-----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, PT3vOwXgiudP4is0D/hugpOtrkb2SMHnoSUfp0amqACCiC7SUAcSKamOh0dBlxbX OzwG/9tfauFzR3wOXAhZDA== 0000950123-96-001270.txt : 19960326 0000950123-96-001270.hdr.sgml : 19960326 ACCESSION NUMBER: 0000950123-96-001270 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960301 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960325 SROS: NASD 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06451 FILM NUMBER: 96537801 BUSINESS ADDRESS: STREET 1: 301 CARNEGIE CENTER STREET 2: P O BOX 2066 CITY: PRINCETON STATE: NJ ZIP: 08543-2066 BUSINESS PHONE: 6099873200 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 8-K/A 1 AMENDMENT TO FORM 8-K CURRENT REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT: (DATE OF EARLIEST EVENT REPORTED) MARCH 1, 1996 SUMMIT BANCORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW JERSEY 1-6451 22-1903313 (STATE OR OTHER JURIS- (COMMISSION (IRS EMPLOYER DICTION OF INCORPORATION FILE NO.) IDENTIFICATION NO.) OR ORGANIZATION) 301 CARNEGIE CENTER, P.O. BOX 2066, PRINCETON, NEW JERSEY 08543-2066 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 987-3200 UJB FINANCIAL CORP. (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) 2 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired (i) The following financial information for The Summit Bancorporation ("Bancorporation" or "Summit") was filed as part of the Annual Report on Form 10-K of Bancorporation for the Fiscal Year ended December 31, 1994; financial information located at the stated page numbers thereof is herein incorporated by reference:
Auditors' Report......................................... 27 Consolidated Statement of Income - Three Years Ended December 31, 1994......................... 28 Consolidated Balance Sheet - December 31, 1994 and 1993.. 29 Consolidated Statement of Stockholders' Equity - Three Years Ended December 31, 1994............. 30 Consolidated Statement of Cash Flows - Three Years Ended December 31, 1994......................... 31 Notes to Consolidated Financial Statements............... 32 (ii) Interim Financial Information - The following financial information for Bancorporation was filed on Form 10-Q of Bancorporation for the quarter ended September 30, 1995; financial information located at the stated page numbers thereof is herein incorporated by reference: Consolidated Balance Sheet at September 30, 1995 and December 31, 1994.............................. 1 Consolidated Statement of Income -Three Months and Nine Months ended September 30, 1995 and 1994.. 2 Consolidated Statement of Stockholders' Equity- Three Months and Nine Months Ended September 30, 1995 and 1994.................... 3 Consolidated Statement of Cash Flows- Three Months and Nine Months Ended September 30, 1995 and 1994.................... 4 Notes to Consolidated Financial Statements ............. 5
(b) Pro Forma Financial Information PRO FORMA FINANCIAL INFORMATION (Unaudited) The following unaudited pro forma condensed combined financial statements reflect the Merger of UJB Financial Corp. (UJB) and The Summit Bancorporation and the related mergers of Flemington National Bank and Trust Company (Flemington) and Garden State Bancshares, Inc. (Garden State) (collectively the "Pooling Acquisition"). This pro forma financial information is based on the estimates and assumptions set forth in the notes to such statements. The pro forma adjustments made in connection with the development of the pro forma information are preliminary and have been made solely for purposes of developing such pro forma information as necessary to comply with the disclosure requirements of the Commission. The pro forma financial information has been prepared using the historical consolidated financial statements and notes thereto appearing in UJB's Form 10-K, Summit's Form 10-K, Flemington's Form 10-KSB and Garden State's Form 10-K each for the fiscal year ended December 31, 1994. The unaudited pro forma condensed combined financial statements do not purport to be indicative of the combined financial position or results of operations of future periods or indicative of the results that actually would have been realized had the entities been a single entity during these periods. The Pro Forma Condensed Combined Statements of Income give effect to the proposed Merger by combining the respective statements of income of UJB, Summit, Garden State and Flemington for the nine months ended September 30, 1995 and 1994 and for each of the three years in the period ended December 31, 1994. The Pro Forma Condensed Combined Statements of Income do not give effect to anticipated expenses and nonrecurring charges related to the Merger and the estimated effect of revenue enhancements and expense savings associated with the consolidation of the operations of UJB and Summit. Had these expenses and nonrecurring charges been reflected in the Pro Forma Condensed Combined Statements of Income for the nine months ended September 30, 1995, UJB and Summit Pro Forma net income would decrease by $54 million or $.63 per share and All Transactions Pro Forma net income would decrease by $61 million or $.67 per share. Earnings per common share amounts for UJB, Summit, Garden State and Flemington are based on the historical weighted average number of common shares outstanding for each company during the period. With respect to the pro forma earnings per share computation, shares of Summit, Garden State and Flemington have been adjusted to the equivalent shares of UJB for each period. The pro forma financial information uses the Exchange Ratio of 0.90 shares of UJB Common for each share of Summit Common, the exchange ratio of 1.3816 shares of UJB Common for each share of Flemington common stock and the effective exchange ratio of 0.972 shares of UJB Common for each share of Garden State common stock, which were the actual exchange ratios at the consummation of these mergers. i) PRO FORMA CONDENSED COMBINED BALANCE SHEET DATED SEPTEMBER 30, 1995 Dollars in Thousands
Pro Forma Adjustment Increase (Decrease) All Transactions Pro Forma ---------------------------------------- -------------------------- Shareholders' Equity Common Stock $(9,515) $110,775 Surplus $ 9,058 $846,021
2 3 ii) PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
All Transactions Pro Forma -------------------------- Net Income Per Common Share $1.99 Average Common Shares Outstanding (in thousands) 90,400
iii) PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
All Transactions Pro Forma -------------------------- Average Common Shares Outstanding (in thousands) 87,641
iv) PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
All Transactions Pro Forma -------------------------- Average Common Shares Outstanding (12/31/94) (in thousands) 87,918 Average Common Shares Outstanding (12/31/93) (in thousands) 85,684 Average Common Shares Outstanding (12/31/92) (in thousands) 80,471
v) NOTES TO THE PRO FORMA FINANCIAL INFORMATION: (2) The Pro Forma Condensed Combined Balance Sheet gives effect to the Merger and the Pooling Acquisitions by combining the respective balance sheets of UJB, Summit, Garden State and Flemington at September 30, 1995 on a pooling-of-interests basis. The capital accounts have been adjusted to reflect the issuance of 34.7 million shares of UJB Common in exchange for all the outstanding shares of Summit, Garden State and Flemington. The following unaudited pro forma combined condensed financial information for UJB Financial Corp. and Bancorporation, filed as part of Registration Statement No. 33-63783 on Form S-4 (declared effective December 7, 1995), and located at the stated page numbers thereof, is herein incorporated by reference with the specific exceptions therefrom of: (i) "Shareholder's Equity - Common Stock" and "Shareholder's Equity Surplus" stated under "Pro Forma Adjustment Increase (Decrease)" and "All Transactions Pro Forma", as reflected on the Pro Forma Condensed Combined Balance Sheet dated September 30, 1995; (ii) (a) Net Income Per Common Share and (b) Average Common Shares Outstanding stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995; (iii) Average Common Shares Outstanding stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1994; (iv) Average Common Shares Outstanding stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 and (v) Note 2 in the Notes to the Pro Forma Financial Information: 3 4 Pro Forma Condensed Combined Balance Sheets - September 30, 1995............................................................... 17 (except for "Shareholders' Equity - Common Stock" and "Shareholders' Equity - Surplus" stated under "Pro Forma Adjustment Increase (Decrease)" and "All Transactions Pro Forma") Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995 and 1994 and the Years Ended December 31, 1994, 1993 and 1992................................. 18 (except for (i) "Net Income Per Common Share" and "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995; (ii) "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1994 and (iii) "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 Notes to Pro Forma Financial Information.................................................. 23 (except with respect to Note 2 )
(c) Exhibits
Exhibit No. Description ----------- ----------- (24) Auditors' Consent (The Summit Bancorporation) (99) A. Item 8 Financial Statements and Supplementary Data from the Annual Report on Form 10-K of the Summit Bancorporation for the Fiscal Year ended December 31, 1994. Auditors' Report Consolidated Statement of Income - Three Years Ended December 31, 1994 Consolidated Balance Sheet - December 31, 1994 and 1993 Consolidated Statement of Stockholders' Equity - Three Years Ended December 31, 1994 Consolidated Statement of Cash Flows - Three Years Ended December 31, 1994 Notes to Consolidated Financial Statements (99) B. Item 1 Financial Statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. Consolidated Balance Sheet at September 30, 1995 and December 31, 1994 Consolidated Statement of Income - Three Months and Nine Months ended September 30, 1995 and 1994 Consolidated Statement of Stockholders' Equity -
4 5 Three Months and Nine Months Ended September 30,1995 and 1994 Consolidated Statement of Cash Flows - Three Months and Nine Months Ended September 30, 1995 and 1994 Notes to Consolidated Financial Statements (99) C. Pro Forma Financial Information Pro Forma Condensed Combined Balance Sheets - September 30, 1995 (except for "Shareholders' Equity - Common Stock" and "Shareholders' Equity - Surplus" stated under "Pro Forma Adjustment Increase (Decrease)" and "All Transactions Pro Forma") Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995 and 1994 and the Years Ended December 31, 1994, 1993, 1992 (except for (i) "Net Income Per Common Share" and "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995; (ii) "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1994 and (iii) "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 Notes to Pro Forma Financial Information (except with respect to Note 2)
5 6 SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized. Date: March 22, 1996 SUMMIT BANCORP. By: /s/ Dennis A. Williams ---------------------- Dennis A. Williams Senior Vice President 6 7 EXHIBIT INDEX
Ex. No. Description ------- ----------- (24) Auditors' Consent (The Summit Bancorporation) (99) A. Item 8 Financial Statements and Supplementary Data from the Annual Report on Form 10-K of the Summit Bancorporation for the Fiscal Year ended December 31, 1994. Auditors' Report Consolidated Statement of Income - Three Years Ended December 31, 1994 Consolidated Balance Sheet - December 31, 1994 and 1993 Consolidated Statement of Stockholders' Equity - Three Years Ended December 31, 1994 Consolidated Statement of Cash Flows - Three Years Ended December 31, 1994 Notes to Consolidated Financial Statements (99) B. Item 1 Financial Statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. Consolidated Balance Sheet at September 30, 1995 and December 31, 1994 Consolidated Statement of Income - Three Months and Nine Months ended September 30, 1995 and 1994 Consolidated Statement of Stockholders' Equity - Three Months and Nine Months Ended September 30, 1995 and 1994 Consolidated Statement of Cash Flows - Three Months and Nine Months Ended September 30, 1995 and 1994 Notes to Consolidated Financial Statements (99) C. Pro Forma Financial Information Pro Forma Condensed Combined Balance Sheets - September 30, 1995 (except for "Shareholders' Equity - Common Stock" and "Shareholders' Equity - Surplus" stated under "Pro Forma Adjustment Increase (Decrease)" and "All Transactions Pro Forma") Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995 and 1994 and the Years Ended December 31, 1994, 1993, 1992
7 8 (except for (i) "Net Income Per Common Share" and "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1995; (ii) "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Nine Months Ended September 30, 1994 and (iii) "Average Common Shares Outstanding" stated under "All Transactions Pro Forma" in the Pro Forma Condensed Combined Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 Notes to Pro Forma Financial Information (except with respect to Note 2)
8 EX-24 2 AUDITORS' CONSENT 1 EXHIBIT (24) INDEPENDENT AUDITORS' CONSENT The Board of Directors Summit Bancorp: We consent to the inclusion in the current report on Form 8-K/A of Summit Bancorp. of our report dated January 17, 1995, relating to the consolidated balance sheets of The Summit Bancorporation and subsidiaries as of December 31, 1994, and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1994, which report is included in the December 31, 1994 Annual Report on Form 10-K of The Summit Bancorporation. /s/ KPMG Peat Marwick LLP ----------------------------------- KPMG Peat Marwick LLP Short Hills, New Jersey March 21, 1996 EX-99.A 3 FINANCIAL STATEMENT FROM SUMMIT'S 1994 FORM 10-K 1 KPMG Peat Marwick LLP Certified Public Accountants 150 John F. Kennedy Parkway Short Hills, NJ 07078 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of The Summit Bancorporation: We have audited the accompanying consolidated balance sheets of The Summit Bancorporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of The Summit Bancorporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Summit Bancorporation and subsidiaries as of December 31, 1994 and 1993 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. January 17, 1995 27 2 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) INTEREST INCOME: Interest and Fees on Loans................................. $244,980 $232,981 $260,765 Interest and Dividends on Investment Securities: Taxable.................................................. 44,133 65,661 89,299 Tax-Exempt............................................... 2,505 3,056 5,866 Interest and Dividends on Securities Available for Sale: Taxable.................................................. 45,436 19,411 -- Tax-Exempt............................................... 1,451 1,665 -- Interest on Trading Account Securities..................... 79 68 66 Interest on Federal Funds Sold and Securities Purchased Under Agreements to Resell............................... 2,918 5,175 4,997 Interest on Other Short-Term Investments................... 325 1,013 1,503 -------- -------- -------- Total Interest Income............................ 341,827 329,030 362,496 -------- -------- -------- INTEREST EXPENSE: Interest on Deposits....................................... 105,499 110,517 144,446 Interest on Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Other Short-Term Borrowings............................................... 8,905 5,273 4,505 Interest on Long-Term Debt................................. 16,700 9,287 16,081 -------- -------- -------- Total Interest Expense........................... 131,104 125,077 165,032 -------- -------- -------- NET INTEREST INCOME........................................ 210,723 203,953 197,464 Provision for Loan Losses.................................. 7,995 17,200 25,998 -------- -------- -------- Net Interest Income After Provision for Loan Losses........ 202,728 186,753 171,466 -------- -------- -------- NONINTEREST INCOME: Trust Income............................................... 11,875 11,125 10,899 Service Fees on Deposit Accounts........................... 18,523 16,936 16,233 Securities Gains........................................... 344 702 710 Other Income............................................... 21,256 22,554 13,863 -------- -------- -------- Total Noninterest Income......................... 51,998 51,317 41,705 -------- -------- -------- NONINTEREST EXPENSE: Salaries and Employee Benefits............................. 86,087 84,624 78,436 Net Occupancy Expense...................................... 18,868 18,619 18,890 Furniture and Equipment Expense............................ 9,496 8,927 8,908 Loss on Sale of Assets..................................... 35,390 -- -- Restructuring and Other Merger-Related Costs............... 13,565 -- -- Other Expenses............................................. 50,280 55,680 57,110 -------- -------- -------- Total Noninterest Expense........................ 213,686 167,850 163,344 -------- -------- -------- Income Before Income Taxes................................. 41,040 70,220 49,827 Applicable Income Tax Expense.............................. 16,640 22,989 16,340 -------- -------- -------- Income Before Accounting Change and Extraordinary Item..... 24,400 47,231 33,487 -------- -------- -------- Cumulative Effect of a Change in Accounting Principle...... -- 5,303 -- Extraordinary Item......................................... -- (1,810) -- -------- -------- -------- Net Income................................................. $ 24,400 $ 50,724 $ 33,487 ======== ======== ======== Net Income Available to Common Stockholders................ $ 23,200 $ 49,524 $ 32,287 ======== ======== ======== PER COMMON SHARE: Income Before Accounting Change and Extraordinary Item..... $ .70 $ 1.43 $ 1.07 Net Income................................................. .70 1.54 1.07 Weighted Average Shares Outstanding........................ 33,090 32,102 30,220
See Accompanying Notes to Consolidated Financial Statements. 28 3 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, ------------------------- 1994 1993 ---------- ---------- (IN THOUSANDS) ASSETS Cash and Due from Banks............................................. $ 261,665 $ 198,479 Short-Term Investments: Federal Funds Sold and Securities Purchased Under Agreements to Resell..................................... -- 248,000 Other Short-Term Investments...................................... 8,208 20,013 ---------- ---------- Total Short-Term Investments.............................. 8,208 268,013 Investment Securities (Market Value of $669,154 and $789,949)....... 707,999 791,808 Securities Available for Sale....................................... 923,414 830,880 Trading Account Securities.......................................... 1,357 1,752 Loans............................................................... 3,448,605 3,137,718 Less: Allowance for Loan Losses..................................... 91,169 94,874 ---------- ---------- Net Loans................................................. 3,357,436 3,042,844 Premises and Equipment.............................................. 45,034 45,513 Other Real Estate Owned............................................. 15,830 35,982 Accrued Interest Receivable......................................... 29,600 29,650 Other Assets........................................................ 116,922 107,028 ---------- ---------- Total Assets.............................................. $5,467,465 $5,351,949 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand............................................................ $ 781,244 $ 692,627 Savings and NOW Accounts.......................................... 1,620,081 1,720,587 Money Market Accounts............................................. 770,987 772,178 Certificates of Deposit of $100,000 and Over...................... 223,326 82,347 Other Time........................................................ 1,013,680 1,144,988 ---------- ---------- Total Deposits............................................ 4,409,318 4,412,727 Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Other Short-Term Borrowings........................ 231,028 180,389 Accrued Expenses and Other Liabilities.............................. 56,786 67,673 Long-Term Debt...................................................... 338,763 251,800 ---------- ---------- Total Liabilities......................................... 5,035,895 4,912,589 Stockholders' Equity: Preferred Stock, No Par Value, Authorized 12,000 Shares Cumulative Adjustable Rate, Issued and Outstanding 800 Shares......................................................... 20,000 20,000 Common Stock, No Par Value, Authorized 50,000 Shares Issued and Outstanding 33,439 and 32,319 Shares................ 49,320 43,372 Surplus........................................................... 305,075 243,685 Retained Earnings................................................. 72,215 128,172 Net Unrealized (Losses) Gains on Securities Available for Sale.... (15,040) 4,131 ---------- ---------- Total Stockholders' Equity................................ 431,570 439,360 ---------- ---------- Total Liabilities and Stockholders' Equity................ $5,467,465 $5,351,949 ========= =========
See Accompanying Notes to Consolidated Financial Statements. 29 4 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NET UNREALIZED ADJUSTABLE GAINS (LOSSES) RATE ON SECURITIES TOTAL PREFERRED COMMON RETAINED AVAILABLE STOCKHOLDERS' STOCK STOCK SURPLUS EARNINGS FOR SALE EQUITY ---------- ------- -------- -------- -------------- ------------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) BALANCE, JANUARY 1, 1992............... $ 20,000 $36,015 $183,820 $ 84,146 $ -- $ 323,981 Net Income............................. -- -- -- 33,487 -- 33,487 Common Stock Issued Under: Public Stock Offering, Net........... -- 4,543 35,595 -- -- 40,138 Dividend Reinvestment and Stock Purchase Plan...................... -- 1,866 15,893 -- -- 17,759 Stock Incentive Plans................ -- 309 1,979 -- -- 2,288 Cash Dividends Declared: Adjustable Rate Preferred ($1.50 Per Share)............................. -- -- -- (1,200) -- (1,200) Common ($.73 Per Share).............. -- -- -- (18,784) -- (18,784) Allowance for Marketable Equity Securities........................... -- -- -- 1,277 -- 1,277 ---------- ------- -------- -------- -------------- ------------- BALANCE, DECEMBER 31, 1992............. 20,000 42,733 237,287 98,926 -- 398,946 Net Income............................. -- -- -- 50,724 -- 50,724 Common Stock Issued Under: Dividend Reinvestment and Stock Purchase Plan...................... -- 306 3,644 -- -- 3,950 Stock Incentive Plans................ -- 333 2,754 -- -- 3,087 Cash Dividends Declared: Adjustable Rate Preferred ($1.50 Per Share)............................. -- -- -- (1,200) -- (1,200) Common ($.74 Per Share).............. -- -- -- (20,278) -- (20,278) Change in Net Unrealized Gains (Losses) on Securities Available for Sale..... -- -- -- -- 4,131 4,131 ---------- ------- -------- -------- -------------- ------------- BALANCE, DECEMBER 31, 1993............. 20,000 43,372 243,685 128,172 4,131 439,360 Net Income............................. -- -- -- 24,400 -- 24,400 Common Stock Issued Under: Dividend Reinvestment and Stock Purchase Plan...................... -- 424 5,115 -- -- 5,539 Stock Incentive Plans................ -- 647 3,520 -- -- 4,167 Cash Dividends Declared: Adjustable Rate Preferred ($1.50 Per Share)............................. -- -- -- (1,200) -- (1,200) Common ($.78 Per Share).............. -- -- -- (23,025) -- (23,025) Change in Net Unrealized Gains (Losses) on Securities Available for Sale..... -- -- -- -- (19,171) (19,171) Acquisition of Lancaster Financial Ltd., Inc. ................ -- 400 -- 2,395 -- 2,795 Adjustment for the Pooling of a Company with a Different Fiscal Year-End..... -- -- -- (1,295) -- (1,295) Adjustment for 10% Stock Dividend...... -- 4,477 52,755 (57,232) -- -- ---------- ------- -------- -------- -------------- ------------- BALANCE, DECEMBER 31, 1994............. $ 20,000 $49,320 $305,075 $ 72,215 $(15,040) $ 431,570 ========= ======== ========= ========= ============== ============
See Accompanying Notes to Consolidated Financial Statements. 30 5 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------------- 1994 1993 1992 --------- --------- ----------- (IN THOUSANDS) OPERATING ACTIVITIES: Net Income............................................. $ 24,400 $ 50,724 $ 33,487 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization Expenses............ 10,816 5,740 6,009 Provision for Loan Losses......................... 7,995 17,200 25,998 Deferred Income Tax Expense (Benefit)............. 4,214 (1,039) (4,963) Securities Gains.................................. (344) (702) (710) Decrease (Increase) in Trading Account Securities...................................... 395 981 (1,008) Gain on Sale of Loans............................. (2,259) (8,186) (3,312) Net Decrease (Increase) in Loans Originated for Sale............................................ 49,194 (139,895) (162,635) Decrease in Accrued Interest Receivable........... 20 3,031 4,474 Decrease in Accrued Interest Payable.............. (56) (1,654) (1,692) Decrease in Other Real Estate Owned............... 21,380 20,576 27,684 (Increase) Decrease in Other Assets............... (16,969) (14,243) 32,999 (Decrease) Increase in Accrued Expenses and Other Liabilities........................... (4,735) (2,611) 1,533 Other, Net........................................ -- 27 (68) --------- --------- ----------- Net Cash Provided (Used) by Operating Activities................................... 94,051 (70,051) (42,204) --------- --------- ----------- INVESTING ACTIVITIES: Net (Increase) Decrease in Loans Made to Customers..... (394,037) (100,134) 126,105 Purchases of Investment Securities..................... (434,195) (726,626) (1,119,075) Maturities of Investment Securities.................... 400,181 785,681 699,078 Proceeds from Sales of Investment Securities........... -- -- 79,313 Proceeds from Sales of Loan Securitizations............ 35,334 116,950 152,582 Purchases of Securities Available for Sale............. (667,376) (581,186) (19,950) Maturities of Securities Available for Sale............ 539,173 336,675 -- Proceeds from Sales of Securities Available for Sale... 105,914 78,753 20,048 Purchases of Premises and Equipment.................... (12,385) (12,167) (11,179) Decrease (Increase) in Short-Term Investments.......... 259,805 (73,900) (35,100) Other, Net............................................. -- 811 124 --------- --------- ----------- Net Cash Used by Investing Activities........... (167,586) (175,143) (108,054) --------- --------- ----------- FINANCING ACTIVITIES: (Decrease) Increase in Deposits........................ (4,630) 35,780 195,183 Increase (Decrease) in Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Other Short-Term Borrowings.......................... 40,297 44,663 (67,057) Long-Term Debt Issued.................................. 474,399 764,180 513,425 Long-Term Debt Matured or Repurchased.................. (359,444) (623,574) (535,518) Cash Dividends Paid.................................... (24,225) (21,478) (19,984) Common Stock Issued.................................... 9,706 7,037 60,185 Adjustment Related to Acquisition...................... 2,795 -- -- Adjustment for the Pooling of a Company with a Different Fiscal Year-End............................ (2,177) -- -- --------- --------- ----------- Net Cash Provided by Financing Activities.... 136,721 206,608 146,234 --------- --------- ----------- Net Increase (Decrease) in Cash and Due From Banks..... 63,186 (38,586) (4,024) Cash and Due from Banks at January 1,.................. 198,479 237,065 241,089 --------- --------- ----------- Cash and Due from Banks at December 31,................ $ 261,665 $ 198,479 $ 237,065 ========= ========= ========== SUPPLEMENTAL DISCLOSURE: Interest Paid.......................................... $ 131,104 $ 128,256 $ 165,825 Income Taxes Paid...................................... 13,128 26,658 15,622 Securities Transferred to Securities Available for Sale................................................. 134,093 294,854 367,362 Loans Transferred to Other Real Estate Owned........... 6,611 27,806 16,462 Mortgage Loans Swapped into Mortgage Backed Securities........................................... 35,233 116,777 152,025
See Accompanying Notes to Consolidated Financial Statements. 31 6 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a description of the more significant accounting policies followed by The Summit Bancorporation (the "Company") in the preparation of the accompanying consolidated financial statements. Investment Securities: Investment securities are comprised of debt securities that the Company has the positive intent and ability to hold to maturity. Such securities are stated at cost, adjusted for amortization of premium and accretion of discount using the interest method over the term of the investments. Net gains or losses on the sale of investment securities are determined by the specific identification method. Securities Available for Sale: On December 31, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Accordingly, debt securities that cannot be categorized as either investment securities or trading account securities are classified as securities available for sale. Such securities include debt securities to be held for indefinite periods of time and not intended to be held to maturity, as well as marketable equity securities. Securities available for sale include securities that management intends to use as part of its asset/liability management strategy and that may be sold in response to changes in interest rates, resultant prepayment risk and other factors related to interest rate and resultant prepayment risk changes. Securities available for sale at December 31, 1994 and 1993 are carried at fair market value and unrealized holding gains and losses (net of related tax effects) on such securities are excluded from earnings, but are included in stockholders' equity. Upon realization, such gains or losses will be included in earnings using the specific identification method. On December 31, 1992, the Company established an available for sale securities category and accounted for these securities at the lower of cost or market using the aggregate method. Trading Account Securities: Trading account securities are adjusted to market value. Included in noninterest income are gains and losses resulting from adjusting trading account securities to market value and from the sale of these securities. Loans: Loans are carried at their principal amounts, net of any unearned income. Interest income on loans is credited to income based on loan principal amounts outstanding at appropriate interest rates. Included in unearned income are net deferred loan origination fees, which are recognized over the life of a loan as interest income. Generally, the accrual of interest income on loans is discontinued if certain factors indicate reasonable doubt as to the timely collectibility of such interest. Loans that are past due on which the accrual of interest income has been discontinued are designated as nonaccrual. Interest payments received on nonaccrual loans are generally either applied against principal or reported as income, according to management's judgment as to the collectibility of principal. Loans are returned to an accrual status when factors indicating doubtful collectability on a timely basis no longer exist. The accrual of interest income on commercial loans is generally discontinued when a loan is past due 90 days or more. In some instances, consumer loans are classified as nonaccrual when payments are past due 90 days, and as a matter of general policy these loans are charged off after they become 120 days past due. The nonaccrual policy regarding real estate loans ranges from 90 to 120 days past due before they are classified as nonaccrual. Mortgage loans which the Company services for investors are not included in the accompanying consolidated financial statements. Fees earned for servicing loans are reported as income when the related loan payments are collected. Loan servicing costs are charged to expense as incurred. Generally, residential mortgage loans held for sale are originated with an outstanding purchase commitment from an investor. These loans are classified as residential mortgage loans and carried at the lower of cost or market using the aggregate method. Gains and losses on loans sold are included in other income. 32 7 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Allowance for Loan Losses: The allowance for loan losses is increased by provisions charged to expense and reduced by charge-offs, net of recoveries. The provision for loan losses is based on management's evaluation of the adequacy of the allowance for loan losses. This evaluation encompasses consideration of past loan loss experience and other factors, including changes in the composition and volume of the credit portfolio, the level and composition of nonperforming loans, the condition of industries experiencing particular financial pressures, the relationship of the current level of the allowance to the credit portfolio and to nonperforming assets, and economic conditions. Premises and Equipment: Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are generally computed by the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the lives of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Major improvements are capitalized, while repairs and maintenance costs are charged to operations as incurred. Upon retirement or sale, any gain or loss is credited or charged to operations. Other Real Estate Owned: Other real estate owned (including in-substance foreclosures) consists of assets acquired in partial or full satisfaction of loan obligations. These assets are recorded at fair market value at the time of acquisition, with any excess charged to the allowance for loan losses. Subsequent declines in the market value of these assets are included in other expenses. Income Taxes: The Company files a consolidated Federal income tax return. Separate state income tax returns are filed for each affiliate based on the laws and regulations of the various states in which they do business. In February 1992, SFAS No. 109, "Accounting for Income Taxes", was issued by the FASB. SFAS No. 109 prescribes a change to the asset and liability method of income tax accounting from the deferred method of accounting for income taxes required by Accounting Principles Board ("APB") Opinion No 11. SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company's financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled. SFAS No. 109 requires that deferred tax assets and liabilities be adjusted for effect of a change in tax rates in the period of enactment. Effective January 1, 1992 and prior to the acquisition of Crestmont Financial Corp. ("Crestmont"), the Company adopted SFAS No. 109. Effective April 1, 1993, Crestmont adopted SFAS No. 109. Pension Plans: The Company has noncontributory pension plans covering substantially all employees. Costs of the plans, based on actuarial computations of current and future benefits for employees, are charged to expense and are funded based on the maximum amount that can be deducted for Federal income tax purposes. Earnings Per Common Share: Earnings per common share is computed by dividing net income, less dividend requirements on the preferred stock, by the weighted average number of shares outstanding. Shares issuable under the stock option incentive plan have not been included in the calculation of earnings per share since their effect is not material. Derivative Financial Instruments: The Company enters into interest rate swap agreements, options, caps and floors as part of its management of interest rate risk. Such instruments have been designated as hedges and are accounted for primarily on an accrual basis. Gains and losses related to contracts that are effective hedges are deferred when necessary to be recognized in income in the same period as gains and losses on the hedged items. Gains and losses on early terminations of contracts that modify the characteristics of specified assets or liabilities are deferred and amortized as an adjustment to the yield of the hedged assets or liabilities over the shorter of the remaining life of the hedged item or the remaining contract period. The Company does not hold or issue derivative financial instruments for trading purposes. 33 8 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statement of Cash Flows: For the statement of cash flows, cash and due from banks are considered to be cash and cash equivalents. Other: Trust income is generally recorded on an accrual basis. Securities and other property (other than cash deposits) held in fiduciary or agency capacities for customers of the trust division are not assets of the Company and, accordingly, are not included in the accompanying financial statements. Fees on standby letters of credit are recorded over the life of the commitment. NOTE 2. EXTRAORDINARY ITEM In May 1993, the Company (i.e., Crestmont) prepaid $27 million of fixed-rate Federal Home Loan Bank of New York ("FHLB") borrowings with a weighted average rate of 8.60% and replaced them with lower costing short-term borrowings. The prepayment of the advances resulted in a prepayment penalty of $1,810,000 net of income tax benefits. NOTE 3. BUSINESS COMBINATIONS On September 1, 1994, the Company exchanged 500,000 shares of its Common Stock for all of the outstanding shares of Lancaster Financial Ltd., Inc. ("Lancaster"). The merger was accounted for using the pooling of interests method of accounting with prior-period financial statements not restated due to the nonmaterial nature of the Lancaster acquisition. On September 13, 1994, the Company exchanged 4,255,098 shares of its Common Stock for all of the outstanding common shares of Crestmont. The merger was accounted for using the pooling of interests method of accounting and prior-period financial statements were restated. The results of operations of the Company and Crestmont for the six months ended June 30, 1994 and the years ended December 31, 1993 and 1992 prior to restatement are as follows:
SIX MONTHS ENDED JUNE 30, 1994 1993 1992 ---------- -------- -------- (IN THOUSANDS) The Company: Net Interest Income..................................... $ 85,974* $171,190 $163,337 Cumulative Effect of a Change in Accounting Principle... -- -- -- Extraordinary Item...................................... -- -- -- Net Income.............................................. 23,833** 42,423 29,434 Crestmont: Net Interest Income..................................... 16,054 32,763 34,127 Cumulative Effect of a Change in Accounting Principle... -- 5,303 -- Extraordinary Item...................................... -- (1,810) -- Net Income.............................................. 2,489 8,301 4,053 Combined: Net Interest Income..................................... 102,028 203,953 197,464 Cumulative Effect of a Change in Accounting Principle... -- 5,303 -- Extraordinary Item...................................... -- (1,810) -- Net Income.............................................. 26,322 50,724 33,487
- --------------- * Includes $135 associated with Lancaster. ** Includes $225 associated with Lancaster. 34 9 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Prior to the combination, Crestmont's fiscal year ended March 31. In recording the pooling of interests combination, Crestmont's financial statements for the year ended December 31, 1994 were combined with the Company's financial statements for the same period and Crestmont's financial statements for the years ended March 31, 1994 and 1993 were combined with the Company's financial statements for the years ended December 31, 1993 and 1992, respectively. Crestmont's unaudited results of operations for the three months ended March 31, 1994 included net interest income of $8,055,000 and net income of $1,295,000. An adjustment has been made to stockholders' equity to eliminate the effect of including Crestmont's results of operations for the three months ended March 31, 1994 in both the year ended December 31, 1994 and the year ended December 31, 1993. NOTE 4. CASH AND DUE FROM BANKS Average required reserves for deposits maintained in accordance with banking regulations were $125,855,000 and $112,217,000 for the years 1994 and 1993. NOTE 5. INVESTMENT SECURITIES The book value of investment securities included in the consolidated balance sheet and the approximate market value consisted of the following:
DECEMBER 31, ------------------------------------------- 1994 1993 ------------------- ------------------- BOOK MARKET BOOK MARKET VALUE VALUE VALUE VALUE -------- -------- -------- -------- (IN THOUSANDS) U.S. Treasury and Federal Agency Securities: Maturing Within 1 Year....................... $ 3,407 $ 3,374 $ 22,755 $ 22,945 Maturing Between 1-5 Years................... 14,220 14,032 12,125 12,290 No Fixed Maturity............................ -- -- 6,992 6,992 -------- -------- -------- -------- 17,627 17,406 41,872 42,227 -------- -------- -------- -------- State and Municipal Securities: Maturing Within 1 Year....................... 39,997 40,072 48,847 49,012 Maturing Between 1-5 Years................... 3,120 3,141 9,557 9,977 Maturing Between 5-10 Years.................. 1,790 1,849 2,041 2,163 Maturing In Over 10 Years.................... 3,012 2,992 3,131 3,405 -------- -------- -------- -------- 47,919 48,054 63,576 64,557 -------- -------- -------- -------- Mortgage-Backed Securities: Federal Agency............................... 388,757 362,488 449,061 447,358 Other........................................ 200,818 189,468 135,910 134,562 -------- -------- -------- -------- 589,575 551,956 584,971 581,920 -------- -------- -------- -------- Other Bonds and Notes: Maturing Within 1 Year....................... 1,065 1,123 70,781 70,523 Maturing Between 1-5 Years................... 17,587 16,678 30,017 30,127 Maturing Between 5-10 Years.................. 34,226 33,937 591 595 -------- -------- -------- -------- 52,878 51,738 101,389 101,245 -------- -------- -------- -------- Total..................................... $707,999 $669,154 $791,808 $789,949 ======== ======== ======== ========
During 1994 the Company, as part of the merger, transferred $134,093,000 of Crestmont securities from the investment securities portfolio and designated them as securities available for sale. On December 31, 35 10 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1993, the Company segregated $294,854,000 of securities from the investment securities portfolio and designated them as securities available for sale as part of its adoption of SFAS No. 115. No sales of debt securities were made in 1994 and 1993. However, the Company received proceeds of $8,293,000, reflecting gross realized gains of $79,000 and incurred gross losses of $3,000 in connection with certain calls by issuers on investment securities during 1994. In 1992, proceeds from the sale of such securities were $64,725,000 resulting in gross realized gains of $35,000 and gross realized losses of $5,000. The gross unrealized gains and losses on debt securities included in investment securities are as follows:
DECEMBER 31, ------------------------------------ 1994 1993 ---------------- --------------- GAINS LOSSES GAINS LOSSES ------ ------- ------ ------ (IN THOUSANDS) U.S. Treasury and Federal Agency Securities........... $ 3 $ 224 $ 355 $ -- State and Municipal Securities........................ 225 90 993 12 Mortgage-Backed Securities............................ 1,259 38,878 5,073 8,124 Other Bonds and Notes................................. 60 1,200 615 759 ------ ------- ------ ------ Total Debt Securities Held for Investment........ $1,547 $40,392 $7,036 $8,895 ====== ======= ====== ======
Securities with a book value of $267,955,000 at December 31, 1994 and $121,183,000 at December 31, 1993 were pledged to qualify for fiduciary powers and other purposes required by law. NOTE 6. SECURITIES AVAILABLE FOR SALE A summary of securities available for sale included in the consolidated balance sheet follows:
DECEMBER 31, ----------------------------------------------- 1994 1993 --------------------- --------------------- MARKET AMORTIZED MARKET AMORTIZED VALUE COST VALUE COST -------- -------- -------- -------- (IN THOUSANDS) U.S. Treasury and Federal Agency Securities: Maturing Within 1 Year................... $ 19,472 $ 19,876 $ 10,081 $ 9,998 Maturing Between 1-5 Years............... 135,266 141,287 -- -- Maturing Between 5-10 Years.............. -- -- 1,257 1,257 -------- -------- -------- -------- 154,738 161,163 11,338 11,255 -------- -------- -------- -------- Mortgage-Backed Securities: Federal Agency........................... 556,967 585,353 480,450 478,885 Other.................................... 153,404 161,820 275,901 279,489 -------- -------- -------- -------- 710,371 747,173 756,351 758,374 -------- -------- -------- -------- Corporate Stock: Maturing Within 1 Year................... -- -- 25,000 25,000 No Fixed Maturity........................ 58,305 41,159 38,191 29,426 -------- -------- -------- -------- 58,305 41,159 63,191 54,426 -------- -------- -------- -------- Total................................. $923,414 $949,495 $830,880 $824,055 ======== ======== ======== ========
FHLB stock amounting to $12,894,000 at December 31, 1994 and $18,870,000 at December 31, 1993 is reflected in the above table as corporate stock having no fixed maturity. Such stock was carried at market value, which was equal to its original cost, on these dates. 36 11 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following information pertains to sales of securities available for sale:
1994 1993 -------- ------- (IN THOUSANDS) Sale Proceeds...................................................... $105,914 $78,753 ======== ======= Gross Realized: Gains............................................................ $ 1,102 $ 809 ======== ======= Losses........................................................... $ 834 $ 107 ======== =======
The gross unrealized gains and losses on securities available for sale are as follows:
DECEMBER 31, --------------------------------------- 1994 1993 ----------------- ----------------- GAINS LOSSES GAINS LOSSES ------- ------- ------- ------- (IN THOUSANDS) U.S. Treasury and Federal Agency Securities........ $ -- $ 6,425 $ 451 $ 654 Mortgage-Backed Securities......................... 1,198 38,000 4,516 6,253 Corporate Stock.................................... 17,823 677 9,687 922 ------- ------- ------- ------- Total Securities Available for Sale.............. $19,021 $45,102 $14,654 $ 7,829 ======= ======= ======= =======
NOTE 7. LOANS A composition of loans, net of unearned income, follows:
DECEMBER 31, ----------------------- 1994 1993 --------- --------- (IN THOUSANDS) Commercial.................................................... $ 647,016 $ 605,084 Consumer...................................................... 507,600 393,229 Construction.................................................. 79,993 103,432 Commercial Mortgage........................................... 740,127 816,217 Residential Mortgage*......................................... 1,473,869 1,219,756 --------- --------- Total....................................................... $3,448,605 $3,137,718 ========= =========
- --------------- * Includes $29,842,000 and $112,776,000 of loans held for sale at December 31, 1994 and 1993. Loans to directors, executive officers, and their related parties ("insider loans"), which are made in the ordinary course of business and with the same terms and interest rates as those prevailing for comparable transactions with others, aggregated $23,241,000 at December 31, 1994 and $31,465,000 at December 31, 1993. During 1994, new loans in the amount of $2,614,000 were made to such persons and repayments by such persons were $11,877,000, while other additions of $1,039,000 resulted from loans to individuals, originated in previous periods, who meet the criteria to be classified as insider loans in the current period. The information for 1993 was not restated for Crestmont as the outstanding loans to directors, executive officers and their related parties no longer meet the criteria to be classified as insider loans. 37 12 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents information concerning: (1) loans accounted for on a nonaccrual basis, (2) loans whose terms have been restructured to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, (3) other real estate owned (including in-substance foreclosures) and (4) loans which are contractually past due 90 days or more as to interest or principal payments but have not been classified as nonaccrual:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (IN THOUSANDS) Nonaccrual Loans................................................. $ 34,244 $ 75,398 Restructured Loans............................................... 182 3,196 -------- -------- Total Nonperforming Loans...................................... 34,426 78,594 Other Real Estate Owned.......................................... 15,830 35,982 -------- -------- Total Nonperforming Assets..................................... $ 50,256 $114,576 ======== ======== Loans Past Due 90 Days or More and Accruing...................... $ 14,182 $ 15,288 ======== ========
If interest income on nonaccrual and restructured loans outstanding at the end of the period had been current in accordance with their original terms, approximately $3,628,000, $6,652,000 and $9,693,000 of interest income would have been recorded in 1994, 1993 and 1992, respectively. These amounts exclude the effect of interest received on loans that were returned to an accruing basis or fully written down during the year. Interest income on nonaccrual and restructured loans outstanding at the end of the year that was recognized as income for the year was $949,000, $1,545,000 and $1,054,000 in 1994, 1993 and 1992, respectively. Not included in these amounts are interest payments received on certain nonaccrual loans that have been applied to reduce the outstanding principal. Commitments to lend additional funds to borrowers whose loans were classified as nonaccrual were not material at December 31, 1994. NOTE 8. ALLOWANCE FOR LOAN LOSSES An analysis of the changes in the allowance for loan losses follows:
1994 1993 1992 -------- -------- -------- (IN THOUSANDS) Balance, January 1,................................... $ 94,874 $ 97,190 $ 96,356 Balance Related to Acquisition........................ 255 -- -- Adjustment for the Pooling of a Company with a Different Fiscal Year-End........................... (178) -- -- Charge-Offs........................................... (16,665) (23,224) (29,934) Recoveries............................................ 4,888 3,708 4,770 -------- -------- -------- Net Charge-Offs.................................. (11,777) (19,516) (25,164) Provision for Loan Losses............................. 7,995 17,200 25,998 -------- -------- -------- Balance, December 31,................................. $ 91,169 $ 94,874 $ 97,190 ======== ======== ========
NOTE 9. PREMISES AND EQUIPMENT An analysis of premises and equipment follows:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (IN THOUSANDS) Land.............................................................. $ 5,535 $ 5,868 Buildings......................................................... 33,540 30,105 Furniture and Equipment........................................... 51,918 51,584 Leasehold Improvements............................................ 19,321 20,031 -------- -------- 110,314 107,588 Less: Accumulated Depreciation and Amortization................... 65,280 62,075 -------- -------- Total........................................................ $ 45,034 $ 45,513 ======== ========
38 13 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Depreciation and amortization of premises and equipment charged to noninterest expense for the years ended December 31, 1994, 1993 and 1992 amounted to $8,434,000, $8,098,000 and $8,364,000, respectively. NOTE 10. OTHER ASSETS The excess of cost over fair value of net assets acquired ("goodwill") relating to affiliates and branches purchased is included in other assets and is amortized on a straight-line basis over periods from 10 to 40 years. Goodwill amounted to $9,218,000 and $10,079,000 at December 31, 1994 and 1993. Such goodwill at year-end 1994 consisted of $5,722,000 relating to acquisitions of certain banking offices that is being amortized on a straight-line basis over 10 or 15 years and of $3,496,000 associated with certain pre-September 30, 1982 acquisitions of financial institutions that has a weighted-average amortization period of 30 years. NOTE 11. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (IN THOUSANDS) Parent Company: 11 7/8% Notes Due February 1, 1995............................. $ 15,000 $ 15,000 Summit Bank: 6 3/4% Subordinated Notes Due June 15, 2003.................... 49,326 49,212 Federal Home Loan Bank Borrowings Due 1994 (Average Rate of 3.69%)............................ -- 95,640 Due 1995 (Average Rate of 6.56% and 4.43%).................. 146,640 1,640 Due 1996 (Average Rate of 5.04% and 4.92%).................. 5,940 5,540 Due 1997 (Average Rate of 5.35% and 4.14%).................. 34,365 32,790 Due 1998 (Average Rate of 5.57% and 5.30%).................. 26,620 23,020 Due 1999 (Average Rate of 7.01% and 5.64%).................. 34,495 2,650 Due 2000 (Average Rate of 6.09% and 5.66%).................. 4,500 3,550 Due 2001 (Average Rate of 7.63% and 5.76%).................. 1,194 44 Due 2002 (Average Rate of 6.30% and 5.86%).................. 1,700 1,300 Due 2003 (Average Rate of 6.20% and 6.18%).................. 1,073 1,074 Due 2004 (Average Rate of 8.05%)............................ 1,336 -- -------- -------- 257,863 167,248 -------- -------- Collateralized Mortgage Obligations* Series 1985-1 (Average Rate of 16.17% and 9.50%)............ 2,210 2,395 Series 1985-2 (Average Rate of 16.51% and 10.55%)........... 3,094 3,952 Series 1986-1 (Average Rate of 9.18% and 8.25%)............. 5,315 6,278 Series 1986-2 (Average Rate of 9.28% and 7.71%)............. 5,455 6,865 -------- -------- 16,074 19,490 -------- -------- Mortgages Payable 8% Due June 1, 1998........................................ 500 500 11% Due December 31, 1995................................... -- 350 -------- -------- 500 850 -------- -------- Total..................................................... $338,763 $251,800 ======== ========
- --------------- * As a result of greater than anticipated prepayments on the underlying mortgage-backed securities, a larger portion of the unamortized discount related to the collateralized mortgage obligations was amortized in 1994. 39 14 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The 11 7/8% Notes, due February 1, 1995, were not redeemable prior to maturity and had no sinking fund requirements. In July 1993, the Bank issued $50 million in 6 3/4% Subordinated Notes Due 2003 (the "Subordinated Notes"). Unamortized discount on the Subordinated Notes was $674,000 at December 31, 1994 and resulted in an effective interest rate of 7.01% for 1994. Interest is payable semiannually on June 15 and December 15 of each year. The Subordinated Notes will mature on June 15, 2003 and are not subject to redemption prior to maturity. The Bank is a member of the Federal Home Loan Bank of New York (the "FHLB") and has access to term financing from the FHLB having a maturity up to 10 years. The FHLB borrowings are secured by investment securities and loans receivable under a blanket collateral agreement. The collateralized mortgage obligations are secured by investments in mortgage-backed securities having carrying and market values of $17,944,000 and $17,295,000 at December 31, 1994, and $20,900,000 and $21,400,000 at December 31, 1993. These mortgage-backed securities had interest rates ranging from 7.25% to 9.50%. A trustee holds the collateral certificates, collects all principal and interest payments thereon, and disburses all funds to the noteholders. The repayment of note principal and interest is directly related to the amount of principal and interest received on the mortgage-backed securities collateralizing a particular series of collateralized mortgage obligations. Within a series, principal payments are first applied to the note with the shortest maturity. Land and buildings having a carrying value of $847,000 at December 31, 1994 and $2,284,000 at December 31, 1993 were pledged as collateral to secure the mortgages payable. The mortgages have a single principal payment due upon their maturity. The aggregate amounts of long-term debt maturing for the five years subsequent to 1994 are $161,640,000 for 1995, $5,940,000 for 1996, $34,365,000 for 1997, $27,120,000 for 1998 and $34,495,000 for 1999. NOTE 12. COMMON AND PREFERRED STOCK Common Stock: On October 18, 1994, the Company declared a 10% stock dividend payable on December 15, 1994 to shareholders of record of the Company's Common Stock as of November 22, 1994, as a result the Company issued 3,035,154 shares of Common Stock on December 15, 1994. On September 1, 1994, the Company exchanged 500,000 shares of its Common Stock for all of the outstanding shares of Lancaster. The Lancaster merger was accounted for using the pooling of interests method of accounting and prior-period financial statements were not restated due to the nonmaterial nature of the Lancaster acquisition. In addition, on September 13, 1994 the Company exchanged 4,255,098 shares of its Common Stock for all of the outstanding common shares of Crestmont. The Crestmont merger was accounted for using the pooling of interests method of accounting and prior-period financial statements were restated. The Company's dividend reinvestment plan allows its existing shareholders to reinvest their quarterly dividends and to make optional cash purchases of the Company's Common Stock at a discount from the current market price (based on a 15-day market price average). Effective October 9, 1992, the Company amended its dividend reinvestment plan to lower the discount rate from 5% to 3 1/2%. By offering newly issued shares of its common stock, the proceeds of the equity sales are added to the Company's stockholders' equity. Adjustable Rate Cumulative Preferred Stock: On March 2, 1983, the Company issued 800,000 shares of $25.00 stated value Adjustable Rate Cumulative Preferred Stock. The holders of the preferred stock are entitled to receive, when and as declared by the Company's Board of Directors, cumulative preferred dividends payable quarterly in cash at the Applicable Rate in effect at the time of declaration. The Applicable Rate for any dividend period is 2 3/4% below the highest of the three-month "Treasury Bill Rate," the "Ten-Year Constant Maturity Rate," and the "Twenty-Year Constant Maturity Rate" determined in advance of the dividend period. However, the Applicable Rate for any dividend period will not be less than 6% per annum nor greater than 12% per annum. The preferred stock is redeemable at the option of the Company at $25.00 per share. 40 15 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Preferred Share Purchase Rights: The Company's Shareholder Rights Plan provides that attached to each share of Common Stock is one Right which, when exercisable, entitles the holder of the Right to purchase one-hundredth of a share of Series B Junior Participating Preferred Stock at a Purchase Price of $70, subject to adjustment. In certain events (such as a person or group acquiring or announcing an intent to acquire 15% or more of the Common Stock or the Company's Board of Directors determining that 10% of more of the Common Stock has been acquired by an Adverse Person as defined in the Shareholder Rights Plan), exercise of the Rights would entitle the holder to Common Stock of the Company or a surviving corporation with a market value of two times the exercise Purchase Price. Accordingly, exercise of the Rights may cause substantial dilution to a person that attempts to acquire the Company. The Rights automatically attach to each outstanding share of Common Stock. There is no monetary value presently assigned to the Rights, and they do not trade separately from the shares of Common Stock unless and until they become exercisable. The Rights expire on January 15, 2000. The Plan may have certain antitakeover effects, although it is not intended to preclude any prospective offer for all outstanding shares of Common Stock at a fair price and otherwise in the best interest of the Company and its shareholders as determined by the Company's Board of Directors. However, a shareholder could potentially disagree with the Company's Board of Directors' determination of what constitutes a fair price or the best interests of the Company and its shareholders. NOTE 13. NONINTEREST INCOME The major components of noninterest income for 1994, 1993 and 1992 consisted of the following:
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 ------- ------- ------- (IN THOUSANDS) Trust Income............................................. $11,875 $11,125 $10,899 Service Fees on Deposit Accounts......................... 18,523 16,936 16,233 Securities Gains......................................... 344 702 710 Other Income: Mortgage Banking Revenue............................... 9,782 9,795 3,000 Service Fees on Loans.................................. 1,686 1,956 1,555 Annuity Commissions.................................... 2,239 2,127 1,848 Mutual Fund Commissions................................ 1,455 1,720 -- Safe Deposit Income.................................... 1,405 1,397 1,354 All Other.............................................. 4,689 5,559 6,106 ------- ------- ------- Total Other Income.................................. 21,256 22,554 13,863 ------- ------- ------- Total Noninterest Income....................... $51,998 $51,317 $41,705 ======= ======= =======
NOTE 14. EMPLOYEE BENEFIT PLANS Pension Plans: The Company has a defined benefit plan covering substantially all of its employees. The benefits are based on years of service and the employee's compensation during the last three years of employment. The Company's funding policy is to contribute annually the maximum amount that can be deducted for Federal income tax purposes. In addition, the Company maintains a supplemental executive retirement plan ("SERP") for the benefit of certain key officers. Total pension expense, including SERP benefits, was $1,973,000, $1,657,000 and $1,666,000 for 1994, 1993 and 1992, respectively. Net pension cost for 1994, 1993 and 1992 included the following components:
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 ------- ------- ------- (IN THOUSANDS) Service Cost--Benefits Earned During the Period.......... $ 2,368 $ 2,201 $ 2,120 Interest Cost on Projected Benefit Obligation............ 3,199 3,009 2,756 Actual Return on Plan Assets............................. 10 (1,745) (872) Net Amortization and Deferral............................ (3,604) (1,808) (2,338) ------- ------- ------- Total Pension Cost............................. $ 1,973 $ 1,657 $ 1,666 ======= ======= =======
41 16 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the plan's funded status:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (IN THOUSANDS) Actuarial Present Value of Obligations: Accumulated Benefit Obligation*................................. $(27,785) $(28,372) ======== ======== Projected Benefit Obligation.................................... $(39,622) $(42,230) Plan Assets at Fair Value, Primarily Listed Stocks and U.S. Bonds............................................................ 37,658 38,586 -------- -------- Deficiency of Assets Under Projected Benefit Obligation...... (1,964) (3,644) Unrecognized Net Asset Being Recognized Over 16 Years............. (1,651) (1,815) Unrecognized Prior Service Cost (Gain) Due to Amendments.......... 344 (95) Unrecognized Net Gain Since Transition............................ (2,778) (808) -------- -------- Unfunded Accrued Cost........................................ $ (6,049) $ (6,362) ======== ======== Weighted-Average Discount Rate.................................... 8.50% 7.50% Expected Long-Term Rate of Return on Plan Assets.................. 8.50 9.00 Rate of Increase in Future Compensation Levels.................... 5.00 5.00
- --------------- * Including Vested Benefits of $(26,636) in 1994 and $(27,556) in 1993. Profit Sharing Plan: The Company maintains a qualified profit sharing plan for eligible employees. A portion of the Company's earnings are contributed annually and participants may contribute up to 5% of their salaries on a pretax basis, which is matched by the Company, and up to 10% on an after-tax basis. The Company's contributions are based on its performance and are determined based on a calculation approved by its Board of Directors. The contributions under this plan were $2,677,000, $2,736,000 and $1,880,000 for 1994, 1993 and 1992, respectively. Stock Incentive Plan: The Company maintains a stock incentive plan for the benefit of officers and key employees. Under the terms of the plan, selected participants may receive awards of stock options, performance share units (which may be accompanied by dividend equivalent rights) or restricted stock. At December 31, 1994, the plan had 503,389 awards available which can be used for either stock options, performance share units or restricted stock. The plan is administered by the Compensation Committee of the Company's Board of Directors, which determines the recipients and terms of the various options and awards, subject to the provisions of the plan. Under the terms of the stock incentive plan, options to purchase shares of the Company's Common Stock are granted at a price equal to the market price of the stock at the date of grant. The options vest in two years and expire in 10 years from the date of grant. Options granted prior to June 1988 did not have a vesting date. At December 31, 1994 and 1993, stock options covering 972,868 and 737,922 shares of the Company's Common Stock were exercisable under the plan. The following is a summary of transactions:
1994 1993 --------- --------- Outstanding at January 1,........................................ 1,507,471 1,554,220 Granted.......................................................... 117,150 229,088 Forfeited........................................................ (37,240) (145,431) Exercised at: $1.51 to $17.59................................................ (293,534) --------- $1.51 to $18.75................................................ (130,406) --------- Outstanding at December 31, at Option Prices of $1.51 to $24.11.......................................................... 1,293,847 1,507,471 ======== ========
42 Other Postretirement Benefits: The Company also provides certain health care and life insurance benefits for retired employees. Substantially all of the company's employees may become eligible for those benefits if they satisfy certain age and service requirements while working for the Company. 17 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company prospectively adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in the first quarter of 1993. Since the Company changed to the accrual method of accounting for postretirement medical and life insurance benefits in 1989, the impact of adopting SFAS No. 106 was not material. The cost of providing these benefits for 1994, 1993 and 1992 was as follows:
YEAR ENDED DECEMBER 31, ------------------------- 1994 1993 1992 ----- ----- ----- (IN THOUSANDS) Service Cost-Benefits Earned During the Period............... $ 252 $ 169 $ 184 Interest Cost on Projected Benefit Obligation................ 448 371 340 Amortization of Unrecognized Gain............................ (165) (261) (284) ----- ----- ----- Net Postretirement Benefit Cost............................ $ 535 $ 279 $ 240 ===== ===== =====
The following table sets forth the plan's funded status:
DECEMBER 31, ------------------- 1994 1993 ------- ------- (IN THOUSANDS) Accumulated Postretirement Benefit Obligation: Retirees......................................................... $(2,905) $(3,440) Fully Eligible Active Plan Participants.......................... (479) (607) Other Active Plan Participants................................... (1,623) (1,595) ------- ------- Total Accumulated Postretirement Benefit Obligation........... (5,007) (5,642) Unrecognized Gain Being Recognized Over 17.4 Years................. (4,278) (3,538) ------- ------- Accrued Postretirement Benefit Cost........................... $(9,285) $(9,180) ======= ======= Weighted-Average Discount Rate..................................... 8.50% 7.50%
Postretirement benefits are estimated based on certain actuarial assumptions and recognized on an accrual basis over the period in which active employees become eligible for such postretirement benefits. The assumed health care cost rate is 10% for 1995 and is projected to decline by 1% per year to a floor of 6% in 1999. The effect of a 1% increase in the weighted-average health care cost trend rate would be to increase the sum of service cost and interest cost by 19% and to increase the accumulated postretirement benefit obligation by 15%. The weighted-average health care trend rate used to determine the accumulated postretirement benefit obligation for 1993 was 7.5%. 43 18 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15. NONINTEREST EXPENSE The major components of noninterest expense for 1994, 1993 and 1992 consisted of the following:
YEAR ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) Salaries and Employee Benefits........................ $ 86,087 $ 84,624 $ 78,436 Net Occupancy Expense................................. 18,868 18,619 18,890 Furniture and Equipment Expense....................... 9,496 8,927 8,908 Restructuring and Other Merger-Related Costs: Loss on Sale of Assets.............................. 35,390 -- -- Severance, Outplacement and Benefits Continuation... 5,404 -- -- Facilities Closing and Consolidation Costs.......... 5,776 -- -- Transaction Expenses................................ 2,385 -- -- -------- -------- -------- Restructuring and Other Merger-Related Costs..... 48,955 -- -- Other Expenses: Advertising and Marketing........................... 4,761 4,443 2,940 External Data Processing Services................... 2,839 4,045 4,365 FDIC Insurance...................................... 10,050 10,487 9,349 Legal and Consulting................................ 5,110 6,099 6,892 Other Real Estate Owned Expense..................... 3,053 6,849 9,258 Postage and Delivery................................ 2,820 2,894 2,605 Stationery, Supplies and Printing................... 2,331 3,322 3,709 Telecommunication................................... 3,160 2,754 2,516 All Other........................................... 16,156 14,787 15,476 -------- -------- -------- Total Other Expenses............................. 50,280 55,680 57,110 -------- -------- -------- Total Noninterest Expense................... $213,686 $167,850 $163,344 ======== ======== ========
44 19 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. INCOME TAXES As discussed in Note 1, the Company adopted SFAS No. 109 effective January 1, 1992. Both the cumulative effect of this accounting change and its impact on earnings for 1992 were not material to the Company's results of operations. During 1994, the Company acquired Crestmont, which had elected to adopt prospectively SFAS No. 109 on April 1, 1993. The cumulative effect of adopting SFAS No. 109 by Crestmont resulted in a $5,303,000 increase to 1993 earnings. Certain deferred tax information for 1993 and 1992 has been adjusted from amounts previously presented to conform with tax returns filed for these periods. The components of the income tax provision are presented below:
YEAR ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 -------- ------- ------- (IN THOUSANDS) Current Federal Income Taxes............................ $ 10,142 $19,108 $16,650 Current State Income Taxes.............................. 2,284 4,920 4,653 Deferred Federal Income Tax Expense (Benefit)........... 3,955 (183) (4,744) Deferred State Income Tax Expense (Benefit)............. 259 (856) (219) -------- ------- ------- Applicable Income Tax Expense................. 16,640 22,989 16,340 Deferred Tax (Benefit) Expense on Unrealized (Losses) Gains on Securities Available for Sale: Federal Income Tax (Benefit) Expense............... (13,941) 4,813 -- State Income Tax (Benefit) Expense................. (2,195) 283 -- -------- ------- ------- (16,136) 5,096 -- -------- ------- ------- Total......................................... $ 504 $28,085 $16,340 ======== ======= =======
In 1993, the Revenue Reconciliation Act of 1993 was enacted increasing the top Federal corporate income tax rate from 34% to 35% for tax years beginning on or after January 1, 1993. This increase in the tax rate did not have a material effect on the Company's results of operations. A reconciliation, restated to reflect the pooling of Crestmont, of the statutory Federal tax rate to the effective tax rate is presented below:
YEAR ENDED DECEMBER 31, ---------------------- 1994 1993 1992 ---- ---- ---- Tax Applicable to Total Income at Statutory Rate................. 35.0% 35.0% 34.0% Tax Benefit Attributable to Tax-Exempt Income.................... (3.4) (3.3) (5.2) State Income Taxes (Net of Federal Income Tax Benefit)........... 4.0 3.7 6.2 Low-Income Housing Credits....................................... (3.7) (1.9) (.3) Merger-Related Bad Debt Recapture................................ 9.6 -- -- Other............................................................ (1.0) (.8) (1.9) ---- ---- ---- Total Income Tax Provision..................................... 40.5% 32.7% 32.8% ==== ==== ====
45 20 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 1994 and 1993, the tax effects of temporary differences that give rise to a significant portion of deferred tax assets and liabilities are as follows:
DECEMBER 31, --------------------- 1994 1993 ------- ------- (IN THOUSANDS) Deferred Tax Assets: Allowance for Loan Losses...................................... $33,850 $38,144 Unrealized Losses on Securities Available for Sale............. 11,040 -- Accrued Expenses............................................... 6,674 6,921 Interest on Nonaccrual Loans................................... 4,007 3,902 Other Postretirement Benefits.................................. 3,769 3,769 Loan Fees...................................................... 3,298 3,266 Depreciation................................................... 2,406 2,121 Other.......................................................... 1,188 1,706 Valuation Allowance............................................ (4,150) (5,081) ------- ------- Total Deferred Tax Asset.................................... 62,082 54,748 ------- ------- Deferred Tax Liabilities: Unrealized Gains on Securities Available for Sale.............. -- 5,096 Mortgage Servicing Rights...................................... -- 98 Other.......................................................... 227 552 ------- ------- Total Deferred Tax Liability................................ 227 5,746 ------- ------- Net Deferred Tax Asset.................................... $61,855 $49,002 ======= =======
The valuation allowance for deferred tax assets was $4,150,000 and $5,081,000 at December 31, 1994 and 1993. The net change in the valuation allowance for the year ended December 31, 1994 was a decline of $931,000. Such valuation allowance is included in other assets on the consolidated balance sheet for these dates. NOTE 17. COMMITMENTS AND CONTINGENCIES Financial Instruments with Off-Balance Sheet Risk: In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. Management does not expect any material losses to result from these transactions. 46 21 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of such financial instruments outstanding at December 31, 1994 and 1993 follows:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (IN THOUSANDS) Commitments to Extend Credit: Home Equity Lines.............................................. $242,273 $213,646 Commitments to Fund Loans Secured by Real Estate............... 22,829 61,861 Other Unused Commitments....................................... 473,152 385,282 Letters of Credit: Standby Letters of Credit...................................... 38,829 44,026 Commercial Letters of Credit................................... 2,116 1,984 Notional Value of: Interest Rate Swap Agreements.................................. 140,000 147,580 Interest Rate Cap Agreement.................................... 42,000 42,000
The commitment and letter of credit amounts in the above table represent the Company's maximum potential credit loss in the event that a commitment to extend credit or letter of credit is drawn upon and the counterparty defaults. The actual credit risk on these contracts rests upon the customer's creditworthiness and the value of the collateral held. The Company employs the same credit policies for these instruments as for those recorded on the balance sheet. The Company enters into interest rate swap agreements to hedge its on-balance sheet exposures to fluctuations in interest rates after conducting a review of the current and prospective financial implications of the transaction by its Asset/Liability Management Committee. At December 31, 1994, the average remaining life of outstanding interest rate swap agreements was 3.2 years. These swap agreements primarily involved receiving a fixed rate of interest in exchange for the payment of a short-term, variable rate of interest. During November 1994, the Company terminated $64,659,000 in swap agreements resulting in a deferred loss of $3,441,000. The unamortized deferred swap loss amounted to $3,322,000 at year-end 1994 and had a remaining weighted-average amortization period of 3.9 years. The Company also has a single interest rate cap agreement in the amount of $42,000,000 that was originally purchased by Crestmont and matured in January 1995. The notional value presented in the preceding table is used to express the dollar amount of these agreements outstanding and does not represent the actual amount of credit exposure to the Company. Such risk is much less and is controlled though credit approvals, limits and monitoring procedures. The Company enters into commitments to extend credit to customers at specified rates and for specific purposes, as long as there have been no violations of any contractual conditions. All of the Company's commitments are contingent upon customers maintaining an appropriate level of creditworthiness. These commitments generally have fixed expiration dates, may have other termination clauses and may require the payment of fees. Since 46% and 64% of these obligations at December 31, 1994 and December 31, 1993 had a term of one year or less and many are expected to expire without being drawn upon, the amounts shown in the preceding table are not representative of future liquidity requirements. The credit condition of each customer is evaluated on an individual basis by the Company, as is the amount and nature of collateral pledged by the customer upon the extension of credit. The collateral received varies but may include accounts receivable, inventory, marketable securities, residential properties, plant and equipment, and income-producing commercial properties. Excluding retail checking credit lines of $53,988,000 and $46,576,000 at December 31, 1994 and 1993, collateral is required for a significant portion of the remaining commitments outstanding. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party and fall into two categories, standby and commercial. Standby letters of credit are issued as either financial or performance letters of credit. Financial letters of credit are typically issued by the Company to support such transactions as tax-exempt borrowing arrangements, such as industrial development obligations, while performance letters of credit are issued to support the satisfactory completion of public and private construction projects. At December 31, 1994 and 1993, the weighted-average life of these guarantees 47 22 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) was 1.7 and 1.3 years, respectively. Commercial letters of credit are issued to finance the actual movement of goods between buyers and sellers and are generally not issued for periods in excess of one year. Under such agreements, a seller of merchandise is assured that prompt payment will be made by the buyer, if the documents of the seller are drawn in compliance with the terms and conditions of the underlying commercial letter of credit. The credit risk associated with the issuance of both standby and commercial letters of credit is essentially identical to that involved in the extension of credit facilities. The Company requires collateral, generally in the form of an interest in the underlying property being financed or, in some cases, cash collateral. Lease Commitments: Aggregate minimum rental commitments on real property at December 31, 1994, under noncancellable leases having initial or remaining terms in excess of one year follow:
AMOUNT -------------- (IN THOUSANDS) 1995...................................................................... $ 8,906 1996...................................................................... 8,182 1997...................................................................... 7,035 1998...................................................................... 5,978 1999...................................................................... 5,181 Thereafter................................................................ 63,908 -------------- Total........................................................... $ 99,190 ===========
Certain leases provide for increases based upon the Department of Labor Consumer Price Index and increases in real estate taxes. Net rental expense, including computer and equipment, was approximately $11,034,000, $10,725,000 and $10,512,000 for the years ended December 31, 1994, 1993 and 1992, respectively. Other Contingencies: The Company is subject to claims and lawsuits which arise in the ordinary course of business. It is the best judgment of management, after consultation with its legal advisors, that the financial position of the Company will not be materially affected by the final outcome of these legal proceedings and that adequate provision has been made therefor in the accompanying consolidated financial statements. The Company has entered into agreements with six executive officers providing for the payment of cash and other benefits to them in the event of their voluntary or involuntary termination within two years following a change in control of the Company. Payment under these agreements would consist of, among other things, a lump sum payment amounting to approximately two to three years of annual gross compensation as defined in these agreements. NOTE 18. THE SUMMIT BANCORPORATION (PARENT COMPANY ONLY) At year-end 1994, the Company had a single wholly owned subsidiary in operation, the Bank. The earnings of the Bank are recognized by the Company using the equity method of accounting. Accordingly, earnings of the Bank are recorded as increases in the Company's investment in the Bank and dividends paid reduce the Company's investment in the Bank. Certain limitations exist on the availability of subsidiary bank undistributed net assets for the payment of dividends to the Company without the prior approval of bank regulatory authorities. The Bank is restricted by limitations imposed under New Jersey State law that permit the payment of dividends to the extent that there is no impairment of the capital accounts of the bank and either the bank will have a surplus of not less than 50% of its capital stock, or the dividend will not reduce the surplus of the bank. The Bank is also subject to FDIC regulations that require it to maintain certain minimum capital ratios. Based on the more restrictive of these limitations (i.e., the maintenance of a total risk-based capital of at least 8%, a Tier 1 risk-based ratio of at least 4% and a Leverage Ratio of at least 4%), the amount available for the payment of dividends was $123,180,000 of the $321,368,000 in total undistributed net assets of the Bank at December 31, 1994. 48 23 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Federal Reserve regulations restrict the amount of loans or advances that a subsidiary bank may extend to their affiliates (including the Parent Company). These regulations prohibit a subsidiary bank from lending to their affiliates unless such loans are secured by specific collateral. Loans to any one affiliate are generally limited to 10% of a subsidiary bank's capital and surplus with the aggregate amount of such loans to all affiliates limited to 20% of that subsidiary bank's capital and surplus. Based upon these regulations, the Bank could have advanced, prior to the declaration of the maximum amount of dividends mentioned above, up to $37,507,000 to the Parent Company. Based upon the dividend and loan restrictions mentioned above, the maximum amount of funds which the Bank could provide to the Parent Company in the form of dividends and loans was $148,369,000 at December 31, 1994. Condensed financial statements of the Parent Company Only are presented below: CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 ------- ------- ------- (IN THOUSANDS) INCOME Dividends from Subsidiaries.............................. $24,199 $17,838 $12,440 Interest and Dividends on Securities..................... 1,261 2,294 3,260 Interest on Short-Term Investments....................... 2,158 906 1,253 Securities Gains (Losses)................................ 123 643 (567) Other Income............................................. 125 9,276 8,360 ------- ------- ------- Total Income................................... 27,866 30,957 24,746 EXPENSES................................................. 2,016 10,152 10,290 ------- ------- ------- Income Before Taxes...................................... 25,850 20,805 14,456 Applicable Income Tax Expense (Benefit).................. 356 300 (2,652) ------- ------- ------- Income Before Equity in Undistributed Income of Subsidiaries........................................... 25,494 20,505 17,108 Equity in Undistributed (Loss) Income of Subsidiaries.... (1,094) 30,219 16,379 ------- ------- ------- Net Income..................................... $24,400 $50,724 $33,487 ======= ======= =======
CONDENSED BALANCE SHEET
DECEMBER 31, ------------------- 1994 1993 -------- -------- (IN THOUSANDS) ASSETS Cash and Due from Banks............................................. $ 990 $ 908 Short-Term Investments.............................................. 77,946 56,739 Investment Securities............................................... 4,025 6,439 Securities Available for Sale....................................... 44,029 50,107 Investment in Subsidiaries.......................................... 325,783 348,602 Other Assets........................................................ 1,760 17,728 -------- -------- Total Assets.............................................. $454,533 $480,523 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accrued Expenses and Other Liabilities.............................. $ 7,963 $ 26,163 Long-Term Debt...................................................... 15,000 15,000 Stockholders' Equity................................................ 431,570 439,360 -------- -------- Total Liabilities and Stockholders' Equity................ $454,533 $480,523 ======== ========
49 24 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED STATEMENT OF CASH FLOWS (PARENT COMPANY ONLY)
YEAR ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) OPERATING ACTIVITIES: Net Income........................................... $ 24,400 $ 50,724 $ 33,487 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Equity in Undistributed Loss (Income) of Subsidiaries............................... 1,094 (30,219) (16,379) Securities (Gains) Losses....................... (123) (643) 567 Decrease (Increase) in Other Assets............. 15,967 (4,035) (9,587) (Decrease) Increase in Accrued Expenses and Other Liabilities............................. (21,194) 1,521 2,044 Decrease in Accrued Interest Payable............ -- -- (115) Increase in Investment in Bank Subsidiaries..... (3,950) -- (18,525) -------- -------- -------- Net Cash Provided (Used) by Operating Activities................................. 16,194 17,348 (8,508) -------- -------- -------- INVESTING ACTIVITIES: Purchases of Investment Securities................... (261) (1,040) (177,193) Maturities of Investment Securities.................. 2,674 33,920 120,152 Proceeds from Sales of Investment Securities......... -- -- 5,944 Purchases of Securities Available for Sale........... (71,602) (208,625) -- Maturities of Securities Available for Sale.......... 85,068 214,149 -- Proceeds from Sales of Securities Available for Sale............................................... 940 4,410 -- (Increase) Decrease in Short-Term Investments........ (21,207) (45,557) 24,142 -------- -------- -------- Net Cash Used Provided by Investing Activities..... (4,388) (2,743) (26,955) -------- -------- -------- FINANCING ACTIVITIES: Long-Term Debt Matured or Repurchased................ -- -- (5,000) Cash Dividends Paid.................................. (24,225) (21,478) (19,984) Common Stock Issued.................................. 9,706 6,779 60,178 Adjustment Related to Acquisition.................... 2,795 -- -- -------- -------- -------- Net Cash (Used) Provided by Financing Activities... (11,724) (14,699) 35,194 -------- -------- -------- Net Increase (Decrease) in Cash and Due from Banks... 82 (94) (269) Cash and Due from Banks at January 1,................ 908 1,002 1,271 -------- -------- -------- Cash and Due from Banks at December 31,.............. $ 990 $ 908 $ 1,002 ======== ======== ========
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS The following fair value estimates, methods and assumptions were used to measure the fair value of each class of financial instruments for which it is practical to estimate that value: Cash and Short-Term Investments: For such short-term investments, the carrying amount was considered to be a reasonable estimate of fair value. Securities and Trading Account Assets: For marketable equity securities available for sale and trading account assets, fair values were based on quoted market prices or dealer quotes. For other securities held as investments or available for sale, quoted market prices were used, if available, to determine fair value. 50 25 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) If a quoted market price was not available, fair values were estimated using quoted market prices for similar securities. Loans: Fair values were estimated for portfolios of performing loans with similar financial characteristics. For certain analogous categories of loans, such as residential mortgages and home equity loans, fair value was estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other performing loan types was estimated by discounting the future cash flows using market discount rates that reflect the credit and interest-rate risk inherent in the loan. Fair value for significant nonperforming loans was based on recent external appraisals of collateral securing such loans. If such appraisals were not available, estimated cash flows were discounted employing a rate incorporating the risk associated with such cash flows. Deposit Liabilities: The fair value of demand deposits, savings deposits and money market accounts was the amount payable on demand at December 31, 1994 and 1993. The fair value of time deposits was based on the discounted value of contractual cash flows. The discount rate was estimated utilizing the rates currently offered for deposits of similar remaining maturities. Short-Term Borrowings: For such short-term borrowings, the carrying amount was considered to be a reasonable estimate of fair value. Long-Term Debt: Quoted market prices were used for instruments on which such quotes were available. If quoted market prices were not available, the fair value of long-term debt was estimated based on rates currently available to the Company for debt with similar terms and remaining maturities. Commitments to Extend Credit and Letters of Credit: Since the Company's loan commitments typically have either a floating rate of interest or have terms of less than one year and are at the prevailing market rate of interest and since its letters of credit specify market rates of interest if drawings are made, the deferred income amounts on such off-balance sheet financial instruments approximated their estimated fair value. Interest Rate Swap Agreements: The fair value of such agreements was based on the net present value of the expected net cash flows using current market interest rates. At December 31, 1994, the fair value of such agreements was a payable of $8,665,000, while at December 31, 1993 there was no appreciable gain or loss on these instruments. The estimated fair values of the Company's financial instruments at December 31, 1994 and 1993 are presented in the following table:
DECEMBER 31, ------------------------------------------------------- 1994 1993 ------------------------- ------------------------- BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE ---------- ---------- ---------- ---------- (IN THOUSANDS) Financial Assets: Cash and Short-Term Investments..... $ 269,873 $ 269,873 $ 466,492 $ 466,492 Investment Securities............... 707,999 669,154 791,808 789,949 Securities Available for Sale....... 923,414 923,414 830,880 830,880 Trading Account Securities.......... 1,357 1,357 1,752 1,752 Loans............................... 3,448,605 3,137,718 Less: Allowance for Loan Losses..... 91,169 94,874 ---------- ---------- Net Loans................... 3,357,436 3,348,426 3,042,844 3,123,743 Financial Liabilities: Deposits............................ 4,409,318 4,397,593 4,412,727 4,420,863 Short-Term Borrowings............... 231,028 231,028 180,389 180,389 Long-Term Debt...................... 338,763 323,314 251,800 254,683
Limitations: The foregoing fair value estimates were made at December 31, 1994 and 1993, based on pertinent market data and relevant information on the financial instrument. These estimates do not include any premium or discount that could result from an offer to sell at one time the Company's entire holdings of a particular financial instrument or category thereof. Since no market exists for a substantial portion of the Company's financial instruments, fair value estimates were necessarily based on judgments with respect to 51 26 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) future expected loss experience, current economic conditions, risk assessments of various financial instruments involving a myriad of individual borrowers, and other factors. Given the innately subjective nature of these estimates, the uncertainties surrounding them and the matters of significant judgment that must be applied, these fair value estimations cannot be calculated with precision. Modifications in such assumptions could meaningfully alter these estimates. Since these fair value approximations were made solely for on-balance and off-balance sheet financial instruments at December 31, 1994 and 1993, no attempt was made to estimate the value of anticipated future business or the value of nonfinancial statement assets and liabilities. For instance, the Company has certain fee-generating activities (e.g., its trust department and mortgage banking operation) that were not considered in these estimates since these activities are not financial instruments. Other important elements which are not deemed to be financial assets or liabilities include the value of the Company's retail branch delivery system, its existing core deposit base, premises and equipment, and goodwill. Furthermore, certain tax implications related to the realization of the unrealized gains and losses could have a substantial impact on these fair value estimates and have not been incorporated into many of the estimates. NOTE 20. RECENT ACCOUNTING PRONOUNCEMENT On May 31, 1993, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 114, "Accounting by Creditors for the Impairment of a Loan." A subsequent amendment, SFAS No. 118, "Accounting by Creditors for the Impairment of a Loan--Income Recognition and Disclosures," was issued in October 1994. Adoption of SFAS No. 114, as amended, is required for financial statements issued for fiscal years beginning after December 15, 1994. It prescribes the recognition criteria for loan impairment and the measurement methods for certain impaired loans and loans whose terms are modified in troubled debt restructurings and amends SFAS No. 5, "Accounting for Contingencies," and SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings." The Company's adoption in the first quarter of 1995 of SFAS No. 114, as amended, will not have a material effect on its future financial position or results of operations. NOTE 21. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The results of operations on a quarterly basis are presented in the following tables:
1994 1994* ------------------------------------- ----------------- FOURTH THIRD SECOND FIRST SECOND FIRST QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- ------- ------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net Interest Income.................. $53,990 $54,705 $52,513 $49,515 $44,491 $41,348 Provision for Loan Losses............ 1,200 1,695 2,550 2,550 1,800 1,800 Noninterest Income................... 12,018 11,752 12,894 15,334 10,122 11,904 Noninterest Expense.................. 38,976 89,444 42,611 42,655 34,434 34,121 Net Income (Loss).................... 16,543 (18,466) 13,468 12,855 12,279 11,329 Net Income (Loss) Per Share.......... .49 (.57) .40 .38 .43 .40
1993 1993* ------------------------------------- ----------------- FOURTH THIRD SECOND FIRST SECOND FIRST QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- ------- ------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net Interest Income.................. $50,452 $52,004 $51,448 $50,049 $43,370 $41,868 Provision for Loan Losses............ 2,925 4,425 4,925 4,925 3,675 3,675 Noninterest Income................... 14,392 12,350 13,025 11,550 11,992 10,630 Noninterest Expense.................. 43,962 42,627 41,258 40,003 35,268 33,996 Net Income........................... 12,414 11,811 11,837 14,662 10,622 9.944 Net Income Per Share................. .37 .36 .36 .45 .37 .35
- --------------- * Represents quarterly data previously reported on Form 10-Q for the three months ending March 31, 1994 and 1993 and June 30, 1994 and 1993, respectively, prior to the Crestmont and Lancaster mergers. Per share data has been adjusted for a 10% stock dividend. 52 EX-99.B 4 FINANCIAL STATEMENT FROM SUMMIT'S 9/30/95 10-Q 1 PART I. FINANCIAL INFORMATION THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited)
SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------ (IN THOUSANDS) ASSETS Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . $ 259,414 $ 261,665 Federal Funds Sold and Other Short-Term Investments . . . . . . . . . . . . . . . . . . . . 68,883 8,208 Investment Securities: U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 12,319 15,689 U.S. Government Agency . . . . . . . . . . . . . . . . . . . . 667,121 390,695 State and Municipal. . . . . . . . . . . . . . . . . . . . . . 22,008 47,919 Other Securities . . . . . . . . . . . . . . . . . . . . . . . 308,407 253,696 --------- --------- Total Investment Securities (Market Value of $1,005,224 and $669,154). . . . . . . . . . 1,009,855 707,999 Securities Available for Sale: U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 30,025 96,404 U.S. Government Agency . . . . . . . . . . . . . . . . . . . . 487,839 615,301 State and Municipal. . . . . . . . . . . . . . . . . . . . . . 17,519 - Other Securities . . . . . . . . . . . . . . . . . . . . . . . 144,167 211,709 --------- --------- Total Securities Available for Sale . . . . . . . . . 679,550 923,414 Trading Account Securities. . . . . . . . . . . . . . . . . . . . 623 1,357 Loans . . . . . . . . . . . . . . . . . . . . . . . . . 3,503,775 3,448,605 Less: Allowance for Loan Losses. . . . . . . . . . . . . . . . . 90,819 91,169 --------- --------- Net Loans . . . . . . . . . . . . . . . . . . . . . . 3,412,956 3,357,436 Premises and Equipment. . . . . . . . . . . . . . . . . . . . . . 43,667 45,034 Other Real Estate Owned . . . . . . . . . . . . . . . . . . . . . 13,401 15,830 Accrued Interest Receivable . . . . . . . . . . . . . . . . . . . 34,776 29,600 Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 96,175 116,922 --------- --------- Total Assets. . . . . . . . . . . . . . . . . . . . . $5,619,300 $5,467,465 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand . . . . . . . . . . . . . . . . . . . . . . . . . $ 800,273 $ 781,244 Savings and NOW Accounts . . . . . . . . . . . . . . . . . . . 1,500,466 1,620,081 Money Market Accounts. . . . . . . . . . . . . . . . . . . . . 847,542 770,987 Certificates of Deposits of $100,000 and Over. . . . . . . . . 347,399 223,326 Other Time . . . . . . . . . . . . . . . . . . . . . . . . . . 1,145,812 1,013,680 --------- --------- Total Deposits. . . . . . . . . . . . . . . . . . . . 4,641,492 4,409,318 Federal Funds Purchased and Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . 157,367 231,028 Accrued Expenses and Other Liabilities. . . . . . . . . . . . . . 65,456 56,786 Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . 270,402 338,763 --------- --------- Total Liabilities . . . . . . . . . . . . . . . . . . 5,134,717 5,035,895 Stockholders' Equity: Preferred Stock, No Par Value, Authorized 12,000 Shares Cumulative Adjustable Rate Issued and Outstanding 504 and 800 Shares. . . . . . . . . . 12,612 20,000 Common Stock, No Par Value, Authorized 50,000 Shares, Issued 33,982 and Issued and Outstanding 33,439 Shares . . . . . . . . . . . . 50,172 49,320 Surplus . . . . . . . . . . . . . . . . . . . . . . . . . 315,700 305,075 Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . 105,088 72,215 Common Stock in Treasury, at Cost, 84 Shares . . . . . . . . . (1,632) - Net Unrealized Gains (Losses) on Securities Available for Sale. . . . . . . . . . . . . . . . . . . . . 2,643 (15,040) --------- --------- Total Stockholders' Equity. . . . . . . . . . . . . . 484,583 431,570 --------- --------- Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . $5,619,300 $5,467,465 ========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 1995 1994 1995 1994 -------- -------- ------ ------ (IN THOUSANDS) INTEREST INCOME: Interest and Fees on Loans . . . . . . . . . . . . . . . $ 74,111 $ 63,198 $216,902 $178,040 Interest and Dividends on Investment Securities: Taxable . . . . . . . . . . . . . . . . . . . . . . . 14,956 11,046 40,461 34,665 Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . 340 566 1,340 1,950 Interest and Dividends on Securities Available for Sale: Taxable . . . . . . . . . . . . . . . . . . . . . . . 10,020 12,674 32,815 31,735 Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . 602 335 1,637 1,111 Interest on Trading Account Securities . . . . . . . . . 14 16 37 59 Interest on Federal Funds Sold and Other Short-Term Investments . . . . . . . . . . . . . 923 574 3,373 3,083 ------- ------ ------- ------- Total Interest Income . . . . . . . . . . . . . . . 100,966 88,409 296,565 250,643 ------- ------ ------- ------- INTEREST EXPENSE: Interest on Deposits . . . . . . . . . . . . . . . . . . 39,750 26,765 110,279 76,061 Interest on Federal Funds Purchased and Other Short-Term Borrowings. . . . . . . . . . . . . . 2,286 2,949 8,195 6,241 Interest on Long-Term Debt . . . . . . . . . . . . . . . 5,206 3,990 15,685 11,608 ------- ------ ------- ------- Total Interest Expense. . . . . . . . . . . . . . . 47,242 33,704 134,159 93,910 ------- ------ ------- ------- NET INTEREST INCOME. . . . . . . . . . . . . . . . . . . 53,724 54,705 162,406 156,733 Provision for Loan Losses. . . . . . . . . . . . . . . . 1,200 1,695 3,600 6,795 ------- ------ ------- ------- Net Interest Income After Provision for Loan Losses. . . 52,524 53,010 158,806 149,938 ------- ------ ------- ------- NONINTEREST INCOME: Trust Income . . . . . . . . . . . . . . . . . . . . . . 3,000 2,800 8,740 8,501 Service Fees on Deposit Accounts . . . . . . . . . . . . 4,990 4,797 15,112 13,378 Securities Gains . . . . . . . . . . . . . . . . . . . . 789 - 1,610 180 Other Income . . . . . . . . . . . . . . . . . . . . . . 4,992 4,155 12,387 17,921 ------- ------ ------- ------- Total Noninterest Income. . . . . . . . . . . . . . 13,771 11,752 37,849 39,980 ------- ------ ------- ------- NONINTEREST EXPENSE: Salaries and Employee Benefits . . . . . . . . . . . . . 20,237 21,482 60,625 66,228 Net Occupancy Expense. . . . . . . . . . . . . . . . . . 4,209 4,613 12,995 14,444 Furniture and Equipment Expense. . . . . . . . . . . . . 2,303 2,309 7,032 6,880 Loss on Sale of Assets . . . . . . . . . . . . . . . . . - 35,390 - 35,390 Restructuring and Other Merger-Related Costs . . . . . . - 13,565 - 13,565 Other Expenses . . . . . . . . . . . . . . . . . . . . . 11,248 12,085 33,127 38,203 ------- ------ ------- ------- Total Noninterest Expense . . . . . . . . . . . . . 37,997 89,444 113,779 174,710 ------- ------ ------- ------- Income Before Income Taxes . . . . . . . . . . . . . . . 28,298 (24,682) 82,876 15,208 Applicable Income Tax Expense (Benefit). . . . . . . . . 10,160 (6,216) 29,524 7,351 ------- ------ ------- ------- NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . $ 18,138 $(18,466) $ 53,352 $ 7,857 ====== ====== ======= ======= NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS . . . . . . . . . . . . . . . . . $ 17,949 $(18,766) $ 52,674 $ 6,957 ====== ====== ======= ======= Net Income (Loss) Per Common Share . . . . . . . . . . . $.53 $(.57) $1.56 $.21 Cash Dividends Declared Per Common Share . . . . . . . . .21 .19 .63 .57 Weighted Average Shares Outstanding. . . . . . . . . . . 33,802 33,124 33,658 32,997
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2 3 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 1995 1994 1995 1994 ------ ------ ------ ------ (IN THOUSANDS) BEGINNING BALANCE. . . . . . . . . . . . . . . . . . . . $467,304 $458,851 $431,570 $439,360 Net Income (Loss). . . . . . . . . . . . . . . . . . . . 18,138 (18,466) 53,352 7,857 Common Stock Issued Under: Dividend Reinvestment and Stock Purchase Plan . . . . 3,849 1,563 8,863 3,869 Stock Incentive Plans . . . . . . . . . . . . . . . . 660 1,664 2,614 3,035 Cash Dividends Declared: Adjustable Rate Preferred Stock . . . . . . . . . . . (189) (300) (678) (900) Common Stock. . . . . . . . . . . . . . . . . . . . . (7,084) (5,334) (21,205) (15,954) Change in Net Unrealized Gains (Losses) on Securities Available for Sale . . . . . . . . . . . 1,905 (8,456) 17,683 (9,245) Purchase of Treasury Stock . . . . . . . . . . . . . . . - - (1,632) - Repurchase of Preferred Stock. . . . . . . . . . . . . . - - (5,984) - Acquisition of Lancaster Financial Ltd., Inc.. . . . . . - - - 2,795 Adjustment for the Pooling of a Company with a Different Fiscal Year-End. . . . . . . . . . . . . . - - - (1,295) ------- ------- ------- ------- BALANCE, SEPTEMBER 30, . . . . . . . . . . . . . . . . . $484,583 $429,522 $484,583 $429,522 ======= ======= ======= =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 4 THE SUMMIT BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 1995 1994 1995 1994 ------ ------ ------ ------ (IN THOUSANDS) OPERATING ACTIVITIES: Net Income (Loss). . . . . . . . . . . . . . . . . . . . $ 18,138 $ (18,466) $ 53,352 $ 7,857 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation, Amortization and Accretion. . . . . . . 2,668 5,545 7,920 7,969 Provision for Loan Losses . . . . . . . . . . . . . . 1,200 1,695 3,600 6,795 Securities Gains. . . . . . . . . . . . . . . . . . . (789) - (1,610) (180) Decrease (Increase) in Trading Account Securities . . 1,117 (276) 734 94 Gain on Sale of Loans . . . . . . . . . . . . . . . . (1,772) (130) (2,939) (2,125) Net Decrease (Increase) in Loans Originated for Sale. 52 (16,133) (17,684) 64,084 Increase in Accrued Interest Receivable . . . . . . . (2,771) (1,612) (5,176) (3,547) Increase in Accrued Interest Payable. . . . . . . . . 990 846 2,571 850 Decrease in Other Real Estate Owned . . . . . . . . . 4,471 14,019 9,072 18,997 (Increase) Decrease in Other Assets . . . . . . . . . (1,876) (6,777) 7,844 (24,065) Increase in Accrued Expenses and Other Liabilities. . 6,425 5,812 6,627 568 ------- ------- ------- ------- Net Cash Provided (Used) by Operating Activities. . 27,853 (15,477) 64,311 77,297 ------- ------- ------- ------- INVESTING ACTIVITIES: Net Increase in Loans Made to Customers. . . . . . . . . (52,770) (131,390) (45,140) (313,294) Purchases of Investment Securities . . . . . . . . . . . (146,929) (13,222) (440,314) (375,753) Maturities of Investment Securities. . . . . . . . . . . 52,980 107,313 137,924 346,599 Proceeds from Sales of Loan Securitization . . . . . . . - - - 35,334 Purchases of Securities Available for Sale . . . . . . . (11,771) (30,231) (130,813) (643,121) Maturities of Securities Available for Sale. . . . . . . 33,939 70,684 84,935 511,362 Proceeds from Sales of Securities Available for Sale . . 2,254 - 320,745 81,306 Purchases of Premises and Equipment. . . . . . . . . . . (1,112) (6,448) (4,656) (11,673) (Increase) Decrease in Short-Term Investments. . . . . . (10,002) 109,995 (60,675) 260,835 ------- ------- ------- ------- Net Cash (Used) Provided by Investing Activities. . (133,411) 106,701 (137,994) (108,405) ------- ------- ------- ------- FINANCING ACTIVITIES: Increase in Deposits . . . . . . . . . . . . . . . . . . 143,771 39,105 231,646 47,144 (Decrease) Increase in Federal Funds Purchased . . . . . (14,723) (136,167) (73,661) 39,990 Long-Term Debt Issued. . . . . . . . . . . . . . . . . . - 33,812 74,925 364,719 Long-Term Debt Matured or Repurchased . . . . . . . . . (46,841) - (143,456) (307,574) Adjustment Related to Acquisition . . . . . . . . . . . - - - 2,795 Adjustment for Pooling of Interest Accounting. . . . . . - - - (2,177) Cash Dividends Paid. . . . . . . . . . . . . . . . . . . (7,273) (5,634) (21,883) (16,854) Common Stock Issued. . . . . . . . . . . . . . . . . . . 4,509 3,227 11,477 6,904 Purchase of Treasury Stock . . . . . . . . . . . . . . . - - (1,632) - Repurchase of Preferred Stock. . . . . . . . . . . . . . - - (5,984) - ------- ------- ------- ------- Net Cash Provided (Used) by Financing Activities. . 79,443 (65,657) 71,432 134,947 ------- ------- ------- ------- Net (Decrease) Increase in Cash and Due From Banks . . . (26,115) 25,567 (2,251) 103,839 Cash and Due from Banks at Beginning of Period . . . . . 285,529 276,751 261,665 198,479 ------- ------- ------- ------- Cash and Due from Banks at End of Period . . . . . . . . $ 259,414 $ 302,318 $ 259,414 $ 302,318 ======= ======= ======= ======= SUPPLEMENTAL DISCLOSURES: Interest Paid. . . . . . . . . . . . . . . . . . . . . . $ 46,252 $ 32,858 $ 131,588 $ 93,060 Income Taxes Paid. . . . . . . . . . . . . . . . . . . . 4,349 622 17,879 12,788 Loans Transferred to Other Real Estate Owned . . . . . . 3,484 2,197 6,643 4,596 Mortgage Loans Swapped Into Mortgage-Backed Securities . . . . . . . . . . . . . . - - - 35,233 Investment Securities Transferred to Securities Available for Sale. . . . . . . . . . . . . - 134,093 - 134,093
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 5 THE SUMMIT BANCORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The financial statements include the accounts of The Summit Bancorporation and its subsidiaries (the "Company"). All material intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) which are necessary for a fair statement of the results of the operations for the interim periods have been reflected herein. 2. ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is increased by provisions charged to expense and reduced by charge-offs, net of recoveries. The provision for loan losses is based on management's evaluation of the adequacy of the allowance for loan losses. This evaluation encompasses consideration of past loan loss experience, changes in the composition and volume of the credit portfolio, the level and composition of nonperforming loans, the condition of industries experiencing particular financial pressures, the relationship of the current level of the allowance to the credit portfolio and to nonperforming assets, and economic conditions. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may vary significantly. Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for the Impairment of a Loan" and its subsequent amendment, SFAS No. 118, "Accounting by Creditors for the Impairment of a Loan - Income Recognition and Disclosures." Adoption of SFAS No. 114, as amended, prescribes the recognition criteria for loan impairment and the measurement methods for certain impaired loans and loans whose terms are modified in troubled debt restructurings and amends SFAS No. 5, "Accounting for Contingencies," and SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings." SFAS No. 114, as amended, addresses the accounting for impaired loans and specifies how allowances for credit losses related to these impaired loans should be determined. SFAS No. 114 sets forth measurement methods for estimating the portion of total loans attributable to impaired loans. It does not address the overall adequacy of the allowance for loan losses, but focuses instead on the allowance for estimated credit losses on impaired loans. It is the Company's responsibility to ensure that the overall allowance for loan losses is adequate to cover all estimated credit losses in the loan portfolio. At September 30, 1995, impaired loans totaled $25.6 million (representing total nonaccrual loans) and the related allowance for loan losses was $2.6 million. Since the Company sufficiently evaluates the adequacy of the allowance for loan losses, the impact of adopting SFAS No. 114, as amended, did not have an effect on the amount of the allowance for loan losses or the existing income recognition and charge-off policies for nonperforming loans. 3. EARNINGS PER COMMON SHARE Earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding. Shares issuable under the Stock Incentive Plan have not been included in the calculation of earnings per share since their effect is not material. 4. RECENT ACCOUNTING PRONOUNCEMENT On May 12, 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 122, "Accounting for Mortgage Servicing Rights." This Statement requires the recognition of mortgage servicing rights as an asset when a mortgage loan is sold or securitized and servicing retained. Also, the Statement requires enterprises to measure the impairment of the servicing rights based on the difference between the carrying amount of the servicing rights and their current value. SFAS No. 122 is to be applied prospectively in fiscal years beginning after December 15, 1995 to transactions in which the Company sells or securitizes mortgage loans with servicing rights retained. The provisions of this Statement should be applied to the measurement of impairment for all capitalized servicing rights, including servicing rights capitalized prior to the initial adoption of this Statement. The Company does not expect the adoption of SFAS No. 122 to have a material effect on its future financial position or results of operations. 5 EX-99.C 5 PROFORMA FINANCIAL STATEMENTS FROM UJB/SUMMIT S-4 1 PRO FORMA CONDENSED COMBINED BALANCE SHEET SEPTEMBER 30, 1995 (Unaudited, in thousands)
Pro Forma Adjustment UJB and Increase Summit Garden UJB Summit (Decrease) Pro Forma State Flemington ------------ ---------- -------------------- ------------ -------- ---------- Assets Cash and due from banks... $807,173 $259,414 $1,066,587 $8,630 $10,591 Interest bearing deposits with banks................ 15,938 13 15,951 77 - Short-term investment securities................ 2,000 68,870 70,870 14,500 850 Investment securities..... 4,027,611 1,690,028 $(3,089)(1) 5,714,550 68,450 82,140 Loans..................... 10,226,745 3,503,775 13,730,520 210,538 190,386 Less: Allowance for loan losses............... 200,337 90,819 291,156 4,110 2,429 ------------ ---------- ------------ -------- ---------- Net loans................. 10,026,408 3,412,956 13,439,364 206,428 187,957 Premises and equipment.... 163,774 43,667 207,441 8,071 3,657 Other real estate owned, net....................... 27,082 13,401 40,483 3,347 342 Other assets.............. 463,084 130,951 31,506 (1)(3) 625,541 4,401 4,036 ------------ ---------- -------------------- ------------ -------- ---------- Total Assets.............. $15,533,070 $5,619,300 $28,417 $21,180,787 $313,904 $289,573 ============ ========== ==================== ============ ======== ========== Liabilities and Shareholders' Equity Deposits.................. $12,871,632 $4,641,492 $17,513,124 $283,856 $257,725 Other borrowed funds...... 936,043 157,367 1,093,410 - 8,640 Other liabilities......... 257,060 65,456 $85,000 (3) 407,516 1,422 4,034 Long-term debt............ 204,338 270,402 474,740 - - ------------ ---------- -------------------- ------------ -------- ---------- Total Liabilities......... 14,269,073 5,134,717 85,000 19,488,790 285,278 270,399 Shareholders' equity Preferred stock........... 30,008 12,612 42,620 - - Common Stock.............. 69,098 50,172 (13,678)(2) 105,592 12,302 2,396 Surplus................... 490,781 314,068 11,977 (1)(2) 816,826 9,900 10,237 Retained earnings......... 677,631 105,088 (54,000)(3) 728,719 6,380 7,301 Net unrealized (loss) gain on investment securities, net of tax................ (3,521) 2,643 (882)(1) (1,760) 44 (760) ------------ ---------- -------------------- ------------ -------- ---------- Total Shareholders' equity.................... 1,263,997 484,583 (56,583) 1,691,997 28,626 19,174 ------------ ---------- -------------------- ------------ -------- ---------- Total Liabilities and Shareholders' Equity...... $15,533,070 $5,619,300 $28,417 $21,180,787 $313,904 $289,573 ============ ========== ==================== ============ ======== ========== Pro Forma Adjustment All Increase Transactions (Decrease) Pro Forma ------------------------- ------------ Assets Cash and due from banks... $1,085,808 Interest bearing deposits with banks................ 16,028 Short-term investment securities................ 86,220 Investment securities..... $(1,119)(1) 5,864,021 Loans..................... 14,131,444 Less: Allowance for loan losses............... 297,695 ------------ Net loans................. 13,833,749 Premises and equipment.... 219,169 Other real estate owned, net....................... 44,172 Other assets.............. 4,801 (1)(4)(5) 638,779 ------------------------- ------------ Total Assets.............. $3,682 $21,787,946 ========================= ============ Liabilities and Shareholders' Equity Deposits.................. $18,054,705 Other borrowed funds...... 1,102,050 Other liabilities......... $11,291 (4)(5) 424,263 Long-term debt............ 474,740 ------------------------- ------------ Total Liabilities......... 11,291 20,055,758 Shareholders' equity Preferred stock........... 42,620 Common Stock.............. *** (2) *** Surplus................... *** (1)(2) *** Retained earnings......... (6,732)(4)(5) 735,668 Net unrealized (loss) gain on investment securities, net of tax................ (420)(1) (2,896) ------------------------- ------------ Total Shareholders' equity.................... (7,609) 1,732,188 ------------------------- ------------ Total Liabilities and Shareholders' Equity...... $3,682 $21,787,946 ========================= ============
- -------------- *** Revised see Item 7. See Notes to Pro Forma Financial Information on page 23. 17 2 PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (Unaudited, in thousands except per share data)
UJB and All Summit Garden Transactions UJB Summit Pro Forma State Flemington Pro Forma -------- -------- --------- --------- ---------- ------------ Interest Income Interest and fees on loans............................. $623,270 $216,902 $840,172 $15,076 $11,387 $866,635 Interest on investment securities...................... 190,296 76,253 266,549 2,984 3,756 273,289 Interest on Federal funds sold and securities purchased under agreements to resell............................. 2,603 3,125 5,728 441 22 6,191 Interest on trading account securities................. 1,320 37 1,357 - - 1,357 Interest on bank balances.............................. 510 248 758 8 - 766 -------- -------- --------- --------- ---------- ------------ Total interest income.................................. 817,999 296,565 1,114,564 18,509 15,165 1,148,238 Interest Expense Interest on savings and time deposits.................. 239,057 98,379 337,436 6,246 4,787 348,469 Interest on commercial certificates of deposits $100,000 and over...................................... 18,860 11,900 30,760 902 703 32,365 Interest on borrowed funds............................. 75,808 23,880 99,688 74 447 100,209 -------- -------- --------- --------- ---------- ------------ Total interest expense................................. 333,725 134,159 467,884 7,222 5,937 481,043 -------- -------- --------- --------- ---------- ------------ Net interest income.................................... 484,274 162,406 646,680 11,287 9,228 667,195 Provision for loan losses.............................. 48,750 3,600 52,350 87 - 52,437 -------- -------- --------- --------- ---------- ------------ Net interest income after provision for loan losses.... 435,524 158,806 594,330 11,200 9,228 614,758 Non-Interest Income Service charges on deposit accounts.................... 49,665 15,112 64,777 1,137 731 66,645 Service and loan fee income............................ 20,707 6,601 27,308 411 213 27,932 Trust income........................................... 16,421 8,740 25,161 462 134 25,757 Investment securities gains............................ 5,205 1,610 6,815 - - 6,815 Trading account gains.................................. 777 175 952 - - 952 Other.................................................. 37,399 5,611 43,010 228 89 43,327 -------- -------- --------- --------- ---------- ------------ Total non-interest income.............................. 130,174 37,849 168,023 2,238 1,167 171,428 Non-Interest Expenses Salaries............................................... 146,639 45,670 192,309 4,082 3,413 199,804 Pension and other employee benefits.................... 47,072 14,955 62,027 1,146 1,057 64,230 Occupancy, net......................................... 39,329 12,995 52,324 923 862 54,109 Furniture and equipment................................ 37,965 7,032 44,997 582 575 46,154 Other real estate owned expenses....................... 5,779 1,998 7,777 439 (84) 8,132 FDIC insurance assessment.............................. 13,710 5,176 18,886 332 255 19,473 Advertising and public relations....................... 8,585 4,199 12,784 362 161 13,307 Other.................................................. 72,139 21,754 93,893 1,893 1,742 97,528 -------- -------- --------- --------- ---------- ------------ Total non-interest expenses............................ 371,218 113,779 484,997 9,759 7,981 502,737 -------- -------- --------- --------- ---------- ------------ Income before income taxes............................. 194,480 82,876 277,356 3,679 2,414 283,449 Federal and state income taxes......................... 70,118 29,524 99,642 1,183 831 101,656 -------- -------- --------- --------- ---------- ------------ Net Income............................................. $124,362 $53,352 $177,714 $2,496 $1,583 $181,793 ======== ======== ========= ========= ========== ============ Net Income Per Common Share............................ $2.20 $1.56 $2.04 $0.82 $1.65 *** ======== ======== ========= ========= ========== ============ Average Common Shares Outstanding (1).................. 55,946 33,658 86,141 3,054 958 *** ======== ======== ========= ========= ========== ============
- --------------- *** Revised see Item 7. See Notes to Pro Forma Financial Information on page 23. 18 3 PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (Unaudited, in thousands except per share data) UJB and All Summit Garden Transactions UJB Summit Pro Forma State Flemington Pro Forma --------- -------- --------- ------- ---------- ------------ Interest Income Interest and fees on loans............................. $510,472 $178,040 $688,512 $11,901 $9,130 $709,543 Interest on investment securities...................... 188,484 69,461 257,945 3,259 4,268 265,472 Interest on Federal funds sold and securities purchased under agreements to resell............................. 255 2,833 3,088 88 40 3,216 Interest on trading account securities................. 557 59 616 - - 616 Interest on bank balances.............................. 434 250 684 105 - 789 --------- -------- --------- ------- ---------- ------------ Total interest income.................................. 700,202 250,643 950,845 15,353 13,438 979,636 Interest Expense Interest on savings and time deposits.................. 173,752 72,375 246,127 4,818 3,833 254,778 Interest on commercial certificates of deposits $100,000 and over...................................... 8,256 3,686 11,942 505 219 12,666 Interest on borrowed funds............................. 62,890 17,849 80,739 11 227 80,977 --------- -------- --------- ------- ---------- ------------ Total interest expense................................. 244,898 93,910 338,808 5,334 4,279 348,421 --------- -------- --------- ------- ---------- ------------ Net interest income.................................... 455,304 156,733 612,037 10,019 9,159 631,215 Provision for loan losses.............................. 55,500 6,795 62,295 467 - 62,762 --------- -------- --------- ------- ---------- ------------ Net interest income after provision for loan losses.... 399,804 149,938 549,742 9,552 9,159 568,453 Non-Interest Income Service charges on deposit accounts.................... 48,474 13,378 61,852 915 631 63,398 Service and loan fee income............................ 20,082 10,367 30,449 658 322 31,429 Trust income........................................... 16,410 8,501 24,911 397 118 25,426 Investment securities gains............................ 1,846 180 2,026 125 50 2,201 Trading account gains.................................. 522 129 651 - - 651 Other.................................................. 33,109 7,425 40,534 181 80 40,795 --------- -------- --------- ------- ---------- ------------ Total non-interest income.............................. 120,443 39,980 160,423 2,276 1,201 163,900 Non-Interest Expenses Salaries............................................... 135,521 51,404 186,925 4,060 3,050 194,035 Pension and other employee benefits.................... 41,721 14,824 56,545 969 1,135 58,649 Occupancy, net......................................... 38,492 14,444 52,936 908 891 54,735 Furniture and equipment................................ 36,170 6,880 43,050 724 574 44,348 Other real estate owned expenses....................... 14,467 2,760 17,227 1,215 76 18,518 FDIC insurance assessment.............................. 20,815 7,555 28,370 609 437 29,416 Advertising and public relations....................... 8,039 2,991 11,030 310 178 11,518 Restructuring charges.................................. - 13,565 13,565 - - 13,565 Loss on sale of assets................................. - 35,390 35,390 - - 35,390 Other.................................................. 70,925 24,897 95,822 1,665 1,457 98,944 --------- -------- --------- ------- ---------- ------------ Total non-interest expenses............................ 366,150 174,710 540,860 10,460 7,798 559,118 --------- -------- --------- ------- ---------- ------------ Income before income taxes............................. 154,097 15,208 169,305 1,368 2,562 173,235 Federal and state income taxes......................... 56,539 7,351 63,890 75 952 64,917 --------- -------- --------- ------- ---------- ------------ Income before cumulative effect of a change in accounting principle................................... 97,558 7,857 105,415 1,293 1,610 108,318 Cumulative effect of a change in accounting principle.............................................. (1,731) - (1,731) - - (1,731) --------- -------- --------- ------- ---------- ------------ Net Income............................................. $95,827 $7,857 $103,684 $1,293 $1,610 $106,587 ========= ======== ========= ======= ========== ============ Net Income Per Common Share: Income before cumulative effect of a change in accounting principle................................... $1.76 $0.21 $1.22 $0.59 $1.68 $1.21 Cumulative effect of a change in accounting principle.............................................. (0.03) - (0.02) - - (0.02) --------- -------- --------- ------- ---------- ------------ Net Income............................................. $1.73 $0.21 $1.20 $0.59 $1.68 $1.19 ========= ======== ========= ======= ========== ============ Average Common Shares Outstanding(1)................... 54,604 32,997 84,204 2,205 958 *** ========= ======== ========= ======= ========== ============
- ---------------- *** Revised see Item 7. See Notes to Pro Forma Financial Information on page 23. 19 4 PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1994 (Unaudited, in thousands except per share data)
UJB and All Summit Garden Transactions UJB Summit Pro Forma State Flemington Pro Forma --------- -------- ---------- -------- ---------- ------------ Interest Income Interest and fees on loans............................. $706,049 $244,980 $951,029 $16,534 $12,733 $980,296 Interest on investment securities...................... 253,027 93,525 346,552 4,274 5,641 356,467 Interest on Federal funds sold and securities purchased under agreements to resell............................. 600 2,918 3,518 140 44 3,702 Interest on trading account securities................. 668 79 747 - - 747 Interest on bank balances.............................. 629 325 954 137 - 1,091 --------- -------- ---------- -------- ---------- ------------ Total interest income.................................. 960,973 341,827 1,302,800 21,085 18,418 1,342,303 Interest Expense Interest on savings and time deposits.................. 239,714 98,433 338,147 6,513 5,154 349,814 Interest on commercial certificates of deposits $100,000 and over...................................... 13,639 7,066 20,705 766 346 21,817 Interest on borrowed funds............................. 91,516 25,605 117,121 54 467 117,642 --------- -------- ---------- -------- ---------- ------------ Total interest expense................................. 344,869 131,104 475,973 7,333 5,967 489,273 --------- -------- ---------- -------- ---------- ------------ Net interest income.................................... 616,104 210,723 826,827 13,752 12,451 853,030 Provision for loan losses.............................. 84,000 7,995 91,995 975 (622) 92,348 --------- -------- ---------- -------- ---------- ------------ Net interest income after provision for loan losses.... 532,104 202,728 734,832 12,777 13,073 760,682 Non-Interest Income Service charges on deposit accounts.................... 64,474 18,523 82,997 1,230 854 85,081 Service and loan fee income............................ 27,531 11,468 38,999 773 408 40,180 Trust income........................................... 21,792 11,875 33,667 532 155 34,354 Investment securities gains (losses)................... 1,888 344 2,232 121 (328) 2,025 Trading account gains.................................. 670 177 847 - - 847 Other.................................................. 43,933 9,611 53,544 257 85 53,886 --------- -------- ---------- -------- ---------- ------------ Total non-interest income.............................. 160,288 51,998 212,286 2,913 1,174 216,373 Non-Interest Expenses Salaries............................................... 183,339 66,868 250,207 5,467 4,324 259,998 Pension and other employee benefits.................... 53,386 19,219 72,605 1,320 1,421 75,346 Occupancy, net......................................... 50,749 18,868 69,617 1,198 1,197 72,012 Furniture and equipment................................ 49,065 9,496 58,561 918 759 60,238 Other real estate owned expenses....................... 18,287 3,053 21,340 1,404 158 22,902 FDIC insurance assessment.............................. 27,933 10,050 37,983 805 572 39,360 Advertising and public relations....................... 10,843 4,761 15,604 474 252 16,330 Restructuring charges.................................. - 13,565 13,565 - - 13,565 Loss on sale of assets................................. - 35,390 35,390 - - 35,390 Other.................................................. 94,597 32,416 127,013 2,556 2,096 131,665 --------- -------- ---------- -------- ---------- ------------ Total non-interest expenses............................ 488,199 213,686 701,885 14,142 10,779 726,806 --------- -------- ---------- -------- ---------- ------------ Income before income taxes............................. 204,193 41,040 245,233 1,548 3,468 250,249 Federal and state income taxes (benefit)............... 72,312 16,640 88,952 (509) 1,288 89,731 --------- -------- ---------- -------- ---------- ------------ Income before cumulative effect of a change in accounting principle................................... 131,881 24,400 156,281 2,057 2,180 160,518 Cumulative effect of a change in accounting principle.............................................. (1,731) - (1,731) - - (1,731) --------- -------- ---------- -------- ---------- ------------ Net Income............................................. $130,150 $24,400 $154,550 $2,057 $2,180 $158,787 ========= ======== ========== ======== ========== ============ Net Income Per Common Share: Income before cumulative effect of a change in accounting principle................................... $2.38 $0.70 $1.82 $0.89 $2.28 $1.79 Cumulative effect of a change in accounting principle.............................................. (0.03) - (0.02) - - (0.02) --------- -------- ---------- -------- ---------- ------------ Net Income............................................. $2.35 $0.70 $1.80 $0.89 $2.28 $1.77 ========= ======== ========== ======== ========== ============ Average Common Shares Outstanding(1)................... 54,697 33,090 84,381 2,308 958 *** ========= ======== ========== ======== ========== ============
- --------------- *** Revised see Item 7. See Notes to Pro Forma Financial Information on page 23. 20 5 PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1993 (Unaudited, in thousands except per share data)
UJB and All Summit Garden Transactions UJB Summit Pro Forma State Flemington Pro Forma -------- -------- --------- -------- ---------- ------------ Interest Income Interest and fees on loans............................. $670,705 $232,981 $903,686 $15,751 $10,952 $930,389 Interest on investment securities...................... 234,020 89,793 323,813 4,898 6,268 334,979 Interest on Federal funds sold and securities purchased under agreements to resell............................. 955 5,175 6,130 102 156 6,388 Interest on trading account securities................. 1,297 68 1,365 - - 1,365 Interest on bank balances.............................. 651 1,013 1,664 61 - 1,725 -------- -------- --------- -------- ---------- ------------ Total interest income.................................. 907,628 329,030 1,236,658 20,812 17,376 1,274,846 Interest Expense Interest on savings and time deposits.................. 271,345 108,452 379,797 7,409 5,758 392,964 Interest on commercial certificates of deposits $100,000 and over...................................... 7,319 2,065 9,384 528 231 10,143 Interest on borrowed funds............................. 53,056 14,560 67,616 5 89 67,710 -------- -------- --------- -------- ---------- ------------ Total interest expense................................. 331,720 125,077 456,797 7,942 6,078 470,817 -------- -------- --------- -------- ---------- ------------ Net interest income.................................... 575,908 203,953 779,861 12,870 11,298 804,029 Provision for loan losses.............................. 95,685 17,200 112,885 1,117 440 114,442 -------- -------- --------- -------- ---------- ------------ Net interest income after provision for loan losses.... 480,223 186,753 666,976 11,753 10,858 689,587 Non-Interest Income Service charges on deposit accounts.................... 60,474 16,936 77,410 1,211 800 79,421 Service and loan fee income............................ 21,063 11,751 32,814 1,065 355 34,234 Trust income........................................... 21,852 11,125 32,977 473 125 33,575 Investment securities gains............................ 8,877 702 9,579 258 1,512 11,349 Trading account gains.................................. 1,884 331 2,215 - - 2,215 Other.................................................. 49,151 10,472 59,623 217 160 60,000 -------- -------- --------- -------- ---------- ------------ Total non-interest income.............................. 163,301 51,317 214,618 3,224 2,952 220,794 Non-Interest Expenses Salaries............................................... 185,570 67,030 252,600 4,892 3,982 261,474 Pension and other employee benefits.................... 58,601 17,594 76,195 1,009 1,041 78,245 Occupancy, net......................................... 48,487 18,619 67,106 1,138 992 69,236 Furniture and equipment................................ 45,592 8,927 54,519 887 692 56,098 Other real estate owned expenses....................... 40,925 6,849 47,774 4,319 1,387 53,480 FDIC insurance assessment.............................. 29,244 10,487 39,731 854 581 41,166 Advertising and public relations....................... 10,517 4,443 14,960 293 227 15,480 Restructuring charges.................................. 21,500 - 21,500 - - 21,500 Other.................................................. 97,533 36,728 134,261 2,168 3,549 139,978 -------- -------- --------- -------- ---------- ------------ Total non-interest expenses............................ 537,969 170,677 708,646 15,560 12,451 736,657 -------- -------- --------- -------- ---------- ------------ Income (loss) before income taxes...................... 105,555 67,393 172,948 (583) 1,359 173,724 Federal and state income taxes (benefit)............... 26,953 21,972 48,925 (46) 450 49,329 -------- -------- --------- -------- ---------- ------------ Income (loss) before cumulative effect of a change in accounting principle................................... 78,602 45,421 124,023 (537) 909 124,395 Cumulative effect of a change in accounting principle.............................................. 3,816 5,303 9,119 - - 9,119 -------- -------- --------- -------- ---------- ------------ Net Income (loss)...................................... $82,418 $50,724 $133,142 $(537) $909 $133,514 ======== ======== ========= ======== ========== ============ Net Income (loss) Per Common Share: Income (loss) before cumulative effect of a change in accounting principle................................... $1.43 $1.37 $1.46 $(0.31) $0.95 $1.41 Cumulative effect of a change in accounting principle.............................................. 0.07 0.17 0.11 - - 0.11 -------- -------- --------- -------- ---------- ------------ Net Income (loss)...................................... $1.50 $1.54 $1.57 $(0.31) $0.95 $1.52 ======== ======== ========= ======== ========== ============ Average Common Shares Outstanding(1)................... 53,917 32,102 82,712 1,724 958 *** ======== ======== ========= ======== ========== ============
- ----------------- *** Revised see Item 7. See Notes to Pro Forma Financial Information on page 23. 21 6 PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1992 (Unaudited, in thousands except per share data)
UJB and All Summit Garden Transactions UJB Summit Pro Forma State Flemington Pro Forma -------- -------- --------- --------- ---------- ------------ Interest Income Interest and fees on loans............................. $713,987 $260,765 $ 974,752 $18,176 $11,988 $1,004,916 Interest on investment securities...................... 258,371 95,165 353,536 5,270 6,609 365,415 Interest on Federal funds sold and securities purchased under agreements to resell............................. 4,615 4,997 9,612 96 136 9,844 Interest on trading account securities................. 1,367 66 1,433 - - 1,433 Interest on bank balances.............................. 668 1,503 2,171 19 - 2,190 -------- -------- --------- --------- ---------- ------------ Total interest income.................................. 979,008 362,496 1,341,504 23,561 18,733 1,383,798 Interest Expense Interest on savings and time deposits.................. 366,023 140,546 506,569 10,167 7,874 524,610 Interest on commercial certificates of deposits $100,000 and over...................................... 16,320 3,900 20,220 782 309 21,311 Interest on borrowed funds............................. 47,382 20,586 67,968 6 103 68,077 -------- -------- --------- --------- ---------- ------------ Total interest expense................................. 429,725 165,032 594,757 10,955 8,286 613,998 -------- -------- --------- --------- ---------- ------------ Net interest income.................................... 549,283 197,464 746,747 12,606 10,447 769,800 Provision for loan losses.............................. 139,555 25,998 165,553 5,501 770 171,824 -------- -------- --------- --------- ---------- ------------ Net interest income after provision for loan losses.... 409,728 171,466 581,194 7,105 9,677 597,976 Non-Interest Income Service charges on deposit accounts.................... 54,356 16,233 70,589 1,137 757 72,483 Service and loan fee income............................ 21,261 4,555 25,816 1,371 238 27,425 Trust income........................................... 19,837 10,899 30,736 314 87 31,137 Investment securities gains............................ 18,485 710 19,195 915 208 20,318 Trading account gains.................................. 1,804 525 2,329 - - 2,329 Other.................................................. 47,610 8,783 56,393 215 301 56,909 -------- -------- --------- --------- ---------- ------------ Total non-interest income.............................. 163,353 41,705 205,058 3,952 1,591 210,601 Non-Interest Expenses Salaries............................................... 179,457 63,007 242,464 4,585 3,651 250,700 Pension and other employee benefits.................... 51,209 15,429 66,638 737 971 68,346 Occupancy, net......................................... 47,872 18,890 66,762 1,091 952 68,805 Furniture and equipment................................ 42,404 8,908 51,312 858 698 52,868 Other real estate owned expenses....................... 38,092 9,258 47,350 2,293 496 50,139 FDIC insurance assessment.............................. 26,047 9,349 35,396 637 505 36,538 Advertising and public relations....................... 10,578 2,940 13,518 273 106 13,897 Other.................................................. 101,204 35,563 136,767 2,225 2,003 140,995 -------- -------- --------- --------- ---------- ------------ Total non-interest expenses............................ 496,863 163,344 660,207 12,699 9,382 682,288 -------- -------- --------- --------- ---------- ------------ Income (loss) before income taxes...................... 76,218 49,827 126,045 (1,642) 1,886 126,289 Federal and state income taxes (benefit)............... 19,430 16,340 35,770 (257) 655 36,168 -------- -------- --------- --------- ---------- ------------ Net Income (loss)...................................... $56,788 $33,487 $90,275 $(1,385) $1,231 $90,121 ======== ======== ========= ========= ========== ============ Net Income (loss) Per Common Share..................... $1.09 $1.07 $1.13 $(0.80) $1.28 $1.08 ======== ======== ========= ========= ========== ============ Average Common Shares Outstanding(1)................... 50,398 30,220 77,499 1,724 958 *** ======== ======== ========= ========= ========== ============
- ------------ *** Revised see Item 7. See Notes to Pro Forma Financial Information on page 23. 22 7 NOTES TO PRO FORMA FINANCIAL INFORMATION (1) Reflects the elimination of 96,519 shares of UJB Common and 23,548 shares of Flemington common stock owned by Summit at September 30, 1995. (2) Revised see Item 7. (3) Reflects charges of approximately $85 million, $54 million after the related tax effects, which includes estimated severance and outplacement costs, expenses related to facilities closures and consolidation costs directly attributable to the Merger. (4) Reflects charges of approximately $7.4 million, $4.4 million after the related tax effects, which includes estimated severance and outplacement costs, expenses related to facilities closures and consolidation costs directly attributable to the merger of Garden State with and into Summit. (5) Reflects charges of approximately $3.9 million, $2.3 million after the related tax effects, which includes estimated severance and outplacement costs, expenses related to facilities closures and consolidation costs directly attributable to the merger of Flemington with and into UJB. 23 -----END PRIVACY-ENHANCED MESSAGE-----