<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: MARCH 31, 1995
COMMISSION FILE NUMBER: 0-11108
SUMMIT BANCSHARES, INC.
STATE OF CALIFORNIA I.R.S. IDENTIFICATION
NUMBER 94-2767067
2969 BROADWAY, OAKLAND CALIFORNIA 94611
(415) 839-8800
Indicate by the check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES_____X____ NO__________
The number of shares outstanding of the registrant's common stock
was:
425,449 shares of no par value common stock
issued as of March 31, 1995
<PAGE>
PART I - FINANCIAL INFORMATION
____ _ _________ ___________
ITEM 1 PAGE
SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS
______ __________ ____ ___ __________ _________ __________
Consolidated Balance Sheets ...................... 2
Consolidated Statements of Income ................ 3-4
Consolidated Statements of Changes in
Shareholders' Equity .......................... 5
Consolidated Statement of Cash Flows ............. 6-7
Notes to Financial Statements..................... 8-9
Interest Rate Risk Reporting Schedule............. 10-12
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 13-19
PART II - OTHER INFORMATION
____ __ _____ ___________
ITEMS 1-6 .................................................. 20-21
<PAGE>
PART I - FINANCIAL INFORMATION
____ _ _________ ___________
ITEM 1.
_______
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
______ __________ ____ ___ __________
CONSOLIDATED BALANCE SHEETS
____________ _______ ______
MARCH 31, 1995 AND DECEMBER 31, 1994
_____ __ ____ ___ ________ __ ____
(Unaudited)
<TABLE>
<CAPTION>
(Stated in Thousands)
ASSETS 3-31-95 12-31-94
______ _______ ________
<S> <C> <C>
Cash and Due from Banks $ 5,097 $ 5,746
Federal Funds Sold 6,050 3,500
______ ______
Cash and Cash Equivalents 11,147 9,246
Interest-bearing Deposits with
Other Financial Institutions 7,040 7,039
Investment Securities (Held-to- 10,321 10,325
Maturity. Market Value of $10,351
at March 31, 1995 and $10,219
at December 31, 1994)
Loans 46,571 47,623
Less: Reserve for Possible
Loan Losses (1,074) (932)
______ ______
Net Loans 45,497 46,691
Premises and Equipment, net 816 849
Other Real Estate Owned 2,816 2,866
Interest Receivable and Other
Assets 1,554 1,585
______ ______
TOTAL ASSETS $79,191 $78,601
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
___________ ___ _____________ ______
Deposits:
Demand $21,799 $22,469
Savings 3,014 3,109
Interest-bearing Transaction
Accounts 27,580 28,815
Other Time 15,330 13,469
______ ______
Total Deposits 67,723 67,862
Interest Payable and Other
Liabilities 747 245
______ ______
TOTAL LIABILITIES 68,470 68,107
______ ______
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value:
2,000,000 shares authorized, no
shares outstanding --- ---
Common Stock, no par value;
3,000,000 shares authorized;
427,485 shares issued and
outstanding at 12-31-94
and 425,449 at 3-31-95 3,793 3,838
Retained Earnings 6,928 6,656
______ ______
TOTAL SHAREHOLDERS' EQUITY 10,721 10,494
______ ______
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $79,191 $78,601
====== ======
</TABLE>
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
______ __________ ____ ___ __________
CONSOLIDATED STATEMENTS OF INCOME FOR THE
____________ __________ __ ______ ___ ___
THREE MONTHS ENDED MARCH 31, 1994 AND 1995
_____ ______ _____ _____ __ ____ ___ ____
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3-31-95 ENDED 3-31-94
_____________ _____________
<S> <C> <C>
Interest Income:
Interest and Fees on Loans $1,342,763 $1,140,311
Interest on Investment Securities 150,862 6,238
Interest on Federal Funds Sold 50,158 5,005
Interest on Time Deposits with
Other Financial Institutions 92,942 115,974
_________ _________
TOTAL INTEREST INCOME 1,636,725 1,267,528
_________ _________
Interest Expense:
Interest on Deposits 309,372 259,680
_________ _________
TOTAL INTEREST EXPENSE 309,372 259,680
_________ _________
NET INTEREST INCOME 1,327,353 1,007,848
Provision for Possible Loan Losses 140,000 183,000
_________ _________
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 1,187,353 824,848
Other Operating Income:
Service Charges on Deposit Accounts 98,170 86,012
Other 43,429 220,585
_________ _________
TOTAL OTHER OPERATING INCOME 141,599 306,597
_________ _________
Other Operating Expenses:
Salaries and Employee Benefits 431,204 415,649
Occupancy Expense 88,736 82,919
Furniture and Equipment Expense 26,325 34,495
Other 326,926 228,043
_________ _________
TOTAL OTHER OPERATING EXPENSES 873,191 761,106
_________ _________
INCOME BEFORE INCOME TAXES 455,761 370,339
_________ _________
Provision for Income Taxes (184,173) (153,135)
_________ _________
NET INCOME $ 271,588 $ 217,204
========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3-31-95 ENDED 3-31-94
_____________ _____________
<S> <C> <C>
NET INCOME $271,588 $217,204
======= =======
PRIMARY EARNINGS:
Weighted Average Shares
Outstanding: 454,684 427,299
_______ _______
PRIMARY EARNINGS PER SHARE $ 0.60 $ 0.51
======= =======
</TABLE>
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
______ __________ ____ ___ __________
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
____________ __________ __ _______ __ _____________ ______
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
___ ___ _____ ______ _____ _____ __ ____ ___ ____
(Unaudited)
<TABLE>
<CAPTION>
NUMBER
OF SHARES COMMON RETAINED
OUTSTANDING STOCK EARNINGS
___________ ______ ________
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 427,485 $3,837,684 $6,656,072
Purchase of Common Stock (2,036) (44,686) ---
Net Income for the Three Months
Ended March 31, 1995 --- --- 271,588
_______ _________ _________
BALANCE AT MARCH 31, 1995 425,449 $3,792,998 $6,927,660
======= ========= =========
BALANCE AT DECEMBER 31, 1993 414,402 $3,674,959 $5,951,371
Purchase of Common Stock (1,937) (26,989) ---
Net Income for the Three Months
Ended March 31, 1994 --- --- 217,204
_______ _________ _________
BALANCE AT MARCH 31, 1994 412,465 $3,647,970 $6,168,575
======= ========= =========
</TABLE>
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1995
(Unaudited)
_____________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 1,484,746
Fees received 224,946
Interest paid (282,917)
Cash paid to suppliers and employees (885,654)
Income taxes paid (70,654)
__________
Net cash provided by operating activities 470,467
__________
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits with other
financial institutions (1,000)
Maturity of investment securities 489,070
Purchase of investment securities (484,810)
Net decrease in loans made to customers 1,284,108
Recoveries on loans previously charged off 2,022
Capital expenditures (4,687)
__________
Net cash used in investing activities 1,284,703
__________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, MRA, NOW,
and savings accounts (1,997,297)
Net increase in time deposits 1,860,925
Decrease in other miscellaneous assets 326,513
Purchase of common stock (44,686)
__________
Net cash provided by financing activities 145,455
__________
Net increase in cash and cash equivalents 1,900,625
Cash and cash equivalents at 12-31-93 9,246,342
__________
Cash and cash equivalents at 3-31-94 $11,146,967
===========
Reconciliation of net income to net cash provided by operating activities:
Net Income $271,588
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 41,988
Provision for possible loan losses 140,000
Increase in accrued interest receivable (37,005)
Decrease in unearned loan fees (31,627)
Increase in accrued interest payable 26,455
Increase in prepaid expenses (18,279)
Decrease in accounts payable (36,172)
Increase in income tax payable 113,519
_______
Total adjustments 215,331
__________
Net cash provided by operating activities $ 470,467
==========
</TABLE>
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1994
(Unaudited)
_____________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 1,135,145
Fees received 220,313
Financing revenue received under lease 4,616
Gain on sale of other real estate owned 188,517
Interest paid (256,493)
Cash paid to suppliers and employees (812,809)
Income taxes paid (25,000)
__________
Net cash provided by operating activities 454,289
__________
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in time deposits with other
financial institutions 2,173,000
Maturity of investment securities 347,421
Purchase of investment securities (442,702)
Net decrease in loans made to customers 389,103
Principal payments received under leases 17,183
Carrying cost of foreclosed properties (92,199)
Proceeds from sales of foreclosed properties 112,415
Recoveries on loans previously charged off 750
Capital expenditures (24,099)
___________
Net cash used in investing activities 2,480,872
___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, MRA, NOW,
and savings accounts (2,995,467)
Net decrease in time deposits (1,433,881)
Decrease in other miscellaneous assets 161,027
Purchase of common stock (26,989)
___________
Net cash provided by financing activities (4,295,310)
___________
Net increase in cash and cash equivalents (1,360,149)
Cash and cash equivalents at 12-31-93 10,387,445
___________
Cash and cash equivalents at 3-31-94 $ 9,027,296
===========
Reconciliation of net income to net cash provided by operating activities:
Net Income $217,204
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 39,561
Provision for possible loan losses 183,000
Increase in accrued interest receivable ( 3,884)
Decrease in unearned loan fees (21,650)
Increase in accrued interest payab 3,187
Increase in prepaid expenses (23,231)
Decrease in accounts payable (68,033)
Increase in income tax payable 128,135
_______
Total adjustments 237,085
_______
Net cash provided by operating activities $454,289
=======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
_____ __ _________ __________
1. CONSOLIDATED FINANCIAL STATEMENTS
____________ _________ __________
In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
financial position at March 31, 1995 and the results of
operations for the three months ended March 31, 1995 and 1994
and cash flows for the three months ended March 31, 1995 and
1994.
Certain information and footnote disclosures presented in the
Corporation's annual consolidated financial statements are not
included in these interim financial statements. Accordingly, the
accompanying unaudited interim consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Corporation's 1994
Annual Report to Shareholders, which is incorporated by reference
in the Company's 1994 annual report on Form 10-K. The results of
operations for the three months ended March 31, 1995 are not
necessarily indicative of the operating results for the full
year.
2. SIGNIFICANT ACCOUNTING POLICIES
___________ __________ ________
Net income per common and common equivalent share is computed
using the weighted average number of shares outstanding during
the period and the dilutive effect of stock options.
3. IMPAIRED LOANS AND TROUBLED DEBT RESTRUCTURING
________ _____ ___ ________ ____ _____________
The Bank adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures," as of January 1,
1995. SFAS No 114 requires that certain impaired loans
be measured based on the present value of expected
future cash flows discounted at the loan's original
effective interest rate. As a practical expedient,
impairment may be measures based on the loan's
observable market price or the fair value of the
collateral if the loan is collateral dependent. When
the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is
recorded through a valuation allowance.
The Bank had previously measured the allowance for
credit losses using the methods similar to those
prescribed in SFAS No 114. As a result of adopting
these statements, no additional allowance for loan
losses was required as of March 31, 1995.
<PAGE>
As of March 31, 1995 the Bank's recorded investment in
impaired loans and the related valuation allowance
calculated under SFAS No 114 are a follows:
<TABLE>
<CAPTION>
1995
-------------------------
Recorded Valuation
Investment Allowance
---------- ----------
<S> <C> <C>
Impaired Loans
--------------
Valuation allowance
required $ 0 $0
No valuation allowance
required 846,000 0
-------------------------
Total Impaired Loans $846,000 $0
_________________________
</TABLE>
The valuation allowance is included in the allowance
for loan losses on the balance sheet.
The average recorded investment in impaired loans for
the quarter ending March 31, 1995 was $662,000.
Interest payments received on impaired loans are
recorded as interest income unless collection of the
remaining recorded investment is doubtful at which time
payments received are recorded as reductions of
principle. The Bank did not recognize interest income
on impaired loans for the first quarter of 1995.
The allowance for loan losses is maintained at a level
considered adequate to provide for estimated probable
incurred losses resulting from loans and leases. The
allowance is reviewed periodically, and as losses are
incurred and the amounts become estimable, they are charged
to operations in the periods that they become known.
The activity in the allowance for loan losses was as
follows:
<TABLE>
<CAPTION>
March 31,
1995 1994
_____________________
<S> <C> <C>
Allowance for loan losses-
Balance at the beginning of year $ 931,878 $728,353
Provision for credit losses 140,000 183,000
Write downs 0 7,651
Recoveries 2,022 750
Transfers and others 0 0
---------------------
Balance at March 31 $1,073,900 $904,452
=====================
</TABLE>
<PAGE>
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
The following table provides an interest rate sensitivity and
interest rate risk analysis for the quarter ended March 31, 1995.
The table presents each major category of interest-earning assets
and interest-bearing liabilities. In addition to illustrating the
traditional GAP analysis, the table also provides an initial review
of interest rate risk as defined in Section 305 of the Federal
Deposit Insurance Corporation Improvement Act (FDICIA), Public Law
102-242. This section requires the federal banking agencies to
revise their risk- based capital guidelines to ensure that those
standards take adequate account of (1) interest rate risk,
(2) concentration of credit risk, and (3) the risks of
nontraditional activities. The agencies must publish final regulations
implementing section 305 and establish reasonable transition rules
to facilitate compliance with those regulations.
An underlying principle of the proposal for incorporating interest
rate risk (IRR) into risk-based capital guidelines is that a certain
amount of IRR is inherent and appropriate in commercial banking. In
addition, the proposal acknowledges that the level of IRR in banks
is difficult to measure with a high degree of confidence. Finally,
the approach takes into consideration the fact that, to date, IRR has
not been a principal threat to the financial health of commercial
banks. Accordingly, the proposal targets the identification of
insititutions with high or significant levels of risk. Institutions
identified as having IRR exposure greater than a supervisor-determined
threshold would be required to allocate additional capital to support
their higher level of measures risk.
The methodology for measuring an institution's IRR exposure applies
the principle of duration to a standard maturity GAP report in order
to approximate the net change in the economic value of the institution
arising from a change in interest rates. Institutions would slot their
assets, liabilities and off-balance-sheet positions into a maturity
ladder report based upon their remaining maturities or nearest repricing
dates. The position reported in each maturity range would then be
multiplied by an IRR weight that represents the interest rate sensitivity
of the respective positions. The IRR weights would be established by the
Banking Agencies and would be based on the modified duration of
instruments with maturities, cash flows, coupons and yields that are
assumed to be representative of the position being weighted.
Under the proposal, an institution with IRR exposure in excess
of a threshold level would be required to allocate additional capital
equal to the dollar amount of the estimated change in its economic
value that is in excess of that level. This would provide complete
coverage of any incremental exposure above the established threshold.
For example, if threshold levels of IRR exposure were set at 1.00 percent
of total assets, an institution with a measured exposure of 1.50 percent
of assets would be required to allocate a dollar amount of capital equal
to 0.50 percent of total assets.
As the following table illustrates, based on the initial review of
the proposed regulation, the Bank would not be required to increase its
capital level and is within proposed threshold levels.
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE RISK REPORTING SCHEDULE
REPORTING INSTITUTION: SUMMIT BANK REPORTING DATE: 03/31/95
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
($000.00
OMITT UP > 3 > 1 > 3 > 7 OVER
TOT 3 < 1 < 3 < 7 < 15 15 YRS
<S> <C> <C> <C> <C> <C> <C> <C>
I. INTEREST-BEARING ASSETS
1. CASH AND BALANCE DUE $5,097 $5,097 $0 $0 $0 $0 $0
2. SECURITIES (INCL TRADING)
a) NON-AMORTIZING $17,361 $4,210 $8,165 $4,986 $0 $0 $0
b) DEEP DISC COUPONS $0
c) HIGH RISK MORT. SEC. $0
3. FED FUNDS SOLD & SEC $6,050 $6,050 $0 $0 $0 $0 $0
SOLD FOR RESALE $0
4. LOANS, LEASES & ACCEPT.
a) AMORTIZING $20,358 $2,507 $2,672 $9,701 $5,478 $0 $0
b) NON-AMORTIZING $25,873 $10,230 $9,343 $3,459 $2,841 $0 $0
5. TOTAL INT BEARG. ASSETS $69,642 $28,094 $20,180 $18,146 $8,319 $0 $0
6. LOAN LOSS PROVISION ($1,074)
II. ALL OTHER ASSETS $4,567
III. TOTAL ASSETS $78,232
IV. INTEREST-BEARING LIABILITIES
1. INTEREST-BEARING DEPOSITS
a) NOW ACCOUNTS $5,094 $0 $3,566 $1,528 $0 $0 $0
b) MMDA ACCOUNTS $22,556 $0 $15,789 $6,767 $0 $0 $0
c) SAVINGS $3,013 $0 $0 $2,109 $904 $0 $0
d) TIME DEPOSITS $16,725 $8,941 $7,351 $433 $0 $0 $0
2. FED FUNDS PURCH & $0 $0 $0 $0 $0 $0 $0
SEC. SOLD FOR REPUR $0 $0 $0 $0 $0 $0 $0
3. OTHER BORROWED FUNDS $0
4. TOTAL INT-BEARING LIAB. $47,388 $8,941 $26,706 $10,837 $904 $0 $0
V. NONINTEREST-BEARING LIAB.
1. DEMAND DEPOSITS $21,799 $3,270 $11,989 $6,540
2. OTHER LIABILITIES $699
VI. TOTAL LIABILITIES $69,886
VII. EQUITY CAPITAL $8,346
VIII. NET OFF-BAL SHEET POSITION
(SWAPS & FUTURES)
1. AMORTIZING $0
2. NON-AMORTIZING $0
MEMORANDA (CMO'S AND MORTGAGE DERIVATIVES)
HIGH RISK SECURITIES EVALUATED $0
HIGH RISK SEC. NOT EVALUATED $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE RISK WEIGHTING CALCULATIONS
(03/31/95)
BALANCE SHEET SUMMARY REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
(FROM REPORTING SCHEDULE)
UP > 3 >1 > 3Y > 7 YRS OVER
TOT 3 <= 1 <=3 Y <= 7Y <=15 YRS 15 YRS
<S> <C> <C> <C> <C> <C> <C> <C>
I. TOTAL ASSETS (EXC.CASH & DUE) $74,209
2. OTHER ASSETS &
HIGH RISK SEC. EVALU $4,567
3. TOTAL INT-BEARG ASSETS. $69,642 $22,997 $20,180 $18,146 $8,319 $0 $0
4. AMORT ASSETS. $20,358 $2,507 $2,672 $9,701 $5,478 $0 $0
5. NON-AMORT ASSETS $49,284 $20,490 $17,508 $8,445 $2,841 $0 $0
6. DEEP DISC ASSETS $0 $0 $0 $0 $0 $0 $0
7. HIGH RISK SEC. NOT EVALU $0 $0 $0 $0 $0 $0 $0
8. TOTAL LIABILITIES $69,886
9. OTHER LIAB. & DDA $22,498 $3,270 $11,989 $6,540 $0 $0 $0
10. INT-BEARG LIAB. $47,388 $8,941 $26,706 $10,837 $904 $0 $0
11. NET WORTH (GAP) $4,323 $10,786 ($18,515) $769 $7,415 $0 $0
12. OFF BAL SHEET POSITIONS
13. AMORT OBS ITEMS: $0 $0 $0 $0 $0 $0 $0
14. NON-AMORT OBS ITEMS $907 $0 $907 $0 $0 $0 $0
IRR WEIGHTS
15. AMORTIZING ASSETS: 0.08% 0.30% 0.80% 2.00% 3.20% 4.30%
16. NON-AMORTIZING ASSETS 0.12% 0.55% 1.75% 3.85% 6.60% 8.90%
17. DEEP DISCOUNT ASSETS: 0.12% 0.60% 1.90% 4.75% 10.50% 21.40%
18. LIABILITIES: 0.12% 0.55% 1.80% 4.10% 7.50% 11.40%
WEIGHTED POSITIONS
19. WEIGHTED AMORT. ASSETS $197.19 $2.01 $8.02 $77.61 $109.56 $0.00 $0.00
20. WEIGHTED NON-AMORT. ASSETS $378.05 $24.59 $96.29 $147.79 $109.38 $0.00 $0.00
21. WEIGHTED DEEP DISC. ASSETS $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
22. WEIGHTED HIGH RISK SEC $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
23. TOTAL RISK WEIGHTED ASSETS: $575.24 $26.59 $104.31 $225.40 $218.94 $0.00 $0.00
24. TOTAL RISK WEIGHTED LIABILITIES $389.74 $10.73 $146.88 $195.07 $37.06 $0.00 $0.00
25. RISK WEIGHTED OFF-BAL SHEET $2.72 $0.00 $2.72 $0.00 $0.00 $0.00 $0.00
26. HIGH RISK SEC EVALUATED $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
27. NET RISK WEIGHTED POSITION $188.22 $15.86 ($39.85) $30.33 $181.88 $0.00 $0.00
IRR MEASUREMENT
NET RISK WEIGHTED POSITION AS A PERCENT OF ASSETS = 0.25% = LEVEL OF IRR
PROPOSED REGULATION F = 1 = PROPOSED TARGET
</TABLE>
<PAGE>
ITEM 2.
____ __
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
____________ __________ ___ ________ __ _________ _________
AND RESULTS OF OPERATIONS
___ _______ __ __________
FOR THE THREE MONTHS ENDED MARCH 31, 1995
___ ___ _____ ______ _____ _____ __ ____
The registrant is a bank holding company whose only operating
subsidiary is Summit Bank. The following discussion
primarily concerns the financial condition and results of
operations of the Holding Company ("Company") on a
consolidated basis including the subsidiary bank. All
adjustments made in the compilation of this information are
of a normal recurring nature.
FINANCIAL CONDITION
___________________
Liquidity Management
_________ __________
The consolidated loan-to-deposit ratio at March 31, 1995 was
67.2% which was an decrease from 75.6% for the same period in
1994. The average loan-to-deposit ratio for the first
quarter of 1995 was 66.9%, down from 76.0% for the same
period last year. This decrease was caused by a $578,000
decline in average total deposits in 1995 versus 1994,
centered in time deposits, and a $3,772,000 decrease in
average outstanding loans centered in real estate
construction loans and consumer lines of credit. Management
continues to seek the acquisition of quality credits. Some
of the deposit decline was directly related to investments in
the mutual fund market.
Net liquid assets, which consists primarily of cash, due from
banks, interest-bearing deposits with other financial
institutions, short term securities and federal funds sold
totaled $28,508,000 on March 31, 1995. This amount
represented 42.1% of total deposits in comparison to the
liquidity ratio of 34.6% as of March 31, 1994. This increase
is a primarily the direct result of a decrease in loan
demand. It is management's belief that the current liquidity
level is appropriate given current economic conditions and is
sufficient to meet current needs.
The Company is not aware of any current recommendations by
the regulatory authorities which, if they were implemented,
would have a material effect on the Company.
<PAGE>
The following table sets forth book value of investments
by category and the percent of total investments at the dates
specified.
Investment Comparative
__________ ___________
<TABLE>
<CAPTION>
3-31-95 % 12-31-94 % 3-31-94 %
_______ _ ________ _ _______ _
<S> <C> <C> <C> <C> <C> <C>
Fed Funds Sold $ 6,050 26% $ 3,500 17% $ 3,000 18%
Interest bearing
Deposits 7,040 30% 7,039 34% 12,991 77%
Securities 10,321 44% 10,325 49% 794 5%
______ ___ ______ ___ ______ ___
$23,411 100% $20,864 100% $16,785 100%
======= === ======= === ======= ===
</TABLE>
Interest bearing deposits are comprised of Time Certificates
of Deposit with other banks and savings and loan institutions
with no more than $100,000 in any institution.
Securities on March 31, 1995 were comprised of $7,984,000 in
U.S. Gov't bills and notes, $1,000,000 in U. S. Gov't
sponsored agency and $1,337,000 in school district tax
anticipation revenues notes used to fund annual school
district budgets. Securities held at March 31, 1994 were
composed of $789,000 in short term U.S. Gov't bills, and a
$5,000 industrial bond.
Changes in Financial Position
_______ __ _________ ________
As of March 31, 1995, deposits decreased $139,000 from year
end 1994 while at the same time net loans outstanding
decreased $1,194,000. Total deposits as of March 31, 1995
were $67,723,000, an increase of 3% from $66,033,000 as of
March 31, 1994. Total loans as of March 31, 1995 were
$46,571,000, a decrease of 8% from $50,821,000 as of March
31, 1994. The decline in the loan category was mentioned
previously under "Liquidity Management."
The following table sets forth the amount of deposits by each
category and the percent of total deposits at the dates
specified.
Deposit Comparative
_______ ___________
<TABLE>
<CAPTION>
3-31-95 % 12-31-94 % 3-31-94 %
_______ _ ________ _ _______ _
<S> <C> <C> <C> <C> <C> <C>
Demand $21,799 32% $22,469 33% $18,728 28%
Savings 3,014 4% 3,109 5% 3,270 5%
Interest bearing
transactions accts 27,580 41% 28,815 42% 29,300 44%
Other Time 15,330 23% 13,469 20% 14,735 22%
______ ___ ______ ___ ______ ___
$67,723 100% $67,862 100% $66,033 100%
====== === ====== === ====== ===
</TABLE>
<PAGE>
The following table sets forth the amount of loans
outstanding by each category and the percent of total loans
outstanding at the dates specified.
<TABLE>
<CAPTION>
Loan Comparative
____ ___________
3-31-95 % 12-31-94 % 3-31-94 %
_______ _ ________ _ _______ _
<S> <C> <C> <C> <C> <C> <C>
Commercial $30,183 65% $30,355 63% $31,161 60%
Real estate-const. 5,256 11% 5,822 12% 8,498 17%
Real estate-other 4,849 10% 4,873 10% 3,589 7%
Installment/Other 6,178 13% 6,450 14% 7,396 15%
Equip. lease 105 1% 123 1% 177 1%
______ ___ ______ ___ ______ ___
$46,571 100% $47,623 100% $50,756 100%
====== === ====== === ====== ===
</TABLE>
Non-Performing Assets
______________ ______
The following table provides information with respect to the
subsidiary Bank's past due loans and components for non-
performing assets at the dates indicated.
<TABLE>
<CAPTION>
Non-Performing Assets
______________ ______
(000.00 Omitted)
3-31-95 12-31-94 3-31-94
_______ ________ _______
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing $ 184 $ 207 $ 81
Non-accrual loans 846 572 2,056
Other real estate owned 2,816 2,866 1,548
Total non-performing assets $3,846 $3,645 $3,685
===== ===== =====
Non-performing assets to
period end loans plus
other real estate owned 7.79% 7.22% 7.04%
Allowance to non-performing
loans 104% 120% 42%
Allowance to non-performing
assets 28% 26% 25%
</TABLE>
The subsidiary Bank's policy is to recognize interest income
on an accrual basis unless the full collectibility of
principal and interest is uncertain. Loans that are
delinquent 90 days as to principal or interest are placed on
a non-accrual basis, unless they are well secured and in
the process of collection, and any interest earned but
uncollected is reversed from income. Collectibility is
determined by considering the borrower's financial condition,
cash flow, quality of management, the existence of collateral
or guarantees and the state of the local economy.
<PAGE>
Other real estate owned is comprised of properties acquired
through foreclosure. These properties are carried at the
lower of the recorded loan balance or their estimated fair
market value based on appraisal. When the loan balance plus
accrued interest exceeds the fair value of the property, the
difference is charged to the allowance for loan losses at the
time of acquisition. Subsequent declines in value from the
recorded amount, if any, and gains or losses upon disposition
are included in noninterest expense. Operating expenses
related to other real estate owned are charged to noninterest
expense in the period incurred.
The increase in non-performing assets from 3-31-94 to 3-31-95
is due primarily to an increase in Other Real Estate Owned,
in which the Bank exercised foreclosure proceedings against a
nonaccrual loan's collateral in the amount of $1,100,000
whose appraised value is in excess of $1,200,000. In
addition, loans 90 days or more past due and still accruing
increased $103,000 and is related to a loan in the process of
renewal.
The amount of $846,000 in non-accrual status represents loans
to 4 borrowers. Two borrowers' loans totaling $618,000 are
secured by single family homes and no loss is anticipated.
The Bank is also pursuing legal action against a title
insurance company for lack of appropritate title insurance
coverage for a loan in the amount of $225,000. A settlement
conference is set for May 11, 1995. The remaining $3,000
will be paid in May, 1995.
The amount in Other Real Estate Owned represents 3 single
family dwellings, a parcel of improved land, and two parcels
of partially improved land. The three single family homes
are in escrow and are scheduled to close in May, 1995.
Financing has been arranged and accepted for these
properties. The Bank is actively marketing the large parcel
of unimproved land. No loss is anticipated on any of the
sale of the properties.
Capital Position
_______ ________
As of March 31, 1995, Shareholders' Equity was $10,721,000.
This represents an increase of $904,000, or 9.2% over the
same period last year. Since the inception of the repurchase
program in 1989, the Company has authorized the repurchase of
$2,050,000 of its stock. As of March 31, 1995, the Company
has repurchased a total of 149,098 shares of the Company
stock constituting 27.7% of the Company's original stock
prior to the repurchase program, at a total cost of
$2,004,942, or an average price per share of $13.45. The
Company plans to continue its repurchase program as an
additional avenue for liquidity for its shareholders. The
program has not affected the Company's liquidity or capital
positions or its ability to operate as the Company's capital
<PAGE>
growth has exceeded its asset growth. In addition, the
Company's subsidiary Bank remains more than well capitalized
under current regulations.
On March 14, 1989, the Board of Directors of the Federal
Deposit Insurance Corporation approved a Statement of Policy
on Risk-Based Capital which became effective December 31,
1990. Under this statement banks are required to meet
certain capital standards in addition to leverage standards
as previously outlined under FDIC Rules and Regulations. The
Bank does not foresee any material or significant impact to
its manner of operation in the foreseeable future. Total
qualifying capital allowable under risk-based capital
guidelines for the subsidiary bank is $8,029,000. The
following table shows the risk-based capital and leverage
ratios as well as the minimum regulatory requirements for the
same as of March 31,1995:
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
<S> <C> <C>
Tier 1 Capital 14.05% 4.00%
Total Capital 15.16% 8.00%
Leverage Ratio 11.01% 3.00%
</TABLE>
The Company is not aware of any current recommendations by
the regulatory authorities which if they were implemented
would have a material effect on the Company.
RESULTS OF OPERATIONS
_______ __ __________
Net Interest Income
___ ________ ______
Total interest income including loan fees increased from
$1,268,000 for the first three months of 1994 to $1,637,000
for the same period in 1995. This increase was due to an
average increase in the prime lending rate of approximately
2.55% over the same period last year. Although average loans
outstanding decreased approximately $3,772,000
from the same period in 1994, the yield on loans increased
2.38% over the same period last year. Loan fees showed a
decrease of $9,000 over the same period last year which is
reflective of the lack of loan growth. Average outstanding
investments showed a increase of $5,437,000 for the first
quarter 1995 versus 1994, primarily due to the decline in
average loan balances. The yield on investments showed a
increase of 2.15% primarily related to an increase in
investment rates brought about by an increase in the prime
lending rate. Interest expense increased from $260,000 as of
the end of the first three months of 1994 to $309,000 in
1995. This increase was brought about by a increase in
average interest-bearing deposit accounts of $3,574,000
during the first quarter of 1994 versus the same period last
year. The average cost of funds for the period ending March
31, 1994 was .63% less than the same period last year. As a
<PAGE>
result of these factors, net interest income for the first
three months of 1994 declined
1.91% from the same period last year.
Other Operating Income
_____ _________ ______
Service charges on deposit accounts as of the end of the
first three months of 1995 increased to $98,000 versus
$86,000 for the same period in 1994. The increase was
centered in service charges related to return check and
overdraft charges. Other charges and fees decreased $177,000
primarily due to a gain on sale of other real estate owned in
the amount of $188,000 which was included in the 1994 figure.
Merchant sales draft fees however increased $7,000 over the
same period in 1994.
Loan Loss Provision
____ ____ _________
The decrease in loan loss provision was primarily due to
a perceived improvement in California's economy as well as
the current level of this ratio.
The allowance for loan losses is maintained at a level that
management of the Company considers to be adequate for losses
that can be reasonably anticipated. The allowance is
increased by charges to operating expenses and reduced by
net-charge-offs. The level of the allowance for loan losses
is based on management's evaluation of potential losses in
the loan portfolio, as well as prevailing and anticipated
economic conditions.
Management employs a systematic methodology on a monthly
basis to determine the adequacy of the allowance for current
and future loan losses. Each loan is graded at the time of
extension or renewal by the credit administrator. Gradings
are assigned a risk factor which is calculated to assess the
adequacy of the allowance for loan losses. Further,
management considers other factors such as overall portfolio
quality, trends in the level of delinquent and classified
loans, specific problem loans, and current and anticipated
economic conditions.
The balance in the allowance for loan losses at March 31,
1995 was $1,074,000 or 2.31% of total loans compared to
$904,000 or 1.78% of total loans at March 31, 1994.
Other Operating Expenses
_____ _________ ________
Total other operating expenses increased $112,000 as of the
end of the first three months of 1995 compared to the same
period last year. This increase was primarily centered in
total salary expense which increased $16,000 and was
primarily related to normal merit increases. In addition,
foreclosure and OREO expense increased $56,000 and was
primarily related to the write down of one single family
dwelling. Consulting fees also increased $24,000 and was
related to a contract with an SBA group for processing SBA
loans.
<PAGE>
Provision for Income Taxes
_________ ___ ______ _____
The Company's provision for income taxes as of the end of the
first three months of 1995 increased from $153,000 in 1994 to
$184,000. This increase is considered normal and includes
some savings related to income generated from tax exempt
municipal bonds which was not available in 1994. For the
same period in 1995 the Company's total effective tax rate
was 40.4% compared to 41.3% in 1994.
Net Income
___ ______
Net income for the first quarter of 1995 increased from
$217,000 for the same period in 1994 to $272,000, or a
increase of 25.0%.
<PAGE>
PART II - OTHER INFORMATION
_______ _____ ___________
ITEM 1 - LEGAL PROCEEDINGS
_____ ___________
No material developments from that which was reported
in the 10-K dated March 31, 1995 for the year ended
December 31, 1994.
ITEM 2 - CHANGE IN SECURITIES
______ __ __________
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
________ ____ ______ __________
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
__________ __ _______ __ _ ____ __ ________ _______
None
ITEM 5 - OTHER INFORMATION
_____ ___________
None
ITEM 6 - REPORTS ON FORM 8-K
_______ __ ____ ___
No reports on Form 8-K have been filed by the registrant
during the first quarter of 1995 for which this report
is filed.
<PAGE>
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
SUMMIT BANCSHARES, INC.
Registrant
DATE: May 12, 1995 For: /s/ Shirley W. Nelson
___________________ __________________________
Shirley W. Nelson
Chairman and CEO
DATE: May 12, 1995 For: /s/ Kikuo Nakahara
___________________ ___________________________
Kikuo Nakahara
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This legend contains summary information extracted from the Form 10-Q and is
qualified in its entirety be reference to such financial statements.
</LEGEND>
<CIK> 0000353203
<NAME> SUMMIT BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 5,096,967
<INT-BEARING-DEPOSITS> 7,040,000
<FED-FUNDS-SOLD> 6,050,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 10,320,732
<INVESTMENTS-MARKET> 10,350,486
<LOANS> 6,571,342
<ALLOWANCE> 1,073,900
<TOTAL-ASSETS> 79,190,535
<DEPOSITS> 67,722,704
<SHORT-TERM> 0
<LIABILITIES-OTHER> 746,996
<LONG-TERM> 0
<COMMON> 3,792,998
0
0
<OTHER-SE> 6,927,660
<TOTAL-LIABILITIES-AND-EQUITY> 10,720,658
<INTEREST-LOAN> 1,227,789
<INTEREST-INVEST> 293,962
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,521,751
<INTEREST-DEPOSIT> 309,372
<INTEREST-EXPENSE> 309,372
<INTEREST-INCOME-NET> 1,212,379
<LOAN-LOSSES> 140,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 873,191
<INCOME-PRETAX> 455,761
<INCOME-PRE-EXTRAORDINARY> 455,761
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271,588
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 846,000
<LOANS-PAST> 184,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 321,000
<ALLOWANCE-OPEN> 931,878
<CHARGE-OFFS> 0
<RECOVERIES> 2,022
<ALLOWANCE-CLOSE> 140,000
<ALLOWANCE-DOMESTIC> 1,073,900
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Not contained in document.
</FN>
</TABLE>
