<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, 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
456,681 shares of no par value common stock
issued as of March 31, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 PAGE
SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS
<S> <C>
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 DECEMBER 31, 1999 AND MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Audited Unaudited
ASSETS 12/31/99 03/31/00
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 5,875,500 $ 7,861,961
Federal funds sold 21,760,000 18,860,000
-------------------- -------------------
Cash and cash equivalents 27,635,500 26,721,961
Time deposits with other financial institutions 27,888,634 31,262,350
Investment securities (fair value of $19,294,504 at
March 31, 2000 and $19,154,772 at
December 31, 1999 ) held to maturity 19,465,133 19,465,101
Loans, net of allowance for loan losses of
$1,273,364 at March 31, 2000 and
$1,273,364 at December 31, 1999 56,071,617 58,703,440
Other real estate owned 0 0
Premises and equipment, net 913,435 853,715
Interest receivable and other assets 3,929,372 5,175,065
-------------------- -------------------
Total Assets $135,903,691 $142,181,632
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------- -------------------- -------------------
Deposits:
Demand $ 39,566,546 $ 46,492,670
Interest-bearing transaction accounts 48,225,818 45,711,228
Savings 2,327,328 2,664,060
Time certificates $100,000 and over 23,047,736 23,372,593
Other time certificates 6,828,925 7,229,555
-------------------- -------------------
Total Deposits 119,996,353 125,470,106
Interest payable and other liabilities 754,210 1,101,488
-------------------- -------------------
Total Liabilities 120,750,563 126,571,594
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;
456,681 shares outstanding at March 31, 2000 and
458,021 shares outstanding at December 31, 1999 3,741,924 3,696,934
Retained Earnings 11,411,204 11,913,104
-------------------- -------------------
Total Shareholders' Equity 15,153,128 15,610,038
Total Liabilities and Shareholders' Equity $135,903,691 $142,181,632
==================== ===================
</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, 1999 AND 2000
<TABLE>
<CAPTION>
Unaudited Unaudited
THREE MONTHS THREE MONTHS
ENDED 3-31-99 ENDED 3-31-00
- ------------------------------------------------------ -------------------------- ------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,375,009 $1,579,891
Interest on time deposits with other
financial institutions 363,680 387,447
Interest on U.S. government
treasury securities 160,768 267,047
Interest on federal funds sold 184,002 251,297
------------------- ------------------
Total interest income 2,083,460 2,485,682
INTEREST EXPENSE:
Interest on deposits 587,219 614,743
------------------- ------------------
Total interest expense 587,219 614,743
------------------- ------------------
Net interest income 1,496,241 1,870,939
Provision for loan losses - -
------------------- ------------------
Net interest income after
provision for loan losses 1,496,241 1,870,939
NON-INTEREST INCOME:
Service charges on deposit accounts 86,821 61,150
Other customer fees and charges 102,901 30,476
------------------- ------------------
Total non-interest income 189,722 91,626
NON-INTEREST EXPENSE:
Salaries and employee benefits 521,448 658,820
Occupancy expense 102,579 101,422
Equipment expense 60,317 65,209
Other 243,367 275,897
------------------- ------------------
Total non-interest expense 927,711 1,101,348
Income before income taxes 758,252 861,217
Provision for income taxes 312,128 359,319
------------------- ------------------
Net Income $446,124 $501,898
=================== ==================
EARNINGS PER SHARE:
Earnings per common share $0.98 $1.10
Earnings per common share assuming dilution $0.96 $1.08
Weighted average shares outstanding 454,323 457,699
Weighted avg. shrs. outsdg. assuming dilution 465,934 465,286
=================== ==================
</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 THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 3-31-99 ENDED 3-31-00
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 1,812,325 $ 2,438,557
Fees received 441,945 379,035
Interest paid (619,524) (613,014)
Cash paid to suppliers and employees (1,008,967) (909,424)
Income taxes paid (125,000) (326,000)
------------------- -------------------
Net cash provided by operating activities 500,779 969,154
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in time deposits with
other financial institutions (5,940,000) (3,373,716)
Maturity of investment securities 5,000,000 32
Purchase of investment securities (5,000,000) 0
Net (increase) decrease in loans to customers 1,427,426 (2,799,959)
Recoveries on loans previously charged-off 0 0
(Increase) decrease in premises and equipment (41,265) (213,064)
------------------- -------------------
Net cash provided by (used in) investing activities (4,553,839) (6,386,708)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in demand, interest
bearing transaction, and savings deposits 1,431,486 4,748,266
Net increase (decrease) in time deposits (5,322,161) 725,488
(Increase) decrease in other assets (121,794) (924,750)
Exercise of stock options 90,000 0
Repurchase of common stock (24,544) (44,990)
Dividends paid 0 0
------------------- -------------------
Net cash provided by (used in) financing activities (3,946,653) 4,504,014
------------------- -------------------
Net increase (decrease) in cash and cash equivalents (7,999,713) (913,540)
Cash and cash equivalents at the
beginning of the year 26,766,067 27,635,500
------------------- -------------------
Cash and cash equivalents at the end of the year $ 18,766,354 $ 26,721,961
------------------- -------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 446,124 $ 501,898
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 63,250 69,713
Provision for loan losses and OREO losses 0 0
(Increase) decrease in interest receivable (159,338) 41,957
Increase (decrease) in unearned loan fees 140,426 181,875
Increase (decrease) in accrued interest payable (32,305) 18,183
(Increase) decrease in prepaid expenses (14,810) 15,354
Increase (decrease) in accounts payable (129,696) 106,858
Increase (decrease) in income taxes payable 187,128 33,319
------------------- -------------------
Total adjustments 54,655 467,259
------------------- -------------------
Net cash provided by operating activities $ 500,779 $ 969,154
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES COMMON RETAINED
OUTSTANDING STOCK EARNINGS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 452,684 $3,829,340 $10,259,075 14,088,415
Stock Options Exercised 7,500 90,000 0 90,000
Repurchase of Common Stock (550) (24,544) 0 (24,544)
Issuance of cash dividends of $.75 per share 0 0 0 0
Net Income 0 0 446,124 446,124
Balance at March 31, 1999 459,634 3,894,796 10,705,199 14,599,995
Balance at December 31, 1999 458,021 3,741,924 11,411,204 15,153,128
Stock Options Exercised 0 - - 0
Repurchase of Common Stock (1,160) (44,990) 0 (44,990)
Issuance of cash dividends of $.75 per share 0 0 0 0
Net Income 0 0 501,898 501,898
Balance at March 31, 2000 456,861 3,696,934 11,913,102 15,610,036
</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 un-audited interim consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position at March 31,
2000 and the results of operations for the three months ended March 31, 2000 and
1999 and cash flows for the three months ended March 31, 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 un-audited 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 three months ended March 31, 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 quarters ended
March 31, 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 into 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.
<PAGE>
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 MARCH 31, 2000
<S> <C> <C> <C>
Basic Earnings
(Loss) per share $502 457,699 $1.10
Stock Options 7,587
Diluted Earnings
(Loss) per share $502 465,286 $1.08
</TABLE>
<TABLE>
<CAPTION>
NET INCOME WEIGHTED PER SHARE
(LOSS) AVG. SHARES AMOUNT
FOR THE QUARTER ENDED MARCH 31, 1999
<S> <C> <C> <C>
Basic Earnings
(Loss) per share $446 454,323 $.98
Stock Options 11,610
Diluted Earnings
(Loss) per share $446 465,934 $.96
</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 THREE MONTHS ENDED MARCH 31, 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.
FINANCIAL CONDITION
LIQUIDITY MANAGEMENT
The consolidated loan-to-deposit ratio at March 31, 2000 was 46.8% which was a
decrease from 49.1% for the same period in 1999. Total outstanding loans as of
March 31, 2000 increased $6,645,000 compared to the same period a year ago while
total
<PAGE>
deposits increased $19,471,000 versus the same time last year. The increases in
loans and deposits are primarily due to Bank's concentrated effort in promoting
sales culture to its employees.
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 $77,449,000 on March 31, 2000. This
amount represented 61.7% of total deposits in comparison to the liquidity ratio
of 60.7% as of March 31, 1999. This increase is primarily a result of an
increase in 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.
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)
3-31-99 % 12-31-99 % 3-31-00 %
--------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fed funds sold $12,350 21% $21,760 31% $18,860 27%
Interest bearing
deposits $30,075 52% $27,889 40% $31,262 45%
Securities $15,500 27% $19,465 29% $19,465 28%
</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, 2000 were comprised of U.S. Gov't agencies.
CHANGES IN FINANCIAL POSITION
As of March 31, 2000, deposits increased $5,474,000 from December 31, 1999 while
at the same time net loans outstanding increased $2,632,00. Total deposits as of
March 31, 2000 were $125,470,000, an increase of 18.4% from $105,999,000 as of
March 31, 1999. Total loans as of March 31, 2000 were $58,703,000, which was an
increase from $52,013,000 as of March 31, 1999.
<PAGE>
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)
3-31-99 % 12-31-99 % 3-31-00 %
---------
<S> <C> <C> <C> <C> <C> <C>
Demand $39,017 37% $39,557 33% $46,493 37%
Savings 2,184 2% 2,327 2% 2,664 2%
Interest bearing
trans. deposits 35,793 34% 48,226 40% 45,711 36%
Other time 29,004 27% 29,877 25% 30,603 25%
</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.
<TABLE>
<CAPTION>
LOAN COMPARATIVE
($000.00 Omitted)
3-31-99 % 12-31-99 % 3-31-00 %
-------- ---------
<S> <C> <C> <C> <C> <C> <C>
Commercial $38,044 71% $32,880 57% $32,624 54%
Real estate-const 4,989 9% 7,627 13% 10,166 17%
Real estate-other 4,668 9% 10,676 19% 11,549 19%
Installment/other 5,631 11% 6,162 11% 5,638 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.
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
--------------------------
(000.00 Omitted)
3-31-99 12-31-99 3-31-00
-------- -------- ---------
<S> <C> <C> <C>
Loans 90 days or more past
due & still accruing $ 631 $ 0 $ 0
Non-accrual loans 742 158 298
Other real estate owned 212 0 0
------ ------ ------
Total non-performing assets $1,585 $ 158 $ 298
====== ====== ======
<PAGE>
Non-performing assets to
period end loans plus
other real estate owned 3.03% .28% .50%
Allowance to non-performing
loans 96% 805% 234%
Allowance to non-performing
assets 83% 805% 234%
</TABLE>
The subsidiary Bank's policy is to recognize interest income on an accrual basis
unless the full collectibility of principal and interest is uncertain. Loans
that are delinquent 90 days as to principal or interest are placed on a
non-accrual basis, unless they are well secured and in the process of
collection, and any interest earned but uncollected is reversed from income.
Collectibility is determined by considering the borrower's financial condition,
cash flow, quality of management, the existence of collateral or guarantees and
the state of the local economy.
Other real estate owned ("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 decrease in non-performing assets from March 31, 1999 to March 31, 2000 is
due primarily to a decrease in loans 90 days past due and non-accrual loans of
$786,000 and a decrease in other real estate owned from $212,000 to $0.
<PAGE>
CAPITAL POSITION
As of March 31, 2000, Shareholders' Equity was $15,610,000. This represents an
increase of $1,010,000, or 6.9% over the same period last year. Since the
inception of the repurchase program in 1989, the Company has authorized the
repurchase of $3,000,000 of its stock. As of March 31, 2000, the Company has
repurchased a total of 165,818 shares of the Company stock constituting 31.0% of
the Company's original stock prior to the repurchase program, at a total cost of
$2,617,690, or an average price per share of $15.79. The Company plans to
continue its repurchase program as an additional avenue for liquidity for its
shareholders. The program has not affected the Company's liquidity or capital
position or its ability to operate as the Company's capital growth has exceeded
its asset growth. In addition, the Company's subsidiary Bank remains more than
well-capitalized under current regulations.
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, 2000:
<TABLE>
<CAPTION>
Minimum
Capital Ratio Regulatory Requirement
<S> <C> <C>
Tier 1 Capital 19.58% 4.00%
Total Capital 20.82% 8.00%
Leverage Ratio 11.39% 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>
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS
The following table provides an interest rate sensitivity and interest
rate risk analysis for the quarter ended September 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: 3-31-00
<TABLE>
<CAPTION>
REMAINING TIME BEFORE MATURITY OR INTEREST RATE ADJUSTMENT
($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 $0 $0 $0 $0 $0 $0 $0
2. U. S. AGENCIES 19,465 0 14,465 5,000 0 0 0
3. FED FUNDS SOLD 18,860 18,860 0 0 0 0 0
4. PURCHASED CDS 31,262 3,166 25,222 2,874 0 0 0
--------------------------------------------------------------------------------------
TOTAL INVESTMENTS $69,587 $22,026 $39,687 $7,874 $0 $0 $0
B. LOANS $58,798 $51,870 $1,393 $454 $3,192 $1,890 $0
--------------------------------------------------------------------------------------
TOTAL LOANS $58,798 $51,870 $1,393 $454 $3,192 $1,890 $0
C. TOTAL EARNING ASSETS $128,385 $73,896 $41,080 $8,328 $3,192 $1,890 $0
II. COST OF FUNDS (DEPOSITS)
A. CERTIFICATE OF DEPOSITS $30,602 $20,839 $9,661 $101 $0 $0 $0
B. MONEY MARKET ACCOUNTS 42,781 5,834 16,448 20,499 0 0 0
C. TRANSACTION ACCOUNTS 5,689 244 731 1,928 1,387 1,398 0
D. SAVINGS ACCOUNTS 2,664 114 343 903 649 655 0
--------------------------------------------------------------------------------------
TOTAL COST OF FUNDS $81,736 $27,031 $27,183 $23,431 $2,036 $2,053 $0
III. INTEREST SENSITIVE ASSETS $128,385 $73,896 $41,080 $8,328 $3,192 $1,890 $0
IV. INTEREST SENSITIVE LIABILITIES $81,736 $27,031 $27,183 $23,432 $2,036 $2,053 $0
--------------------------------------------------------------------------------------
V. GAP $46,649 $46,865 $13,897 ($15,105) $1,156 ($164) $0
VI. CUMULATIVE GAP $46,649 $46,865 $60,762 $45,657 $46,813 $46,649 $46,649
VII. GAP RATIO 1.57 2.73 1.51 -0.36 1.57 0.92 1.57
VIII. CUMULATIVE RATIO 1.57 2.73 2.12 1.59 1.59 1.57 1.57
IX. GAP AS A % OF TOTAL ASSETS 33.26 33.41 9.91 -10.77 0.82 -0.12 0.00
X. CUMULATIVE GAP AS A % OF 33.26 33.41 43.32 32.55 33.37 33.26 33.26
TOTAL ASSETS
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Total interest income including loan fees increased from $2,083,000 for the
first three months of 1999 to $2,502,000 for the same period in 2000. The prime
lending rate increased to 9.00% in March 2000 from 7.75% compared to the same
period last year. The primary reason for the increase in interest income on
loans was due to $7,325,000 increase in average loans compared to the same
period a year ago. Loan fees showed an increase of $6,000 over the same period
last year. The yield on loans and fees increased 27 basis points over the same
period last year. The increase in interest income from investments was due to
total average outstanding investments volume increase of $10,088,000 combined
with an increase in the rate earned on investments for the first quarter 2000
versus 1999. The yield on investments showed an increase of 45 basis points
reflective of market conditions. Interest expense increased from $576,000 as of
the end of the first three months of 1999 to $615,000 in 2000. This increase was
brought about by a increase in average interest-bearing deposit accounts of
$12,355,000 during the first quarter of 2000 versus the same period last year.
The average cost of funds however, for the period ending March 31, 2000 was 12
basis points less than the same period last year. As a result of these factors,
net interest margin for the first three months of 2000 was 5.81% compared to
5.42% for the same period last year.
OTHER OPERATING INCOME
Service charges on deposit accounts as of the end of the first three months of
2000 decreased to $61,000 versus $87,000 for the same period in 1999. The
decrease was due to lower fees collected in service charges related to return
check and overdraft charges and from analysis of service charges on commercial
accounts. Other charges and fees decreased $74,000 primarily due to the sale of
Other Real Estate Owned in 1999.
<PAGE>
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 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 inherent 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 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, 2000 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
(000.00 Omitted)
3-31-00 3-31-99
------- -------
<S> <C> <C>
Balance, beginning of the period $1,273 $1,319
Provision for loan losses 0 0
Recoveries 0 0
Loans charged-off 0 0
------ ------
Balance, end of the period $1,273 $1,319
</TABLE>
The balance in the allowance for loan losses at March 31, 2000 was 2.12% of
total loans compared to 2.47% of total loans at March 31, 1999.
OTHER OPERATING EXPENSES
Total non interest expenses increased $174,000 as of the end of the first three
months of 2000 compared to the same period last year. This increase was
primarily due to an increase in salaries and employee expense. The Bank's
commitment to grow increased the number of employees from 42 to 49 primarily in
the sales area. The increase was also attributed to increase in regular raises
in pay and increased cost of benefits.
<PAGE>
PROVISION FOR INCOME TAXES
The Company's provision for income taxes as of the end of the first three months
of 2000 increased from $312,000 in 1999 to $359,000. This increase is attributed
to increased income from regular business operations. For the same period in
2000 the Company's total effective tax rate was 41.7% compared to 41.1% in 1999.
NET INCOME
Net income for the first quarter of 2000 increased from $446,000 for the same
period in 1999 to $502,000, or an increase of 12.6%.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
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.
<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, 2000 for the year ended December 31, 1999.
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
One Form 8-K was filed by the registrant during the first
quarter of 2000, reporting that the Company had dismissed
PriceWaterhouseCoopers as Its independent accountants. On May
8, 2000, the Company filed a Form 8-K indicating that it
retained Arthur Andersen LLP as its independent public
accountants for the fiscal year ending December 31, 2000.
<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: May 15, 2000 BY: /s/ Shirley W. Nelson
------------------------- -----------------------------
SHIRLEY W. NELSON
CHAIRMAN AND CEO
(PRINCIPAL EXECUTIVE OFFICER)
DATE: May 15, 2000 BY: /s/ Kikuo Nakahara
------------------------- -----------------------------
KIKUO NAKAHARA
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
The remainder of this page is intentionally left blank
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