-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PAGraJyI8PQ9kjz7lI2PBWdLIeEoWJLE0oFhXj6p61xM7cpdXWMythWn/LHDnOM/ 3S2DMbciLo0SXq5OD+eNNw== 0000101320-97-000005.txt : 19970520 0000101320-97-000005.hdr.sgml : 19970520 ACCESSION NUMBER: 0000101320-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMIT BANCORP/NJ/ CENTRAL INDEX KEY: 0000101320 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 221903313 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06451 FILM NUMBER: 97605973 BUSINESS ADDRESS: STREET 1: 301 CARNEGIE CENTER STREET 2: P O BOX 2066 CITY: PRINCETON STATE: NJ ZIP: 08543-2066 BUSINESS PHONE: 6099873200 MAIL ADDRESS: STREET 1: PO BOX 2066 CITY: PRINCETON STATE: NJ ZIP: 08543-2066 FORMER COMPANY: FORMER CONFORMED NAME: UJB FINANCIAL CORP /NJ/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: UNITED JERSEY BANKS DATE OF NAME CHANGE: 19890815 10-Q 1 FORM 10-Q 3/31/97 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 ----------------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- ------------- Commission File Number: 1-6451 ----------------------------------- Summit Bancorp. - ------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-1903313 - ------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 301 Carnegie Center, P.O. Box 2066, Princeton, New Jersey 08543-2066 - -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (609) 987-3200 - --------------------------------------------------------------- Registrant's telephone number, including area code) - --------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of April 30, 1997 there were 98,540,507 shares of common stock, $1.20 par value, outstanding. SUMMIT BANCORP. FORM 10-Q INDEX Part I Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1997, December 31, 1996 and March 31, 1996............................... 2 Consolidated Statements of Income - Three Months Ended March 31, 1997 and 1996....... 3 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996....... 4 Consolidated Statements of Shareholders' Equity - Three Months Ended March 31, 1997 and 1996....... 5 Consolidated Average Balance Sheets With Resultant Interest and Rates - Three Months Ended March 31, 1997 and 1996....... 6 Notes to Consolidated Financial Statements........... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 9 Part II. Other Information. Item 1. Legal Proceedings........................... 17 Item 2. Changes in Securities....................... 18 Item 4. Submission of Matters to a Vote of Security Holders......................... 19 Item 6. Exhibits and Reports on Form 8-K............ 20 Signatures.......................................... 21 Exhibit Index....................................... 22 1 SUMMIT BANCORP. CONSOLIDATED BALANCE SHEETS Unaudited (dollars in thousands)
March 31, December 31, March 31, 1997 1996 1996 ------------- ------------ ------------ Assets Cash and due from banks $ 968,930 $ 1,256,684 $ 1,122,977 Federal funds sold and securities purchased under agreements to resell 188,800 111,143 41,892 Interest bearing deposits with banks 13,457 24,825 36,338 Securities: Trading account securities 33,806 26,376 49,755 Securities available for sale 3,079,597 2,670,414 2,476,859 Securities held to maturity 3,085,774 3,217,384 3,471,920 ------------- ------------ ------------ Total securities 6,199,177 5,914,174 5,998,534 Loans (net of unearned discount): Commercial 5,616,090 5,266,665 5,354,519 Commercial mortgage 2,395,650 2,313,610 2,456,852 Residential mortgage 3,829,124 3,795,752 3,551,936 Consumer 3,655,081 3,443,568 3,192,783 ------------- ------------ ------------ Total loans 15,495,945 14,819,595 14,556,090 Less: Allowance for loan losses 277,011 267,719 280,590 ------------- ------------ ------------ Net loans 15,218,934 14,551,876 14,275,500 ------------- ------------ ------------ Premises and equipment 201,363 204,953 213,192 Accrued interest receivable 139,880 140,368 136,227 Due from customers on acceptances 17,915 15,671 19,838 Other assets 490,889 448,318 485,278 ------------- ------------ ------------ Total Assets $ 23,439,345 $ 22,668,012 $ 22,329,776 ============= ============ ============ Deposits: Non-interest bearing demand deposits $ 4,184,241 $ 3,984,366 $ 3,628,466 Interest bearing deposits: Savings and time deposits 13,981,408 13,779,803 13,698,428 Commercial certificates of deposit $100,000 and over 665,885 610,817 766,910 ------------- ------------ ------------ Total deposits 18,831,534 18,374,986 18,093,804 ------------- ------------ ------------ Other borrowed funds 1,374,190 1,338,734 1,568,639 Accrued expenses and other liabilities 300,215 271,510 375,540 Accrued interest payable 67,434 50,261 56,428 Bank acceptances outstanding 17,915 15,671 19,838 Long-term debt 680,257 689,977 398,605 Capital trust pass-through securities 150,000 - - ------------- ------------ ------------ Total liabilities 21,421,545 20,741,139 20,512,854 Shareholders' equity: Preferred stock: Series B and C - - 42,620 Common stock par value $1.20: Authorized 130,000,000 shares; issued and outstanding 98,450,950 at March 31, 1997; 93,962,565 at December 31, 1996 and 93,398,970 at March 31, 1996 118,141 112,755 112,079 Surplus 926,802 881,483 869,307 Retained earnings 984,161 927,672 794,948 Net unrealized gain (loss) on securities, net of tax (11,304) 4,963 (2,032) ------------- ------------ ------------ Total shareholders' equity 2,017,800 1,926,873 1,816,922 ------------- ------------ ------------ Total Liabilities and Shareholders' Equity $ 23,439,345 $ 22,668,012 $ 22,329,776 ============= ============ ============ See accompanying Notes to Consolidated Financial Statements.
2 SUMMIT BANCORP. CONSOLIDATED STATEMENTS OF INCOME Unaudited (dollars in thousands, except per share data)
Three Months Ended March 31, ------------------------- 1997 1996 ----------- ----------- Interest Income Loans $ 309,338 $ 295,129 Securities: Trading account securities 373 568 Securities available for sale 44,702 39,211 Securities held to maturity 50,098 51,539 ----------- ----------- Total securities 95,173 91,318 Federal funds sold and securities purchased under agreements to resell 877 1,115 Deposits with banks 174 191 ----------- ----------- Total interest income 405,562 387,753 ----------- ----------- Interest Expense Savings and time deposits 124,408 123,601 Commercial certificates of deposit $100,000 and over 8,387 10,541 Borrowed funds, long-term debt and Capital trust pass-through securities 32,710 27,620 ----------- ----------- Total interest expense 165,505 161,762 ----------- ----------- Net interest income 240,057 225,991 Provision for loan losses 14,500 15,500 ----------- ----------- Net interest income after provision for loan losses 225,557 210,491 ----------- ----------- Non-Interest Income Service charges on deposit accounts 26,271 23,456 Service and loan fee income 10,718 10,569 Trust income 11,329 9,243 Securities gains 1,140 757 Trading account gains 432 31 Other 15,546 14,207 ----------- ----------- Total non-interest income 65,436 58,263 Non-Interest Expenses Salaries 64,610 62,992 Pension and other employee benefits 23,049 23,927 Occupancy, net 16,855 20,241 Furniture and equipment 16,836 15,633 Communications 7,834 7,252 Deposit insurance premiums 905 1,226 Restructuring charges 26,500 110,700 Other 32,663 30,764 ----------- ----------- Total non-interest expenses 189,252 272,735 ----------- ----------- Income (loss) before income taxes 101,741 (3,981) Federal and state income taxes (benefit) 35,256 (1,742) ----------- ----------- Net Income (loss) $ 66,485 $ (2,239) =========== =========== Net Income (loss) Per Common Share $ 0.68 $ (0.03) =========== =========== Average Common Shares Outstanding (in thousands) 98,271 93,134 =========== =========== See accompanying Notes to Consolidated Financial Statements.
3 SUMMIT BANCORP. CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (dollars in thousands)
Three Months Ended March 31, --------------------------- 1997 1996 ------------- ------------- Operating activities Net income (loss) $ 66,485 $ (2,239) Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses and other real estate owned 14,750 15,872 Depreciation, amortization and accretion, net 21,403 7,001 Restructuring charges 26,500 110,700 Gains on sales of trading account securities and securities available for sale (1,572) (788) Gains (losses) on sales of mortgages held for sale (1,715) 18 Gains on sales of other real estate owned (288) (503) Proceeds from sales of other real estate owned 2,971 6,138 Proceeds from sales of mortgages held for sale 92,909 17,232 Originations of mortgages held for sale (70,165) (15,625) Increase in trading account securities (6,998) (21,087) Increase in accrued interest receivable and other assets (14,247) (38,079) Increase in accrued interest payable, accrued expenses and other liabilities 12,888 23,831 ------------- ------------- Net cash provided by operating activities 142,921 102,471 ------------- ------------- Investing activities Purchases of securities held to maturity (21,044) (473,623) Purchases of securities available for sale (712,695) (244,913) Proceeds from maturities of securities held to maturity 163,170 154,550 Proceeds from maturities of securities available for sale 202,543 121,299 Proceeds from sales of securities available for sale 235,436 81,018 Net (increase) decrease in Federal funds sold and securities purchased under agreements to resell (77,657) 133,083 Net decrease (increase) in interest bearing deposits with banks 11,466 (18,009) Net increase in loans (265,047) (162,881) Purchases of premises and equipment, net (1,587) (2,190) ------------- ------------- Net cash used in investing activities (465,415) (411,666) ------------- ------------- Financing activities Net decrease in deposits (95,163) (400,622) Net increase in short-term borrowings 2,780 520,946 Principal payments on long-term debt (26,496) (26,257) Proceeds from issuance of long-term debt 4,500 - Proceeds from issuance of capital trust pass-through securities 150,000 - Dividends paid (33,836) (38,156) Proceeds from issuance of common stock under dividend reinvestment and other stock plans 11,163 13,597 ------------- ------------- Net cash provided by financing activities 12,948 69,508 ------------- ------------- Decrease in cash and due from banks (309,546) (239,687) Begining cash balance of acquired entities 21,792 24,946 Cash and due from banks at beginning of period 1,256,684 1,337,718 ------------- ------------- Cash and due from banks at end of period $ 968,930 $ 1,122,977 ============= ============= Supplemental disclosure of cash flow information Cash paid: Interest payments $ 148,332 $ 150,901 Income tax payments 10,746 395 Noncash investing activities: Net transfer of loans to other real estate owned 4,826 9,000 See accompanying Notes to Consolidated Financial Statements.
4 SUMMIT BANCORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Unaudited (dollars in thousands)
Net Total Preferred Common Retained Unrealized Shareholders' Stock Stock Surplus Earnings Gain (Loss) Equity -------- --------- --------- --------- ----------- ----------- Balance, December 31, 1995 $ 42,620 $ 106,165 $ 826,788 $ 821,579 $ 5,164 $ 1,802,316 Balances at beginning of period of immaterial pooled acquisitions (4,353,085 shares) - 5,224 29,612 14,054 (567) 48,323 Net income (loss) - - - (2,239) - (2,239) Cash dividends declared: Preferred stock - - - (639) - (639) Common stock - - - (37,807) - (37,807) Common stock issued: Dividend reinvestment and other stock plans (283,457 shares) - 340 9,098 - - 9,438 Exercise of stock options, net (291,400 shares) - 350 3,809 - - 4,159 Change in unrealized gain (loss) on securities, net of tax - - - - (6,629) (6,629) -------- --------- --------- --------- ----------- ----------- Balance, March 31, 1996 $ 42,620 $ 112,079 $ 869,307 $ 794,948 $ (2,032) $ 1,816,922 ======== ========= ========= ========= =========== =========== Balance, December 31, 1996 $ - $ 112,755 $ 881,483 $ 927,672 $ 4,963 $ 1,926,873 Balances at beginning of period of immaterial pooled acquisition (4,031,051 shares) - 4,837 34,705 25,562 (278) 64,826 Net income (loss) - - - 66,485 - 66,485 Cash dividends declared on common stock - - - (35,558) - (35,558) Common stock issued: Dividend reinvestment and other stock plans (103,588 shares) - 124 4,450 - - 4,574 Exercise of stock options, net (353,746 shares) - 425 6,164 - - 6,589 Change in unrealized gain (loss) on securities, net of tax - - - - (15,989) (15,989) -------- --------- --------- --------- ----------- ----------- Balance, March 31, 1997 $ - $ 118,141 $ 926,802 $ 984,161 $ (11,304) $ 2,017,800 ======== ========= ========= ========= =========== =========== See accompanying Notes to Consolidated Financial Statements.
5 SUMMIT BANCORP. CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES Unaudited (Tax-equivalent basis, dollars in thousands)
Three Months Ended March 31, --------------------------------------------------------------- 1997 1996 ----------------------------- ----------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ----------- --------- ------- ----------- --------- ------- Assets Interest earning assets: Federal funds sold and securities purchased under agreements to resell $ 67,791 $ 877 5.25 % $ 76,240 $ 1,115 5.88 % Interest bearing deposits with banks 12,485 174 5.65 14,686 191 5.23 Securities: Trading account securities 32,146 374 4.72 43,934 580 5.31 Securities available for sale 2,901,196 44,702 6.16 2,533,420 39,211 6.19 Securities held to maturity 3,235,225 51,816 6.41 3,361,155 54,062 6.43 ----------- --------- ------- ----------- --------- ------- Total securities 6,168,567 96,892 6.28 5,938,509 93,853 6.32 Loans: Commercial 5,406,368 112,934 8.47 5,321,143 111,029 8.39 Commercial mortgage 2,401,925 51,793 8.63 2,447,476 53,208 8.70 Residential mortgage 3,850,106 71,185 7.40 3,494,086 65,259 7.47 Consumer 3,592,151 74,787 8.44 3,155,019 66,884 8.53 ----------- --------- ------- ----------- --------- ------- Total loans 15,250,550 310,699 8.26 14,417,724 296,380 8.27 ----------- --------- ------- ----------- --------- ------- Total interest earning assets 21,499,393 408,642 7.71 20,447,159 391,539 7.70 ----------- --------- ------- ----------- --------- ------- Non-interest earning assets: Cash and due from banks 1,044,222 1,135,779 Allowance for loan losses (282,003) (293,194) Other assets 823,777 799,279 ----------- ----------- Total non-interest earning assets 1,585,996 1,641,864 ----------- ----------- Total Assets $23,085,389 $22,089,023 =========== =========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 8,186,591 51,576 2.56 $ 8,077,351 51,276 2.55 Time deposits 5,774,208 72,832 5.12 5,634,517 72,325 5.16 Commercial certificates of deposit $100,000 and over 655,908 8,387 5.19 778,039 10,541 5.45 ----------- --------- ------- ----------- --------- ------- Total interest bearing deposits 14,616,707 132,795 3.68 14,489,907 134,142 3.72 ----------- --------- ------- ----------- --------- ------- Commercial paper 47,835 622 5.27 44,265 582 5.29 Other borrowed funds 1,448,686 19,925 5.58 1,435,412 19,278 5.40 Long-term debt and Capital trust pass-through securit 709,206 12,163 6.86 410,642 7,760 7.56 ----------- --------- ------- ----------- --------- ------- Total interest bearing liabilities 16,822,434 165,505 3.99 16,380,226 161,762 3.97 ----------- --------- ------- ----------- --------- ------- Non-interest bearing liabilities: Demand deposits 3,904,200 3,524,750 Other liabilities 338,963 308,185 ----------- ----------- Total non-interest bearing liabilities 4,243,163 3,832,935 ----------- ----------- Total Shareholders' Equity 2,019,792 1,875,862 ----------- ----------- Total Liabilities and Shareholders' Equity $23,085,389 $22,089,023 =========== --------- =========== --------- Net Interest Income (tax-equivalent basis) 243,137 3.72 % 229,777 3.73 % --------- ======= --------- ======= Tax-equivalent basis adjustment (based on a Federal income tax rate of 35%) (3,080) (3,786) --------- --------- Net Interest Income $ 240,057 $ 225,991 ========= ========= Net Interest Income as a Percent of Interest Earning Assets (tax-equivalent basis) 4.59 % 4.52 % ======= ======= See accompanying Notes to Consolidated Financial Statements.
6 SUMMIT BANCORP. Notes to Consolidated Financial Statements (Unaudited) 1.) Basis of Presentation The accompanying financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the financial position of Summit Bancorp. (the "Company"), the results of its operations, changes in shareholders' equity and changes in its cash flows. In all material respects, the financial statements presented comply with the current reporting requirements of supervisory authorities. Certain prior period amounts have been reclassified for comparative purposes. The adoption of new accounting pronouncements had an immaterial impact on the company's financial statements. For additional information and disclosures required under generally accepted accounting principles, reference is made to the registrant's 1996 Annual Report on Form 10-K. Earnings per common share is calculated by dividing net income, less the dividends on preferred stocks, by the average daily number of common shares outstanding during the period. Common stock equivalents are not included in the calculation as they have no material dilutive effect. 2.) Acquisitions and Restructuring Charges On March 1, 1997, the Company completed the acquisition of B.M.J. Financial Corp. ("B.M.J."). This acquisition was accounted for as a pooling of interests, and was recorded as an adjustment to beginning shareholders' equity as of January 1, 1997, without restating the consolidated financial statements for 1996 and prior years. A restructuring charge of $26.5 million, $16.7 million or $.17 per share after tax, was recorded related to this acquisition. At December 31, 1996, B.M.J. had total assets of $676.0 million, loans of $449.0 million and deposits of $552.0 million. On December 7, 1996, the Company completed the acquisition of Central Jersey Financial Corporation ("Central Jersey"). This acquisition was accounted for as a purchase, and the assets and results of operations are included from that date. Central Jersey had total assets of $446.6 million, loans of $200.5 million and deposits of $376.8 million. Garden State Bancshares, Inc. ("Garden State") was acquired on January 16, 1996, and The Flemington National Bank and Trust Company ("Flemington") was acquired on February 23, 1996. Both of these acquisitions were accounted for as poolings of interest and were recorded as adjustments to beginning shareholders' equity as of January 1, 1996, without restating the consolidated financial statements for 1995 and prior years. On March 1, 1996, the company completed its acquisition of The Summit Bancorporation. This acquisition was accounted for as a pooling of interests and all 7 financial information has been restated to reflect the combined results of operations. A restructuring charge of $110.7 million, $70.0 million or $.75 per share after tax, was recorded primarily as a result of these acquisitions as well as a supermarket branch initiative. On February 28, 1997, the Company announced a definitive agreement to acquire Collective Bancorp, Inc. ("Collective"). Collective, which operates Collective Bank, has assets of $5.5 billion, loans of $2.9 billion and deposits of $3.5 billion, with 82 branches in 15 counties located throughout New Jersey. The transaction is intended to be accounted for as a pooling of interests in an exchange of .895 shares of the Company's common stock for each share of Collective common stock. At March 31, 1997, there were approximately 20.4 million of Collective shares issued and outstanding. This transaction is expected to close in the third quarter of 1997 and is subject to regulatory and Collective shareholder approvals. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF ----------------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ----------------------------------------------- Summit Bancorp., (the "Company"), is a bank holding company located in Princeton, New Jersey. The Company owns three banks ("bank subsidiaries") and several active non-bank subsidiaries and currently ranks as the largest New Jersey-based bank holding company. The Company's bank subsidiaries provide a broad range of retail, commercial and private banking services as well as trust and investment services through a line of business approach to individuals, businesses, not-for-profit organizations, government entities and other financial institutions. These services are provided through an extensive branch network, including supermarket branches and private banking facilities, as well as through automated teller machines and personal computers. FINANCIAL CONDITION March 31, 1997 versus December 31, 1996 Total assets at March 31, 1997, were $23.4 billion, an increase of $771.3 million or 3.4 percent from year-end 1996. Approximately $676.0 million of this increase was the result of the first quarter acquisition of B.M.J. Excluding the impact of the B.M.J. acquisition, total assets increased $95.3 million, or .4 percent from year-end 1996. Securities held to maturity at March 31, 1997, were $3.1 billion and were comprised of $1.6 billion of U.S. Government and Federal agency securities, $219.5 million of state and political subdivision securities and $1.2 billion of other securities. These securities decreased $131.6 million or 4.1 percent from year-end 1996. The decrease was the result of $163.2 million in maturities, offset by $21.0 million in purchases and $14.4 million attributable to the B.M.J. acquisition. At March 31, 1997, the aggregate market value of the held-to-maturity portfolio was $3.0 billion. The aggregate market value at December 31, 1996, was $3.2 billion. At March 31, 1997, securities available for sale amounted to $3.1 billion and were comprised of $2.6 billion of U.S. Government and Federal agency securities, $14.7 million of state and political subdivision securities and $437.4 million of other securities, predominately corporate collateralized mortgage obligations. These securities increased $409.2 million or 15.3 percent from year-end 1996. For the first three months of 1997, $712.7 million of securities were purchased and $163.9 million were acquired from B.M.J. These increases were offset by maturities of $202.5 million and sales of $235.4 million. Currently, cash flows from maturities, calls and paydowns from both portfolios are now being reinvested in the available for sale portfolio to provide greater flexibility in our asset and liability management. 9 At March 31, 1997, total loans amounted to $15.5 billion and increased $676.4 million or 4.6 percent from year-end 1996. The acquisition of B.M.J. accounted for approximately $449.0 million of this increase, most of which growth was in commercial and consumer loans. Commercial loans at March 31, 1997, increased $349.4 million or 6.6 percent from year-end 1996. Commercial mortgage loans increased $82.0 million or 3.5 percent, and residential mortgage loans increased $33.4 million or .9 percent from December 31, 1996. Consumer loans increased $211.5 million or 6.1 percent from year-end 1996 to $3.7 billion. Total deposits were $18.8 billion at March 31, 1997, an increase of $456.5 million or 2.5 percent from December 31, 1996, with most of this increase due to the acquisition of B.M.J. Demand deposits increased $199.9 million or 5.0 percent from year-end 1996 to $4.2 billion. Savings and time deposits increased $201.6 million or 1.5 percent from December 31, 1996, to $14.0 billion. Commercial certificates of deposit $100,000 and over were $665.9 million, an increase of $55.1 million or 9.0 percent compared to December 31, 1996. Borrowed funds, including long-term debt, at March 31, 1997, increased $25.7 million or 1.3 percent from December 31, 1996, to $2.1 billion. On March 20, 1997, the Company issued $150.0 million of 8.40 percent capital trust pass-through securities. The Company will use the proceeds from the issuance of these securities, which qualify as Tier I capital, for general corporate purposes. Total shareholders' equity increased $90.9 million or 4.7 percent from December 31, 1996, to $2.0 billion. Contributing to this increase, in addition to earnings, was the B.M.J. acquisition, which added $64.8 million to shareholders' equity. As of March 31, 1997, the unrealized loss on securities, net of tax, recorded in equity amounted to $11.3 million, compared to an unrealized gain of $5.0 million at year-end 1996. Capital ratios for March 31, 1997, as compared to select prior periods are shown in the following table. The capital ratios from year-end 1996 were benefited by the issuance of the $150.0 million in capital trust pass-through securities. March 31, Dec. 31, March 31, Selected Capital Ratios: 1997 1996 1996 - ------------------------- --------- --------- --------- Equity to assets 8.61% 8.50% 8.14% Leverage ratio 8.88 8.06 7.79 Tier I capital 11.99 11.09 10.57 Total capital 14.57 13.75 13.23 10 Non-performing Loans and Other Real Estate Owned Total non-performing loans and other real estate owned ("OREO") as well as non-performing loan ratios are shown in the following table as of March 31, 1997, December 31, 1996, and March 31, 1996. Non-performing assets March 31, 1997 Dec. 31, 1996 March 31, 1996 ------------ ------------ ------------ Non-performing loans Commercial and industrial $ 49,024 $ 54,308 $ 56,722 Construction 28,252 31,901 50,883 Real estate related 40,449 45,877 81,164 --------- --------- --------- Total non-performing loans 117,725 132,086 188,769 OREO 23,431 20,979 26,410 --------- --------- --------- Total non-performing assets $ 141,156 $ 153,065 $ 215,179 --------- --------- --------- Non-performing loans to total loans 0.76% 0.89% 1.30%
The average balance of non-performing loans for the three months ended March 31, 1997, was $122.8 million. Interest income received on non-performing loans amounted to $.8 million for the quarter ended March 31, 1997. Certain loans, primarily consumer and residential mortgage loans, which are 90 days past due are not included in non-performing loans because they are well collateralized and in the process of collection. These loans amounted to $58.9 million at March 31, 1997, compared to $60.6 million and $52.0 million at December 31, 1996, and March 31, 1996, respectively. Allowance for Loan Losses The allowance for loan losses at March 31, 1997, was $277.0 million, or 1.79 percent of loans, compared to $267.7 million or 1.81 percent of loans at December 31, 1996, and $280.6 million or 1.93 percent of loans at March 31, 1996. For the three months ended March 31, 1997, net charge offs were $13.9 million, or .37 percent of average loans compared to $20.3 million, or .57 percent of average loans in the first three months of 1996. The coverage of non-performing loans at March 31, 1997, was 235.30 percent, compared to 202.69 percent and 148.64 percent at year-end 1996 and March 31, 1996, respectively. 11 Transactions in the allowance for loan losses are shown in the following table (dollars in thousands): Three Months Ended March 31, ---------------------------- 1997 1996 --------- --------- Balance, January 1 $ 267,719 $ 279,034 Acquisition adjustments, net 8,719 6,342 Provision charged to expense 14,500 15,500 --------- --------- 290,938 300,876 --------- --------- Less charge offs: Commercial and industrial 8,134 7,863 Construction and development 724 6,751 Commercial mortgage 3,029 6,835 Residential mortgage 566 547 Consumer 7,490 3,057 --------- --------- Total charge offs 19,943 25,053 --------- --------- Add recoveries: Commercial and industrial 2,627 2,577 Construction and development 183 856 Commercial mortgage 753 366 Residential mortgage 492 85 Consumer 1,961 883 --------- --------- Total recoveries 6,016 4,767 --------- --------- Net charge offs 13,927 20,286 --------- --------- Balance, March 31 $ 277,011 $ 280,590 ========= ========= A standardized process has been established to assess the adequacy of the allowance for loan losses and to identify the risks inherent in the loan portfolio. This process incorporates credit reviews and gives consideration to areas of exposure such as concentrations of credit, economic and industry conditions, trends in delinquencies and collections, collateral coverage, and the composition of the performing and non-performing loan portfolios. The allowance for loan losses is maintained at a level that management believes to be adequate to absorb anticipated loan losses. The unallocated portion of the allowance for loan losses was $134.1 million at March 31, 1997, compared to $133.2 million at December 31, 1996. 12 RESULTS OF OPERATIONS Net income for the three months ended March 31, 1997, was $66.5 million compared to a net loss of $2.2 million for the first three months of 1996. On a per common share basis, net income for the three months ended March 31, 1997, was $.68 compared to a net loss of $.03 for the same period in 1996. The first quarter of 1997 includes a non-recurring restructuring charge of $26.5 million, $16.7 million or $.17 per share, after-tax, related to the B.M.J. acquisition. The results for the three months ended March 31, 1996, also include non-recurring merger-related restructuring charges of $110.7 million, $70.0 million or $.75 per share, after-tax, primarily related to the acquisitions of The Summit Bancorporation, Flemington, and Garden State. Also included in these charges were expenses recorded in conjunction with an announced agreement to open 70 in-store supermarket branches. Excluding the effects of the non-recurring restructuring charges, net income would have been $83.2 million or $.85 per share for the first quarter of 1997, and $67.7 million or $.72 per share for the prior year period, an 18.1 percent increase. Key performance indicators are as follows: For the three months ended, ------------------------------ March 31, Dec. 31, March 31, 1997 1996 1996 --------- -------- --------- Before restructuring charges Return on: Average assets 1.46% 1.47% 1.23 % Average common equity 16.70 17.46 14.72 Efficiency ratio 52.22 53.34 55.60 After restructuring charges Return on: Average assets 1.17% 1.47% (0.04)% Average common equity 13.35 17.46 (0.63) Net interest spread Interest income on a tax-equivalent basis was $408.6 million for the three months ended March 31, 1997, an increase of $17.1 million, or 4.4 percent, compared to the prior year period. For the three months ended March 31, 1997, interest-earning assets averaged $21.5 billion, an increase of $1.1 billion, or 5.1 percent. This increase in interest-earning assets contributed $16.7 million to interest income. Interest expense increased $3.7 million, or 2.3 percent, for the three months ended March 31, 1997, compared to the same period in 1996. For the three months ended March 31, 1997, interest-bearing liabilities averaged $16.8 billion, an increase of 13 $442.2 million, or 2.7 percent, from the prior year period. This increase in interest- bearing liabilities contributed $3.2 million to the increase in interest expense. Net interest income on a tax-equivalent basis was $243.1 million for the three months ended March 31, 1997, an increase of $13.4 million, or 5.8 percent, compared to the same period in 1996. The net interest spread percentage on a tax-equivalent basis (the difference between the rate earned on average interest earning assets and the rate paid on average interest bearing liabilities) was 3.72 percent for the three months ended March 31, 1997, compared to 3.73 percent for the prior year period. Net interest margin (net interest income on a tax-equivalent basis as a percentage of average interest earning assets) was 4.59 percent during the first three months of 1997 compared to 4.52 percent during the same period in 1996. The increase in net interest margin was benefited by an increase in non-interest bearing funds. Asset and liability management efforts involve the use of certain derivative financial instruments for purposes of stabilizing net interest income in a changing interest rate environment. At March 31, 1997, the derivative financial instruments portfolio consisted primarily of interest rate swaps, caps and floors with notional values of $415.0 million, $750.0 million and $430.0 million, respectively. These derivatives resulted in a net interest income reduction of $.5 million for the first quarter of 1997 and 1996. The cost to terminate these contracts at March 31, 1997, would have been $1.7 million compared to $3.7 million at March 31, 1996. As a result of improved asset quality, the provision for loan losses for the first quarter was $14.5 million, a decrease of $1.0 million compared with $15.5 million for the same period a year ago. Non-interest income Non-interest income for the first quarter of 1997 totaled $65.4 million, an increase of $7.2 million, or 12.3 percent, compared with the first quarter of 1996. Excluding securities gains, total non-interest income was $64.3 million for the first quarter of 1997, an increase of $6.8 million, or 11.8 percent, from the prior year period. For the first quarter of 1997, service charges on deposits were $26.3 million, an increase of $2.8 million or 12.0 percent compared with the first quarter of 1996. This increase was primarily attributable to higher fee income from business and personal demand deposit accounts. Fee income on demand deposit accounts increased as a result of a larger customer base in 1997 when compared to 1996. Trust fee income for the first quarter of 1997 was $11.3 million, an increase of $2.1 million or 22.6 percent compared with the first quarter of 1996. These increases are primarily due to higher fees from mutual funds and investment advisory accounts. 14 For the first quarter of 1997, net gains of $1.1 million on the sales and early redemptions of securities were realized compared with net gains of $.8 million in the first quarter of 1996. For the three months ended March 31, 1997, other income increased $1.3 million, or 9.4 percent as compared to the first quarter of 1996. This increase was primarily attributable to ATM access fees and safe deposit rental income. Non-interest expenses Non-interest expenses for the first quarter of 1997 totaled $189.3 million compared to $272.7 for the first quarter of 1996. Non-interest expenses for the first three months of 1997 and 1996 included restructuring charges of $26.5 million and $110.7 million, respectively. Excluding these restructuring charges, non-interest expenses increased $.7 million or .4 percent for the first quarter of 1997 when compared to the prior year period. Salaries expense for the first quarter of 1997 was $64.6 million, which increased $1.6 million, or 2.6 percent from the prior year period. For the first quarter of 1997, pension and other employee benefits decreased $.9 million, or 3.7 percent, as compared to the first quarter of 1996. Occupancy expenses for the first quarter of 1997 decreased $3.4 million, or 16.7 percent, compared to the prior year period. The decrease was due in part to the lower rental and maintenance expenses associated with the 351 full-service branches operated during the first quarter of 1997, as compared to 361 full-service branches operated during 1996. In addition, the decrease was partially attributable to the expenses associated with the severe weather conditions experienced during the first quarter of 1996 as compared to the conditions experienced in 1997. Furniture and equipment expenses rose $1.2 million, or 7.7 percent, in the first quarter of 1997 when compared with the first quarter of 1996. This increase was due in part to increases in lease expense on branch automation equipment installed at acquired institutions. Communications expense increased $.6 million, or 8.0 percent for the three months ended March 31, 1997, as compared to the prior year period. This increase is attributable to higher telecommunications expenses, as a result of branch rewiring and technology updates, partially offset by a decrease in postage expenses. For the first quarter of 1997, other operating expenses increased $1.9 million, or 6.2 percent as compared to the first quarter of 1996. This increase was partially attributable to increases in advertising, acquisition premium amortization for Central Jersey, and other miscellaneous expenses. 15 LIQUIDITY Liquidity is the ability to meet the borrowing needs and deposit withdrawal requirements of customers and support asset growth. Principal sources of liquidity are deposit generation, access to purchased funds, maturities and repayments of loans and investment securities and interest and fee income. The consolidated statements of cash flows present the change in cash and due from banks from operating, investing and financing activities. During the first three months of 1997, net cash provided by operating activities totaled $142.9 million. Contributing to net cash provided by operating activities were the results of operations adjusted for the restructuring charges, the provisions for loan losses and other real estate owned, and proceeds from the sales of mortgages held for sale. Net cash used in investing activities totaled $465.4 million and was the result of investment and loan activity. During the first three months of 1997, there were proceeds of $365.7 million from maturities in the securities portfolios. Scheduled maturities and anticipated principal repayments of the held to maturity portfolio will approximate $860.2 million throughout the balance of 1997. In addition, the securities available for sale portfolio is another source of liquidity. These sources can be used to meet the funding needs during periods of loan growth. Other uses of funds included an increase in total loans of $265.0 million, and $733.7 million of purchased securities. Net cash provided by financing activities totaled $12.9 million. The issuance of $150.0 million in capital trust pass-through securities was a source of funds, offset by a decrease of $95.2 million in deposits and $19.2 million in borrowed funds. Liquidity is also available through additional lines of credit and the ability to incur additional debt. In addition, the banking subsidiaries have established lines of credit with the Federal Reserve Bank and the Federal Home Loan Bank of New York and other correspondent banks which further support and enhance liquidity. 16 PART II. OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS. - --------------------------- 1. In re Payroll Express Corporation of New York and Payroll --------------------------------------------------------- Express Corporation, United States Bankruptcy Court for the - ------------------- Southern District of New York. Case Nos. 92-B-43 149 (CB) and 92-B-43 150 (CB). Reported on Form 10-K for the period ended December 31, 1996. The bankruptcy trustee's fraudulent conveyance claim against the Bank, John E. Pereira, as Chapter --------------------------- 11 Trustee of the Estate of Payroll Express Corporation et al. - ------------------------------------------------------------- V. United Jersey Bank, United States Bankruptcy Court for the - ---------------------- Southern District of New York, Adversary Proceeding No. 94-8297A, has been settled in principle but the settlement cannot be concluded until the court has approved it. Neither the trustee's preference claim against the Bank nor the Payroll Express customers' claims will be affected by the proposed settlement. 2. Michael Hochman and Joan Hochman, individually and on behalf ------------------------------------------------------------ of a class of similarly situated depositors v. United Jersey - ---------------------------------------------------------------- Bank, a New Jersey corporation and UJB Financial Corp., a New - ---------------------------------------------------------------- Jersey Corporation, originally filed on December 7, 1995 in the - ------------------ Superior Court of New Jersey, Law Division, Middlesex County, Docket No. MID-L-10623-95, and removed to the United States District Court for the District of New Jersey, Case No.96-916 (MTB). Reported on Form 10-K for the period ended December 31, 1996. On May 2, 1997, the District Court granted the bank's motion for summary judgment as to the plaintiff's federal claims under the Truth in Savings Act and remanded the remainder of the plaintiffs' claims back to the state court. 3. Cushman & Wakefield of New Jersey, Inc. v. Alexander Summer ----------------------------------------------------------- Company and United Jersey Bank. Filed December 26, 1989 in the - ------------------------------- Superior Court of New Jersey, Bergen County, Docket No. L-000012-90; cross-appealed to the Superior Court of New Jersey, Appellate Division, Docket No. A-1531-94 (T1); petition to the New Jersey Supreme Court for certification, Docket number 43,333. Reported on Form 10-K for the period ended December 31, 1996. On April 28, 1997, the New Jersey Supreme Court granted the Bank's petition for certification. 17 ITEM 2. CHANGES IN SECURITIES. - ------------------------------- (a) At the annual meeting of shareholders of the Company held on April 18, 1997 the shareholders of the Company approved a proposal to amend the Restated Certificate of Incorporation of the Company to increase authorized Common Stock, $1.20 par value, from 130 million shares to 260 million shares. (c) On March 20, 1997, Summit Capital Trust ("Trust"), a statutory business trust created under the laws of the State of Delaware and wholly-owned subsidiary of the Company, issued $150.0 million of 8.4 percent Capital Trust Pass-through Securities, representing undivided beneficial interests in the assets of the Trust ("Capital Securities"), and $4.6 million of 8.4 percent Common Securities, representing undivided beneficial interest in the assets of the Trust ("Common Securities") (collectively, the Capital Securities and Common Securities are referred to as the "Trust Securities"). The Trust used the proceeds received from the sale of the Trust Securities to purchase $154.6 million of 8.4 percent Junior Subordinated Deferrable Interest Debentures due 2027 issued by the Company ("Subordinated Debentures"). The Trust was created solely for the purpose of investing the proceeds received for the sale of the Trust Securities in the Subordinated Debentures. The Trust Securities and Subordinated Debentures were issued in reliance on an exemption from the provisions of Section 5 of the Securities Act of 1933 provided by Section (4)(2) thereof. The Capital Securities were sold through Salomon Brothers, Inc., Citicorp Securities, Inc., Lehman Brothers, Inc. and Merrill Lynch, Peirce, Fenner & Smith, Incorporated (The "Initial Purchasers") to "Qualified Institutional Buyers" ("QIBs") as defined in Rule 144A under the Securities Act. The Company paid underwriting compensation of $1.5 million. 18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------- The annual meeting of the shareholders of Summit Bancorp. was held April 18, 1997. The following is a brief description of each matter voted on at the meeting. PROPOSAL 1 - ELECTION OF DIRECTORS - ---------------------------------- The following Directors were nominated for election to the Board of Directors as Class I Directors for a three year term: James C. Brady, Jr., T.J. Dermot Dunphy, Fred G. Harvey, Francis J. Mertz, T. Joseph Semrod and Douglas G. Watson. PROPOSAL 2 - AMENDMENT TO THE RESTATED CERTIFICATE OF - ----------------------------------------------------- INCORPORATION OF SUMMIT BANCORP. - -------------------------------- Shareholders were presented with a proposal to approve an amendment to the Summit Bancorp. Restated Certificate of Incorporation increasing authorized Common Stock from 130 million to 260 million shares. PROPOSAL 3 - INDEPENDENT ACCOUNTANTS - ------------------------------------ Shareholders were presented with a proposal to ratify the selection of KPMG Peat Marwick LLP, independent certified public accountants, to audit the consolidated financial statements of Summit Bancorp. and its subsidiaries for the year ending December 31, 1997. The results of the voting at the annual meeting were as follows: SHARES ----------------------------- PROPOSAL FOR WITHHELD - ---------------------------------------------------------------- 1 - Election of Directors James C. Brady, Jr. 81,355,793 955,107 T.J. Dermot Dunphy 81,415,521 895,379 Fred G. Harvey 81,416,583 894,317 Francis J. Mertz 81,437,978 872,922 T. Joseph Semrod 81,364,734 946,166 Douglas G. Watson 78,004,883 4,306,017 FOR AGAINST ABSTAIN -------------------------------- 2 - Amendment to Restated Certificate of Incorporation of Summit Bancorp. increasing authorized Common Stock from 130 million to 260 million shares 77,015,248 4,634,347 661,305 3 - Independent Accountants 81,562,664 340,955 407,281 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. - ------------------------------------------ (a) Exhibits -------- (10) EE.(v) Amendment to form of Termination Agreement between Summit Bancorp. and various executive officers. (27) Summit Bancorp. financial data schedule - March 31, 1997 (b) Reports on Form 8-K ------------------- In a current report on Form 8-K dated February 27, 1997, the Company under Item 5, Other Events, and Item 7, Financial Statements and Exhibits, reported the execution of an Agreement and Plan of Merger, dated February 27, 1997, among Collective Bancorp, Inc. and Summit Bancorp. and a meeting with investment analysts in connection therewith. In a current report on Form 8-K dated March 7, 1997, the Company under Item 5, Other Events, and Item 7, Financial Statements and Exhibits, filed certain consolidated financial statements and other materials from the Company's 1996 Annual Report to Shareholders. 20 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUMMIT BANCORP. --------------------- Registrant DATE: May 13, 1997 BY: /s/ WILLIAM J. HEALY ---------------------- William J. Healy Executive Vice President and Comptroller (Duly Authorized Officer and Chief Accounting Officer) 21 EXHIBIT INDEX ------------- Exhibit No. Description - -------------------------------------------------- (10) EE.(v) Amendment to form of Termination Agreement between Summit Bancorp. and various executive officers. (27) Summit Bancorp. financial data schedule - March 31, 1997 22 EX-10 2 EXHIBIT (10) EE. (v) AMENDMENT NO. 4 TO TERMINATION AGREEMENT THIS AMENDMENT NO. 4 dated and entered into effective as of the 20th day of March, 1996, to the TERMINATION AGREEMENT (the Agreement) by and between United Jersey Banks (now Summit Bancorp), a New Jersey corporation (the Company) and [executive officer] (the Executive), as amended by Amendment No. 1 dated December 20, 1989, Amendment No. 2 dated October 16, 1991 and Amendment No. 3 dated December 16, 1992. WITNESSETH: WHEREAS, the Company and the Executive have previously entered into the Agreement referred to above; and WHEREAS, the Company and the Executive desire to amend the Agreement to extend the term of the Agreement; NOW, THEREFORE, to assure the Company of the Executive's continued dedication and the availability of his advice and counsel in the event of any proposed change of control of the Company, to induce the Executive to remain in the employ of the Company or a Subsidiary of the Company, and to reward the Executive for his valuable, dedicated service to the Company or a Subsidiary should his service be terminated under circumstances described in the Agreement, and for other good and valuable consideration, the receipt and adequacy whereof each party acknowledges, the Company and the Executive agreed that the Agreement is hereby amended as follows: 1.Paragraph 1.(b) of the Agreement is amended in its entirety to read as follows: 1.(b) The Company shall be obligated to make the payments referred to in paragraphs 3 and 4 hereof following, and the provisions of paragraph 2 hereof shall apply to, a Change in Control of the Company only if such Change in Control shall have occurred prior to, or as a result of efforts designed to attain such and known to the parties hereto to have commenced prior to, January 11, 1999 (or such later date as the Board shall determine). IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to the Agreement as of the date set forth above. SUMMIT BANCORP. EXECUTIVE BY:______________________________________________________________ T. Joseph Semrod, Chairman of the Board [Name of Executive and Chief Executive Officer Officer] EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1997 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS DEC-31-1997 MAR-31-1997 968930 13457 188800 33806 3079597 3085774 3042849 15495945 277011 23439345 18831534 1374190 385564 830257 0 0 118141 1899659 23439345 309338 95173 1051 405562 132795 165505 240057 14500 1140 189252 101741 66485 0 0 66485 0.68 0.68 4.59 117725 58905 0 7502 276438 19943 6016 277011 142890 0 134121
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