<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: MARCH 31, 1996
COMMISSION FILE NUMBER: 0-11108
SUMMIT BANCSHARES, INC.
STATE OF CALIFORNIA I.R.S. IDENTIFICATION
NUMBER 94-2767067
2969 BROADWAY, OAKLAND CALIFORNIA 94611
(510) 839-8800
Indicate by the check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--------- ----------
The number of shares outstanding of the registrant's common stock
was:
425,359 shares of no par value common stock
issued as of March 31, 1996
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
---- - --------- -----------
ITEM 1 PAGE
SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS
------ ----------- ---- --- ---------- --------- ----------
Consolidated Balance Sheets ...................... 3
Consolidated Statements of Income ................ 4-5
Consolidated Statements of Changes in
Shareholders' Equity .......................... 6
Consolidated Statement of Cash Flows ............. 7-8
Notes to Financial Statements..................... 9-11
Interest Rate Risk Reporting Schedule............. 12
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 13-18
PART II - OTHER INFORMATION
---- -- ----- -----------
ITEMS 1-6 .................................................. 19-20
2
<PAGE> 3
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
---- - --------- -----------
ITEM 1.
---- --
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
------ ----------- ---- --- ----------
CONSOLIDATED BALANCE SHEETS
------------ ------- ------
MARCH 31, 1996 AND DECEMBER 31, 1995
----- --- ---- --- -------- --- ----
(Unaudited)
(Stated in Thousands)
ASSETS 3-31-96 12-31-95
------ ------- --------
<S> <C> <C>
Cash and Due from Banks $ 5,543 $ 6,828
Federal Funds Sold 14,250 9,600
------- --------
Cash and Cash Equivalents 19,793 16,428
Interest-bearing Deposits with
Other Financial Institutions 11,100 11,002
Investment Securities (Held-to- 6,757 6,018
Maturity. Market Value of $6,853
at March 31, 1996 and $6,090
at December 31, 1995)
Loans 46,470 50,670
Less: Allowance for Possible
Loan Losses (1,111) (1,025)
------ ------
Net Loans 45,359 49,645
Premises and Equipment, net 863 872
Other Real Estate Owned 1,303 1,303
Interest Receivable and Other
Assets 1,429 1,555
------ ------
TOTAL ASSETS $86,604 $86,822
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
----------- --- ------------- ------
Deposits:
Demand $22,036 $27,573
Savings 2,369 2,365
Interest-bearing Transaction
Accounts 28,985 26,394
Other Time 20,969 18,919
------ ------
Total Deposits 74,359 75,251
Interest Payable and Other
Liabilities 802 469
------ ------
TOTAL LIABILITIES 75,161 75,720
------ ------
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value:
2,000,000 shares authorized, no
shares outstanding --- ---
Common Stock, no par value;
3,000,000 shares authorized;
424,259 shares issued and
outstanding at 12-31-95
and 425,359 at 3-31-96 3,781 3,767
Retained Earnings 7,662 7,335
------ ------
TOTAL SHAREHOLDERS' EQUITY 11,443 11,102
------ ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $86,604 $86,822
====== ======
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
------ ----------- ---- --- ----------
CONSOLIDATED STATEMENTS OF INCOME FOR THE
------------ ---------- -- ------ --- ---
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
----- ------ ----- ----- --- ---- --- ----
(Unaudited)
THREE MONTHS THREE MONTHS
ENDED 3-31-95 ENDED 3-31-96
------------- -------------
<S> <C> <C>
Interest Income:
Interest and Fees on Loans $1,342,763 $1,376,755
Interest on Investment Securities 150,862 96,567
Interest on Federal Funds Sold 50,158 113,280
Interest on Time Deposits with
Other Financial Institutions 92,942 164,738
--------- ---------
TOTAL INTEREST INCOME 1,636,725 1,751,340
--------- ---------
Interest Expense:
Interest on Deposits 309,372 418,563
--------- ---------
TOTAL INTEREST EXPENSE 309,372 418,563
--------- ---------
NET INTEREST INCOME 1,327,353 1,332,777
Allowance for Loan Losses 140,000 85,000
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,187,353 1,427,777
Other Operating Income:
Service Charges on Deposit Accounts 98,170 82,284
Other 43,429 59,088
--------- ---------
TOTAL OTHER OPERATING INCOME 141,599 141,372
--------- ---------
Other Operating Expenses:
Salaries and Employee Benefits 431,204 456,923
Occupancy Expense 88,736 87,640
Furniture and Equipment Expense 26,325 16,616
Other 326,926 252,169
--------- ---------
TOTAL OTHER OPERATING EXPENSES 873,191 813,348
--------- ---------
INCOME BEFORE INCOME TAXES 455,761 575,801
--------- ---------
Provision for Income Taxes (184,173) (248,701)
--------- ---------
NET INCOME $ 271,588 $ 327,100
========= ==========
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
------ ----------- ---- --- ----------
CONSOLIDATED STATEMENTS OF INCOME FOR THE
------------ ---------- -- ------ --- ---
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
----- ------ ----- ----- --- ---- --- ----
(Unaudited)
(Continued)
THREE MONTHS THREE MONTHS
ENDED 3-31-95 ENDED 3-31-96
------------- -------------
<S> <C> <C>
NET INCOME $271,588 $327,100
======= =======
PRIMARY EARNINGS:
Weighted Average Shares
Outstanding: 454,684 460,045
-------- -------
PRIMARY EARNINGS PER SHARE $ 0.60 $ 0.71
======= =======
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
------ ----------- ---- --- ----------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------ ---------- -- ------- -- ------------- ------
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
--- --- ----- ------ ----- ----- --- ---- --- ----
(Unaudited)
NUMBER
OF SHARES COMMON RETAINED
OUTSTANDING STOCK EARNINGS
----------- ------ --------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 424,259 $3,767,258 $7,335,003
Exercise of Stock Options 1,100 13,497 ---
Net Income for the Three Months
Ended March 31, 1996 --- --- 327,100
------- --------- ---------
BALANCE AT MARCH 31, 1996 425,359 $3,780,755 $7,662,103
======= ========= =========
BALANCE AT DECEMBER 31, 1994 427,485 $3,837,684 $6,656,072
Purchase of Common Stock (2,036) (44,686) ---
Net Income for the Three Months
Ended March 31, 1995 --- --- 271,588
------- --------- ---------
BALANCE AT MARCH 31, 1995 425,449 $3,792,998 $6,927,660
======= ========= =========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1996
(Unaudited)
- -----------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 1,671,106
Fees received 232,792
Interest paid (408,292)
Cash paid to suppliers and employees (442,838)
Income taxes paid ( 0)
----------
Net cash provided by operating activities 1,052,768
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits with other
financial institutions (98,000)
Maturity of investment securities 0
Purchase of investment securities (738,596)
Net decrease in loans made to customers 4,013,124
Recoveries on loans previously charged off 1,250
Capital expenditures (25,468)
----------
Net cash used in investing activities 3,152,310
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, MRA, NOW,
and savings accounts (2,942,356)
Net increase in time deposits 2,050,459
Increase in other miscellaneous assets 51,519
Purchase of common stock 0
----------
Net cash provided by financing activities (840,378)
----------
Net increase in cash and cash equivalents 3,364,700
Cash and cash equivalents at 12-31-95 16,427,803
----------
Cash and cash equivalents at 3-31-96 $19,792,503
===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net Income $ 327,100
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 33,716
Provision for possible loan losses 85,000
Decrease in accrued interest receivable 48,125
Decrease in unearned loan fees (36,939)
Increase in accrued interest payable 10,271
Decrease in prepaid expenses 39,087
Increase in accounts payable 297,707
Increase in income tax payable 248,701
-------
Total adjustments 804,067
---------
Net cash provided by operating activities $1,052,768
=========
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 1,484,746
Fees received 224,946
Interest paid (282,917)
Cash paid to suppliers and employees (885,654)
Income taxes paid (70,654)
----------
Net cash provided by operating activities 470,467
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits with other
financial institutions (1,000)
Maturity of investment securities 489,070
Purchase of investment securities (484,810)
Net decrease in loans made to customers 1,284,108
Recoveries on loans previously charged off 2,022
Capital expenditures (4,687)
----------
Net cash used in investing activities 1,284,703
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, MRA, NOW,
and savings accounts (1,997,297)
Net increase in time deposits 1,860,925
Decrease in other miscellaneous assets 326,513
Purchase of common stock (44,686)
----------
Net cash provided by financing activities 145,455
----------
Net increase in cash and cash equivalents 1,900,625
Cash and cash equivalents at 12-31-93 9,246,342
----------
Cash and cash equivalents at 3-31-94 $11,146,967
===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net Income $271,588
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 41,988
Provision for possible loan losses 140,000
Increase in accrued interest receivable (37,005)
Decrease in unearned loan fees (31,627)
Increase in accrued interest payable 26,455
Increase in prepaid expenses (18,279)
Decrease in accounts payable (36,172)
Increase in income tax payable 113,519
-------
Total adjustments 215,331
Net cash provided by operating activities $470,467
========
</TABLE>
8
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
----- -- --------- ----------
1. CONSOLIDATED FINANCIAL STATEMENTS
------------ --------- ----------
In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
financial position at March 31, 1996 and the results of operations
for the three months ended March 31, 1996 and 1995 and cash flows
for the three months ended March 31, 1996 and 1995.
Certain information and footnote disclosures presented in the
Corporation's annual consolidated financial statements are not
included in these interim financial statements. Accordingly, the
accompanying unaudited interim consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Corporation's 1995
Annual Report to Shareholders, which is incorporated by reference in
the Company's 1995 annual report on Form 10-K. The results of
operations for the three months ended March 31, 1996 are not
necessarily indicative of the operating results for the full year.
2. SIGNIFICANT ACCOUNTING POLICIES
----------- ---------- --------
Net income per common and common equivalent share is computed using
the weighted average number of shares outstanding during the period
and the dilutive effect of stock options.
3. IMPAIRED LOANS AND TROUBLED DEBT RESTRUCTURING
-------- ----- --- -------- ---- -------------
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan,"
and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
-Income Recognition and Disclosures," requires that certain impaired
loans be measured based on the present value of expected future cash
flows discounted at the loan's original effective interest rate. As
a practical expedient, impairment may be measured based on the
loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. When the measure of the
impaired loan is less than the recorded investment in the loan, the
impairment is recorded through a valuation allowance.
9
<PAGE> 10
As of March 31, 1996 and March 31, 1995 the Bank's recorded investment in
impaired loans and the related valuation allowance calculated under SFAS
No 114 are a follows:
<TABLE>
<CAPTION>
1996
-------------------------
Recorded Valuation
Investment Allowance
---------- ----------
<S> <C> <C>
Impaired Loans
--------------
Valuation allowance
required $ 0 $0
No valuation allowance
required 609,000 0
-------------------------
Total Impaired Loans $609,000 $0
=========================
1995
-------------------------
Recorded Valuation
Investment Allowance
---------- ----------
Impaired Loans
--------------
Valuation allowance
required $ 0 $0
No valuation allowance
required 846,000 0
-------------------------
Total Impaired Loans $846,000 $0
=========================
</TABLE>
The valuation allowance is included in the allowance for loan losses on
the balance sheet.
Interest payments received on impaired loans are recorded as interest
income unless collection of the remaining recorded investment is doubtful
at which time payments received are recorded as reductions of principle.
The Bank did not recognize interest income on impaired loans for the first
quarter of 1995 but did record $22,143 in interest income on impaired
loans for the first quarter of 1996.
The average recorded investment in impaired loans for the quarters ending
March 31, 1996 and 1995 were $612,000 and $662,000 respectively.
10
<PAGE> 11
The allowance for loan losses is maintained at a level considered
adequate to provide for estimated probable incurred losses resulting
from loans and leases. The allowance is reviewed periodically, and as
losses are incurred and the amounts become estimable, they are
charged to operations in the periods that they become known.
The activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
March 31,
1995 1996
---------------------
<S> <C> <C>
Allowance for loan losses-
Balance at the beginning of year $ 931,878 $1,024,922
Provision for loan losses 140,000 85,000
Write downs 0 0
Recoveries 2,022 1,250
Transfers and others 0 0
---------------------
Balance at March 31 $1,073,900 $1,111,172
======================
</TABLE>
11
<PAGE> 12
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
- -------- ---- -------------------- ---- ---- --------
The following table provides an interest rate sensitivity and interest rate
risk analysis for the year ended 1995. The table presents each major
category of interest-earning assets and interest-bearing liabilities.
<TABLE>
<CAPTION>
INTEREST RATE RISK REPORTING SCHEDULE
REPORTING INSTITUTION: SUMMIT BANK REPORTING DATE: 3/31/96
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
($000.00)
OMITTED UP > 3 > 1 > 3 > 5 OVER
TOTAL 3 < 1 < 3 < 5 < 10 10 YRS
<S> <C> <C> <C> <C> <C> <C> <C>
I. EARNING ASSETS
------- ------
A. INVESTMENTS:
------------
1. U. S. TREASURIES $ 6,757 $ 1,558 $ 3,960 $1,239 $0 $0 $0
2. FED FUNDS 14,250 14,250 0 0 0 0 0
3. PURCHASED CDS 11,100 2,480 5,054 3,566 0 0 0
------ ------ ------ ----- - - -
TOTAL INVESTMENTS $32,107 $18,288 $ 9,014 $4,805 $0 $0 $0
B. LOANS:
-----
1. COMMERCIAL LOANS $42,751 $40,351 $ 1,330 $ 799 $266 $5 $0
2. REAL ESTATE LOANS 1,557 7 1,550 0 0 0 0
3. INSTALLMENT 17 17 0 0 0 0 0
------ ------ ------ ----- --- - -
TOTAL LOANS $44,325 $40,375 $ 2,880 $ 799 $266 $5 $0
C. TOTAL EARNING ASSETS $76,432 $58,663 $11,894 $5,604 $266 $5 $0
--------------------
II. COST OF FUNDS (DEPOSITS)
---- -- ----- ----------
A. CERTIFICATES OF DEPOSITS $21,969 $13,911 $ 7,760 $ 278 $ 0 $20 $0
B. MONEY MARKET ACCOUNTS 21,492 0 10,746 10,746 0 0 0
C. TRANSACTIONS ACCOUNTS 7,545 0 0 4,527 1,509 1,509 0
D. SAVINGS ACCOUNTS 2,369 0 0 1,421 474 474 0
------ ------ ------ ----- ----- ----- -
TOTAL COST OF FUNDS $53,376 $13,911 $18,506 $16,973 $1,983 $2,003 $0
------ ------ ------ ----- ----- ----- -
III. INTEREST SENSITIVE ASSETS $76,432 $58,663 $11,894 $ 5,605 $ 266 $ 4 $0
IV. INTEREST SENSITIVE LIABILITIES $53,376 $13,911 $18,506 $16,973 $1,983 $2,003 $0
------- ------- ------- ------- ------ ------ --
V. GAP $23,056 $44,752 $(6,612) $(11,368) $(1,717) $(1,999) $0
VI. CUMULATIVE GAP $23,056 $44,752 $38,140 $26,772 $25,055 $23,056 $23,056
VII. GAP RATIO 1.43 4.22 0.64 0.33 0.13
VIII.CUMULATIVE RATIO 1.43 4.22 2.18 1.54 1.49 1.43 1.43
IX. GAP AS % OF TOTAL ASSETS 27.50 53.39 (7.89) (13.56) (2.05) (2.38)
X. CUMULATIVE GAP AS A % OF
TOTAL ASSETS 27.50 53.39 45.50 31.94 29.89 27.50 27.50
</TABLE>
12
<PAGE> 13
ITEM 2.
---- -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
------------ ---------- --- -------- -- --------- ---------
AND RESULTS OF OPERATIONS
--- ------- -- ----------
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
The registrant is a bank holding company whose only operating subsidiary is
Summit Bank. The following discussion primarily concerns the financial condition
and results of operations of the Holding Company ("Company") on a consolidated
basis including the subsidiary bank. All adjustments made in the compilation of
this information are of a normal recurring nature.
FINANCIAL CONDITION
- --------- ---------
Liquidity Management
- --------- ----------
The consolidated loan-to-deposit ratio at March 31, 1996 was 62.5% which was a
decrease from 67.2% for the same period in 1995. Although the outstanding loans
as of March 31, 1996 were approximately the same as March 31, 1995, total
deposits increased $6,600,000 versus the same time last year. Most of the
increase is anticipated to run-off due to payments of income and property taxes
during April, 1996. The average loan-to-deposit ratio for the first quarter of
1996 was 67.5%, up from 66.9% for the same period last year. This increase was
caused by a $1,072,000 addition in average total loans in 1996 versus 1995.
Management continues to seek the acquisition of quality credits.
Net liquid assets, which consists primarily of cash, due from banks,
interest-bearing deposits with other financial institutions, investment
securities and federal funds sold totaled $37,650,000 on March 31, 1996. This
amount represented 50.6% of total deposits in comparison to the liquidity ratio
of 42.1% as of March 31, 1995. This increase is primarily a result of deposit
growth increasing faster than loan growth. It is management's belief that the
current liquidity level is appropriate given current economic conditions and is
sufficient to meet current needs.
The Company is not aware of any current recommendations by the regulatory
authorities which, if they were implemented, would have a material effect on the
Company.
13
<PAGE> 14
The following table sets forth book value of investments by category and the
percent of total investments at the dates specified.
<TABLE>
<CAPTION>
Investment Comparative
----------------------
3-31-95 % 12-31-95 % 3-31-96 %
------- - -------- - ------- -
<S> <C> <C> <C> <C> <C> <C>
Fed Funds Sold $ 6,050 26% $ 9,600 36% $14,250 44%
Interest bearing
Deposits 7,040 30% 11,002 41% 11,100 35%
Securities 10,321 44% 6,018 23% 6,757 21%
------- --- ------- --- ------- ---
$23,411 100% $26,620 100% $32,107 100%
======= === ======= === ======= ===
</TABLE>
Interest bearing deposits are comprised of Time Certificates of Deposit with
other banks and savings and loan institutions with no more than $100,000 in any
institution.
Securities on March 31, 1996 were comprised of $2,517,000 in
U.S. Gov't treasury bills and $4,240,000 in U. S. Gov't
notes.
Changes in Financial Position
- ------- -- --------- --------
As of March 31, 1996, deposits decreased $892,000 from year end 1995 while at
the same time net loans outstanding decreased $4,286,000. Total deposits as of
March 31, 1996 were $74,359,000, an increase of 10% from $67,723,000 as of March
31, 1995. Total loans as of March 31, 1996 were $46,470,000, which was a minor
decrease from $46,571,000 as of March 31, 1995. The decline in the loan category
was mentioned previously under "Liquidity Management."
The following table sets forth the amount of deposits by each category and the
percent of total deposits at the dates specified.
<TABLE>
<CAPTION>
Deposit Comparative
------- -----------
3-31-95 % 12-31-95 % 3-31-96 %
------- - -------- - ------- -
<S> <C> <C> <C> <C> <C> <C>
Demand $21,799 32% $27,573 37% $22,036 30%
Savings 3,014 4% 2,365 3% 2,369 3%
Interest bearing
transactions accts 27,580 41% 26,394 35% 28,985 39%
Other Time 15,330 23% 18,919 25% 20,969 28%
------- --- ------- --- ------- ---
$67,723 100% $75,251 100% $74,359 100%
======= === ======= === ======= ===
</TABLE>
14
<PAGE> 15
The following table sets forth the amount of loans outstanding by each category
and the percent of total loans outstanding at the dates specified.
<TABLE>
<CAPTION>
Loan Comparative
---- -----------
3-31-95 % 12-31-95 % 3-31-96 %
------- - -------- - ------- -
<S> <C> <C> <C> <C> <C> <C>
Commercial $30,183 65% $30,472 60% $28,095 60%
Real estate-const. 5,256 11% 8,432 17% 7,052 15%
Real estate-other 4,849 10% 6,193 12% 5,810 13%
Installment/Other 6,283 14% 5,573 11% 5,513 12%
----- -- ----- -- ----- --
$46,571 100% $50,670 100% $46,470 100%
======= === ======= === ======= ===
</TABLE>
Non-Performing Assets
- -------------- ------
The following table provides information with respect to the subsidiary Bank's
past due loans and components for non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
Non-Performing Assets
---------------------
(000.00 Omitted)
3-31-95 12-31-95 3-31-96
------- -------- -------
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing $ 184 $ 367 $ 472
Non-accrual loans 846 39 137
Other real estate owned 2,816 1,303 1,303
----- ----- -----
Total non-performing assets $3,846 $1,709 $1,912
====== ===== =====
Non-performing assets to
period end loans plus
other real estate owned 7.79% 3.28% 4.00%
Allowance to non-performing
loans 104% 274% 182%
Allowance to non-performing
assets 28% 65% 58%
</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.
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
15
<PAGE> 16
accrued interest exceeds the fair value of the property, the difference is
charged to the allowance for loan losses at the time of acquisition. Subsequent
declines in value from the recorded amount, if any, and gains or losses upon
disposition are included in noninterest expense. Operating expenses related to
other real estate owned are charged to noninterest expense in the period
incurred.
The decrease in non-performing assets from March 31, 1995 to March 31, 1996 is
due primarily to a decrease in non-accrual loans of $709,000 and a substantial
decrease in Other Real Estate owned of $1,513,000. Loans 90 days or more past
due and still accruing increased $288,000 and is related to a loan in the
process of renewal.
The amount of $137,000 in non-accrual loans represents loans to 2 borrowers. One
loan in the amount of $38,000 is reducing $1,000 per month. The remaining loan
of $99,000 is in the process of foreclosure with minimal loss anticipated
The amount in Other Real Estate Owned represents a parcel of improved land, and
two parcels of partially improved land. The Bank is actively marketing these
parcels. No loss is anticipated on any of the sale of the properties.
Capital Position
- ------- --------
As of March 31, 1996, Shareholders' Equity was $11,443,000. This represents an
increase of $722,000, or 6.7% over the same period last year. Since the
inception of the repurchase program in 1989, the Company has authorized the
repurchase of $2,050,000 of its stock. As of March 31, 1996, the Company has
repurchased a total of 150,288 shares of the Company stock constituting 28.0% of
the Company's original stock prior to the repurchase program, at a total cost of
$2,030,682, or an average price per share of $13.51. The Company plans to
continue its repurchase program as an additional avenue for liquidity for its
shareholders. The program has not affected the Company's liquidity or capital
positions or its ability to operate as the Company's capital growth has exceeded
its asset growth. In addition, the Company's subsidiary Bank remains more than
well capitalized under current regulations.
On March 14, 1989, the Board of Directors of the Federal Deposit Insurance
Corporation approved a Statement of Policy on Risk-Based Capital which became
effective December 31, 1990. Under this statement banks are required to meet
certain capital standards in addition to leverage standards as previously
outlined under FDIC Rules and Regulations. The Bank does not foresee any
material or significant impact to its manner of operation in the foreseeable
future. Total qualifying capital allowable under risk-based capital guidelines
for the subsidiary bank is $8,704,000. The
16
<PAGE> 17
following table shows the risk-based capital and leverage ratios as well as the
minimum regulatory requirements for the same as of March 31, 1996:
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
<S> <C> <C>
Tier 1 Capital 12.72% 4.00%
Total Capital 13.85% 8.00%
Leverage Ratio 9.91% 3.00%
</TABLE>
The Company is not aware of any current recommendations by the regulatory
authorities which if they were implemented would have a material effect on the
Company.
RESULTS OF OPERATIONS
- ------- -- ----------
Net Interest Income
- --- -------- ------
Total interest income including loan fees increased from $1,637,000 for the
first three months of 1995 to $1,751,000 for the same period in 1996. Although
the prime lending rate decreased .47% for the first quarter 1996 versus the same
period last year, average loans outstanding increased $1,100,000. Loan fees
showed an increase of $13,000 over the same period last year. The yield on loans
and fees increased .23% over the same period last year. Average outstanding
investments showed a increase of $5,207,000 for the first quarter 1996 versus
1995, primarily due to the increase in deposit balances. The yield on
investments showed a increase of .23% reflective of market conditions. Interest
expense increased from $309,000 as of the end of the first three months of 1995
to $419,000 in 1996. This increase was brought about by a increase in average
interest-bearing deposit accounts of $3,101,000 during the first quarter of 1996
versus the same period last year. The average cost of funds for the period
ending March 31, 1996 was .98% more than the same period last year. As a result
of these factors, net interest margin for the first three months of 1996
declined .82% from the same period last year.
Other Operating Income
- ----- --------- ------
Service charges on deposit accounts as of the end of the first three months of
1996 decreased to $82,000 versus $98,000 for the same period in 1995. The
decrease was due to lower fees collected in service charges related to return
check and overdraft charges. Other charges and fees increased $16,000 primarily
due to fees collected on wire transfers.
17
<PAGE> 18
Loan Loss Provision
- ---- ---- ---------
The decrease in loan loss provision was primarily due to a perceived improvement
in California's economy as well as the current level of the allowance.
The allowance for loan losses is maintained at a level that management of the
Company considers to be adequate for losses that can be reasonably anticipated.
The allowance is increased by charges to operating expenses and reduced by
net-charge-offs. The level of the allowance for loan losses is based on
management's evaluation of potential losses in the loan portfolio, as well as
prevailing and anticipated economic conditions.
Management employs a systematic methodology on a monthly basis to determine the
adequacy of the allowance for current and future loan losses. Each loan is
graded at the time of extension or renewal by the credit administrator. Gradings
are assigned a risk factor which is calculated to assess the adequacy of the
allowance for loan losses. Further, management considers other factors such as
overall portfolio quality, trends in the level of delinquent and classified
loans, specific problem loans, and current and anticipated economic conditions.
The balance in the allowance for loan losses at March 31, 1996 was $1,111,000 or
2.39% of total loans compared to $1,074,000 or 2.31% of total loans at March 31,
1995.
Other Operating Expenses
- ----- --------- --------
Total other operating expenses decreased $60,000 as of the end of the first
three months of 1996 compared to the same period last year. This decrease was
primarily due to a decrease in foreclosure and OREO expense as well as a
decrease in legal fess.
Provision for Income Taxes
- --------- --- ------ -----
The Company's provision for income taxes as of the end of the first three months
of 1996 increased from $184,000 in 1995 to $249,000. This increase is considered
normal and includes some savings related to income generated from tax exempt
municipal bonds which was available in 1995 but not available in 1996. For the
same period in 1996 the Company's total effective tax rate was 43.2% compared to
40.4% in 1995.
Net Income
- --- ------
Net income for the first quarter of 1996 increased from $272,000 for the same
period in 1995 to $327,000, or a increase of 20.2%.
18
<PAGE> 19
PART II - OTHER INFORMATION
---- -- ----- -----------
ITEM 1 - LEGAL PROCEEDINGS
----- -----------
No material developments from that which was reported in the
10-K dated March 31, 1996 for the year ended December 31, 1995.
ITEM 2 - CHANGE IN SECURITIES
------ -- ----------
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
-------- ---- ------ ----------
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------- -- ------- -- - ---- -- -------- -------
None
ITEM 5 - OTHER INFORMATION
----- -----------
None
ITEM 6 - REPORTS ON FORM 8-K
------- -- ---- ---
No reports on Form 8-K have been filed by the registrant during
the first quarter of 1996 for which this report is filed.
19
<PAGE> 20
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SUMMIT BANCSHARES, INC.
Registrant
DATE: May 14, 1996 For: /s/ Shirley W. Nelson
-------------------- ------------------------------
Shirley W. Nelson
Chairman and CEO
DATE: May 14, 1996 For: /s/ Kikuo Nakahar
-------------------- -------------------------------
Kikuo Nakahara
Chief Financial Officer
The remainder of this page is intentionally left blank
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000353203
<NAME> SUMMIT BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 5,542,503
<INT-BEARING-DEPOSITS> 11,100,000
<FED-FUNDS-SOLD> 1,425,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 6,757,053
<INVESTMENTS-MARKET> 6,852,675
<LOANS> 46,469,929
<ALLOWANCE> 1,111,172
<TOTAL-ASSETS> 86,603,523
<DEPOSITS> 74,359,017
<SHORT-TERM> 0
<LIABILITIES-OTHER> 801,648
<LONG-TERM> 0
0
0
<COMMON> 3,780,755
<OTHER-SE> 7,662,103
<TOTAL-LIABILITIES-AND-EQUITY> 11,442,858
<INTEREST-LOAN> 1,376,755
<INTEREST-INVEST> 374,585
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,751,340
<INTEREST-DEPOSIT> 418,563
<INTEREST-EXPENSE> 418,563
<INTEREST-INCOME-NET> 1,332,777
<LOAN-LOSSES> 85,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 813,348
<INCOME-PRETAX> 575,801
<INCOME-PRE-EXTRAORDINARY> 575,801
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 327,100
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 137,000
<LOANS-PAST> 472,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 137,000
<ALLOWANCE-OPEN> 1,024,922
<CHARGE-OFFS> 0
<RECOVERIES> 1,250
<ALLOWANCE-CLOSE> 1,111,172
<ALLOWANCE-DOMESTIC> 1,111,172
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Not contained in document.
</FN>
</TABLE>
