<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, 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
438,035 shares of no par value common stock issued as of June 30, 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 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
</TABLE>
2
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 06/30/98 12/30/97
--------------------------------
<S> <C> <C>
Cash and due from banks $ 8,191,470 $ 8,664,015
Federal funds sold 25,510,000 12,910,000
------------ ------------
Cash and cash equivalents 33,701,470 21,574,015
Time deposits with other financial institutions 6,337,000 5,664,000
Investment securities (fair value of $14,903,513 at
June 30, 1998 and $12,515,656 at
December 31, 1997 ) held to maturity 14,898,572 12,496,651
Loans, net of allowance for loan losses of
$1,289,897 at June 30, 1998 and
$1,238,012 at December 31, 1997 50,528,486 60,832,859
Other real estate owned 1,359,342 1,222,080
Premises and equipment, net 1,003,031 872,619
Interest receivable and other assets 2,360,511 1,679,307
------------ ------------
Total Assets $110,188,412 $104,341,531
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $32,678,577 $31,062,481
Interest-bearing transaction accounts 33,777,699 33,012,655
Savings 3,062,987 2,264,538
Time certificates $100,000 and over 19,375,308 16,848,993
Other time certificates 6,676,972 7,243,075
------------ ------------
Total Deposits 95,571,543 90,431,742
Interest payable and other liabilities 1,193,089 1,031,120
------------ ------------
Total Liabilities 96,764,632 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;
438,035 shares outstanding at June 30, 1998 and
436,565 shares outstanding at December 31, 1997 3,721,630 3,709,145
Retained Earnings 9,702,150 9,169,524
------------ ------------
Total Shareholders' Equity 13,423,780 12,878,669
Total Liabilities and Shareholders' Equity $110,188,412 $104,341,531
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED 6-30-98 ENDED 6-30-97 ENDED 6-30-98 ENDED 6-30-97
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $1,521,508 $1,622,703 $3,143,348 $3,127,713
Interest on time deposits with other
financial institutions 93,260 129,144 183,275 251,820
Interest on U.S. government
treasury securities 210,581 170,438 377,842 312,055
Interest on federal funds sold 276,018 117,505 488,118 279,714
---------- ---------- ---------- ----------
Total interest income 2,101,367 2,039,790 4,192,583 3,971,302
INTEREST EXPENSE:
Interest on deposits 516,198 466,553 1,017,740 922,575
---------- ---------- ---------- ----------
Total interest expense 516,198 466,553 1,017,740 922,575
---------- ---------- ---------- ----------
Net interest income 1,585,169 1,573,237 3,174,843 3,048,727
Provision for loan losses 25,000 25,000 100,000 100,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,560,169 1,548,237 3,074,843 2,948,727
NON-INTEREST INCOME:
Service charges on deposit accounts 90,953 70,672 176,955 144,626
Other customer fees and charges 42,603 51,756 85,981 99,478
---------- ---------- ---------- ----------
Total non-interest income 133,556 122,428 262,936 244,104
NON-INTEREST EXPENSE:
Salaries and employee benefits 513,088 505,778 1,019,307 1,007,578
Occupancy expense 98,249 92,511 202,084 182,618
Equipment expense 56,974 43,084 101,129 71,150
Other 277,062 320,984 520,449 566,628
---------- ---------- ---------- ----------
Total non-interest expense 945,373 962,357 1,842,969 1,827,974
Income before income taxes 748,352 708,308 1,494,810 1,364,857
Provision for income taxes 312,234 295,013 623,293 570,049
---------- ---------- ---------- ----------
Net Income $436,118 $413,295 $871,517 $794,808
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER SHARE:
Earnings per common share $1.00 $0.97 $1.99 $1.85
Earnings per common share assuming dilution $0.93 $0.89 $1.86 $1.72
Weighted average shares outstanding 437,678 427,896 437,434 429,483
Weighted avg. shrs. outsdg. assuming dilution 469,528 463,020 469,284 463,020
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED 6-30-98 ENDED 6-30-97
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 4,041,361 $ 3,575,737
Fees received 425,959 512,933
Interest paid (1,057,921) (935,921)
Cash paid to suppliers and employees (1,914,864) (1,663,628)
Income taxes paid (634,364) (465,000)
------------- -----------
Net cash provided by operating activities 860,171 1,024,121
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in time deposits with
other financial institutions (693,000) 1,186,000
Maturity of investment securities 5,598,079 2,515,682
Purchase of investment securities (8,000,000) (4,498,526)
Net (increase) decrease in loans to customers 10,181,099 (5,543,793)
Recoveries on loans previously charged-off 2,123 1,750
(Increase) decrease in premises and equipment (242,394) (118,353)
------------- -----------
Net cash provided by (used in) investing activities 6,845,907 (6,457,240)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) decrease in demand, interest
bearing transaction, and savings deposits 3,179,589 140,148
Net increase (decrease) in time deposits 1,960,212 (39,864)
(Increase) decrease in other assets (392,018) 43,232
Exercise of stock options 18,755 -
Repurchase of common stock 62,701 (180,182)
Dividends paid 6,270 (320,756)
------------- -----------
Net cash provided by (used in) financing activities 4,421,377 (357,422)
------------- -----------
Net increase (decrease) in cash and cash equivalents 12,127,455 (5,790,541)
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 $ 33,701,470 $ 13,377,974
------------- -----------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net Income $ 871,517 $ 794,808
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 111,982 95,009
Provision for loan losses and OREO losses 100,000 150,000
(Increase) decrease in interest receivable 58,677 (151,836)
Increase (decrease) in unearned loan fees (46,876) (24,900)
Increase (decrease) in accrued interest payable (40,181) (13,346)
(Increase) decrease in prepaid expenses (92,663) (4,798)
Increase (decrease) in accounts payable (91,214) 74,136
Increase (decrease) in income taxes payable (11,071) 105,048
------------- -----------
Total adjustments (11,346) 229,313
------------- -----------
Net cash provided by operating activities $ 860,171 $ 1,024,121
----------- -----------
</TABLE>
The accompanying notes are an integral part of these 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,
1998 and the results of operations for the six months ended June 30, 1998 and
1997 and cash flows for the six months ended June 30, 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 six months ended June 30, 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 has restated 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 437,434 and 429,483
during the three months ended June 30, 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.
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 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 June 30, 1998 was 54.2% which was a
decrease from 71.8% for the same period in 1997. Total outstanding loans as
of June 30, 1998 decreased $4,781,353 compared to the same period a year ago
while total deposits increased $15,162,243 versus the same time last year.
The decrease in loans was caused by the highly competitive marketplace while
the growth in deposits reflects continued success with our marketing program.
The average loan-to-deposit ratio for the second quarter of 1998 was 56.4%,
down from 68.8% for the same period last year. This decrease was caused by
an increase in average total deposits of $12,337,000 or 15.37% while average
total loans decreased $1,878,000 or 3.5%. 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 $54,937,042 on June 30, 1998. This
amount represented 57.4% of total deposits in comparison to the liquidity
ratio of 34.0% as of June 30, 1997. This increase is primarily a result of an
increase in deposits & a decrease in loans. 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.
7
<PAGE>
The following table sets forth book value of investments by category and the
percent of total investments at the dates specified.
<TABLE>
<CAPTION>
INVESTMENT COMPARATIVE
($000.00 Omitted)
6-30-98 % 12-31-97 % 6-30-97 %
<S> <C> <C> <C> <C> <C> <C>
Fed funds sold $25,510 55% $12,910 42% $ 8,190 30%
Interest bearing
deposits 6,337 14% 5,664 18% 8,421 31%
Securities 14,899 31% 12,497 40% 10,743 39%
-------
-------
</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 June 30, 1998 were comprised of $4,498,303 in U. S. Gov't notes
and $10,400,269 in U.S. Gov't agencies.
CHANGES IN FINANCIAL POSITION
As of June 30, 1998, total deposits increased $5,140,000 from December 31,
1997 while at the same time net loans outstanding decreased $10,295,000.
Total deposits as of June 30, 1998 were $95,572,000, an increase of 18.9%
from $80,409,000 as of June 30, 1997. Total loans as of June 30, 1998 were
$51,818,000, a decrease of 10.2% from $57,728,000 as of June 30, 1997.
The following table sets forth the amount of deposits by each category and
the percent of total deposits at the dates specified.
<TABLE>
<CAPTION>
DEPOSIT COMPARATIVE
($000.00 Omitted)
6-30-98 % 12-31-97 % 6-30-97 %
<S> <C> <C> <C> <C> <C> <C>
Demand $32,679 43% $31,062 34% $26,090 32%
Savings 3,063 4% 2,664 3% 3,209 4%
Interest bearing
trans. deposits 33,778 44% 33,013 37% 29,723 37%
Other time 26,052 9% 24,092 26% 21,387 27%
-------
-------
</TABLE>
8
<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.
<TABLE>
<CAPTION>
LOAN COMPARATIVE
($000.00 Omitted)
6-30-98 % 12-31-97 % 6-30-97 %
<S> <C> <C> <C> <C> <C> <C>
Commercial $37,042 72% $44,044 71% $40,337 70%
Real estate-const 4,773 9% 7,471 12% 8,297 14%
Real estate-other 4,724 9% 4,850 8% 3,020 5%
Installment/other 5,279 10% 5,706 9% 6,074 11%
-------
-------
</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>
6-30-98 12-31-97 6-30-97
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing $ 0 $ 408 $ 3
Non-accrual loans 413 176 0
Other real estate owned 1,359 1,222 1,241
------ ------ ------
Total non-performing assets $1,772 $1,806 $1,244
------ ------ ------
------ ------ ------
Non-performing assets to
period end loans plus
other real estate owned 3.43% 2.85% 2.20%
Allowance to non-performing
loans 312% 212% 37624%
Allowance to non-performing
assets 73% 68% 94%
</TABLE>
9
<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 increase in non-performing assets from June 30, 1997 to June 30, 1998 is
due primarily to an increase in non-accrual loans of $413,000 and a increase
of $118,000 in OREO.
The total OREO amount, $1,359, 000, is related to three properties. One of
the properties is vacant land in the Oakland Hills. The second property is
two contiguous parcels in the Danville/Diablo Mountain area of Alameda
County. The third property is vacant land located in Contra Costa County.
10
<PAGE>
CAPITAL POSITION
As of June 30, 1998, Shareholders' Equity was $13,424,000. This represents an
increase of $1,191,000 or 9.7% 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, 1998, the Company has
repurchased a total of 158,872 shares of the Company stock constituting 29.6%
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 $10,868,000.
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, 1998:
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
<S> <C> <C>
Tier 1 Capital 15.45% 4.00%
Total Capital 16.71% 8.00%
Leverage Ratio 10.04% 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.
11
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Total interest income including loan fees increased from $3,971,000 for the
first six months of 1997 to $4,193,000 for the same period in 1998. The
primary factor for increased income was the increase in deposits causing an
increase in investment income. Loan fees showed a decrease of $83,830 over
the same period last year. The yield on loans and fees decreased 90 basis
points from the same period last year, due to the competitive nature of the
marketplace. The increase in interest income from investments was due to
total average outstanding investments volume increase of $6,526,000 for the
first six months in 1998 versus 1997. This increase was primarily due to an
increase in deposit balances. The yield on investments for the first six
months of 1998 showed an increase of 19 basis points compared to the same
period in 1997.
Interest expense increased from $923,000 at the end of the first six months
of 1997 to $1,018,000 in 1998. This increase was due to an increase in
average interest-bearing deposit accounts of $6,492,000 during the first six
months of 1998 versus the same period last year. The average cost of funds
for the period ending June 30, 1998 was 25 basis points less than the same
period last year. As a result of these factors, net interest margin for the
first six months of 1998 was 6.77% compared to 7.25% for the same period last
year.
For the second quarter, total interest income on loans including loan fees
increased from $2,040,000 in 1997 to $2,101,000 for the same period in 1998.
This increase is primarily due to an increase in investment instruments.
Average loan volume for the second quarter of 1998 showed a decrease of
$402,000 from the same period last year. For the second quarter of 1998,
total interest income on investments increased $162,772. This increase was
attributable to an average investment volume increase of $11,437,000,
although the interest yield remained approximately the same as last year at
5.71%.
12
<PAGE>
For the second quarter of 1998, interest expense increased $51,000 compared
to the same period in 1997. Average outstanding interest bearing deposits
increased from $56,072,000 in the second quarter in 1997 to $62,460,000 in
the second quarter in 1998. Average cost of funds for the same period was
3.31% in 1998 compared to 3.32% in 1997. As a result, net interest income for
the second quarter of 1997 increased $12,000, or .77% compared to the same
period in 1996.
OTHER OPERATING INCOME
Service charges on deposit accounts as of the end of the first half of 1998
increased to $177,000 from $145,000 for the same period in 1997. The
increase was due to higher fees collected in service charges related to
return check and overdraft charges and from normal service charges on
commercial accounts. Other charges and fees decreased $13,497, primarily due
to lower fees collected from merchant fees.
Service charges on deposit accounts for the second quarter of 1998 increased
$20,281 compared to the same period last year due to decreased collection of
fees associated with return check and overdraft charges and normal service
charges collected on commercial accounts. Other customer fees and charges
decreased $9,153 for the present quarter associated with decreased 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.
13
<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, 1998 and 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------
($000.00 Omitted)
6-30-98 6-30-97
<S> <C> <C>
Balance, beginning of the period $1,238 $1,070
Provision for loan losses 100 100
Recoveries 2 2
Loans charged-off (50) (43)
------ ------
Balance, end of the period $1,290 $1,129
------
------
</TABLE>
The balance in the allowance for loan losses at June 30, 1998 was 2.49% of
total loans compared to 1.95% of total loans at June 30, 1997.
OTHER OPERATING EXPENSES
Total other operating expenses increased $14,995 as of the end of the first
six months of 1998 compared to the same period last year. This increase was
primarily due to an increase in occupancy and equipment expense related to
the opening of the Bank's new Pleasanton office, the purchase of a new
LAN/WAN computer system, and a new telephone system.
For the second quarter of 1998, operating expenses increased $11,128 compared
to the same period last year for the same reasons mentioned above.
14
<PAGE>
PROVISION FOR INCOME TAXES
The Company's provision for income taxes as of the end of the first six
months of 1998 increased from $570,000 in 1996 to $623,000. This increase is
attributed to increased income from regular business operations. For the same
period in 1998 the Company's total effective tax rate was 41.8% compared to
41.8% in 1997.
For the second quarter of 1998, the provision for income taxes increased
$17,000 compared to the second quarter of 1997. The effective tax rate for
this period was 41.7% versus 41.8% for the same period last year.
NET INCOME
Net income for the first half of 1998 increased from $795,000 for the same
period in 1997 to $872,000, or a increase of 9.7%. Second quarter net income
increased $23,000 or 5.5% over the same period last year.
IMPACT OF YEAR 2000
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.
15
<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, 1998. 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: 6-30-98
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
<TABLE>
<CAPTION>
($000.00)
OMITTED UP > 3 > 1 > 3 > 5 OVER
TOTAL 3 < 1 < 3 < 5 < 10 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
I. EARNING ASSETS
A. INVESTMENTS:
1. U. S. TREASURIES $4,498 $2,000 $2,498 $0 $0 $0 $0
2. U. S. AGENCIES 10,400 4,500 1,000 4,900 0 0 0
3. FED FUNDS SOLD 25,510 25,510 0 0 0 0 0
4. PURCHASED CDS 6,337 297 3,961 2,079 0 0 0
------- ------- -------- ------- ------- ------- -------
TOTAL INVESTMENTS $46,745 $32,307 $7,459 $6,979 $ 0 $ 0 $0
B. LOANS $49,719 $48,089 $1,086 $244 $ 265 $36 $0
TOTAL LOANS $49,719 $48,089 $1,086 $244 $ 265 $36 $0
------- ------- -------- ------- ------- ------- --------
C. TOTAL EARNING ASSETS $96,464 $80,396 $8,545 $7,223 $ 265 $36 $0
II. COST OF FUNDS (DEPOSITS)
A. CERTIFICATE OF DEPOSITS $26,052 $17,543 $8,379 $110 $ 20 $0 $0
B. MONEY MARKET ACCOUNTS 29,399 1,633 13,678 14,087 0 0 0
C. TRANSACTION ACCOUNTS 5,480 235 705 1,858 1,336 1,347 0
D. SAVINGS ACCOUNTS 3,063 131 394 1,038 747 753 0
------- ------- -------- ------- ------- ------- -------
TOTAL COST OF FUNDS $63,994 $19,542 $23,156 $17,093 $2,103 $2,100 $0
III. INTEREST SENSITIVE ASSETS $96,464 $80,396 $8,545 $7,223 $265 $36 $0
IV. INTEREST SENSITIVE LIABILITIES $63,994 $19,542 $23,156 $17,093 $2,103 $2,100 $0
------- ------- -------- ------- ------- ------- -------
V. GAP $32,470 $60,854 ($14,611) ($9,870) ($1,838) ($2,064) $0
VI. CUMULATIVE GAP $32,470 $60,854 $46,243 $36,373 $34,535 $32,471 $32,471
VII. GAP RATIO 1.51 4.11 0.37 0.42 0.13 0.02
VIII. CUMULATIVE RATIO 1.51 4.11 2.08 1.61 1.56 1.51 1.51
IX. GAP AS A % OF TOTAL ASSETS 30.10 56.41 -13.54 -9.15 -1.70 -1.91 0.00
X. CUMULATIVE GAP AS A % OF 30.10 56.41 42.87 33.72 32.02 30.10 30.10
TOTAL ASSETS
</TABLE>
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, 1998 for
the year ended December 31, 1997.
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 22,
1998.
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
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
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<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,191,470
<INT-BEARING-DEPOSITS> 6,337,000
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<ALLOWANCE> 1,289,897
<TOTAL-ASSETS> 110,188,412
<DEPOSITS> 95,571,543
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0
0
<COMMON> 3,721,630
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<INCOME-PRETAX> 1,494,810
<INCOME-PRE-EXTRAORDINARY> 1,494,810
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<NET-INCOME> 871,517
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.86
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<LOANS-NON> 413,000
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