<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, 2000
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
458,999 shares of no par value common stock
issued as of JUNE 30, 2000
<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
Consolidated Statement of Changes in Shareholders'
Equity .......................................................... 6
Notes to Financial Statements ................................... 7-8
Interest Rate Risk Reporting Schedule ........................... 9
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 10-18
PART II - OTHER INFORMATION
ITEMS 1-6 ............................................................ 19-20
</TABLE>
2
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
(UNAUDITED)
ASSETS 06/30/00 12/31/99
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 8,423,286 $ 5,875,500
Federal funds sold 10,370,000 21,760,000
------------ ------------
Cash and cash equivalents 18,793,286 27,635,500
Time deposits with other financial institutions 34,432,350 27,888,634
Investment securities, held to maturity
(fair value of $19,320,364 at
June 30, 2000 and $19,442,158 at
December 31, 1999) 19,465,000 19,465,133
Loans, net of allowance for loan losses of
$1,324,113 at June 30, 2000 and
$1,273,364 at December 31, 1999 62,258,863 56,071,617
Other real estate owned 0 0
Premises and equipment, net 816,287 913,435
Interest receivable and other assets 4,343,972 3,929,371
------------ ------------
Total Assets $140,109,757 $135,903,690
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $ 42,687,700 $ 39,566,546
Interest-bearing transaction accounts 34,418,104 48,225,818
Savings 2,598,380 2,327,328
Time certificates $100,000 and over 35,847,878 23,047,736
Other time certificates 7,641,322 6,828,925
------------ ------------
Total Deposits 123,193,384 119,996,353
Interest payable and other liabilities 1,076,524 754,210
------------ ------------
Total Liabilities 124,269,908 120,750,563
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;
458,999 shares outstanding at June 30, 2000 and
458,021 shares outstanding at December 31, 1999 3,693,805 3,741,923
Retained Earnings 12,146,044 11,411,204
------------ ------------
Total Shareholders' Equity 15,839,849 15,153,127
Total Liabilities and Shareholders' Equity $140,109,757 $135,903,690
============ ============
</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, 2000 AND 1999
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED 6-30-00 ENDED 6-30-99 ENDED 6-30-00 ENDED 6-30-99
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 1,751,792 $ 1,436,657 $ 3,331,682 $ 2,811,666
Interest on time deposits with other
financial institutions 450,690 379,791 838,137 743,471
Interest on U.S. government
agency securities 268,278 189,020 535,325 349,788
Interest on federal funds sold 269,846 128,548 521,143 312,550
------------ ------------ ------------ ------------
Total interest income 2,740,606 2,134,015 5,226,287 4,217,475
INTEREST EXPENSE:
Interest on deposits 704,045 535,226 1,318,788 1,122,444
------------ ------------ ------------ ------------
Total interest expense 704,045 535,226 1,318,788 1,122,444
------------ ------------ ------------ ------------
Net interest income 2,036,561 1,598,790 3,907,499 3,095,031
Provision for loan losses 30,000 0 30,000 0
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 2,006,561 1,598,790 3,877,499 3,095,031
NON-INTEREST INCOME:
Service charges on deposit accounts 63,711 86,238 124,861 173,059
Other customer fees and charges 26,263 44,106 56,739 147,007
------------ ------------ ------------ ------------
Total non-interest income 89,974 130,344 181,600 320,066
NON-INTEREST EXPENSE:
Salaries and employee benefits 619,954 544,800 1,278,774 1,066,248
Occupancy expense 107,173 103,356 208,595 205,935
Equipment expense 71,423 63,919 136,632 124,236
Other 295,671 250,013 571,568 493,381
------------ ------------ ------------ ------------
Total non-interest expense 1,094,221 962,089 2,195,568 1,889,800
Income before income taxes 1,002,313 767,045 1,863,531 1,525,297
Provision for income taxes 425,121 325,172 784,440 637,301
------------ ------------ ------------ ------------
Net Income $ 577,192 $ 441,873 $ 1,079,091 $ 887,996
============ ============ ============ ============
EARNINGS PER SHARE:
Earnings per common share $ 1.26 $ 0.96 $ 2.36 $ 1.93
Earnings per common share assuming dilution $ 1.25 $ 0.94 $ 2.33 $ 1.90
Weighted average shares outstanding 456,314 459,030 457,843 459,030
Weighted avg. shrs. outsdg. assuming dilution 461,228 470,046 463,261 467,732
============ ============ ============ ============
</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, 1999 AND 2000
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED 6-30-99 ENDED 6-30-00
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 3,928,256 $ 4,730,265
Fees received 572,523 434,994
Interest paid (1,173,387) (1,312,121)
Cash paid to suppliers and employees (1,853,267) (1,948,262)
Income taxes paid (765,000) (728,000)
------------ ------------
Net cash provided by operating activities 709,125 1,176,876
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in time deposits with
other financial institutions (4,455,000) (6,543,716)
Maturity of investment securities 7,499,670 0
Purchase of investment securities (5,000,000) 0
Net (increase) decrease in loans to customers (469,474) (5,843,131)
Recoveries on loans previously charged-off 0 20,749
(Increase) decrease in premises and equipment (48,042) (43,053)
------------ ------------
Net cash provided by (used in) investing activities (2,472,846) (12,409,152)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in demand, interest
bearing transaction, and savings deposits 9,409,713 (10,415,508)
Net increase in time deposits (7,907,160) 13,612,539
(Increase) decrease in other assets (3,427,846) (414,600)
Exercise of stock options 90,000 46,895
Repurchase of common stock (decrease) (81,892) (95,013)
Dividends paid (decrease) (344,135) (344,251)
------------ ------------
Net cash provided by (used in) financing activities (2,261,320) 2,390,063
------------ ------------
Net increase (decrease) in cash and cash equivalents (4,025,041) (8,842,214)
Cash and cash equivalents at the
beginning of the period 26,766,067 27,635,500
------------ ------------
Cash and cash equivalents at end of period $ 22,741,026 $ 18,793,286
------------ ------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 887,996 $ 1,079,091
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 118,914 140,202
Provision for loan losses and OREO losses 0 30,000
(Increase) decrease in interest receivable (64,493) (253,739)
Increase (decrease) in unearned loan fees 27,731 11,110
Increase (decrease) in accrued interest payable (50,943) 6,667
(Increase) decrease in prepaid expenses (50,491) 26,788
Increase (decrease) in accounts payable (31,890) 80,317
Increase (decrease) in income taxes payable (127,699) 56,440
------------ ------------
Total adjustments (178,871) 97,786
------------ ------------
Net cash provided by operating activities $ 709,125 $ 1,176,877
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
NUMBER OF
SHARES COMMON RETAINED
OUTSTANDING STOCK EARNINGS TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1999 458,021 $ 3,741,923 $ 11,411,204 15,153,127
Stock Options Exercised 3,490 46,895 0 46,895
Repurchase of Common Stock (2,512) (95,013) 0 (95,013)
Issuance of cash dividends of $.75 per share 0 0 (344,251) (344,251)
Net Income 0 0 1,079,091 1,079,091
Balance at June 30, 2000 458,999 3,693,805 12,146,044 15,839,849
Balance at December 31, 1998 452,684 $ 3,829,341 $ 10,259,075 14,088,416
Stock Options Exercised 7,500 90,000 0 90,000
Repurchase of Common Stock (1,837) (81,892) 0 (81,892)
Issuance of cash dividends of $.75 per share 0 0 (344,135) (344,135)
Net Income 0 0 887,997 887,997
Balance at June 30, 1999 458,347 3,837,449 10,802,937 14,640,386
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
6
<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,
2000 and the results of operations for the three months and six months ended
June 30, 2000 and 1999 and cash flows for the six months ended June 30, 2000
and 1999.
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 1999 Annual Report to Shareholders, which is incorporated by
reference in the Company's 1999 annual report on Form 10-K. The results of
operations for the six months ended June 30, 2000 are not necessarily indicative
of the operating results for the full year.
2. COMPREHENSIVE INCOME
The Company had no items of other comprehensive income for the three month
and six month periods ended June 30, 2000 and 1999. Accordingly, total
comprehensive income was equal to net income for each of those periods.
3. SEGMENT REPORTING
The Company is principally engaged in community banking activities through
the four banking offices of its subsidiary bank. The community banking
activities include accepting deposits, providing loans and lines of credit to
local individuals and businesses, investing in investment securities and
money market instruments. The four banking offices have been aggregated in to
a single reportable segment. Because the Company's financial information is
internally evaluated as a single operating segment, no separate segment
information is presented. The combined results are reflected in these
financial statements.
4. EARNINGS PER SHARE
The following table reconciles the numerator and denominator of the basic and
diluted earnings per share computations:
<TABLE>
<CAPTION>
NET INCOME WEIGHTED PER SHARE
(LOSS) AVG. SHARES AMOUNT
FOR THE QUARTER ENDED JUNE 30, 2000
<S> <C> <C> <C>
Basic Earnings
(Loss) per share $ 577 457,988 $ 1.26
Stock Options 3,490
Diluted Earnigs
(Loss) per share $ 577 463,261 $ 1.25
</TABLE>
<TABLE>
<CAPTION>
NET INCOME WEIGHTED PER SHARE
(LOSS) AVG. SHARES AMOUNT
FOR THE QUARTER ENDED JUNE 30, 1999
<S> <C> <C> <C>
Basic Earnings
(Loss) per share $ 442 459,030 $ 1.94
Stock Options 0
Diluted Earnigs
(Loss) per share $ 442 467,732 $ 1.90
</TABLE>
<TABLE>
<CAPTION>
NET INCOME WEIGHTED PER SHARE
(LOSS) AVG. SHARES AMOUNT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<S> <C> <C> <C>
Basic Earnings
(Loss) per share $ 577 457,843 $ 2.36
Stock Options 0
Diluted Earnigs
(Loss) per share $ 577 463,261 $ 2.33
</TABLE>
<TABLE>
<CAPTION>
NET INCOME WEIGHTED PER SHARE
(LOSS) AVG. SHARES AMOUNT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<S> <C> <C> <C>
Basic Earnings
(Loss) per share $ 442 459,030 $ .96
Stock Options 0
Diluted Earnigs
(Loss) per share $ 442 470,046 $ .94
</TABLE>
For the periods reported, the "Company" had no reconciling items between net
income (loss) and income (loss) available to common shareholders.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000
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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NONE
FINANCIAL CONDITION
LIQUIDITY MANAGEMENT
The consolidated loan-to-deposit ratio at June 30, 2000 was 50.5% which was an
increase from 48.0% for the same period in 1999. Total outstanding loans as of
June 30, 2000 increased
7
<PAGE>
$8,730,000 compared to the same period a year ago while total deposits
increased $11,801,000 versus the same time last year. The increase in loans
and deposits was primarily due to the company's marketing efforts.
One of the company's customers manages accounts for medical offices and
physicians. This customer has brought approximately 80 of the accounts they
manage to the company. As of June 30, 2000 the aggregate monthly average balance
in these accounts was $26,000,000. Some of these deposits were previously money
market accounts but have recently been transferred to time certificates of
deposit.
Due to the actual ownership of the accounts being different entities, the
company believes the chances of these deposits moving to another institution are
low. An analysis of the loan to deposit ratio shows that without this
concentration of deposits, the loan to deposit ratio would be over 60%.
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 $72,691,000 on June 30, 2000. This
amount represented 59.0% of total deposits in comparison to the liquidity ratio
of 57.8% as of June 30, 1999. This increase is primarily a result of a
proportionately higher increase in deposit growth than the corresponding
increase in loans. It is management's belief that the current liquidity level
is sufficient to meet current needs.
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)
<S> <C> <C> <C> <C> <C> <C>
6-30-00 % 12-31-99 % 6-30-99 %
Fed funds sold $10,370 16% $ 21,760 31% $ 15,168 26%
Interest bearing
Deposits 34,432 54% 27,889 40% 25,590 48%
Securities 19,465 30% 19,465 29% 13,000 26%
</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, 2000 were comprised of U.S. Gov't agencies.
8
<PAGE>
CHANGES IN FINANCIAL POSITION
As of June 30, 2000, total deposits increased $3,197,000 from December 31, 1999
and loans outstanding increased $6,238,000. Total deposits as of June 30, 2000
were $123,193,000, an increase of 10.6% from $111,392,000 as of June 30, 1999.
Total loans as of June 30, 2000 were $63,583,000, an increase from $54,853,000
as of June 30, 1999.
The following table sets forth the amount of deposits by category and the
percent of total deposits at the dates specified.
<TABLE>
<CAPTION>
DEPOSIT COMPARATIVE
($000.00 Omitted)
<S> <C> <C> <C> <C> <C> <C>
6-30-00 % 12-31-99 % 6-30-99 %
Demand $42,688 35% $39,567 34% $42,219 38%
Savings 2,598 2% 2,327 2% 2,268 2%
Interest bearing 34,418 28% 48,226 41% 40,486 36%
Trans. Deposits
Other time 43,489 35% 29,877 24% 26,419 24%
</TABLE>
The following table sets forth the amount of loans outstanding by category
and the percent of total loans outstanding at the dates specified.
<TABLE>
<CAPTION>
LOAN COMPARATIVE
($000.00 Omitted)
<S> <C> <C> <C> <C> <C> <C>
6-30-00 % 12-31-99 % 6-30-99 %
Commercial $31,721 50% $33,405 58% $36,495 67%
Real estate-const 12,553 20% 7,627 12% 5,789 11%
Real estate-other 11,909 18% 9,678 17% 7,271 12%
Installment/other 7,400 12% 6,636 12% 5,298 10%
</TABLE>
NON-PERFORMING ASSETS
9
<PAGE>
The following table provides information with respect to the Bank's
past due loans and components for non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
($000.00 Omitted)
<S> <C> <C> <C>
6-30-00 12-31-99 6-30-99
Loans 90 days or more past
due & still accruing $ 85 $ 0 $ 50
Non-accrual loans 145 158 522
Other real estate owned 0 0 560
------ ------ ------
Total non-performing assets $ 230 $ 158 $1,132
====== ====== ======
Non-performing assets to
period end loans plus
other real estate owned .36% 0.28% 2.04%
Allowance to non-performing
loans 576% 806% 230%
Allowance to non-performing
assets 576% 806% 116%
</TABLE>
The 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, less
estimated disposal costs. 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 foreclosure. 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 non-interest expense in the period incurred.
The decrease in non-performing assets from June 30, 1999 to June 30, 2000 is
the result of a small increase in loans 90 days past due, a decrease in
non-accrual loans. The non-accrual loan amount represents one loan which was
subsequently paid in full in July, 2000.
10
<PAGE>
CAPITAL POSITION
As of June 30, 2000, Shareholders' Equity was $15,840,000. This represents an
increase of $1,199,000 or 8.2% over the same period last year. Since the
inception of the repurchase program in 1989, the Company has authorized the
repurchase of $3,500,000 of its stock. As of June 30, 2000, the Company has
repurchased a total of 167,170 shares of the Company stock constituting 31.1%
of the Company's original stock prior to the repurchase program, at a total
cost of $2,668,000, or an average price per share of $15.96. The Company
plans to continue its repurchase program as an additional avenue for
liquidity for its shareholders. The program has not significantly 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.
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, 2000:
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
<S> <C> <C>
Tier 1 Capital 18.67% 4.00%
Total Capital 19.86% 8.00%
Leverage Ratio 12.45% 4.00%
</TABLE>
11
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Total interest income including loan fees increased to $5,226,000 for the first
six months of 2000 from $4,217,000 for the same period in 1999.
Total interest income from loans and investments for the first six months of
2000 increased from $4,217,000 in 1999 to $5,226,000. The yield on loans and
fees increased 58 basis points over the same period last year. This increase was
brought about by an increase in the average outstanding loans of $6,548,000 for
the period in addition to an increase in the prime rate from 7.75% to 9.50%. The
yield on investments increased 48 basis points over the same period last year.
This increase was brought about by an increase in the average outstanding
investments of $12,840,000 for the period.
Interest expense increased from $1,122,000 at the end of the first six months of
1999 to $1,319,000 in 2000. This increase was due to an increase in average
interest-bearing deposit accounts of $13,832,000 during the first six months of
2000 versus the same period last year. The average cost of funds, however for
the period ending June 30, 2000 was 10 basis points less than the same period
last year.
As a result of these factors, net interest margin for the first six months of
2000 was 6.00% compared to 5.71% for the same period last year.
For the second quarter, total interest income including loan fees increased from
$2,134,000 in 1999 to $2,741,000 for the same period in 2000. This increase is
due to an increase in income on loans of $315,000, and an increase in income on
investments of $141,000. This increase was caused by an increase in both volume
and interest rate compared to the same period last year. Average loan volume for
the second quarter showed an increase of $657,000 from the same period last
year. Average investments increased $12,840,000 compared to the same period last
year.
For the second quarter of 2000, interest expense increased $168,819 compared to
the same period in 1999. Average outstanding interest bearing deposits increased
from $65,176,000 in 1999 to $82,231,000 in 2000. Average cost of funds for the
same period was 3.42% compared to 3.28% in 1999. As a result, net interest
income for the second quarter of 2000 increased $437,000, or 27.33% compared to
the same period in 1999.
12
<PAGE>
OTHER OPERATING INCOME
Service charges on deposit accounts as of the end of the first six months of
2000 decreased to $125,000 versus $173,000 for the same period in 1999. This
was primarily related to a decrease in service charges collected on returned
checks.
Other customer fees and charges decreased $90,000. This was primarily related
to a gain on sale of $41,000 in other real estate owned in 1999. In addition,
$24,000 in 1999 was recognized from a reimbursement of real estate taxes
previously paid on leased property. The remainder was lease income realized
in 1999 from rental property who's lease has expired. Rental income from this
property in 1999 was $13,000.
Service charges on deposit accounts as of the end of the second quarter of
2000 decreased to $64,000 versus $86,000 for the same period in 1999. This
was primarily related to a decrease in service charges collected on returned
checks.
Other customer fees and charges decreased $18,000 for the second quarter.
This was primarily related to a decrease in merchant fee income and rental
income.
LOAN LOSS PROVISION
The allowance for loan losses is maintained at a level that management of the
Company considers to be adequate for losses that are inherent in the current
loan portfolio. 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 losses in the loan portfolio, as well as
prevailing 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 loan
losses for the six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------
($000.00 Omitted)
6-30-00 6-30-99
<S> <C> <C>
Balance, beginning of the period $1,273 $1,319
Provision for loan losses 30 0
Recoveries 21 1
Loans charged-off 0 5
------ ------
13
<PAGE>
Balance, end of the period $1,324 $1,315
</TABLE>
The balance in the allowance for loan losses at June 30, 2000 was 2.08% of total
loans compared to 2.46% of total loans at June 30, 1999.
OTHER OPERATING EXPENSES
Total other operating expenses increased $306,000 as of the end of the first six
months of 2000 compared to the same period last year. This increase was
primarily due to an increase in salaries of $213,000 primarily centered in
incentive accruals and an increase in staff over the same period last year. In
addition, other expenses increased $93,000 centered in business
development/entertainment, donations, and furniture and fixtures.
Total other operating expenses increased $132,000 as of the end of the second
quarter of 2000. This increase was primarily due to an increase in salaries of
$75,000 primarily centered in incentive accruals and an increase in staff over
the same period last year. In addition, other expenses increased $45,000
centered in business development/entertainment, donations, and furniture and
fixtures.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes as of the end of the first six months
of 1999 increased from $637,000 in 1999 to $784,000. For the same period, the
Company's total effective tax rate was 42.1% compared to 41.8% in 1999.
NET INCOME
Net income for the first six months of 2000 increased to $1,079,000 from
$888,000 for the same period in 1999, or an increase of 21.5%.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
14
<PAGE>
The primary factor which may affect future results is the fluctuation of
interest rates in the market place more commonly referred to as interest rate
risk. Interest rate risk is the exposure of a bank's current and future earnings
and equity capital arising from adverse movements in interest rates. It results
from the possibility that changes in interest rates may have an adverse effect
on a bank's earnings and its underlying economic value. Changes in interest
rates affect a bank's earnings by changing its net interest income and the level
of other interest-sensitive income and operating expenses. As mentioned
previously, the potential decrease in a declining interest rate environment
would be minimized by an increase in assets. In addition, earnings and growth of
the company are and will be affected by general economic conditions, both
domestic and international, and by monetary and fiscal policies of the United
States Government, particularly the Federal Reserve Bank.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No material developments from that which was reported in the Form 10-K
dated for the year ended December 31, 1999.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
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 May 16, 2000.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (Article 9)
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
15
<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
