of Midlantic Bank, National
Association ("MB") and several smaller subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
RECLASSIFICATIONS - Certain amounts in the financial statements presented for
prior periods have been reclassified to conform with the 1994 presentation.
Effective June 30, 1994 and for all prior periods presented, the Corporation
reclassified factored receivables and the allowance for factored receivables
from other assets/other liabilities to loans and the allowance for loan
losses, respectively. Net discount income earned on factored receivables was
reclassified from noninterest income to interest income on loans while the
provision for losses on factored receivables was transferred from other
noninterest expenses to the provision for loan losses. Such reclassifications
were made to conform with general industry practice and did not have a
material effect on Midlantic's results of operations or financial condition.
STATEMENT OF CASH FLOWS - The statement of cash flows is presented using the
indirect method.
Cash equivalents, for the purpose of this statement, are defined as cash and
due from banks.
The changes in accrued interest payable on interest rate swap contracts are
netted against the changes in accrued interest receivable.
The changes in assets and liabilities presented in the cash flow statement are
net of the effects of divestitures which are disclosed as the net proceeds
received in such transactions.
MONEY MARKET INVESTMENTS - Money market investments are defined as interest-
bearing deposits in other banks and other short-term investments. Other
short-term investments include federal funds sold, term federal funds sold,
commercial paper and securities purchased under resale agreements.
INVESTMENT SECURITIES - On January 1, 1994, the Corporation adopted Statement
of Financial Accounting Standards ("FAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities," which established the accounting
and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. In
accordance with FAS No. 115, those investments are classified and accounted
for in three categories: (1) securities which Midlantic has both the positive
intent and ability to hold until maturity (held-to-maturity securities) are
reported at amortized/accreted cost; (2) securities which are purchased and
held principally for the purpose of selling in the near term (trading
securities) are reported at fair value with unrealized gains and losses
included in earnings (which is consistent with the prior accounting policy for
such securities); and (3) available-for-sale securities, which do not meet the
criteria of the other categories, are reported at fair value with unrealized
gains and losses, net of applicable income taxes, reported as a separate
component of shareholders' equity and excluded from earnings. Gains or losses
on the sale of securities are determined using the specific identification
method.
Prior to January 1, 1994, investments in debt securities that Midlantic had
both the intent and ability to hold until maturity were stated at cost,
adjusted for premiums or discounts. Debt securities identified for possible
sale prior to their contractual maturities in order to meet asset and
liability management objectives and marketable equity securities were carried
at the lower of aggregate cost or market value.
LOANS - Loan origination fees and certain direct loan origination costs are
netted and the deferred amounts are amortized as adjustments of the loans'
yields. Midlantic generally amortizes net loan fees over the contractual
lives of the related loans.
Unearned interest income on all loan categories is taken into earnings over
the terms of the related loans.
NONACCRUAL LOANS AND OTHER REAL ESTATE OWNED - Loans are generally reported as
nonaccrual if they are past due as to maturity or payment of principal or
interest for a period of more than 90 days, unless such loans are well-secured
and in the process of collection. If a loan or a portion of a loan is
classified as doubtful or is partially charged off, the loan is classified as
nonaccrual. Loans that are on a current payment status or past due less than
90 days may also be classified as nonaccrual if in management's judgment there
is little likelihood that the borrower will be able to comply with the
contractual terms of the loan or if management concludes that there exists
other imminent signs of deterioration. Loans, with the exception of partially
charged off loans or loans with any portion classified as doubtful, may be
placed back on accrual status when all principal and interest amounts
contractually due (including arrearages) are reasonably assured of repayment
within an acceptable period of time and there is a sustained period of
repayment performance (generally a minimum of six months) by the borrower, in
accordance with the contractual terms, involving payments of cash or cash
equivalents. The remaining recorded balance of a partially charged off loan
may be returned to
<PAGE>47
accrual status if the entire contractual loan balance, together with all
unpaid contractual interest, is determined to be fully collectible.
While a loan is classified as nonaccrual and the future collectibility of the
recorded loan balance is doubtful, collections of interest and principal are
generally applied as a reduction to principal outstanding. When the future
collectibility of the recorded loan balance is expected, interest income may
be recognized on a cash basis. In the case where a nonaccrual loan had been
partially charged off, recognition of interest on a cash basis is limited to
that which would have been recognized on the recorded loan balance at the
contractual interest rate. Cash interest receipts in excess of that amount
are recorded as recoveries to the allowance for loan losses until prior
charge-offs have been fully recovered.
Other real estate owned ("OREO") consists principally of real estate
collateral whereby Midlantic has foreclosed and/or has obtained title to the
properties and "in-substance" foreclosures ("ISF(s)"). A loan is classified
as an ISF when conditions exist where the debtor has little or no equity in
the supporting collateral, considering the current fair value of such
collateral; the proceeds for repayment of the loan can be expected only from
the operation or sale of such collateral; and the debtor has either formally
or effectively abandoned control of the collateral to the lender or retained
control, but his ability to rebuild equity in the collateral or otherwise
repay the loan in the foreseeable future is doubtful. A loan does not have to
be in default to be classified as an ISF.
OREO is carried at the lower of the recorded investment in the loan or the
fair value less estimated costs of disposal of the property ("net realizable
value"). Upon transfer of a loan to OREO status, an appraisal is made of the
foreclosed property (or the underlying collateral in the case of an ISF) and
any excess of the loan balance over net realizable value is charged against
the allowance for loan losses. Subsequent adjustments to net realizable
value, primarily determined through appraisals of the properties and the
overall condition of the real estate market, are recognized through a
provision charged to OREO expense. Costs incurred for the holding of OREO
properties, net of rental income (if any) and gains or losses on the sale of
OREO, are also charged/credited directly to OREO expense.
When a loan is transferred to nonaccrual status or directly to OREO, it is
Midlantic's general policy to reverse interest income accrued but not received
for the current period and charge interest accrued but not yet received for
prior periods against the allowance for loan losses.
RENEGOTIATED LOANS - Loans are considered troubled debt restructurings under
FAS No. 15 "Accounting by Debtors and Creditors for Troubled Debt
Restructurings" if, for economic or legal reasons, a concession has been
granted to the borrower related to the borrower's financial difficulties that
the creditor would not otherwise consider. Midlantic has restructured certain
loans in instances where a determination was made that greater economic value
will be realized under new terms than through foreclosure, liquidation or
other disposition. Prior to demonstrating performance, restructured loans are
classified as nonaccrual. When restructured loans can demonstrate performance
(as generally evidenced by six months of pre- or post-restructuring payment
performance in accordance with the restructured terms, or by the presence of
other significant factors) such loans are classified as "renegotiated loans"
and accrual of interest resumes. Renegotiated loans that have demonstrated
performance and have an effective yield greater than or equal to a market
interest rate at the date of closing are classified as accruing loans in the
reporting period following the year they were disclosed as renegotiated and
were so disclosed in the annual financial statements for that year. In those
cases where the average current yield differs from the effective yield,
interest income on renegotiated loans is recognized on the more conservative
average current yield basis until certain contingencies are met.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established
through charges to earnings in the form of a provision for loan losses.
Loans, or portions of loans, which are determined to be uncollectible are
charged against the allowance account and subsequent recoveries, if any, are
credited to the account. In establishing an appropriate allowance, factors
that are considered include an assessment of the financial condition of
individual borrowers, a determination of the value and adequacy of underlying
collateral, including appraisals as required, the composition and balance of
the credit portfolio, a review of historical loss experience, and an analysis
of the levels and trends of delinquencies, charge-offs and the risk ratings of
the various loan categories. Such factors as the level and trend of interest
rates and the condition of the national and local economies are also
considered.
ACCOUNTING FOR LOAN IMPAIRMENT - In May, 1993, the Financial Accounting
Standards Board issued FAS No. 114 "Accounting by Creditors for Impairment of
a Loan" and in October, 1994, issued FAS No. 118 "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure," both of which are
effective for fiscal years beginning after December 15, 1994. Under FAS No.
114, an impaired loan is defined as a loan for which it is probable, based on
current information, that the lender will not collect all amounts due under
the contractual terms of the loan agreement. FAS No. 114 requires that
impaired loans be measured based upon either the present value of expected
future cash flows discounted at the loan's effective interest rate, the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. If the calculated measurement of the impaired loan is
less than the recorded investment in the loan, the deficiency is recognized
through a provision to the allowance for loan losses. FAS No. 118 amends the
provisions of FAS No. 114 regarding the recognition of interest income on
impaired loans, allowing banks to substantially use the methods of income
recognition presently in effect. Upon adoption, Midlantic will
<PAGE>48
continue to account for income on these loans using the method previously
described in "Nonaccrual loans and other real estate owned." FAS No. 114 also
provides for the reclassification of all ISFs outstanding from OREO to the
loan portfolio as nonaccrual loans at their current carrying value. The
Corporation will no longer be required to identify and isolate future loans
that may meet the former criteria for ISF classification. The adoption of FAS
Nos. 114 and 118 in the first quarter of 1995 will not have a material impact
on Midlantic's financial condition or results of operations at the time of
adoption.
PREMISES AND EQUIPMENT, NET - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed
principally on the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized on a straight-line basis over
the shorter of the terms of the leases or the estimated useful lives of the
improvements. Expenditures for maintenance and repairs are charged to
expense; major replacements, renewals and betterments are capitalized. Gains
and losses on dispositions are reflected in current operations.
ASSETS HELD FOR ACCELERATED DISPOSITION - Assets held for accelerated
disposition, included in other assets, consist of accruing and nonaccrual
loans and OREO properties. These assets are carried at net realizable value.
INTANGIBLE ASSETS - Goodwill (excess cost over net assets acquired) resulting
from various acquisitions is amortized generally on a straight-line basis over
the estimated period to be benefitted. The remaining amortization period
averages 15.5 years. Other intangibles, primarily consisting of the present
value of excess servicing of loans that were securitized and sold, are being
amortized over the estimated periods of benefit. The remaining amortization
period averages 9 months.
TRUST INCOME - Trust income is recognized generally on a cash basis. The
results of trust operations would not be materially different if reported on
an accrual method.
PENSION PLANS - Midlantic has a noncontributory defined benefit pension plan
which covers substantially all employees. Benefits are based upon years of
service and generally upon the employee's average compensation during the four
consecutive years prior to normal retirement which produces the highest
average. Annual contributions to the plans are at least equal to the minimum
amount, if any, required by the Employee Retirement Income Security Act of
1974 but no greater than the maximum amount that can be deducted for federal
income tax purposes. Prior services costs are being amortized over 12 years.
POSTRETIREMENT BENEFITS - In the first quarter of 1993, the Corporation
adopted FAS No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions." FAS No. 106 requires that the projected future cost of
providing postretirement health care and other benefits be recognized on an
accrual basis during the periods employees provide services to earn those
benefits. Midlantic has elected to amortize the transition obligation on a
straight-line basis over a period of 20 years, beginning in 1993, and such
transition obligation is included as a component of net periodic
postretirement benefit cost. The transition obligation is the unrecognized
amount of the accumulated postretirement benefit obligation ("APBO") in excess
of the fair value of plan assets plus any recognized accrued postretirement
benefit cost or less any recognized prepaid postretirement benefit cost for
all plan participants at the point of adoption. Prior to 1993, Midlantic
accounted for postretirement costs on a "pay-as-you-go" basis.
POSTEMPLOYMENT BENEFITS - In the first quarter of 1994, the Corporation
adopted FAS No. 112 "Employers' Accounting for Postemployment Benefits"
as a cumulative effect of a change in accounting principle, amounting
to a charge of $7.5 million, net of income taxes, or $.14 per fully diluted
common share. FAS No. 112 requires accrual accounting for postemployment
benefits (benefits such as severance and disability payments to former or
inactive employees after employment but before retirement), under the
following circumstances: if the employees' rights to postemployment benefits
are attributable to services already rendered; the rights to those benefits
accumulate or vest; if payment of the benefits is probable; and if the amount
of the benefits can be reasonably estimated. If the four criteria mentioned
cannot be met, the employer must nevertheless accrue for any benefits when
payment is both probable and estimable. Prior to 1994, the Corporation
accounted for postemployment benefits on a "pay-as-you-go" basis.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - In the ordinary course of business,
the Corporation has entered into off-balance sheet financial instruments
including commitments to extend credit, standby and commercial letters of
credit and interest rate swap contracts. Amounts due or payable on such
instruments are recorded on the balance sheet.
Midlantic enters into interest rate swap contracts to manage interest rate
risk (the risk that changes in Midlantic's net interest income will occur from
fluctuations in market interest rates, unscheduled payments and other events).
Such instruments are used as interest rate hedges for certain groups of
interest-earning assets and interest-bearing liabilities. The net periodic
payments or receipts arising from these swaps are recognized on an accrual
basis as adjustments to interest income/interest expense depending upon the
underlying asset or liability that is hedged. Gains or losses, if any, on the
termination of swap contracts entered into for hedging purposes are deferred
and amortized/accreted over the shorter of the remaining term of the original
swap contract or the remaining expected maturity of the hedged
asset/liability.
ADVERTISING EXPENSES - Advertising costs are expensed as incurred.
<PAGE>49
INCOME TAXES - Midlantic adopted FAS No. 109 "Accounting for Income Taxes" in
the first quarter of 1993 as a cumulative effect of a change in accounting
principle. The cumulative effect of this change in accounting principle
increased net income by $39.0 million or $.74 per fully diluted common share.
FAS No. 109 required a change from the "deferred tax method," utilized prior
to 1993, to a comprehensive tax allocation using the "liability method" of
accounting for income taxes. Under the liability method, deferred income
taxes are provided for temporary differences based upon the expected tax rates
in the years that payment or receipt of such taxes is expected, and adjustment
of the deferred tax asset or liability is required to reflect subsequent
changes in income tax rates. The establishment of a valuation allowance is
required for that portion of a deferred tax asset for which a tax benefit is
not reasonably assured.
Prior to 1993, the Corporation accounted for income taxes in conformity with
Accounting Principles Board Opinion No. 11 "Accounting for Income Taxes." A
detail of the components of deferred federal income tax expense for 1992 is
presented in Note 21.
INCOME PER COMMON SHARE - Primary income per common share ("primary EPS") is
computed by dividing net income (less preferred stock dividends, declared or
in arrears) by the weighted average number of common shares and common share
equivalents outstanding during each year. Fully diluted income per common
share ("fully diluted EPS") is determined by dividing net income (plus
interest expense, net of federal income taxes on convertible subordinated
debentures; less preferred stock dividends, declared or in arrears) by the
weighted average number of common shares and common share equivalents
outstanding during each year plus the number of shares issuable on conversion
of debentures only if the effect of the interest expense and number of shares
relating to the debentures are dilutive.
Primary and fully diluted income per common share before the cumulative effect
of accounting changes are computed by dividing income before the cumulative
effect of the accounting change by the same factors as those used to compute
primary and fully diluted EPS.
2. DIVESTITURES AND INTERNAL MERGERS
____________________________________
On August 27, 1994, Continental Bank merged into Midlantic National Bank
("MNB") and the combined bank was renamed Midlantic Bank, National
Association. Also in August 1994, MNB's direct parent, Midlantic Banks Inc.,
was merged into MC.
As part of Midlantic's objective to concentrate its business in its core
market area, in 1993, Midlantic exited the Hong Kong market by selling its
Hong Kong-based affiliate for a price of $16.0 million (which was
substantially equal to book value). At December 31, 1992, the Hong Kong-based
affiliate had total assets of $107.6 million.
During 1992, MC completed the following transactions pursuant to a
restructuring program initiated during 1991 which encompassed a strategy to
sell assets and subsidiaries located outside of New Jersey and southeastern
Pennsylvania and consolidate operations in New Jersey in order to strengthen
MC's capital position and focus on its core market:
. On December 31, 1992, The Merchants National Bank & Trust Company of
Syracuse ("Merchants") and Union National Bank ("Union") were sold to
ONBANCorp, Inc. for a price of $93.3 million in cash and other
consideration. At December 31, 1992, Merchants and Union had combined
assets and shareholder's equity totalling $994.0 million and $77.7
million, respectively, and had combined net income for 1992 of $2.7
million.
. On July 1, 1992, Central Trust Company ("Central") and Endicott Trust
Company ("Endicott") were sold to Manufacturers & Traders Trust Company,
a subsidiary of First Empire State Corporation, for a price of $114.8
million in cash and other consideration. At June 30, 1992, Central and
Endicott had combined assets and shareholder's equity totalling $1.4
billion and $70.9 million, respectively, and had combined net income
for 1992 through date of sale of $3.4 million.
. On March 24, 1992, MC sold Midlantic Home Mortgage Corporation ("MHMC"),
a mortgage banking subsidiary, for a total consideration of $44.6
million.
Midlantic recognized pretax gains in 1992 aggregating $15.5 million relating
to those subsidiaries sold during that year, which included net pension
curtailment and settlement gains totalling $4.8 million (see Note 20).
Restructuring charges in 1992 were recognized as a part of Midlantic's "FOCUS
'92" program designed to reduce operating expenses and improve Midlantic's
effectiveness in serving its customers and were comprised of $12.5 million for
severance pay and outplacement services and $10.0 million for the write-off of
leases and leasehold improvements, primarily for operational support
buildings.
3. CASH AND DUE FROM BANKS
__________________________
Average cash balances to meet regulatory requirements of the Federal
Reserve Board amounted to $374.0 million and $380.8 million at
December 31, 1994 and 1993, respectively.
<PAGE>50
4. INVESTMENT SECURITIES
________________________
At December 31, 1994, the carrying amount of investment securities amounted to
portfolio was $2,756.5 million, which consists of the fair value of available-
for-sale securities of $333.3 million, the amortized cost of held-to-maturity
securities of $2,415.6 million and trading securities of $7.6 million. The
amortized cost, fair values and gross unrealized gains and losses of the
securities portfolio at December 31, 1994 (excluding trading securities) are
as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
AVAILABLE-FOR-SALE (In thousands) Cost Gains Losses Value
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
United States Treasury securities $ 270,003 $ 28 $ (214) $ 269,817
Obligations of states and political subdivisions 6,275 -- (865) 5,410
Other securities 62,203 511 (4,646) 58,068
---------- ---- -------- ----------
Total $ 338,481 $539 $ (5,725) $ 333,295
========== ==== ======== ==========
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
HELD-TO-MATURITY (In thousands) Cost Gains Losses Value
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
United States Treasury securities $1,522,562 $ 12 $(27,756) $1,494,818
Obligations of United States government agencies 874,446 920 (62,796) 812,570
Obligations of states and political subdivisions 12,137 42 (24) 12,155
Other securities 6,490 -- (129) 6,361
---------- ---- -------- ----------
Total $2,415,635 $974 $(90,705) $2,325,904
========== ==== ======== ==========
</TABLE>
At December 31, 1993, the amortized cost, fair values and gross unrealized gains
and losses of the securities portfolio (excluding trading securities of $19.4
million) are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
_______________________________________________________________________________________________________
<S> <C> <C> <C> <C>
United States Treasury securities $1,278,711 $ 458 $ (144) $1,279,025
Obligations of United States government agencies 1,083,674 9,753 (689) 1,092,738
Obligations of states and political subdivisions 5,281 4 (562) 4,723
Other securities 68,360 3,732 (169) 71,923
---------- ------- ------- ----------
Total $2,436,026 $13,947 $(1,564) $2,448,409
========== ======= ======= ==========
</TABLE>
The components of realized investment securities gains and losses for 1994,
1993 and 1992 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994* 1993 1992
______________________________________________________________________________________
<S> <C> <C> <C>
Gross realized investment securities gains $ 3,031 $7,469 $56,977
Gross realized investment securities losses (9,694) (464) (4,224)
------- ------ -------
Investment securities (losses) gains $(6,663) $7,005 $52,753
======= ====== =======
<FN>* Represents gains/losses on available-for-sale securities.
</TABLE>
At December 31, 1994, a maturity distribution of the amortized cost, fair values
and weighted average interest rates of the securities portfolio are as follows:
<TABLE>
<CAPTION>
Obligations
of States
AVAILABLE-FOR-SALE U.S.Treasury and Political Other
(In thousands) Securities Subdivisions(4) Securities
_________________________________________________________________________________________
<S> <C> <C> <C>
0-1 YEAR
Amortized cost $270,003 $ -- $ --
Fair value 269,817 -- --
Average yield (1) 5.48% --% --%
1-5 YEARS
Amortized cost $ -- $ -- $ --
Fair value -- -- --
Average yield (1) --% --% --%
5-10 YEARS
Amortized cost $ -- $ -- $ --
Fair value -- -- --
Average yield (1) --% --% --%
10+ YEARS
Amortized cost $ -- $6,275 $33,359
Fair value -- 5,410 28,713
Average yield (1) --% .25% 7.62%
NO MATURITY (2)
Amortized cost $ -- $ -- $28,844
Fair value -- -- 29,355
TOTAL
Amortized cost $270,003 $6,275 $62,203
Fair value 269,817 5,410 58,068
Average yield (1)(3) 5.48% .25% 7.62%
======== ====== =======
<PAGE>51
<CAPTION>
Obligations Obligations
of U.S. of States
HELD-TO-MATURITY U.S. Treasury Government and Political Other
(In thousands) Securities Agencies Subdivisions Securities
________________________________________________________________________________________
<S> <C> <C> <C> <C>
0-1 YEAR
Amortized cost $ 450,728 $ -- $11,563 $ 600
Fair value 438,605 -- 11,606 589
Average yield (1) 4.25% --% 5.39% 6.41%
1-5 YEARS
Amortized cost $1,071,834 $304,056 $ 293 $2,278
Fair value 1,056,213 282,769 290 2,207
Average yield (1) 6.94% 6.18% 6.60% 6.63%
5-10 YEARS
Amortized cost $ -- $491,937 $ 72 $3,287
Fair value -- 452,168 70 3,272
Average yield (1) --% 5.98% 8.00% 6.66%
10+ YEARS
Amortized cost $ -- $ 78,453 $ 209 $ 325
Fair value -- 77,633 189 293
Average yield (1) --% 8.53% 6.17% 7.33%
TOTAL
Amortized cost $1,522,562 $874,446 $12,137 $6,490
Fair value 1,494,818 812,570 12,155 6,361
Average yield (1) 6.14% 6.28% 5.45% 6.66%
========== ======== ======= =======
<FN>
(1)Average yields are computed on a yield-to-maturity basis.
(2)Investment securities with no stated maturity include Federal Reserve Bank stock
and other equity securities.
(3)The total average yield excludes securities with no maturity.
(4)Includes bonds with an aggregate amortized cost and fair value of $6.2 million and
$5.4 million, respectively, on which the Corporation was not accruing interest at
December 31, 1994.
</TABLE>
Net unrealized holding losses on available-for-sale securities were $3.1
million (net of deferred tax benefits of $2.1 million) at December 31, 1994,
compared to a $1.9 million gain (net of deferred taxes of $1.1 million) which
was recorded on January 1, 1994 when FAS No. 115 was adopted, and were
included as a component of shareholders' equity.
Investment securities (primarily obligations of the U.S. government and its
agencies) carried at $884.0 million at December 31, 1994 and $849.6 million at
December 31, 1993 were pledged for fiduciary powers, securities sold under
repurchase agreements, and other purposes required by law.
5. LOANS
________
Loans at December 31, 1994 and 1993 consist of the following:
(In thousands) 1994 1993
___________________________________________________________________________
Commercial, financial and foreign $3,018,972 $2,996,145
Real estate
Construction and development 591,701 834,013
Long-term commercial mortgage 1,563,800 1,664,757
Long-term 1-4 family residential 544,428 636,632
Loans to individuals 2,663,908 2,415,391
---------- ----------
Total loans 8,382,809 8,546,938
Less: unearned income* 144,850 137,241
---------- ----------
Total loans, net of unearned income 8,237,959 8,409,697
Less: allowance for loan losses 349,520 400,311
---------- ----------
Net loans $7,888,439 $8,009,386
========== ==========
*Includes net deferred loan fees of $9.8 million in 1994 and $9.6 million in
1993.
6. ALLOWANCE FOR LOAN LOSSES
____________________________
An analysis of the allowance for loan losses for 1994, 1993 and 1992 is as
follows:
(In thousands) 1994 1993 1992
__________________________________________________________________________
Balance at beginning of period $400,311 $ 670,545 $ 847,998
Allowances related to subsidiaries sold -- (712) (41,413)
Net charge-offs on loans sold in bulk
sales or transferred to assets held
for accelerated disposition (7,901) (181,863) --
Provision charged to operating expense 21,625 81,343 140,580
Recoveries on loans 40,487 34,485 45,723
Loans charged off (105,002) (203,487) (322,343)
--------- --------- ---------
Balance at end of period $ 349,520 $ 400,311 $ 670,545
========= ========= =========
<PAGE>52
7. LOANS TO RELATED PARTIES
___________________________
Loans to related parties include loans made to directors and executive
officers (and to any associates of such persons) of MC and MB. Associates of
a director or executive officer include his immediate family and any
corporation, venture or organization of which such director or executive
officer is a general partner or is, directly or indirectly, the beneficial
owner of ten percent or more of any class of equity securities. The following
analysis shows the activity of related party loans for 1994:
(In thousands)
_____________________________________________________________________________
Balance at December 31, 1993 $ 142,424
Additions (1) 518,091
Repayments (1) (536,717)
Other reductions (2) (27,869)
---------
Balance at December 31, 1994 $ 95,929
=========
(1) Activity during 1994 primarily represents utilization of several active
revolving lines of credit.
(2) Represents removal of 15 loans to a former director of Midlantic.
At December 31, 1994, there were no related party loans classified as
nonaccrual.
8. NONACCRUAL LOANS
___________________
Nonaccrual loans at December 31, 1994 and 1993 are as follows:
(In thousands) 1994 1993
______________________________________________________________________________
Nonaccrual loans
Commercial, financial and foreign $ 81,304 $114,632
Real estate
Construction and development 22,234 50,143
Long-term mortgage 46,991 67,920
Loans to individuals 14,473 32,604
-------- --------
Total nonaccrual loans $165,002 $265,299
======== ========
Impact on income
Interest income that would have been recorded
during the year on nonaccrual loans outstanding
at period-end in accordance with original terms $ 16,384 $ 27,904
Less: interest income actually recorded on such
nonaccrual loans during the year 3,983 4,933
-------- --------
Loss of interest income on nonaccrual
loans outstanding at period-end $ 12,401 $ 22,971
======== ========
9. RENEGOTIATED LOANS
_____________________
Renegotiated loans at December 31, 1994 and 1993 are as follows:
(In thousands) 1994 1993
____________________________________________________________________________
Renegotiated loans $59,821 $172,058
======= ========
Impact on income
Interest income that would have been recorded
during the year on renegotiated loans outstanding
at period-end in accordance with original terms $ 4,683 $ 9,970
Less: interest income actually recorded on
such renegotiated loans during the year 3,887 8,092
------- --------
Loss of interest income on renegotiated
loans outstanding at period-end $ 796 $ 1,878
======= ========
The loans presented in the above table are performing in accordance with their
new terms. At December 31, 1994, there were no commitments to extend credit
on renegotiated loans.
10. PREMISES AND EQUIPMENT, NET
_______________________________
At December 31, 1994 and 1993, premises and equipment, net, consist of the
following:
(In thousands) 1994 1993
______________________________________________________________________________
Land $ 24,385 $ 24,946
Buildings 132,600 133,501
Vaults, equipment and fixtures 203,823 196,132
Leasehold improvements 45,937 45,400
Capitalized leases 12,156 12,067
-------- --------
418,901 412,046
Less: allowance for depreciation and
amortization 272,378 256,917
-------- --------
Premises and equipment, net $146,523 $155,129
======== ========
<PAGE>53
11. OTHER ASSETS
________________
At December 31, 1994 and 1993, other assets consist of the following:
(In thousands) 1994 1993
________________________________________________________________________
Net deferred tax asset $203,653 $176,869
Accrued interest receivable 92,783 77,281
Goodwill 88,394 93,799
OREO, net 82,804 132,670
Assets held for accelerated disposition 10,105 158,157
Other 73,161 147,612
-------- --------
Total other assets $550,900 $786,388
======== ========
At December 31, 1993, the Corporation identified loans and OREO with an
aggregate book value of $292.2 million which it placed for possible bulk sale.
The assets for sale were reclassified to other assets as "assets held for
accelerated disposition" at net realizable value of $158.2 million. During
1994, substantially all of the assets (which primarily represented real estate
development loans and holdings of land in New Jersey and Pennsylvania) as well
as certain other loans and OREO that were added to assets held for accelerated
disposition during 1994, were sold in several transactions for a net gain of
$32.3 million. The assets remaining in assets held for accelerated
disposition at December 31, 1994, are expected to be sold or settled on an
individual basis in 1995.
12. ALLOWANCE FOR OREO
______________________
An analysis of the allowance for OREO for 1994, 1993 and 1992 is as follows:
(In thousands) 1994 1993 1992
___________________________________________________________________________
Balance at beginning of period $ 37,032 $ 46,101 $ 48,609
Allowances related to subsidiaries sold -- -- (1,250)
Charge-offs on OREO sold in bulk sales
or transferred to/from assets held for
accelerated disposition 702 (77,027) --
Provision charged to operating expense 7,500 130,545 77,132
Write-downs to net realizable value (31,672) (62,587) (78,390)
-------- -------- --------
Balance at end of period $ 13,562 $ 37,032 $ 46,101
======== ======== ========
13. DEPOSITS
____________
The following shows the time remaining to maturity of domestic time
certificates of deposit of $100,000 or more at December 31, 1994:
(In thousands)
____________________________________________________________________
Three months or less $282,905
Over three through six months 64,937
Over six through twelve months 34,822
Over twelve months 64,926
--------
Total $447,590
========
The majority of overseas branch deposits is in denominations of $100,000 or
more.
14. SHORT-TERM BORROWINGS
_________________________
At December 31, 1994, 1993 and 1992, short-term borrowings consist of the
following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
________________________________________________________________________________________
<S> <C> <C> <C>
Federal funds puchased
At December 31 - Balance $ 37,570 $ 34,754 $ 50,605
- Weighted average interest rate 5.47% 3.03% 2.87%
During the year - Maximum outstanding at any
month-end $ 43,810 $ 80,880 $101,220
- Daily average 35,458 46,726 65,584
- Weighted average interest
rate paid 4.19% 2.99% 3.52%
Securities sold under repurchase agreements
At December 31 - Balance $516,919 $609,743 $286,492
- Weighted average interest rate 5.36% 3.13% 2.83%
During the year - Maximum outstanding at any
month-end $575,021 $609,743 $459,616
- Daily average 522,714 318,985 408,755
- Weighted average interest
rate paid 3.56% 2.91% 3.22%
Other borrowings
At December 31 - Balance $ 30,000 $ 30,000 $ 33,621
- Weighted average interest rate 5.20% 2.71% 2.41%
During the year - Maximum outstanding at any
month-end $ 30,000 $ 34,920 $150,789
- Daily average 26,500 28,680 50,861
- Weighted average interest
rate paid 3.97% 3.12% 3.72%
======== ======== ========
</TABLE>
<PAGE>54
Included in securities sold under repurchase agreements at December 31, 1993
was $244.1 million of borrowings which Midlantic assumed under a security
lending program ("SL Program"). Under the SL Program, the Corporation made
available to an unaffiliated third party, tax-exempt income on certain loans
and invested the proceeds in higher-yielding taxable securities. The SL
Program was structured to allow Midlantic to continue to utilize the tax
benefits of the loans upon their return. The transaction was reported as a
borrowing with the tax-exempt loans remaining on Midlantic's consolidated
balance sheet and the proceeds reported in short-term borrowings. As a result
of changes in the Corporation's tax position during 1994, the SL Program was
terminated and Midlantic's right to recognize the tax-exempt income was re-
established upon their return on October 20, 1994.
All federal funds purchased mature in one day and, with the exception of the
previously mentioned borrowings related to the SL Program, the majority of
securities sold under repurchase agreements mature within 30 days. Other
borrowings consist principally of demand notes to the U.S. Treasury.
15. LONG-TERM DEBT
__________________
At December 31, 1994 and 1993, long-term debt of MC consists of:
(In thousands) 1994 1993
______________________________________________________________________________
9.20% Subordinated Capital Notes Due
August 1, 2001 $100,000 $100,000
9.875% Subordinated Capital Notes
Due December 1, 1999 100,000 100,000
9 1/4% Notes Due September 1, 1999 100,000 100,000
8 1/4% Convertible Subordinated Debentures
Due July 1, 2010 73,000 75,000
7 3/4% Debentures due March 1, 1998
(redeemed in January, 1994) -- 11,752
-------- --------
Total long-term debt $373,000 $386,752
======== ========
In January 1994, the Corporation redeemed the remaining outstanding 7 3/4%
debentures at par value totalling $11.8 million. Also during 1994, Midlantic
repurchased $2.0 million of its 8 1/4% convertible subordinated debentures.
During the next four years (1995-1998) there are no scheduled principal
payments or maturities on long-term obligations. In 1999, the $100 million of
9 1/4% notes and the $100 million of 9.875% subordinated capital notes will
mature in September and December of that year, respectively.
The 9 1/4% notes are unsecured, rank on a parity with all other unsecured and
unsubordinated indebtedness of MC and are not redeemable prior to maturity.
The 9.20% and 9.875% subordinated capital notes are to be exchanged at
maturity for common stock or perpetual preferred stock of MC having a market
value equal to the principal amount of the notes or, upon satisfaction of
certain conditions, MC may elect to repay the notes in cash. As defined in
the indenture covering the notes, MC may exercise this election to the extent
it has issued capital securities and designated proceeds. The notes may not
be exchanged or redeemed prior to maturity, except upon the occurrence of
certain events relating to the federal income tax treatment of the notes.
The 8 1/4% debentures are convertible into MC common stock at any time on or
before maturity unless previously redeemed, at a conversion price of $48 per
share, subject to adjustments in certain events. The debentures are
redeemable by MC at a price equal to 101.50% of principal amount and at prices
declining to 100% of principal amount on and after July 1, 1996.
The 8 1/4% debentures are subordinated to all current and future indebtedness
of MC and the 9.20% and 9.875% notes are subordinated to all current and
future indebtedness of MC only for borrowed money and certain other
indebtedness unless such future indebtedness is specified as not superior in
right of payment to the 8 1/4% debentures or the 9.20% or 9.875% notes. The
8 1/4% debentures are senior in right of payment to MC's 9.20% and 9.875%
notes.
The indenture under which MC's 9.20% and 9.875% subordinated notes, 8 1/4%
debentures and 9 1/4% notes were issued limit the sale or other disposition of
the voting stock or assets of MB or the merger or consolidation of MB with an
unaffiliated corporation.
16. CAPITAL STOCK
_________________
PREFERRED STOCK
MC's Term Adjustable Rate Cumulative Preferred Stock - Series A ("Preferred
Stock-A"), no par value, had an annual dividend rate of 7.625% in the first
quarter of 1992 and 7.25% for the remainder of 1992 through year-end 1994,
based upon a $100 stated value per share. On July 22, 1992, pursuant to an
agreement between Midlantic and the sole holder of the Preferred Stock-A, MC
issued 225,941 shares of its common stock in full satisfaction of $2.9 million
of dividends in arrears and its second quarter 1992 Preferred Stock-A dividend
requirement in lieu of cash dividends. Based on the agreement, quarterly
dividends on Preferred Stock-A may be paid, at MC's option, in cash or common
stock, subject to certain limitations. When paid through the issuance of
common stock, the number of shares is determined based upon the average market
price of MC's common stock for the five business days immediately preceding
the date the dividend is declared. Based on the agreement, the dividend rate
of 7.25% will remain in effect for dividend periods commencing prior to April
1, 1997. The dividend rate thereafter is adjusted in relationship to rates
derived
<PAGE>55
from certain U.S. Treasury obligations, but in no event shall the annual
dividend rate be less than 6% or more than 12%. The Preferred Stock-A can be
redeemed solely at the option of MC at a redemption price of $100 per share
plus accrued and unpaid dividends to the date of redemption provided, however,
that prior approval for redemption must be obtained from the Federal Reserve
Bank of New York. Preferred Stock-A has a liquidation value of $100 per share
plus accrued and unpaid dividends to the date of final distribution prior to
any distribution to holders of the common stock of MC. No dividends may be
paid on the common stock of MC unless full cumulative dividends on all
outstanding shares of Preferred Stock-A have been paid or declared and set
aside for payment for all dividend periods. Subsequent to July 1992, through
the fourth quarter of 1993, the quarterly dividends on Preferred Stock-A were
paid in shares of MC's common stock. All 1994 dividend requirements on the
Preferred Stock-A were paid by the Corporation in cash. The fourth quarter
dividend was paid in January, 1995.
Pursuant to the agreement, quarterly dividends are payable in the first month
following the end of each quarter. Prior to 1994, preferred dividends were
declared and paid during the first month following the dividend-related
quarter. During 1994, MC began declaring quarterly dividends on Preferred
Stock-A in the last month of the quarter to which the dividend pertains.
Therefore, dividends declared during 1994 are comprised of all 1994 dividend
requirements plus the dividend for the fourth quarter of 1993, which was
declared and paid in January, 1994.
COMMON STOCK
On May 4, 1993, MC issued, through a public offering, 5.75 million shares of
common stock for a net cash price of $107.1 million.
On August 13, 1992, pursuant to an agreement entered into with Fox-Pitt,
Kelton N.V. ("FPK"), an international investment banking firm, FPK purchased
6.6 million shares of MC common stock for a net cash price of $94.1 million.
On August 24, 1992, five United States investors purchased, through a private
placement, a total of 1.05 million shares of MC common stock for an aggregate
cash price of $15.4 million.
17. STOCK PURCHASE RIGHTS
_________________________
The stock purchase rights ("Rights") are equivalent to one Right for each
outstanding common share of MC and will be exercisable if a person or group
acquires beneficial ownership of 15 percent or more of MC's outstanding common
stock or voting securities, or commences a tender or exchange offer that would
result in such person or group acquiring beneficial ownership of 15 percent or
more of MC's outstanding common stock or voting securities. Each Right will
initially entitle its holder to buy one one-hundredth of a share of a new
series of participating preferred stock of MC at an exercise price of $125.
In the event a person or group acquires 15 percent or more of the common stock
or voting securities of MC (except in transactions approved by the Board of
Directors) or thereafter MC is acquired in a merger or other business
combination or more than 50 percent of its assets, earning power or cash flow
is sold, each Right will then entitle its holder to acquire shares of MC or
the acquiring person, as the case may be, having a value of twice the Right's
exercise price. MC may redeem the Rights at $.01 per Right any time until the
tenth business day following public announcement that a 15 percent position
has been acquired. The Rights will expire on March 12, 2000.
18. FINANCIAL INSTRUMENTS
_________________________
OFF-BALANCE SHEET RISK
In the normal course of business, there are various financial instruments
which are properly not recorded in the consolidated financial statements.
Midlantic's risk of accounting loss due to the credit risks and market risks
associated with these off-balance sheet instruments varies with the type of
financial instrument. Principal or notional amounts may not necessarily
indicate the degree of exposure involved. Credit risk represents the
possibility of a loss occurring from the failure of another party to perform
in accordance with the terms of a contract. Market risk represents the
possibility that future changes in market prices may make a financial
instrument less valuable.
The following table summarizes the notional amounts of Midlantic's significant
off-balance sheet financial instruments at December 31, 1994 and 1993:
NOTIONAL AMOUNTS OF OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
(In thousands) 1994 1993
_____________________________________________________________________________
Unused commitments to extend credit $2,724,949 $2,691,026
Financial standby letters of credit
and similar arrangements 116,468 128,230
Performance standby letters of credit
and similar arrangements 151,670 174,291
Commercial letters of credit and other
short-term trade-related contingencies 45,920 48,993
Interest rate swaps* 3,448,500 4,267,617
Forward interest rate swap agreements -- 300,000
Foreign exchange contracts 44,711 58,714
========== ==========
*All interest rate swaps are held for purposes other than trading.
<PAGE>56
Credit policies and procedures for commitments to extend credit and standby
and commercial letters of credit are the same as those applicable to loans and
the credit risk associated with these instruments is considered in
management's assessment of the adequacy of the allowance for loan losses.
Commitments to extend credit represent legally binding agreements to lend to a
customer at a specified rate with fixed expiration dates or other termination
clauses and generally have maturities ranging from less than one year to three
years. The collateral requirements, if any, vary depending upon the type of
commitment and creditworthiness of the customer. The nature of collateral
held varies with the type of commitment, but is usually in the form of real
estate, machinery and equipment, accounts receivable, securities and
inventory. Since many of the commitments normally expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements for Midlantic. Commitment clauses are utilized which enable
Midlantic to control funding based upon the financial condition of the
customer or other contingencies and reduce the credit risk associated with
these obligations.
Financial standby letters of credit and similar arrangements are irrevocable
obligations to fund outstanding loans or debt instruments of customers in the
event of default of principal and/or interest payments to third parties.
These instruments principally support the debt of private corporations.
Performance standby letters of credit and similar arrangements are irrevocable
obligations to fund, in the event of default, the contractual nonfinancial
performance of a customer to a third party.
Standby letters of credit generally have terms of one year, but may contain
renewal clauses at the option of Midlantic. Collateral requirements for
standby letters of credit are based upon a credit assessment of the customer
in conjunction with an evaluation of other credit extensions to that customer
and the type of collateral held is usually in the form of compensating
balances, securities, real estate, accounts receivable and inventory.
Commercial letters of credit and other short-term trade-related contingencies
are normally instruments with maturities of up to 180 days that are used to
facilitate the shipment of merchandise from exporter to importer (Midlantic's
customer) by ensuring payment directly by Midlantic to the exporter after
presentation of a draft or other documents in accordance with the instrument's
terms. The customer has a nonqualified obligation to reimburse Midlantic.
Midlantic may have the right, as security, to title and disposal of all
merchandise covered by the letter of credit, which reduces the credit risk
associated with these instruments.
Interest rate risk refers to the periodic and cumulative exposure from changes
in interest rates on earnings and capital. While Midlantic, like any
financial institution, will typically incur some amount of interest rate risk
in the normal course of providing services to its borrowing customers and
depositors, the Corporation's policy is to protect its earnings and capital
from undue exposure to interest rate volatility. Midlantic's Asset/Liability
Committee assesses the degree of this risk by simulating the Corporation's
earnings under alternative balance sheet structures and under a variety of
interest rate scenarios, with the actual amount of such risk typically
maintained at a manageable percent of net interest income (generally less than
five percent) and capital.
Earnings exposure to interest rates arises primarily from mismatches in the
maturity and repricing distribution of the Corporation's assets and
liabilities including hedging positions created by interest rate swaps. For
example, at any point in time, if more of the Corporation's outstanding assets
are scheduled to mature or to reprice earlier than its liabilities, the
Corporation's earnings may be vulnerable to a decline in the general level of
interest rates because in this circumstance the Corporation's asset yields
would decline sooner than its funding costs. Conversely, if more of the
Corporation's liabilities reprice or mature earlier than its assets, earnings
may be exposed to an increase in the general level of interest rates since
funding costs would tend to rise before asset yields.
In order to maintain earnings and capital exposure to interest rate changes
within prudent bounds, Midlantic utilizes interest rate swaps to hedge
existing balance sheet items that have a high degree of inverse rate
correlation to the swap. The Corporation enters into interest rate swap
arrangements for hedging purposes only. The notional amount of each swap
represents the base on which interest due each counterparty is calculated.
The notional amounts do not represent values exchanged by the counterparties
and are not recorded on the balance sheet.
Most of the interest rate swaps outstanding as of December 31, 1994 and 1993
entitled Midlantic to receive or pay a fixed rate of interest to the final,
fixed maturity of each swap in exchange for a variable rate of interest, which
is reset quarterly and generally tied to the three month LIBOR (an
internationally recognized interest rate index).
At December 31, 1994 and 1993, all interest rate swaps were tied to either a
fixed rate, LIBOR or the prime rate and the Corporation did not maintain or
utilize any exchange traded futures contracts, options or other exchange
traded off-balance sheet derivative financial instruments. Midlantic has not
engaged in any swap transactions as an intermediary, although the Corporation
may decide to do so in the future if customer demand warrants. Midlantic is
not a party to any leveraged derivative contract.
Where Midlantic has entered into interest rate swap contracts for which the
Corporation receives a fixed rate of interest and pays a variable interest
rate, at December 31, 1994, the hedged items include $1.6 billion of loans
whose yields are indexed to the prime rate and $925.0 million of fixed-rate
certificates of deposit. The purpose of these contracts is to hedge against
the volatility of short-term market interest rates.
In the case of interest rate swap contracts for which Midlantic has agreed to
pay a fixed rate and receive a variable rate, the hedged items are investment
securities bearing fixed rates of interest with stated original maturities of
five
<PAGE>57
to seven years. The purpose of these hedges is to reduce the risk that over
the term of the investment the yield on similar securities increases and
consequently the value of Midlantic's investment declines.
During 1994, the Corporation entered into $300.0 million (notional amount) of
swap contracts in which it pays an interest rate tied to the prime rate and
receives LIBOR. The purpose of these contracts is to hedge against the risk
that funding costs might rise faster than the prime rate on the underlying
hedged prime rate-based commercial mortgage loans.
To illustrate the effectiveness of interest rate swaps, in the case of those
interest rate swaps hedging prime rate-based loans, if the prime rate was to
decline, the reduction in interest income from these loans would be largely
offset by an increase in the net exchange rate received on the swap contracts
by Midlantic. In the event of an increase in market interest rates, loan
interest income would increase but the net exchange rate on the swaps would
decline. However, the change in loan interest may not be equal to the change
in swap income as the variable LIBOR rates on these swaps are repriced at more
frequent intervals and typically in smaller increments than the prime rate.
The following table provides a breakout by hedged item of Midlantic's interest
rate swaps at the end of each of the past two years and the rates received and
paid:
DECEMBER 31, 1994
___________________________________________
Weighted Weighted Net Exchange
Average Average Rate
Notional Fixed Variable Favorable
(In millions) Amounts Rate Rate* (Unfavorable)
____________________________________________________________________________
Receive a fixed
rate of interest
Hedging commercial and
financial loans $1,200 5.56% 5.90% (.34)%
Hedging construction and
development loans 125 4.89 5.69 (.80)
Hedging long-term
commercial mortgage loans 300 5.83 5.71 .12
Hedging retail certificates
of deposit 925 5.45 5.73 (.28)
Pay a fixed rate
of interest (all hedging
U.S. government agency
securities) 599 4.68 5.96 1.28
Receive and pay a
variable rate of
interest (all hedging
long-term commercial 300 N/A 6.04 (receive) }.08
mortgage loans) 5.96 (pay) }
====== ==== ==== ====
December 31, 1993
___________________________________________
Weighted Weighted Net Exchange
Average Average Rate
Notional Fixed Variable Favorable
(In millions) Amounts Rate Rate* (Unfavorable)
____________________________________________________________________________
Receive a fixed
rate of interest
Hedging commercial and
financial loans $1,300 5.64% 3.46% 2.18%
Hedging construction and
development loans 275 5.30 3.39 1.91
Hedging long-term
commercial mortgage loans 300 5.83 3.47 2.36
Hedging retail certificates
of deposit 1,250 5.35 3.42 1.93
Hedging repurchase agreements 244 3.44 3.35 .09
Pay a fixed rate
of interest (all hedging
U.S. government agency
securities) 899 5.15 3.40 (1.75)
====== ==== ==== =====
* The variable rates are tied to either LIBOR or the prime rate and the
weighted average rate was calculated using the December 31 rates as a
constant. If rates were to subsequently increase/decrease, the net
exchange rate would vary accordingly.
N/A - Not Applicable
The following table details the Corporation's interest rate swap activity
during 1994 and 1993:
SWAP ACTIVITY (In millions) 1994 1993
_____________________________________________________________________
Interest rate swaps outstanding
at beginning of year
Receive fixed $3,369 $2,525
Pay fixed 899 --
Receive and pay variable -- --
New swaps
Receive fixed -- 944
Pay fixed 300 899
Receive and pay variable 300 --
Matured swaps
Receive fixed 596 100
Pay fixed -- --
Receive and pay variable -- --
Swaps terminated
Receive fixed 223* --
Pay fixed 600* --
Receive and pay variable -- --
------ ------
Interest rate swaps outstanding
at end of year
Receive fixed $2,550 $3,369
Pay fixed 599 899
Receive and pay variable 300 --
====== ======
* Interest rate swap contracts were terminated at values that did not require
the recognition of gains or losses.
<PAGE>58
Credit risk associated with interest rate swap contracts arises from the
potential for a counterparty to default on its obligations. Midlantic
attempts to limit credit risk by transacting only with the most creditworthy
counterparties. All counterparties to contracts in place as of December 31,
1994 and 1993 were associated with organizations having securities rated as
investment grade by independent rating agencies. The list of eligible
counterparties, setting of counterparty limits and monitoring of credit
exposure for swaps is overseen by the Credit Policy Committee, a group of
senior executives, many of whom have extensive credit risk management
experience. The credit risk portion of all interest rate swaps is included in
risk assets for the purpose of calculating risk-based capital ratios.
As of December 31, 1994 and 1993, the estimated credit exposure associated
with interest rate swap contracts was $50.2 million and $90.7 million,
respectively, representing those swaps that show a positive (favorable) mark-
to-market position. As of both December 31, 1994 and 1993, there were no
deferred gains or losses on swaps terminated during those years.
The following tables provide both a maturity distribution of Midlantic's
interest rate swaps at December 31, 1994 and a summary of fair values for the
end of each of the past two years:
<TABLE>
<CAPTION>
Notional Amounts
__________________________________________
Receive Pay Receive and
MATURITY DISTRIBUTION (In millions) Fixed Fixed Pay Variable Total
____________________________________________________________________________________
<S> <C> <C> <C> <C>
1995 - First quarter $ 400 $ -- $ -- $ 400
- Second quarter -- -- -- --
- Third quarter -- -- -- --
- Fourth quarter 1,000 -- -- 1,000
1996 900 -- 300 1,200
1997 250 599 -- 849
------ ---- ---- ------
Total interest rate swaps $2,550 $599 $300 $3,449
====== ==== ==== ======
</TABLE>
<TABLE>
<CAPTION>
Receive Pay Receive and
FAIR VALUE (In thousands) Fixed Fixed Pay Variable Total
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1994
Contracts with a positive
mark-to-market position $ -- $48,362 $ 1,813 $ 50,175
Contracts with a negative
mark-to-market position (60,876) -- (5,538) (66,414)
-------- ------- ------- --------
Net fair value of interest rate swaps $(60,876) $48,362 $(3,725) $(16,239)
======== ======= ======= ========
AT DECEMBER 31, 1993
Contracts with a positive
mark-to-market position $ 85,878 $ 4,806 $ -- $ 90,684
Contracts with a negative
mark-to-market position -- (2,801) -- (2,801)
-------- ------- ------- --------
Net fair value of interest rate swaps $ 85,878 $ 2,005 $ -- $ 87,883
======== ======= ======= ========
</TABLE>
The following table describes the direct impact of interest rate swaps on net
interest income for each of the past two years. In 1992, interest rate swaps
had a negligible effect on net interest income as most of the swaps
outstanding at December 31, 1992 had been entered into during the fourth
quarter of that year. Since that time, Midlantic has used such swaps
exclusively as one of several tools to manage interest rate risk. Any net
benefit or expense derived from these interest rate contracts is intended as
an offset to changing levels of net interest income related to specific assets
or liabilities on the Corporation's balance sheet and should be evaluated in
that context.
(In thousands) 1994 1993
_________________________________________________________________
Benefit to interest income $16,893 $40,056
Benefit to interest expense 13,569 25,721
------- -------
Benefit to net interest income $30,462 $65,777
======= =======
At December 31, 1993, Midlantic held a firm commitment for delivery, on April
1, 1994, of $300.0 million of interest rate swap contracts. The swaps were
delivered on April 1, 1994 and terminated shortly thereafter.
Foreign exchange contracts and spot contracts are agreements in which a seller
agrees to deliver and a buyer agrees to purchase a foreign currency at a
future date. The exchange date, amount and rate are specified in the contract.
Foreign exchange contracts are generally for periods ranging from one week to
one year and usually require the customer to have a supporting line of credit,
whereas spot contracts usually have two day terms. Midlantic generally enters
into such agreements on behalf of its customers who provide the necessary
funding on or before the exchange date. Failure of a customer to fund the
contract and failure of a contract counterparty to buy/sell the contracted
foreign currency represent the credit risk associated with this instrument.
Market risk, resulting from possible fluctuations in currency exchange rates,
occurs when a customer or contract counterparty fails to fulfill his
obligation under the contract and Midlantic is then obligated to purchase or
sell the foreign currency on its own account. Gains or losses on foreign
exchange contracts and spot contracts are currently and have been historically
immaterial.
<PAGE>59
CONCENTRATIONS OF CREDIT RISK
Since Midlantic's predominant focus in mortgage lending has been to finance
real estate in its immediate market area, individual state concentrations of
credit risk exist in commercial mortgage loans (long-term commercial mortgages
and construction and development loans) in New Jersey and Pennsylvania.
Commercial mortgage lending in these states is similarly affected by economic
conditions such as housing and commercial development starts, building
occupancy rates and real estate values. At December 31, 1994 and 1993,
consolidated commercial mortgage loans, which are primarily secured by the
underlying real estate, totalled $2.2 billion and $2.5 billion, respectively.
New Jersey and Pennsylvania comprised approximately 90 percent of consolidated
commercial mortgage loans in both years. Commitments to extend credit and
standby letters of credit for commercial mortgage loans in these states
aggregated $369.3 million and $12.5 million, respectively, at December 31,
1994, and $361.4 million and $32.3 million, respectively, at December 31, 1993.
FAIR VALUE
Generally accepted accounting principles ("GAAP") require disclosure of the
fair value of financial instruments for which it is practicable to estimate
fair value. GAAP permits the use of simplified assumptions in order to
provide a reasonable estimate of fair value at a reasonable cost. In
determining the fair value of financial instruments, GAAP requires the use of
quoted market prices, if available. In situations where quoted market prices
are not available, fair values are based on Midlantic's best estimate of fair
value using techniques that include the present value of future cash flows.
Those techniques are significantly affected by the assumptions used, including
projections of future cash flows and discount rates. Changes in either the
assumptions used or the discount rates could have a material impact on the
calculated fair values of these financial instruments. Midlantic's estimate
of fair value for certain financial instruments cannot be substantiated by
comparison to independent markets, nor may the estimated fair value represent
the amounts that would actually be realized in the sale or liquidation of the
financial instrument. Furthermore, Midlantic's assumptions about the fair
value of financial instruments are based on estimates of market conditions at
the balance sheet date and do not reflect possible changes in those conditions
subsequent to that date. GAAP excludes certain financial instruments from its
scope, does not require an estimate of the value of anticipated future
operations and excludes all nonfinancial instruments from its disclosure
requirements. For these and other reasons, the aggregate fair value of
financial instruments presented do not purport to represent the underlying
value of Midlantic taken as a whole and should not be compared to the fair
value of other financial institutions, which may differ depending upon the
assumptions made and the valuation techniques employed.
The inherent volatility of the fair value of financial instruments is, in
part, created by changes in market interest rates. Midlantic manages interest
rate risk as part of its overall asset and liability management process. It
is a result of that process that unrealized gains or losses on the asset side
of the balance sheet will, to some degree, offset unrealized gains or losses
on the liability side. Certain unrealized gains as measured under GAAP may
not be actualized by Midlantic due to contractual restrictions and the
possible absence of alternative investments bearing equally favorable terms.
The following methods and significant assumptions were used to estimate the
fair value of Midlantic's financial instruments:
CASH AND DUE FROM BANKS AND MONEY MARKET INVESTMENTS - The carrying
amounts reported in the consolidated balance sheet represent a
reasonable estimate of those assets' fair values. Money market
investments primarily mature in six months or less and do not present
unanticipated credit concerns.
INVESTMENT SECURITIES - Fair values are based on quoted market prices,
if available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments.
LOANS - The fair value of loans is determined by segmenting the loan
portfolio based on loan type, credit quality and interest rate repricing
characteristics. Performing variable rate loans, which are primarily
indexed to the prime rate, have a fair value equal to the present value
of future projected cash flows, discounted at the current spread over
prime, reduced for credit risk by estimating future credit losses. The
fair value of performing fixed rate loans is based upon the present
value of future projected cash flows. Discount rates used in estimating
fair value for fixed rate installment loans are based upon the current
rates offered by Midlantic for similar loans with the same remaining
maturities. Discount rates used in estimating fair value for all other
fixed rate loans are derived from corporate debt yields with comparable
remaining maturities and similar credit grades, adjusted for servicing
costs. The fair value of nonaccrual loans is based upon management's
estimate of the expected future cash flows discounted using an interest rate
commensurate with the risk involved. Midlantic has and may continue to
securitize segments of its loan portfolio and has also sold or
identified for sale, certain problem loans in bulk transactions;
however, the loan portfolio is generally intended to be held until
maturity and unrealized gains and losses are not expected to be realized
in the ordinary course of business.
OTHER ASSETS - Financial instruments included in other assets consist of
accrued interest receivable and amounts due from customers on
acceptances (both of which have a carrying value that approximates fair
value due to their short-term maturities) and excess servicing fee
receivables (which have a fair value approximating carrying value as
they are periodically adjusted to approximate market). Other assets
also include assets held for accelerated disposition. The carrying
amounts of the assets included in this classification approximate those
assets' fair values net of the estimated costs of sale.
<PAGE>60
DEPOSITS - The fair values of demand deposits (both interest-bearing and
noninterest-bearing) and savings accounts are, by definition under GAAP,
the amount payable on demand at the balance sheet date. The carrying
amounts for variable rate deposits represent a reasonable estimate of
fair value. The fair value of fixed rate certificates of deposit is
based on the discounted value of the future expected cash flows.
Discount rates are based on the current rates offered by Midlantic for
similar deposits with the same remaining maturities.
SHORT-TERM BORROWINGS - The carrying amounts reported in the balance
sheet represent a reasonable estimate of fair value as these borrowings
primarily mature in six months or less.
OTHER LIABILITIES - Financial instruments included in other liabilities
consist of accrued interest payable and bank acceptances outstanding
which have a carrying value that approximates fair value due to their
short-term maturities.
LONG-TERM DEBT - Midlantic's long-term debt instruments are publicly
traded and quoted market prices are used to estimate fair value.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - The fair value of unused
commitments to extend credit and letter of credit agreements is based
upon the fees currently charged to enter into similar agreements which
take into account the remaining maturities of the agreements and credit
risk. The fair value of such instruments represents a liability to
Midlantic since these instruments are an obligation of the issuer even
though such instruments generate income through the fees charged. The
fair value of interest rate swaps and forward rate agreements are based
upon quoted market prices obtained from dealers. The fair value of
foreign exchange contracts represents the amount that Midlantic would
receive, using quoted market prices, if the contracts were settled and
Midlantic had been required to purchase or sell the foreign currencies
on its own account.
The estimated fair values and related carrying amounts of the Corporation's
consolidated balance sheet financial instruments are as follows:
<TABLE>
<CAPTION>
1994 1993
___________________________ ___________________________
Fair Carrying Fair Carrying
(In thousands) Value Amount Value Amount
__________________________________________________________________________________________
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks and
money market investments $ 1,933,587 $ 1,933,587 $ 2,491,781 $ 2,491,781
Investment securities (1) 2,666,812 2,756,543 2,467,793 2,455,410
Loans (2) 7,943,970 7,888,439 8,164,308 8,009,386
Other assets 116,963 116,963 219,221 219,221
FINANCIAL LIABILITIES
Deposits (2) 10,800,416 10,807,334 11,635,613 11,587,801
Short-term borrowings 584,489 584,489 674,497 674,497
Other liabilities 27,614 27,614 20,106 20,106
Long-term debt 376,844 373,000 426,627 386,752
=========== =========== =========== ===========
<FN>
(1) Includes trading assets of $7.6 million and $19.4 million at December 31, 1994 and
1993, respectively.
(2) The weighted average discount rate used in the discounted cash flow calculations for
loans was equal to 9.00 percent compared to a weighted average contractual yield of
8.58 percent in 1994 and a discount rate of 6.72 percent compared to a contractual
yield of 7.45 percent in 1993. The weighted average discount rate used in the
discounted cash flow calculations for deposits was equal to 4.14 percent compared to
a weighted average contractual yield of 4.48 percent in 1994 and a discount rate of
2.60 percent compared to a contractual yield of 4.08 percent in 1993. The weighted
average contractual yields do not include benefits realized (if any) from interest
rate swap positions.
</TABLE>
The estimated fair values of Midlantic's financial instruments whose notional
amounts are not recorded in the consolidated balance sheet at December 31,
1994 and 1993 are as follows (1):
(In thousands) 1994 1993
_________________________________________________________________________
Asset (liability)
Unused commitments to extend credit $ (9,411) $(18,654)
Financial standby letters of credit
and similar arrangements (582) (561)
Performance standby letters of credit
and similar arrangements (727) (1,572)
Commercial letters of credit and other
short-term trade-related contingencies (115) (122)
Interest rate swaps, net (16,239) 87,883
Forward interest rate swap agreements -- 4,875
Foreign exchange contracts (2) -- --
======== ========
(1) The carrying amounts of such financial instruments are not significant.
(2) The fair value of foreign exchange contracts at both December 31, 1994
and 1993 has been determined to be insignificant.
In both 1994 and 1993, the fair value of Midlantic's loan portfolio exceeded
its carrying value primarily because the unallocated portion of the allowance
for loan losses includes consideration of credit losses related to other
financial instruments, largely unused commitments to extend credit and letters
of credit. Further, in 1993, the total fair value of loans had been favorably
affected by the low interest rate environment, which similarly had a negative
impact on the fair value of deposits. In 1994, the spread between the fair
value and the carrying value of the Corporation's loan portfolio had
contracted somewhat due primarily to the effect of a rising interest rate
environment. Increases in market interest rates during 1994 had a favorable
effect on the fair value of Midlantic's deposit liabilities.
<PAGE>61
19. OTHER COMMITMENTS AND CONTINGENCIES
_______________________________________
Minimum lease payments at December 31, 1994, under net noncancelable real
property operating lease commitments for succeeding years are: $15.0 million
in 1995; $12.4 million in 1996; $9.9 million in 1997; $7.7 million in 1998;
$6.9 million in 1999; and $17.4 million thereafter. Operating expenses
include equipment and occupancy rentals of $17.8 million in 1994, $18.8
million in 1993 and $22.4 million in 1992.
MC and various directors and former officers of MC are defendants in a
consolidated action, initially commenced in March 1990, pending in Federal
District Court in New Jersey (the "Action"). The Action has been instituted
by shareholders of MC, either on behalf of MC against various directors and
former officers of MC, or directly against MC and various directors and former
officers of MC. In general, the Action seeks damages payable either to MC or
to the shareholders and holders of certain debt securities because of alleged
discrepancies between certain public statements made by MC and later results
of MC's operations. The Action includes claims that certain actions of MC are
void. The claims are based upon alleged violations of the United States
securities laws and New Jersey common law. In their pleadings, plaintiffs do
not seek damages in a stated dollar amount. As of December 31, 1994, the
parties to the Action had reached a tentative agreement for the full
settlement of the Action. During 1994, the Corporation recognized as an
operating expense the amount of its anticipated contribution to the
settlement. Settlement of the Action is subject to certain conditions,
including complete documentation of the settlement agreement and court
approval.
Midlantic is subject to claims and lawsuits which arise primarily in the
ordinary course of business and the Action. Based upon information currently
available and advice received from legal counsel representing Midlantic in
connection with such claims, lawsuits and the Action, it is the opinion of
management that the disposition or ultimate determination of such claims,
lawsuits and the Action will not have a material adverse effect on the
consolidated financial position or results of operations of Midlantic.
20. RETIREMENT AND OTHER BENEFIT PLANS
______________________________________
INCENTIVE AND PROFIT SHARING PLANS
Midlantic has a formal plan that provides for the granting to key employees
supplementary compensation in the form of awards of MC common stock, incentive
or nonqualified stock options to purchase MC common stock and stock
appreciation rights or a combination thereof. MC common stock can be
purchased through incentive or nonqualified stock options at not less than the
fair market value on the dates the options are granted, but in no event less
than the par value of MC common stock. The stock appreciation rights, which
relate to specific options granted, permit the qualifying employee, under
certain limitations, to exercise a right, in lieu of the related option, to
receive in cash or MC common stock an amount equal to the excess of the fair
market value of the shares subject to such options over the option price per
share. At December 31, 1994, MC had reserved 2,974,357 shares of authorized
common stock for issuance in connection with outstanding nonqualified or
incentive stock options under its current plan and predecessor plans and those
shares which remain available for grant as stock awards or options.
Data with respect to outstanding options follows:
<TABLE>
<CAPTION>
Number of Number of
Options Options
Outstanding at Exercise Outstanding at Exercise
Date of Grant December 31, 1994 Price Date of Grant December 31, 1994 Price
_____________________________________________________________________________________________
<S> <C> <C> <S> <C> <C>
May 15, 1985 21,300 $24.31 September 20, 1991 75,000 $ 6.25
June 19, 1985 11,200 39.38 October 16, 1991 37,800 6.00
May 21, 1986 21,377 44.67 November 20, 1991 25,000 5.56
June 18, 1986 16,750 49.69 February 25, 1992 80,000 7.94
January 18, 1990 245,316 27.82 May 20, 1992 47,000 11.63
January 18, 1990 * 22,900 27.82 June 17, 1992 820,850 12.50
June 20, 1990 2,400 15.50 July 21, 1992 3,000 15.88
January 16, 1991 24,500 3.25 September 16, 1992 6,000 13.81
April 11, 1991 190,000 6.81 December 16, 1992 7,500 17.25
July 17, 1991 80,000 5.63 June 22, 1994 1,108,000 28.31
======= ====== ========= ======
<FN>*Stock appreciation rights are associated with these options.
</TABLE>
Subject to certain exceptions, generally, 50 percent of an option grant
becomes exercisable two years after the date of grant and 50 percent becomes
exercisable three years after the date of grant. Options generally expire ten
years after date of grant, unless earlier terminated, pursuant to the terms of
the relevant plan or option agreement.
<PAGE>62
Weighted
Average
Price
Nonqualified and Incentive Stock Options shares per Share
_____________________________________________________________________________
Outstanding at January 1, 1992 1,605,372 $19.19
--------- ------
Granted in 1992 1,130,000 12.19
Cancelled in 1992 (398,343) 26.02
Exercised in 1992 (144,500) 4.24
--------- ------
Outstanding at December 31, 1992 2,192,529 15.32
--------- ------
Cancelled in 1993 (78,193) 27.30
Exercised in 1993 (86,314) 10.91
Expired in 1993 (3,149) 17.97
--------- ------
Outstanding at December 31, 1993 2,024,873 15.04
--------- ------
Granted in 1994 1,108,000 28.31
Exercised in 1994 (268,570) 19.82
Cancelled in 1994 (17,477) 29.58
Expired in 1994 (933) 17.84
--------- ------
Outstanding at December 31, 1994 2,845,893 $19.67
========= ======
During 1993, the Corporation established a 401(k) employee savings plan to
provide for defined contributions and named it the Midlantic Savings and
Investment Plan which covers substantially all employees of MC and its
subsidiaries. Midlantic's contributions to the plan are a matching percentage
of each employee's contribution up to 3.0 percent of the employee's salary.
An additional contribution of up to 2.0 percent may be made, subject to
certain conditions. Employer contributions to the plan amounted to $4.3
million in 1994 and $1.9 million in 1993.
PENSION PLANS
The following table sets forth the funded status and amounts recognized in the
consolidated balance sheet for Midlantic's pension plans at December 31, 1994
and 1993:
(In thousands) 1994 1993
_____________________________________________________________________________
Actuarial present value of benefit obligations
Accumulated benefit obligation, including vested
benefits of $193,401 and $206,092 in 1994 and
1993, respectively $ 196,779 $ 210,183
========= =========
Projected benefit obligation $(219,908) $(235,424)
Plan assets at fair value* 258,782 265,596
--------- ---------
Plan assets at fair value in excess of
projected benefit plan obligation 38,874 30,172
Unrecognized net gain (24,608) (10,286)
Prior service cost not yet recognized in net
periodic pension cost 16,202 13,876
Unrecognized net assets at January 1
being recognized over 10 years (17,718) (21,486)
Adjustment to recognize minimum liability 1,882 --
--------- ---------
Prepaid pension cost recognized in the
consolidated balance sheet $ 14,632 $ 12,276
========= =========
*Primarily comprised of equity and stock funds, fixed income funds, short-term
funds, and U.S. government and agency obligations.
Net pension cost (credit) for 1994, 1993, and 1992 for Midlantic includes the
following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
_________________________________________________________________________________________
<S> <C> <C> <C>
Service cost of benefits earned during the period $ 6,034 $ 5,825 $ 7,568
Interest cost on projected benefit obligation 17,308 16,617 16,344
Actual return on plan assets (6,839) (27,656) (23,295)
Net amortization and deferral (16,501) 4,848 (699)
-------- -------- --------
Net pension cost (credit) $ 2 $ (366) $ (82)
======== ======== ========
</TABLE>
The weighted average discount rate was 8.5 percent in 1994, 7.5 percent in
1993 and 8.0 percent in 1992 and the rate of increase in future compensation
levels was 5.0 percent for 1994 and 1993 and 4.0 percent in 1992 which were
used in the calculation of the actuarial present value of the projected
benefit obligation of Midlantic. The expected long-term rate of return on
assets was 8.5 percent in 1994 and 1993 and 9.0 percent in 1992.
As a result of the divestiture of Merchants, Union, Central, Endicott and MHMC
and the termination of employees through the FOCUS '92 program, Midlantic
recognized pension curtailment gains of $6.5 million and pension settlement
losses of $1.3 million in 1992.
POSTRETIREMENT BENEFITS
Midlantic offers health care and life insurance benefits (although it retains
the right to terminate or modify such benefits at its discretion) to employees
who retire from the Corporation at age 55 or later and who meet certain
eligibility requirements. The postretirement health care plan costs are
shared between the Corporation and its retired employees. The postretirement
life insurance plan is noncontributory. The plans are funded through a
Voluntary Employee Beneficiary Association trust and postretirement benefit
claims are paid as incurred.
<PAGE>63
The following table reconciles the funded status of the postretirement plans
to the amounts recognized in the consolidated balance sheet at December 31,
1994 and 1993:
(In thousands) 1994 1993
_____________________________________________________________________________
Accumulated postretirement benefit obligation ("APBO")
Retirees $ 45,339 $ 49,872
Fully eligible active plan participants 5,112 5,391
Other active plan participants 12,130 12,975
-------- --------
Total accumulated postretirement benefit obligation $ 62,581 $ 68,238
======== ========
Plan assets at fair value $ -- $ --
Accumulated postretirement benefit obligation
in excess of plan assets 62,581 68,238
Unrecognized net gain 12,178 4,845
Unrecognized transition obligation (63,396) (66,918)
-------- --------
Accrued postretirement benefit cost $ 11,363 $ 6,165
======== ========
The components of net periodic postretirement benefit cost accrued for 1994
and 1993 include the following:
(In thousands) 1994 1993
____________________________________________________________________________
Service cost of benefits earned during the period $1,039 $ 1,423
Interest cost on accumulated postretirement
benefit obligation 4,850 5,390
Amortization of transition obligation over 20 years 3,522 3,522
------ --------
Net periodic postretirement benefit cost $9,411 $10,335
====== ========
Postretirement benefits, expensed as incurred, totalled $6.3 million in 1992.
The weighted average discount rate used in determining the APBO was 8.0
percent in 1994 and 7.0 percent in 1993. The health care cost trend rate used
to measure the expected cost of benefits covered by the plans for 1995 is 5.0
percent and future increases in such costs are, thereafter, capped at 5.0
percent. The trend in health care costs is expected to exceed the 5.0 percent
cap indefinitely, therefore, the impact of a 1.0 percent increase in the
assumed health care cost trend rates on the Corporation's future cost and the
APBO at December 31, 1994 is insignificant.
21. INCOME TAXES
Income tax expense (benefit) includes the following components:
(In thousands) 1994 1993* 1992
______________________________________________________________________________
Current tax expense (benefit)
Federal $ 47,543 $ (39,444) $(97,390)
State 4,141 2,424 2,844
-------- --------- --------
Total current 51,684 (37,020) (94,546)
-------- --------- --------
Deferred tax (benefit) expense
Federal 13,372 (55,524) 97,390
State (40,156) (18,499) --
-------- --------- --------
Total deferred (26,784) (74,023) 97,390
-------- --------- --------
Total income tax expense (benefit) $ 24,900 $(111,043) $ 2,844
======== ========= ========
*Excludes cumulative effect of the accounting change.
A reconciliation of income taxes computed at the statutory federal income tax
rate to "income tax expense (benefit)" is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993* 1992
________________________________________________________________________________________________
<S> <C> <C> <C>
Computed "expected" tax expense $ 106,402 $ 7,124 $ 3,356
Reduction in federal taxes resulting from tax-exempt income (3,107) (7,823) (13,124)
Increase resulting from interest incurred to carry
tax-exempt investments 104 450 947
Increase resulting from the amortization of goodwill 2,127 2,133 2,009
Decrease resulting from purchase accounting accretion income -- -- (3,757)
State taxes on income, net of federal tax benefit 15,531 3,502 1,877
Increase (decrease) resulting from the sale of subsidiaries -- 425 (49,409)
Increase resulting from tax benefits not recognized -- -- 60,334
Decrease resulting from reduction of FAS No. 109
valuation allowance (106,815) (109,998) --
Increase (decrease) resulting from tax legislation, tax
rate differentials on loss carryback refunds, and other
required changes in deferred tax liabilities and assets 11,175 (3,613) --
Other (517) (3,243) 611
--------- --------- --------
Income tax expense (benefit) $ 24,900 $(111,043) $ 2,844
========= ========= ========
<FN>*Excludes cumulative effect of the accounting change.
</TABLE>
<PAGE>64
Deferred income taxes reflect the impact of differences between the financial
statements and income tax bases of assets and liabilities and available tax
carryforwards. The temporary differences and tax carryforwards which created
deferred tax assets and liabilities at December 31, 1994 and 1993 are as
follows:
(In thousands) 1994 1993
_____________________________________________________________________________
DEFERRED TAX ASSETS
Loan loss provision $145,998 $ 169,601
State net operating loss carryforwards 42,237 82,079
Minimum tax credit carryforwards 26,404 41,471
OREO 13,496 25,305
Other 33,208 49,784
-------- ---------
261,343 368,240
Valuation allowance -- (106,815)
-------- ---------
Total deferred tax assets $261,343 $ 261,425
======== =========
DEFERRED TAX LIABILITIES
Federal benefit of state temporary differences $ 23,513 $ 38,509
Leasing 3,990 9,215
Depreciation 8,634 12,153
Other 21,553 24,679
-------- ---------
Total deferred tax liabilities $ 57,690 $ 84,556
======== =========
Net deferred tax asset $203,653 $ 176,869
======== =========
The components of deferred federal income tax expense for the year ended
December 31, 1992 are as follows:
(In thousands) 1992
____________________________________________________________________________
Excess of tax over book income on lease financing $ (7,671)
Excess of tax over book provision for loan losses
net of unrecognized tax benefits 56,955
Excess of tax over book recognition of income from
excess servicing fees (794)
Excess of book over tax provision for OREO (3,146)
Minimum tax credit carryforward (12,479)
Excess of book over tax depreciation expense (2,015)
Excess of tax over book pension/welfare benefits expense 13,519
Effect of not fully recognizing tax benefits on pretax
book income adjusted for permanent tax differences 49,833
Other 3,188
--------
Deferred federal income tax expense $ 97,390
========
In 1994, the Corporation provided $120.5 million of federal and state income
taxes on operating earnings. This was offset in part by tax benefits of $95.6
million related to a reduction in the FAS No. 109 tax valuation reserve net of
all required adjustments to deferred tax liabilities and assets. For 1993,
Midlantic recognized tax benefits of $111.0 million comprised of a tax benefit
related to a reduction in the FAS No. 109 tax valuation reserve of $110.0
million, plus a tax benefit of $6.7 million related to the impact on Midlantic
of the 1993 federal tax legislation and the tax rate differential associated
with Midlantic's tax loss carryback refunds, less $5.7 million of federal and
state income tax expenses on operating earnings. The valuation reserve
adjustments were the result of Midlantic's expectations for the realization of
its deferred tax asset based upon estimated future profitability.
Income tax expenses in 1992 were attributable to state and local income taxes
imposed on Midlantic's profitable subsidiaries. From mid-1991 through the
fourth quarter of 1992, Midlantic was not able to recognize federal income tax
benefits on its reported pretax loss based upon the accounting principles that
existed prior to FAS No. 109.
As of December 31, 1994, Midlantic had available a minimum tax credit
carryforward of $27.3 million which may be carried over indefinitely to
offset regular taxes due in any future year in excess of the minimum tax
liability for that year and a $625.7 million New Jersey state net operating
loss carryforward. The New Jersey net operating loss carryforward is
attributable to MB and expires during the period 1997 through 2000.
<PAGE>65
22. INCOME PER COMMON SHARE
___________________________
The following table summarizes the computation of income per common share for
the years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
(In thousands, except share and per share data) 1994 1993 1992
_____________________________________________________________________________________________________
<S> <C> <C> <C>
EARNINGS APPLICABLE TO PRIMARY COMMON SHARES
Income before cumulative effect of accounting changes $279,105 $131,396 $ 7,028
Preferred stock dividends (4,531) (3,626) (3,672)
-------- -------- -------
Income before cumulative effect of accounting changes
applicable to primary common shares 274,574 127,770 3,356
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993 (7,528) 38,962 --
-------- -------- -------
Net income applicable to primary common shares $267,046 $166,732 $ 3,356
======== ======== =======
EARNINGS APPLICABLE TO FULLY DILUTED COMMON SHARES
Income before cumulative effect of accounting changes
applicable to primary common shares $274,574 $127,770 $ 3,356
Interest expense on convertible subordinated debentures,
net of income taxes 3,962 4,084 N/A
-------- -------- -------
Income before cumulative effect of accounting changes
applicable to fully diluted common shares 278,536 131,854 3,356
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993 (7,528) 38,962 --
-------- -------- -------
Net income applicable to fully diluted common shares $271,008 $170,816 $ 3,356
======== ======== =======
NUMBER OF AVERAGE SHARES
Primary
Average common shares outstanding 52,365,028 50,098,667 41,176,415
Average common share equivalents 613,013 844,657 392,671
---------- ---------- ----------
Average primary common shares 52,978,041 50,943,324 41,569,086
========== ========== ==========
Fully diluted
Average common shares outstanding 52,365,028 50,098,667 41,176,415
Average common share equivalents 617,953 907,372 777,390
Average convertible subordinated debentures
converted to common shares 1,538,870 1,562,500 N/A
---------- ---------- ----------
Average fully diluted common shares 54,521,851 52,568,539 41,953,805
========== ========== ==========
INCOME PER COMMON SHARE
Income before cumulative effect of accounting changes
Primary $5.18 $2.51 $.08
Fully diluted 5.11 2.51 .08
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993
Primary (.14) .76 --
Fully diluted (.14) .74 --
Net income
Primary 5.04 3.27 .08
Fully diluted 4.97 3.25 .08
===== ===== ====
N/A - Not Applicable
Convertible subordinated debentures were anti-dilutive in 1992 and have been
excluded from the per common share computations for that period.
23. CASH FLOW DATA
___________________
Cash paid during 1994, 1993 and 1992 for interest on deposits, short-term
borrowings and long-term debt amounted to $283.1 million, $327.7 million and
$625.6 million, respectively. Net cash paid for federal and state income
taxes was $16.3 million in 1994, and net cash received was $81.5 million in
1993 and $165.2 million in 1992.
In several bulk sales transactions during 1993, Midlantic sold $219.5 million
of distressed real estate loans (with charge-offs against the related
allowance for loan losses of $84.5 million) and $74.1 million of OREO for cash
proceeds of $220.8 million. In late 1993, Midlantic identified for possible
bulk sale $218.2 million of real estate loans (with related charge-offs of
$97.4 million) and $37.4 million of OREO (net of writedowns of $36.7 million)
and transferred the net balance to other assets as assets held for accelerated
disposition. During 1994, additional loans of $69.3 million (with related
charge-offs of $12.2 million) and $876 thousand of net OREO were also
transferred to other assets. By year-end 1994, Midlantic sold $201.9 million
of such assets in bulk sales transactions for cash proceeds of $235.0 million,
including a net gain of $32.3 million.
During 1992, Midlantic sold $411.0 million of automobile loan asset-backed
certificates.
During 1994, 1993 and 1992, $24.0 million, $126.4 million and $166.6 million,
respectively, of loans, net of charge-offs, were transferred into OREO. The
aforementioned transfer of loans and OREO to assets held for accelerated
disposition and the transfer of loans to OREO constituted non-cash
transactions and, accordingly, are not reflected in the statement of cash
flows.
<PAGE>66
24. PARENT COMPANY FINANCIAL STATEMENTS
_______________________________________
On August 27, 1994, Midlantic Banks Inc., the lower-tier bank holding company
of MC, was merged into MC. The financial statements of MC presented below
have been restated to reflect the combined entities for all periods presented.
The following condensed financial information for MC should be read in
conjunction with the other notes to consolidated financial statements:
BALANCE SHEET AT DECEMBER 31 (In Thousands) 1994 1993
______________________________________________________________________________
ASSETS
Cash and due from banks $ 2,239 $ 624
Other short-term investments 19,000 39,700
Investment securities 242,889 94,304
Loans 304 105,117
Advances to subsidiaries -- 3,538
Investments in subsidiaries
Banks 1,476,113 1,260,448
Nonbanks 6,508 10,874
Other assets 24,877 26,904
---------- ----------
Total assets $1,771,930 $1,541,509
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities $ 24,744 $ 32,193
Long-term debt 373,000 386,752
---------- ----------
Total liabilities 397,744 418,945
---------- ----------
Shareholders' equity
Preferred stock 50,000 50,000
Common stock 157,693 156,522
Surplus 611,205 603,732
Retained earnings 558,385 312,310
Net unrealized holding losses on available-
for-sale securities, net of taxes (3,097) --
---------- ----------
Total shareholders' equity 1,374,186 1,122,564
---------- ----------
Total liabilities and shareholders' equity $1,771,930 $1,541,509
========== ==========
</TABLE>
<TABLE>
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31
<CAPTION>
(In thousands) 1994 1993 1992
_________________________________________________________________________________________________
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries
Banks $ 57,045 $ 31,081 $ 42,043
Nonbanks 13,172 -- 8,000
Interest on advances to subsidiaries 2,426 1,441 1,476
Interest on money market investments 1,690 3,501 2,303
Interest on investment securities 6,035 1,132 596
Interest on loans 616 2,555 1,043
Net gains (losses) on disposition of assets 1,009 (48) 16,952
Management fees from subsidiaries 18,179 18,012 18,342
Investment securities gains 2,815 2,138 466
Other income 1,252 661 5,024
-------- -------- --------
104,239 60,473 96,245
-------- -------- --------
EXPENSES
Interest 34,463 36,385 41,918
Provision for loan losses 450 -- 1,630
Salaries and benefits 12,638 13,835 10,247
Other 12,270 16,523 11,513
-------- -------- --------
59,821 66,743 65,308
-------- -------- --------
Income (loss) before income taxes, the cumulative
effect of accounting changes and undistributed
earnings (losses) of subsidiaries 44,418 (6,270) 30,937
Income tax benefit (10,425) (16,673) (1,664)
-------- -------- --------
Income before the cumulative effect of accounting changes and
undistributed earnings (losses) of subsidiaries 54,843 10,403 32,601
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993 (854) 9,840 --
Equity in undistributed earnings (losses) of subsidiaries 217,588 150,115 (25,573)
-------- -------- --------
NET INCOME $271,577 $170,358 $ 7,028
======== ======== ========
</TABLE>
<PAGE>67
<TABLE>
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31
<CAPTION>
(In thousands) 1994 1993 1992
____________________________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 271,577 $ 170,358 $ 7,028
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Equity in undistributed earnings of subsidiaries (221,735) (150,115) (1,192)
Amortization of goodwill and other intangibles 3,536 3,556 3,783
Depreciation of premises and equipment 207 207 184
Net gain on sale of assets (3,824) (281) (17,398)
Provision for loan losses 450 -- 1,630
Cumulative effect of the changes in accounting for
postemployment benefits in 1994 and for income taxes in 1993 854 (9,840) --
Deferred income tax expense (benefit) 1,384 (6,945) 56,913
Net decrease in other assets 2,047 18,058 10,252
Net (increase) decrease in taxes receivable and net
deferred tax asset (174) 8,670 (55,993)
Net (decrease) increase in other liabilities (6,809) 469 (9,456)
Other (5,446) 13 (621)
--------- --------- ---------
Net cash provided (used) by operating activities 42,067 34,150 (4,870)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash proceeds from the sale of subsidiaries -- 3,040 187,521
Proceeds from sales of loans 7,184 -- --
Net decrease in advances to subsidiaries 3,538 8,935 14,041
Net decrease (increase) in money market investments with
an original maturity of 3 months or less 20,700 (5,404) (81,703)
Purchase of money market investments with an
original maturity greater than 3 months -- (24,000) (64,000)
Maturities of money market investments with an
original maturity greater than 3 months -- 83,000 64,000
Purchases of available-for-sale securities (581,596) (90,933) (16,333)
Maturities of available-for-sale securities 417,072 18,702 --
Proceeds from sales of available-for-sale securities 28,273 919 --
Distributions from partnership investments -- 647 743
Decrease (increase) in loans 98,179 (82,372) (13,648)
Capital injections to subsidiaries (551) (4,489) (194,900)
Purchases of premises and equipment (117) (255) (96)
Sales of premises and equipment 9 8 18
--------- --------- ---------
Net cash used by investing activities (7,309) (92,202) (104,357)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (23,690) -- --
Proceeds from issuance of common stock 7,813 108,839 109,990
Payments on long-term debt (13,752) (50,360) (4,806)
Advances from affiliated companies 2,403 28 90
Repayments on advances from affiliated companies (5,917) (129) (29)
--------- --------- ---------
Net cash (used) provided by financing activities (33,143) 58,378 105,245
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 1,615 $ 326 $ (3,982)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 624 298 4,280
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,239 $ 624 $ 298
========= ========= =========
</TABLE>
<PAGE>68
<TABLE>
25. CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
_____________________________________________________
<CAPTION>
QUARTERS ENDED 1994
_________________________________________
(In thousands, except per share data) 3/31 6/30 9/30 12/31
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Interest income $204,948 $212,048 $221,062 $225,426
Interest expense 67,651 67,845 68,948 74,503
Net interest income 137,297 144,203 152,114 150,923
Provision for loan losses 8,021 5,604 5,000 3,000
Noninterest income
Investment securities gains (losses) 1,263 (4,637) -- (3,289)
Net gains on disposition of assets -- 25,056 1,064 6,180
Other noninterest income 46,066 49,810 48,306 44,391
Noninterest expenses 120,984 124,321 114,839 112,973
Income before income taxes and cumulative effect of
the change in accounting for postemployment benefits 55,621 84,507 81,645 82,232
Cumulative effect of the change in accounting for
postemployment benefits (7,528) -- -- --
Net income 45,825 72,279 76,247 77,226
Income (loss) per common share
Income before cumulative effect of the change in
accounting for postemployment benefits
Primary .99 1.35 1.42 1.42
Fully diluted .98 1.33 1.40 1.40
Cumulative effect of the change in accounting for
postemployment benefits
Primary (.14) -- -- --
Fully diluted (.14) -- -- --
Net income
Primary .85 1.35 1.42 1.42
Fully diluted .84 1.33 1.40 1.40
Cash dividends per common share -- .10 .13 .17
Weighted average common shares and common share equivalents
Primary 52,821 52,915 53,097 53,079
Fully diluted 54,403 54,467 54,618 54,600
======== ======== ======== ========
<CAPTION>
Quarters Ended 1993
_________________________________________
(In thousands, except per share data) 3/31 6/30 9/30 12/31
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Interest income $210,220 $207,169 $205,369 $202,789
Interest expense 89,976 78,709 73,019 69,153
Net interest income 120,244 128,460 132,350 133,636
Provision for loan losses 20,540 15,624 14,598 30,581
Noninterest income
Investment securities gains 4,851 9 3 2,142
Other noninterest income 45,584 45,393 43,288 45,183
Noninterest expenses 178,632 134,490 129,307 157,018
Income (loss) before income taxes and cumulative effect of
the change in accounting for income taxes (28,493) 23,748 31,736 (6,638)
Cumulative effect of the change in accounting for income taxes 38,962 -- -- --
Net income 23,495 40,916 46,887 59,060
Income (loss) per common share*
Income (loss) before cumulative effect of the change
in accounting for income taxes
Primary (.35) .79 .87 1.10
Fully diluted (.35) .78 .86 1.08
Cumulative effect of the change in accounting for income taxes
Primary .83 -- -- --
Fully diluted .83 -- -- --
Net income
Primary .48 .79 .87 1.10
Fully diluted .48 .78 .86 1.08
Cash dividends per common share -- -- -- --
Weighted average common shares and common share equivalents*
Primary 46,973 50,715 52,969 53,030
Fully diluted 47,042 52,277 54,601 54,610
======== ======== ======== ========
<FN>
* For the quarter ended March 31, 1993, convertible subordinated debentures for fully diluted are
anti-dilutive and have been excluded from the per share computations.
</TABLE>
<PAGE>69
26. LENDING AND DIVIDEND LIMITATIONS
____________________________________
Under federal law, subject to exceptions, no bank subsidiary of MC may extend
credit to MC or to its affiliates on terms and under circumstances which are
not substantially the same or at least as favorable to the bank subsidiary as
comparable extensions of credit to nonaffiliates and no extension of credit
may be made by a bank subsidiary of MC to MC or its affiliates which is in
excess of 10 percent of the capital stock and surplus of such subsidiary or in
excess of 20 percent of the capital and surplus of such subsidiary as to
extensions of credit to MC and its affiliates in the aggregate. Such
extensions of credit, with limited exceptions, must be fully collateralized.
The approval of the Office of the Comptroller of the Currency ("OCC") is
required if dividends declared in any year by a national bank, such as MB,
exceed the bank's net income for that year combined with the retained net
income of that bank for the two immediately preceding years. National banks
are prohibited by law from declaring dividends when the bank has losses equal
to or exceeding the bank's undivided profits and no dividends can be paid in
an amount greater than the bank's undivided profits. Under the foregoing
principles, at December 31, 1994, MB could declare dividends aggregating
$384.2 million without regulatory approval. However, bank regulatory
authorities are authorized to prohibit banks and bank holding companies from
paying dividends which would constitute an unsafe and unsound banking
practice. The OCC and the Board of Governors of the Federal Reserve ("FRB")
have indicated that it would generally be an unsafe and unsound banking
practice for banks and bank holding companies to pay dividends except out of
current operating earnings. Capital requirements imposed by federal
regulators could also further limit the dividend paying capacity of banks and
bank holding companies (see Note 27).
27. REGULATORY MATTERS
______________________
During 1992, 1993 and in early 1994, MC and MNB were subject to written
agreements with the FRB and the OCC, respectively. These agreements covered
certain objectives and/or restrictions related to areas such as loan
administration, credit risk and asset quality management, loan loss reserve
adequacy, management structure and succession, compensation and severance
policies, intercompany transactions, capital adequacy, liquidity and operating
plans. Following significant improvement in financial condition, performance,
asset quality and capital ratios, MC and MNB were released from these
agreements in March, 1994.
Bank regulators currently establish several capital ratios as guidelines for
banking institutions such as Midlantic and its bank subsidiary. The tier 1
ratio generally relates shareholders' equity, net of goodwill, certain
intangibles and a portion of the deferred tax asset to total risk-weighted
assets, which include the credit risk equivalent of certain off-balance sheet
items. The total capital ratio relates the sum of tier 1 capital, qualifying
long-term debt and a portion of the allowance for loan losses to total risk-
weighted assets. The leverage ratio relates tier 1 equity to total assets,
reduced by goodwill, certain intangibles and a portion of the deferred tax
asset. The minimum regulatory guidelines for these capital ratios are 4
percent, 8 percent and 3 percent, respectively. Midlantic and MB currently
exceed the aforementioned capital ratio minimums. At December 31, 1994, the
risk-based and leverage ratios for Midlantic and MB are:
Tier 1 Total Leverage
Capital Ratio Capital Ratio Ratio
____________________________________________________________________________
Midlantic 13.07% 17.22% 9.43%
MB 14.12 15.40 10.39
===== ===== =====
28. RECENT AND SUBSEQUENT EVENTS
________________________________
On December 30, 1994, Midlantic announced it had entered into a definitive
agreement to acquire Old York Road Bancorp, Inc. ("Old York"), headquartered
in Willow Grove, Pennsylvania, for an approximate purchase price of $28.3
million, based on the December 31, 1994 closing price of Midlantic's common
stock. Old York's principal subsidiary is Bank and Trust Company of Old York
Road. As of December 31, 1994, Old York had total assets of $231.2 million
and shareholders' equity of $12.8 million. The acquisition will be accounted
for as a purchase and is expected to be consummated by the end of the second
quarter 1995. Under the terms of the agreement, a maximum of 49 percent of
Old York's common stock will be exchanged for cash. Old York shares not
exchanged for cash will be exchanged for Midlantic common stock
(.3721 shares of Midlantic common stock for each share of Old York common
stock, subject to adjustment under certain circumstances). Midlantic
currently expects to repurchase, from time-to-time in the open market,
outstanding Midlantic common shares equal to the approximate number of
Midlantic common shares estimated to be issued in the acquisition.
On January 20, 1995, Midlantic acquired from the Resolution Trust Corporation
approximately $126 million in deposits of three branches of Carteret Federal
Savings Bank of New Jersey located in Newark and Dover, New Jersey, for a
premium of $12.5 million.
<PAGE>70
REPORT OF INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Independent Certified Public Accountants
1301 Avenue of the Americas
New York, New York 10019
Board of Directors and Shareholders
Midlantic Corporation
We have audited the accompanying consolidated balance sheet of Midlantic
Corporation and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1994.
These consolidated financial statements are the responsibility of Midlantic
Corporation's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Midlantic Corporation and Subsidiaries as of December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Notes 1, 4, 20 and 21 of notes to consolidated financial
statements, Midlantic Corporation changed its methods for accounting for
postemployment benefits and investment securities in 1994 and postretirement
benefits other than pensions and income taxes in 1993.
January 18, 1995
(January 20, 1995 as to Note 28)
<PAGE>71
<TABLE>
Midlantic Corporation and Subsidiaries
CONSOLIDATED SUMMARY OF INCOME
(In thousands, except per share data)
<CAPTION>
YEAR ENDED DECEMBER 31 1994 1993 1992 1991 1990
-------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $676,741 $ 663,410 $ 844,240 $1,433,692 $1,888,269
Interest on investment securities
Taxable interest income 116,082 91,036 171,188 200,144 167,648
Tax-exempt interest income 805 1,012 10,233 22,292 34,999
Interest on deposits with banks 17,586 18,319 5,869 22,814 29,020
Interest on other short-term
investments 52,270 51,770 30,677 63,438 88,183
-------- --------- ---------- ---------- ----------
Total interest income 863,484 825,547 1,062,207 1,742,380 2,208,119
-------- --------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits 223,366 262,886 483,154 1,011,800 1,175,719
Interest on short-term borrowings 21,128 11,586 17,341 50,759 152,925
Interest on long-term debt 34,453 36,385 41,517 42,220 42,178
-------- --------- ---------- ---------- ----------
Total interest expense 278,947 310,857 542,012 1,104,779 1,370,822
-------- --------- ---------- ---------- ----------
Net interest income 584,537 514,690 520,195 637,601 837,297
Provision for loan losses 21,625 81,343 140,580 643,940 701,489
-------- --------- ---------- ---------- ----------
Net interest income (loss) after
provision for loan losses 562,912 433,347 379,615 (6,339) 135,808
NONINTEREST INCOME
Trust income 43,263 41,459 46,776 56,156 52,725
Service charges on deposit accounts 77,337 78,815 79,478 78,188 70,848
Investment securities (losses) gains (6,663) 7,005 52,753 (2,890) (16,360)
Mortgage banking fees -- -- 6,361 32,459 32,616
Other 100,273 59,174 104,997 80,448 144,762
-------- --------- ---------- ---------- ----------
Total noninterest income 214,210 186,453 290,365 244,361 284,591
-------- --------- ---------- ---------- ----------
777,122 619,800 669,980 238,022 420,399
-------- --------- ---------- ---------- ----------
NONINTEREST EXPENSES
Salaries and benefits 226,676 219,332 257,221 345,679 336,958
Net occupancy 44,354 44,622 51,410 61,566 63,690
Equipment rental and expense 23,542 26,881 35,776 43,529 44,768
Other real estate owned, net 5,212 134,337 99,744 122,999 56,700
FDIC assessment charges 28,407 33,841 34,090 40,433 22,154
Legal and professional fees 45,174 51,511 51,403 50,803 39,273
Other 99,752 88,923 130,464 159,792 152,695
-------- --------- ---------- ---------- ----------
Total noninterest expenses 473,117 599,447 660,108 824,801 716,238
-------- --------- ---------- ---------- ----------
Income (loss) before income taxes and
cumulative effect of accounting
changes 304,005 20,353 9,872 (586,779) (295,839)
Income tax expense (benefit) 24,900 (111,043) 2,844 (43,476) (100,834)
-------- --------- ---------- ---------- ----------
Income (loss) before cumulative
effect of accounting changes 279,105 131,396 7,028 (543,303) (195,005)
Cumulative effect of accounting
changes (7,528) 38,962 -- -- --
-------- --------- ---------- ---------- ----------
NET INCOME (LOSS) $271,577 $ 170,358 $ 7,028 $ (543,303) $ (195,005)
======== ========= ========== ========== ==========
INCOME (LOSS) APPLICABLE TO PRIMARY
COMMON SHARES*
Income (loss) before cumulative
effect of accounting changes $274,574 $127,770 $ 3,356 $ (547,115) $ (198,817)
Net income (loss) 267,046 166,732 3,356 (547,115) (198,817)
======== ========= ========== ========== ==========
INCOME (LOSS) APPLICABLE TO FULLY
DILUTED COMMON SHARES*
Income (loss) before cumulative
effect of accounting changes $278,536 $131,854 $ 3,356 $ (547,115) $ (198,817)
Net income (loss) 271,008 170,816 3,356 (547,115) (198,817)
======== ========= ========== ========== ==========
INCOME (LOSS) PER COMMON SHARE*
Income (loss) before cumulative
effect of accounting changes
Primary $5.18 $2.51 $.08 $(14.36) $(5.22)
Fully diluted 5.11 2.51 .08 (14.36) (5.22)
Cumulative effect of accounting
changes
Primary (.14) .76 -- -- --
Fully diluted (.14) .74 -- -- --
Net income (loss)
Primary 5.04 3.27 .08 (14.36) (5.22)
Fully diluted 4.97 3.25 .08 (14.36) (5.22)
======== ========= ========== ========== ==========
AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS*
Primary 52,978 50,943 41,569 38,095 38,097
Fully diluted 54,522 52,569 41,954 38,095 38,097
======== ========= ========== ========== ==========
<FN>
*Common share equivalents for both primary and fully diluted in 1991 and 1990 and convertible
subordinated debentures for fully diluted in 1992, 1991 and 1990 are anti-dilutive and have been
excluded from the per share computations.
</TABLE>
<PAGE>72
<TABLE>
Midlantic Corporation and Subsidiaries
COMPARATIVE CONSOLIDATED AVERAGE BALANCE SHEET
WITH RESULTANT INTEREST AND AVERAGE RATES(1)
(In thousands)
<CAPTION>
1994 1993
------------------------------ -----------------------------
AVERAGE AVERAGE Average Average
BALANCE INTEREST RATE Balance Interest Rate
----------- -------- ---- ----------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Interest-bearing deposits $ 435,202 $ 17,586 4.04% $ 530,335 $ 18,319 3.45%
Other short-term investments 1,245,016 52,270 4.20 1,414,695 51,770 3.66
U.S. Treasury securities 1,213,835 54,769 4.51 1,130,657 44,375 3.92
Obligations of U.S. government
agencies 955,919 57,255 5.99 723,501 42,761 5.91
Obligations of states and
political subdivisions 17,783 805 4.53 10,773 1,012 9.39
Other securities 67,259 4,058 6.03 70,224 3,900 5.55
----------- -------- ---- ----------- -------- ----
Total investment securities 2,254,796 116,887 5.18 1,935,155 92,048 4.76
----------- -------- ---- ----------- -------- ----
Commercial, financial and
foreign loans 3,008,209 247,708 8.23 3,195,212 255,489 8.00
Real estate loans 2,859,977 232,765 8.14 3,463,730 245,896 7.10
Loans to individuals 2,410,350 196,268 8.14 1,949,598 162,025 8.31
----------- -------- ---- ----------- -------- ----
Total loans (2)(3)(4) 8,278,536 676,741 8.17 8,608,540 663,410 7.71
----------- -------- ---- ----------- -------- ----
Total interest-earning assets 12,213,550 863,484 7.07 12,488,725 825,547 6.61
----------- -------- ---- ----------- -------- ----
Noninterest-earning assets
Cash and due from banks 782,944 790,118
Other assets 824,505 1,006,948
Allowance for loan losses (377,891) (578,116)
----------- -----------
Total noninterest-earning
assets 1,229,558 1,218,950
----------- -----------
Total assets $13,443,108 $13,707,675
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Domestic savings and
time deposits $ 8,368,748 222,895 2.66 $ 9,155,117 262,517 2.87
Overseas branch deposits 12,274 471 3.84 11,243 369 3.28
Short-term borrowings 584,672 21,128 3.61 394,391 11,586 2.94
Long-term debt 374,251 34,453 9.21 396,217 36,385 9.18
----------- -------- ---- ----------- -------- ----
Total interest-bearing
liabilities 9,339,945 278,947 2.99 9,956,968 310,857 3.12
----------- -------- ---- ----------- -------- ----
Noninterest-bearing liabilities
and shareholders' equity
Demand deposits 2,704,249 2,616,243
Other liabilities 161,822 160,986
----------- -----------
Total noninterest-bearing
liabilities 2,866,071 2,777,229
----------- -----------
Shareholders' equity 1,237,092 973,478
----------- -----------
Total liabilities and
shareholders' equity $13,443,108 $13,707,675
----------- -----------
NET INTEREST INCOME $584,537 $514,690
======== ========
INTEREST INCOME AS A PERCENT OF
AVERAGE INTEREST-EARNING ASSETS 7.07% 6.61%
==== ====
INTEREST EXPENSE AS A PERCENT OF
AVERAGE INTEREST-EARNING ASSETS 2.28% 2.49%
==== ====
NET INTEREST MARGIN (5) 4.79% 4.12%
==== ====
<PAGE>73
<CAPTION>
1992 1991 1990
----------------------------- ----------------------------- -----------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 145,859 $ 5,869 4.02% $ 323,717 $ 22,814 7.05% $ 342,740 $ 29,020 8.47%
863,056 30,677 3.55 1,042,439 63,438 6.09 1,063,757 88,183 8.29
2,058,784 131,355 6.38 1,962,382 152,922 7.79 1,499,059 132,245 8.82
421,350 33,311 7.91 391,723 34,511 8.81 238,728 21,715 9.10
151,655 10,233 6.75 321,718 22,292 6.93 519,780 34,999 6.73
112,014 6,522 5.82 182,560 12,711 6.96 172,516 13,688 7.93
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
2,743,803 181,421 6.61 2,858,383 222,436 7.78 2,430,083 202,647 8.34
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
4,378,374 316,748 7.23 6,375,229 572,573 8.98 7,552,349 794,966 10.53
4,687,987 332,455 7.09 6,439,179 552,464 8.58 7,003,784 716,293 10.23
2,054,468 195,037 9.49 2,863,128 308,655 10.78 3,378,938 377,010 11.16
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
11,120,829 844,240 7.59 15,677,536 1,433,692 9.14 17,935,071 1,888,269 10.53
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
14,873,547 1,062,207 7.14 19,902,075 1,742,380 8.75 21,771,651 2,208,119 10.14
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
889,332 1,088,692 1,372,440
1,292,083 1,614,500 1,234,752
(810,697) (842,429) (533,972)
----------- ----------- -----------
1,370,718 1,860,763 2,073,220
----------- ----------- -----------
$16,244,265 $21,762,838 $23,844,871
----------- ----------- -----------
$11,524,817 482,648 4.19 $16,005,949 1,010,425 6.31 $16,195,692 1,167,331 7.21
12,739 506 3.97 20,371 1,375 6.75 97,518 8,388 8.60
525,200 17,341 3.30 908,165 50,759 5.59 1,926,182 152,925 7.94
443,213 41,517 9.37 461,013 42,220 9.16 448,946 42,178 9.39
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
12,505,969 542,012 4.33 17,395,498 1,104,779 6.35 18,668,338 1,370,822 7.34
----------- --------- ---- ----------- --------- ----- ----------- ---------- -----
2,759,284 3,047,091 3,414,732
215,611 286,888 310,614
----------- ----------- -----------
2,974,895 3,333,979 3,725,346
----------- ----------- -----------
763,401 1,033,361 1,451,187
----------- ----------- -----------
$16,244,265 $21,762,838 $23,844,871
----------- ----------- -----------
$ 520,195 $ 637,601 $ 837,297
========= ========= ===========
7.14% 8.75% 10.14%
==== ===== =====
3.64% 5.55% 6.30%
==== ===== =====
3.50% 3.20% 3.84%
==== ===== =====
<FN>
(1) Interest income and average rates are not presented on a tax-equivalent
basis.
(2) Includes loan fees. Such income is not significant.
(3) Includes nonaccrual loans.
(4) Net of unearned income.
(5) Net interest margin is net interest income as a percent of average
interest-earning assets.
</TABLE>
<PAGE>74
<TABLE>
Midlantic Corporation and Subsidiaries
SUMMARY OF CONSOLIDATED QUARTERLY INFORMATION
(In thousands)
<CAPTION>
December 31 September 30 June 30 March 31 December 31
FOR THE THREE MONTHS ENDED 1994 1994 1994 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME $ 150,923 $ 152,114 $ 144,203 $ 137,297 $ 133,636
----------- ----------- ----------- ----------- -----------
AVERAGES
Interest-earning assets
Money market investments $ 1,385,600 $ 1,771,510 $ 1,801,179 $ 1,762,583 $ 1,517,296
Investment securities 2,439,842 2,052,276 2,141,463 2,385,603 2,286,719
Loans 8,131,746 8,296,460 8,314,731 8,371,207 8,575,474
Total interest-earning
assets 11,957,188 12,120,246 12,257,373 12,519,393 12,379,489
Interest-bearing liabilities
Interest-bearing deposits 8,103,600 8,257,766 8,481,242 8,681,480 8,798,017
Short-term borrowings 459,920 516,428 644,947 717,393 421,955
Long-term debt 372,958 373,000 374,483 376,563 386,749
Total interest-bearing
liabilities 8,936,478 9,147,194 9,500,672 9,775,436 9,606,721
Shareholders' equity 1,342,206 1,269,986 1,192,795 1,143,381 1,078,613
----------- ----------- ----------- ----------- -----------
AVERAGE YIELDS EARNED
Interest-earning assets
Money market investments 5.09% 4.46% 3.88% 3.40% 3.32%
Investment securities 5.89 5.20 4.89 4.71 4.18
Loans 8.36 8.33 8.13 7.87 7.68
Total interest-earning
assets 7.48 7.24 6.94 6.64 6.50
----------- ----------- ----------- ----------- -----------
AVERAGE RATES PAID
Interest-bearing liabilities
Interest-bearing deposits 2.99% 2.66% 2.55% 2.52% 2.58%
Short-term borrowings 4.50 3.91 3.27 2.90 2.90
Long-term debt 9.13 9.13 9.23 9.33 9.08
Total interest-bearing
liabilities 3.31 2.99 2.86 2.81 2.86
----------- ----------- ----------- ----------- -----------
NET INTEREST MARGIN 5.01% 4.98% 4.72% 4.45% 4.28%
----------- ----------- ----------- ----------- -----------
OPERATING RATIOS
Return on average assets 2.33% 2.28% 2.14% 1.34% 1.72%
Return on average common equity 23.43 24.50 25.05 16.66 22.43
Return on average total equity 22.83 23.82 24.31 16.25 21.72
----------- ----------- ----------- ----------- -----------
ASSET QUALITY
Nonaccrual loans $ 165,002 $ 194,626 $ 224,974 $ 253,455 $ 265,299
Other real estate owned, net 82,804 98,863 108,308 121,002 132,670
----------- ----------- ----------- ----------- -----------
Total nonaccrual assets $ 247,806 $ 293,489 $ 333,282 $ 374,457 $ 397,969
----------- ----------- ----------- ----------- -----------
Total nonaccrual assets
as a % of total assets 1.86% 2.21% 2.48% 2.74% 2.86%
----------- ----------- ----------- ----------- -----------
Allowance for loan losses $ 349,520 $ 357,163 $ 373,345 $ 387,374 $ 400,311
Allowance for loan losses
as a % of nonaccrual loans 211.83% 183.51% 165.95% 152.84% 150.89%
Allowance for loan losses
as a % of total loans 4.24 4.35 4.45 4.58 4.76
Net charge-offs (1) as a
% of average loans .52 1.01 .95 .63 1.79
Provision for loan losses
as a % of average loans .15 .24 .27 .39 1.41
----------- ----------- ----------- ----------- -----------
CAPITAL RATIOS
Tier 1 risk-based 13.07% 12.01% 10.85% 9.95% 9.28%
Total capital risk-based 17.22 16.10 14.87 13.98 13.29
Leverage 9.43 8.87 8.17 7.35 6.81
----------- ----------- ----------- ----------- -----------
CORE EFFICIENCY RATIO (2) 57.88% 58.37% 60.01% 63.71% 62.59%
=========== =========== =========== =========== ===========
<FN>
(1) Ratios for the fourth quarter of 1993 and the first quarter of 1994 exclude net
charge-offs on loans that were sold in bulk sales or transferred to assets held
for accelerated disposition.
(2) Noninterest expenses excluding OREO expenses and certain nonrecurring expenses
as a percent of net interest income plus noninterest income, excluding securities
gains or losses and certain nonrecurring income.
</TABLE>
<PAGE>75
<TABLE>
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATISTICAL INFORMATION
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BOOK VALUE PER COMMON SHARE $25.19 $20.56 $17.19 $17.78 $32.10
------ ------ ------ ------ ------
OPERATING RATIOS
Net interest margin 4.79% 4.12% 3.50% 3.20% 3.84%
Return on average assets 2.02 1.24 .04 (2.49) (.82)
Return on average common equity 22.57 18.05 .47 (55.64) (14.19)
Return on average total equity 21.95 17.50 .92 (52.58) (13.44)
------ ------ ------ ------ ------
LIQUIDITY AND FUNDING RATIOS
Liquidity ratio(1) 30.72% 31.61% 29.81% 20.91% 17.33%
Funding ratio(2) (7.78) (14.31) (15.80) (1.04) 5.40
------ ------ ------ ------ ------
CAPITAL RATIOS
Risk-adjusted ratios(3)
Tier 1 capital ratio 13.07% 9.28% 6.83% 4.29% 5.93%
Total capital ratio 17.22 13.29 10.76 7.69 8.86
Leverage ratio 9.43 6.81 5.19 3.43 4.81
Average shareholders' equity
as a % of average assets 9.20 7.08 4.69 4.74 6.07
------ ------ ------ ------ ------
LOAN LOSS RATIOS
As a % of total year-end loans, net
of unearned income
Allowance for loan losses at
year-end 4.24% 4.76% 7.41% 6.74% 4.39%
Nonaccrual loans at year-end 2.00 3.15 8.95 9.95 6.70
As a % of average loans, net of
unearned income
Net charge-offs(4) .78 1.96 2.49 3.07 1.92
Provision for loan losses .26 .94 1.26 4.11 3.91
------ ------ ------ ------ ------
RATIOS: AS A % OF AVERAGE TOTAL
DEPOSITS
Average total loans, net of unearned
income 74.68% 73.06% 77.79% 82.20% 91.00%
Average investment securities 20.34 16.42 19.19 14.99 12.33
Average shareholders' equity 11.16 8.26 5.34 5.42 7.36
Average noninterest-bearing demand
deposits 24.39 22.20 19.30 15.98 17.33
Average interest-bearing deposits 75.61 77.80 80.70 84.02 82.67
------ ------ ------ ------ ------
NONFINANCIAL DATA
Total number of employees 6,174 5,863 6,342 9,561 11,637
Total number of full-time
equivalent employees 5,327 5,090 5,748 9,086 10,935
Total number of domestic and
foreign banking offices 325 326 331 426 484
====== ====== ====== ====== ======
<FN>
(1) Ratio of net short-term assets to net funding liabilities.
(2) Total purchased funds less investment securities due in one year and money
market investments as a percentage of investment securities due in more
than one year and total loans, net of unearned income.
(3) Based upon full-implementation regulatory standards that have been in effect
since December 31, 1992.
(4) Ratios for 1994 and 1993 exclude net charge-offs on loans that were sold in
bulk sales or transferred to assets held for accelerated disposition.
</TABLE>
<PAGE>
ITEM 14(a)3 - EXHIBIT 21
Midlantic Corporation and Subsidiaries
Subsidiaries Listing
December 31, 1994
Jurisdiction
Owned by of
Name Parent Parent Organization
_____________________________________________________________________________
REGISTRANT
Midlantic Corporation -- -- New Jersey
SUBSIDIARIES
Midlantic Securities Corp. Midlantic Corporation W-O New Jersey
Midlantic Funding Corp. Midlantic Corporation W-O New Jersey
Lenders Life Insurance Co. Midlantic Corporation W-O Arizona
Voploans Acquisition Co. Midlantic Corporation W-O New Jersey
Midlantic Bank, N.A.* Midlantic Corporation W-O United States
Midlantic Commercial
Leasing Corp. Midlantic Corporation W-O New York
Midlantic International Inc. Midlantic Corporation W-O New Jersey
Greater Jersey Mortgage Co. Midlantic Corporation W-O New Jersey
Parkway Management Inc. Midlantic Corporation W-O New Jersey
Central Investment Corp. Midlantic Bank, N.A. W-O New York
Midlantic Overseas Ltd. Midlantic Bank, N.A. W-O United States
Metuchen Management, Inc. Midlantic Bank, N.A. W-O New Jersey
Midlantic National
Leasing Corp. Midlantic Bank, N.A. W-O New Jersey
Midlantic Financial
Services Corp. Midlantic Bank, N.A. W-O Florida
Iron Investments Corp. Midlantic Bank, N.A. W-O New Jersey
Midlantic Agency Midlantic Bank, N.A. W-O New Jersey
499 Holding Inc. Midlantic Bank, N.A. W-O New Jersey
MNL Corporation Midlantic Bank, N.A. W-O New Jersey
Parkway Sussex Inc. Midlantic Bank, N.A. W-O New Jersey
NE Investment Inc. Midlantic Bank, N.A. W-O New Jersey
MNBN Holding Inc. Midlantic Bank, N.A. W-O New Jersey
Mark X Corporation Midlantic Bank, N.A. W-O New Jersey
Tournament of Stars,
Philadelphia, Inc. Midlantic Bank, N.A. W-O Pennsylvania
Thornall Financial Services
Corp. Midlantic Bank, N.A. W-O New Jersey
Numidia Realty, Inc. Midlantic Bank, N.A. W-O Pennsylvania
Lease and Go, Inc. Midlantic Bank, N.A. W-O New Jersey
Continental/Von Louhr Inc. Midlantic Bank, N.A. W-O Pennsylvania
Midlantic Commercial Co.,Inc. MNBN Holding Inc. W-O New Jersey
Alfieri-Parkway Associates Parkway Management Inc. 50% owned New Jersey
*Constitutes a significant subsidiary as defined in Rule 1-02(v) of Regulation
S-X.
W-O - Wholly-owned
In addition to the subsidaries listed above, Midlantic Bank, N.A. and MNBN
Holding Inc. have 76 subsidiaries and 10 subsidiaries, respectively, for the
purpose of holding assets acquired through foreclosure and Midlantic
Corporation has subsidiaries in the following jurisdictions for the purpose of
name saving in such jurisdictions: Connecticut, Delaware, District of
Columbia, Florida, Georgia, Kentucky, Maryland, New York, Ohio, South
Carolina, Tennessee and Virginia.
<PAGE>
ITEM 14(a)3 - EXHIBIT 23
________________________
CONSENT OF INDEPENDENT ACCOUNTANTS
__________________________________
We consent to the incorporation by reference in the Prospectus constituting
part of the Registration Statements on Form S-3 (Nos. 33-30504 and 33-54187)
and in the Prospectuses constituting part of the Registration Statements on
Form S-8, (Nos. 33-16256, 33-23396 and 33-63222), of Midlantic Corporation of
our report, which contains an explanatory paragraph stating that Midlantic
Corporation changed its methods of accounting for postemployment benefits and
investment securities in 1994 and for postretirement benefits other than
pensions and income taxes in 1993, dated January 18, 1995, (January 20, 1995
as to note 28), on our audits of the consolidated financial statements of
Midlantic Corporation and Subsidiaries as of December 31, 1994 and 1993, and
for each of the three years in the period ended December 31, 1994, which
report appears on page 70 of the 1994 Annual Report to Shareholders which is
incorporated by reference in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
March 24, 1995
New York, New York
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Garry J. Scheuring
__________________
Garry J. Scheuring
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Howard I. Atkins
________________
Howard I. Atkins
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
James E. Kelly
______________
James E. Kelly
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Charles Ehinger
_______________
Charles Ehinger
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
David Girard-diCarlo
____________________
David Girard-diCarlo
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Fred Haab
_________
Fred Haab
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Kevork Hovnanian
________________
Kevork Hovnanian
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Arthur Kania
____________
Arthur Kania
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Aubrey Lewis
____________
Aubrey Lewis
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
David McBride
_____________
David McBride
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Desmond McDonald
________________
Desmond McDonald
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
William McKenna
_______________
William McKenna
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Marcy Syms
__________
Marcy Syms
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Roy Peraino
___________
Roy Peraino
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Ernest Ransome, III
___________________
Ernest Ransome, III
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
B.P. Russell
____________
B.P. Russell
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Fred Sullivan
_____________
Fred Sullivan
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
<PAGE>
POWER OF ATTORNEY
1994 FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do
hereby make, constitute and appoint each of Joseph H. Kott,
Howard I. Atkins and James E. Kelly, signing singly, as my true
and lawful agent and attorney-in-fact, for me and in my name
(with full power of substitution) to sign, execute, attest,
acknowledge and deliver and to do all other acts and things on my
behalf as a Director and/or Officer of Midlantic Corporation
("Midlantic"), a New Jersey corporation, as said agent and
attorney-in-fact may deem necessary or advisable to enable
Midlantic to comply with the Securities Exchange Act of 1934, as
amended, and any rules and regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of annual reports for the year ended
December 31, 1994 on Form 10-K (the "Annual Reports") under the
Securities Exchange Act of 1934, as amended, including
specifically, but without limiting the generality of the
foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director and/or Officer of
Midlantic to said Annual Reports, and to any and all amendments
thereto, and to any and all instruments and documents filed as
part of or in connection with the said Annual Reports or
amendments thereto; HEREBY RATIFYING AND CONFIRMING all that said
agent and attorney-in-fact shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has subscribed
these presents as of the 21st day of December, 1994.
Harold Yoh
__________
Harold Yoh
Attest:
John M. Sperger
_______________
John M. Sperger
Senior Vice President & Secretary
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