-----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, VX+mEqgcd8YDuPzQ39MwV7RKg4sEufVBNyZW1SRC9HORUIiVEMdR9auk8TUG/LOq l+VUPoIh5MnQMcq3Lep8dw== 0000101320-97-000011.txt : 19971117 0000101320-97-000011.hdr.sgml : 19971117 ACCESSION NUMBER: 0000101320-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-06451 FILM NUMBER: 97720107 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 9/30/97 ============================================================================= 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 September 30, 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 October 31, 1997 there were 176,013,383 shares of common stock, $.80 par value, outstanding. ============================================================================= SUMMIT BANCORP. FORM 10-Q INDEX Page No. Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1997, December 31, 1996 and September 30, 1996........................................ 2 Consolidated Statements of Income - Three and Nine Months Ended September 30, 1997 and 1996....3 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996..............4 Consolidated Statements of Shareholders' Equity - Nine Months Ended September 30, 1997 and 1996..............5 Consolidated Average Balance Sheets With Resultant Interest and Rates - Nine Months Ended September 30, 1997 and 1996..............6 Notes to Consolidated Financial Statements...................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................10 Part II. Other Information. Item 1. Legal Proceedings...........................................21 Item 2. Changes in Securities.......................................22 Item 3. Defaults Upon Senior Securities.............................22 Item 4. Submission of Matters to a Vote of Security Holders.........22 Item 5. Other Information...........................................22 Item 6. Exhibits and Reports on Form 8-K............................23 Signature...................................................25 Exhibit Index...............................................26 1 SUMMIT BANCORP. CONSOLIDATED BALANCE SHEETS Unaudited (dollars in thousands)
September 30, December 31, September 30, 1997 1996 1996 ------------- ------------ ------------ Assets Cash and due from banks $ 1,117,347 $ 1,327,507 $ 1,407,284 Federal funds sold and securities purchased under agreements to resell 14,359 114,789 4,052 Interest bearing deposits with banks 4,309 24,825 9,136 Securities: Trading account securities 29,808 26,376 20,049 Securities available for sale 4,596,923 2,872,051 2,643,827 Securities held to maturity 4,078,729 5,422,093 5,492,568 ------------- ------------ ------------ Total securities 8,705,460 8,320,520 8,156,444 Loans (net of unearned discount): Commercial 5,846,194 5,220,939 5,435,472 Commercial mortgage 2,808,423 2,624,427 2,605,424 Residential mortgage 5,803,498 5,904,490 5,689,812 Consumer 4,172,548 3,636,203 3,547,038 ------------- ------------ ------------ Total loans 18,630,663 17,386,059 17,277,746 Less: Allowance for loan losses 294,114 280,611 284,223 ------------- ------------ ------------ Net loans 18,336,549 17,105,448 16,993,523 ------------- ------------ ------------ Premises and equipment 239,209 244,193 243,259 Accrued interest receivable 170,857 169,236 167,303 Due from customers on acceptances 15,814 15,671 15,756 Other assets 487,202 445,082 408,259 ------------- ------------ ------------ Total Assets $ 29,091,106 $ 27,767,271 $ 27,405,016 ============= ============ ============ Deposits: Non-interest bearing demand deposits $ 4,256,398 $ 4,080,316 $ 4,178,322 Interest bearing deposits: Savings and time deposits 16,780,101 16,812,682 16,314,409 Commercial certificates of deposit $100,000 and over 901,529 736,533 960,907 ------------- ------------ ------------ Total deposits 21,938,028 21,629,531 21,453,638 ------------- ------------ ------------ Other borrowed funds 3,256,136 2,806,367 3,013,320 Accrued expenses and other liabilities 294,432 272,968 264,306 Accrued interest payable 67,640 56,103 65,834 Bank acceptances outstanding 15,814 15,671 15,756 Long-term debt 1,001,617 695,793 397,862 ------------- ------------ ------------ Total liabilities 26,573,667 25,476,433 25,210,716 Shareholders' equity: Preferred stock: Series B and C - - 42,620 Common stock par value $ .80: Authorized 390,000,000 shares; issued and outstanding 175,735,180 at September 30, 1997; 168,296,135 at December 31, 1996 and issued 168,165,506 at September 30, 1996 140,588 134,637 134,527 Surplus 968,881 918,411 917,238 Retained earnings 1,402,581 1,237,892 1,179,878 ESOP Debt (4,470) (5,816) (6,085) Net unrealized gain (loss) on securities, net of tax 9,859 5,714 11,985 ------------- ------------ ------------ 2,517,439 2,290,838 2,280,163 Treasury stock (3,326,663 shares at September 30, 1996) - - (85,863) ------------- ------------ ------------ Total shareholders' equity 2,517,439 2,290,838 2,194,300 ------------- ------------ ------------ Total Liabilities and Shareholders' Equity $ 29,091,106 $ 27,767,271 $ 27,405,016 ============= ============ ============ See accompanying Notes to Consolidated Financial Statements.
2 SUMMIT BANCORP. CONSOLIDATED STATEMENTS OF INCOME Unaudited (dollars in thousands, except per share data)
Nine Months Ended Three Months Ended September 30, September 30, ------------------------- ------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Interest Income Loans $ 1,121,321 $ 1,034,325 $ 380,000 $ 348,014 Securities: Trading account securities 1,876 1,172 772 253 Securities available for sale 164,594 121,544 60,313 39,287 Securities held to maturity 243,756 265,282 75,305 86,129 ----------- ----------- ----------- ----------- Total securities 410,226 387,998 136,390 125,669 Federal funds sold and securities purchased under agreements to resell 3,579 3,697 982 1,129 Deposits with banks 520 570 129 157 ----------- ----------- ----------- ----------- Total interest income 1,535,646 1,426,590 517,501 474,969 ----------- ----------- ----------- ----------- Interest Expense Savings and time deposits 473,169 458,108 158,122 150,774 Commercial certificates of deposit $100,000 and over 35,445 36,376 12,271 12,858 Borrowed funds, including long-term debt 172,420 144,635 59,326 46,192 ----------- ----------- ----------- ----------- Total interest expense 681,034 639,119 229,719 209,824 ----------- ----------- ----------- ----------- Net interest income 854,612 787,471 287,782 265,145 Provision for loan losses 45,100 47,599 14,500 15,910 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 809,512 739,872 273,282 249,235 ----------- ----------- ----------- ----------- Non-Interest Income Service charges on deposit accounts 85,506 77,823 28,926 26,607 Service and loan fee income 36,753 34,267 12,490 10,999 Trust income 35,342 28,787 12,644 9,975 Securities gains 3,471 1,268 1,265 (237) Other 54,028 49,378 18,847 16,471 ----------- ----------- ----------- ----------- Total non-interest income 215,100 191,523 74,172 63,815 ----------- ----------- ----------- ----------- Non-Interest Expenses Salaries 216,109 200,297 73,254 64,329 Pension and other employee benefits 69,887 68,711 22,233 21,464 Occupancy, net 54,313 59,512 18,027 18,258 Furniture and equipment 57,569 51,236 19,415 17,155 Communications 25,747 24,578 8,416 8,084 Advertising and public relations 16,620 12,673 5,813 4,008 Deposit insurance premiums 4,368 8,352 1,407 2,835 Savings Association Insurance Fund assessment - 11,059 - 11,059 Restructuring charges 83,000 110,700 56,500 - Other 97,948 96,341 32,221 30,733 ----------- ----------- ----------- ----------- Total non-interest expenses 625,561 643,459 237,286 177,925 ----------- ----------- ----------- ----------- Income before income taxes 399,051 287,936 110,168 135,125 Federal and state income taxes 140,299 100,992 38,956 47,624 ----------- ----------- ----------- ----------- Net Income $ 258,752 $ 186,944 $ 71,212 $ 87,501 =========== =========== =========== =========== Net Income per Common Share $ 1.48 $ 1.11 $ 0.41 $ 0.52 =========== =========== =========== =========== Average Common Shares Outstanding (in thousands) 174,896 167,023 175,396 166,908 =========== =========== =========== =========== See accompanying Notes to Consolidated Financial Statements.
3 SUMMIT BANCORP. CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (dollars in thousands)
Nine Months Ended September 30, --------------------------- 1997 1996 ------------- ------------- Operating activities Net income $ 258,752 $ 186,944 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses and other real estate owned 46,308 49,943 Depreciation, amortization and accretion, net 58,794 30,410 Restructuring and other non-recurring charges 83,000 121,759 Gains on sales of trading account securities and securities available for sale (1,832) (1,534) Gains on sales of mortgages held for sale (4,791) (2,968) Gains on sales of other real estate owned (2,691) (1,616) Proceeds from sales of other real estate owned 23,865 24,813 Proceeds from sales of mortgages held for sale 318,552 257,643 Originations of mortgages held for sale (336,854) (393,621) (Increase) decrease in trading account securities (5,071) 22,183 Decrease in accrued interest receivable and other assets 18,475 51,307 Decrease in accrued interest payable, accrued expenses and other liabilities (107,240) (123,264) ------------- ------------- Net cash provided by operating activities 349,267 221,999 ------------- ------------- Investing activities Purchases of securities held to maturity (191,636) (916,796) Purchases of securities available for sale (2,050,670) (551,393) Proceeds from maturities of securities held to maturity 738,691 929,656 Proceeds from maturities of securities available for sale 645,547 376,235 Proceeds from sales of securities available for sale 636,597 151,652 Net decrease in Federal funds sold and securities purchased under agreements to resell 148,880 174,640 Net decrease in interest bearing deposits with banks 20,614 9,193 Net increase in loans (520,458) (405,692) Purchases of premises and equipment, net (22,363) (10,794) ------------- ------------- Net cash used in investing activities (594,798) (243,299) ------------- ------------- Financing activities Net decrease in deposits (541,583) (318,941) Net increase in short-term borrowings 325,394 523,790 Principal payments on long-term debt (33,452) (33,085) ESOP debt repayment 911 807 Proceeds from issuance of long-term debt 176,300 - Proceeds from issuance of capital trust pass-through securities 150,000 - Dividends paid (120,199) (111,517) Proceeds from issuance of common stock under dividend reinvestment and other stock plans 21,704 24,473 Treasury stock purchased - (85,863) ------------- ------------- Net cash used in financing activities (20,925) (336) ------------- ------------- Decrease in cash and due from banks (266,456) (21,636) Beginning cash balance of acquired entities 56,296 24,946 Cash and due from banks at beginning of period 1,327,507 1,403,974 ------------- ------------- Cash and due from banks at end of period $ 1,117,347 $ 1,407,284 ============= ============= Supplemental disclosure of cash flow information Cash paid: Interest payments $ 671,312 $ 624,193 Income tax payments 145,500 122,836 Noncash investing activities: Net transfer of securities from held to maturity to available for sale resulting from acquisitions 805,854 - Net transfer of loans to other real estate owned 13,518 18,706 See accompanying Notes to Consolidated Financial Statements.
4 SUMMIT BANCORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Unaudited (dollars in thousands)
Net Total Preferred Common Retained ESOP Treasury Unrealized Shareholders' Stock Stock Surplus Earnings Debt Stock Gain (Loss) Equity --------- --------- --------- --------- ----------- ----------- ----------- ----------- Balance, December 31, 1995 $ 42,620 $ 128,028 $ 864,428 $1,094,624 $ (6,892) $ - $ 7,300 $ 2,130,108 Balances at beginning of period of immaterial pooled acquisitions (6,529,628 shares) - 5,224 29,612 14,054 - - (567) 48,323 Net income - - - 186,944 - - - 186,944 Cash dividends declared: Preferred stock - - - (1,917) - - - (1,917) Common stock - - - (113,827) - - - (113,827) Common stock issued: Dividend reinvestment and other stock plans (431,986 shares) - 339 9,951 - - - - 10,290 Exercise of stock options, net (1,169,288 shares) - 936 13,247 - - - - 14,183 ESOP Debt Repayment - - - - 807 - - 807 Treasury stock - - - - - (85,863) - (85,863) Change in unrealized gain (loss) on securities, net of tax - - - - - - 5,252 5,252 --------- --------- --------- --------- ----------- ----------- ----------- ----------- Balance, September 30, 1996 $ 42,620 $ 134,527 $ 917,238 $1,179,878 $ (6,085) $ (85,863) $ 11,985 $ 2,194,300 ========= ========= ========= ========= =========== =========== =========== =========== Balance, December 31, 1996 $ - $ 134,637 $ 918,411 $1,237,892 $ (5,816) $ - $ 5,714 $ 2,290,838 Adjustment for the pooling of a company with a different fiscal year end - (158) (4,771) 9,288 539 - 1,832 6,730 --------- --------- --------- --------- ----------- ----------- ----------- ----------- Adjusted beginning balance - 134,479 913,640 1,247,180 (5,277) - 7,546 2,297,568 Balances at beginning of period of immaterial pooled acquisition (6,046,577 shares) - 4,837 34,705 25,562 - - (278) 64,826 Net income - - - 258,752 - - - 258,752 Cash dividends declared on common stock - - - (128,913) - - - (128,913) Common stock issued: Dividend reinvestment and other stock plans (184,774 shares) - 148 5,427 - - - - 5,575 Exercise of stock options, net (1,404,416 shares) - 1,124 15,005 - - - - 16,129 ESOP Debt repayment - - 104 - 807 - - 911 Change in unrealized gain (loss) on securities, net of tax - - - - - - 2,591 2,591 --------- --------- --------- --------- ----------- ----------- ----------- ----------- Balance, September 30, 1997 $ - $ 140,588 $ 968,881 $1,402,581 $ (4,470) $ - $ 9,859 $ 2,517,439 ========= ========= ========= ========= =========== =========== =========== =========== 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)
Nine Months Ended September 30, --------------------------------------------------------------- 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 $ 87,395 $ 3,579 5.48 % $ 76,920 $ 3,697 6.42 % Interest bearing deposits with banks 12,483 520 5.57 14,168 570 5.37 Securities: Trading account securities 35,327 1,929 7.30 28,587 1,182 5.52 Securities available for sale 3,446,290 165,933 6.42 2,585,697 122,475 6.32 Securities held to maturity 5,104,860 249,036 6.50 5,609,591 271,122 6.44 ----------- --------- ------- ----------- --------- ------- Total securities 8,586,477 416,898 6.47 8,223,875 394,779 6.40 ----------- --------- ------- ----------- --------- ------- Loans: Commercial 5,586,702 355,418 8.51 5,319,191 333,771 8.38 Commercial mortgage 2,798,431 183,432 8.74 2,664,257 172,971 8.66 Residential mortgage 5,985,504 333,928 7.44 5,615,873 314,234 7.46 Consumer 3,997,691 252,690 8.45 3,423,949 217,547 8.49 ----------- --------- ------- ----------- --------- ------- Total loans 18,368,328 1,125,468 8.19 17,023,270 1,038,523 8.15 ----------- --------- ------- ----------- --------- ------- Total interest earning assets 27,054,683 1,546,465 7.64 25,338,233 1,437,569 7.58 ----------- --------- ------- ----------- --------- ------- Non-interest earning assets: Cash and due from banks 1,033,494 1,287,176 Allowance for loan losses (298,651) (301,051) Other assets 921,838 876,667 ----------- ----------- Total non-interest earning assets 1,656,681 1,862,792 ----------- ----------- Total Assets $28,711,364 $27,201,025 =========== =========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 9,641,202 188,871 2.62 $ 9,268,351 176,387 2.54 Time deposits 7,351,386 284,298 5.17 7,317,940 281,721 5.14 Commercial certificates of deposit $100,000 and over 880,414 35,445 5.38 901,867 36,376 5.39 ----------- --------- ------- ----------- --------- ------- Total interest bearing deposits 17,873,002 508,614 3.80 17,488,158 494,484 3.78 ----------- --------- ------- ----------- --------- ------- Commercial paper 44,846 1,830 5.46 43,898 1,726 5.25 Other borrowed funds 3,065,196 125,738 5.48 2,897,490 112,693 5.20 Long-term debt 850,173 44,852 7.03 405,947 30,216 9.92 ----------- --------- ------- ----------- --------- ------- Total interest bearing liabilities 21,833,217 681,034 4.17 20,835,493 639,119 4.10 ----------- --------- ------- ----------- --------- ------- Non-interest bearing liabilities: Demand deposits 4,083,140 3,804,624 Other liabilities 335,259 362,201 ----------- ----------- Total non-interest bearing liabilities 4,418,399 4,166,825 ----------- ----------- Shareholders' equity: Preferred equity - 42,620 Common equity 2,459,748 2,156,087 ----------- ----------- Total Shareholders' Equity 2,459,748 2,198,707 ----------- ----------- Total Liabilities and Shareholders' Equity $28,711,364 $27,201,025 =========== --------- =========== --------- Net Interest Income (tax-equivalent basis) 865,431 3.47 % 798,450 3.48 % --------- ======= --------- ======= Tax-equivalent basis adjustment (based on a Federal income tax rate of 35%) (10,819) (10,979) --------- --------- Net Interest Income $ 854,612 $ 787,471 ========= ========= Net Interest Income as a Percent of Interest Earning Assets (tax-equivalent basis) 4.28 % 4.21 % ======= ======= 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. For additional information and disclosures required under generally accepted accounting principles ("GAAP"), reference is made to the registrant's 1996 Annual Report on Form 10-K. These financial statements give effect to the merger of Collective Bancorp, Inc. ("Collective") which was consummated on August 1, 1997, as a result of which all financial information has been restated. On August 20, 1997, the Board of Directors of the Company approved a 3-for-2 common stock split, payable on September 24, 1997, to shareholders of record on September 3, 1997. In connection with the stock split, the Company amended its Restated Certificate of Incorporation to provide for a corresponding increase in the number of authorized shares of common stock from 260,000,000 to 390,000,000 and preferred stock from 4,000,000 to 6,000,000 and a decrease in the par value of the common stock from $1.20 per share to $.80 per share. Additionally, all share data has been retroactively adjusted for the common stock split. The Company currently calculates earnings per share in accordance with Accounting Principles Board ("APB") Opinion No. 15, "Earnings Per Share." Earnings per 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 August 1, 1997, the Company completed the acquisition of Collective in an exchange of .895 shares (pre-split) of the Company's common stock for each share of Collective common stock. As of June 30, 1997, Collective, which operated Collective Bank, had assets of $5.5 billion, loans of $2.9 billion and deposits of $3.5 billion, with over 80 branches in 15 counties located throughout New Jersey. This acquisition was accounted for as a pooling of interests and all financial information has been restated to reflect the combined financial information. After giving effect to the merger exchange ratio and the common stock split, there were 27.3 million shares of common stock of the Company issued for all of the outstanding shares of Collective. A restructuring charge of $56.5 million ($37.1 million or $.21 per share after tax) was recorded as a result of this acquisition. 7 On March 1, 1997, the Company completed the acquisition of B.M.J. Financial Corp. ("BMJ"). 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 $.10 per share after tax) was recorded as a result of this acquisition. At December 31, 1996, BMJ had total assets of $676.0 million, loans of $449.0 million and deposits of $552.0 million, with 20 branches throughout Burlington, Mercer and Ocean counties. 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, with five branches located in central New Jersey. Intangible assets totaling $41.4 million were recorded as a result of this acquisition. On October 1, 1996, Collective completed the acquisition of Continental Bancorporation ("Continental") for $25.7 million in cash. This acquisition was accounted for as a purchase. Continental had total assets of $161.3 million and deposits of $129.5 million, with five branches located in Camden County. Intangible assets totaling $16.9 million were recorded as a result of this acquisition. Garden State Bancshares, Inc. was acquired on January 16, 1996, and The Flemington National Bank and Trust Company 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 financial information has been restated to reflect the combined results of operations. A restructuring charge of $110.7 million ($70.0 million or $.42 per share after tax) was recorded primarily as a result of these acquisitions as well as a supermarket branch initiative. 3.) Recent Accounting Pronouncements On March 3, 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earning Per Share." SFAS No. 128 establishes new standards for the computation and presentation of earnings per share ("EPS") by simplifying the standards prescribed in APB Opinion No. 15. Under the new requirements, the Company will be required to present both basic and diluted EPS on the face of the income statement. Basic EPS will replace the current EPS terminology and continue to be computed by dividing income available to common shareholders by the weighted - -average number of common shares outstanding. Diluted EPS will include any additional common shares as if all potentially dilutive common shares were issued. The 8 Company will be required to adopt SFAS No. 128 for the period ended December 31, 1997. All prior-period EPS data is required to be restated. The impact of adopting SFAS No. 128 is not expected to be material to the Company. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF ----------------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ----------------------------------------------- Summit Bancorp. is a bank holding company located in Princeton, New Jersey. Effective August 1, 1997, the Company completed its acquisition of Collective Bancorp, Inc., a unitary savings and loan holding company and the sole shareholder of Collective Bank, a federally chartered savings bank. This acquisition was accounted for as a pooling of interests and all financial information has been restated to reflect the combined results of operations. See Note 2 of the financial statements. 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. Since October 1996, the Company completed three acquisitions that affect comparisons to prior year financial information. The purchase acquisitions of Continental Bancorporation and Central Jersey Financial Corporation were completed on October 1,1996 and December 7, 1996, respectively. The first quarter acquisition of B.M.J. Financial Corp. was completed on March 1, 1997, and has been reflected in the financial statements from January 1, 1997. FINANCIAL CONDITION September 30, 1997 versus December 31, 1996 Total assets at September 30, 1997, were $29.1 billion, an increase of $1.3 billion or 4.8 percent from year-end 1996. Approximately $816.6 million of this increase was the result of the acquisitions that were not reflected in the 1996 results. Excluding the impact of these acquisitions, total assets increased $507.3 million, or 1.8 percent from year-end 1996. Securities held to maturity at September 30, 1997, were $4.1 billion and were comprised of $2.9 billion of U.S. Government and Federal agency securities, $200.8 million of state and political subdivision securities and $1.0 billion of other securities, predominately corporate collateralized mortgage obligations. These securities decreased $1.3 billion or 24.8 percent from year-end 1996. This decrease primarily resulted from the transfer of securities, predominately U.S. Government and Federal agency securities, with a carrying value of $805.9 million to the available-for-sale portfolio. These securities had a fair market value of $808.4 million. These transfers were made in connection with the Collective and BMJ acquisitions and were made to maintain the Company's interest rate risk position under its existing asset and liability management approach. 10 Also contributing to this decrease in securities held to maturity were $738.7 million in maturities, most of which were reinvested in the available-for-sale portfolio. This decrease was offset by $191.6 million in purchases. At September 30, 1997, the aggregate market value of the held-to-maturity portfolio was $4.1 billion. The aggregate market value at December 31, 1996, was $5.3 billion. At September 30, 1997, securities available for sale amounted to $4.6 billion and were predominately comprised of U.S. Government and Federal agency securities. These securities increased $1.7 billion or 60.1 percent from year-end 1996. This increase resulted primarily from the transfer of securities from the held-to-maturity portfolio. For the first nine months of 1997, $2.1 billion of securities were purchased. These increases were offset by maturities of $645.5 million and sales of $636.6 million. At September 30, 1997, total loans amounted to $18.6 billion and increased $1.2 billion or 7.2 percent from year-end 1996. Approximately $502.7 million of this increase was attributable to acquisitions that were not reflected in the 1996 results. Commercial loans at September 30, 1997, increased $625.3 million or 12.0 percent from year-end 1996 due to growth in both the middle market and asset based lending areas. Commercial mortgage loans increased $184.0 million or 7.0 percent, and residential mortgage loans decreased $101.0 million or 1.7 percent from December 31, 1996. Contributing to this decline, in the third quarter $140.5 million of mortgage loans, predominately adjustable rate, were sold to mitigate prepayment risk. Consumer loans increased $536.3 million or 14.8 percent from year-end 1996 to $4.2 billion, due to growth in home equity lending and automobile financing. Total deposits were $21.9 billion at September 30, 1997, an increase of $308.5 million or 1.4 percent from December 31, 1996. Demand deposits increased $176.1 million or 4.3 percent from year-end 1996 to $4.3 billion. Savings and time deposits at $16.8 billion decreased $32.6 million or .2 percent from December 31, 1996. Commercial certificates of deposit $100,000 and over were $901.5 million an increase of $165.0 million or 22.4 percent compared to December 31, 1996. Borrowed funds, including long-term debt, at September 30, 1997, increased $755.6 million or 21.6 percent from December 31, 1996, to $4.3 billion. In the first quarter of 1997, the Company issued $150.0 million of 8.40 percent capital trust pass-through securities. The Company has used the proceeds from the capital trust securities for general corporate purposes. Most of the remaining increase in borrowed funds was in short-term borrowings which were used to fund growth in interest-earning assets, particularly in the commercial and consumer loan categories and securities available for sale. Total shareholders' equity increased $226.6 million or 9.9 percent from December 31, 1996, to $2.5 billion. In addition to earnings, contributing to this increase in shareholders' equity was the BMJ acquisition, which added $64.8 million. During the third quarter of 1997, the quarterly dividend paid on common stock was increased from $.24 to $.27 per share on a 11 post-split basis. At September 30, 1997, the unrealized gain on securities, net of tax, amounted to $9.9 million, compared to an unrealized gain of $5.7 million at year-end 1996. Capital ratios for September 30, 1997, as compared to select prior periods, are shown in the following table. The capital ratios for 1997 were benefited by the first quarter issuance of $150.0 million of capital trust pass-through securities.
Sept. 30, Dec. 31, Sept. 30, Selected Capital Ratios: 1997 1996 1996 ------------------------- --------- -------- --------- Equity to assets 8.65% 8.25% 8.01% Leverage ratio 8.72 7.73 7.57 Tier I capital 12.73 11.68 11.30 Total risk-based capital 15.13 14.17 13.84
Non-performing Assets Non-performing assets include non-performing loans and other real estate owned ("OREO") and are shown in the following table as of September 30, 1997, December 31, 1996, and September 30, 1996.
Sept. 30, Dec. 31, Sept. 30, 1997 1996 1996 --------- --------- --------- Non-performing loans: Commercial and industrial $ 31,368 $ 54,308 $ 52,961 Construction 10,760 31,901 32,857 Real estate related 46,829 52,922 81,648 --------- --------- --------- Total non-performing loans 88,957 139,131 167,466 OREO 19,121 26,406 26,618 --------- --------- --------- Total non-performing assets $ 108,078 $ 165,537 $ 194,084 ========= ========= ========= Non-performing loans to total loans 0.48% 0.80% 0.97% Non-performing assets to total loans and OREO 0.58 0.95 1.12
The average balance of non-performing loans for the nine months ended September 30, 1997, was $113.1 million. Interest income received on non-performing loans amounted to $2.0 million for the nine months ended September 30, 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 $67.5 million at September 30, 1997, compared to $79.0 million and $85.1 million at December 31, 1996, and September 30, 1996, respectively. 12 Allowance for Loan Losses The allowance for loan losses at September 30, 1997, was $294.1 million, or 1.58 percent of loans, compared to $280.6 million or 1.61 percent of loans at December 31, 1996, and $284.2 million or 1.65 percent of loans at September 30, 1996. For the nine months ended September 30, 1997, net charge offs were $41.6 million, or .30 percent of average loans compared to $62.9 million, or .49 percent of average loans in the first nine months of 1996. For the quarter ended September 30, 1997, net charge offs amounted to $14.5 million, or .31 percent of average loans compared to $20.9 million, or .48 percent of average loans for the third quarter of 1996. The coverage of non-performing loans at September 30, 1997, was 330.62 percent compared to 201.69 percent at year-end 1996, respectively. Transactions in the allowance for loan losses are shown in the following table (dollars in thousands):
Nine Months Ended September 30, ------------------------------- 1997 1996 --------------- ------------- Balance, January 1 $ 280,611 $ 293,160 Acquisition adjustments, net 9,994 6,342 Provision charged to expense 45,100 47,599 --------------- ------------- 335,705 347,101 Less charge offs: Commercial and industrial 19,143 29,725 Construction and development 2,872 15,327 Commercial mortgage 9,687 16,985 Residential mortgage 11,622 4,799 Consumer 21,522 13,504 --------------- ------------- Total charge offs 64,846 80,340 --------------- ------------- Add recoveries: Commercial and industrial 10,562 9,034 Construction and development 3,274 2,321 Commercial mortgage 3,841 2,238 Residential mortgage 769 497 Consumer 4,809 3,372 --------------- ------------- Total recoveries 23,255 17,462 --------------- ------------- Net charge offs 41,591 62,878 --------------- ------------- Balance, September 30 $ 294,114 $ 284,223 =============== =============
13 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, in excess of specific and general reserves, was $155.5 million at September 30, 1997, compared to $133.2 million at December 31, 1996. 14 RESULTS OF OPERATIONS For the third quarter of 1997, the Company reported net income of $71.2 million or $.41 per share compared to net income of $87.5 million or $.52 per share earned during the third quarter of 1996. The results for the three months ended September 30, 1997, include a merger-related restructuring charge of $56.5 million ($37.1 million or $.21 per share, after tax) associated with the Collective acquisition. Included in the results for the third quarter of 1996 was an $11.1 million ($6.8 million or $.04 per share, after tax) accrual for a one-time special assessment to recapitalize the Savings Association Insurance Fund. For the nine months ended September 30, 1997, net income amounted to $258.8 million, or $1.48 per share compared to $186.9 million, or $1.11 per share for the nine months ended September 30, 1996. In addition to the Collective restructuring charge the nine months ended September 30, 1997, includes a first quarter restructuring charge of $26.5 million, $16.7 million or $.10 per share, after-tax, related to the BMJ acquisition. The results for the nine months ended September 30, 1996, also include first quarter restructuring charges of $110.7 million, $70.0 million or $.42 per share, after - -tax, primarily related to the acquisitions of The Summit Bancorporation, Flemington, and Garden State. Included in the 1996 charges were expenses recorded in conjunction with an announced agreement to open 70 in-store supermarket branches. Excluding the effects of the non-recurring charges, net income would have been $312.5 million or $1.79 per share for the first nine months of 1997, and $263.7 million or $1.57 per share for the prior year period, a 14.0 percent increase. Key performance indicators are as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1997 1996 1997 1996 -------- -------- -------- -------- Before non-recurring charges charges Net income $108,312 $94,266 $312,532 $263,688 Dividends per share 0.27 0.24 0.75 0.66 Earnings per share 0.62 0.56 1.79 1.57 Return on: Average assets 1.50% 1.38% 1.46% 1.29% Average common equity 17.02 17.20 16.99 16.22 Efficiency ratio 49.64 49.91 50.12 52.22 After non-recurring charges Net income $ 71,212 $87,501 $258,752 $186,944 Earnings per share 0.41 0.52 1.48 1.11 Return on: Average assets 0.98% 1.29% 1.20% 0.92% Average common equity 11.19 15.96 14.06 11.46
15 Net interest income Interest income on a tax-equivalent basis was $1.5 billion for the nine months ended September 30, 1997, an increase of $108.9 million, or 7.6 percent, compared to the prior year period. This increase was primarily due to growth in interest earning assets. Interest - -earning assets averaged $27.1 billion, an increase of $1.7 billion, or 6.8 percent compared to the prior year period. Interest expense increased $41.9 million, or 6.6 percent, for the nine months ended September 30, 1997, compared to the same period in 1996. Interest-bearing liabilities averaged $21.8 billion, an increase of $997.7 million, or 4.8 percent, from the prior year period. This increase in interest-bearing liabilities contributed $30.9 million to the increase in interest expense. Net interest income on a tax-equivalent basis was $291.3 million for the three months ended September 30, 1997, an increase of $22.9 million, or 8.5 percent, compared to the same period in 1996. Net interest income on a tax-equivalent basis was $865.4 million for the nine months ended September 30, 1997, an increase of $67.0 million, or 8.4 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 3.43 percent for the quarter ended September 30, 1997, compared to 3.48 percent for the prior year period. The net interest spread was 3.47 percent for the nine months ended September 30, 1997, compared to 3.48 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 4.26 percent during the third quarter of 1997 compared to 4.23 percent during the same period in 1996. Net interest margin was 4.28 percent during the first nine months of 1997 compared to 4.21 percent during the same period in 1996. The increase in net interest margin reflected the benefits from an improved asset mix and favorable spreads on loan yields and deposit costs. 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 September 30, 1997, the derivative financial instruments portfolio consisted primarily of interest rate swaps, caps and floors with notional values of $413.0 million, $1.2 billion and $430.0 million, respectively. These derivatives resulted in a net interest income reduction of $.9 million for the first nine months of 1997 compared to a reduction of $1.3 million through the nine months of 1996. The cost to terminate these contracts at September 30, 1997 would have been $.3 million. As a result of continued improvement in asset quality ratios, the third quarter provision for loan losses for 1997 was $14.5 million, a decrease of $1.4 million or 8.9 percent compared with $15.9 million for the same period a year ago. For the nine months ended September 16 30, 1997 the provision for loan losses was $45.1 million, a decrease of $2.5 million or 5.3 percent compared to the prior year period. Non-interest income Non-interest income for the third quarter of 1997 totaled $74.2 million, an increase of $10.4 million, or 16.2 percent, compared with the third quarter of 1996. Excluding securities gains, total non-interest income was $72.9 million for the third quarter of 1997, an increase of $8.9 million, or 13.8 percent, from the prior year quarter. For the nine months ended September 30, 1997, non-interest income totaled $215.1 million, an increase of $23.6 million, or 12.3 percent from the prior year period. Excluding securities gains, total non-interest income was $211.6 million for the nine months ended September 30, 1997, an increase of $21.4 million, or 11.2 percent, from the prior year period. For the third quarter of 1997, net gains of $1.3 million on the sales and early redemptions of securities were realized compared with net loses of $.2 million in the third quarter of 1996. On a year-to-date basis, securities gains were $3.5 million, compared to $1.3 million during the first nine months of 1996. For the third quarter of 1997, service charges on deposits were $28.9 million, an increase of $2.3 million or 8.7 percent compared with the third quarter of 1996. On a year-to-date basis, 1997 service charges on deposit accounts have increased $7.7 million, or 9.9 percent as compared to the same period in 1996. These increases were primarily attributable to higher fee income from business and personal demand deposit accounts. Fee income on demand deposit accounts increased primarily as a result of a larger customer base, resulting from acquisitions, in 1997 when compared to 1996. Service and loan fee income for the third quarter of 1997 was $12.5 million, an increase of $1.5 million or 13.6 percent compared with the third quarter of 1996. On a year-to-date basis, 1997 service and loan fee income has increased $2.5 million, or 7.3 percent as compared to the same period in 1996. These increases are attributable to higher fee income on commercial loans, merchant credit card and consumer debit card processing, partially offset by a decline in mortgage origination fees. Trust fee income for the third quarter of 1997 was $12.6 million, an increase of $2.7 million or 26.8 percent compared with the third quarter of 1996. For the nine months ended September 30, 1997, trust fee income amounted to $35.3 million, an increase of $6.6 million or 22.8 percent compared to the prior year period. These increases were largely due to increases in fee income from the sales of mutual funds through the Company's extensive retail distribution channels. For the three months ended September 30, 1997, other income increased $2.4 million, or 14.4 percent as compared to the third quarter of 1996. For the nine months ended September 30, 1997, other income amounted to $54.0 million, an increase of $4.7 million, or 17 9.4 percent as compared to the prior year period. These increases were primarily attributable to service fees earned on the sale of annuity products and ATM access fees. Non-interest expenses Non-interest expenses for the third quarter of 1997 totaled $237.3 million compared to $177.9 for the third quarter of 1996, representing an increase of $59.4 million, or 33.4 percent. For the first nine months of 1997, non-interest expenses amounted to $625.6 million, compared to $643.5 million for the prior year period. Non-interest expenses for the first nine months of 1997 and 1996 included non-recurring charges of $83.0 million and $121.8 million, respectively. Excluding these non-recurring charges, non-interest expenses increased $20.9 million, or 4.0 percent for the first nine months of 1997 when compared to the prior year period. During the third quarter of 1997, the Company recorded a non-recurring restructuring charge of $56.5 million in connection with the Collective acquisition. This charge anticipates the expenses associated with the costs of integrating Collective into the Company. These costs will include severance pay and benefits for terminated employees, real estate expenses incurred when branches and other operational facilities are consolidated, charges for professional fees and data processing, which primarily include costs associated with the disposal or write-offs of duplicate or non-useable software or hardware systems. Management believes that this charge is for non-recurring expenses which will have no future economic value to the Company. Funding for cash expenditures related to this charge has, and will be paid for out of operations of the Company. Liquidity will not be significantly impacted by these restructuring costs. Salaries expense for the third quarter of 1997 was $73.3 million, which increased $8.9 million, or 13.9 percent from the prior year period. On a year-to-date basis, salaries expense for 1997 amounted to $216.1 million, an increase of $15.8 million, or 7.9 percent from a year ago. Salaries expenses for the third quarter and the nine months ended September 30, 1997 reflected expense associated with certain acquisitions which are not included in 1996 results. Salaries expense for the quarter and nine-month period ended September 30, 1997 have been impacted by merit increases and higher levels of commissions and fee-based compensation. For the third quarter of 1997, pension and other employee benefits increased $.8 million, or 3.6 percent, as compared to the third quarter of 1996. For the first nine months of 1997, pension and other employee benefits increased $1.2 million, or 1.7 percent, as compared to the prior year period. Occupancy expenses for the third quarter of 1997 decreased $.2 million, or 1.3 percent, compared to the prior year period. On a year-to-date basis, occupancy expenses for 1997 decreased $5.2 million, or 8.7 percent as compared to 1996. These decreases were due in part to the lower rental and maintenance expenses associated with the 419 full-service branches operated at September 30, 1997, as compared to 440 full-service branches operated 18 at September 30, 1996. In addition, the year-to-date decrease was partially attributable to the expenses associated with the severe weather conditions experienced during the first quarter of 1996. Furniture and equipment expenses rose $2.3 million, or 13.2 percent, in the third quarter of 1997 when compared with the third quarter of 1996. For the nine months ended September 30, 1997, furniture and equipment expenses increased $6.3 million, or 12.4 percent as compared to the prior year period. These increases were due in part to new computer equipment leases for branch automation equipment installed at acquired institutions. Communications expense increased $.3 million, or 4.1 percent for the three months ended September 30, 1997, as compared to the prior year quarter. On a year-to-date basis, communications expense increased $1.2 million, or 4.8 percent when compared to the first nine months of 1996. These increases were attributable to higher telecommunications expenses, as a result of branch rewiring and technology updates. Advertising and public relations expense for the three months and nine months ended September 30, 1997, increased $1.8 million and $3.9 million respectively over the comparable periods in 1996. These increases were due in part to the additional costs to promote the Company and its products in the new markets it serves as a result of the acquisitions in late 1996 and 1997. Deposit insurance premiums decreased $1.4 million and $4.0 million for the respective three and nine-month periods ended September 30, 1997 compared to the prior year periods. For the third quarter of 1997, other operating expenses increased $1.5 million, or 4.8 percent as compared to the third quarter of 1996. For the nine months ended September 30, 1997, other operating expenses increased $1.6 million, or 1.7 percent as compared to the prior year period. These increases can be partially attributable to an increase in acquisition premium amortization for purchase acquisitions in 1996 and employment agency fees offset by declines in OREO expenses. 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 nine months of 1997, net cash provided by operating activities totaled $349.3 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. 19 Net cash used in investing activities totaled $594.8 million and was the result of investment and loan activity. For the nine months ended September 30, 1997, net cash used in transactions involving the investment portfolios totaled $221.5 million, while the growth in the loan portfolio used $520.5 million. These net uses of cash were partially offset by a decrease of $148.9 million Federal funds sold and securities purchased under agreements to resell. Scheduled maturities and anticipated principal repayments of the held to maturity portfolio will approximate $325 million throughout the balance of 1997. In addition, the securities available for sale portfolio is another source of liquidity. These sources can also be used to meet the funding needs during periods of loan growth. Net cash used in financing activities totaled $20.9 million. During the first nine months of 1997, total deposits decreased $541.6 million and the payment of dividends totaled $120.2 million. These uses of cash were partially offset by the issuance of $150.0 million in capital trust pass-through securities and a net increase in short - -term and long-term borrowings totaling $469.2 million. 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. LOOKING AHEAD This report contains certain forward-looking statements, either expressed or implied, which are provided to assist the reader to understand anticipated future financial performance. These forward-looking statements involve certain risks, uncertainties, estimates and assumptions made by management. Factors that may cause actual results to differ from those results expressed or implied include, but are not limited to, the interest rate environment and the overall economy, the ability of customers to repay their obligations, the adequacy of the allowance for loan losses, the progress of integrating acquired financial institutions, competition and technological changes. Although management has taken certain steps to mitigate the negative effect of the above mentioned items, significant unfavorable changes could severely impact the assumptions used and have an adverse affect on profitability. 20 PART II. OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS. - --------------------------- 1. 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, filed on December 7, 1995 in the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. MID-L-10623-95. Reported on Form 10-K for the period ended December 31, 1996 and on Form 10-Q for the periods ended March 31, 1997 and June 30, 1997. On August 1, 1997, the court dismissed the remaining counts of the complaint against the Bank and the holding company. The plaintiffs did not appeal the decision and this matter is now concluded. 2. 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 and on Form 10-Q for the period ended June 30, 1997. On September 4, 1997, the court approved a settlement in 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, pursuant to which Summit paid the sum of $300,000.00 to the Trustee. The adversary proceeding was dismissed on September 16, 1997. Neither the trustee's preference claim against the Bank nor the Payroll Express customers' claims are affected by the settlement. 3. Annette Loatman on behalf of herself and all others similarly ------------------------------------------------------------- situated v. United Jersey Bank, U.S. District Court for the - ------------------------------ District of New Jersey, Civil Action No. 95-5258 (JBS), filed on October 4, 1995. Robert M. Gundle, on behalf of himself and all ---------------------------------------------- other similarly situated v. Summit Bank, successor in interest to - ----------------------------------------------------------------- United Jersey Bank, U.S. District Court for the District of New - ------------------ Jersey, Civil Action No. 96-4477 (JBS), filed on October 14, 1996. Reported on Form 10-K for the period ended December 31, 1996. On August 28, 1997, the court entered an order directing the Bank to compensate Loatman's attorneys for fees and costs stemming from their efforts to enjoin employees of the Bank from contacting plaintiff personally and in connection with their motion for sanctions. On August 29, 1997, the court granted the Bank's motion for summary judgment as to all federal claims asserted in both matters, and dismissed the plaintiffs' complaints as to the remaining claims for lack of supplemental jurisdiction. On September 19, 1997, Plaintiff's attorneys filed a fee application in the U.S. District Court, pursuant to the August 28, 1997 order, which the Bank opposed. No decision has been rendered by the court. On September 24, 1997, the Bank filed a notice of appeal from the August 28, 1997 order to the United States Court of Appeals for the Third Circuit. On September 26, 1997, the Superior Court of New Jersey, Camden County, orally granted Loatman's application to reinstate her state court complaint in the matter Annette Loatman, on ------------------- 21 behalf of herself - ----------------- and all others similarly situated v. United Jersey Bank, Superior - ------------------------------------------------------- Court of New Jersey, Docket No. CAM-L-3526-96. No formal order has yet been entered. 4. Daniel Iverson, Lawrence Cohen and Terri Cohen, on behalf of ------------------------------------------------------------ themselves and all others similarly situated v. Collective Bank, a - ------------------------------------------------------------------ federally chartered savings bank organized under the laws of the - ---------------------------------------------------------------- United States of America (improperly named as Collective Bancorp, - ----------------------------------------------------------------- Inc., a Delaware corporation), on behalf of itself and all others - ----------------------------------------------------------------- similarly situated. Superior Court of New Jersey, Atlantic County, - ------------------ Docket No. ATL-L-2578-95, filed on July 26, 1995. In their complaint, plaintiffs contend that, under the New Jersey Mortgage Financing Law, a lender may not charge an attorney review fee to a borrower in connection with a residential mortgage transaction. They contend that Collective's so doing was a violation of that law and of the New Jersey Consumer Fraud Act. The measure of damages sought is the total amount of review fees paid by members of the putative (but as yet uncertified) class. Plaintiffs also seek treble damages under the Consumer Fraud Act. On October 2, 1997, the court entered an order granting partial summary judgment to the plaintiffs. On October 17, 1997, the Bank filed a notice of motion for leave to appeal to the Appellate Division of the Superior Court of New Jersey. ITEM 2. CHANGES IN SECURITIES. - ------------------------------- (a) On August 20, 1997, the Board of Directors of the Registrant approved a three for two split up on the capital stock of the Registrant, payable on September 24, 1997 to shareholders of record on September 3, 1997. In connection with the stock split, the Registrant amended its Restated Certificate of Incorporation to provide for a corresponding increase in the number of authorized shares of common stock from 260,000,000 to 390,000,000 and preferred stock from 4,000,000 to 6,000,000 and a decrease in the par value of the common stock from $1.20 per share to $.80 per share. Also in connection with this stock split, pursuant to the Rights Agreement, dated as of August 16, 1989 between the Registrant and First Chicago Trust Company of New York, the exercise price and the number of shares of Series R Preferred Stock purchasable upon exercise of the Registrants preferred stock purchase rights were adjusted from $90 to $60 and from one-hundredth of a share to one-hundred and fiftieth of a share, respectively. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. - ----------------------------------------- Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------- Not applicable. ITEM 5. OTHER INFORMATION. - --------------------------- Not applicable. 22 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. - ------------------------------------------ (a) Exhibits -------- (2) A(i) Certificate of Amendment effective September 24, 1997 to the Restated Certificate of Incorporation of Summit Bancorp. (2) A(ii) Restated Certificate of Incorporation of Summit Bancorp. dated August 8, 1997 as amended effective September 24, 1997 (3) A(i) Notice to Rights Agent dated August 20, 1997 (27.1) Summit Bancorp. financial data schedule - September 30, 1997 (27.2) Summit Bancorp. financial data schedule - June 30, 1997 (27.3) Summit Bancorp. financial data schedule - March 31, 1997 (27.4) Summit Bancorp. financial data schedule - September 30, 1996 (27.5) Summit Bancorp. financial data schedule - December 31, 1996 (27.6) Summit Bancorp. financial data schedule - December 31, 1995 (27.7) Summit Bancorp. financial data schedule - December 31, 1994 (b) Reports on Form 8-K ------------------- In a current report on Form 8-K dated July 28, 1997, the Company under Item 7 Financial Statements, Pro Forma Financial Information and Exhibits reported audited financial statements and notes for Collective Bancorp, Inc. ("Collective"). These financial statements included audited balance sheets at June 30, 1996 and 1995, audited statements of income, cash flows, and stockholders' equity for the three years ended June 30, 1996. The Company also reported interim financial statements for Collective. These financial statements included balance sheets at March 31, 1997 and June 30, 1996, statements of income, cash flows and stockholders' equity for the three months and nine months ended March 31, 1997 and 1996. The Company also reported Pro Forma Financial Information which included a condensed pro forma balance sheet at March 31, 1997 and condensed pro forma statements of income 23 for the nine months ended March 31, 1997 and 1996 and the years ended December 31, 1996, 1995, and 1994. In a current report on Form 8-K dated August 1, 1997, the Company under Item 2 Acquisitions or Disposition of Assets reported the completion of the pooling acquisition of Collective on August 1, 1997. In a current report on Form 8-K dated August 20, 1997, the Company under Item 5 Other Events reported that Board of Directors of the Company approved a 3-for-2 stock split of its common stock, payable on September 24, 1997 to shareholders of record on September 3, 1997. The Board of Directors of the Company also approved a 12.5 percent increase in the Company's quarterly common stock cash dividend from $.24 per common share (as adjusted for the stock split) to $.27 per share on a post -split basis. 24 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUMMIT BANCORP. --------------- Registrant DATE: November 13, 1997 BY: /s/ WILLIAM J. HEALY ----------------------- William J. Healy Executive Vice President and Comptroller (Duly Authorized Officer and Chief Accounting Officer) 25 EXHIBIT INDEX ------------- Exhibit No. Description - ----------- ------------------------------------------------- (2) A(i) Certificate of Amendment effective September 24, 1997 to the Restated Certificate of Incorporation of Summit Bancorp. (2) A(ii) Restated Certificate of Incorporation of Summit Bancorp. dated August 8, 1997 as amended effective September 24, 1997 (3) A(i) Notice to Rights Agent dated August 20, 1997 (27.1) Summit Bancorp. financial data schedule - September 30, 1997 (27.2) Summit Bancorp. financial data schedule - June 30, 1997 (27.3) Summit Bancorp. financial data schedule - March 31, 1997 (27.4) Summit Bancorp. financial data schedule - September 30, 1996 (27.5) Summit Bancorp. financial data schedule - December 31, 1996 (27.6) Summit Bancorp. financial data schedule - December 31, 1995 (27.7) Summit Bancorp. financial data schedule - December 31, 1994 26 EX-2 2 EXHIBIT (2)A(I) CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF SUMMIT BANCORP. _______________ To: The Secretary of State State of New Jersey Pursuant to the provisions of Section 14A:7-15.1(3) of the New Jersey Business Corporation Act, the undersigned corporation hereby executes the following Certificate of Amendment to its Restated Certificate of Incorporation dated August 8, 1997 (the "Certificate of Incorporation"): 1. The name of the corporation is Summit Bancorp. (the "Corporation"). 2. The Board of Directors of the Corporation duly adopted a resolution approving of the division of the shares of the Corporation at a regular meeting of the Board of Directors held on August 20, 1997. 3. The Amendment to the Certificate of Incorporation set forth in Section Five hereof shall not adversely affect the rights or preferences of the holders of outstanding shares of any class or series and will not result in the percentage of authorized shares that remains unissued after the share division exceeding the percentage of authorized shares that was unissued before the share division. 4. (a) The Two Hundred Sixty Million (260,000,000) shares of the Common Stock, $1.20 par value per share, of the Corporation presently authorized are to be divided into Three Hundred Ninety Million (390,000,000) of Common Stock, $0.80 par value per share. (b) The Four Million (4,000,000) shares of the Preferred Stock, without par value, of the Corporation presently authorized are to be divided into Six Million (6,000,000) shares of the Preferred Stock, without par value. 5. The following amendment to the Certificate of Incorporation set forth below was approved by the Board of Directors of the Corporation on August 20, 1997 in connection with the three-for- two division of the shares of the capital stock of the Corporation authorized, issued and outstanding at the close of business September 3, 1997, payable on September 24, 1997 to shareholders of record at the close of business on September 3, 1997 and the change in the par value of all authorized common stock of the Corporation from $1.20 per share to $0.80 per share: 3. The total number of shares of capital stock authorized and which may be issued by this Corporation is Three Hundred Ninety-Six Million (396,000,000) shares, of which Three Hundred Ninety Million (390,000,000) shares of Eighty Cents ($0.80) par value each shall be designated as Common Stock, and of which Six Million (6,000,000) shares without par value shall be designated as Preferred Stock. All or any part of such authorized Common Stock and Preferred Stock may be issued by the Corporation from time to time and for such consideration as may be determined upon and fixed by the Board of Directors as provided by law. 6. The dividend of shares set forth herein is to become payable and the amendment to the Certificate of Incorporation set forth herein is to become effective at 11:59 p.m., September 24, 1997. Dated this 16th day of September, 1997. By:/s/RICHARD F. OBER, JR. _______________________________ Richard F. Ober, Jr. Executive Vice President EX-2 3 EXHIBIT (2)A(II) RESTATED CERTIFICATE OF INCORPORATION OF SUMMIT BANCORP. (Filed August 8, 1997) SUMMIT BANCORP., a corporation formed pursuant to the provisions of the New Jersey Business Corporation Act (N.J.S.A. 14A: 1-1 et. seq.), hereby restates its Certificate of Incorporation pursuant to the provisions of the New Jersey Business Corporation Act (N.J.S.A. 14A:9-5). 1. The name of the Corporation is SUMMIT BANCORP. 2. The purposes for which the corporation is formed are: A. To engage in and carry on the business of a registered bank holding company. B. To acquire, by purchase, subscription or otherwise, own, hold for investment or otherwise, use, sell, exchange, mortgage, pledge, hypothecate, create a security interest in, or otherwise deal with and dispose of, any and all securities, as hereinafter defined, and to possess and exercise any and all rights, powers and privileges of ownership of any and all such securities, including the right to vote thereon and to consent, assent or dissent with respect thereto for any and all purposes, and to issue or deliver its own securities in payment or exchange, in whole or in part, for any securities or to make payment therefor by any other lawful means; to aid by loan, subsidy or in any other lawful manner any corporation, firm, organization, association or other entity in which the Corporation may be or become interested through the direct or indirect holding of securities or in any other manner; to do any and all acts and things for the enhancement, protection or preservation of any securities which are in any manner, directly or indirectly, held or guaranteed by the Corporation, and to do any and all acts and things designed to accomplish any such purpose. The term "securities", as used in this article, shall mean any and all shares, stocks, bonds, debentures, notes, acceptances, voting trust certificates, certificates of deposit, evidences of indebtedness, other obligations, certificates of any interest in or of the deposit of any of the foregoing, scrip, interim or other receipts, warrants or rights to subscribe for or purchase, or guarantees of, any of the foregoing, or any other interests or instruments commonly known as securities. C. To the extent permitted by law, to cause to be formed, organized, reorganized, consolidated, merged or liquidated and to take charge of, any corporation, firm, organization, association or other entity, foreign or domestic. D. To the extent permitted by law, to furnish services to and perform services for, and to act in any representative capacity for, any corporation, firm, organization, association, or other entity in which the Corporation may be or become interested through the direct or indirect holding of securities or in any other manner, whether in the development, exploitation, promotion, operation, management, liquidation, or otherwise, of any of the business or property thereof or of any lawful enterprise related thereto. E. To make loans and give other forms of credit with or without security. F. To borrow money for its corporate purposes; to draw, make, accept, endorse, execute, issue, deliver and negotiate bonds, debentures, promissory notes, drafts, bills of exchange and other negotiable or transferable instruments and to secure the payment thereof and the interest thereon by a deed or deeds of trust or by mortgage or pledge of or upon, or by the creation of a security interest in, all or any part of the property of the Corporation, real or personal, or any interest therein, wherever situated, whether at the time owned or thereafter acquired, and to sell, pledge, create a security interest in or otherwise dispose of such bonds, debentures, notes or other obligations. G. To purchase, lease or otherwise acquire, take, hold, own, use, improve, maintain, develop, complete, extend, manage, operate, mortgage or otherwise impose a lien upon or create a security interest in, sell, exchange, lease or otherwise dispose of or convey or transfer in any manner, buildings, storage and other facilities, real and personal property of all kinds, and any and all rights, interests or easements therein, without limit as to amount and wherever situated. H. To engage in any such activity directly or through a subsidiary or subsidiaries, and to take all acts deemed appropriate to promote the interest of such subsidiary or subsidiaries, including without limiting the foregoing, making contracts and incurring liabilities for the benefit of such subsidiary or subsidiaries; and transferring or causing to be transferred to any such subsidiary or subsidiaries assets of the Corporation. I. To guarantee the bonds, debentures, notes or other evidences of indebtedness issued, or obligations incurred by subsidiary companies in which the Corporation holds, directly or indirectly, at least a majority of the voting stock, or by any corporation, partnership, limited partnership, joint venture or other association where the Corporation has or may acquire a substantial interest in such corporation, partnership, limited partnership, joint venture or other association or where such guarantee is otherwise in furtherance of the interest of the Corporation. J. To provide that the obligations of such subsidiary companies may be convertible into, or exchangeable for, or carry rights or options to purchase or subscribe to, or both, shares of the Corporation of any class. K. In general, to do any and all of the acts and things herein set forth to the same extent as natural persons could do, and in any part of the world, as principal, factor, agent, contractor or otherwise, either alone or in company with any person, entity, syndicate, partnership, association, corporation or others; to establish and maintain offices and agencies within and anywhere outside of the State of New Jersey; and to exercise all or any of its corporate powers and rights in the State of New Jersey and in any and all other states, territories, districts, possessions or dependencies of the United States of America and in any other countries or places. L. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the purposes herein set forth and to do every other act and thing incidental thereto or connected therewith, provided the same be not forbidden by law. 3. The total number of shares of capital stock authorized and which may be issued by this Corporation is Two Hundred Sixty-Four Million (264,000,000) shares, of which Two Hundred Sixty Million (260,000,000) shares of One and 20/100 Dollars ($1.20) par value each shall be designated as Common Stock, and of which Four Million (4,000,000) shares without par value shall be designed as Preferred Stock. All or any part of such authorized Common Stock and Preferred Stock may be issued by the Corporation from time to time and for such consideration as may be determined upon and fixed by the Board of Directors as provided by law. No holders of shares of Common Stock or Preferred Stock of the Corporation shall be entitled, as such, as a matter of preemptive or preferential right, to subscribe for or purchase any part of any new or additional issue of shares of Common Stock or Preferred Stock, or any treasury shares of Common Stock or Preferred Stock, or of securities of the Corporation or of any subsidiary of the Corporation convertible into or exchangeable for, or carrying rights or options to purchase or subscribe to, or both, shares of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise. The Board of Directors of the Corporation is, pursuant to the New Jersey Business Corporation Law (N.J.S.A. 14A:7-2), authorized to amend this Restated Certificate of Incorporation of the Corporation so as (a) to divide the authorized shares of Preferred Stock of the Corporation into series within such class, (b) to determine the designation and the number of shares of any such series, and (c) to determine the relative voting, dividend, conversion, redemption, liquidation and other rights, preferences and limitations of the authorized shares of Preferred Stock of the Corporation. A. Creation of Preferred Stock, Series R. -------------------------------------- A series of Preferred Stock of the Corporation, consisting of 1,500,000 Shares, is hereby created and designated as "Series R Preferred Stock" (the "Series R Preferred Stock") which series of Preferred Stock shall have a stated value of $100 per share and the following rights and preferences: (a) Dividends and Distributions. ---------------------------- (1) Subject to the provisions for adjustment hereinafter set forth, the holders of shares of Series R Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, (i) cash dividends in an amount per share (rounded to the nearest cent) equal to one hundred (100) times the aggregate per share amount of all cash dividends declared or paid on the Common Shares, $1.20 par value per share, of the Corporation (the "Common Shares"), and (ii) a preferential cash dividend (the "Preferential Dividends"), if any, on the first business day of February, May, August and November of each year (each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series R Preferred Stock in an amount equal to $1.00 per share of Series R Preferred Stock reduced (but not to an amount less than zero) by the per share amount of all cash dividends declared on the Series R Preferred Stock pursuant to clause (i) of this sentence since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series R Preferred Stock. In the event the Corporation shall, at any time after the issuance of any share or fraction of a share of Series R Preferred Stock, make any distribution on the Common Shares of the Corporation, whether by way of a dividend or a reclassification of stock, a recapitalization, reorganization or partial liquidation of the Corporation or otherwise, which is payable in cash or any debt security, debt instrument, real or personal property or any other property (other than cash dividends subject to the immediately preceding sentence, a distribution of Common Shares or other capital stock of the Corporation or a distribution of rights or warrants to acquire any such share, including any debt securityconvertible into or exchangeable for any such share, at a price less than the Fair Market Value (as hereinafter defined) of such share), then and in each such event the Corporation shall simultaneously pay on each then outstanding share of Series R Preferred Stock of the Corporation a distribution, in like kind, of one hundred (100) times such distribution paid on a Common Share (subject to the provisions for adjustment hereinafter set forth). The dividends and distributions on the Series R Preferred Stock to which holders thereof are entitled pursuant to clause (i) of the first sentence of this paragraph and pursuant to the second sentence of this paragraph are hereinafter referred to as "Participating Dividends" and the multiple of such cash and non-cash dividends on the Common Shares applicable to the determination of the Participating Dividends, which shall be one hundred (100) initially but shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Dividend Multiple". In the event the Corporation shall at any time after August 28, 1989 declare or pay any dividend or make any distribution on Common Shares payable in Common Shares or any class or series thereof, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding Common Shares into a greater or lesser number of Common Shares, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of Participating Dividends which holders of shares of Series R Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (2) The Corporation shall declare each Participating Dividend at the same time it declares any cash or non-cash dividend or distribution on the Common Shares in respect of which a Participating Dividend is required to be paid. No cash or non-cash dividend or distribution on the Common Shares in respect of which a Participating Dividend is required to be paid shall be paid or set aside for payment on the Common Shares unless a Participating Dividend in respect of such dividend or distribution on the Common Shares shall be simultaneously paid, or set aside for payment, on the Series R Preferred Stock. (3) Preferential Dividends shall begin to accrue on outstanding shares of Series R Preferred Stock commencing with the Quarterly Dividend Payment Date next following the date of issuance of any shares of Series R Preferred Stock and shall accrue on and as of such date and each successive Quarterly Dividend Payment Date thereafter. Accrued but unpaid Preferential Dividends shall cumulate but shall not bear interest. Preferential Dividends paid on the shares of Series R Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (b) Voting Rights. The holders of shares -------------- of Series R Preferred Stock shall have the following voting rights: (1) Subject to the provisions for adjustment hereinafter set forth, each share of Series R Preferred Stock shall entitle the holder thereof to one hundred (100) votes on all matters submitted to a vote of the shareholders of the Corporation. The number of votes which a holder of Series R Preferred Stock is entitled to cast, as the same may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Corporation shall at any time after August 28, 1989 declare or pay any dividend on Common Stock payable in Common Shares, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding Common Shares into a greater or lesser number of Common Shares, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series R Preferred Stock shall be entitled after such event shall be the Vote Multiple immediately prior to such event multiplied by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (2) Except as otherwise provided herein, or by law, the Certificate of Incorporation or the By-laws, the holders of shares of Series R Preferred Stock and the holders of Common Shares shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (3) If at the time of any annual meeting of shareholders of the Corporation for the election of directors, the Corporation shall have failed to pay the Preferential Dividends on the shares of the Series R Preferred Stock for six dividend payment periods, whether or not consecutive, or shall fail to pay in full such dividends, if any, as may accumulate on any other series of Preferred Stock for a period of 18 months (referred to herein as a "Dividend Payment Default"), the number of directors of the Corporation shall be increased by two and the holders of the all outstanding series of Preferred Stock in respect of which such a default in payment of dividends as described hereinabove exists, voting as a single class without regard to series, will be entitled to elect such additional two directors until full cumulative dividends for all past dividend periods upon all series of Preferred Stock have been paid or declared and set apart for payment. If and when the full cumulative dividends on all series of Preferred Stock for all past dividend payment periods shall have been paid or declared and set apart for payment, the holders of Preferred Stock shall be divested of the foregoing special voting right, subject to revesting in the event of each and every subsequent Dividend Payment Default. Upon the termination of each such special voting right, the term of office of each director elected by the holders of shares of Preferred Stock in respect of which a default exists in the payment of dividends as described hereinabove (herein referred to as a "Preferred Director") pursuant to such special voting right shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced by two. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock in respect of which such a default exists, voting together as a single class without regard to series, at a meeting of the shareholders, or of the holders of shares of such Preferred Stock, called for the purpose. As long as a Dividend Payment Default shall continue (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock in respect of which such a default exists, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted or a subsequent meeting. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. (4) Except as otherwise set forth herein or required by law, the Certificate of Incorporation or the By-laws, holders of Series R Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for the taking of any corporate action. (c) Certain Restrictions. --------------------- (1) Whenever Preferential Dividends or Participating Dividends are in arrears or the Corporation shall be in default of payment thereof, thereafter and until all accrued and unpaid Preferential Dividends and Participating Dividends, whether or not declared, on shares of Series R Preferred Stock outstanding shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, and in addition to any and all other rights which any holder of shares of Series R Preferred Stock may have in such circumstances, the Corporation shall not: (i) declare or pay or set apart for payment dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series R Preferred Stock; (ii) declare or pay or set apart for payment dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series R Preferred Stock, unless dividends are paid ratably on the Series R Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full dividends accrued thereon were to be paid; (iii) except as permitted by subparagraph (iv) of this paragraph (c)(1), redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series R Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon liquidation, dissolution or winding up) to the Series R Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series R Preferred Stock, or any shares of stock ranking on a parity with the Series R Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up), except in accordance with a purchase offer made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (2) The Corporation shall not permit any Subsidiary (as hereinafter defined) of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (1) of this Section (c), purchase or otherwise acquire such shares at such time and in such manner. A "Subsidiary" of the Corporation shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other persons performing similar functions are beneficially owned, directly or indirectly, by the Corporation or by any corporation or other entity that is otherwise controlled by the Corporation. (3) The Corporation shall not issue any shares of Series R Preferred Stock except upon exercise of rights issued pursuant to that certain Rights Agreement dated as of August 16, 1989 between the Corporation and First Chicago Trust Company of New York, as Rights Agent, a copy of which is on file with the Secretary of the Corporation at its principal executive office and shall be made available to shareholders of record without charge upon written request therefor addressed to said Secretary. Notwithstanding the foregoing sentence, nothing contained in the provisions hereof shall prohibit or restrict the Corporation from issuing for any purpose any series of Preferred Stock with rights and privileges similar to, different from, or greater than, those of the Series R Preferred Stock. (d) Reacquired Shares. Any shares of ------------------ Series R Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares upon their retirement and cancellation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors. (e) Liquidation, Dissolution or Winding Up. --------------------------------------- Upon the dissolution, liquidation or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series R Preferred Stock unless the holders of shares of Series R Preferred Stock shall have received, subject to adjustment as hereinafter provided, (1) $1.00 per one-hundredth share ($100 per share) plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (2) if greater than the amount specified in clause (i)(1) of this sentence, an amount equal to one hundred (100) times the aggregate amount to be distributed per share to holders of Common Shares, as the same may be adjusted as hereinafter provided, and (ii) to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Series R Preferred Stock, unless simultaneously therewith distributions are made ratably on the Series R Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Series R Preferred Stock are entitled under clause (i)(1) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The amount to which holders of Series R Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Corporation pursuant to clause (i)(2) of the foregoing sentence is hereinafter referred to as the "Participating Liquidation Amount" and the multiple of the amount to be distributed to holders of Common Shares upon the liquidation, dissolution or winding up of the Corporation applicable, pursuant to said clause, to the determination of the Participating Liquidation Amount, as said multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Liquidation Multiple". In the event the Corporation shall at any time after August 28, 1989 declare or pay any dividend on Common Shares payable in Common Shares or any class or series thereof, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding Common Shares into a greater or lesser number of Common Shares, then in each such case the Liquidation Multiple thereafter applicable to the determination of the Participating Liquidation Amount to which holders of Series R Preferred Stock shall be entitled after such event shall be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. The sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation shall not be deemed a dissolution, liquidation or winding up of the Corporation for the purposes of this Section (e), nor shall the merger or consolidation of the Corporation into or with any other corporation or association or the merger or consolidation of any other corporation or association into or with the Corporation, be deemed to be a dissolution, liquidation or winding up of the Corporation for the purposes of this Section (e). (f) Certain Reclassifications and Other Events. ------------------------------------------- (1) In the event that holders of Common Shares of the Corporation receive after August 28, 1989 in respect of their Common Shares any share of capital stock of the Corporation (other than any Common Shares of the Corporation of the same class and series as such outstanding Common Shares), whether by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a "Transaction"), then and in each such event the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Corporation of the shares of Series R Preferred Stock shall be adjusted so that after such event the holders of Series R Preferred Stock shall be entitled, in respect of each share of Series R Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such adjustment, to (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a Common Share shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock; (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such Transaction multiplied by the additional voting rights which the holder of a Common Share shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock; and (iii) such additional distributions upon liquidation, dissolution or winding up of the Corporation as equal the Liquidation Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a Common Share shall be entitled to receive upon liquidation, dissolution or winding up of the Corporation by virtue of the receipt in the Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock. (2) In the event that all holders of Common Shares of the Corporation receive after August 28, 1989 in respect of their Common Shares any right or warrant to purchase Common Shares (including as such a right, for all purposes of this paragraph, any security convertible into or exchangeable for Common Shares) at a purchase price per share less than the Fair Market Value of a Common Share on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Corporation of the shares of Series R Preferred Stock shall each be adjusted so that after such event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple shall each be the product of the Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be, in effect immediately prior to such event multiplied by a fraction the numerator of which shall be the number of Common Shares outstanding immediately before such issuance of rights or warrants plus the maximum number of Common Shares which could be acquired upon exercise in full of all such rights or warrants and the denominator of which shall be the number of Common Shares outstanding immediately before such issuance of rights or warrants plus the number of Common Shares which could be purchased, at the Fair Market Value of the Common Shares at the time of such issuance, by the maximum aggregate consideration payable upon exercise in full of all such rights or warrants. (3) In the event that holders of Common Shares of the Corporation receive after August 28, 1989 in respect of their Common Shares any right or warrant to purchase capital stock of the Corporation (other than Common Shares of any class or series), including as such a right, for all purposes of this paragraph, any security convertible into or exchangeable for capital stock of the Corporation (other than Common Shares of any class or series), at a purchase price per share less than the Fair Market Value of such shares of capital stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon liquidation, dissolution or winding up of the Corporation of the shares of Series R Preferred Stock shall each be adjusted so that after such event each holder of a share of Series R Preferred Stock shall be entitled, in respect of each share of Series R Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such event, to receive (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such event multiplied, first, by the additional dividends to which the holder of a Common Share shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction (as hereinafter defined); (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such event multiplied, first, by the additional voting rights to which the holder of a Common Share shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction; and (iii) such additional distributions upon liquidation, dissolution or winding up of the Corporation as equal the Liquidation Multiple in effect immediately prior to such event multiplied, first, by the additional amount which the holder of a Common Share shall be entitled to receive upon liquidation, dissolution or winding up of the Corporation upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise and multiplied again by the Discount Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a fraction the numerator of which shall be the difference between the Fair Market Value of a share of the capital stock subject to a right or warrant distributed to holders of Common Shares of the Corporation as contemplated by this paragraph immediately after the distribution thereof and the purchase price per share for such share of capital stock pursuant to such right or warrant and the denominator of which shall be the Fair Market Value of a share of such capital stock immediately after the distribution of such right or warrant. (4) For purposes hereof, the "Fair Market Value" of a share of capital stock of the Corporation (including a Common Share) on any date shall be deemed to be the average of the daily closing price per share thereof over the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that, in the event that such Fair Market Value of any such share of capital stock is determined during a period which includes any date that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split, combination, consolidation, reverse stock split or reclassification of such stock, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Corporation to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange), or, if the shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Corporation. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares are listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on any national securities exchange, on which the New York Stock Exchange or such other national securities exchange as may be selected by the Board of Directors of the Corporation is open. If the shares are not publicly held or not so listed or traded on any day within the period of 30 Trading Days applicable to the determination of Fair Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value thereof per share as determined in good faith by the Board of Directors of the Corporation. In either case referred to in the foregoing sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary of the Corporation. (g) Consolidation, Merger, etc. In case --------------------------- the Corporation shall enter into any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Series R Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each Common Share is changed or exchanged multiplied by the highest of the Dividend Multiple, the Vote Multiple or the Liquidation Multiple in effect immediately prior to such event. (h) Effective Time of Adjustments. ------------------------------ (1) Adjustments to the Series R Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring such adjustments occurs. (2) The Corporation shall give prompt written notice to each holder of a share of Series R Preferred Stock of the effect of any adjustment to the voting rights, dividend rights or rights upon liquidation, dissolution or winding up of the Corporation of such shares required by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Corporation to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment. (i) No Redemption. The shares of Series -------------- R Preferred Stock shall not be redeemable at the option of the Corporation or any holder thereof. Notwithstanding the foregoing sentence of this Section, the Corporation may acquire shares of Series R Preferred Stock in any other manner permitted by law, the provisions hereof and the Certificate of Incorporation of the Corporation. (j) Ranking. Unless otherwise provided -------- in the Certificate of Incorporation of the Corporation or a Certificate of Amendment relating to a subsequent series of preferred stock of the Corporation, the Series R Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up and senior to the Common Shares. (k) Conversion or Exchange. The holders ----------------------- of shares of Series R Preferred Stock shall not have any rights to convert such shares into or exchange such shares for Common Shares of the Corporation or any other stock of the Corporation. (l) Preemptive Rights. Shares of the ------------------ Series R Preferred Stock are not entitled to any preemptive rights. (m) Amendment. Unless the vote or ---------- consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of this Series R Preferred Stock at the time outstanding given in person or by proxy, either in writing or by a vote at a meeting called for the purpose, on which matter the holders of shares of this Series R Preferred Stock shall vote together as a separate class, shall be necessary to authorize, effect or validate any amendment, alteration or repeal of any of the provisions of the Restated Certificate of Incorporation of the Corporation or of any certificate amendatory or supplemental thereto which amendment, alteration or repeal would, if effected, adversely affect the preferences, rights, powers or privileges of this Series R Preferred Stock. 4. The location of the current registered office of the Corporation in this State is 301 Carnegie Center, P. O. Box 2066, Princeton, New Jersey 08543-2066, and the name of the current agent therein and in charge thereof upon whom process against this Corporation may be served is Richard F. Ober, Jr. 5. The current Board of Directors consists of eighteen persons whose names and addresses are as follows: S. RODGERS BENJAMIN Chairman Flemington Fur Company 8 Spring Street Flemington, NJ 08822 ROBERT L. BOYLE Publisher Emeritus of the Dispatch 7 Orchard Lane Rumson, NJ 07760 JAMES C. BRADY, JR. Partner Mill House Associates, Inc. Box 351 Gladstone, NJ 07934 JOHN G. COLLINS Vice Chairman Summit Bancorp. 301 Carnegie Center P.O. Box 2066 Princeton, NJ 08543-2066 ROBERT G. COX President Summit Bancorp. 301 Carnegie Center P.O. Box 2066 Princeton, NJ 08543-2066 T. J. DERMOT DUNPHY President & CEO Sealed Air Corporation Park 80 Plaza East Saddle Brook, NJ 07662 ANNE EVANS ESTABROOK Owner Elberon Development Co. P.O. Box 677 Kenilworth, NJ 07033-0677 ELINOR J. FERDON Professional Volunteer Litchfield Way P.O. Box 255 Alpine, NJ 07620 FRED G. HARVEY Vice President E. & E. Corp. 225 West 2nd Street Bethlehem, PA 18015 JOHN R. HOWELL Chairman First Valley Corporation One Bethlehem Plaza Bethlehem, PA 18018 FRANCIS J. MERTZ President Fairleigh Dickinson University 1000 River Road Teaneck, NJ 07666 GEORGE L. MILES, JR. President & CEO WQED Pittsburgh 4802 Fifth Avenue Pittsburgh, PA 15213 HENRY S. PATTERSON II President E'town Corporation P.O. Box 788 Westfield, NJ 07091 T. JOSEPH SEMROD Chairman and CEO Summit Bancorp. 301 Carnegie Center P.O. Box 2066 Princeton, NJ 08543-2066 RAYMOND SILVERSTEIN Consultant Alloy, Silverstein, Shapiro, Adams Mulford & Co. 900 North Kings Highway Cherry Hill, NJ 08034 ORIN R. SMITH Chairman and CEO Engelhard Corporation 101 Wood Avenue Iselin, NJ 08830 JOSEPH M. TABAK President and CEO JPC Enterprises, Inc. 30 South Adelaide Avenue Penthouse F Highland Park, NJ 08904 DOUGLAS G. WATSON President Pharmaceuticals Division Ciba-Geigy Corporation 556 Morris Avenue Summit, NJ 07901 The Board of Directors shall consist of not less than five (5) persons and not more than forty (40) persons, as may be determined from time to time in the discretion of the Board of Directors. Except as otherwise provided by statute, by this Restated Certificate of Incorporation as the same may be amended from time to time, or by By-Laws as the same may be amended from time to time, all corporate powers may be exercised by the Board of Directors. Without limiting the foregoing, the Board of Directors shall have power, without shareholders' action: A. To authorize and cause to be executed and/or issued mortgages, liens, bonds, debentures or other obligations including bonds, debentures or other obligations convertible into, or exchangeable for stock of any class, or bearing, warrants or other evidences of optional rights to purchase or subscribe to, or both, stock of any class, upon the terms, in the manner and under the condition fixed by resolution of the Board of Directors prior to the issue thereof, secured or not secured, upon the real and personal or other property of the Corporation, or any part thereof, provided that a majority of the whole Board of Directors concur therein by resolution or in writing. B. With the sanction of a resolution passed by the holders of two-thirds of the shares issued and outstanding at any annual or special meeting of shareholders duly called for that purpose, to sell, assign, transfer or otherwise dispose of all the rights, franchises and property of the Corporation as an entirety; and any such sale may be wholly or partly in consideration of the bonds, mortgages, debenture obligations, securities or evidences of indebtedness, or shares of the capital stock, of any corporation or corporations of any state, territory or foreign country, formed or to be formed for the purpose of purchasing the same. C. To loan money to, or guarantee an obligation of, or otherwise assist any officer or other employee of the Corporation or of any subsidiary, including an officer or employee who is also a director of the Corporation, whenever, in the judgment of the Board of Directors, such loan, guarantee, or assistance may reasonably be expected to benefit the Corporation. D. To designate three (3) or more of their number to constitute an executive committee, which committee shall for the time being and subject to the control and direction of the Board of Directors have and exercise all the powers of the Board of Directors which may be lawfully delegated for the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. 6. Except to the extent prohibited by law, no Director or officer of the Corporation shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, provided that a Director or officer shall not be relieved from liability for any breach of duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Corporation or its shareholders, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by such person of an improper personal benefit. Neither the amendment or repeal of this Article 7, nor the adoption of any provision of this Restated Certificate of Incorporation inconsistent with this Article 7, shall eliminate or reduce the effect of this Article 7 in respect of any matter which occurred, or any cause of action, suit or claim which but for this Article 7 would have accrued or arisen, prior to such amendment, repeal or adoption. 7. Except as may be otherwise provided in respect of directors to be elected by the holders of Preferred Stock, or any series thereof, by the terms of any resolution or resolutions of the Board of Directors providing for any series of Preferred Stock adopted pursuant to the provisions of Article 3 hereof, the Board of Directors shall be classified, with respect to the time for which directors shall hold office, into three classes, as determined by the Board of Directors, each as nearly equal in number as possible. At the annual meeting of the shareholders of the Corporation at which this Article 8 is adopted, the first such class of directors shall be elected for a term expiring upon the next following annual meeting of shareholders and upon the election and qualification of their respective successors, the second such class of directors shall be elected for a term expiring upon the second following annual meeting of shareholders and upon the election and qualification of their respective successors, and the third such class of directors shall be elected for a term expiring upon the third following annual meeting of shareholders and upon the election and qualification of their respective successors. At each annual meeting of shareholders following the annual meeting at which this Article 8 is adopted, directors of the class of directors whose term expires at such annual meeting shall be elected for a term expiring upon the third following annual meeting of shareholders and upon the election and qualification of their respective successors. Whenever the number of directors constituting the whole Board of Directors is changed, except as may be otherwise provided in respect of directors to be elected by the holders of Preferred Stock, or any series thereof, by the terms of any resolution or resolutions of the Board of Directors providing for any series of Preferred Stock adopted pursuant to the provisions of Article 3 hereof, any increase or decrease in the number of directors shall be apportioned by the Board of Directors among the three classes so as to maintain all the classes as equal in number as possible, and each such director shall hold office until the next annual meeting of shareholders and until such director's successor shall have been elected and qualified; provided, however, that no decrease in the number of directors shall effect the then-current term of any director then in office. A director may be disqualified from office as required by law or under any applicable rules, regulations or orders of any federal or state regulatory authority or by provisions of general applicability in the Restated Certificate of Incorporation or By-Laws adopted prior to such director's election. Any action by the Board of Directors or shareholders creating one or more vacancies on the Board of Directors by increasing the authorized number of directors shall be effective only if such action has received the affirmative vote, in the case of the Board of Directors, of eighty percent (80%) or more of the directors then holding office or, in the case of the shareholders, of eighty percent (80%) or more of the combined voting power of the then outstanding shares of all classes and series of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. 8. Subject to the rights of the holders of shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as to dividends or upon liquidation, any action required or permitted to be taken by the shareholders of the Corporation must be effected exclusively either at a duly called annual or special meeting of shareholders of the Corporation or by the unanimous (but no less than unanimous) written consent of the shareholders. 9. In addition to any requirements of law and any other provision of the Restated Certificate of Incorporation of the Corporation or any resolution or resolutions of the Board of Directors providing for any series of Preferred Stock adopted pursuant to Article 3 hereof (and notwithstanding the fact that approval by a lesser vote may be permitted by law, any other Article, or other provisions hereof or any such resolution or resolutions), the affirmative vote of the holders of eighty percent (80%) or more of the combined voting power of the then outstanding shares of all classes and series of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter or repeal, or adopted any provision or take action inconsistent with, this Article 10 or Articles 8 or 9 hereof. CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF SUMMIT BANCORP. _______________ To: The Secretary of State State of New Jersey Pursuant to the provisions of Section 14A:7-15.1(3) of the New Jersey Business Corporation Act, the undersigned corporation hereby executes the following Certificate of Amendment to its Restated Certificate of Incorporation dated August 8, 1997 (the "Certificate of Incorporation"): 1. The name of the corporation is Summit Bancorp. (the "Corporation"). 2. The Board of Directors of the Corporation duly adopted a resolution approving of the division of the shares of the Corporation at a regular meeting of the Board of Directors held on August 20, 1997. 3. The Amendment to the Certificate of Incorporation set forth in Section Five hereof shall not adversely affect the rights or preferences of the holders of outstanding shares of any class or series and will not result in the percentage of authorized shares that remains unissued after the share division exceeding the percentage of authorized shares that was unissued before the share division. 4. (a) The Two Hundred Sixty Million (260,000,000) shares of the Common Stock, $1.20 par value per share, of the Corporation presently authorized are to be divided into Three Hundred Ninety Million (390,000,000) of Common Stock, $0.80 par value per share. (b) The Four Million (4,000,000) shares of the Preferred Stock, without par value, of the Corporation presently authorized are to be divided into Six Million (6,000,000) shares of the Preferred Stock, without par value. 5. The following amendment to the Certificate of Incorporation set forth below was approved by the Board of Directors of the Corporation on August 20, 1997 in connection with the three-for- two division of the shares of the capital stock of the Corporation authorized, issued and outstanding at the close of business September 3, 1997, payable on September 24, 1997 to shareholders of record at the close of business on September 3, 1997 and the change in the par value of all authorized common stock of the Corporation from $1.20 per share to $0.80 per share: 3. The total number of shares of capital stock authorized and which may be issued by this Corporation is Three Hundred Ninety-Six Million (396,000,000) shares, of which Three Hundred Ninety Million (390,000,000) shares of Eighty Cents ($0.80) par value each shall be designated as Common Stock, and of which Six Million (6,000,000) shares without par value shall be designated as Preferred Stock. All or any part of such authorized Common Stock and Preferred Stock may be issued by the Corporation from time to time and for such consideration as may be determined upon and fixed by the Board of Directors as provided by law. 6. The dividend of shares set forth herein is to become payable and the amendment to the Certificate of Incorporation set forth herein is to become effective at 11:59 p.m., September 24, 1997. Dated this 16th day of September, 1997. By:/s/RICHARD F. OBER, JR. _______________________________ Richard F. Ober, Jr. Executive Vice President EX-3 4 EXHIBIT (3)A(I) CERTIFICATE OF ADJUSTMENT TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK AS RIGHTS AGENT UNDER RIGHTS AGREEMENT DATED AS OF AUGUST 16, 1989 WITH UJB FINANCIAL CORP. (NOW SUMMIT BANCORP) AND TRANSFER AGENT OF SERIES R PREFERRED STOCK OF SUMMIT BANCORP 30 West Broadway New York, NY 10007 ATTN: Tenders and Exchange Administration This certificate is delivered pursuant to Section 12 of the Rights Agreement between UJB Financial Corp. (now Summit Bancorp) and First Chicago Trust Company of New York dated as of August 16, 1989. Any capitalized terms not defined herein shall have the same meanings as in such Rights Agreement. On August 20, 1997, the Board of Directors declared a 3 for 2 stock split on the Common Stock, par value $1.20 of Summit Bancorp, with a record date of September 3, 1997 and a distribution date of September 24, 1997. Upon such distribution: The Adjusted Exercise Price of each right shall be $60.00. The Adjusted Number of Shares which may be purchased upon the exercise of a right shall be 1/150 of a share of Series R Preferred Stock without par value (stated value $100). Dated: August 20, 1997 /s/ Richard F. Ober, Jr. ------------------------ Richard F. Ober, Jr. Executive Vice President & Secretary EX-27.1 5 EX-27 09/30/97
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1997 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS DEC-31-1997 SEP-30-1997 1,117,347 4,309 14,359 29,808 4,596,923 4,078,729 4,061,421 18,630,663 294,114 29,091,106 21,938,028 3,256,136 377,886 1,001,617 0 0 140,588 2,376,851 29,091,106 1,121,321 410,226 4,099 1,535,646 508,614 681,034 854,612 45,100 3,471 625,561 399,051 258,752 0 0 258,752 1.48 1.48 4.28 88,957 67,496 0 19,174 290,605 64,846 23,255 294,114 138,581 0 155,533
EX-27.2 6 RESTATED EX-27 06/30/97
9 ON AUGUST 1, 1997, SUMMIT BANCORP. COMPLETED ITS ACQUISITION OF COLLECTIVE BANCORP, INC. THIS ACQUISITION WAS ACCOUNTED FOR AS A POOLING OF INTEREST AND THE SUMMARY FINANCIAL INFORMATION HAS BEEN RESTATED. 1000 6-MOS DEC-31-1997 JUN-30-1997 1,153,517 6,879 143,497 43,407 3,513,390 5,138,227 5,072,035 18,597,663 294,066 29,224,687 22,167,140 3,332,234 330,485 910,766 0 0 140,291 2,343,771 29,224,687 741,321 273,836 2,988 1,018,145 338,221 451,315 566,830 30,600 2,206 388,275 288,883 187,540 0 0 187,540 1.07 1.07 4.28 110,177 71,510 0 18,745 290,605 42,782 15,643 294,066 147,366 0 146,700
EX-27.3 7 RESTATED EX-27 03/31/97
9 ON AUGUST 1, 1997, SUMMIT BANCORP. COMPLETED ITS ACQUISITION OF COLLECTIVE BANCORP, INC. THIS ACQUISITION WAS ACCOUNTED FOR AS A POOLING OF INTEREST AND THE SUMMARY FINANCIAL INFORMATION HAS BEEN RESTATED. 1000 3-MOS DEC-31-1997 MAR-31-1997 1,034,857 13,457 243,395 33,806 3,366,770 5,196,227 5,015,456 18,376,154 290,471 28,907,850 22,330,582 2,948,117 395,392 835,744 0 0 139,925 2,258,090 28,907,850 365,230 134,658 1,426 501,314 168,314 221,299 280,015 15,510 1,431 206,942 126,963 82,482 0 0 82,482 0.47 0.47 4.29 125,583 76,429 0 7,502 290,605 21,658 6,014 290,471 156,350 0 134,121
EX-27.4 8 RESTATED EX-27 09/30/96
9 ON AUGUST 1, 1997, SUMMIT BANCORP. COMPLETED ITS ACQUISITION OF COLLECTIVE BANCORP, INC. THIS ACQUISITION WAS ACCOUNTED FOR AS A POOLING OF INTEREST AND THE SUMMARY FINANCIAL INFORMATION HAS BEEN RESTATED. 1000 9-MOS DEC-31-1996 SEP-30-1996 1,407,284 9,136 4,052 20,049 2,643,827 5,492,568 5,369,211 17,277,746 284,223 27,405,016 21,453,638 3,013,320 345,896 397,862 0 42,620 134,527 2,017,153 27,405,016 1,034,325 387,998 4,267 1,426,590 494,484 639,119 787,471 47,599 1,268 643,459 287,936 186,944 0 0 186,944 1.11 1.11 4.21 167,466 85,090 0 20,631 299,502 80,340 17,462 284,223 156,377 0 127,846
EX-27.5 9 RESTATED EX-27 12/31/96
9 ON AUGUST 1, 1997, SUMMIT BANCORP. COMPLETED ITS ACQUISITION OF COLLECTIVE BANCORP, INC. THIS ACQUISITION WAS ACCOUNTED FOR AS A POOLING OF INTEREST AND THE SUMMARY FINANCIAL INFORMATION HAS BEEN RESTATED. 1000 12-MOS DEC-31-1996 DEC-31-1996 1,327,507 24,825 114,789 26,376 2,872,051 5,422,093 5,321,724 17,386,059 280,611 27,767,271 21,629,531 2,806,367 344,742 695,793 0 0 134,637 2,156,201 27,767,271 1,383,150 517,584 6,262 1,906,996 659,034 853,707 1,053,289 64,034 3,862 815,591 433,706 283,675 0 0 283,675 1.69 1.69 4.21 139,130 79,013 0 11,048 299,502 108,307 23,231 280,611 147,387 0 133,224
EX-27.6 10 RESTATED EX-27 12/31/95
9 ON AUGUST 1, 1997, SUMMIT BANCORP. COMPLETED ITS ACQUISITION OF COLLECTIVE BANCORP, INC. THIS ACQUISITION WAS ACCOUNTED FOR AS A POOLING OF INTEREST AND THE SUMMARY FINANCIAL INFORMATION HAS BEEN RESTATED. 1000 12-MOS DEC-31-1995 DEC-31-1995 1,403,974 18,329 165,367 41,965 2,521,700 5,463,303 5,385,830 16,413,221 293,160 26,647,452 21,232,926 2,096,184 361,480 826,754 0 42,620 128,029 1,959,459 26,647,452 1,297,168 526,997 7,769 1,831,934 630,303 822,232 1,009,702 72,090 8,595 707,839 467,405 300,412 0 0 300,412 1.89 1.89 4.29 193,561 60,463 199 18,708 330,172 130,492 22,095 293,160 207,302 0 85,858
EX-27.7 11 RESTATED EX-27 12/31/94
9 ON AUGUST 1, 1997, SUMMIT BANCORP. COMPLETED ITS ACQUISITION OF COLLECTIVE BANCORP, INC. THIS ACQUISITION WAS ACCOUNTED FOR AS A POOLING OF INTEREST AND THE SUMMARY FINANCIAL INFORMATION HAS BEEN RESTATED. 1000 12-MOS DEC-31-1994 DEC-31-1994 1,254,506 18,822 56,600 34,870 1,339,725 7,071,341 6,672,271 15,048,579 323,336 25,484,073 19,981,071 2,451,154 320,667 917,736 0 50,008 123,770 1,639,667 25,484,073 1,080,046 487,852 4,472 1,572,370 464,033 599,732 972,638 94,347 4,954 758,355 337,662 215,648 0 (1,731) 213,917 1.37 1.37 4.42 206,943 59,780 2,920 34,614 363,229 119,546 22,258 323,336 217,476 0 105,860
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