<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED COMMISSION FILE NUMBER
DECEMBER 31, 1994 0-11108
SUMMIT BANCSHARES, INC.
_______________________
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2767067
__________ __________
(State of Incorporation) (I.R.S. Employer Identification No.)
2969 Broadway, Oakland, California 94611
_________________________________________
(Address of principal executive offices and zip code)
(510) 839-8800
______________
(Registrant's area code and telephone number)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, No Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 day period.
Yes __X__ No _______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
/X/
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average of bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing:
$7,314,132.00 (1)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
425,559 shares no par common stock
issued as of February 28, 1995
Documents Incorporated by Reference
The Registrant's Proxy Notice and Statement
of Annual Meeting of Shareholders to be Held on
April 19, 1995 -- Part III, Arthur Andersen LLP
_______________
1
For purposes of this calculation only, shares are deemed to have
market value of $21.00, the average of bid and asked prices on
February 28, 1995, and each of the executive officers, directors and
persons holding 5% or more of the outstanding common stock is deemed
to be an affiliate.
<PAGE> 2
PART I
ITEM 1. BUSINESS
________
Summit Bancshares, Inc. (the "Company") is a one-bank holding
company registered under the Bank Holding Company Act of 1956, as
amended. It was incorporated under the laws of the State of
California on July 22, 1981. Its principal office is located at
2969 Broadway, Oakland, California 94611, and its telephone
number is (510) 839-8800.
On March 1, 1985, the Bank opened a banking facility at
112 La Casa Via, Walnut Creek, California 94596, which moved into new
quarters located at 1700 N. Main, Walnut Creek, California 94598 in
September, 1990. The telephone number is (510) 935-9220. In addition, a
full service branch began operation in December, 1985, in the Watergate
III Tower at 2000 Powell Street, Emeryville, California 94608. The
telephone number is (510) 428-1868.
Summit Bancshares, Inc. owns all of the capital stock of Summit
Bank (the "Bank"), its subsidiary bank, and its activities during 1994
were limited to acting as the Bank's holding company.
The Bank has conducted the business of a commercial bank since
July 1, 1982. The Bank provides commercial credit and other banking
services to small and mid-sized businesses and professionals,
including professional firms of physicians, attorneys, accountants,
retailers and service firms, wholesalers and distributors. Because of
the concentration of medical facilities and related organizations in the
Bank's primary service area, the Bank primarily focuses its marketing efforts
on health service businesses; however, the Bank also offers a broad spectrum
of financial services to the business community at large. The Bank offers a
variety of loan products as well as money market investment services to
attract and retain commercial customers. The Bank offers various checking
and savings accounts for both personal and business purposes, time
certificates of deposit, cashier's checks, money orders, travelers
checks, safe deposit boxes, installment collection services, night
depository, depository pickup and courier services, telephone transfers,
collection services for notes, Individual Retirement and Business
Planning (formerly Keogh) Accounts. The Bank has not requested and
does not have regulatory approval to offer trust services, although
it may provide such services in the future. The Bank assists customers
requiring services not offered by the Bank in obtaining such services
from its correspondent banks and other financial services firms.
Although the Bank does not actively solicit consumer business from the
general public, it does offer banking services and facilities
compatible with the need of its consumer customers.
<PAGE> 3
The banking office in Walnut Creek offers virtually the
same services listed above with the exception of safe deposit boxes.
The Emeryville Office offers all the same services as the Oakland Office.
On March 30, 1989, the State Banking Department approved the
Bank's application to establish a new subsidiary, Summit Equities,
Inc, whose purpose is to engage in real property investment
activities as authorized by Section 751.3 of the California Financial
Code. On November 13, 1992 the FDIC imposed regulations limiting real
estate investment to those authorized by national banks, thus no real
estate transactions are allowed to be transacted under this subsisdiary.
The corporation is exploring other avenues or types of approved investment
activities. As of this date, the subsidiary has not conducted any business.
SERVICE AREA
____________
The primary geographic market served by the Bank encompasses the
"Pill Hill" area of the City of Oakland and extends to the northern
portion of Alameda County to the Contra Costa County line along the
boundary cities of Richmond and Albany; running south along the bay front
(including the city of Alameda) to Highway 238/580 to the Castro Valley
"Y"; east along Highway 580 to encompass the communities of Livermore
and Blackhawk; northerly along Highway 680 to the Highway 24 corridor
to encompass the cities of Walnut Creek and Concord and west to the
starting point in northern Alameda County. This area includes a
substantial number of commercial businesses, a large health services
complex and substantial residential population. In Alameda County,
the health services complex includes two major hospitals, approximately
500 physicians and a wide variety of health related and other professionals,
and small and medium-sized businesses.
The Walnut Creek office is about 16 miles northeast of the head
office in Oakland and located in the central business district in Walnut
Creek. The site is approximately 1 mile west of John Muir Hospital,
which is a 343-bed hospital employing approximately 1150 people and
accommodates a large staff of approximately 325 visiting physicians.
The surrounding service area includes 4 convalescent hospitals, an acute
psychiatric care facility, and the 204-bed Kaiser Foundation Hospital,
which employs over 1150 people in downtown Walnut Creek and is staffed
by approximately 95 physicians.
The Emeryville branch is a further extension of the Bank's plan to
expand into areas which will further utilize specialized services
directed at medium-sized businesses and professionals. Located west of
Interstate 80 at 2000 Powell Street, it is servicing a commercial sector
and an up-scale employee population.
The Bank also obtains business clients from areas adjacent to the
Pill Hill area in Oakland, the John Muir and Kaiser areas of Walnut
Creek and in Emeryville, and from other sections of those metropolitan
areas. The Bank's customers are primarily business and professional
persons working in the vicinity of each branch, officers and employees
of businesses and professional firms serviced by the Bank, and residents
of areas close to the Bank.
<PAGE> 4
COMPETITION
___________
The banking business in the Oakland/East Bay metropolitan area is
very competitive with respect to both loans and deposits, and is
dominated by relatively few major banks which have offices operating
throughout California. Among the advantages such banks have are their
ability to finance wide-ranging advertising campaigns, to offer certain
services (for example, trust services) which are not offered directly
by the Bank, and to have substantially higher legal lending limits due
to their greater capitalization. There are six other independent banks
in Oakland, six in Walnut Creek and none in Emeryville.
In competing for deposits, the Bank is subject to certain
limitations not applicable to non-bank financial institution
competitors. Over the past years, legislative changes have enabled
the Bank to compete more effectively for deposits with savings and
loan institutions but still remains at a competitive disadvantage when
competing with money market funds.
To compete with major financial institutions and other independent
banks in its primary service areas, the Bank relies upon the
experience of its executive officers in serving business clients, its
specialized services, local promotional activity, personal contacts by
its officers, directors, employees, and organizers of the Company. For
customers whose loan demands exceed the Bank's legal lending limit, the
Bank arranges for such loans on a participation basis with correspondent
banks as well as other independent banks.
REGULATION AND SUPERVISION
__________________________
THE COMPANY. The Company is a bank holding company within
___________
the meaning of the Bank Holding Company Act of 1956, as amended (the
"BHC Act"), and is registered as such with the Federal Reserve Board
(FRB). A bank holding company is required to file with the FRB annual
reports and other information regarding its business operations and
those of its subsidiaries. It is also subject to examination by the
FRB and is required to obtain FRB approval before acquiring, directly
or indirectly, ownership or control of any voting shares of any bank,
if after such acquisition, it would directly or indirectly own or
control more than 5% of the voting stock of that bank. The BHC Act
further provides that the FRB shall not approve any such acquisition
that would result in or further the creation of a monopoly, or the
effect of which may be to substantially lessen competition, unless the
anticompetitive effects of the proposed transaction are clearly
outweighed by the probable effect in meeting the convenience and needs
of the community to be served.
Furthermore, under the BHC Act, a bank holding company is,
with limited exceptions, prohibited from (i) acquiring direct or
indirect ownership or control of more than 5% of the voting shares of any
company which is not a bank, or (ii) engaging in any activity other
than managing or controlling banks. With the prior approval of the
FRB, however, a bank holding company may own shares of a company
engaged in activities which the FRB has determined to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto.
<PAGE> 5
The FRB has by regulation determined that certain activities are
so closely related to banking as to be a proper incident thereto within
the meaning of the BHC Act. These activities include, but are not
limited to: operating an industrial loan company, industrial bank,
Morris Plan Bank, savings association, mortgage company, finance
company, credit card company or factoring company; performing certain
data processing operations; providing investment and financial advice;
operating as a trust company in certain instances, selling traveler's
checks, United States savings bonds and certain money orders; providing
certain courier services; providing management consulting advice to
nonaffiliated depository institutions in some instances; acting as
insurance agent for certain types of credit-related insurance; leasing
property or acting as agent, broker or advisor for leasing property on
a "full pay-out basis"; acting as a consumer financial counselor,
including tax planning and return preparation; performing futures and
options advisory services, check guarantee services and discount
brokerage activities; operating a collection or credit bureau; or
performing personal property appraisals. The Company has no present
intention to engage in any of such permitted activities at this time.
The FRB also has determined that certain activities are not so
closely related to banking to be a proper incident thereto within the
meaning of the BHC Act. Such activities include: real estate brokerage
and syndication; land development; property management; underwriting of
life insurance not related to credit transactions; and with certain
exceptions, securities underwriting and equity funding. In the future,
the FRB may add or delete from the list of activities permissible for
bank holding companies. Under the BHC Act, a bank holding company and
its subsidiaries are prohibited from acquiring any voting shares of or
interest in all or substantially all of the assets of any bank located
outside the state in which the operations of the bank holding company's
banking subsidiaries are principally conducted, unless the acquisition
is specifically authorized by the law of the state in which the bank to
be acquired is located or unless the transaction qualifies under
federal law as an "emergency interstate acquisition" of a closed or
failing bank. The California interstate banking bill is described
under "Interstate Banking" (below).
A bank holding company and its subsidiaries are prohibited from
certain tie-in arrangements in connection with any extension of credit,
sale or lease of a property or furnishing of services. For example,
with certain exceptions, a bank may not condition an extension of
credit on a promise by its customer to obtain other services provided
by it, its holding company or other subsidiaries, or on a promise by
its customer not to obtain other services from a competitor. In
addition, federal law imposes certain restrictions on transactions
between the Company and its subsidiaries, including the Bank. As an
affiliate of the Bank, the Company is subject, with certain exceptions,
to provisions of federal law imposing limitations on, and requiring
collateral for, extensions of credit by the Bank to its affiliates.
Directors of the Company, and the companies with which they are
associated, have had and will continue to have banking transactions
with the Bank in the ordinary course of the Bank's business. It is the
firm intention of the Company that any loans and commitments to loan
included in such transactions be made in accordance with applicable
<PAGE> 6
law, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions
with other persons of similar creditworthiness, and on terms not
involving more than the normal risk of collectability or presenting
other unfavorable features. At December 31, 1994, loans to directors
totalled $.8 million or 7.4% of the Company's shareholders' equity.
THE BANK. The Bank is a member of the FDIC which currently
________
insures the deposits of each member bank to a maximum of $100,000 per
depositor. For this protection, the Bank pays a semi-annual assessment
and is subject to the rules and regulations of the FDIC pertaining to
deposit insurance and other matters.
The Bank is subject to regulation, supervision and regular
examination by the California State Banking Department (the
"Department"). Although the Bank is a non-member of the Federal
Reserve System, it is subject to regulation, supervision, but not
examination by the FRB. The regulations of these agencies govern most
aspects of the Bank's business, including the making of periodic
reports by the Bank and the Bank's activities, branching, mergers and
acquisitions, reserves against deposits and numerous other areas.
Subject to the regulations of the California Superintendent of
Banks (the "Superintendent"), the Bank may invest in capital stock,
obligations or other securities of other corporations, provided such
corporations are not insurance companies, agents or brokers. In
addition, the Bank may acquire any or all of the securities of a
company that engages in activities that the Bank may engage in directly
under California law without the prior approval of the FRB. California
state-chartered banks are also specifically authorized to provide real
estate appraisal services, management consulting and advisory services
and electronic data processing services.
The Company's primary source of income (other than interest earned
on Company capital) is the receipt of dividends and management fees
from the Bank. The ability of the Bank to pay management fees and
dividends to the Company and its affiliates is subject to restrictions
set forth in the California Financial Code and, under certain
circumstances, is subject to approval of the Department. The board of
directors of a state-chartered bank may declare a dividend out of so
much of net profits as such board deems appropriate, subject to
California law which restricts the amount available for cash dividends
to the lesser of retained earnings or the bank's net income for its
last three fiscal years (less any distributions to shareholders made
during such period).
In the event that a bank has no retained earnings or net income
for the prior three fiscal years, cash dividends may be paid out of net
income for such bank's last preceding fiscal year or current fiscal
year upon the prior approval of the Department. Although there are not
specific regulations restricting dividend payments by bank holding
companies other than state corporation law, supervisory concern
focuses on the holding company's capital position, its ability to meet its
financial obligations as they come due and the capacity to act as a
source of financial strength to its subsidiary banks.
<PAGE> 7
The FRB and the Superintendent have authority to prohibit a bank
from engaging in business practices which are considered to be unsafe
or unsound. Depending upon the financial condition of the Bank and
upon other factors, the FRB or Superintendent could assert that the
payments of dividends or other payments by the Bank to the Company
might be such an unsafe or unsound practice. Also, if the Bank were to
experience either significant loan losses or rapid growth in loans or
deposits, or some other event resulting in a depletion or deterioration
of the Bank's capital account were to occur, the Company might be
compelled by federal banking authorities to invest additional capital
in the Bank necessary to return the capital account to a satisfactory
level.
Impact of Economic Conditions and Monetary Policies. The earnings
___________________________________________________
and growth of the Company are and will be affected by general economic
conditions, both domestic and international, and by the monetary and
fiscal policies of the United States Government and its agencies,
particularly the FRB. One function of the FRB is to regulate the
national supply of bank credit in order to mitigate recessionary and
inflationary pressures. Among the instruments of monetary policy used
to implement those objectives are open market transactions in United
States Government securities and changes in the discount rate on member
bank borrowings. The monetary policies of the FRB have had a
significant effect on the operating results of commercial banks in the
past and are expected to continue to do so in the future. However, the
effect, if any, of such policies on the future business and earnings of
the Company cannot be accurately predicted.
Accounting Changes. In May 1993, the FASB issued Statement of
__________________
Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan as amended by SFAS No. 118. This
statement is applicable to all creditors and to all loans, uncollateralized as
well as collateralized, except large groups of smaller-balance homogeneous
loans that are collectively evaluated for impairment and loans that are
measured at fair value or at the lower of cost or fair value. The
statement also applies to all loans that are restructured in a troubled
debt restructuring involving a modification of terms. The statement
requires that impaired loans that are within the scope of this statement
be measured based on the present value of expected cash flows discounted
at the loan's effective interest rate, or as a practical expedient, at
the loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. The Company adopted this statement
effective January 1, 1995. The Company does not expect that the adoption
of the accounting prescribed by this statement will have a material impact
on its financial position or results of operations.
In May 1993, the FASB issued Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt
and Equity Securities. This statement requires that investments in debt
and equity securities be classified as "held-to-maturity," "trading securities"
or "available -for-sale." It requires that investments classified as
held-to-maturity be reported at amortized cost, that investments classified as
trading securities be reported at fair value with unrealized gains and losses
<PAGE> 8
included in earnings and that investments classified as available-for-sale be
reported at fair value with unrealized gains and losses, net of related tax, if
any, reported as a separate component of stockholders' equity. The Company
adopted this statement effective January 1, 1994. This statement specifically
precludes retroactive application to prior years' financial statements.
As the Company generally holds its investments until maturity, the impact of
this accounting statement has been immaterial.
Legislation and Proposed Changes. From time to time, legislation
________________________________
is enacted which has the effect of increasing the cost of doing business,
limiting or expanding permissible activities or affecting the competitive
balance between banks and other financial institutions. Proposals to change
the laws and regulations governing the operations and taxation of banks, bank
holding companies and other financial institutions are frequently made in
Congress, in the California legislature and before various bank regulatory
agencies. No prediction can be made as to the likelihood of any major changes
or the impact such changes might have on the Company. Certain changes of
potential significance to the Company which have been enacted recently or
others which are currently under consideration by Congress or various
regulatory or professional agencies are discussed below.
Financial Institutions Reform, Recovery and Enforcement Act of 1989.
___________________________________________________________________
On August 9, 1989, President Bush signed into law the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA").
FIRREA contains provisions, which among other things: (1)
establish two separate financial industry insurance funds, both administered by
the FDIC - the Bank Insurance Fund and the Savings Association Fund; (2)
abolish the Federal Home Loan Bank Board and establish the Office of
Thrift Supervision as an office of the Treasury Department, with
responsibility for examination and supervision of all savings and loan
associations; (3) increase the insurance premiums paid by FDIC-insured
institutions; (4) permit bank holding companies to acquire healthy
savings and loan associations; (5) enhance federal banking agencies'
enforcement authority over the operations of all insured depository
institutions and increase the civil and criminal penalties that may be
imposed in connection with violations of laws and regulations; (6)
curtail investments and certain activities of state-chartered savings
and loan associations; and (7) increase the capital requirements of
savings and loan associations. Management of the Company does not
believe that the provisions of FIRREA have had or will have a material
adverse impact on the Company's consolidated financial position or
results of operations.
Competitive Equality Banking Act. The Competitive Equality
________________________________
Banking Act of 1987 contained provisions which, among other
things: (1) permanently closed the loophole which formerly
allowed for the creation of "non-bank banks"; (2) limited the restrictions
imposed on banks on the availability of funds deposited by check; and (3)
provided explicit leasing authority for national banks. The enactment
of this legislation has not had a material adverse effect on the
Company's consolidated financial condition or results of operations.
Interstate Banking. In September, 1986, California adopted an
__________________
interstate banking law. The law allows California banks and bank
holding companies to be acquired by banking organizations in other
states on a reciprocal basis (i.e., provided the other state's laws
permit California banking organizations to acquire banking
organizations in that state on substantially the same terms and
conditions applicable to banking organizations solely within that
state). The law took effect in two stages. The first stage, which
<PAGE> 9
became effective July 1, 1987, allowed acquisitions on a reciprocal
basis within a region consisting of all 11 states (Alaska, Arizona,
Colorado, Hawaii, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and
Washington) which currently permit acquisitions by California banking
organizations of banks and bank holding companies in such states.
The second stage, which became effective January 1, 1991, allows
interstate acquisitions on a national reciprocal basis. The Company
believes that this legislation will further increase competition as
out-of-state financial institutions enter the California market.
Capital Adequacy Guidelines. The FRB has issued capital adequacy
___________________________
guidelines establishing a risk-based capital framework consisting
of a definition of capital comprised of a core component (essentially
shareholders' equity less goodwill) ("Tier 1 capital"), a supplementary
component ("Tier 2 capital"), a system for assigning assets & off-
balance sheet items to four weighted risk categories (with higher
levels of capital being required for the categories being perceived as
representing greater credit risk ) and a schedule for achieving a
minimum risk-based capital ratio of 7.25% by the end of 1990
(which at least 3.625% should be in the form of common shareholders'
equity) and 8% by the end of 1992 (which at least 4% should be in the form of
common shareholders' equity). An institution's risk-based capital
would be determined by dividing its qualifying capital by its
risk - weighted assets.
The guidelines make regulatory capital requirements more sensitive
to the differences in risk profiles among banking institutions, take
off-balance sheet items into account when assessing capital adequacy
and minimize disincentives to holding liquid low-risk assets. In
addition, the guidelines may require some banking institutions to
increase the level of their common shareholders' equity. It is not
anticipated that the guidelines will have a material adverse effect on
the Company's financial condition or results of operations over the
short term. At the end of 1994, the guidelines provided for a minimum
risk-based capital ratio of 8%, and this provision may limit the
Company's ability to increase its assets or require the Company to
raise additional equity to facilitate growth.
On August 2, 1990, the FRB adopted standards for compliance by
banking organizations with risk-based capital guidelines to include a
minimum leverage ratio of 3% of Tier 1 capital to total average assets
(the "leverage ratio") based upon the definition of Tier 1 capital for 1994.
The FRB emphasized that the leverage ratio constitutes a minimum
requirement for well-run banking organizations having diversified risk,
including no undue interest rate risk exposure, excellent asset
quality, high liquidity, good earnings and a favorable composite rating
under the applicable regulatory rating system. Banking organizations
experiencing or anticipating significant growth, as well as those
organizations which do not exhibit the characteristics of a strong
well-run banking organization described above, will be required to
maintain minimum capital ranging from 100 to 200 basis points in excess
of the leverage ratio.
<PAGE> 10
The FRB leverage ratio establishes a new limit on the
ability of banking organizations to increase assets and liabilities without
increasing capital proportionately. In management's opinion, the
leverage ratio will have no material effect on its capital needs
in the foreseeable future. The Bank's leverage ratio at December 31,
1994 was 10.4% (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Capital Adequacy" under Item #8).
EMPLOYEES
_________
On December 31, 1994 the Bank employed 31 full time employees
and 3 part time employees for a total equivalent of 32.7 full
time employees. At the present time there are no salaried employees
of the Company.
STATISTICAL DATA
________________
The following statistical data relating to the Company should
be read in conjunction with the Consolidated Financial Statements
which are included elsewhere in this 10-K Annual Report.
<PAGE> 11
Distribution of Assets, Liabilities and Shareholders' Equity
____________________________________________________________
The following table summarizes the distribution, by amount (in thousands) and
percentage of the daily average assets, liabilities, and shareholders' equity of
Summit Bancshares, Inc. (consolidated) for the year ended December 31, 1994.
Comparative figures for the years ended December 31, 1993 and 1992, are also
provided:
<TABLE>
<CAPTION>
ASSETS 1994 1993 1992
______ ____ ____ ____
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
______ __________ ______ __________ ______ __________
<S> <C> <C> <C> <C> <C> <C>
Cash and Due
From Banks $ 6,118 7.92% $ 6,108 7.65% $ 6,476 8.65%
Time Deposits with Other
Financial Institutions 10,487 13.57 12,650 15.84 6,093 8.14
Investment
Securities:
Taxable 3,649 4.72 2,276 2.85 200 .27
Non-taxable 497 0 0 4,214 5.63
Federal Funds .64
Sold 3,560 4.61 5,923 7.42 4,313 5.76
Loans, Net 48,975 63.40 49,888 62.48 51,674 69.03
Other Assets 3,970 5.14 3,002 3.76 1,884 2.52
------- ------ ------- ------ ------- ------
TOTAL ASSETS $77,256 100.00% $79,847 100.00% $74,854 100.00%
======= ====== ======= ====== ======= ======
LIABILITIES & SHAREHOLDERS' EQUITY
__________________________________
Deposits:
Demand $18,883 24.44% $17,740 22.21% $15,719 21.00%
Interest bearing
transaction accounts 29,719 38.47 31,705 39.71 25,351 33.87
Savings 3,189 4.13 3,259 4.08 2,944 3.93
Time 15,090 19.53 17,110 21.43 21,692 28.98
Other Liabilities 338 .44 623 .78 482 .64
Shareholders' Equity 10,037 12.99 9,410 11.79 8,666 11.58
------- ------ ------ ----- ------- ------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $77,256 100.00% $79,847 100.00% $74,854 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
<PAGE> 12
The following is an analysis of Net Interest Income for 1994.
Comparative figures for 1993 and 1992 are also presented on the
following pages. Non-accrual loans are included in the average
balances. Balances are expressed in thousands of dollars.
<TABLE>
<CAPTION>
For the year ended December 31, 1994
____________________________________
Interest Rates
Average Income/ Earned/
Balance Expense Paid
ASSETS _______ ________ _______
------
<S> <C> <C> <C>
Time Deposits with Other
Financial Institutions $10,487 $ 410 3.91 %
Investment Securities (footnote #1) 4,146 212 5.11
Federal Funds Sold 3,560 159 4.47
Loans (Interest and Fees) 48,975 5,044 * 10.12
------ -----
Total Earning Assets $67,168 $5,825 8.67 %
===== =====
Cash and Due from Banks 6,118
Premises and Equipment 923
Other Assets 3,047
------
TOTAL ASSETS $77,256
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $18,883 $ --- --- %
Savings 3,189 64 2.01
Interest-bearing Transaction 29,719 607 2.04
Time 15,090 477 3.16
------ ------
Total Deposits $66,881 $ 1,148 1.72 %
====== =====
Other Liabilities 338
Shareholders' Equity 10,037
------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $77,256
======
AS A PERCENTAGE OF AVERAGE
TOTAL EARNING ASSETS:
Interest and Fee Income $ 5,825
Interest Expense 1,148
------
NET INTEREST INCOME AND MARGIN $ 4,677 6.96 %
====== =====
</TABLE>
*Includes loan fees of $490,000
1.) Investment income rate is not calculated on a tax equivalent basis.
<PAGE> 13
<TABLE>
<CAPTION>
For the year ended December 31, 1993
____________________________________
Interest Rates
Average Income/ Earned/
Balance Expense Paid
ASSETS _______ ________ _______
______
<S> <C> <C> <C>
Time Deposits with Other
Financial Institutions $12,650 $ 455 3.60 %
Investment Securities (footnote #1) 2,276 74 3.25
Federal Funds Sold 5,923 171 2.89
Loans (Interest and Fees) 49,888 4,858 * 9.73
------ -----
Total Earning Assets $70,737 $5,558 7.86 %
===== =====
Cash and Due from Banks 6,108
Premises and Equipment 1,054
Other Assets 1,948
------
TOTAL ASSETS $79,847
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $17,740 $ --- --- %
Savings 3,259 75 2.30
Interest-bearing Transaction 31,705 720 2.27
Time 17,110 523 3.06
------ ------
Total Deposits $69,814 $ 1,318 1.89 %
====== =====
Other Liabilities 623
Shareholders' Equity 9,410
------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $79,847
======
AS A PERCENTAGE OF AVERAGE
TOTAL EARNING ASSETS:
Interest and Fee Income $ 5,558
Interest Expense 1,318
------
NET INTEREST INCOME AND MARGIN $ 4,240 5.99 %
====== =====
</TABLE>
*Includes loan fees of $596,000
1.) Investment income rate is not calculated on a tax equivalent basis.
<PAGE> 14
<TABLE>
<CAPTION>
For the year ended December 31, 1992
____________________________________
Interest Rates
Average Income/ Earned/
Balance Expense Paid
ASSETS _______ ________ _______
------
<S> <C> <C> <C>
Time Deposits with Other
Financial Institutions $ 6,093 $ 270 4.43 %
Investment Securities (footnote #1) 4,414 191 4.33
Federal Funds Sold 4,313 132 3.06
Loans (Interest and Fees) 51,674 5,238 * 10.14
------ -----
Total Earning Assets $66,494 $5,831 8.77 %
===== =====
Cash and Due from Banks 6,476
Premises and Equipment 754
Other Assets 1,130
------
TOTAL ASSETS $74,854
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $15,719 $ --- --- %
Savings 2,944 91 3.09
Interest-bearing Transaction 25,351 786 3.10
Time 21,692 875 4.03
------ ------
Total Deposits $65,706 $ 1,752 2.67 %
====== =====
Other Liabilities 482
Shareholders' Equity 8,666
------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $74,854
======
AS A PERCENTAGE OF AVERAGE
TOTAL EARNING ASSETS:
Interest and Fee Income $ 5,831
Interest Expense 1,752
------
NET INTEREST INCOME AND MARGIN $ 4,079 6.13 %
====== =====
</TABLE>
*Includes loan fees of $630,000
1.) Investment income rate is not calculated on a tax equivalent
basis.
<PAGE> 15
Following is an analysis of changes in Interest Income and Expense
(in thousands of dollars) for 1994 over 1993. A similar comparison
for 1993 over 1992 is on the following page. Changes not solely attributed
to volume or rates have been allocated proportionately to volume and rate
components.
<TABLE>
<CAPTION>
1994 over 1993
INCREASE (DECREASE) IN ______________
INTEREST AND FEE INCOME Volume Rate Total
_______________________ ______ ____ _____
<S> <C> <C> <C>
Time Deposits with Other
Financial Institutions $(82) $ 37 $ (45)
Investment Securities 89 49 138
Federal Funds Sold (84) 72 (12)
Loans, Net (64) 250 186
--- ---- ----
Total Increase in
Interest and Fee Income (141) 408 267
--- ---- ----
INCREASE IN
INTEREST EXPENSE
________________
Savings Deposits (2) (9) (11)
Interest-bearing Transaction (43) (70) (113)
Time Deposits (63) 17 (46)
---- ---- -----
Total Increase in
Interest Expense (108) (62) (170)
--- ------ -----
INCREASE IN
NET INTEREST INCOME $(33) $ 470 $ 437
=== ==== ====
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
1993 over 1992
INCREASE (DECREASE) IN ______________
INTEREST AND FEE INCOME Volume Rate Total
_______________________ ______ ____ _____
<S> <C> <C> <C>
Time Deposits with Other
Financial Institutions $244 $ (59) $ 185
Investment Securities (77) (40) (117)
Federal Funds Sold 47 ( 8) 39
Loans, Net (175) (205) (380)
--- ----- -----
Total Increase in
Interest and Fee Income 38 (311) (273)
--- ----- -----
INCREASE IN
INTEREST EXPENSE
________________
Savings Deposits 9 (25) (16)
Interest-bearing Transaction 172 (238) 66
Time Deposits (165) (187) (352)
---- ----- -----
Total Increase in
Interest Expense 16 (450) (434)
--- ----- -----
INCREASE IN
NET INTEREST INCOME $ 22 $ 139 $ 161
=== ==== ====
</TABLE>
<PAGE> 17
INVESTMENT SECURITIES
_____________________
The following table sets forth the book value as of December 31 for the
securities indicated:
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
U. S. Treasury
Securities $ 8,981,172 $693,613 $ 198,251
Obligations of
States and
Political
Subdivisions 1,343,820 4,900 3,013,343
----------- -------- ---------
TOTAL $10,324,902 $698,513 $3,211,594
=========== ======== =========
</TABLE>
The increase or decrease in municipal bonds in 1994, 1993 and 1992 was brought
about by by a corresponding increase or decrease in interest rates in the
marketplace. The amortized cost and estimated fair values of investment in debt
securties for 1994 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
____ _____ ______ _____
U.S. Treasury
securities $ 8,981,172 $ 0 $103,445 $ 8,877,727
Obligations of
states and political
subdivisions 1,343,820 0 2,913 1,340,907
_______________________________________________________________________________
TOTAL $10,324,992 $ 0 $106,358 $10,218,634
_______________________________________________________________________________
The amortized cost and estimated market value of debt securities at December 31,
1994 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
____ _____
<S> <C> <C>
Due in one year or less $ 5,338,285 $4,865,740
Due after one year through
five years 4,986,707 5,352,894
$10,324,992 $10,218,634
========== ==========
</TABLE>
There were no sales of investments in debt securities during 1994.
<PAGE> 18
The following table is a summary of the relative maturities and yields of
Summit Bancshares, Inc. investment securities as of December 31, 1994 and 1993.
Yields on securities have been computed by dividing interest income, adjusted
for amortization of premium and accretion of discount, by book values of the
related securities. Investment yield is not calculated on a tax equivalent
basis.
<TABLE>
<CAPTION>
Maturing Maturing After One
Within One Year Through Five Years Total
_______________ __________________ _____
Amount Yield Amount Yield Amount Yield
______ _____ ______ _____ ______ _____
December 31, 1994
_________________
<S> <C> <C> <C> <C> <C> <C>
U. S. Treasury
Security $3,999,365 5.64% $4,981,807 6.36% $ 8,981,172 6.06%
States and
Political Sub-
divisions 1,338,920 4.65 4,900 10.14 1,343,820 4.67%
_________ _____ _________ _____ _________ ____
TOTAL $5,338,285 5.40% $4,986,707 6.39% $10,324,992 5.88%
========= ===== ========= ===== ========== ====
December 31, 1993
_________________
U. S. Treasury
Security $693,613 3.54% $ 0 0% $693,613 3.54%
States and
Political Sub-
divisions 0 0 4,900 10.10 4,900 10.10%
________ _____ ______ _____ ________ _____
TOTAL $693,613 3.54% $4,900 10.10% $698,513 3.55%
========= ===== ====== ===== ======== ====
</TABLE>
<PAGE> 19
LOAN PORTFOLIO
______________
Composition of Loans
____________________
The following table shows the composition of loans (in thousands
of dollars) of Summit Bancshares, Inc. as of December 31 for each
respective year designated.
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Commercial and
Financial $30,355 $30,928 $30,102
Real Estate, Including
Construction 10,695 12,501 12,663
Installment 6,450 7,646 9,923
Leases 132 219 306
------ ------ ------
47,632 51,294 52,994
Less Unearned Income (9) (25) (48)
Less Reserve for
Possible Loan Losses (932) (728) (899)
------ ------ ------
TOTAL $46,691 $50,541 $52,047
====== ====== ======
</TABLE>
MATURITY, DISTRIBUTION AND INTEREST RATE
________________________________________
SENSITIVITY OF LOANS
____________________
The following table shows the maturity distribution of loans
(in thousands of dollars) as of December 31, 1994.
<TABLE>
<CAPTION>
Loans with a Maturity of
_____ ____ _ ________ __
One Year One through Over Five
or Less Five Years Years Total
__ ____ ____ _____ _____ _____
<S> <C> <C> <C> <C>
Commercial and
Financial $18,378 $9,296 $2,681 $30,355
Real Estate
Construction 3,882 275 0 4,157
------ ----- ----- ------
TOTAL $23,815 $9,571 $2,681 $34,512
====== ===== ===== ======
</TABLE>
All but one loan for $12,540 reported above which have maturities of
over one year are at floating interest rates.
<PAGE> 20
Commitments and Lines of Credit
___________ ___ _____ __ ______
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the statement of financial position. The contract amount
of those instruments reflects the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
<TABLE>
<CAPTION>
Contract Amount
________ ______
<S> <C>
Financial instruments whose contract
amount represents credit risk:
Commitments to extend credit in the future $13,904,287
Standby letters of credit 991,600
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the
Company upon extension of credit is based on management's credit
evaluation of the counter-party. Collateral held varies but may include
accounts receivable, inventory, property, plant, and equipment, and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Most all guarantees expire within a 1 year. The credit risk involved in
issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers.
A part of the subsidiary Bank's marketing strategy is to offer quality
financial services to the professional and small business communities. The
Company has been especially successful in targeting health care professionals.
This segment has traditionally provided high levels of deposits and low loan
losses.
While approximately 20% of the Company's loans are concentrated
with health care professionals, the Bank has had only two charge-offs
totalling $133,206 since it was founded in 1982.
<PAGE> 21
NON-PERFORMING LOANS AND
______________ _____ ___
SUMMARY OF LOAN LOSS EXPERIENCE
_______ __ ____ ____ __________
(In thousands of dollars)
<TABLE>
<CAPTION>
Dec. 31, 1994 Dec. 31, 1993 Dec.31, 1992
_____________ _____________ ____________
<S> <C> <C> <C>
Non-accrual loans $ 572 $ 966 $ 686
90 days past due but
still accruing 207 4 212
------ ------ -----
Total non-accrual
and 90 days past
due loans 779 970 898
Other real estate owned 2,866 1,509 0
----- ------ -----
Total Non-performing
assets $3,645 $2,479 $898
====== ====== ======
</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.
The increase in non-performing assets from 12-31-93 to 12-31-94
is due primarily to an increase in other real estate owned (OREO), which
consists of 6 properties. Of the total OREO amount, $2,509,000 is
related to two properties. One of the properties is a single family
residence and is currently in escrow with a estimated closing date in the
second quarter. The Bank estimates a $50,000 loss on the property due to
extensive water damage to the structure which was not attended to over
the years. The second property is two continguous parcels in the
Danville/Diablo Mountain area of Alameda County. These two parcels are
currently on the market for sale. In addition, two other properties are
also in escrow which should also close in the second quarter. Once all
escrows close, the OREO amount should be reduced to under $1,200,000.
The remaining property in OREO is in the process of being sold with no
loss anticipated.
Regarding the $572,000 placed on non-accrual status, this amount
represents loans to three borrowers, of which one loan is $6,500 and has
subsequently reduced to $3,500. Of the remaining two loans, one is
secured by a single family dwelling and the other is partially secured by
vacant land in the Oakland Hills.
<PAGE> 22
The allowance for loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably anticipated. The
reserve is increased by provisions and reduced by net charge-offs. The
Bank makes credit reviews of the loan portfolio, considers current
economic conditions, loan loss experience, and other factors in determining
the adequacy of the reserve balance. The allowance for
loan losses is based on estimates and ultimate losses may vary from
current estimates. As adjustments become necessary, they are reported in
earnings in the periods in which they become known.
Any loans classified for regulatory purposes as loss,
doubtful, substandard, or special mention that have not been disclosed
under Item III of Industry Guide 3 do not (i) represent or result from
trends or uncertainties which management reasonably expects will materially
impact future operating results, liquidity or capital resources, or (ii)
represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment program.
<PAGE> 23
An analysis of activity in the allowance for loan losses for the
years ended December 31 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Balance at beginning
of period $728,353 $899,083 $869,863
------- ------- -------
Provision for possible
loan losses 670,000 430,800 180,000
------- ------- -------
Loan charged off
Commercial 262,005 552,274 150,858
Real Estate Construction 0 0 0
Installment 255,850 64,850 9,606
_______ _______ _______
Total chargeofffs 517,855 617,124 160,464
------- ------- -------
Recoveries
Commercial 47,500 12,594 5,934
Real Estate Construction 0 0 0
Installment 3,880 3,000 3,750
______ ______ _____
Total recoveries 51,380 15,594 9,684
------ ------ ------
Net chargeoffs 466,475 601,530 150,780
------- ------- -------
Balance at end of
period $931,878 $728,353 $899,083
======== ======= =======
Ratio of net charge-
offs to average
loans outstanding .95% 1.20% 0.29%
==== ==== ====
</TABLE>
Although it cannot be accurately predicted, it is estimated that in
1995, Loan Losses in the Commercial loan category may approximate $315,000
while losses in the Instalment loan category may approximate $51,000. No
losses are anticipated in the Real Estate Loan category.
Allocations for Loan Loss Reserves for the next two years are as follows:
<TABLE>
<CAPTION>
1995
<S> <C>
Commercial Loans $485,353
Real Estate Loans 316,525
Installment Loans 130,000
________
$931,878
========
1996
Commercial Loans $ 621,000
Real Estate Loans 410,000
Installment Loans 135,000
_______
$1,166,000
========
</TABLE>
<PAGE> 24
TIME DEPOSITS IN THE AMOUNT OF $100,00 AND OVER
____ ________ __ ___ ______ __ _______ ___ ____
The following table sets forth by time remaining to maturity, Summit Bank's
issuance of time deposits in the amount of $100,000 or more (in thousands
of dollars) as of December 31 of the respective year designated:
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
Amount Percentage Amount Percentage Amount Percentage
<S> <C> <C> <C> <C> <C> <C>
3 months or less $ 7,362 71.7% $ 7,472 74.3% $ 7,664 63.4%
Over 3 through
6 months 1,015 9.9 1,150 10.0 3,539 29.3
Over 6 through
12 months 1,891 18.4 1,651 14.4 884 7.3
Over 12 months 0 0 150 1.3 0 0
------ ----- ------ ----- ------ -----
TOTAL $10,268 100.0% $10,423 100.0% $12,087 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
RETURN ON EQUITY AND ASSETS
___________________________
The following table shows key financial ratios for the years
ending December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Return on average assets 1.17% 1.06% 1.09%
Return on average shareholders'
equity 9.04% 9.00% 9.38%
Dividend payout ratio 22.39% 11.87% 13.32%
Average shareholders' equity
as a percent of:
Average Assets 12.99% 11.78% 11.58%
Average Deposits 15.01% 13.49% 13.19%
</TABLE>
<PAGE> 25
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
________ ____ ____________________ ____ ____ ________
The following table provides an interest rate sensitivity and
interest rate risk analysis for the year ended 1994. 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> 26
<TABLE>
<CAPTION>
INTEREST RATE RISK REPORTING SCHEDULE
REPORTING INSTITUTION: SUMMIT BANK REPORTING DATE: 12/31/94
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 $5,746 $5,746 $0 $0 $0 $0 $0
2. SECURITIES (INCL TRADING)
a) NON-AMORTIZING $17,364 $5,247 $7,130 $4,987 $0 $0 $0
b) DEEP DISC COUPONS $0
c) HIGH RISK MORT. SEC. $0
3. FED FUNDS SOLD & SEC $3,500 $3,500 $0 $0 $0 $0 $0
SOLD FOR RESALE $0
4. LOANS, LEASES & ACCEPT.
a) AMORTIZING $19,249 $1,337 $3,163 $9,188 $5,561 $0 $0
b) NON-AMORTIZING $28,020 $5,269 $13,626 $6,404 $2,721 $0 $0
5. TOTAL INT BEARG. ASSETS $68,133 $21,099 $23,919 $20,579 $8,282 $0 $0
6. LOAN LOSS PROVISION ($932)
II. ALL OTHER ASSETS $4,672
III. TOTAL ASSETS $77,619
IV. INTEREST-BEARING LIABILITIES
1. INTEREST-BEARING DEPOSITS
a) NOW ACCOUNTS $6,149 $0 $4,304 $1,845 $0 $0 $0
b) MMDA ACCOUNTS $22,733 $0 $15,913 $6,820 $0 $0 $0
c) SAVINGS $3,109 $0 $0 $2,176 $933 $0 $0
d) TIME DEPOSITS $14,864 $9,871 $4,776 $217 $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. $46,855 $9,871 $24,993 $11,058 $933 $0 $0
V. NONINTEREST-BEARING LIAB.
1. DEMAND DEPOSITS $22,469 $3,370 $12,358 $6,741
2. OTHER LIABILITIES $218
VI. TOTAL LIABILITIES $69,542
VII. EQUITY CAPITAL $8,077
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> 27
<TABLE>
<CAPTION>
INTEREST RATE RISK WEIGHTING CALCULATIONS
(12-31-94)
BALANCE SHEET SUMMARY REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
(FROM REPORTING SCHEDULE)
<C> <S> <C> <C> <C> <C> <C> <S><C> <C>
UP > 3 >1 > 3Y > 7 YRS OVER
TOT 3 <= 1 <=3 Y <= 7Y <=15 YRS 15 YRS
I. TOTAL ASSETS (EXC.CASH & DUE) $72,805
2. OTHER ASSETS &
HIGH RISK SEC. EVALU $4,672
3. TOTAL INT-BEARG ASSETS. $68,133 $15,353 $23,919 $20,579 $8,282 $0 $0
4. AMORT ASSETS. $19,249 $1,337 $3,163 $9,188 $5,561 $0 $0
5. NON-AMORT ASSETS $48,884 $14,016 $20,756 $11,391 $2,721 $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 $69,542
9. OTHER LIAB. & DDA $22,687 $3,370 $12,358 $6,741 $0 $0 $0
10. INT-BEARG LIAB. $46,855 $9,871 $24,993 $11,058 $933 $0 $0
11. NET WORTH (GAP) $3,263 $2,112 ($13,432) $2,780 $7,349 $0 $0
12. OFF BAL SHEET POSITIONS
13. AMORT OBS ITEMS: $0 $0 $0 $0 $0 $0 $0
14. NON-AMORT OBS ITEMS $865 $0 $865 $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 $195.28 $1.07 $9.49 $73.50 $111.22 $0.00 $0.00
20. WEIGHTED NON-AMORT. ASSETS $435.08 $16.82 $114.16 $199.34 $104.76 $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: $630.36 $17.89 $123.65 $272.85 $215.98 $0.00 $0.00
24. TOTAL RISK WEIGHTED LIABILITIES $386.59 $11.85 $137.46 $199.04 $38.24 $0.00 $0.00
25. RISK WEIGHTED OFF-BAL SHEET $2.60 $0.00 $2.60 $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 $246.36 $6.04 ($11.22) $73.80 $177.74 $0.00 $0.00
IRR MEASUREMENT
NET RISK WEIGHTED POSITION AS A PERCENT OF ASSETS = 0.34% = LEVEL OF IRR
PROPOSED REGULATION F = 1 = PROPOSED TARGET
</TABLE>
<PAGE> 28
ITEM 2. PROPERTIES
When the Bank first entered into its initial lease agreement
it signed a ten-year lease which commenced September 1, 1981 (with
options to extend the lease on the same terms and conditions for
two additional five-year periods). This space housed the permanent
Head Offices for the Bank and the Company at 2969 Broadway, Oakland,
California 94611 at the intersection of Broadway and 30th Street in
the "Pill Hill" area. The premises consisted of approximately 3,800
square feet located in a portion of a single story building on the
southwest corner at the intersection. The Bank spent approximately
$388,448 on leasehold improvements at this location. Improvements
consisted of a complete remodeling of the facility, including a new
roof, new facade, new floor, partitions and structural improvements.
In September, 1987 the Bank entered into an additional ten year
lease for 6,010 sq. ft. adjacent to its location in Oakland. The Bank
utilizes approximately 2,900 sq. ft. of this new area. The Bank's cost
of leasehold improvements in this new location was approximately
$294,000. Improvements consisted of a complete remodeling of the
facility, including a new facade, new floor, partitions and structural
improvements. The initial lease in the above paragraph has expired
and has been rolled into this new lease. The current monthly rent for
the entire 9,810 sq. ft. is $5,123.00 subject to yearly CPI adjustments.
Commencing on December 1, 1984, the Bank leased 720 square feet of
office space in a new building at 112 La Casa Via in Walnut Creek,
California. This location housed the Bank's initial branch office.
The building was fully serviced and the base rental was $1,274 per month
subject to cost-of-living adjustments on the anniversary of each rental
year. Necessary leasehold improvements were completed within the landlord's
authorized allowance. The term of this lease expired on November 30, 1989,
however, the Bank negotiated a month to month lease pending its move to
new quarters in September, 1990. Monthly rent was $1,502.83.
In September, 1989, the Bank entered into a new lease for 1,500 sq. ft.
of office space located at the corner of No. Main Street and Civic Drive
in downtown Walnut Creek. This new location is twice the physical size
of the old location and is closer to the financial district of Walnut Creek.
The Bank moved into this new location in September, 1990. The new lease is
for a term of 12 years commencing November 1, 1989 and terminates January
14, 2001. The Bank's cost for leasehold improvement in this new location
was approximately $210,000. Improvements consisted of a complete remodeling
of the facility, including enclosing an existing drive through facility,
partitions and structural improvements. The lease provides for a monthly
rent of $4,769.80, fixed for 12 years and beginning January 1, 1991.
The Emeryville Branch began operations in December, 1985 on the
ground floor of the Watergate III Building at 2000 Powell Street. The
Bank currently occupies approximately 2,200 square feet of space at this
location, at a base rent of $2.00 per net rentable square foot ($4,390
per month). The term of this lease expired August 31, 1992 with two
successive options to extend the lease by one three year option and one
five year option. The Bank renewed the lease at a base rent of $1.95
per net rentable square foot ($4,329 per month) with two three year options
effective 1-1-93.
<PAGE> 29
In September, 1990 the Company purchased two contiguous parcels
totaling 10,000 sq. ft. adjacent to the Bank's Walnut Creek Office for a
price of $544,644. Included on one of the parcels is a single story,
2,500 sq. ft. concrete block building suitable for a restaurant. The
Company entered into a five year lease on April 1, 1991 with an
individual who operates a Japanese restaurant at this location for a
monthly rent of $4,350, triple net commencing April 1, 1992. The leasee
in turn made improvements to the building to bring it to today's standards.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is a party to claims and legal
proceedings arising in the ordinary course of business. Currently, the
Company has no outstanding suits brought against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
__________ __ _______ __ _ ____ __ ________ _______
Neither the Company nor the Bank submitted any matter covered by
this report to a vote of security holders, through the solicitation
of proxies or otherwise, during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF SUMMIT BANCSHARES, INC.
_________ ________ __ ______ __________ ___
Pursuant to General Instruction G(3), the information required by
Item 401(b) and (e) of Regulation S-K concerning executive officers of
the Company and the Bank is presented here rather than in the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held
on April 19, 1995.
The following individuals are the executive officers of the Company
as of February 28, 1995:
Name Age Position Since
Shirley W. Nelson 53 Chairman and Chief 1982
Executive Officer
George H. Hollidge 51 Secretary 1981
Kikuo Nakahara 62 Chief Financial 1985
Officer
The following individuals are the executive officers of the
Bank as of February 28, 1995:
Name Age Position Since
Shirley W. Nelson 53 Chairman, Chief 1982
Executive Officer
and President
C. Michael Ziemann 50 CFO and Cashier 1987
<PAGE> 30
Denise Dodini Senior Vice 1994
President
The business experience of the executive officers follows:
Shirley W. Nelson was President and Chief Executive Officer of the
Bank and Holding Company since May, 1983 and was elected in July, 1989
to the position of Chairman. Prior to this assignment she was the Senior
Vice President, Senior Loan Officer. She is currently a member of the
Board of Directors' Audit Commitee, Asset and Liability Committee, Loan
Committee, and Personnel Committee.
Kikuo Nakahara is Managing Director of IDS Tax and Business
Services, a division of IDS Financial Services Inc. Prior to this
positon he was a partner of Greene & Nakahara, an accounting firm
in Walnut Creek since 1993, and which merged with IDS Financial
Services Inc. in 1994. From 1978 to 1993 he was managing Director
of Greene, Nakahara and Lew Accountancy Corporation in Oakland.
He is a corporate member of Blue Shield and a speaker at continuing
education courses sponsored by the California Society of Certified
Public Accountants.
George H. Hollidge has been President of Hollidge Transmissions,
Inc., Oakland, transmission specialists, since 1980. Prior to 1980,
Mr. Hollidge was a partner in Hollidge Hydramatic, transmission specialists.
C. Michael Ziemann has been CFO and Cashier since April 1987.
Prior to that he was active in the administration of the Bank and
was the manager of the Bank's Walnut Creek Office since April 1985.
Prior to joining the Bank, he held various positions during his 16
years with Bank of America in operations, branch management, and
regional administration where he was a district administrator.
Denise Dodini has been the Senior Vice President - Senior Loan
Officer at the Bank since July, 1994. Prior to joining the Bank,
Denise had fifteen years of Banking experience with Bank of America,
where she was involved in consumer, commercial, real estate, and
corporate lending. Denise joined the Bank in October, 1989 as a
Vice President, Loan Officer where she assisted clients in the
Oakland Office.
PART II
_______
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
____________________________________________________
SECURITY HOLDER MATTERS
_______________________
(a) MARKET INFORMATION. The stock of the Company is not listed
__________________
on any stock exchange but is publicly traded in limited and infrequent
transactions in the "over the counter" market. According to information
made available to the Company by the Market Maker, Marc F.Arnett,
Hoefer & Arnett, Investment Bankers, 100 Pine Street, San Francisco, CA.,
the range of high and low bids for such common stock for each calendar quarter
since January 1993 is as follows:
<PAGE> 31
<TABLE>
<CAPTION>
Dividends
High Low Declared
____ ___ _________
1994
<S> <C> <C> <C>
First Quarter...... $14 1/4 $13 --- $ ---
Second Quarter..... 16 3/4 16 --- .12
Third Quarter...... 17 3/4 16 1/2 .25
Fourth Quarter..... 25 --- 18 1/2 .12
_____
$ .49
=====
1993
First Quarter...... $13 1/2 $13 --- $ ---
Second Quarter..... 13 1/2 13 --- .12
Third Quarter...... 13 1/2 13 --- ---
Fourth Quarter..... 14 1/4 12 3/4 .12
_____
$ .24
=====
</TABLE>
As of February 28, 1995, there were 425,559 shares of common stock of the
Company issued.
(b) SHAREHOLDERS. As of February 28, 1995, there were 346 shareholders
____________
of the common stock. There were no other classes of securities outstanding.
(c) DIVIDENDS. On June 8, 1994 and December 8, 1994 the Company
_________
paid a 12 cent per share cash dividend. On August 26, 1994 the Company
also paid a special 25 cent per share cash dividend . It is the present
intention of the Company to issue semi-annual cash dividends so long as
said dividends do not inhibit future development. Additionally, payment
of cash dividends by the Company is dependent upon payment of
dividends by the Bank to the Company. Payment of cash dividends by the
Bank may under certain circumstances require approval of the California
Superintendent of Banks, and as a matter of law, the Bank may
only declare cash dividends from the lesser of its retained earnings
or its undistributed net income from the last three years. In the event
that the Bank does not have retained earnings or net income for
the last three fiscal years, the Bank may declare dividends only with
the prior written consent of the Superintendent.
<PAGE> 32
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information of Summit Bancshares, Inc. for
the years from the period January 1, 1990 through December 31, 1994 should be
read in conjunction with the consolidated financial statements and the
accompanying notes included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
_____________________________________________________________________________________________________________
FOR THE YEAR ENDED 1994 1993 1992 1991 1990
___________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net Income $907,603 $846,771 $812,538 $1,016,324 $1,124,617
Per Common Share $2.09 $1.97 $1.76 $2.07 $2.14
Cash Dividends per Share, declared $0.49 $0.24 $0.24 $0.24 $0.24
AT YEAR END
(In Thousands)
Deposits $67,862 $70,462 $70,452 $62,554 $65,735
Loans (Net) 46,691 50,541 52,047 50,800 52,416
Assets 78,601 80,356 79,778 71,626 74,937
Shareholders' Equity 10,494 9,626 8,969 8,603 8,445
Non-performing Loans to Total Loans 1.66% 1.88% 1.29% 1.42% .65%
Allowance to Non-performing Loans 120% 75% 131% 119% 231%
Allowance to Non-performing Assets 26% 29% 131% 119% 231%
Tier 1 Capital 13.33% 11.55% 10.87% 9.92% 11.14%
Total Tier Capital 14.44% 12.66% 11.98% 11.02% 12.25%
Leverage Ratio 10.40% 8.95% 9.81% 8.96% 9.96%
</TABLE>
<PAGE> 33
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This section is a review of Summit Bancshares, Inc.'s resultsas
reflected in the Consolidated Financial Statements. It discusses
the principal items of income and expense and the factors affecting
the Company's financial position. This discussion should be read
together with the Selected Financial Data and Consolidated Financial
Statements included elsewhere in the Annual Report.
The Company's wholly owned subsidiary, Summit Bank (the "Bank"), has
conducted the business of a commercial bank since 1982. It provides
commercial credit and various checking and savings account products
for small and midsized businesses and professionals as well as individual
consumers.
SUMMARY OF EARNINGS
The Company's net income for 1994 was $908,000 compared to
$847,000 in 1993 and $813,000 in 1992. The increase in 1994
net income from 1993 is mainly attributed to an increase in net
interest margin. The increase in 1993 net income from 1992 is
attributed to an increase in average earning assets, a decrease
in the higher earning interest bearing time deposit accounts, and
a decrease in overall operating expenses. The net income of
$908,000 for 1994 represents $2.09 per share earnings, compared
to $1.97 per share in 1993 and $1.76 per share in 1992.
The Company adopted Statement of Financial Accounting Standards
No. 115 in the first quarter of 1994 and since the Company's adoption
of this provision it has had no impact on the Company's financial
position or results of operations.
NET INTEREST INCOME
The primary source of income for the Company is Net Interest Income or
"Gross Margin" which is the difference between interest earned on loans
and investments and interest paid on deposits and other liabilities.
In general, net interest income is affected by a change in interest
rates. As interest rates rise or fall, so will the Company's net
interest income, excluding changes in total assets. The primary
reasons for this is that the Company's investment portfolio earns income
on a fixed interest rate basis while a majority of the lending portfolio
earns income on a floating interest rate basis. In addition, all
investments are held to maturity and 52% of the investment portfolio
matures in one year. Regarding loans, approximately 61% of the loans
outstanding mature within one year, while the longest maturity is 5 years.
In a declining interest rate environment interest income on loans will
generally decline faster than the investment income and vice versa.
To offset any decline in interest income due to a declining interest rate
environment, the Company monitors closely its interest expense on deposits.
Of the total time certificates of deposit outstanding at year end, all but
<PAGE> 34
1% mature within one year while 62% mature within 90 days. Thus the
Company is able to minimize the effects of a declining interest rate
environment by repricing these instruments on a more frequent basis
than if the average maturity were longer than 1 year. Most economists
agree that interest rates may increase in the short term but should
stabilize for the remainder of the year, if not decline. As such,
net interest income should further increase in the short term and
could further improve with asset growth.
Net interest income for 1994 was $4,677,000, an increase of 10.3% over
the $4,240,000 posted in 1993, and as compared to $4,079,000 in 1992.
The increase in 1994 was primarily the result of an increase in the
average prime rate from 6.00% in 1993 to 7.14% in 1994. This increase
partially offset the effects of the decline in average earning assets
which decreased 5.5% from $71,785,000 in 1993 to $67,769,000 in 1994.
This decline was partly caused by a decline in average total deposits
which decreased 2.5% from $69,805,000 in 1993 to $68,022,000 in 1994.
This decrease was a reflection of the marketplace which saw higher
yielding treasury investments than standard bank investment products.
In addition, the decline in average earning assets was brought about
by a lack of quality credit requests in the marketplace.
The 1993 increase was primarily the result of an increase in average
earning assets to $71,785,000, 7.8% more than the $66,565,000 posted
in 1992, and a decrease in the average outstanding time certificates of
deposit accounts to $17,100,000, a 18.3% decrease from the $20,937,000
posted in 1992. Although average deposits increased 7.6% to $69,805,000
in 1993 from $64,850,000 in 1992, the increase was in lower cost accounts.
This decrease in deposit expense partially offset the decrease in the
average prime rate of .3% in 1993 versus 1992.
Average loans outstanding decreased by 2.8% in 1994 to $49,583,000 as
compared to $51,037,000 in 1993 and $51,775,000 in 1992. Average
outstanding investments decreased 12.3% to $18,186,000 in 1994 as
compared to $20,748,000 in 1993 and $14,790,000 in 1992. The
average loan to deposit ratio declined in 1994 to 72.9% as compared
to 73.1% in 1993 and 79.8% in 1992. The yield on average earning
assets was 8.6% in 1994 as compared to 7.7% in 1993 and 8.7% in
1992. The increase in 1994 was caused by the rise in the prime rate.
The decrease in 1993 was primarily caused by the decrease in the loan to
deposit ratio, the decrease in the average prime lending rate and more
earning assets being invested in the investment portfolio versus the lending
portfolio.
Interest expense decreased 12.9% to $1,148,000 in 1994 from $1,318,000
in 1993 and $1,753,000 in 1992. Average interest-bearing deposits
decreased 7.5% in 1994 to $48,140,000 as compared to $52,065,000
in 1993 and $49,986,000 in 1992 and were primarily centered in the less
expensive interest bearing accounts. Average non-interest bearing
deposits increased 6.4% in 1994 to $18,882,000 as compared to
$17,740,000 in 1993 and $15,719,000 in 1992. Overall cost of funds
in 1994 was 2.4% as compared to 2.5% in 1993 and 2.7% in 1992.
<PAGE> 35
NON-INTEREST INCOME AND EXPENSE
Non-interest income, consisting primarily of service charges on deposit
accounts, other customer fees and charges including rents and gain on
sale of other real estate owned, was $682,000 in 1994, up from $620,000
in 1993 and $522,000 in 1992. Total service charge income from deposit
accounts decreased by 4.5% from $374,000 in 1993 to $357,000 in 1994
while total income from other charges increased 32.1% from $246,000 in
1993 to $325,000 in 1994. This compares to 1992 figures of $329,000 in
deposit accounts income and $193,000 in income from other charges. The
deposit income decline in 1994 was primarily related to a reduction in
service charges related to return check charges which was $12,000 less than
1993 receipts. The increase in other income charges in 1994 was related to
sale of an other real estate owned property for a gain of $192,000.
The deposit income increase in 1993 was associated with an account analysis
program for business accounts instituted in late 1991, and service charges
related to check return fees. The increase in 1993 in other charges was
primarily related to increases from Visa/Mastercard merchant fees and gain
on sale of other real estate owned in the amount of $62,000.
Non-interest expenses increased 4.1% to $3,142,000 in 1994, from
$3,019,000 in 1993 and $3,126,000 in 1992. The increase in 1994
can be attributed to an increase in foreclosure and real estate
owned expense which increased from $7,000 in 1993 to $84,000 in 1994,
and was related to carrying costs on properties. Salary expense
increased 4.2% from $1,613,000 in 1993 to $1,681,000 in 1994 and
was due to normal staffing needs. In addition, legal expense increased
26.5% from the 1993 figure of $98,000 to $124,000 in 1994 and was related
to other real estate owned, pursuing charged-off loans, taking legal action
against those clients who had filed under bankruptcy protection and other
general legal related expenses. The decrease in non-interest expense in
1993 was attributed primarily to total salary and employee benefits
decreasing 5.3% from $1,703,000 in 1992 to $1,613,000 in 1993. In
addition, legal expenses decreased 36.8% from $155,000 in 1992 to $98,000 in
1993.
Occupancy and equipment expense increased slightly to $484,000 in 1994
from $480,000 in 1993 and decreased from $500,000 in 1992. The decrease
in 1993 was related to decreases in F & E depreciation and F & E repairs.
The Bank's allowance for loan losses as a percent of loans was
1.9% and 1.4% as of December 31, 1994 and 1993, respectively. The
average in the industry for banks our size is approximately 1.9%.
Total gross loans charged off in 1994 were $518,000 compared to
$617,000 in 1993 and $160,000 in 1992.
Operating expenses increased 5.6% to $977,000 in 1994 compared to
$925,000 in 1993 and $923,000 in 1992. Increases in legal expense
and foreclosure and REO expense was the primary reason for the increase
in 1994.
<PAGE> 36
PROVISION FOR INCOME TAXES
The provision for income taxes reflects a combined Federal and California
effective tax rate of 41.3% in 1994, compared to 40.2% in 1993 and 37.2%
in 1992 as described in Note 6 to the Financial Statements.
LIQUIDITY AND CAPITAL
Liquidity is defined as the ability to meet present and future obligations
either through the sale or maturity of existing assets or by the
acquisition of funds through liability management. Additionally, the
Bank's investment portfolio is managed to provide liquidity as well as
appropriate rates of return. It is the Bank's practice to hold
securities until maturity rather than actively trade its portfolio.
As of December 31, 1994 the Bank had $9,246,000 in cash and cash
equivalents compared to $10,387,000 as of December 31, 1993, and
$13,109,000 as of December 31, 1992. The ratio of net loans to deposits
as of December 31, 1994, was 68.8% compared to 71.7% as of December 31,
1993, and 73.9% as of December 31, 1992.
The Bank maintains a portion of its assets in loans and investments
with short-term maturities. More specifically, loans and investments
due within one year totaled $44,482,000 at December 31, 1994, as compared
to $54,915,000 at December 31, 1993, and $49,098,000 at December 31, 1992,
which is equivalent to 56.7%, 68.3%, and 61.5% of total assets at the
corresponding year ends, respectively.
During 1994, the Company repurchased 3,717 shares of its common stock
for a total price of $57,187. The Company plans to continue its repurchase
program as an additional avenue for liquidity for its shareholders as long
as it is economically appropriate to do so. 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 regulatory requirements.
CREDIT CONCENTRATION
A part of the subsidiary Bank's marketing strategy is to offer quality
financial services to the professional and small business communities.
The Bank has been especially successful in targeting health care
professionals. This segment has traditionally provided high levels
of deposits and low loan losses. While approximately 20.0% of the
Bank's loans are concentrated with health care professionals, the
Bank has had only two charge-offs related to this business segment
totaling $133,206 since it was founded in 1982. Health care reform
has received close scrutiny over the past year as the Clinton
administration attempted to restructure the method by which health
care is provided to the public. To date it appears that such reform
is not likely to occur in the immediate future. However, over the
past few years, the doctors and health care providers in the Company's
<PAGE> 37
communities have been adjusting to the emerging trends in this industry.
This includes higher percentages of patients on Medicare; closer scrutiny
from insurance carriers; and movement to managed care and "capitation"
contracts. Through this process, the Bank has not experienced any
noticeable deterioration in credit quality. The Bank cannot predict
the ultimate outcome of health care reform. However, the Bank closely
monitors the status of reform and considers the potential impact of any
reform on its current customers and its underwriting of loans to health
care professionals.
NON-PERFORMING ASSETS
The increase in non-performing assets from December 31, 1993 to
December 31, 1994 is due primarily to an increase in other real estate
owned (OREO). Of the total OREO amount, two properties compose the
majority of this amount. One is a single family dwelling and the other
is vacant land comprised of approximately 90 acres. Both properties
are being actively marketed. Current comparables favor a complete
recovery at the time of sale. Of the remaining three properties one is
being actively marketed and two are in the process of being sold as
offers have been accepted with no principal loss anticipated.
At December 31, 1994 the $572,000 placed on non-accrual status
represents loans to three borrowers. Two borrowers' loans total $565,000
and are secured by a single family home and vacant land in the Alameda/
Contra Costa County area and no principal loss is anticipated.
CAPITAL ADEQUACY
In 1989, the Federal Deposit Insurance Corporation (FDIC) established
risk-based capital guidelines requiring banks to maintain certain ratios
of "qualifying capital" to "risk-weighted assets". Under the guidelines,
qualifying capital is classified into two tiers, referred to as Tier 1
(core) and Tier 2 (supplementary) capital. Currently, the Bank's Tier 1
capital consists of shareholders' equity, while Tier 2 capital consists
of eligible allowance for loan losses. Risk-weighted assets are
calculated by applying the risk percentage specified by the FDIC to
categories of both balance-sheet assets and off-balance-sheet assets.
The Bank's Tier 1 and total risk-based capital (which includes Tier 1
and Tier 2) ratios exceeded the current regulatory minimum at both
December 31, 1994 and December 31, 1993.
At year-end 1990, the FDIC also adopted a leverage ratio requirement.
This ratio supplements the risk-based capital ratios and is defined
as Tier 1 capital divided by the quarterly average assets during the
reporting period.
The following table shows the risk-based capital ratios and the
leverage ratios for 1994 and 1993, as well as the minimum regulatory
requirements. The Bank does not foresee any material or significant impact
to its manner of operation in the foreseeable future that would prevent it
from meetings these requirements.
<PAGE> 38
<TABLE>
<CAPTION>
Minimum
Capital Ratios Regulatory
December 31, Requirements
Risk-based capital ratios: 1994 1993 1994
__________ _______ ______ ____ ____ ____
<S> <C> <C> <C>
Tier 1 capital 13.33% 11.55% 4.00%
Total capital 14.44% 12.66% 8.00%
Leverage ratio 10.40% 8.95% 3.00%
</TABLE>
<PAGE> 39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated statement of financial position as of December 31, 1994
and 1993 and the consolidated statements of income, changes in shareholders'
equity and cash flows for the years ended December 31, 1994, 1993, and 1992,
together with the report of independent public accountant, follow:
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1994 AND 1993
ASSETS 1994 1993
________________________________________________________________________________
<S> <C> <C>
Cash and due from banks $ 5,746,342 $ 2,887,455
Federal funds sold 3,500,000 7,500,000
________________________________________________________________________________
Cash and cash equivalents (Note 1) 9,246,342 10,387,455
Time deposits with other financial
institutions 7,039,000 15,164,000
Investment securities (fair value
of $10,218,634 at December 31, 1994
and $700,610 at December 31, 1993 -
Note 2) held to maturity 10,324,992 698,513
Loans, net of allowance for loan
losses of $931,878 at December 31,
1994 and $728,353 at December 31,
1993 (Notes 3 and 4) 46,691,459 50,540,975
Other real estate owned (Note 3) 2,865,747 1,508,672
Premises and equipment, net (Note 5) 848,703 978,065
Interest receivable and other assets 1,585,109 1,078,933
________________________________________________________________________________
TOTAL ASSETS $ 78,601,352 $ 80,356,613
________________________________________________________________________________
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $22,468,813 $21,732,979
Interest-bearing transaction accounts 28,814,712 28,986,556
Savings 3,109,239 3,573,774
Time certificates over $100,000 10,267,686 10,423,154
Other time certificates 3,201,626 5,745,874
________________________________________________________________________________
Total Deposits 67,862,076 70,462,337
________________________________________________________________________________
Interest payable and other liabilities 245,520 267,676
________________________________________________________________________________
TOTAL LIABILITIES 68,107,596 70,730,013
________________________________________________________________________________
Commitments and contingent liabilities
(Note 10)
Shareholders' Equity (Notes 7, 8, and 9):
Preferred Stock, no par value:
2,000,000 shares authorized, no shares
outstanding 0 0
Common Stock, no par value:
3,000,000 shares authorized;
427,485 shares outstanding at December
31, 1994 and
414,402 shares outstanding at December
31, 1993 3,837,684 3,674,959
Retained earnings 6,656,072 5,951,641
________________________________________________________________________________
TOTAL SHAREHOLDERS' EQUITY 10,493,756 9,626,600
________________________________________________________________________________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $78,601,352 $80,356,613
________________________________________________________________________________
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $5,044,315 $4,858,060 $5,238,234
Interest on time deposits with
other financial institutions 409,858 455,306 270,271
Interest on U. S. government
treasury securities 193,253 10,702 10,181
Interest on investment securities
exempt from federal income taxes 18,850 63,061 180,776
Interest on federal funds sold 159,175 170,938 131,894
________________________________________________________________________________
TOTAL INTEREST INCOME 5,825,451 5,558,067 5,831,356
________________________________________________________________________________
INTEREST EXPENSE:
Interest on savings deposits 63,575 75,212 91,243
Interest on interest-bearing
transaction accounts 607,289 719,988 786,699
Interest on time deposits 477,394 522,647 874,655
________________________________________________________________________________
TOTAL INTEREST EXPENSE 1,148,258 1,317,847 1,752,597
________________________________________________________________________________
NET INTEREST INCOME 4,677,193 4,240,220 4,078,759
Provision for loan losses
(Note 3) 670,000 430,800 180,000
________________________________________________________________________________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,007,193 3,809,420 3,898,759
________________________________________________________________________________
NON-INTEREST INCOME:
Service charges on deposit
accounts 356,853 374,084 329,451
Other customer fees and charges 325,417 246,065 192,646
________________________________________________________________________________
TOTAL NON-INTEREST INCOME 682,270 620,149 522,097
________________________________________________________________________________
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,681,273 1,612,634 1,703,369
Occupancy expense (Notes 5 and 10) 350,450 334,715 334,688
Equipment expense
(Note 5 and 10) 133,569 145,438 164,979
FDIC assessment 151,135 155,447 139,558
Legal expense 123,849 97,931 155,144
Insurance expense 85,101 89,249 73,697
Foreclosure and REO expense 84,101 7,087 0
Other 532,978 576,141 554,384
________________________________________________________________________________
TOTAL NON-INTEREST EXPENSE 3,142,456 3,018,642 3,125,819
________________________________________________________________________________
INCOME BEFORE INCOME TAXES 1,547,007 1,410,927 1,295,037
Provision for income taxes
(Note 6) 639,404 564,156 482,499
________________________________________________________________________________
NET INCOME $ 907,603 $ 846,771 $ 812,538
________________________________________________________________________________
EARNINGS PER SHARE (Note 7):
Weighted average shares
outstanding 434,616 429,029 462,293
NET INCOME PER SHARE $2.09 $1.97 $1.76
________________________________________________________________________________
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Number of Shares Common Retained
Outstanding Stock Earnings TOTAL
____________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1991 443,002 $4,101,644 $4,501,013 $8,602,657
Issuance of Cash Dividends,
$.24 per share (Note 9) 0 0 (108,234) (108,234)
Stock Options Exercised
(Note 8) 15,250 146,740 0 146,740
Repurchase of Common Stock (36,968) (484,373) 0 (484,373)
Net Income 0 0 812,538 812,538
_______________________________________________________________________________________
Balance at December 31, 1992 421,284 $3,764,011 $5,205,317 $8,969,328
Issuance of Cash Dividends,
$.24 per share (Note 9) 0 0 (100,447) (100,447)
Repurchase of Common Stock (6,882) (89,052) 0 (89,052)
Net Income 0 0 846,771 846,771
_______________________________________________________________________________________
Balance at December 31, 1993 414,402 $3,674,959 $5,951,641 $9,626,600
Issuance of Cash Dividends,
$.49 per share (Note 9) 0 0 (203,172) (203,172)
Stock Options Exercised
(Note 8) 16,800 219,912 0 219,912
Repurchase of Common Stock (3,717) (57,187) 0 (57,187)
Net Income 0 0 907,603 907,603
_______________________________________________________________________________________
Balance at December 31, 1994 427,485 $3,837,684 $6,656,072 $10,493,756
_______________________________________________________________________________________
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 5,146,813 $ 5,034,356 5,301,241
Fees received 1,149,840 1,165,529 1,215,577
Interest paid (1,130,943) (1,349,985) (1,890,947)
Cash paid to suppliers and employees (2,934,212) (2,890,781) (2,843,813)
Income taxes paid (625,947) (612,000) (508,769)
________________________________________________________________________________
Net cash provided by operating
activities 1,605,551 1,347,119 1,273,289
________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in time deposits
with other financial institutions 8,125,000 (5,753,000) (3,168,000)
Maturity of investment securities 2,846,509 3,309,972 5,212,642
Purchase of investment securities (12,472,988) (796,891) (3,203,878)
Net (increase) decrease in loans
to customers 2,160,530 295,991 (1,620,380)
Recoveries on loans previously
charged off 51,380 15,594 9,684
(Increase) decrease in premises
and equipment 121,687 (1,330) 51,172
________________________________________________________________________________
Net cash provided by (used in)
investing activities 832,118 (2,929,664) (2,718,760)
________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand,
interest bearing transactions, and
savings deposits 96,455 1,508,121 12,517,039
Net increase (decrease) in
time deposits (2,699,716) (1,497,893) (4,618,572)
(Increase) decrease in other assets (935,075) (959,764) (241,132)
Exercise of stock options 219,912 0 146,740
Repurchase of common stock (57,186) (89,052) (484,373)
Dividends paid (203,172) (100,447) (108,234)
________________________________________________________________________________
Net cash provided by (used
in) financing activities (3,578,782) (1,139,035) 7,211,468
________________________________________________________________________________
Net increase (decrease) in
cash and cash equivalents (1,141,113) (2,721,580) 5,765,997
________________________________________________________________________________
Cash and cash equivalents
at the beginning of the year 10,387,455 13,109,035 7,343,038
________________________________________________________________________________
Cash and cash equivalents
at the end of the year $9,246,342 $ 10,387,445 $13,109,035
________________________________________________________________________________
Reconciliation of net income to net cash provided by operating
activities:
Net Income $907,603 $ 846,771 $ 812,538
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 155,284 178,678 185,632
Provision for loan losses 670,000 430,800 180,000
(Increase) decrease in interest
receivable (188,857) 71,833 100,480
Increase (decrease) in unearned
loan fees (22,211) (50,164) 62,884
Increase (decrease) in accrued
interest payable 17,315 (32,138) (138,350)
(Increase) decrease in prepaid
expenses 10,233 4,710 (2,349)
Increase (decrease) in accounts
payable 42,727 (55,527) 98,723
Increase (decrease) in income
taxes payable 13,457 (47,844) (26,269)
________________________________________________________________________________
Total adjustments 697,948 500,348 460,751
________________________________________________________________________________
Net cash provided by operating
activities $ 1,605,551 $ 1,347,119 $1,273,289
________________________________________________________________________________
</TABLE>
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Summit Bancshares, Inc. (the Company)
and its wholly owned subsidiary, Summit Bank (the Bank), a California
state-chartered bank, conform with generally accepted accounting principles and
general practice within the banking industry. The following are descriptions of
the more significant of these policies.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Company and
the Bank. Significant intercompany transactions have been eliminated in
consolidation. Certain prior years amounts have been reclassified to conform
with present year presentation.
INVESTMENT SECURITIES:
Investment securities are carried at cost, adjusted for amortization of premium
and accretion of discount using a method that approximates the effective
interest method. Gains and losses on sale or redemption of securities are
determined using the specific identification method.
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. This statement requires that investments in debt
and equity securities be classified as "held-to-maturity," "trading securities"
or "available -for-sale." The Company adopted this provision in the first
quarter of 1994 and since the Company classified all investments as held to
maturity the adoption of this provision has no impact on the Company's financial
position or results of operation.
PREMISIS AND EQUIPMENT:
Premises and equipment are carried at cost, net of accumulated depreciation and
amortization. Depreciation on furniture and equipment is calculated on a
straight-line basis over the estimated useful life of the property, generally
seven years for furniture and three to fifteen years for equipment. Leasehold
improvements are amortized over the life of the related lease or the estimated
life of the improvements, whichever is shorter.
LOANS:
Loans are stated at the principal amount outstanding. Interest income is accrued
daily on a simple interest basis. Loans that are delinquent 90 days or more as
to principal or interest are placed on a nonaccrual basis, unless they are
well secured and in the process of collection, and any interest earned but
uncollected is reversed from income. Loan origination costs and fees are being
deferred and amortized as an adjustment of the related loan's yield. The
Bank is generally amortizing these amounts over the contractual life of the
related loans.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated. The allowance is
increased by provisions and reduced by net charge-offs. The Bank performs
credit reviews of the loan portfolio and considers current economic conditions,
loan loss experience, and other factors in determining the adequacy of the
allowance balance. The allowance for loan losses is based on estimates, and
ultimate losses may vary from current estimates. As adjustments become
necessary, they are reported in earnings in the periods in which they become
known.
<PAGE> 44
OTHER REAL ESTATE OWNED:
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.
INCOME TAXES:
Income taxes reported in the statements of income are computed at current tax
rates, including deferred taxes resulting from timing differences between the
recognition of items for tax and financial reporting purposes.
In February, 1992 the FASB issued a new standard (SFAS 109) on accounting for
income taxes. In 1993 the Bank adopted the new accounting standard which did not
have a significant effect on its financial position or results of operations.
CASH AND CASH EQUIVALENTS:
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, and federal funds sold. Generally, federal funds
sold are purchased and sold for one-day periods.
<PAGE> 45
2. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investments in debt secuirites
held-to-maturity as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury securities $8,981,172 $0 $103,445 $8,877,727
Obilgations of States and
political subdivisions 1,343,820 0 2,913 1,340,907
________________________________________________________________________________
TOTAL $10,324,992 0 $106,358 $10,218,634
________________________________________________________________________________
</TABLE>
The amortized cost and estimated market values of investments in debt securities
held to maturity as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury securities $693,613 $1,593 $0 $695,206
________________________________________________________________________________
Obligations of states and
political subdivisions 4,900 504 0 5,404
________________________________________________________________________________
TOTAL $698,513 $2,097 $0 $700,610
________________________________________________________________________________
</TABLE>
The amortized cost and estimated fair value of debt securities at December 31,
1994 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION> Estimated
Amortized Fair
Cost Value
________________________________________________________________________________
<S> <C> <C>
Due in one year or less $5,338,285 $4,865,740
Due after one year through
five years 4,986,707 5,352,894
________________________________________________________________________________
$10,324,992 $10,218,634
</TABLE>
There were no sales of investments in debt securities during 1994 or 1993.
At December 31, 1994, securities carried at $6,989,247 were pledged to secure
public deposits, as required by law.
3. LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
A summary of loans as of December 31, 1994 and 1993 (net of unearned loan fees
of $228,286 and $250,497, respectively), is as follows:
<TABLE>
<CAPTION>
1994 1993
________________________________________________________________________________
<S> <C> <C>
Commercial loans 30,355,200 $30,928,164
Real estate loans 4,872,953 4,333,375
Real estate construction loans 5,822,380 8,167,909
Installment loans 6,449,741 7,645,515
Lease financing 132,206 218,941
________________________________________________________________________________
47,632,480 51,293,904
Less: Unearned income on leases (9,143) (24,576)
________________________________________________________________________________
47,623,337 51,269,328
Less: Allowance for loan losses (931,878) (728,353)
________________________________________________________________________________
$46,691,459 $50,540,975
________________________________________________________________________________
</TABLE>
<PAGE> 46
The changes in the allowance for loan losses for the years ended December 31,
1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
Balance, beginning of period $728,353 $899,083 $869,863
Provision for possible loan losses 670,000 430,800 180,000
Recoveries 51,380 15,594 9,684
Loans charged-off (517,855) (617,124) (160,464)
________________________________________________________________________________
Balance, end of period $931,878 $728,353 $899,083
________________________________________________________________________________
</TABLE>
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 Omitted)
December 31,
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing:
Commercial $207 $0 $ 29
Real Estate 0 0 49
Consumer 0 4 134
________________________________________________________________________________
Total $207 $4 $212
________________________________________________________________________________
Non-accrual loans:
Commercial $232 $480 $173
Real Estate 340 338 249
Consumer 0 148 264
________________________________________________________________________________
Total $572 $966 $686
________________________________________________________________________________
Other Real Estate Owned $2,866 $1,509 $0
________________________________________________________________________________
TOTAL NON-PERFORMING ASSETS $3,645 $2,479 $898
________________________________________________________________________________
</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. As
mentioned previously, 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.
As of December 31, 1994 and 1993, loans totalling $571,500 and $966,593,
respectively, were on nonaccrual. Interest foregone on nonaccrual loans as of
December 31, 1994 and December 31, 1993 were $144,577 and $151,110,
respectively. The Bank grants commercial, construction and installment loans to
customers mainly in the California counties of Alameda and Contra Costa.
Although the Bank has a diversified loan portfolio, a substantial portion of its
commercial loan portfolio is concentrated in loans to customers in or related to
the medical profession. The greater portion of these loans are secured by real
estate located within the two counties. The amount in other real estate owned is
comprised of six properties, of which three are single family dwellings, one is
vacant land in the Grizzly Peak area of the Oakland Hills and two are contiguous
land parcels in the Danville/Diablo Mountain area of Alameda county.
<PAGE> 47
4. RELATED PARTY TRANSACTIONS
The Bank has, and expects to have in the future, banking transactions in the
oridinary course of its business with directors, officers, principal
shareholders and their associated. In management's opinion and as required by
federal law, loans to related parties are granted on the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactionw with others, and do not involve more than normal risk
of collectibility or present other unfavorable features. As of December 31,
1994 and 1993, loans outstanding to directors, officers and principal
shareholders and their known associates were $775,993 and $574,771 respectively.
In 1994 advances on such loans were $283,208 and collections were $307,700. In
1993 advances on such loans were $350,748 and collections were $398,457. In 1994
a new director was appointed to the Board of Directors who had outstanding loans
as if December 31, 1994 and were not included in the 1993 totals.
5. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
Accumulated
Depreciation/ Net Book
Cost Amortization Value
____ ____________ _____
<S> <C> <C> <C>
December 31, 1994:
Land and building $497,912 $ 66,779 $431,133
Leasehold improvements 1,035,345 662,364 372,981
Furniture and equipment 297,882 253,294 44,588
________________________________________________________________________________
Total $1,831,139 $982,437 $848,702
________________________________________________________________________________
December 31, 1993:
Land and building $479,112 $ 48,971 $430,141
Leashold improvements 1,035,345 577,410 457,935
Furniture and equipment 438,369 348,380 89,989
________________________________________________________________________________
Total $1,952,826 $974,761 $978,065
________________________________________________________________________________
</TABLE>
Depreciation and amoritization included in occupancy and equipment expenses were
$155,284, $178,678 and $185,632 for the years ended December 31, 1994, 1993 and
1992, respectively.
<PAGE> 48
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
Current:
Federal $562,000 $438,000 $383,000
State 202,000 159,000 138,000
________________________________________________________________________________
Total current 764,000 597,000 521,000
________________________________________________________________________________
Deferred:
Federal (95,000) (27,000) (44,000)
State (30,000) (6,000) 5,000
________________________________________________________________________________
Total deferred (125,000) (33,000) (39,000)
________________________________________________________________________________
Total taxes $639,000 $564,000 $482,000
________________________________________________________________________________
The deferred tax provisions
(benefits) are applicable to:
1994 1993 1992
______________________________________
Difference between book and
tax reporting for accrual basis income $ 0 $ 0 $(31,000)
Difference between loan loss provision
charged to income and amount deducted
for tax purposes (88,000) 52,000 (10,000)
Difference between depreciation expense
for book purposes and amount deducted
for tax purposes (23,000) (43,000) (13,000)
Difference between state taxes deducted
and amount benefited for book purposes (2,000) 2,000 15,000
Other timing differences, net (12,000) (44,000) 0
________________________________________________________________________________
$ (125,000) $ (33,000) $(39,000)
________________________________________________________________________________
</TABLE>
The Company adopted SFAS No. 109, Accounting for Income Taxes in 1993. This
statement changed the method of computing income taxes for financial statement
purposes by adopting the liability or balance sheet method under which the net
deferred tax liability or asset is determined based on the tax effects of the
differences between the book and tax bases of the various balance sheet assets
and liabilities. Under this method, the computation of the net deferred tax
liability or asset gives current recognition to changes in tax laws and rates.
The adoption of SFAS No. 109 did not have a material impact on the Company's
financial position or results of operations.
<PAGE> 49
The components of the net deferred tax asset of the Company as of December 31,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
___________________________________________________________________
<S> <C> <C>
Deferred Tax Assets:
Allowance for loan losses $ 357,000 $ 269,000
State Taxes 27,000 25,000
Depreciation 49,000 26,000
Other 25,000 21,000
Deferred Tax Liabilities:
Lease Income and Other (6,000) (14,000)
___________________________________________________________________
Total $ 452,000 $327,000
___________________________________________________________________
</TABLE>
The provisions for income taxes applicable to operating income differ from the
amount computed by applying the statutory federal tax rate to operating income
before taxes.
The reasons for these differences are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
__________________________________________________________________________
Amount Percent Amount Percent Amount Percent
________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Federal income
tax expense,
based on the
statutory
federal income
tax rate $526,000 34.0% $480,000 34.0% $440,000 34.0%
Municipal
income (20,000) (1.3%) (56,000) (3.7%) (54,000) (4.2%)
State franchise
taxes, net of
federal income
tax benefit 111,000 7.2% 102,000 7.2% 94,000 7.3%
Other, net 22,000 1.4% 38,000 2.7% 2,000 .1%
________________________________________________________________________________
Tax Provision $639,000 41.3% $564,000 40.2% $482,000 37.2%
</TABLE>
<PAGE> 50
7. SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
The Company has 2,000,000 authorized shasres of no par value, serial preferred
stock of which no shares have been issued. Earnings per share amounts have been
computed on the basis of the weighted average number of shares of common stock
and common stock equivalents outstanding during the years, including the effect
of stock options.
8. STOCK OPTION PLAN
The Company adopted an incentive stock option plan in 1982 and reserved 40,000
shares of the Company's common stock for issuance under this plan. In 1986 the
directors and shareholders approved inreasing the number of shares in this plan
90,000. The additional shares were registered in accordance with federal and
state securities laws in 1987. In 1987, the Company issued a 10% stock dividend
which increased the number of shares in this plan to 99,000. Options may be
granted at a price not less than the fair market value of the stock at the date
of grant, become exercisable in cumulative 10% annual installments commencing
one year after the date of grant and expire 10 years from the date of grant.
In 1992, the shareholders approved the 1992 Employee and Consultant Stock Option
Plan ( the "1992 Plan") which was designed to replace the 1982 Incentive Stock
Option Plan which expired on February 28, 1992, after which no new unallocated
stock options may be granted. The 1992 Plan was designed to carryforward the
remaining 82,995 options issued but not exercised under the 1982 Incentive Plan
at the new current market price. No new additonal shares of the Company have
been reserved for issuance under the 1992 Plan.
Following is a summary of stock option activity under the 1982 Incentive Stock
Option Plan during the years ended December 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
Options Outstanding
___________________
Shares
Available Number of Price
for Grant Shares Per Share
________________________________________________________________________________
<S> <C> <C> <C>
BALANCE DECEMBER 31, 1991 9,495 84,500 $9.09 - $13.63
OPTIONS GRANTED (9,495) 9,495 $13.00
OPTIONS EXERCISED 0 (11,000) $9.09
________________________________________________________________________________
BALANCE DECEMBER 31, 1992 0 82,995 $10.00 - $13.63
OPTIONS TERMINATED 6,200 (6,200) $11.25 - $13.00
________________________________________________________________________________
BALANCE DECEMBER 31, 1993 6,200 76,795 $10.00 - $13.63
OPTIONS EXERCISED 0 (16,800) $11.25 - $13.63
OPTIONS TERMINATED 2,900 (2,900) $11.25 - $13.00
OPTIONS TRANSFERRED TO 1992 PLAN (9,100) 0 $0.00
________________________________________________________________________________
BALANCE DECEMBER 31, 1994 0 57,095 $10.00 - $13.63
________________________________________________________________________________
</TABLE>
Options for 28,384 shares at an average price of $10.82 per share were
exercisable at December 31, 1994.
<PAGE> 51
Following is a summary of stock option activity under the 1992 Employee and
Consultant Stock Option Plan during the years ended December 31, 1992, 1993 and
1994:
<TABLE>
<CAPTION>
Options Outstanding
___________________
Shares
Available Number of Price
for Grant Shares Per Share
________________________________________________________________________________
<S> <C> <C> <C>
Balance December 31, 1992 82,995 0 0
________________________________________________________________________________
Balance December 31, 1993 82,995 0 0
Options Granted (9,100) 9,100 $17.75
Options Exercised under 1982 Plan (16,800) 0 N/A
________________________________________________________________________________
BALANCE DECEMBER 31, 1994 73,895 9,100 $17.75
================================================================================
</TABLE>
In addition to the above plan, shareholders approved, in 1989, the 1989 Non-
Qualified Stock Option Plan for Directors, including Advisory Board members,
and reserved 35,000 shares of the Company's common stock for issuance under
this plan. The plan was established to give appropriate recognition to this
group of individuals for their continuing responsibility for the Company's
growth and profitability. As of December 31, 1994, of the 10,750 options
granted at an excercise price of $11.00 per share, 4,250 were exercised and the
remainder forfeited leaving 30,750 shares available for options under this plan.
9. RESTRICTIONS
The Bank is regulated by the Federal Deposit Insurance Corporation, whose
regulations do not specifically limit payment of dividends, and the California
State Banking Department. California banking laws limit dividends to the lesser
of retained earnings or net income less cash dividends to the Company of up to
approximately $1,661,028 without regulatory approval.
Generally, banks are required to maintain reserves with the Federal Reserve Bank
equal to a percentage of their reservable deposits. In 1993 and 1994 the Bank
was required to maintain average reserve balances of $7,000 and $23,000,
respectively.
10. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is obligated for rental payments under certain operating lease and
contract agreements. Total rental expense for all leases included in occupancy
and equipment expenses was $182,974, $177,072 and $181,077 for the years ended
December 31, 1994, 1993 and 1992. At December 31, 1994, the approximate future
minimum payments for noncancelable leases with initial or remaining terms in
excess of one year were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 $185,253
1996 133,310
1997 101,613
1998 57,574
1999 57,574
Thereafter 57,574
</TABLE>
The Company is subject to various pending and threatened legal actions which
arise out of the normal course of business. In the opinion of management, the
disposition of claims currently pending will not have a material adverse effect
on the Company's financial position.
<PAGE> 52
11. PENSION PLAN
The Company provides pension benefits for all its eligible employees through a
401(k) Profit Sharing Program which was adopted in 1984. Under the terms of the
plan, eligible employees are allowed to contribute, under the 401(k) portion of
the plan, up to 15% of their salaries. The Comapny in turn will match 25% of
the employee's contribution up to a maximum of $500 annually. Under this part
of the plan, $3,608 was contributed in 1994, $5,403 in 1993 and $4,572 in 1992.
In addition, the Company may contribute up to 15% of eligible employees' annual
compensation to the profit sharing portion of this plan. Such contributions
were $56,650 in 1994, $49,715 in 1993, and $45,460 in 1992. Employees' interest
in the contributions made by the Company on their behalf become 100% vested in
accordance with a 7 year program. Any forfeited amounts are redistributed among
the remaining participants in the plan.
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, and standby
letters of credit. These instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the statement of financial
position. The contract amount of those instruments reflects the extent of
involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
At December 31, 1994, financial instruments CONTRACT AMOUNT
whose contract amounts represent credit risk:
Commitments to extend credit in the future $13,904,287
Standby letters fo credit 991,600
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained
if deemed necessary by the Company upon extension of credit is based on
management's credit evaluation of the counter-party. Collateral held varies but
may include accounts receivable, inventory, property, plant, and equipment, and
income-producing commerical properties.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Most all guarantees
expire within one year. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan facilities to
customers.
Approximately 20.0% of the Company's loans are concentrated with health care
professionals.
<PAGE> 53
13. NEW ACCOUNTING PRONOUNCEMENTS
In May 1993, the FASB issued Statement of Financial Accounting Standards No.
114, Accounting by Creditors for Impairment of a Loan as amended by SFAS 118.
The statement requires that impaired loans that are within the scope of this
statement be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate, or as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. The Company plans on adopting this statement no
later than January 1, 1995. The Company does not expect that the adoption of
the accounting prescribed by this statement will have a material impact on its
financial position or results of operations.
14. SUMMIT BANCSHARES, INC. (PARENT COMPANY ONLY)
The following are the statements of financial position as of December 31, 1994
and 1993 and the related statements of income and cash flows for the years
ended December 31, 1994, 1993 and 1992 for Summit Bancshares, Inc. (parent
company only):
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL POSITION
December 31, 1994 December 31,1993
________________________________________________________________________________
<S> <C> <C>
Assets:
Cash $ 56,719 $ 10,753
Short term investments 1,395,000 1,174,000
Loan participation with subsidiary 353,289 783,584
Land and building 431,133 430,141
Investment in subsidiary 8,077,222 7,228,330
Other assets 208,159 23,490
________________________________________________________________________________
TOTAL ASSETS $10,521,522 $9,650,298
________________________________________________________________________________
Liabilities:
Accounts payable $4,350 $4,350
Income taxes payable 23,416 19,348
________________________________________________________________________________
TOTAL LIABILITIES 27,766 23,698
________________________________________________________________________________
Shareholders' equity:
Common stock 3,837,684 3,674,959
Retained earnings 6,656,072 5,951,641
________________________________________________________________________________
TOTAL SHAREHOLDERS' EQUITY 10,493,756 9,626,600
________________________________________________________________________________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,521,522 $9,650,298
________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Year Ended December 31,
________________________________________________________________________
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
Income:
Interest on short-term investments
and loan $ 92,777 $ 61,163 $ 95,764
________________________________________________________________________________
Rental and other income 42,055 42,543 42,589
________________________________________________________________________________
TOTAL INCOME 134,832 103,706 138,353
________________________________________________________________________________
Expense:
Miscellaneous expense 34,317 36,431 40,199
________________________________________________________________________________
TOTAL EXPENSE 34,317 36,431 40,199
________________________________________________________________________________
Income before income tax and
equity in undistributed
earnings of subsidiary 100,515 67,275 98,154
________________________________________________________________________________
Provision for income taxes 41,804 27,756 40,500
________________________________________________________________________________
Income before equity in
undistributed earnings of
subsidiary 58,711 39,519 57,654
________________________________________________________________________________
Equity in undistributed
earnings of subsidiary 848,892 807,252 754,884
________________________________________________________________________________
NET INCOME $907,603 $846,771 $812,538
________________________________________________________________________________
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 92,777 $ 61,163 $ 95,764
Forward lease payments received 0 0 8,700
Rental income 52,200 43,500 40,608
Other income 295 783 0
Cash paid to suppliers (16,509) (18,623) (22,391)
Property taxes paid (4,060) 0 0
Income taxes paid (37,789) (22,556) (61,641)
Income tax refund 53 27,855 0
________________________________________________________________________________
Net cash provided by operating
activities 86,967 92,122 61,040
________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in
short term investments (221,000) (355,000) 610,000
Net (increase) decrease in
loans 430,295 (299,919) (225,584)
(Increase) decrease in land
and building (18,800) 0 0
Dividend received from subsidiary 0 750,000 0
________________________________________________________________________________
Net cash provided by (used in)
investing activities 190,495 95,081 384,416
________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised 219,912 0 146,740
(Increase) in other assets (191,049) 0 0
Purchase of common stock (57,186) (89,053) (484,373)
Dividends paid (203,173) (100,446) (108,234)
________________________________________________________________________________
Net cash used in financing
activities (231,496) (189,499) (445,867)
________________________________________________________________________________
Net increase (decrease) in
cash and cash equivalents 45,966 (2,296) (411)
Cash at the beginning of the year 10,753 13,049 13,460
________________________________________________________________________________
Cash at the end of the year $ 56,719 $ 10,753 $ 13,049
________________________________________________________________________________
Reconciliation of net income to net
cash provided by operating activities:
Net Income $907,603 $846,771 $812,538
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 17,808 17,808 17,808
Non-cash earnings from
subsidiary (848,892) (807,252) (754,884)
(Increase) decrease in account
receivables 6,380 10,440 2,369
Increase (decrease) in account
payables 0 (8,700) 4,350
Increase (decrease) in income
tax payable 4,068 33,055 (21,141)
________________________________________________________________________________
Total adjustments (820,636) (754,649) (751,498)
________________________________________________________________________________
Net cash provided by operating
activities $ 86,967 $ 92,122 $ 61,040
________________________________________________________________________________
</TABLE>
<PAGE> 55
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Summit Bancshares, Inc.:
We have audited the accompanying consolidated statements of financial position
of SUMMIT BANCSHARES, INC. (a California corporation) AND SUBSIDIARY as of
December 31, 1994 and 1993, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Summit Bancshares, Inc. and
subsidiary as of December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
San Francisco, California
January 13, 1995
/s/ _______________________________
<PAGE> 56
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
_____________ __ __________ ___ _________ __________
Since the date of organization of the Company, there have been no
disagreements on accounting and financial disclosures or changes in accountants.
PART III
________
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
_________ ___ _________ ________ __ ___ __________
The information required by paragraphs (a), (c) (d), (f) and (g) of
this item is presented in the Company's Proxy Statement issued in
connection with the Annual Meeting of Shareholders to be held on April 19,
1995 under "Election of Directors," which is incorporated in this Report
by reference thereto and will be filed within 120 days after the end of
the Company's fiscal year. The information concerning executive officers
requested by paragraphs (b) and (e) is set forth under Part I in a
separate Item captioned Executive Officers of Summit Bancshares, Inc.
ITEM 11. EXECUTIVE COMPENSATION
_________ ____________
The information required by this item in presented in the Company's
Proxy Statement issued in connection with the Annual Meeting of
Shareholders to be held on April 19, 1995. under "Executive
Compensation," which is incorporated in this Report by reference thereto and
will be filed within 120 days after the end of the Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
___________________________________________________
MANAGEMENT
__________
The information required by this item is presented in the Company's
Proxy Statement issued in connection with the Annual Meeting of
Shareholders to be held on April 19, 1995, under "Principal Security
Holders" and "Security Ownership of Management," which is incorporated
in this Report by reference thereto and will be filed within 120 days
after the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
_______ _____________ ___ _______ ____________
The information required by this item is presented in the Company's
Proxy Statement issued in connection with the Annual Meeting of
Shareholders to be held April 19, 1995, under "Certain Relationships and
Related Transactions," which is incorporated in this Report by reference
thereto and will be filed within 120 days after the end of the Company's
fiscal year.
<PAGE> 57
PART IV
_______
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(A) 1. CONSOLIDATED FINANCIAL STATEMENTS.
The following Financial Statements are included in this Report in Item 8.
Consolidated Statement of Financial Position - December 31, 1994 and 1993
Consolidated Statements of Income for the years ended December 31, 1994,
1993 and 1992
Statements of Changes in Shareholders' Equity (Consolidated and Parent
Company Only) for the years ended December 31, 1994, 1993 and 1992, and
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements
Auditors' Report
(B) 2. FINANCIAL STATEMENT SCHEDULES.
_________ _________ _________
Not Applicable
In accordance with the rules of Regulation S-X, the required
schedules are not submitted because they are not applicable
to or required of the Company.
(C) 3. INDEX TO EXHIBITS.
The following exhibits are incorporated by reference pursuant
to Item 601 of Regulation S-K:
Exhibit Number Exhibit
______________ _______
3.1 Articles of Incorporation Footnote #1
of Summit Bancshares, Inc.
3.2 Bylaws of Summit
Bancshares, Inc. Footnote #2
<PAGE> 58
Exhibit Number Exhibit
______________ _______
4.1 Specimen Stock Certificate Footnote #3
10.1 Lease - Broadway Property Footnote #4
10.2 Summit Bancshares, Inc.
Incentive Stock Option Plan Footnote #5
10.3 Organizational Stock
Agreement Footnote #6
10.4 Employment Agreement/
Shirley W. Nelson Footnote #7
10.5 Agreement for Sale
of Stock Footnote #8
10.6 Lease-Walnut Creek
Property Footnote #9
10.7 Lease-Emeryville
Property Footnote #10
10.8 Lease-Oakland Office
Expansion Footnote #11
10.9 Lease-Walnut Creek
New Premises Footnote #12
10.10 Lease-Emeryville
Renegotiated Footnote #13
10.11 Summit Bancshares, Inc.
1989 Non-Qualified Stock Option
Plan for Directors Footnote #14
10.12 Stock Option Agreement Form
Summit Bancshares, Inc.
Incentive Stock Option Plan Footnote #15
10.13 Stock Option Agreement Form
1989 Non-Qualified Stock Option
Plan for Directors Footnote #16
10.14 Amendment to By-Laws of
Summit Bancshares, Inc. Footnote #17
<PAGE> 59
Exhibit Number Exhibit
______________ ________
10.15 Lease - Walnut Creek
Summit Banchsares, Inc. owned
Property . Footnote #18
10.16 Lease - Emeryville
Renegotiated Footnote #19
11 Statement Re: Computation
of Per Share Earnings Filed herewith
21 Wholly Owned Subsidiary of Filed herewith
Summit Bank - Summit Equities,
Inc.
24.1 Power of Attorney - see
Signature Page Filed herewith
27 Financial Data Schedule Filed herewith
________________
1. Incorporated by reference to Exhibit 2.1 of Registrant's Exhibits
to Form S-18 Registration Statement, as filed with the Securities
and Exchange Commission on December 21, 1981.
2. Incorporated by reference to Exhibit 2.2 of Registrant's Exhibits
to Form S-18 Registration Statement, as filed with the Securities
and Exchange Commission on December 21, 1981.
3. Incorporated by reference to Exhibit 3.1 of Registrant's Exhibits
to Form S-18 Registration Statement, as filed with the Securities
and Exchange Commission on December 21, 1981.
4. Incorporated by Reference to Exhibit 9.1 of Registrant's Exhibits
to Form S-18 Registration Statement, as filed with the Securities
and Exchange Commission on December 21, 1981.
5. Incorporated by reference to Exhibit 9.2 of Registrant's Exhibits
to Post-Effective Amendment No. 1 to Form S-18 Registration
Statement, as filed with the Securities and Exchange Commission on
March 11, 1982.
6. Incorporated by reference to Exhibit 9.4 of Registrant's Exhibits
to Post-Effective Amendment No. 1 to Form S-18 Registration
Statement, as filed with the Securities and Exchange Commission on
March 11, 1982.
7. Incorporated by reference to Exhibit 10.4 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1983.
<PAGE> 60
8. Incorporated by reference to Exhibit 10.6 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1984.
9. Incorporated by reference to Exhibit 10.9 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985.
10. Incorporated by reference to Exhibit 10.10 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985.
11. Incorporated by reference to Exhibit 10.6 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987.
12. Incorporated by reference to Exhibit 10.9 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.
13. Incorporated by reference to Exhibit 10.10 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.
14. Incorporated by reference to Exhibit 10.11 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.
15. Incorporated by reference to Exhibit 10.12 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.
16. Incorporated by reference to Exhibit 10.13 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.
17. Incorporated by reference to Exhibit 2.2 of Registrant's Exhibits
to Form S-18 Registration Statement, as filed with the Securities
and Exchange Commission on December 21, 1981.
18. Incorporated by reference to Exhibit 10.15 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
19. Incorporated by reference to Exhibit 10.16 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.
(B) REPORTS ON FORM 8-K
None submitted for the year.
<PAGE> 61
Exhibit 11
WEIGHTED AVERAGE SHARES
Twelve Months Ended December 31, 1994
PRIMARY FULLY
_______ _____
A. Common Stock 1994 WEIGHTED AVERAGE 414,217 414,217
(4TH QTR) 416,292 416,292
414,402 12-31-93 (Bal. Fwd.)
414,402 to 01-07-94 6 days = 2,486,412
414,302 to 02-02-94 26 days = 10,771,852
413,972 to 03-03-94 29 days = 12,005,188
413,175 to 03-14-94 11 days = 4,544,925
412,465 to 06-30-94 109 days = 44,958,685
413,565 to 07-18-94 17 days = 7,030,605
AVG FOR 413,015 to 07-21-94 3 days = 1,239,045
4th QTR 412,555 to 07-25-94 4 days = 1,650,220
416,292 415,055 to 07-26-94 1 day = 415,055
415,155 to 08-31-94 36 days = 14,945,580
414,385 to 12-16-94 107 days = 44,339,195
420,885 to 12-23-94 7 days = 2,946,195
427,485 to 01-01-95 9 days = 3,856,365
365 days = 151,189,322
Average shares outstanding for period = 414,217
B. Stock Options
12-31-93 year end price $13.50
12-31-94 quarter end $21.00
12-31-94 end of quarter average $20.50 (18.00 - 23.00)
Fully $17.44 end of quarter average
Primary $17.25 year end to end of quarter
(13.50 + 21.00)
_______________
2
MARKET PRICES
@ 3-31-94 14.00
@ 6-30-94 16.25
@ 9-30-94 18.50 AVERAGE $17.44
@ 12-31-94 21.00
(14.00 +16.25 +18.50 +21.00)
______________________________
4.00
Options - Primary 20,399
_______ _______
MZ 1,100 X (17.25 - 12.27) = 318
_______________
17.25
FD 550 X (17.25 - 12.27) = 159
_______________
17.25
<PAGE> 62
SN 8,250 X (17.25 - 10.45) = 3,252
_______________
17.25
MZ 1,000 X (17.25 - 10.00) = 420
_______________
17.25
SN 10,000 X (17.25 - 10.00) = 4,203
_______________
17.25
SN 15,689 X (17.25 - 10.00) 6,594
_______________
17.25
SN 8,333 X (17.25 - 12.00) = 2,536
_______________
17.25
MZ 2,900 X (17.25 - 13.50) = 630
_______________
17.25
TW 400 X (17.25 - 12.25) = 116
_______________
17.25
SN 978 X (17.25 - 13.25) = 227
_______________
17.25
SJ 500 X (17.25 - 13.00) = 123
_______________
17.25
DD 2,500 X (17.25 - 13.00) = 615
_______________
17.25
MZ 1,045 X (17.25 - 13.00) = 257
_______________
17.25
FD 1,950 X (17.25 - 13.00) = 480
_______________
17.25
AC 400 X (17.25 - 13.00) = 99
_______________
17.25
TW 1,500 X (17.25 - 13.00) = 370
_______________
17.25
Options - Fully 28,637
_______ _____
MZ 1,100 X (21.00 - 12.27) = 457
_______________
21.00
FD 550 X (21.00 - 12.27) = 505
_______________
21.00
SN 8,250 X (21.00 - 10.45) = 4,145
_______________
21.00
<PAGE> 63
MZ 1,000 X (21.00 - 10.00) = 524
_______________
21.00
SN 10,000 X (21.00 - 10.00) = 5,238
_______________
21.00
SN 15,689 X (21.00 - 10.00) 8,218
_______________
21.00
SN 8,333 X (21.00 - 12.00) = 3,571
_______________
21.00
MZ 2,900 X (21.00 - 13.50) = 1,036
_______________
21.00
TW 400 X (21.00 - 12.25) = 167
_______________
21.00
SN 978 X (21.00 - 13.25) = 361
_______________
21.00
SJ 500 X (21.00 - 13.00) = 190
_______________
21.00
DD 2,500 X (21.00 - 13.00) = 952
_______________
21.00
MZ 1,045 X (21.00 - 13.00) = 398
_______________
21.00
FD 1,950 X (21.00 - 13.00) = 743
_______________
21.00
AC 400 X (21.00 - 13.00) = 152
______________
21.00
TW 1,500 X (21.00 - 13.00) = 571
_______________
21.00
SN 4,000 X (21.00 - 17.75) = 620
_______________
21.00
MZ 2,000 X (21.00 - 17.75) = 310
______________
21.00
DD 1,000 X (21.00 - 17.75) = 155
_______________
21.00
TW 1,000 X (21.00 - 17.75) = 155
_______________
21.00
FD 500 X (21.00 - 17.75) = 77
_______________
21.00
SJ 500 X (21.00 - 17.75) = 77
_______________
21.00
<PAGE> 64
AC 100 X (21.00 - 17.75) = 15
_______________
21.00
TOTAL SHARES 4TH QUARTER 436,691 444,929
======= =======
TOTAL SHARES YEAR END 434,616 442,854
======= =======
NET INCOME 4TH QUARTER $267,537 $267,537
======= =======
NET INCOME YTD $907,603 $907,603
======= =======
EARNINGS PER SHARE 4TH QTR $0.61 $0.60
======= =======
EARNINGS PER SHARE YTD $2.09 $2.04
======= =======
<PAGE> 65
Exhibit 22
SUMMIT EQUITIES. INC.
(PARENT COMPANY ONLY)
DECEMBER 31, 1994
==========================================================================
ASSETS
========
CASH $10,348.00
TOTAL ASSETS $10,348.00
================= ==============
LIABILITIES AND SHAREHOLDERS EQUITY
============================================
LIABILITIES
==============
RESERVE FOR FED TAXES $0.00
RESERVE FOR STATE TAXES $0.00
TOTAL RESERVE FOR TAXES $0.00
--------------
TOTAL LIABILITIES $0.00
====================
SHAREHOLDERS EQUITY
===================
COMMON STOCK $10,000.00
RETAINED EARNINGS $113.00
PROFIT/LOSS YEAR-TO-DATE $235.00
----------------
$10,348.00
TOTAL SHAREHOLDERS EQUITY $10,348.00
------------------------- --------------
TOTAL LIABILITIES &
SHAREHOLDERS EQUITY $10,348.00
======================= ==============
<PAGE> 66
SUMMIT EQUITIES, INC.
(PARENT COMPANY ONLY)
DECEMBER 31, 1994
===========================================================================
INCOME
========
INTEREST INCOME - MMA & TCD $235.00
INTEREST INCOME - LOANS $0.00
OTHER INCOME $0.00
--------
TOTAL INCOME $235.00
============
EXPENSE
========
BUILDING DEPRECIATION $0.00
ANNUAL REPORT & MEETING EXPENSE $0.00
MISCELLANEOUS EXPENSE $0.00
LEGAL $0.00
PROPERTY/TAXES $0.00
--------
TOTAL EXPENSES $0.00
================== --------
INCOME BEFORE TAXES &
EARNINGS OF SUBSIDIARY $235.00
======================
PROVISION FOR TAXES
==================
FEDERAL INCOME TAX PROVISION $0.00
STATE INCOME TAX PROVISION $0.00
TOTAL TAX PROVISION $0.00
-------
NET INCOME $235.00
========== =======
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 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.
Date: March 22, 1995 By: /s/ Shirley W. Nelson
____________________________
Shirley W. Nelson, Chief
Chairman and CEO
(Principle Executive Officer)
Date: March 22, 1995 By: /s/ Kikuo Nakahara
____________________________
Kikuo Nakahara
(Chief Financial Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints SHIRLEY W. NELSON and KIKUO NAKAHARA,
and each or any one of them, as his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities, to
sign any and all amendments to this Report, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorney-
in-fact and agents or any of them, or their substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange
Act of 1934, this Report has been executed in Oakland, California, by
the following persons on behalf of the Registrant on the capacities and on the
dates indicated.
<PAGE> 68
Signature Title Date
/S/ SHIRLEY W. NELSON Chairman of the Board, 3-22-95
_________________________ Chief Executive Officer
SHIRLEY W. NELSON and President
/S/ KIKUO NAKAHARA Chief Financial 3-22-95
_________________________ Officer and Director
KIKUO NAKAHARA
/S/ GEORGE H. HOLLDIGE Secretary and Director 3-22-95
_________________________
GEORGE H. HOLLIDGE
Director
_________________________
THOMAS F. LOUDERBACK, JR.
/S/ THOMAS H. STATE Director 3-22-95
_________________________
THOMAS H. STATE
/S/ BARBARA J. WILLIAMS Director 3-24-95
_________________________
BARBARA J. WILLIAMS
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000353203
<NAME> SUMMIT BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,746,342
<INT-BEARING-DEPOSITS> 7,039,000
<FED-FUNDS-SOLD> 3,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 10,324,992
<INVESTMENTS-MARKET> 10,218,634
<LOANS> 47,623,337
<ALLOWANCE> 931,878
<TOTAL-ASSETS> 78,601,352
<DEPOSITS> 67,862,076
<SHORT-TERM> 0
<LIABILITIES-OTHER> 245,520
<LONG-TERM> 0
<COMMON> 3,837,684
0
0
<OTHER-SE> 6,656,072
<TOTAL-LIABILITIES-AND-EQUITY> 78,601,352
<INTEREST-LOAN> 5,044,315
<INTEREST-INVEST> 781,936
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,825,451
<INTEREST-DEPOSIT> 1,148,258
<INTEREST-EXPENSE> 1,148,258
<INTEREST-INCOME-NET> 4,677,193
<LOAN-LOSSES> 670,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,142,456
<INCOME-PRETAX> 1,547,007
<INCOME-PRE-EXTRAORDINARY> 1,547,007
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 907,603
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.04
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 572,000
<LOANS-PAST> 207,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 321,000
<ALLOWANCE-OPEN> 728,353
<CHARGE-OFFS> 517,855
<RECOVERIES> 51,380
<ALLOWANCE-CLOSE> 670,000
<ALLOWANCE-DOMESTIC> 931,878
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Not contained in document.
</FN>
</TABLE>
