<PAGE> 1
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: SEPTEMBER 30, 1995
COMMISSION FILE NUMBER: 0-11108
SUMMIT BANCSHARES, INC.
STATE OF CALIFORNIA I.R.S. IDENTIFICATION
NUMBER 94-2767067
2969 BROADWAY, OAKLAND CALIFORNIA 94611
(510) 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:
424,259 shares of no par value common stock
issued as of September 30, 1995
<PAGE> 2
PART I - FINANCIAL INFORMATION
____ _ _________ ___________
ITEM 1 PAGE
SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS
______ ___________ ____ ___ __________ _________ __________
Consolidated Balance Sheets ...................... 3
Consolidated Statements of Income ................ 4-5
Consolidated Statements of Changes in
Shareholders' Equity .......................... 6
Consolidated Statement of Cash Flows ............. 7-8
Notes to Financial Statements..................... 9-10
Interest Rate Risk Reporting Schedule............. 11-12
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 14-20
PART II - OTHER INFORMATION
____ __ _____ ___________
ITEMS 1-6 .................................................. 21
<PAGE> 3
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
______ ___________ ____ ___ __________
CONSOLIDATED BALANCE SHEETS
____________ _______ ______
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
_________ ___ ____ ___ ________ ___ ____
(Unaudited)
(Stated in Thousands)
ASSETS 9-30-95 12-31-94
______ ________ ________
<S> <C> <C>
Cash and Due from Banks $ 6,809 $ 5,746
Federal Funds Sold 8,300 3,500
________ ________
Cash and Cash Equivalents 15,109 9,246
Interest-bearing Deposits with
Other Financial Institutions 10,110 7,039
Investment Securities (Held to 7,930 10,325
Maturity. Market Value of $8,028
at September 30, 1995 and $10,219
at December 31, 1994)
Loans 49,113 47,623
Less: Allowance for Loan Losses (1,272) (932)
________ ________
Net Loans 47,841 46,691
Premises and Equipment, net 864 849
Other Real Estate Owned 1,303 2,866
Interest Receivable and Other Assets 1,666 1,585
________ ________
TOTAL ASSETS $ 84,823 $ 78,601
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
___________ ___ _____________ ______
Deposits:
Demand $ 22,306 $ 22,469
Savings 2,533 3,109
Interest-bearing Transaction
Accounts 29,467 28,815
Other Time 18,718 13,469
________ ________
Total Deposits 73,024 67,862
Interest Payable and Other
Liabilities 600 245
________ ________
TOTAL LIABILITIES 73,624 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 424,259 at 9-30-95 3,767 3,838
Retained Earnings 7,432 6,656
________ ________
TOTAL SHAREHOLDERS' EQUITY 11,199 10,494
________ ________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 84,823 $ 78,601
======== ========
</TABLE>
-2-
<PAGE> 4
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
______ ___________ ____ ___ __________
CONSOLIDATED STATEMENTS OF INCOME FOR THE
____________ __________ __ ______ ___ ___
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
_____ ___ ____ ______ _____ _________ ___ ____ ___ ____
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
9-30-95 9-30-94 9-30-95 9-30-94
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $1,402,669 $1,302,460 $4,115,584 $3,674,113
Interest on Investment Sec. 135,385 69,432 438,115 94,597
Interest on Federal Funds Sold 128,936 57,234 274,402 93,218
Interest on Time Deposits with
Other Financial Institutions 142,783 93,039 341,316 325,313
__________ __________ __________ __________
TOTAL INTEREST INCOME 1,809,773 1,522,165 5,169,417 4,187,241
Interest Expense:
Interest on Deposits 427,859 295,967 1,108,663 836,176
__________ __________ __________ __________
TOTAL INTEREST EXPENSE 427,859 295,967 1,108,663 836,176
__________ __________ __________ __________
NET INTEREST INCOME 1,381,914 1,226,198 4,060,754 3,351,065
Provision for Loan Losses 125,000 190,000 415,000 505,000
__________ __________ __________ __________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,256,914 1,036,198 3,645,754 2,846,065
__________ __________ __________ __________
Other Operating Income:
Service Charges on Deposit Accts 90,878 90,992 282,867 266,680
Other 42,602 35,502 127,780 314,047
__________ __________ __________ __________
TOTAL OTHER OPERATING INCOME 133,480 125,494 410,647 580,727
__________ __________ __________ __________
Other Operating Expenses:
Salaries and Employee Benefits 471,531 412,617 1,344,201 1,229,337
Occupancy Expense 92,918 90,348 273,999 260,774
Furniture and Equipment Expense 23,120 32,485 72,632 102,904
Other 253,161 270,744 868,482 736,541
__________ __________ __________ __________
TOTAL OTHER OPERATING EXPENSE 840,730 806,194 2,559,314 2,329,556
__________ __________ __________ __________
INCOME BEFORE INCOME TAXES 549,664 355,498 1,497,087 1,097,236
Provision for Income Taxes 233,422 150,288 615,282 456,899
__________ __________ __________ __________
NET INCOME $ 316,242 $ 205,210 $ 881,805 $ 640,337
========== ========== ========== ==========
</TABLE>
-3-
<PAGE> 5
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
9-30-95 9-30-94 9-30-95 9-30-94
________ ________ ________ ________
<S> <C> <C> <C> <C>
NET INCOME APPLICABLE TO
COMMON STOCK $316,242 $205,210 $881,805 $640,337
________ ________ ________ ________
FULLY DILUTED EARNINGS:
Weighted Average Shares
Outstanding: 456,224 433,109 457,038 432,950
PRIMARY EARNINGS PER SHARE $ 0.69 $ 0.47 $ 1.93 $ 1.48
________ ________ ________ ________
</TABLE>
-4-
<PAGE> 6
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
______ ___________ ____ ___ __________
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
____________ __________ __ _______ __ _____________ ______
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
___ ___ ____ ______ _____ _________ ___ ____ ___ ____
(Unaudited)
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 (3,226) (70,246) ---
Net Income for the Nine Months
Ended September 30, 1995 --- --- 881,805
Payment of $.25 Cash Dividend
For Holders of Record as of
May 12, 1995 and Payable on
June 9, 1995 --- --- (106,252)
_______ ___________ ___________
BALANCE AT SEPTEMBER 30, 1995 424,259 $ 3,767,438 $ 7,431,625
======= =========== ===========
BALANCE AT DECEMBER 31, 1993 414,402 $ 3,674,959 $ 5,951,371
Issuance of Common Stock
Through Exercise of Stock Options 2,600 28,863
Purchase of Common Stock (3,717) (57,187) ---
Net Income for the Nine Months
Ended September 30, 1994 --- --- 640,337
Payment of $.25 Cash Dividend
for Holders of Record as of
August 6, 1994 and Payable on
August 26, 1994 --- --- (153,579)
_______ __________ __________
BALANCE AT SEPTEMBER 30, 1994 413,285 $3,646,635 $6,438,129
======= ========== ==========
</TABLE>
-5-
<PAGE> 7
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
(Unaudited)
__________________________________________________________________________________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 4,741,684
Fees received 799,792
Interest paid (991,961)
Cash paid to employees and suppliers (2,349,817)
Income taxes paid (791,654)
______________
Net cash provided by operating activities 1,408,044
______________
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits with other
financial institutions (3,071,000)
Maturity of investment securities 6,476,325
Purchase of investment securities (4,081,780)
Net increase in loans made to customers (1,483,221)
Recoveries on loans previously charged off 10,639
Capital expenditures (123,197)
______________
Net cash used in investing activities (2,272,234)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, interest bearing
transaction and savings accounts (83,851)
Net increase in time deposits 5,248,906
Increase in other miscellaneous assets 1,738,464
Purchase of common stock (70,426)
Dividends paid (106,252)
_____________
Net cash provided by financing activities 6,726,841
Net increase in cash and cash equivalents 5,862,651
Cash and cash equivalents at 12-31-94 9,246,342
_____________
Cash and cash equivalents at 9-30-95 $ 15,108,993
=============
Reconciliation of net income to net cash provided by operating activities:
Net Income $ 881,805
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 107,961
Provision for loan losses 415,000
Increase in accrued interest receivable (61,041)
Increase in unearned loan fees 22,453
Increase in accrued interest payable 116,702
Increase in prepaid expenses (24,693)
Increase in accounts payable 126,229
Increase in income tax payable (176,372)
_________
Total adjustments 526,239
_______
Net cash provided by operating activities $ 1,408,044
_____________
</TABLE>
-6-
<PAGE> 8
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
(Unaudited)
________________________________________________________________________________
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 3,687,118
Fees received 802,584
Gain on sale of other real estate owned 186,963
Interest paid (817,575)
Cash paid to employees and suppliers (2,162,348)
IRS refund 53
Income taxes paid (455,000)
____________
Net cash provided by operating activities 1,241,795
____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits with other
financial institutions 7,430,000
Maturity of investment securities 1,136,315
Purchase of investment securities (8,585,280)
Net decrease in loans made to customers 1,115,607
Carrying cost of foreclosed properties (138,354)
Proceeds from sale of foreclosed properties 265,666
Recoveries on loans previously charged off 3,130
Capital expenditures (25,921)
____________
Net cash used in investing activities 1,201,163
____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, interest bearing
transaction and savings accounts (606,829)
Net decrease in time deposits (1,291,246)
Increase in other miscellaneous assets (704,980)
Issuance of stock 28,863
Purchase of common stock (57,187)
Dividends paid (153,664)
_____________
Net cash provided by financing activities (2,785,043)
_____________
Net increase in cash and cash equivalents (342,085)
Cash and cash equivalents at 12-31-93 10,387,445
_____________
Cash and cash equivalents at 9-30-94 $ 10,045,360
=============
Reconciliation of net income to net cash provided by operating activities:
Net Income $ 640,337
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 117,408
Provision for loan losses 505,000
Increase in accrued interest receivable (126,044)
Increase in unearned loan fees 34,741
Increase in accrued interest payable 18,601
Increase in prepaid expenses (58,626)
Increase in accounts payable 108,426
Increase in income tax payable 1,952
_________
Total adjustments 601,458
__________
Net cash provided by operating activities $ 1,241,795
_____________
</TABLE>
-7-
<PAGE> 9
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 September 30, 1995 and the results of
operations for the nine months ended September 30, 1995 and 1994
and cash flows for the nine months ended September 30, 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 nine months
ended September 30, 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 measured 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
January 1, 1995.
-8-
<PAGE> 10
As of September 30, 1995 the Bank's recorded investment in
impaired loans and the related valuation allowance
calculated under SFAS No 114 are as follows:
<TABLE>
<CAPTION>
1995
________________________
Recorded Valuation
Investment Allowance
__________ _________
Impaired Loans
______________
<S> <C> <C>
Valuation allowance
required $265,000 $220,000
No valuation allowance
required 429,000 0
__________ __________
Total Impaired Loans $694,000 $220,000
========== ==========
</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 September 30, 1995 was $441,000 while the average for the
year was $604,000.
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 principal. The
Bank did not recognize interest income on impaired loans
for the first nine months 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>
September 30,
1995 1994
_____________________
<S> <C> <C>
Allowance for loan losses-
Balance at the beginning of year $ 931,878 $728,353
Provision for credit losses 415,000 505,000
Write downs 85,397 346,552
Recoveries 10,629 3,130
Transfers and others 0 0
__________ ________
Balance at September 30 $1,272,110 $889,931
========== ========
</TABLE>
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<PAGE> 11
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
The following table provides an interest rate sensitivity and
interest rate risk analysis for the quarter ended September 30, 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 of 1992(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 have published a proposed
policy statement 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
institutions 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 measured 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.
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.
-10-
<PAGE> 12
<TABLE>
<CAPTION>
INTEREST RATE RISK REPORTING SCHEDULE
REPORTING INSTITUTION: SUMMIT BANK REPORTING DATE: 09-30-95
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
($000.00
OMITTED) UP TO > 3 MO > 1 YR > 3 YR > 7 YR OVER
TOTAL 3 MO < 1 YR < 3 YR < 7 YR < 15 YR 15 YRS
<S> <C> <C> <C> <C> <C> <C> <C>
I. INTEREST-BEARING ASSETS
1. CASH AND BALANCE DUE $6,809 $6,809 $0 $0 $0 $0 $0
2. SECURITIES (INCL TRADING)
a) NON-AMORTIZING $18,040 $6,841 $9,116 $2,083 $0 $0 $0
b) DEEP DISC COUPONS $0
c) HIGH RISK MORT. SEC. $0
3. FED FUNDS SOLD & SEC $8,300 $8,300 $0 $0 $0 $0 $0
SOLD FOR RESALE $0
4. LOANS, LEASES & ACCEPT.
a) AMORTIZING $17,990 $659 $4,729 $6,928 $5,674 $102 $0
b) NON-AMORTIZING $30,923 $7,305 $14,362 $6,244 $3,012 $0 $0
5. TOTAL INT BEARG. ASSETS $75,253 $23,105 $28,207 $15,255 $8,686 $102 $0
6. ALLOWANCE FOR LOAN LOSSES ($1,272)
II. ALL OTHER ASSETS $3,229
III. TOTAL ASSETS $84,019
IV. INTEREST-BEARING LIABILITIES
1. INTEREST-BEARING DEPOSITS
a) NOW ACCOUNTS $5,395 $0 $3,777 $1,619 $0 $0 $0
b) MMDA ACCOUNTS $24,113 $0 $16,879 $7,234 $0 $0 $0
c) SAVINGS $2,533 $0 $0 $1,773 $760 $0 $0
d) TIME DEPOSITS $20,179 $11,233 $7,660 $474 $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. $52,220 $11,233 $28,316 $11,100 $760 $0 $0
V. NONINTEREST-BEARING LIAB.
1. DEMAND DEPOSITS $22,306 $3,346 $12,268 $6,692
2. OTHER LIABILITIES $566
VI. TOTAL LIABILITIES $75,092
VII. EQUITY CAPITAL $8,927
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>
-11-
<PAGE> 13
<TABLE>
<CAPTION>
INTEREST RATE RISK WEIGHTING CALCULATIONS
(09/30/95)
BALANCE SHEET SUMMARY REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
(FROM REPORTING SCHEDULE)
UP TO > 3 MO >1 YR > 3YR > 7 YRS OVER
TOTAL 3 MO <= 1 YR <=3 YR <= 7YR <=15 YRS 15 YRS
<S> <C> <C> <C> <C> <C> <C> <C>
I. TOTAL ASSETS (EXC.CASH & DUE) $78,482
2. OTHER ASSETS &
HIGH RISK SEC. EVALU $3,229
3. TOTAL INT-BEARG ASSETS. $75,253 $23,105 $28,207 $15,255 $8,686 $102 $0
4. AMORT ASSETS. $17,990 $659 $4,729 $6,928 $5,674 $102 $0
5. NON-AMORT ASSETS $57,263 $22,446 $23,478 $8,327 $3,012 $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 $74,280
9. OTHER LIAB. & DDA $22,872 $3,346 $12,268 $6,692 $0 $0 $0
10. INT-BEARG LIAB. $51,408 $11,233 $28,316 $11,100 $760 $0 $0
11. NET WORTH (GAP) $4,202 $8,526 ($12,377) ($2,536) $7,926 $102 $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 $186.88 $0.53 $14.19 $55.42 $113.48 $3.26 $0.00
20. WEIGHTED NON-AMORT. ASSETS $417.75 $26.94 $129.13 $145.72 $115.96 $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: $604.63 $27.46 $143.32 $201.15 $229.44 $3.26 $0.00
24. TOTAL RISK WEIGHTED LIABILITIES $400.16 $13.48 $155.74 $199.79 $31.16 $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 $207.19 $13.98 ($9.70) $1.36 $198.29 $3.26 $0.00
IRR MEASUREMENT
NET RISK WEIGHTED POSITION AS A PERCENT OF ASSETS = 0.26% = LEVEL OF IRR
PROPOSED REGULATION F = 1.00% = PROPOSED TARGET
</TABLE>
-12-
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
____________ __________ ___ ________ __ _________
CONDITION AND RESULTS OF OPERATIONS
_________ ___ _______ __ __________
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 September 30, 1995 was
67.3% which was a decrease from 69.7% for the same period in 1994.
The average loan-to-deposit ratio for the third quarter of 1995 was
66.1%, down from 72.6% for the same period last year. Although the
average loan-to-deposit ratio is down from last year, average total
deposits for the year through September 30, 1995 increased
$1,731,000 in 1995 versus 1994. The higher cost Public Deposit, Time
Certificates and Market Rate accounts increased $616,000, while
interest free Demand Deposits accounts increased $1,115,000.
However, average outstanding loans declined $3,374,000 centered in
consumer and real estate transactions. Management continues to seek
the acquisition of quality credits.
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 $33,149,000 on
September 30, 1995. This amount represented 45.4% of total deposits
in comparison to the liquidity ratio of 37.8% as of September 30,
1994. This increase is primarily the result of a decrease in Other
Real Estate Owned of $1,238,000, an increase in total deposits and a
decrease in total loans. It is management's belief that the current
liquidity level is appropriate given current economic uncertainties
and is sufficient to meet current needs.
The issuer is not aware of any current recommendations by the
regulatory authorities which, if they were implemented, would have a
material effect on the Company.
-13-
<PAGE> 15
The following table sets forth book value of investments by category
and the percent of total investments at the dates specified.
<TABLE>
<CAPTION>
Investment Comparative
______________________
(000.00 Omitted)
9-30-95 % 12-31-94 % 9-30-94 %
_______ _ ________ _ _______ _
<S> <C> <C> <C> <C> <C> <C>
Fed Funds Sold $ 8,300 32% $ 3,500 17% $ 4,400 22%
Interest bearing
Deposits 10,110 38% 7,039 34% 7,734 38%
Securities 7,930 30% 10,325 49% 8,147 40%
_______ ____ _______ ____ _______ ____
$26,340 100% $23,363 100% $20,281 100%
======= ==== ======= ==== ======= ====
</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 September 30, 1995 were comprised of $7,570,000 in
U.S. Gov't and Agency instruments maturing between 3 months and 3
years, and $360,000 in a bank qualified 1 year Tax Anticipation
Revenue Note used to fund an annual school district budget.
Securities on September 30, 1994 were comprised of $7,163,000 in
U.S. Gov't and Agency instruments maturing between 3 months and 3
years, $979,000 in bank qualified 1 year Tax Anticipation Revenue
Notes used to fund annual school district budgets and a $5,000
industrial bond.
Changes in Financial Position
_______ __ _________ ________
As of September 30, 1995, deposits increased $5,162,000 from year
end 1994 while at the same time loans outstanding increased
$1,490,000. Total deposits as of September 30, 1995 were
$73,024,000, a increase of 6% from $68,564,000 as of September 30,
1994. Total loans as of September 30, 1995 were $49,113,000, a
increase of 1% from $48,719,000 as of September 30, 1994.
The following table sets forth the amount of deposits by each
category and the percent of total deposits at the dates specified.
<TABLE>
<CAPTION>
Deposit Comparative
_______ ___________
(000.00 Omitted)
9-30-95 % 12-31-94 % 9-30-94 %
_______ _ ________ - _______ _
<S> <C> <C> <C> <C> <C> <C>
Demand $22,306 31% $22,469 33% $19,716 28%
Savings 2,533 3% 3,109 5% 3,130 5%
Interest bearing
transactions accts 29,467 40% 28,815 42% 30,840 45%
Other Time 18,718 26% 13,469 20% 14,878 22%
_______ ____ _______ ____ _______ ____
$73,024 100% $67,862 100% $68,564 100%
======= ==== ======= ==== ======= ====
</TABLE>
-14-
<PAGE> 16
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
____ ___________
(000.00 Omitted)
9-30-95 % 12-31-94 % 9-30-94 %
_______ _ ________ _ _______ _
<S> <C> <C> <C> <C> <C> <C>
Commercial $32,114 65% $30,355 63% $30,014 61%
Real estate-const. 7,192 15% 5,822 12% 6,849 14%
Real estate-other 4,745 9% 4,873 10% 4,408 9%
Installment/Other 4,994 10% 6,450 14% 7,313 15%
Equip. lease 68 1% 123 1% 135 1%
_______ ____ _______ ____ _______ ____
$49,113 100% $47,623 100% $48,719 100%
======= ==== ======= ==== ======= ====
</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)
9-30-95 12-31-94 9-30-94
_______ ________ _______
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing $ 392 $ 207 $ 340
Non-accrual loans 694 572 667
Other real estate owned 1,303 2,866 2,541
______ ______ ______
Total non-performing assets $2,389 $3,645 $3,548
====== ====== ======
Non-performing assets to
period end loans plus
other real estate owned 4.74% 7.22% 6.92%
Allowance to non-performing
loans 117% 120% 88%
Allowance to non-performing
assets 53% 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.
-15-
<PAGE> 17
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 decrease in non-performing assets from 9-30-94 to 9-30-95 is due
primarily to a decrease in Other Real Estate Owned, caused by the
sale of three properties. The amount in Other Real Estate Owned
represents 3 parcels of partially improved land. The Bank is
actively marketing these parcels and no loss is anticipated.
The remaining $694,000 in non-accrual status represents loans to 5
borrowers. One borrower's loan of $340,000 is secured by a single
family dwelling and no loss is anticipated. The remaining $354,000
is composed of 4 loans of which $220,000 is a probable loss.
Capital Position
_______ ________
As of September 30, 1995, Shareholders' Equity was $11,199,000. This
represents an increase of $1,114,000, or 11.0% over the same period
last year. Since the inception of the stock repurchase program in
1989, the Company has authorized the repurchase of $2,050,000 of its
stock. As of September 30, 1995, the Company has repurchased a total
of 150,288 shares of the Company's stock constituting 28.0% of the
Company's original stock prior to the repurchase program, at a total
cost of $2,031,000, or an average price per share of $13.51. 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 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
-16-
<PAGE> 18
guidelines for the subsidiary bank is $9,613,000. The following
table shows the risk-based capital ratios and the leverage ratios
for 1995 as well as the minimum regulatory requirements as of
September 30, 1995:
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
<S> <C> <C>
Tier 1 Capital 14.44% 4.00%
Total Capital 15.55% 8.00%
Leverage Ratio 10.96% 3.00%
</TABLE>
The issuer 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 $3,674,000
for the first nine months of 1994 to $4,116,000 for the same period
in 1995. Although average loans outstanding decreased $3,374,000
from September 30, 1994 to September 30, 1995, the average prime
rate during the first nine months of 1995 was 2.09% greater than the
same period last year. Yield on loans increased approximately 1.75%
over the same period last year which was below the average prime
rate increase. This was primarily due to other bank interest rate
indexes that did not rise as rapidly or as high as the prime rate.
Loan fees showed a decrease of $7,000 from the same period last year
primarily reflective of the decrease in good quality credit demand.
Following the trend in the prime lending rate, the investment
portfolio showed an increase of 1.90% in its yield. Interest expense
increased from $836,000 as of the end of the first nine months of
1994 to $1,109,000 in 1995. In addition to average outstanding
interest-bearing deposit accounts increasing $616,000 during the
first nine months of 1995 versus the same period last year, the
average cost of funds for the period ending September 30, 1995 was
.53% more than the same period last year. As a result of these
factors, net interest income for the first nine months of 1995
increased 21.1% over the same period last year.
For the third quarter, total interest income increased from
$1,522,000 in 1994 to $1,810,000 for the same period in 1995. The
average loans for the 1995 period showed a decrease of $2,103,000
from the same period last year. However, the average prime rate
during the third quarter was 1.37% greater than the same period last
year which caused the yield on loans in the third quarter of 1995 to
be approximately 1.35% greater than 1994. Loan fees showed a
increase of $18,000 over the same period last year. Following the
trend in the
-17-
<PAGE> 19
prime lending rate, the investment portfolio showed an increase of
1.43% in its yield. For the third quarter of 1995 interest expense
increased from $296,000 to $428,000. Average outstanding
interest-bearing deposit accounts increased $2,669,000 during the
third quarter versus the same period last year. The average cost of
funds for the third quarter of 1995 increased .88% compared to the
same period last year. As a result of these factors, net interest
income for the third quarter of 1995 increased 12.7% over the third
quarter of 1994.
Other Operating Income
_____ _________ ______
Service charges on deposit accounts as of the end of the first nine
months of 1995 increased to $283,000 versus $267,000 for the same
period in 1994 and was centered in service charges related to return
check and overdraft charges which increased $26,000. Other charges
and fees decreased $186,000 compared to 1994, primarily due to a net
gain on sale of an OREO of $186,000 in 1994.
Service charges on deposit accounts for the third quarter of 1995
remained relatively the same as last year. Other charges and fees
increased $7,000 primarily due to a increase in Merchant Sales Draft
Fees.
Loan Loss Provision
____ ____ _________
The decrease in loan loss provision was primarily due to reduced
loan losses and the adequacy of the allowance account. The balance
in the allowance for loan losses at September 30, 1995 was
$1,272,000 or 2.59% of total loans compared to $890,000 or 1.83% at
September 30, 1994.
The allowance for loan losses is maintained at a level that
management of 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.
-18-
<PAGE> 20
Other Operating Expenses
________________________
Total other operating expenses increased $230,000 as of the end of
the first nine months of 1995 compared to the same period last year.
Total salary expense increased $115,000 due to an increase of 3
employees. Foreclosure and OREO expense increased $49,000 primarily
related to properties sold in 1995, $36,000 increase in Consulting
Fees related to the Bank's SBA loan program, $23,000 in legal fees,
and $23,000 in data processing expenses related to an upgrade to our
current system. These increases were offset by a decrease of $30,000
in furniture and equipment and a decrease of $37,000 in FDIC
insurance.
For the third quarter 1995 operating expenses increased $35,000
compared to the same period last year and was centered in items
previously mentioned above.
Provision for Income Taxes
_________ ___ ______ _____
The Company's provision for income taxes as of the end of the first
nine months of 1995 increased from $457,000 in 1994 to $615,000.
This increase was primarily related to the decline in income from
tax exempt municipal bonds and increase in overall income. For the
first nine months of 1995 the Company's total effective tax rate was
41.1% compared to 41.7% in 1994.
For the third quarter 1995 the provision for income taxes increased
$83,000 compared to the third quarter of 1994. This increase was
related to the items mentioned above. The Company's total effective
tax rate was 42.5% for the third quarter of 1995 versus 42.2% for
the same period last year.
Net Income
___ ______
Net income for the first nine months of 1995 increased from $640,000
for the same period in 1994 to $882,000, or an increase of 37.8%.
Third quarter net income increased 54.1% over the same period last
year.
-19-
<PAGE> 21
PART II - OTHER INFORMATION
____ __ _____ ___________
ITEM 1 - LEGAL PROCEEDINGS
_____ ___________
No material developments from that which was reported
in the 10-K dated March 22, 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 third quarter of 1995 for which this report
is filed.
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: November 14, 1995 By: /s/ Shirley W. Nelson
_________________ __________________________
Shirley W. Nelson
Chairman and
Chief Executive Officer
DATE: November 14, 1995 By: /s/ Kikuo Nakahara
_________________ __________________________
Kikuo Nakahara
Chief Financial Officer
-20-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This legend contains summary information extracted from the Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000353203
<NAME> SUMMIT BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 6,808,993
<INT-BEARING-DEPOSITS> 10,110,000
<FED-FUNDS-SOLD> 8,300,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 7,930,420
<INVESTMENTS-MARKET> 8,028,119
<LOANS> 49,112,898
<ALLOWANCE> 1,272,110
<TOTAL-ASSETS> 84,822,987
<DEPOSITS> 73,623,927
<SHORT-TERM> 0
<LIABILITIES-OTHER> 599,526
<LONG-TERM> 0
<COMMON> 3,767,258
0
0
<OTHER-SE> 7,431,625
<TOTAL-LIABILITIES-AND-EQUITY> 84,822,810
<INTEREST-LOAN> 4,115,584
<INTEREST-INVEST> 1,053,833
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,169,417
<INTEREST-DEPOSIT> 1,108,663
<INTEREST-EXPENSE> 1,108,663
<INTEREST-INCOME-NET> 4,060,754
<LOAN-LOSSES> 415,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,559,314
<INCOME-PRETAX> 1,497,087
<INCOME-PRE-EXTRAORDINARY> 1,497,087
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 881,805
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.92
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 694,262
<LOANS-PAST> 392,208
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 311,178
<ALLOWANCE-OPEN> 931,878
<CHARGE-OFFS> 85,397
<RECOVERIES> 10,629
<ALLOWANCE-CLOSE> 1,272,120
<ALLOWANCE-DOMESTIC> 1,272,120
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Not contained in document.
</FN>
</TABLE>
