<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: MARCH 31, 1998
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 437,455
shares of no par value common stock issued as of March 31, 1998.
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 PAGE
<S> <C>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . 4
Consolidated Statements of Changes in
Shareholders' Equity . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . 7
Interest Rate Risk Reporting Schedule . . . . . . . . . 8
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 9-16
PART II - OTHER INFORMATION
ITEMS 1-6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17-18
</TABLE>
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 3/31/98 12/31/97
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 6,124,312 $ 8,664,015
Federal funds sold 18,677,000 12,910,000
- ------------------------------------------------------------------------------
Cash and cash equivalents 24,801,312 21,574,015
Time deposits with other financial institutions 6,337,000 5,644,000
Investment securities (fair value of $12,920,301 at
March 31, 1998 and $8,830,810 at
December 31, 1997) held to maturity 12,897,880 12,496,651
Loans, net of allowance for loan losses of
$1,313,762 at March 31, 1998 and
$1,238,012 at December 31, 1997 55,353,654 60,832,859
Other real estate owned 1,222,080 1,222,080
Premises and equipment, net 861,831 872,619
Interest receivable and other assets 1,790,159 1,699,307
Total Assets $103,263,916 $104,341,531
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
Deposits:
Demand $ 28,155,989 $ 31,062,481
Interest-bearing transaction accounts 33,273,431 33,012,655
Savings 3,446,480 2,264,538
Time certificates $100,000 and over 18,782,099 18,828,044
Other time certificates 5,305,923 5,264,024
- ------------------------------------------------------------------------------
Total Deposits 88,963,922 90,431,742
Interest payable and other liabilities 982,196 1,031,120
Total Liabilities 89,946,118 91,462,862
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;
437,455 shares outstanding at March 31, 1998 and
436,565 shares outstanding at December 31, 1997 3,712,875 3,709,145
Retained Earnings 9,604,923 9,169,524
Total Shareholders' Equity 13,317,798 12,878,669
Total Liabilities and Shareholders' Equity $103,263,916 $104,341,531
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3-31-98 ENDED 3-31-97
- ---------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,621,840 $1,505,010
Interest on time deposits with other
financial institutions 90,015 122,676
Interest on U.S. government
treasury securities 167,261 141,617
Interest on federal funds sold 212,100 162,209
Total interest income 2,091,216 1,931,512
INTEREST EXPENSE:
Interest on deposits 501,543 456,022
Total interest expense 501,543 456,022
Net interest income 1,589,673 1,475,490
Provision for loan losses 75,000 75,000
Net interest income after
provision for loan losses 1,514,673 1,400,490
NON-INTEREST INCOME:
Service charges on deposit accounts 86,002 73,954
Other customer fees and charges 43,378 47,722
Total non-interest income 129,380 121,676
NON-INTEREST EXPENSE:
Salaries and employee benefits 506,219 501,800
Occupancy expense 103,835 90,107
Equipment expense 44,154 28,066
Other 243,387 245,644
Total non-interest expense 897,595 865,617
Income before income taxes 746,458 656,549
Provision for income taxes 311,059 275,036
NET INCOME $435,399 $381,513
EARNINGS PER SHARE:
Earnings per common share 1.00 0.89
Earnings per common share assuming dilution 0.93 0.82
Weighted average shares outstanding 437,193 429,746
Weighted average shares outstanding
assuming dilution 469,252 469,317
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
SUMMIT BANCSHARES, INC. & SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1998 & 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES COMMON RETAINED
OUTSTANDING STOCK EARNINGS TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $436,565 $3,709,145 $9,169,524 $12,878,669
Stock Options Exercised 1,000 10,000 0 10000
Repurchase of Common Stock (110) (6,270) 0 (6,270)
Net Income 0 0 435,399 435,399
BALANCE AT MARCH 31, 1998 437,455 3,712,875 9,604,923 $13,317,798
BALANCE AT DECEMBER 31, 1996 $433,209 $3,830,343 $8,108,800 $11,939,143
Stock Options Exercised 0 0 0 0
Repurchase of Common Stock (3,985) (129,064) 0 (129,064)
Net Income 0 0 381,513 381,513
BALANCE AT MARCH 31, 1997 $429,224 $3,701,279 $8,490,313 $12,191,592
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE QUARTER ENDED MARCH 31, 1998 AND MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3-31-98 ENDED 3-31-97
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $2,075,456 $1,747,925
Fees received 193,344 307,686
Interest paid (476,113) (439,169)
Cash paid to suppliers and employees (1,009,863) (783,344)
Income taxes paid (113,864) 0
Net cash provided by operating activities 668,960 833,098
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in time deposits with
other financial institutions (693,000) 196,000
Maturity of investment securities 4,599,066 970,791
Purchase of investment securities (5,000,295) (1,999,531)
Net (increase) decrease in loans to customers 5,301,879 (337,611)
Recoveries on loans previously charged-off 750 750
(Increase) decrease in premises and equipment (42,198) (64,978)
Net cash provided by (used in) investing activities 4,166,202 (1,234,579)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in demand, interest
bearing transaction, and savings deposits (1,463,774) 48,855
Net increase (decrease) in time deposits (4,046) 959,661
(Increase) decrease in other assets (143,775) (206,595)
Exercise of stock options 10,000 0
Repurchase of common stock (6,270) (129,064)
Dividends paid 0 0
Net cash provided by (used in) financing activities (1,607,865) 672,857
Net increase (decrease) in cash and cash equivalents 3,227,297 271,376
Cash and cash equivalents at the
beginning of the year 21,574,015 19,168,515
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $24,801,312 $19,439,891
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $435,399 $381,513
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 52,984 47,630
Provision for loan losses 75,000 75,000
(Increase) decrease in interest receivable 91,413 (44,008)
Increase (decrease) in unearned loan fees (43,209) 46,431
Increase (decrease) in accrued interest payable 25,430 16,853
(Increase) decrease in prepaid expenses (38,490) 28,350
Increase (decrease) in accounts payable (126,762) 6,293
Increase (decrease) in income taxes payable 197,195 275,036
- --------------------------------------------------------------------------------
Total adjustments 233,561 451,585
Net cash provided by operating activities $668,960 $833,098
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<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 March 31,
1998 and the results of operations for the three months ended March 31, 1998
and 1997 and cash flows for the three months ended March 31, 1998 and 1997.
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 1997 Annual Report to Shareholders, which is incorporated by
reference in the Company's 1997 annual report on Form 10-K. The results of
operations for the three months ended March 31, 1998 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 was required to adopt SFAS 128 in the fourth quarter of
1997 and restated 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 437,193 and 429,746
during the three months ended March 31, 1998 and 1997, 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.
3. SUBSEQUENT EVENT
On April 22, 1998 the Company announced a $0.75 cash dividend payable on
June 12, 1998 to shareholders of record as of May 1, 1998.
<PAGE>
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
The following table provides an interest rate sensitivity and interest
rate risk analysis for the quarter ended March 31, 1998. The table presents
each major category of interest-earning assets and interest
bearing-liabilities. and interest-bearing liabilities.
INTEREST RATE RISK REPORTING SCHEDULE
REPORTING INSTITUTION: SUMMIT BANK REPORTING DATE: 3-31-98
<TABLE>
<CAPTION>
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
($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>
EARNING ASSETS
INVESTMENTS:
U. S. TREASURIES $5,498 $1,000 $3,000 $1,498 $0 $0 $0
U. S. AGENCIES 7,400 0 500 6,900 0 0 0
FED FUNDS SOLD 18,677 18,677 0 0 0 0 0
PURCHASED CDS 6,337 1,386 2,575 2,376 0 0 0
-------- -------- ------- -------- ---- ---- ----
TOTAL INVESTMENTS $37,912 $21,063 $6,075 $10,774 $0 $0 $0
LOANS
COMMERCIAL $54,444 $52,456 $1,624 $326 $38 $0 $0
REAL ESTATE 0 0 0 0 0 0 0
INSTALLMENT 10 10 0 0 0 0 0
-------- -------- ------- -------- ---- ---- ----
TOTAL LOANS $54,454 $52,466 $1,624 $326 $38 $0 $0
TOTAL EARNING ASSETS $92,366 $73,529 $7,699 $11,100 $38 $0 $0
COST OF FUNDS (DEPOSITS)
CERTIFICATE OF DEPOSITS $24,088 $16,304 $7,428 $336 $20 $0 $0
MONEY MARKET ACCOUNTS 29,402 1,623 13,685 14,094 0 0 0
TRANSACTION ACCOUNTS 5,816 249 748 1,972 1,418 1,429 0
SAVINGS ACCOUNTS 3,446 0 72 1,687 840 847 0
-------- -------- ------- -------- ---- ---- ----
TOTAL COST OF FUNDS $62,752 $18,176 $21,933 $18,089 $2,278 $2,276 $0
INTEREST SENSITIVE ASSETS $92,366 $73,529 $7,699 $11,100 $38 $0 $0
INTEREST SENSITIVE
LIABILITIES $62,752 $18,176 $21,933 $18,089 $2,278 $2,276 $0
-------- -------- ------- -------- ---- ---- ----
GAP $29,614 $55,353 ($14,234) ($6,989) ($2,240) ($2,276) $0
CUMULATIVE GAP $29,614 $55,353 $41,119 $34,120 $31,890 $29,614 $29,614
GAP RATIO 1.47 4.01 0.35 0.61 0.02 0.00
CUMULATIVE RATIO 1.47 4.01 1.76 1.42 1.42 1.47 1.47
GAP AS A % OF TOTAL ASSETS 28.41 53.77 (14.03) (6.88) 0.02 1.47 1.47
CUMULATIVE GAP AS A % OF
TOTAL ASSETS 28.41 53.77 39.75 32.86 30.66 28.41 28.41
</TABLE>
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
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 March 31, 1998 was 62.2% which was
an decrease from 65.0% for the same period in 1997. Total outstanding loans
as of March 31, 1998 increased $2,396,000 compared to the same period a year
ago while total deposits increased $7,543,000 versus the same time last year.
The increases in loans and deposits are mainly due to Bank's concentrated
effort in promoting sales culture to its employees. The average
loan-to-deposit ratio for the first quarter of 1998 was 67.5%, up from 65.5%
for the same period last year. This increase was caused by an increase in
average total deposits of $6,578,000 or 8.1% compared to increase in average
total loans of $6,574,000 or 12.5%. 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 $44,036,000 on March 31, 1998.
This amount represented 49.5% of total deposits in comparison to the
liquidity ratio of 47.5% as of March 31, 1997. This increase is primarily a
result of deposit 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.
<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)
<TABLE>
<CAPTION>
3-31-97 % 12-31-97 % 3-31-98 %
<S> <C> <C> <C> <C> <C> <C>
Fed funds sold 13,360 41% 12,910 42% 18,677 49%
Interest bearing
deposits 9,411 29% 5,644 18% 6,337 17%
Securities 9,789 30% 12,497 40% 12,898 34%
</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, 1998 were comprised of $5,498,000 in U.S. Gov't notes
and $7,400,000 in U.S. Gov't agencies.
Changes in Financial Position
As of March 31, 1998, deposits decreased $1,468,000 from December 31, 1997
while at the same time net loans outstanding decreased $5,479,000 primarily
due to payoff of commercial loans. Total deposits as of March 31, 1998 were
$88,964,000, an increase of 8.1% from $81,420,000 as of March 31, 1997.
Total loans as of March 31, 1998 were $55,354,000, which was an increase from
$52,957,000 as of March 31, 1997.
<PAGE>
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)
<TABLE>
<CAPTION>
3-31-97 % 12-31-97 % 3-31-98 %
------- --- -------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Demand $25,018 31% $31,062 34% $28,156 32%
Savings 2,774 3% 2,264 3% 3,447 4%
Interest bearing
trans. deposits 31,322 38% 33,013 37% 33,273 37%
Other time 22,306 28% 24,092 26% 24,088 27%
</TABLE>
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)
<TABLE>
<CAPTION>
3-31-97 % 12-31-97 % 3-31-98 %
------- --- -------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Commercial $36,800 69% $44,044 71% $38,371 68%
Real estate-const 7,342 14% 7,471 12% 8,635 15%
Real estate-other 3,179 6% 4,850 8% 4,043 7%
Installment/other 5,636 11% 5,706 9% 5,618 10%
</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.
NON-PERFORMING ASSETS
(000.00 Omitted)
<TABLE>
<CAPTION>
3-31-97 12-31-97 3-31-98
------- -------- -------
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing $ 0 $ 408 $ 0
Non-accrual loans 0 176 661
Other real estate owned 1,291 1,222 1,222
------- -------- -------
Total non-performing assets $1,291 $1,806 $1,883
------- -------- -------
------- -------- -------
Non-performing assets to
period end loans plus
other real estate owned 2.44% 2.85% 3.22%
Allowance to non-performing
loans 0% 212% 199%
Allowance to non-performing
assets 106% 68% 70%
</TABLE>
<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 non-interest expense.
Operating expenses related to other real estate owned are charged to
non-interest expense in the period incurred.
The increase in non-performing assets from March 31, 1997 to March 31, 1998
is due primarily to a increase in loans 90 days past due and non-accrual
loans of $661,000 and a decrease in other real estate owned.
The total OREO amount, $1,222,000, is related to two properties. One of the
properties is vacant land in the Oakland Hills and the second property is two
contiguous parcels in the Danville/Diablo Mountain area of Alameda County.
<PAGE>
CAPITAL POSITION
As of March 31, 1998, Shareholders' Equity was $13,317,798. This represents
an increase of $1,126,209, or 9.2% over the same period last year. Since the
inception of the repurchase program in 1989, the Company has authorized the
repurchase of $2,500,000 of its stock. As of March 31, 1998, the Company has
repurchased a total of 158,872 shares of the Company stock constituting 29.5%
of the Company's original stock prior to the repurchase program, at a total
cost of $2,313,438, or an average price per share of $14.56. 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. 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 $10,405,000.
The following table shows the risk-based capital and leverage ratios as well
as the minimum regulatory requirements for the same as of March 31, 1998.
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
------------- ----------------------
<S> <C> <C>
Tier 1 Capital 15.35% 4.00%
Total Capital 16.60% 8.00%
Leverage Ratio 9.61% 4.00%
</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.
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Total interest income including loan fees increased from $1,932,000 for the
first three months of 1997 to $2,091,000 for the same period in 1998. The
primary reason for the increase in interest income was due to a $6,574,000
increase in average loans outstanding compared to the same period a year ago.
The yield on loans and fees decreased 48 basis points over the same period
last year primarily due to competition for loans in the marketplace. The
increase in interest income from investments was due to total average
outstanding investments volume increase of $1,578,000 for the first quarter
1998 versus 1997. This increase was primarily due to increase in deposit
balances. The yield on investments showed a increase of 26 basis points
reflective of market conditions. Interest expense increased from $456,000 as
of the end of the first three months of 1997 to $502,000 in 1998. This
increase was brought about by a increase in average interest-bearing deposit
accounts of $6,605,000 during the first quarter of 1998 versus the same
period last year. The average cost of funds for the period ending March 31,
1998 was 6 basis points less than the same period last year. As a result of
these factors, net interest margin for the first three months of 1998
decreased to 6.96% from 7.10% compared to the same period last year.
OTHER OPERATING INCOME
Service charges on deposit accounts as of the end of the first three months
of 1998 increased to $86,000 versus $74,000 for the same period in 1997. The
decrease was due to lower fees collected in service charges related to return
check and overdraft charges. Other charges and fees decreased $4,000
primarily due to lower fees collected on merchant mastercard/visa accounts.
<PAGE>
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.
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 three months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(000.00 Omitted)
3-31-97 3-31-96
<S> <C> <C>
Balance, beginning of the period $1,070 $1,025
Provision for loan losses 75 85
Recoveries 1 1
Loans charged-off 0 0
------ ------
Balance, end of the period $1,146 $1,111
</TABLE>
The balance in the allowance for loan losses at March 31, 1997 was 2.16% of
total loans compared to 2.39% of total loans at March 31, 1996.
<PAGE>
OTHER OPERATING EXPENSES
Total other operating expenses increased $52,000 as of the end of the first
three 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
committment to grow increased the number of employees from 39 to 42 primarily in
the sales area. The increase was also attributed to increase in regular raises
in pay and increased cost of benefits.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes as of the end of the first three months
of 1997 increased from $249,000 in 1996 to $275,000. 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 41.9% compared to
43.2% in 1996.
NET INCOME
Net income for the first quarter of 1997 increased from $327,000 for the same
period in 1996 to $382,000, or a increase of 16.8%.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
In regard to the year 2000 issue, the Company has conducted a review of its
computer systems to identify the systems that could be affected and has
developed an implementation plan to resolve the issue. The year 2000 problem
is the result of computer programs being written using two digits rather than
four to define the applicable year. Any of the Company's programs that have
time sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in a major system failure or miscalculations.
The Company expects its year 2000 date conversion project to be completed on
a timely basis. During the execution of this project, the Company will incur
internal staff costs as well as consulting and other expenses related to
enhancements necessary to prepare the systems for the year 2000. The expense
of the year 2000 project as well as the related potential effect on the
Company's earning is not expected to have a material effect on its financial
position or results of operations.
<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
None
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
None
<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
<PAGE>
EXHIBIT 11
WEIGHTED AVERAGE SHARES
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRIMARY FULLY
<S> <C> <C>
A. COMMON STOCK ANNUAL 437193.11 437193.11
(1ST QTR) 437193.11 437193.11
</TABLE>
<TABLE>
<CAPTION>
NO. OF
DAYS
--------
<S> <C> <C>
436565.00 12-31-97 (BAL FWD)
436565.00 TO 1-14-98 13.00 5675345.00
436455.00 TO 1-26-98 12.00 5237460.00
437455.00 TO 4-01-98 65.00 28434575.00
0.00
0.00
0.00
0.00
0.00
-----------------------
90.00 39347380.00
AVERAGE SHARES OUTSTANDING
FOR THE YEAR 437193.11
AVERAGE SHARES OUTSTANDING
FOR THE 1ST QUARTER 437193.11
</TABLE>
<PAGE>
OPTIONS--FULL
-------------
USE HIGHER OF YEAR END PRICE OR AVERAGE PRICE
YEAR END PRICE/QTR END 54.000
AVERAGE PRICE 52.000
USE YEAR END PRICE OF 54.000 32058.81
---------
<TABLE>
<CAPTION>
NO. OF YEAR END OPTION NO. OF
SHARES PRICE PRICE SHARES
------------------------------------------------
<S> <C> <C> <C> <C>
MZ 2900.00 54.000 13.50 2,175
SN 15689.00 54.000 10.00 12,784
SN 8333.00 54.000 12.00 6,481
TW 400.00 54.000 12.25 309
SN 978.00 54.000 13.25 738
DD 2500.00 54.000 13.00 1,898
MZ 1045.00 54.000 13.00 793
AC 400.00 54.000 13.00 304
TW 1500.00 54.000 13.00 1,139
SN 4000.00 54.000 17.75 2,685
MZ 2000.00 54.000 17.75 1,343
DD 1000.00 54.000 17.75 671
TW 1000.00 54.000 17.75 671
AC 100.00 54.000 17.75 67
</TABLE>
OPTIONS--PRIMARY
----------------
AVERAGE PRICE FOR THE YEAR 52.000 31682.41
---------
<TABLE>
<CAPTION>
NO. OF YEAR END OPTION NO. OF
SHARES PRICE PRICE SHARES
------------------------------------------------
<S> <C> <C> <C> <C>
SN 15689.00 52.000 10.00 12,672
SN 8333.00 52.000 12.00 6,410
MZ 2900.00 52.000 13.50 2,147
TW 400.00 52.000 12.25 306
SN 978.00 52.000 13.25 729
DD 2500.00 52.000 13.00 1,875
MZ 1045.00 52.000 13.00 784
AC 400.00 52.000 13.00 300
TW 1500.00 52.000 13.00 1,125
SN 4000.00 52.000 17.75 2,635
MZ 2000.00 52.000 17.75 1,317
DD 1000.00 52.000 17.75 659
TW 1000.00 52.000 17.75 659
AC 100.00 52.000 17.75 66
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL SHARES 1ST QUARTER 469251.92 468875.52
TOTAL SHARES YEAR-TO-DATE 469251.92 468875.52
NET INCOME 1ST QUARTER $434,894 $434,894
NET INCOME YEAR TO DATE, 1998 $434,894 $434,894
EARNINGS PER SHARE 1ST QUARTER $0.927 $0.928
EARNINGS PER SHARE YTD $0.927 $0.928
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SUMMIT BANCSHARES INC. STEVE NELSON CONTROLLER AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,124,312
<INT-BEARING-DEPOSITS> 6,337,000
<FED-FUNDS-SOLD> 18,677,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 12,897,880
<INVESTMENTS-MARKET> 0
<LOANS> 56,575,734
<ALLOWANCE> 1,313,762
<TOTAL-ASSETS> 103,263,916
<DEPOSITS> 88,963,922
<SHORT-TERM> 0
<LIABILITIES-OTHER> 982,196
<LONG-TERM> 0
0
0
<COMMON> 3,712,875
<OTHER-SE> 9,604,923
<TOTAL-LIABILITIES-AND-EQUITY> 103,263,916
<INTEREST-LOAN> 1,621,840
<INTEREST-INVEST> 469,376
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,091,216
<INTEREST-DEPOSIT> 501,543
<INTEREST-EXPENSE> 501,543
<INTEREST-INCOME-NET> 1,589,673
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 897,595
<INCOME-PRETAX> 746,458
<INCOME-PRE-EXTRAORDINARY> 746,458
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 435,399
<EPS-PRIMARY> 1.00
<EPS-DILUTED> .93
<YIELD-ACTUAL> 0
<LOANS-NON> 176,000
<LOANS-PAST> 408,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,238,012
<CHARGE-OFFS> 0
<RECOVERIES> 750
<ALLOWANCE-CLOSE> 1,313,762
<ALLOWANCE-DOMESTIC> 1,313,762
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
