<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: JUNE 30, 1997
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
427,675 shares of no par value common stock
issued as of June 30, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 PAGE
SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . . . . . . . . . . 3
Consolidated Statements of Income. . . . . . . . . . . . 4
Consolidated Statement of Cash Flows . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . 6
Interest Rate Risk Reporting Schedule. . . . . . . . . 7
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 8-16
PART II - OTHER INFORMATION
ITEMS 1-6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17-19
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 6-30-97 12-31-1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 5,187,974 $ 7,188,515
Federal funds sold 8,190,000 11,980,000
------------ ---------------
Cash and cash equivalents 13,377,974 19,168,515
Time deposits with other financial institutions 8,421,000 9,607,000
Investment securities (fair value of $10,769,413 at
June 30, 1997 and $8,830,810 at
December 31, 1996 ) held to maturity 10,742,694 8,759,850
Loans, net of allowance for loan losses of
$1,128,716 at June 30, 1997 and
$1,070,318 at December 31, 1996 56,599,736 51,408,038
Other real estate owned 1,241,459 1,291,459
Premises and equipment, net 917,455 896,856
Interest receivable and other assets 2,018,977 1,814,083
------------ ---------------
Total Assets $93,319,295 $92,945,801
------------ ---------------
------------ ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------
Deposits:
Demand $ 26,089,687 $ 27,833,067
Interest-bearing transaction accounts 29,723,463 28,663,828
Savings 3,209,136 2,665,539
Time certificates $100,000 and over 14,144,778 15,324,980
Other time certificates 7,242,236 6,022,170
------------ ---------------
Total Deposits 80,409,300 80,509,584
Interest payable and other liabilities 676,983 497,074
------------ ---------------
Total Liabilities 81,086,283 81,006,658
Shareholders' Equity
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;
427,675 shares outstanding at June 30, 1997 and
433,209 shares outstanding at December 31, 1996 3,650,161 3,830,343
Retained Earnings 8,582,851 8,108,800
------------ ---------------
Total Shareholders' Equity 12,233,012 11,939,143
Total Liabilities and Shareholders' Equity $93,319,295 $92,945,801
------------ ---------------
------------ ---------------
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED 6-30-97 ENDED 6-30-96 ENDED 6-30-97 ENDED 6-30-96
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,622,703 $1,316,207 $ 3,127,713 $ 2,692,962
Interest on time deposits with other
financial institutions 129,144 124,550 251,820 299,333
Interest on U.S. government
treasury securities 170,438 136,838 312,055 221,117
Interest on federal funds sold 117,505 134,595 279,714 250,118
----------- ----------- ----------- -----------
Total interest income 2,039,790 1,712,190 3,971,302 3,463,530
INTEREST EXPENSE:
Interest on deposits 466,553 415,460 922,575 834,023
Total interest expense 466,553 415,460 922,575 834,023
----------- ----------- ----------- -----------
Net interest income 1,573,237 1,296,730 3,048,727 2,629,507
Provision for loan losses 25,000 30,000 100,000 115,000
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 1,548,237 1,266,730 2,948,727 2,514,507
NON-INTEREST INCOME:
Service charges on deposit accounts 70,672 78,508 144,626 160,792
Other customer fees and charges 51,756 43,545 99,478 102,633
----------- ----------- ----------- -----------
Total non-interest income 122,428 122,053 244,104 263,425
NON-INTEREST EXPENSE:
Salaries and employee benefits 505,778 461,559 1,007,578 918,482
Occupancy expense 92,511 94,875 182,618 182,515
Equipment expense 43,084 22,351 71,150 38,967
Other 320,984 233,355 566,628 485,524
----------- ----------- ----------- -----------
Total non-interest expense 962,357 812,140 1,827,974 1,625,488
Income before income taxes 708,308 576,643 1,364,857 1,152,444
Provision for income taxes 295,013 234,322 570,049 483,023
----------- ----------- ----------- -----------
Net Income $413,295 $342,321 $794,808 $669,421
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
PRIMARY EARNINGS:
Weighted average shares outstanding 463,020 460,045 463,020 461,081
----------- ----------- ----------- -----------
PRIMARY EARNINGS PER SHARE $0.89 $0.74 $1.72 $1.45
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
-4-
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED 6-30-97 ENDED 6-30-96
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 3,575,737 $ 3,286,906
Fees received 512,933 492,665
Interest paid (935,921) (869,922)
Cash paid to suppliers and employees (1,663,628) (1,387,314)
Income taxes paid (465,000) (377,000)
------------ ------------
Net cash provided by operating activities 1,024,121 1,145,335
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in time deposits with
other financial institutions 1,186,000 1,787,000
Maturity of investment securities 2,515,682 1,554,594
Purchase of investment securities (4,498,526) (5,228,600)
Net (increase) decrease in loans to customers (5,543,793) 3,128,678
Recoveries on loans previously charged-off 1,750 2,000
(Increase) decrease in premises and equipment (118,353) (88,692)
------------ ------------
Net cash provided by (used in) investing activities (6,457,240) 1,154,980
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) decrease in demand, interest
bearing transaction, and savings deposits 140,148 (3,613,410)
Net increase (decrease) in time deposits (39,864) 2,089,687
(Increase) decrease in other assets 43,232 27,562
Exercise of stock options 0 0
Repurchase of common stock (180,182) (36,438)
Dividends paid (320,756) (319,432)
Net cash provided by (used in) financing activities (357,422) (1,852,031)
------------ ------------
Net increase (decrease) in cash and cash equivalents (5,790,541) 448,284
Cash and cash equivalents at the
beginning of the year 19,168,515 16,427,803
------------ ------------
Cash and cash equivalents at the end of the year $ 13,377,974 16,876,087
------------ ------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 794,808 $ 669,421
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 95,009 59,325
Provision for loan losses and OREO losses 150,000 115,000
(Increase) decrease in interest receivable (151,836) 65,922
Increase (decrease) in unearned loan fees (24,900) (13,306)
Increase (decrease) in accrued interest payable (13,346) (35,899)
(Increase) decrease in prepaid expenses (4,798) 32,754
Increase (decrease) in accounts payable 74,136 146,095
Increase (decrease) in income taxes payable 105,048 106,023
------------ ------------
Total adjustments 229,313 475,914
------------ ------------
Net cash provided by operating activities $ 1,024,121 $ 1,145,335
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
NOTES TO CONSOLIDATED 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 June 30, 1997
and the results of operations for the six months ended June 30, 1997 and 1996
and cash flows for the six months ended June 30, 1997 and 1996.
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 1996 Annual Report to Shareholders, which is incorporated by
reference in the Company's 1996 annual report on Form 10-K. The results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the operating results for the full year.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February of 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). The
Bank is required to adopt SFAS 128 in the fourth quarter of 1997 and will
restate at that time earnings per share data for prior periods to conform with
SFAS 128. Earlier application is not permitted.
SFAS 128 replaces current earnings per share reporting requirements and requires
a dual presentation of basic and diluted earnings per share. Earnings per share
excludes dilution and is computed by dividing net income by the weighted average
common shares outstanding of 463,020 and 460,045 during the three months ended
June 30, 1997 and 1996, respectively. Diluted earnings per share reflects the
potential dilution that could occur if common shares were issued pursuant to the
exercise of options under the Bank's Stock Option Plans. Diluted earnings per
share under SFAS 128 would not have been significantly different than primary
earnings per share currently reported for the periods.
-6-
<PAGE>
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
The following table provides an interest rate sensitivity and interest rate
risk analysis for the quarter ended June 30, 1997. The table presents each
major category of interest-earning assets and interest bearing-liabilities.
INTEREST RATE RISK REPORTING SCHEDULE
REPORTING INSTITUTION: SUMMIT BANK REPORTING DATE: 6-30-97
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
<TABLE>
<CAPTION>
($000.00)
OMITTED UP TO > 3MOS > 1YR > 3YRS > 5YRS OVER
TOTAL 3MOS < 1YR < 3YRS < 5YRS < 10YRS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
I. EARNING ASSETS
A. INVESTMENTS:
1. U. S. TREASURIES $6,743 $0 $2,248 $4,495 $0 $0 $0
2. U. S. AGENCIES 4,000 0 2,500 1,500 0 0 0
3. FED FUNDS SOLD 8,190 8,190 0 0 0 0 0
4. PURCHASED CDS 8,421 2,478 5,448 495 0 0 0
-------- -------- -------- -------- -------- -------- ---------
TOTAL INVESTMENTS $27,354 $10,668 $10,196 $6,490 $0 $0 $0
B. LOANS
1. COMMERCIAL $55,224 $52,095 $1,078 $789 $396 $866 $0
2. REAL ESTATE 0 0 0 0 0 0 0
3. INSTALLMENT 15 15 0 0 0 0 0
-------- -------- -------- -------- -------- -------- ---------
TOTAL LOANS $55,239 $52,110 $1,078 $789 $396 $866 $0
C. TOTAL EARNING ASSETS $82,593 $62,778 $11,274 $7,279 $396 $866 $0
II. COST OF FUNDS (DEPOSITS)
A. CERTIFICATE OF DEPOSITS $21,387 $12,219 $8,132 $939 $97 $0 $0
B. MONEY MARKET ACCOUNTS 25,477 0 12,739 12,738 0 0 0
C. TRANSACTION ACCOUNTS 5,296 0 0 2,648 1,324 1,324 0
D. SAVINGS ACCOUNTS 2,220 0 0 1,110 555 555 0
-------- -------- -------- -------- -------- -------- ---------
TOTAL COST OF FUNDS $54,380 $12,219 $20,871 $17,435 $1,976 $1,879 $0
III. INTEREST SENSITIVE ASSETS $82,593 $62,778 $11,274 $7,279 $396 $866 $0
IV. INTEREST SENSITIVE LIABILITIES $54,380 $12,219 $20,871 $17,435 $1,976 $1,879 $0
-------- -------- -------- -------- -------- -------- ---------
V. GAP $28,213 $50,559 ($9,597) ($10,156) ($1,580) ($1,013) $0
VI. CUMULATIVE GAP $28,213 $50,559 $40,962 $30,806 $29,226 $28,213 $28,213
VII. GAP RATIO 1.52 5.14 0.54 0.42 0.20 0.46
VIII. CUMULATIVE RATIO 1.52 5.14 2.25 1.61 1.56 1.52 1.52
IX. GAP AS A % OF TOTAL 31.23 55.97 -10.63 -11.24 -1.75 -1.12
ASSETS
X. CUMULATIVE GAP AS A % OF
TOTAL ASSETS 31.23 55.97 45.35 34.10 32.36 31.23 31.23
</TABLE>
-7-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997
The registrant, Summit Bancshares, Inc. (the "Company") is a bank holding
company whose only operating subsidiary is Summit Bank (the "Bank"). The
following discussion primarily concerns the financial condition and results of
operations of the 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 June 30, 1997 was 71.8% which was an
increase from 64.8% for the same period in 1996. Total outstanding loans as of
June 30, 1997 increased $9,966,000 compared to the same period a year ago while
total deposits increased $6,682,000 versus the same time last year. The
increases in loans and deposits are mainly due to Bank's effort in marketing its
products. The average loan-to-deposit ratio for the second quarter of 1997 was
68.8%, up from 64.2% for the same period last year. This increase was caused by
an increase in average total deposits of $7,965,000 or 11.0% while average total
loans increased $8,609,000 or 18.5%. Management continues to seek growth and
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 $27,354,000 on June 30, 1997. This
amount represented 34.0% of total deposits in comparison to the liquidity
ratio of 48.5% as of June 30, 1996. This decrease is primarily a result of
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.
-8-
<PAGE>
The following table sets forth book value of investments
by category and the percent of total investments at the dates specified.
INVESTMENT COMPARATIVE
($000.00 Omitted)
6-30-97 % 12-31-96 % 6-30-96 %
Fed funds sold 8,190 30% 11,980 39% 10,450 36%
Interest bearing
deposits 8,421 31% 9,607 32% 9,215 31%
Securities 10,743 39% 8,759 29% 9,692 33%
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 June 30, 1997 were comprised of $6,742,000 in U. S. Gov't notes
and $4,000,000 in U.S. Gov't agencies.
CHANGES IN FINANCIAL POSITION
As of June 30, 1997, total deposits increased $100,000 from December 31, 1996
while at the same time net loans outstanding increased $5,192,000. Total
deposits as of June 30, 1997 were $80,409,000, an increase of 9.1% from
$73,727,000 as of June 30, 1996. Total loans as of June 30, 1997 were
$57,728,000, an increase of 20.9% from $47,762,000 as of June 30, 1996.
The following table sets forth the amount of deposits by each category and the
percent of total deposits at the dates specified.
DEPOSIT COMPARATIVE
($000.00 Omitted)
6-30-97 % 12-31-96 % 6-30-96 %
Demand $26,090 32% $27,833 34% $22,764 31%
Savings 3,209 4% 2,666 3% 2,178 3%
Interest bearing
trans. deposits 29,723 37% 28,664 36% 27,777 38%
Other time 21,387 27% 21,347 27% 21,008 28%
-9-
<PAGE>
The following table sets forth the amount of loans
outstanding by each category and the percent of total loans
outstanding at the dates specified.
LOAN COMPARATIVE
($000.00 Omitted)
6-30-97 % 12-31-96 % 6-30-96 %
Commercial $40,337 70% $35,788 68% $29,850 62%
Real estate-const 8,297 14% 7,508 14% 6,530 14%
Real estate-other 3,020 5% 3,063 6% 5,783 12%
Installment/other 6,074 11% 6,119 12% 5,599 12%
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.
NON-PERFORMING ASSETS
(000.00 Omitted)
6-30-97 12-31-96 6-30-96
Loans 90 days or more past
due & still accruing $ 3 $ 0 $ 58
Non-accrual loans 0 0 146
Other real estate owned _1,241 1,291 1,302
------ ------ ------
Total non-performing assets $1,244 $1,291 $1,506
------ ------ ------
------ ------ -------
Non-performing assets to
period end loans plus
other real estate owned 2.20% 2.46% 3.07%
Allowance to non-performing
loans 37624% 0% 560%
Allowance to non-performing
assets 94% 83% 76%
-10-
<PAGE>
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 ("OREO")is comprised of properties acquired through
foreclosure. These properties are carried at the lower of the recorded loan
balance or their estimated fair market value based on appraisal. When the loan
balance plus accrued interest exceeds the fair value of the property, the
difference is charged to the allowance for loan losses at the time of
acquisition. Subsequent declines in value from the recorded amount, if any, and
gains or losses upon disposition are included in noninterest expense. Operating
expenses related to other real estate owned are charged to noninterest expense
in the period incurred.
The decrease in non-performing assets from June 30, 1996 to June 30, 1997 is due
primarily to a decrease in loans 90 days past due and non-accrual loans of
$201,000 and a decrease of $61,000 in OREO.
The total OREO amount, $1,241, 000, is related to two properties. One of the
properties is vacant land in the Oakland Hills and the second property is two
continguous parcels in the Danville/Diablo Mountain area of Alameda County. The
Bank is actively marketing these two parcels.
-11-
<PAGE>
CAPITAL POSITION
As of June 30, 1997, Shareholders' Equity was $12,233,000. This represents an
increase of $797,000, or 7.0% over the same period last year. Since the
inception of the repurchase program in 1989, the Company has authorized the
repurchase of $2,500,000 of its stock. As of June 30, 1997, the Company has
repurchased a total of 157,652 shares of the Company stock constituting 29.1% of
the Company's original stock prior to the repurchase program, at a total cost of
$2,266,153, or an average price per share of $14.37. 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
position 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 ("FDIC") 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 following table shows the risk-based capital and leverage ratios as well as
the minimum regulatory requirements for the same as of June 30, 1997:
Minimum
Capital Ratio Regulatory Requirement
Tier 1 Capital 15.16% 4.00%
Total Capital 16.37% 8.00%
Leverage Ratio 10.23% 3.00%
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.
-12-
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Total interest income including loan fees increased from $3,464,000 for the
first six months of 1996 to $3,971,000 for the same period in 1997. The prime
lending rate increased to 8.50% in March 1997 from 8.25% compared to the same
period last year and a factor in the increased interest income on loans. Another
reason for the increase in interest income on loans was due to $5,600,000
increase in average loans compared to the same period a year ago. Loan fees
showed an increase of $51,182 over the same period last year. The yield on
loans and fees increased 36 basis points over the same period last year. The
increase in interest income from investments was due to total average
outstanding investments volume increase of $2,401,000 for the first six months
in 1997 versus 1996. This increase was primarily due to an increase in deposit
balances. The yield on investments for the first six months of 1997 showed a
decrease of 3 basis points compared to the same period in 1996 reflective of
market conditions.
Interest expense increased from $834,000 at the end of the first six months of
1996 to $923,000 in 1997. This increase was due to increase in average
interest-bearing deposit accounts of $4,871,000 during the first six months of
1997 versus the same period last year. The average cost of funds for the period
ending June 30, 1997 was 9 basis points more than the same period last year. As
a result of these factors, net interest margin for the first six months of 1997
was 7.25% compared to 6.93% for the same period last year.
For the second quarter, total interest income on loans including loan fees
increased from $1,712,000 in 1996 to $2,040,000 for the same period in 1997.
This increase is primarily due to increase in the prime lending rate and the
increase in loan volume. Average loan volume for the second quarter of 1997
showed an increase of $8,609,000 from the same period last year. For the second
quarter of 1997, total interest income on investments increased $21,100. This
increase was attributable to an average investment volume increase of $524,000
and an interest yield increase from 5.53% in the second quarter of 1996 to 5.72%
for the same period in 1997.
-13-
<PAGE>
For the second quarter of 1997, interest expense increased $51,000 compared to
the same period in 1996. Average outstanding interest bearing deposits increased
from $51,155,000 in the second quarter in 1996 to $55,833,000 in the second
quarter in 1997. Average cost of funds for the same period was 3.34% in 1997
compared to 3.25% in 1996. As a result, net interest income for the second
quarter of 1997 increased $277,000. or 2.53% compared to the same period in
1996.
OTHER OPERATING INCOME
Service charges on deposit accounts as of the end of the first half of 1997
decreased to $145,000 versus $161,000 for the same period in 1996. The decrease
was due to lower fees collected in service charges related to return check and
overdraft charges and from analysis of service charges on commercial accounts.
Other charges and fees decreased $3,000, primarily due to lower fees collected
on wire transfers but partially offset by increase in merchant fees collected.
Service charges on deposit accounts for the second quarter of 1997 decreased
$7,800 compared to the same period last year due to decreased collection of fees
associated with return check and overdraft charges. Other customer fees and
charges increased $8,200 for the present quarter associated with increased fees
from merchant activities.
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 for loan losses.
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.
-14-
<PAGE>
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 following table summarizes the activity in the Bank's allowance for credit
losses for the six months ended June 30, 1997 and 1996.
SIX MONTHS ENDED
-----------------
(000.00 Omitted)
6-30-97 6-30-96
Balance, beginning of the period $1,070 $1,025
Provision for loan losses 100 115
Recoveries 2 2
Loans charged-off (43) 0
------ ------
Balance, end of the period $1,129 $1,142
The balance in the allowance for loan losses at June 30, 1997 was 1.95% of total
loans compared to 2.39% of total loans at June 30, 1996.
OTHER OPERATING EXPENSES
Total other operating expenses increased $202,000 as of the end of the first six
months of 1997 compared to the same period last year. This increase was
primarily due to an increase in salaries and employee expense. The Bank's
commitment to grow increased the number of employees from 39 to 40 primarily in
the sales area. The increase was also attributed to increase in regular raises
in pay, increased cost of benefits and bonuses related to sales. Other expenses
increased due to increased foreclosure expenses and business development costs.
For the second quarter 1997, operating expenses increased $150,000 compared to
the same period last year for the same reasons mentioned above.
-15-
<PAGE>
PROVISION FOR INCOME TAXES
The Company's provision for income taxes as of the end of the first six months
of 1997 increased from $483,000 in 1996 to $570,000. This increase is
attributed to increased income from regular business operations. For the same
period in 1997 the Company's total effective tax rate was 41.8% compared to
41.9% in 1996.
For the second quarter of 1997, the provision for income taxes increased $61,000
compared to the second quarter of 1996. The effective tax rate for this period
was 41.7% versus 40.6% for the same period last year.
NET INCOME
Net income for the first half of 1997 increased from $669,000 for the same
period in 1996 to $795,000, or a increase of 18.8%. Second quarter net income
increased $71,000 or 20.7% over the same period last year.
-16-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No material developments from that which was
reported in the Form 10-K dated March 31, 1997 for
the year ended December 31, 1996.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting of shareholders minutes are attached
(Exhibit #1) The annual meeting was held April 24,
1997.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re: computation of per share
earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
One Form 8-K was filed by the registrant during
the first quarter of 1997, reporting that the
Company had dismissed Arthur Andersen L.L.P. as
its independent accountants. On May 8, 1997, the Company
filed a Form 8-K indicating that it retained Coopers and
Lybrand L.L.P. as its independent public accountants for
the fiscal year ending December 31, 1997.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
SUMMIT BANCSHARES, INC.
REGISTRANT
DATE: BY:
-------------------- ---------------------------
SHIRLEY W. NELSON
CHAIRMAN AND CEO
(PRINCIPAL EXECUTIVE OFFICER)
DATE: BY:
-------------------- ---------------------------
KIKUO NAKAHARA
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
The remainder of this page is intentionally left blank
-18-
<PAGE>
WEIGHTED AVERAGE SHARES
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PRIMARY FULLY
<S> <C> <C> <C> <C> <C>
A. COMMON STOCK ANNUAL 428,816 428,816
(1ST QTR) 428,816 428,816
NO OF
DAYS
433,209 12-31-96(BAL FWD) ----------
433,209 TO 1-06-97 6 2,599,254
432,109 TO 1-14-97 8 3,456,872
429,224 TO 4-14-97 89 38,200,936
427,675 TO 6-30-97 78 33,358,650
----------- -----------
181 77,615,712
AVERAGE SHARES OUTSTANDING
FOR THE PERIOD 428,816
OPTIONS-FULLY
------------------
USE HIGHER OF YEAR END PRICE OR AVERAGE PRICE
<S> <C> <C> <C>
YEAR END PRICE 33.125
AVERAGE PRICE 34.250
USE YEAR END PRICE OF 34.250 34,204
------------
<CAPTION>
NO OF YEAR END OPTION NO OF
SHARES PRICE PRICE SHARES
------------ -------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
MZ 1,000 34.250 10.00 708
SN 10,000 34.250 10.00 7,080
MZ 2,900 34.250 13.50 1,757
SN 15,689 34.250 10.00 11,108
SN 8,333 34.250 12.00 5,413
TW 400 34.250 12.25 257
SN 978 34.250 13.25 600
DD 2,500 34.250 13.00 1,551
MZ 1,045 34.250 13.00 648
AC 400 34.250 13.00 248
TW 1,500 34.250 13.00 931
SN 4,000 34.250 17.75 1,927
MZ 2,000 34.250 17.75 964
DD 1,000 34.250 17.75 482
TW 1,000 34.250 17.75 482
AC 100 34.250 17.75 48
OPTIONS-PRIMARY
---------------------
AVERAGE PRICE FOR THE YEAR 34.250 34,204
--------
<CAPTION>
NO OF YEAR END OPTION NO OF
SHARES PRICE PRICE SHARES
------------ -------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
MZ 1,000 34.250 10.00 708
SN 10,000 34.250 10.00 7,080
SN 15,689 34.250 10.00 11,108
SN 8,333 34.250 12.00 5,413
MZ 2,900 34.250 13.50 1,757
TW 400 34.250 12.25 257
SN 978 34.250 13.25 600
DD 2,500 34.250 13.00 1,551
MZ 1,045 34.250 13.00 648
AC 400 34.250 13.00 248
TW 1,500 34.250 13.00 931
SN 4,000 34.250 17.75 1,927
MZ 2,000 34.250 17.75 964
DD 1,000 34.250 17.75 482
TW 1,000 34.250 17.75 482
AC 100 34.250 17.75 48
TOTAL SHARES 1ST QUARTER 463,020 463,020
TOTAL SHARES YEAR-END 463,020 463,020
NET INCOME 2ND QUARTER $413,295 $413,295
NET INCOME YEAR TO DATE, 1997 $794,808 $794,808
EARNINGS PER SHARE 1ST QUARTER $0.893 $0.893
EARNINGS PER SHARE, YTD $1.717 $1.717
</TABLE>
-19-
<PAGE>
MINUTES OF AN ANNUAL MEETING OF
THE SHAREHOLDERS OF SUMMIT BANCSHARES, INC.
APRIL 24, 1997
-----------------------------------------------
A meeting of the Shareholders of Summit Bancshares, Inc., was conducted on
April 24, 1997, in the board room of Summit Bank at 2969 Broadway, Oakland,
California.
The meeting was called to order by Shirley W. Nelson, Chairman of the Board, at
2:00 p.m. The Chairman asked George H. Hollidge, Corporate Secretary, to present
proof of the due calling of the meeting.
Secretary Hollidge presented a copy of the printed Notice of Annual Meeting of
Shareholders dated March 26, 1997, stating the meeting's time, place, and
purpose. The Secretary suggested that the reading of the notice be dispensed
unless there was a request to do so. No request was made. He then stated if
any of the Shareholders present had an objection to the contents of the notice
or the manner in which the notice was served, such objection should be stated or
it would be deemed waived. No objection was voiced.
Second, the Secretary presented a complete list certified by ChaseMellon
Shareholder Services, L.L.C., the stock transfer agent for the Company, of the
holders of the common stock of the Company at the close of business on
February 28, 1997, the record date fixed by the Board of Directors for
Shareholders entitled to notice of and to vote at the meeting. This list, which
was kept open to the inspection of Shareholders throughout the meeting, showed
that at the close of business on February 28, 1997, there were 429,224 common
shares of the Company issued and outstanding.
Third, the Secretary requested that the Chairman instruct that there be attached
to the minutes of the meeting the declaration of Duane Knutson, an employee of
ChaseMellon Shareholder Services, L.L.C., showing that he caused to be mailed on
March 26, 1997, to each of the Shareholders of Record, a copy of the Notice of
Annual Meeting of Shareholders.
Chairman Nelson directed Secretary Hollidge to incorporate a copy of the notice
of meeting, together with the declaration of mailing of the notice, in the
Minute Book of the Company as a part of the Minutes of this meeting. The
Chairman stated that the Minute Book would be kept open to the inspection of
Shareholders throughout the meeting.
The Chairman then introduced Mr. Duane Knutson, of ChaseMellon Shareholder
Services, L.L.C., who was appointed by the Board of Directors as the Inspector
of Elections, and indicated that Mr. Knutson had duly taken his oath of office
in writing. The Secretary was directed to file said oath with the minutes of
the meeting. The Chairman then requested that the Inspector make a poll of the
shares represented at the meeting in person or by proxy.
<PAGE>
Summit Bancshares, Inc.
Annual Meeting of Shareholders
April 24, 1997
Page 2
Mr. Knutson reported that there were represented in person or by proxy 295,018
common shares of the Company, for a total percentage of shares of the Company
present, in person or by proxy, of 68.7%.
Chairman Nelson stated that, based upon these numbers, a quorum was present.
The meeting was declared lawfully and properly convened and competent to proceed
to the transaction of the business as stated in the notice.
Chairman Nelson then announced that there were two items on the agenda for the
meeting and briefly discussed voting procedures. She briefly described the
agenda items:
Item 1 pertained to election of Directors to serve until the 1998 Annual Meeting
of Shareholders or until their successors are elected and qualified. Those
seven (7) nominees receiving the highest number of votes will be those elected.
Item 2 involved the proposal to approve the appointment of Coopers & Lybrand,
L.L.P., as public auditors for the year 1997.
Chairman Nelson explained that, in addition, the Shareholders may consider such
other business as may be properly come before the Annual Meeting and any
adjournment or adjournments thereof. She further indicated that the meeting
would take up the agenda items in the order described and that any Shareholder
voting in person at the meeting had been provided a ballot for use in voting on
the agenda items and would be given time after each item was discussed to mark
the ballot, entering in the appropriate space the number of shares being voted
on each matter.
The Chairmen next indicated that the first item was election of Directors to
serve until the 1998 Annual Meeting or until their successors are elected and
qualified. The Board of Directors nominated seven individuals for election as
Directors, to serve until the 1998 Annual Meeting of Shareholders or until their
successors are elected and qualified, to wit: Jerrald R. Goldman, M.D.;
George H. Hollidge; Kikuo Nakahara; Shirley W. Nelson; Thomas H. State; Mary C.
Warren; and Barbara J. Williams. The Secretary announced that there were no
further nominees; and, accordingly, nominations were declared closed. The
Chairman requested that any Shareholders voting in person mark their ballots and
hold the same pending later matters to be voted.
Next on the agenda was Item 2, the ratification of the selection of Coopers &
Lybrand, L.L.P., to audit the financial statement of the Company for the fiscal
year 1997. The following resolution was proposed by the Secretary:
RESOLVED THAT THE APPOINTMENT OF THE ACCOUNTING FIRM OF COOPERS &
LYBRAND, L.L.P., AS THE INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1997, BE APPROVED AND
RATIFIED.
The resolution was moved by Mr. State and seconded by Mrs. Warren. The Chairman
asked if there was any discussion. Hearing none, the discussion was closed.
<PAGE>
Summit Bancshares, Inc.
Annual Meeting of Shareholders
April 24, 1997
Page 3
The Chairman thereupon inquired whether there was any further business to come
before the meeting. Hearing none, she then asked Mr. Knutson to provide the
tally of votes.
Mr. Knutson as Inspector of Elections then reported to the persons present that
the seven (7) highest number of votes of the common shares of the Company for
the office of Director were as follows: Jerrald R. Goldman, M.D.; George H.
Hollidge; Kikuo Nakahara; Shirley W. Nelson; Thomas H. State; Mary C. Warren;
and Barbara J. Williams. Those individuals were declared elected to serve as
Directors of the Company for the following year or until their successors are
elected and qualified.
In addition, the Inspector of Elections indicated that holders of 294,688 common
shares of the Company, being in excess of the majority of the 295,018 common
shares represented at the meeting, in person or by proxy, voted to approve
Item 2, the appointment of Coopers & Lybrand, L.L.P., as auditors of the Company
for the fiscal year ending December 31, 1997.
The Chairman announced that the Report of the Inspector of Elections was
approved and ordered it appended to the minutes of the meeting.
There being no other business to come before the meeting, the Chairman asked for
a motion to adjourn. Mr. Hollidge moved that the meeting be adjourned, and Mr.
State seconded the motion. Hearing no objection, the meeting was adjourned at
2:10 p.m.
Respectfully submitted:
---------------------------------------
Xristi Megas
Recording Secretary
Attested: Attested:
- ---------------------------- -------------------------------------
George H. Hollidge Shirley W. Nelson
Corporate Secretary Chairman of the Board
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,187,974
<INT-BEARING-DEPOSITS> 8,421,000
<FED-FUNDS-SOLD> 8,190,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 10,742,694
<INVESTMENTS-MARKET> 10,769,413
<LOANS> 57,728,452
<ALLOWANCE> 1,128,716
<TOTAL-ASSETS> 93,319,295
<DEPOSITS> 80,409,300
<SHORT-TERM> 0
<LIABILITIES-OTHER> 676,983
<LONG-TERM> 0
0
0
<COMMON> 3,650,161
<OTHER-SE> 8,582,851
<TOTAL-LIABILITIES-AND-EQUITY> 93,319,295
<INTEREST-LOAN> 3,127,713
<INTEREST-INVEST> 312,055
<INTEREST-OTHER> 531,534
<INTEREST-TOTAL> 3,971,302
<INTEREST-DEPOSIT> 922,575
<INTEREST-EXPENSE> 922,575
<INTEREST-INCOME-NET> 3,048,727
<LOAN-LOSSES> 100,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,827,974
<INCOME-PRETAX> 1,364,857
<INCOME-PRE-EXTRAORDINARY> 1,364,857
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 794,808
<EPS-PRIMARY> 1
<EPS-DILUTED> 1.717
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 3,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,068
<ALLOWANCE-OPEN> 1,070,318
<CHARGE-OFFS> 43,000
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 1,128,716
<ALLOWANCE-DOMESTIC> 100,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
