<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
[ X ] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998; or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ______________ to _______________.
COMMISSION FILE NUMBER 0-11986
SUMMIT BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 75-1694807
- ------------------------ --------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1300 SUMMIT AVENUE, FORT WORTH, TEXAS 76102
-------------------------------------------
(Address of principal executive offices)
(817) 336-6817
----------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGE
-------------------------------------------------------------------------
(Former name, former address and former fiscal year if changed since last
report)
Indicate by 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 of common stock, $1.25 par value, outstanding at June 30,
1998 was 6,514,794 shares.
<PAGE>
SUMMIT BANCSHARES, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1998
and 1997 and at December 31, 1997 4
Consolidated Statements of Income for the Three Months
and Six Months Ended June 30, 1998 and 1997 and for
the Year Ended December 31, 1997 5-6
Consolidated Statements of Changes in Shareholders'
Equity for the Six Months Ended June 30, 1998 and
1997 and for the Year Ended December 31, 1997 7
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 and for the
Year Ended December 31, 1997 8-9
Notes to Consolidated Financial Statements for the Six
Months Ended June 30, 1998 and 1997 and for the
Year Ended December 31, 1997 10-21
The June 30, 1998 and 1997 and the December 31, 1997 financial statements
included herein are unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management of the registrant, necessary to a fair statement of
the results for the interim periods.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Six Months
Ended June 30, 1998 and 1997 22-29
2
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Change in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
3
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, (Unaudited)
--------------------------- December 31,
1998 1997 1997
---------- -------------- -----------
ASSETS (In Thousands)
<S> <C> <C> <C>
CASH AND DUE FROM BANKS - NOTE 1 $ 25,602 $ 28,170 $ 30,487
FEDERAL FUNDS SOLD 27,675 10,900 35,760
INVESTMENT SECURITIES - NOTE 2
Securities Available-for-Sale, at fair value 60,223 61,276 60,476
Securities Held-to-Maturity, at cost 47,749 52,379 45,151
(fair value of $48,011,000, $52,462,000,
and $45,360,000 June 30, 1998 and 1997
and December 31, 1997, respectively)
LOANS - NOTE 3
Loans, Net of Unearned Discount 292,846 246,816 276,069
Allowance for Loan Losses (4,413) (3,512) (4,065)
-------- -------- --------
LOANS, NET 288,433 243,304 272,004
PREMISES AND EQUIPMENT - NOTE 4 7,781 7,665 7,916
ACCRUED INCOME RECEIVABLE 3,575 3,310 3,442
OTHER REAL ESTATE - NOTE 5 71 151 151
OTHER ASSETS 4,506 2,776 4,407
-------- -------- --------
TOTAL ASSETS $465,615 $409,931 $459,794
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS - NOTE 6
Noninterest-Bearing Demand $116,822 $105,226 $126,398
Interest-Bearing 289,150 255,723 275,326
-------- -------- --------
TOTAL DEPOSITS 405,972 360,949 401,724
SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE - NOTE 7 13,728 9,027 14,689
ACCRUED INTEREST PAYABLE 657 616 678
OTHER LIABILITIES 1,911 1,466 1,591
-------- -------- --------
TOTAL LIABILITIES 422,268 372,058 418,682
-------- -------- --------
COMMITMENTS AND CONTINGENCIES - NOTE 11
SHAREHOLDERS' EQUITY - NOTES 12, 14 AND 18
Common Stock - $1.25 Par Value; 20,000,000
shares authorized; 6,514,794, 3,236,286
and 6,501,332 shares issued and outstanding
at June 30, 1998 and 1997 and
at December 31, 1997, respectively 8,143 4,045 8,127
Capital Surplus 6,218 6,152 6,251
Retained Earnings 29,114 27,536 26,491
Unrealized Gain on Investment Securities
Available for Sale, Net of Tax 286 140 243
Treasury Stock at Cost
(20,000 shares at June 30, 1998) (414) -0- -0-
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 43,347 37,873 41,112
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $465,615 $409,931 $459,794
======== ======== ========
</TABLE>
The accompanying Notes should be read with these financial statements.
4
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
For the Six Months Ended June 30, (Unaudited)
----------------------------------- Year Ended December 31,
1998 1997 1997
------------------ --------------- ------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $13,653 $11,330 $24,063
Interest and Dividends on Investment Securities:
Taxable 3,272 3,538 6,878
Exempt from Federal Income Taxes 26 9 23
Interest on Federal Funds Sold 989 319 1,008
------- ------- -------
TOTAL INTEREST INCOME 17,940 15,196 31,972
------- ------- -------
INTEREST EXPENSE
Interest on Deposits 6,230 4,996 10,773
Interest on Securities Sold Under
Agreements to Repurchase 307 257 528
------- ------- -------
TOTAL INTEREST EXPENSE 6,537 5,253 11,301
------- ------- -------
NET INTEREST INCOME 11,403 9,943 20,671
LESS: PROVISION FOR LOAN LOSSES - NOTE 3 408 352 900
------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 10,995 9,591 19,771
------- ------- -------
NON-INTEREST INCOME
Service Charges and Fees on Deposits 1,004 900 1,890
Loss on Sale of Investment Securities -0- -0- (1)
Other Income 822 682 1,376
------- ------- -------
TOTAL NON-INTEREST INCOME 1,826 1,582 3,265
------- ------- -------
NON-INTEREST EXPENSE
Salaries and Employee Benefits 4,102 3,575 7,524
Occupancy Expense - Net 471 387 774
Furniture and Equipment Expense 584 431 919
Other Real Estate Owned Income - Net -0- (8) (63)
Other Expense - Note 8 1,784 1,537 3,164
------- ------- -------
TOTAL NON-INTEREST EXPENSE 6,941 5,922 12,318
------- ------- -------
INCOME BEFORE INCOME TAXES 5,880 5,251 10,718
APPLICABLE INCOME TAXES - NOTE 9 2,013 1,807 3,678
------- ------- -------
NET INCOME $ 3,867 $ 3,444 $ 7,040
======= ======= =======
NET INCOME PER SHARE - NOTE 14
Basic $.59 $.53 $1.09
Diluted .56 .51 1.04
</TABLE>
The accompanying Notes should be read with these financial statements.
5
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
June 30,
--------------------------------------
1998 1997
----------------- -------------------
(In Thousands, Except Per Share Data)
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $6,975 $5,946
Interest and Dividends on Investment Securities:
Taxable 1,648 1,802
Exempt from Federal Income Taxes 13 6
Interest on Federal Funds Sold 431 116
------ ------
TOTAL INTEREST INCOME 9,067 7,870
------ ------
INTEREST EXPENSE
Interest on Deposits 3,144 2,586
Interest on Securities Sold Under Agreements
to Repurchase 144 127
------ ------
TOTAL INTEREST EXPENSE 3,288 2,713
------ ------
NET INTEREST INCOME 5,779 5,157
LESS: PROVISION FOR LOAN LOSSES - NOTE 3 250 197
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,529 4,960
------ ------
NON-INTEREST INCOME
Service Charges and Fees on Deposits 518 463
Other Income 438 357
------ ------
TOTAL NON-INTEREST INCOME 956 820
------ ------
NON-INTEREST EXPENSE
Salaries and Employee Benefits 2,061 1,828
Occupancy Expense - Net 232 190
Furniture and Equipment Expense 289 220
Other Real Estate Owned (Income) Expense - Net 3 (5)
Other Expense 850 843
------ ------
TOTAL NON-INTEREST EXPENSE 3,435 3,076
------ ------
INCOME BEFORE INCOME TAXES 3,050 2,704
APPLICABLE INCOME TAXES - NOTE 9 1,047 932
------ ------
NET INCOME $2,003 $1,772
====== ======
NET INCOME PER SHARE
Basic $.30 $.27
Diluted .29 .26
</TABLE>
The accompanying Notes should be read with these financial statements.
6
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Common Stock Gain (Loss)
------------------------- Capital Retained on Investment Treasury
Shares Amount Surplus Earnings Securities-Net Stock Total
------------ ------ ------- -------- -------------- -------- -------
(Dollars in Thousands, Except Per Share Data0
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1997 3,233,036 $4,041 $ 6,136 $24,675 $ 228 $ -0- $35,080
Net Income for the
Six Months Ended
June 30, 1997 3,444 3,444
Stock Options Exercised 3,250 4 16 20
Cash Dividend $.09
Per Share (583) (583)
Securities Available-for-
Sale Adjustment (88) (88)
--------- ------ -------- ------- ----- ----- -------
BALANCE AT
JUNE 30, 1997 3,236,286 4,045 6,152 27,536 140 -0- 37,873
Net Income for the
Six Months Ended
December 31, 1997 3,596 3,596
Stock Options Exercised 18,540 24 99 123
Two-for-One Stock Split 3,246,506 4,058 (4,058) -0-
Cash Dividend $.09
Per Share (583) (583)
Securities Available-for-
Sale Adjustment 103 103
--------- ------ -------- ------- ----- ----- -------
BALANCE AT
DECEMBER 31, 1997 6,501,332 8,127 6,251 26,491 243 -0- 41,112
Purchase of Stock Held
In Treasury (908) (908)
Retirement of Stock Held
In Treasury (25,000) (31) (463) 494 -0-
Net Income for the
Six Months Ended
June 30, 1998 3,867 3,867
Stock Options Exercised 38,462 47 (33) 14
Cash Dividend $.12
Per Share (781) (781)
Securities Available-for-
Sale Adjustment 43 43
--------- ------ -------- ------- ----- ----- -------
BALANCE AT
JUNE 30, 1998 6,514,794 $8,143 $ 6,218 $29,114 $ 286 $(414) $43,347
========= ====== ======== ======= ===== ===== =======
</TABLE>
The accompanying Notes should be read with these financial statements.
7
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
AND FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
(Unaudited)
June 30, (Unaudited)
------------------------- December 31,
1998 1997 1997
---------- ------------- -----------
(In Thousands)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 3,867 $ 3,444 $ 7,040
-------- -------- --------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 516 396 840
Net Premium Amortization
of Investment Securities 84 44 97
Provision for Loan Losses 408 352 900
Deferred Income Taxes 167 50 233
Loss on Sale of Investment Securities -0- -0- 1
Writedown of Other Real Estate -0- 4 4
Net Gain From Sale of Other Real Estate (2) (21) (21)
Net (Gain) Loss on Sale of Premises and Equipment 1 (1) 12
Increase in Accrued Income and Other Assets (324) (889) (2,796)
Increase in Accrued Expenses and Other Liabilities 299 146 333
-------- -------- --------
Total Adjustments 1,149 81 ( 397)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,016 3,525 6,643
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in Federal Funds Sold 8,085 9,450 (15,410)
Proceeds from Matured and Prepaid Investment Securities
. Held-to-Maturity 13,457 9,494 21,486
. Available-for-Sale 14,614 8,172 14,906
Proceeds from Sales of Investment Securities -0- 3,505 4,506
Purchase of Investment Securities
. Held-to-Maturity (15,118) (7,029) (12,884)
. Available-for-Sale (15,317) (10,961) (16,702)
Loans Originated and Principal Repayments, Net (16,990) (26,842) (56,363)
Recoveries of Loans Previously Charged-Off 55 259 439
Proceeds from Sale of Premises and Equipment 2 32 1
Proceeds from Sale of Other Real Estate 82 1 32
Purchases of Premises and Equipment (383) (956) (1,664)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (11,513) (14,875) (61,653)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase in Demand Deposits, Savings
Accounts and Interest Bearing Transaction Accounts 2,778 10,341 41,081
Net Increase in Certificates of Deposit 1,470 5,585 15,620
Net Increase (Decrease) in Repurchase Agreements (961) (4,182) 1,480
Payments of Cash Dividends (781) (583) (1,166)
Proceeds from Stock Options Exercised 14 20 143
Purchase of Treasury Stock (908) -0- -0-
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,612 11,181 57,158
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND DUE FROM
BANKS (4,885) (169) 2,148
CASH AND DUE FROM BANKS AT BEGINNING
OF PERIOD 30,487 28,339 28,339
-------- -------- --------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 25,602 $ 28,170 $ 30,487
======== ======== ========
</TABLE>
8
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONT'D
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES:
<TABLE>
<CAPTION>
(Unaudited)
June 30, (Unaudited)
------------------------- December 31,
1998 1997 1997
----------- ------------ -----------
(In Thousands)
<S> <C> <C> <C>
(1) Interest Paid $6,558 $5,275 $11,260
(2) Income Taxes Paid 2,215 1,866 3,876
</TABLE>
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
NOTE 1 - Summary of Significant Accounting Policies
- ------
The accounting and reporting policies of Summit Bancshares, Inc. (the
"Corporation") and Subsidiaries are in accordance with generally accepted
accounting principles. A summary of the more significant policies
follows:
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The consolidated financial statements of the Corporation include its
accounts and those of its wholly-owned subsidiaries, Summit National Bank
and Summit Community Bank, National Association (the "Subsidiary Banks")
and Summit Bancservices, Inc., a wholly-owned operations subsidiary. All
significant intercompany balances and transactions have been eliminated
in consolidation.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Cash and Due From Banks
-----------------------
The Subsidiary Banks are required to maintain certain balances at the
Federal Reserve Bank based on their levels of deposits. During the first
six months of 1998 the average cash balance maintained at the Federal
Reserve Bank was $631,000. Compensating balances held at correspondent
banks, to minimize service charges, averaged approximately $15,269,000
during the same period.
Investment Securities
---------------------
The Corporation has adopted Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities
("SFAS 115"). At the date of purchase, the Corporation is required to
classify debt and equity securities into one of three categories: held-
to-maturity, trading or available-for-sale. At each reporting date, the
appropriateness of the classification is reassessed. Investments in debt
securities are classified as held-to-maturity and measured at amortized
cost in the financial statements only if management has the positive
intent and ability to hold those securities to maturity. Securities that
are bought and held principally for the purpose of selling them in the
near term are classified as trading and measured at fair value in the
financial statements with unrealized gains and losses included in
earnings. Investments not classified as either held-to-maturity or
trading are classified as available-for-sale and measured at fair value
in the financial statements with unrealized gains and losses reported,
net of tax, in a separate component of shareholders' equity until
realized.
The Corporation has the ability and intent to hold to maturity its
investment securities classified as held-to-maturity; accordingly, no
adjustment has been made for the excess, if any, of amortized cost over
market. In determining the investment category classifications,
management considers its asset/liability strategy, changes in interest
rates and prepayment risk, the need to increase capital and other
factors. Under certain circumstances (including the deterioration of the
issuer's creditworthiness, a change in tax law, or statutory or
regulatory requirements), the Corporation may change the investment
security classification. In the periods reported for 1998 and 1997 the
Corporation held no securities that would have been classified as trading
securities.
All investment securities are adjusted for amortization of premiums and
accretion of discounts. Amortization of premiums and accretion of
discounts are recorded to income over the contractual maturity or
estimated life of the individual investment on the level yield method.
Gain or loss on sale of investments is based upon the specific
identification method and the gain or loss is recorded in non-interest
income. Income earned on the Corporation's investments in state and
political subdivisions is not taxable.
10
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
- ------
Loans and Allowance for Loan Losses
-----------------------------------
Loans are stated at the principal amount outstanding less unearned
discount and the allowance for loan losses. Unearned discount on
installment loans is recognized as income over the terms of the loans by
a method approximating the interest method. Interest income on all other
loans is recognized based upon the principal amounts outstanding. The
accrual of interest on a loan is discontinued when, in the opinion of
management, there is doubt about the ability of the borrower to pay
interest or principal. Interest previously earned, but uncollected on
such loans, is written off. When loans are put on non-accrual all
payments received are applied to the principal and no interest income is
recorded until the loan is returned to accrual status or the principal
has been reduced to zero.
The Corporation follows Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by
Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan -Income Recognition and Disclosure."
Under this standard, the allowance for loan losses related to loans that
are identified for evaluation in accordance with Statement No. 114
(impaired loans) is based on discounted cash flows using the loan's
initial effective rate or the fair value of the collateral for certain
collateral dependent loans.
The allowance for loan losses is comprised of amounts charged against
income in the form of a provision for loan losses as determined by
management. Management's evaluation is based on a number of factors,
including the Subsidiary Banks' loss experience in relation to
outstanding loans and the existing level of the allowance, prevailing and
prospective economic conditions, and management's continuing review of
the discounted cash flow values of impaired loans and its evaluation of
the quality of the loan portfolio. Loans are placed on non-accrual status
when management believes that the borrower's financial condition, after
giving consideration to economic and business conditions and collection
efforts, is such that collection of interest is doubtful. Loans are
charged against the allowance for loan losses when management believes
that the collectibility of the principal is unlikely.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed on the straight-line method based upon
the estimated useful lives of the assets ranging from three to forty
years. Maintenance and repairs are charged to operating expenses.
Renewals and betterments are added to the asset accounts and depreciated
over the periods benefitted. Depreciable assets sold or retired are
removed from the asset and related accumulated depreciation accounts and
any gain or loss is reflected in the income and expense accounts.
Other Real Estate
-----------------
Other real estate is foreclosed property held pending disposition and is
valued at the lower of its fair value or the recorded investment in the
related loan. At foreclosure, if the fair value of the real estate
acquired is less than the bank's recorded investment in the related loan,
a writedown is recognized through a charge to the allowance for loan
losses. Any subsequent reduction in value is recognized by a charge to
income. Operating expenses of such properties, net of related income, and
gains and losses on their disposition are included in non-interest
expense.
Federal Income Taxes
--------------------
The Corporation joins with its Subsidiaries in filing a consolidated
federal income tax return. The Subsidiaries pay to the parent a charge
equivalent to their current federal income tax based on the separate
taxable income of the Subsidiaries.
The Corporation and the Subsidiaries maintain their records for financial
reporting and income tax reporting purposes on the accrual basis of
accounting. Deferred income taxes are provided in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". Deferred income taxes are provided for accumulated
temporary differences due to basic differences for assets and liabilities
for financial reporting and income tax purposes.
Realization of net deferred tax assets is dependent on generating
sufficient future taxable income. Although realization is not assured,
management believes it is more likely than not that all of the net
deferred tax assets will be realized. The amount of the net deferred tax
asset considered realizable, however, could be reduced in the near term
if estimates of future taxable income are reduced.
Cash and Cash Equivalents
-------------------------
For the purpose of presentation in the Statements of Cash Flows, cash and
cash equivalents are defined as those amounts included in the balance
sheet caption "Cash and Due from Banks."
Reclassification
----------------
Certain reclassifications have been made to the 1997 financial statements
to conform to the 1998 presentation.
11
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
- ------
Earnings Per Common and Common Equivalent Share
-----------------------------------------------
Earnings per common and common equivalent share is calculated by dividing
net income by the weighted average number of common shares and common
share equivalents. Stock options are regarded as common share equivalents
and are therefore considered in earnings per share calculations, if
dilutive. The number of common share equivalents is determined using the
treasury stock method.
Audited Financial Statements
----------------------------
The consolidated balance sheet as of December 31, 1997, and the
consolidated statements of income, changes in shareholders' equity and
cash flows for the year ended December 31, 1997 are headed "unaudited" in
these financial statements. These statements were reported in the
Securities Exchange Commission Form 10-K as of December 31, 1997 as
"audited" but are required to be reflected in these statements as
unaudited because of the absence of an independent auditor's report.
NOTE 2 - Investment Securities
- ------
A summary of amortized cost and estimated fair values of investment
securities is as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1998
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Investment Securities - Held-to-Maturity
U.S. Treasury Securities $ 14,993 $175 $ (2) $ 15,166
U.S. Government Agencies
and Corporations 25,405 63 (27) 25,441
U.S. Government Agency Mortgage
Backed Securities 6,216 53 (6) 6,263
Obligations of States and
Political Subdivisions 1,135 6 -0- 1,141
-------- ---- ---- --------
Total Held-to-Maturity Securities 47,749 297 (35) 48,011
-------- ---- ---- --------
Investment Securities - Available-for-Sale
U.S. Treasury Securities 39,533 366 (20) 39,879
U.S. Government Agencies
and Corporations 11,104 49 -0- 11,153
U.S. Government Agency Mortgage
Backed Securities 8,104 39 -0- 8,143
Federal Reserve and Federal Home Loan Bank Stock 1,048 -0- -0- 1,048
-------- ---- ---- --------
Total Available-for-Sale Securities 59,789 454 (20) 60,223
-------- ---- ---- --------
Total Investment Securities $107,538 $751 $(55) $108,234
======== ==== ==== ========
</TABLE>
In the above schedule the amortized cost of Total Held-to-Maturity
--------------
Securities of $47,749,000 and the fair value of Total Available-for-Sale
----------
Securities of $60,223,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 1998 for a total of $107,972,000. A
net unrealized gain of $434,000 is included in the Available-for-Sale Investment
Securities balance. The unrealized gain, net of tax, is included in
Shareholders' Equity.
12
<PAGE>
NOTE 2 - Investment Securities (cont'd.)
- ------
Investment securities with carrying value of $41,504,000 at June 30,
1998, were pledged to secure federal, state and municipal deposits and for other
purposes as required or permitted by law. The fair value of these pledged
securities totaled $41,741,000 at June 30, 1998.
<TABLE>
<CAPTION>
June 30, 1997
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Investment Securities - Held-to-Maturity
U.S. Treasury Securities $ 23,980 $108 $ (57) $ 24,031
U.S. Government Agencies
and Corporations 18,113 28 (40) 18,101
U.S. Government Agency Mortgage
Backed Securities 9,693 59 (18) 9,734
Obligations of States and
Political Subdivisions 593 3 -0- 596
-------- ---- ----- --------
Total Held-to-Maturity Securities 52,379 198 (115) 52,462
-------- ---- ----- --------
Investment Securities - Available-for-Sale
U.S. Treasury Securities 55,445 249 (113) 55,581
U.S. Government Agencies
and Corporations 2,988 20 -0- 3,008
U.S. Government Agency Mortgage
Backed Securities 2,377 56 -0- 2,433
Federal Reserve Bank Stock 254 -0- -0- 254
-------- ---- ----- --------
Total Available-for-Sale Securities 61,064 325 (113) 61,276
-------- ---- ----- --------
Total Investment Securities $113,443 $523 $(228) $113,738
======== ==== ===== ========
</TABLE>
In the above schedule the amortized cost of Total Held-to-Maturity
--------------
Securities of $52,379,000 and the fair value of Total Available-for-Sale
----------
Securities of $61,276,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 1997 for a total of $113,655,000. A
net unrealized gain of $212,000 is included in the Available-for-Sale Investment
Securities balance. The unrealized gain, net of tax, is included in
Shareholders' Equity.
There were no sales of investment securities during the first six months
of 1998. However, proceeds from sales were $3,505,000 during the first six
months of 1997 and $4,506,000 during the year 1997. For the year ended December
31, 1997, losses from sales of securities of $3,000 were realized, but were
partially offset by gains of $2,000.
NOTE 3 - Loans and Allowance for Loan Losses
- ------
The book values of loans by major type follow (in thousands):
<TABLE>
<CAPTION>
June 30
------------------------ December 31,
1998 1997 1997
---------- ------------ ----------
<S> <C> <C> <C>
Commercial $129,424 $118,311 $127,800
Real Estate Mortgage 96,994 78,459 90,638
Real Estate Construction 35,338 21,430 26,290
Loans to Individuals 31,654 29,370 32,003
Less: Unearned Discount (564) (754) (662)
-------- -------- --------
292,846 246,816 276,069
Allowance for Loan Losses (4,413) (3,512) (4,065)
-------- -------- --------
Loans - Net $288,433 $243,304 $272,004
======== ======== ========
</TABLE>
13
<PAGE>
NOTE 3 - Loans and Allowance for Loan Losses (cont'd.)
- ------
Transactions in the allowance for loan losses are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
------------------------------- December 31,
1998 1997 1997
----------- ------------ -----------
<S> <C> <C> <C>
Balance, Beginning of Period $4,065 $2,972 $2,972
Provisions, Charged to Income 408 352 900
Loans Charged-Off (115) (71) (246)
Recoveries of Loans Previously
Charged-Off 55 259 439
------ ------ ------
Net Loans (Charged-Off) Recovered (60) 188 193
------ ------ ------
Balance, End of Period $4,413 $3,512 $4,065
====== ====== ======
</TABLE>
The provisions for loan losses charged to operating expenses during the
six months ended June 30, 1998 and June 30,1997 of $408,000 and $352,000,
respectively, were considered adequate to maintain the allowance in accordance
with the policy discussed in Note 1. For the year ended December 31, 1997, a
provision of $900,000 was recorded.
At June 30, 1998, the recorded investment in loans that are considered to
be impaired under Statement of Financial Accounting Standards No. 114 was
$6,775,000 (of which $6,775,000 were on non-accrual status). The related
allowance for loan losses for these loans was $1,167,000. The average recorded
investment in impaired loans during the six months ended June 30, 1998 was
approximately $4,138,000. For this period the Corporation recognized no interest
income on these impaired loans.
NOTE 4 - Premises and Equipment
- ------
The investment in premises and equipment stated at cost and net of
accumulated amortization and depreciation is as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
---------------------- December 31,
1998 1997 1997
--------- --------- ------------
<S> <C> <C> <C>
Land $ 1,446 $ 2,170 $ 1,446
Buildings and Improvements 7,573 7,375 7,532
Furniture & Equipment 6,816 5,415 6,661
------- ------- -------
Total Cost 15,835 14,960 15,639
Less: Accumulated Amortization and Depreciation (8,054) (7,295) (7,723)
------- ------- -------
Net Book Value $ 7,781 $ 7,665 $ 7,916
======= ======= =======
</TABLE>
NOTE 5 - Other Real Estate
- ------
The carrying value of other real estate is as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------- December 31,
1998 1997 1997
-------- ---------- ------------
<S> <C> <C> <C>
Other Real Estate $ 71 $ 186 $ 185
Valuation Reserve -0- (35) (34)
----- ----- -----
Net Other Real Estate $ 71 $ 151 $ 151
===== ===== =====
</TABLE>
14
<PAGE>
NOTE 5 - Other Real Estate (cont'd.)
- ------
Transactions in the valuation reserve are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
------------------------------- December 31,
1998 1997 1997
--------------- ----------- -----------
<S> <C> <C> <C>
Balance, Beginning of Period $ 34 $ 35 $ 35
Provisions Charged to Income -0- -0- -0-
Reductions from Sales (34) -0- (1)
----- ----- -----
Balance, End of Period $ -0- $ 35 $ 34
===== ===== =====
</TABLE>
There were no direct writedowns of other real estate charged to income
for the six months ended June 30, 1998; however there was $4,000 for the six
months ended June 30,1997 and $4,000 for the year ended December 31, 1997.
NOTE 6 - Deposits
- ------
The book values of deposits by major type follow (in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------- December 31,
1998 1997 1997
--------- ------------ ----------
<S> <C> <C> <C>
Noninterest-Bearing Demand Deposits $116,822 $105,226 $126,398
-------- -------- --------
Interest-Bearing Deposits:
Interest-Bearing Transaction
Accounts and Money Market Funds 137,165 128,077 133,139
Savings 62,435 49,600 54,107
Savings Certificates - Time 52,162 47,503 51,685
Certificates of Deposits $100,000 or more 36,610 29,838 35,690
Other 778 705 705
-------- -------- --------
Total 289,150 255,723 275,326
-------- -------- --------
Total Deposits $405,972 $360,949 $401,724
======== ======== ========
</TABLE>
NOTE 7 - Securities Sold Under Repurchase Agreements
- ------
Securities sold under repurchase agreements generally represent
borrowings with maturities ranging from one to thirty days. Information relating
to these borrowings is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
-------------------------------- December 31,
1998 1997 1997
---------------- ------------- -----------
<S> <C> <C> <C>
Securities Sold Under Repurchase Agreements:
Average $13,461 $12,038 $11,668
Period-End 13,728 9,027 14,689
Maximum Month-End Balance During Period 15,249 13,212 15,263
Interest Rate
Average 4.60% 4.28% 4.45%
Period-End 4.55 4.50 4.55
</TABLE>
15
<PAGE>
NOTE 8 - Other Non-Interest Expense
- ------
The significant components of other non-interest expense are as follows
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
--------------------------------- December 31,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Business Development $ 303 $ 273 $ 588
Legal and Professional Fees 252 248 496
Printing and Supplies 202 174 373
Regulatory Fees and Assessments 84 85 160
Other 943 757 1,547
------ ------ ------
Total $1,784 $1,537 $3,164
====== ====== ======
</TABLE>
NOTE 9 - Income Taxes
- ------
Federal income taxes included in the consolidated balance sheets were as
follows (in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------- December 31,
1998 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
Current Tax Asset (Liability) $ 28 $ 37 $ (7)
Deferred Tax Asset 816 542 672
----- ----- -----
Total Included in Other Assets $ 844 $ 579 $ 665
===== ===== =====
</TABLE>
The deferred tax asset at June 30, 1998 of $816,000 included $148,000
related to unrealized gains on Available-for-Sale Securities.
The components of income tax expense were as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
--------------------------- December 31,
1998 1997 1997
------------- ------------ -------------
<S> <C> <C> <C>
Federal Income Tax Expense
Current $2,180 $1,857 $3,911
Deferred (167) (50) (233)
------ ------ ------
Total Federal Income Tax Expense $2,013 $1,807 $3,678
====== ====== ======
Effective Tax Rates 34.2% 34.4% 34.3%
====== ====== ======
</TABLE>
The reasons for the difference between income tax expense and the amount
computed by applying the statutory federal income tax rate to operating earnings
are as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
--------------------------- December 31,
1998 1997 1997
------------- ------------ ------------
<S> <C> <C> <C>
Federal Income Taxes at Statutory
Rate of 34% $1,999 $1,785 $3,644
Effect of Tax Exempt Interest Income (10) (5) (12)
Non-deductible Expenses 25 23 47
Other (1) 4 (1)
------ ------ ------
Income Taxes Per Income Statement $2,013 $1,807 $3,678
====== ====== ======
</TABLE>
16
<PAGE>
NOTE 10 - Related Party Transactions
- -------
The Subsidiary Banks have transactions made in the ordinary course of
business with certain of its officers, directors and their affiliates. All loans
included in such transactions are made on substantially the same terms,
including interest rate and collateral, as those prevailing at the time for
comparable transactions with other persons. Total loans outstanding to such
parties amounted to approximately $3,443,000 at December 31, 1997.
NOTE 11 - Commitments and Contingent Liabilities
- -------
In the normal course of business, there are various outstanding
commitments and contingent liabilities, such as guarantees and commitments to
extend credit, which are not reflected in the financial statements. No losses
are anticipated as a result of these transactions. Commitments are most
frequently extended for real estate, commercial and industrial loans.
At June 30, 1998, outstanding documentary and standby letters of credit
totaled $3,502,000 and commitments to extend credit totaled $109,019,000.
NOTE 12 - Stock Option Plans
- -------
The Corporation has two Incentive Stock Option Plans, the 1993 Plan and
the 1997 Plan, ("the Plans"). Each Plan has reserved 600,000 shares (adjusted
for two-for-one stock splits in 1993, 1995 and 1997) of common stock for grants
thereunder. The Plans provide for the granting to executive management and other
key employees of Summit Bancshares, Inc. and subsidiaries incentive stock
options, as defined under the current tax law. The options under the Plans will
be exercisable for ten years from the date of grant and generally vest ratably
over a five year period. Options will be and have been granted at prices which
will not be less than 100-110% of the fair market value of the underlying common
stock at the date of grant.
The Corporation applies APB Opinion No. 25 and related Interpretations in
accounting for its plans. Since the option prices are considered to approximate
fair market value at date of grant, no compensation expense has been reported.
Had compensation cost for these plans been determined consistent with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" the Corporation's net income and earnings per share would have
been reduced by insignificant amounts on a proforma basis for the year ended
December 31, 1997, and the six months ended June 30, 1998.
The following is a summary of transactions during the periods presented:
<TABLE>
<CAPTION>
Shares Under Option
----------------------------------
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Outstanding, Beginning of Period 543,112 464,100
Additional Options Granted During
the Period 3,000 118,752
Forfeited During the Period (600) (4,480)
Exercised During the Period (44,762) (35,260)
------- -------
Outstanding, End of Period 500,750 543,112
======= =======
</TABLE>
Options outstanding at June 30, 1998 ranged in price from $3.00 to $19.25
per share with a weighted average exercise price of $5.16 and 365,658 shares
exercisable. At June 30, 1998, there remained 527,900 shares reserved for future
grants of options under the 1997 Plan.
NOTE 13 - Employee Benefit Plans
- -------
Pension Plan
- ------------
The Corporation has a defined benefit pension plan covering substantially
all of its employees. The benefits are based on years of service and the
employee's compensation history. The employee's compensation used in the benefit
calculation is the highest average for any five consecutive years of employment
within the employee's last ten years of employment.
Funding for the plan is provided by employer contributions to trust funds
in amounts determined by actuarial assumptions and valuation of the plan.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
17
<PAGE>
NOTE 13 - Employee Benefit Plans (cont'd.)
- -------
The table below sets forth the plan's funded status and amounts
recognized in the Corporation's consolidated balance sheets at December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $2,240,000 in 1997 and $1,647,000 in 1996 $2,420 $1,762
====== ======
Projected benefit obligation for service rendered
to date $3,035 $1,997
Plan assets at fair value, primarily listed stocks
and U.S. bonds 2,883 2,192
------ ------
Plan assets in excess of (less than) projected benefit obligation (152) 195
Unrecognized net loss from past experience
different from that assumed and effect of
changes in assumptions 396 21
Prior service cost not yet recognized in net
periodic pension cost (12) 15
------ ------
Net pension cost included in other assets $ 232 $ 231
====== ======
Prepaid pension cost included the following components (in thousands):
Year Ended December 31,
-----------------------
1997 1996
------ ------
Service Cost - benefits earned during the period $ 227 $ 195
Interest cost on projected benefit obligation 157 131
Less: Actual return on plan assets (196) (153)
Net amortization and deferral 5 (2)
------ ------
Net periodic pension cost $ 193 $ 171
====== ======
</TABLE>
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligation
were 7 percent and 6 percent, respectively. The expected long-term rate of
return on plan assets was 7 percent.
The market value of plan assets at June 30, 1998 was $1,826,000. There
has not been a contribution to the plan to this date during 1998. Prepaid
pension cost at June 30, 1998 was $398,000.
401(k) Plan
- -----------
The Corporation implemented a 401(k) plan in December 1997 covering
substantially all employees. The Corporation did not match the employee's
contributions in 1997 nor to date in 1998.
Management Security Plan
- ------------------------
In 1992, the Corporation established a Management Security Plan to
provide key employees with retirement, death or disability benefits in addition
to those provided by the Pension Plan. The expense charged to operations for
such future obligations was $110,000 and $168,000 during the first six months of
1998 and 1997, respectively, and $276,000 for the year 1997.
Other Post Retirement Benefits
- ------------------------------
The Corporation provides certain health care benefits for certain retired
employees who bear all costs of these benefits. These benefits are covered under
the "Consolidated Omnibus Budget Reconciliation Act" (COBRA).
18
<PAGE>
NOTE 14 - Earnings per Share
- -------
The following data shows the amounts used in computing earnings per share
and the weighted average number of shares of dilutive potential common stock.
The number of shares used in the calculations reflect a two-for-one stock split
in December 1997 (dollars in thousands)
<TABLE>
<CAPTION>
June 30,
----------------------- December 31,
1998 1997 1997
---------- ----------- ----------
<S> <C> <C> <C>
Net income $ 3,867 $ 3,444 $ 7,040
========== ========== ==========
Weighted average number of common
shares used in Basic EPS 6,508,425 6,470,490 6,478,795
Effect of dilutive stock options 343,130 283,287 321,081
---------- ---------- ----------
Weighted number of common shares
and dilutive potential common
stock used in Diluted EPS 6,851,555 6,753,777 6,799,876
========== ========== ==========
</TABLE>
NOTE 15 - Financial Instruments with Off-Balance Sheet Risk
- -------
The Corporation is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include loan commitments, standby letters
of credit and documentary letters of credit. The instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the financial statements.
The Corporation's exposure to credit loss in the event of non-performance
by the other party of these loan commitments and standby letters of credit is
represented by the contractual amount of those instruments. The Corporation uses
the same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments.
The total contractual amounts of financial instruments with off-balance
sheet risk are as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Financial Instruments Whose
Contract Amounts Represent
Credit Risk:
Commitments to Extend Credit $109,019 $82,853
Documentary and Standby
Letters of Credit 3,502 3,098
</TABLE>
Since many of the loan commitments may expire without being drawn upon,
the total commitment amount does not necessarily represent future cash
requirements. The Corporation evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Corporation upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, owner occupied real estate
and income-producing commercial properties.
The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers.
NOTE 16 - Concentrations of Credit Risk
- -------
The Subsidiary Banks grant commercial, consumer and real estate loans in
their direct market which is defined as Fort Worth and its surrounding area. The
Board of Directors of each Subsidiary Bank monitors concentrations of credit by
purpose, collateral and industry at least quarterly. Certain limitations for
concentration are set by the Boards. Additional loans in excess of these limits
must have prior approval of the bank's directors' loan committee. Although its
Subsidiary Banks have diversified loan portfolios, a substantial portion of its
debtors' abilities to honor their contracts is dependent upon the strength of
the local and state economy.
19
<PAGE>
NOTE 17 - Litigation
- -------
Certain of the Subsidiary Banks are involved in legal actions arising in
the ordinary course of business. It is the opinion of management, after
reviewing such actions with outside legal counsel, that the settlement of these
matters will not materially affect the Corporation's financial position.
NOTE 18 - Stock Repurchase Plan
- -------
On April 21, 1998, the Board of Directors approved a stock repurchase
plan. The plan authorized management to purchase up to 325,654 shares of the
Corporation's common stock over the next twelve months through the open market
or in privately negotiated transactions in accordance with all applicable state
and federal laws and regulations.
In the first six months of 1998, 45,000 shares were purchased by the
Corporation through a similar repurchase plan through the open market and
subsequently 25,000 shares have been canceled.
NOTE 19 - Subsequent Event
- -------
On July 21, 1998, the Board of Directors of the Corporation approved a
quarterly dividend of $.06 per share to be paid on August 14, 1998 to
shareholders of record on July 31, 1998.
NOTE 20 - Fair Values of Financial Instruments
- -------
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and due from banks and federal funds sold approximate
those assets' fair values.
Investment securities (including mortgage-backed securities): Fair values
for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Loans: For variable-rate loans, fair values are based on carrying values.
The fair values for fixed rate loans such as mortgage loans (e.g., one-
to-four family residential) and installment loans are estimated using
discounted cash flow analysis. The carrying amount of accrued interest
receivable approximates its fair value.
Deposit liabilities: The fair value disclosed for interest bearing and
noninterest-bearing demand deposits, passbook savings, and certain types
of money market accounts are, by definition, equal to the amount payable
on demand at the reporting date or their carrying amounts. Fair values
for fixed-rate certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being offered
on certificates to a schedule of aggregated expected monthly maturities
on time deposits.
Short-term borrowings: The carrying amounts of borrowings under
repurchase agreements approximate their fair values.
20
<PAGE>
NOTE 20 - Fair Values of Financial Instruments (cont'd.)
- -------
The estimated fair values of the Corporation's financial instruments are
as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
------------------------------------------
1998 1997
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial Assets
Cash and due from banks $ 25,602 $ 25,602 $ 28,170 $ 28,170
Federal funds sold 27,675 27,675 10,900 10,900
Securities 107,972 108,677 113,655 113,738
Loans 292,846 292,170 246,816 245,620
Reserve for loan losses (4,413) (4,413) ( 3,512) (3,512)
Financial Liabilities
Deposits 405,972 406,241 360,949 361,026
Securities sold under repurchase
agreements 13,728 13,731 9,027 9,027
Off-balance Sheet Financial Instruments
Loan commitments 109,019 82,853
Letters of credit 3,502 3,098
</TABLE>
NOTE 21 - Comprehensive Income
- -------
The Corporation has adopted Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income". This new standard requires an entity to report and display
comprehensive income and its components. Comprehensive income is as follows (in
thousands):
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------- Year Ended
1998 1997 December 31, 1997
--------------- ----------------- -----------------
<S> <C> <C> <C>
Net Income $3,867 $3,444 $7,040
Other Comprehensive Income:
Unrealized gain (loss) on securities
available-for-sale, net of tax 43 (88) 15
------ ------ ------
Comprehensive Income $3,910 $3,356 $7,055
====== ====== ======
</TABLE>
21
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- ----------------
Summary
- -------
Net income for the second quarter of 1998 was $2,003,000, or $.29 diluted
earnings per share, compared with $1,772,000, or $.26 diluted earnings per
share, for the second quarter of 1997. On a per share basis, diluted net income
increased 11.5% over the second quarter of the prior year. Net income for the
first six months of 1998 was $3,867,000, or .56 per diluted earnings per share,
compared with $3,444,000, or .51 per diluted earnings per share for the first
six months of 1997. Per share amounts are based on average shares outstanding of
6,508,425 for the first six months of 1998 and 6,470,490 for the comparable
period of 1997 adjusted to 6,851,555 and 6,753,777, respectively to reflect
stock options granted. Also, shares outstanding reflect a two-for-one stock
split in December 1997.
Outstanding loans at June 30, 1998 of $292.8 million represented an
increase of $46.0 million, or 18.6%, over June 30,1997 and an increase of $16.8
million, or 6.1%, from December 31, 1997.
Total deposits at June 30, 1998 of $406.0 million represented an increase
of $45.0 million, or 12.5%, over June 30,1997 and an increase of $4.2 million,
or 1.1%, from December 31, 1997.
In the second quarter, net interest income increased 12.1% over the
previous year. An increase in non-interest expense of 11.7% partially offset the
increase in net interest income.
The following table summarizes the Corporation's performance for the
three months and six months ended June 30, 1998 and 1997 (tax equivalent basis
and dollars in thousands).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------
1998 1997 1998 1997
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Interest Income $9,075 $7,874 $17,956 $15,204
Interest Expense 3,288 2,713 6,537 5,253
------ ------ ------- -------
Net Interest Income 5,787 5,161 11,419 9,951
Provision for Loan Loss 250 197 408 352
------ ------ ------- -------
Net Interest Income After
Provision for Loan Loss 5,537 4,964 11,011 9,599
Non-Interest Income 956 820 1,826 1,582
Non-Interest Expense 3,435 3,076 6,941 5,922
------ ------ ------- -------
Income Before Income Tax 3,058 2,708 5,896 5,259
Income Tax Expense 1,055 936 2,029 1,815
------ ------ ------- -------
Net Income $2,003 $1,772 $ 3,867 $ 3,444
====== ====== ======= =======
Net Income per Share-
Basic $ .30 $ .27 $ .59 $ .53
Diluted .29 .26 .56 .51
Return on Average Assets 1.73% 1.76% 1.69% 1.75%
Return on Average
Stockholders' Equity 18.65% 19.15% 18.42% 19.07%
</TABLE>
22
<PAGE>
Summary of Earning Assets and Interest-Bearing Liabilities
- ----------------------------------------------------------
The following schedule presents average balance sheets that highlight
earning assets and interest-bearing liabilities and their related rates earned
and paid for the second quarter of 1998 and 1997 (rates on tax equivalent
basis).
<TABLE>
<CAPTION>
Three Months ended June 30,
--------------------------------------------------------------------
1998 1997
--------------------------------- ----------------------------------
Average Average Average Average
Balances Interest Yield/Rate Balances Interest Yield/Rate
---------- -------- ----------- ---------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Federal Funds Sold & Due From $ 31,338 $ 431 5.53% $ 8,442 $ 116 5.44%
Investment Securities (Taxable) 107,658 1,648 6.14 115,598 1,801 6.25
Investment Securities (Tax-exempt) 1,137 20 6.88 595 10 6.45
Loans, Net of Unearned Discount/(1)/ 290,811 6,976 9.62 245,235 5,947 9.73
-------- ------ -------- ------
Total Earning Assets 430,944 9,075 8.45 369,870 7,874 8.54
------ ------
Non-interest Earning Assets:
Cash and Due From Banks 22,130 24,083
Other Assets 15,506 13,056
Allowance for Loan Losses (4,306) (3,413)
-------- --------
Total Assets $464,274 $403,596
======== ========
Interest-Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Money Market Funds $139,867 1,283 3.68 $128,018 1,133 3.55
Savings & Premium 64,202 710 4.43 49,882 516 4.15
Savings Certificates 51,866 660 5.10 47,008 571 4.87
Certificates of Deposit
$100,000 or more 35,931 478 5.34 28,184 358 5.09
Other Time 956 13 5.56 566 8 5.43
Other Borrowings 12,730 144 4.53 11,248 127 4.49
-------- ------ -------- ------
Total Interest-Bearing Liabilities 305,552 3,288 4.32 264,906 2,713 4.11
------ ------
Non-interest Bearing Liabilities:
Demand Deposits 113,223 99,359
Other Liabilities 2,419 2,210
Shareholders' Equity 43,080 37,121
-------- --------
Total Liabilities and
Shareholders' Equity $464,274 $403,596
======== ========
Net Interest Income and Margin
(Tax-equivalent Basis)/(2)/ $5,787 5.39 $5,161 5.60
====== ======
</TABLE>
(1) Loan interest income includes fees and loan volumes include loans on non-
accrual.
(2) Presented on a tax equivalent basis ("T/E") using a federal income tax rate
of 34% in both years.
23
<PAGE>
The following schedule presents average balance sheets that highlight
earning assets and interest-bearing liabilities and their related rates earned
and paid for the six months ended June 30, 1998 and 1997 (rates on tax
equivalent basis).
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
Average Average Average Average
Balances Interest Yield/Rate Balances Interest Yield/Rate
----------- -------- ---------- ---------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Federal Funds Sold $ 36,104 $ 991 5.53% $ 11,863 $ 320 5.35%
Investment Securities (Taxable) 107,026 3,271 6.16 115,436 3,537 6.18
Investment Securities (Tax-exempt) 1,139 39 6.98 413 13 6.50
Loans, Net of Unearned Discount/(1)/ 283,944 13,655 9.70 236,007 11,334 9.68
-------- ------- -------- -------
Total Earning Assets 428,213 17,956 8.46 363,719 15,204 8.43
------- -------
Non-interest Earning Assets:
Cash and Due From Banks 22,169 23,371
Other Assets 15,490 12,980
Allowance for Loan Losses (4,224) (3,273)
-------- --------
Total Assets $461,648 $396,797
======== ========
Interest-Bearing Liabilities:
Interest-Bearing Transaction
Accounts & Money Market Funds $138,328 2,498 3.64 $125,331 2,169 3.49
Savings 65,137 1,438 4.45 50,113 1,013 4.08
Savings Certificates 51,767 1,308 5.09 47,059 1,127 4.83
Certificates of Deposit
$100,000 or more 36,346 960 5.33 27,123 679 5.05
Other Time 931 26 5.63 538 14 5.09
Other Borrowings 13,461 307 4.60 12,038 251 4.28
-------- ------- -------- -------
Total Interest-Bearing Liabilities 305,970 6,537 4.31 262,202 5,253 4.04
------- -------
Non-interest Bearing Liabilities:
Demand Deposits 111,004 96,001
Other Liabilities 2,337 2,180
Shareholders' Equity 42,337 36,414
-------- --------
Total Liabilities and
Shareholders' Equity $461,648 $396,797
======== ========
Net Interest Income and Margin
(Tax-equivalent Basis)/(2)/ $11,419 5.38 $ 9,951 5.52
======= =======
</TABLE>
(1) Loan interest income includes fees and loan volumes include loans on non-
accrual.
(2) Presented on a tax equivalent basis ("T/E") using a federal income tax rate
of 34% in both years.
24
<PAGE>
Net Interest Income
- -------------------
Net interest income (tax equivalent) for the second quarter of 1998 was
$5,787,000 which represented an increase of $626,000, or 12.1%, over the second
quarter of 1997. This increase was heavily contributed to by a 18.6% increase in
average loans for the second quarter of 1998 versus the same quarter last year.
The following table summarizes the effects of changes in interest rates,
average volumes of earning assets and interest bearing liabilities on net
interest income ( tax equivalent) for the periods ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Dollars in Thousands)
2nd Qtr. 1998 vs. 2nd Qtr. 1997 Six Months 1998 vs. Six Months 1997
Increase (Decrease) Increase (Decrease)
Due to Changes in: Due to Changes in:
--------------------------------- -------------------------------------
Volume Rate Total Volume Rate Total
---------- -------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Federal Funds Sold $ 313 $ 2 $ 315 $ 660 $ 11 $ 671
Investment Securities (Taxable) (122) (31) (153) (255) (11) (266)
Investment Securities (Tax-exempt) 9 1 10 25 1 26
Loans, Net of Unearned Discount 1,479 (450) 1,029 2,298 23 2,321
------ ----- ------ ------ ---- ------
Total Interest Income 1,679 (478) 1,201 2,728 24 2,752
------ ----- ------ ------ ---- ------
Interest-Bearing Liabilities:
Deposits 414 144 558 887 341 1,228
Other Borrowings 16 1 17 34 22 56
------ ----- ------ ------ ---- ------
Total Interest Expense 430 145 575 921 363 1,284
------ ----- ----- ------ --- -----
Net Interest Income $ 1,249 $ (623) $ 626 $ 1,807 $ (339) $ 1,468
======= ====== ======== ======= ====== =======
</TABLE>
Allowance for Loan Losses and Non-Performing Assets
- ---------------------------------------------------
The Corporation's allowance for loan losses was $4,413,000, or 1.51% of
total loans, as of June 30, 1998 compared to $3,512,000, or 1.42% of total
loans, as of June 30,1997.
Transactions in the provision for loan losses are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1998 1997 1998 1997
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Balance, Beginning of Period $4,192 $3,327 $4,065 $2,972
Provisions, Charged to Income 250 197 408 352
Loans Charged-Off (68) (52) (115) (71)
Recoveries of Loans Previously
Charged-Off 39 40 55 259
------ ------ ------ ------
Net Loans (Charged-Off)
Recovered (29) (12) (60) 188
------ ------ ------ ------
Balance, End of Period $4,413 $3,512 $4,413 $3,512
====== ====== ====== ======
</TABLE>
25
<PAGE>
The following table summarizes the non-performing assets as of the end of
the last five quarters (in thousands).
<TABLE>
<CAPTION>
June 30, March 31, December 31, September 30, June 30,
1998 1998 1997 1997 1997
-------- --------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans $6,830 $2,885 $2,112 $1,245 $ 901
Other Real Estate Owned 71 151 151 151 151
------ ------ ------ ------ ------
Total Non-Performing Assets $6,901 $3,036 $2,263 $1,396 $1,052
====== ====== ====== ====== ======
</TABLE>
Non-accrual loans to total loans were 2.33% at June 30, 1998 and non-
performing assets were 2.37% of loans and other real estate owned at the same
date. As of June 30, 1998, loans to five borrowers represent approximately 89%
of the loans on non-accrual and four of five of these borrowers are current as
to payment of principal and interest on their loans. The Corporation does not
see this increase in non-accrual loans as a signal of a weakened local economy
or a change in the Corporation's lending standards, rather this is the
implementation of the Corporation's strict policy of identifying problem loans
as soon as any difficulty a borrower may be experiencing is noted.
The following table summarizes the relationship between non-performing
loans, criticized loans and the allowance for loan losses (dollars in
thousands).
<TABLE>
<CAPTION>
June 30, March 31, December 31, September 30, June 30,
1998 1998 1997 1997 1997
--------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Non-Performing Loans $ 6,830 $ 2,885 $2,112 $1,245 $ 901
Criticized Loans 11,737 12,484 9,295 7,896 8,314
Allowance for Loan Losses 4,413 4,192 4,065 3,681 3,512
Allowance for Loan Losses
as a Percent of:
Non-Performing Loans 65% 145% 193% 296% 390%
Criticized Loans 38 34 44 47 42
</TABLE>
Non-interest Income
- -------------------
The major component of non-interest income is service charges on
deposits. Other service fees are the majority of other non-interest income.
The following table reflects the changes in non-interest income during
the periods presented (dollars in thousands).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -----------------
1998 1997 % Change 1998 1997 % Change
----- ----- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Service Charges on Deposit Accounts $ 518 $ 463 11.9% $1,004 $ 900 11.6%
Non-recurring Income 88 34 -- 154 87 --
Other Non-interest Income 350 323 8.4 668 595 12.3
----- ----- ---- ------ ------
Total Non-interest Income $ 956 $ 820 16.6 $1,826 $1,582 15.4
===== ===== ====== ======
</TABLE>
Non-recurring income is primarily interest recovered on loans charged-off
in prior years and gains on sales of assets taken in satisfaction of debt in
prior years.
26
<PAGE>
Non-interest Expense
- --------------------
Non-interest expenses include all expenses other than interest expense,
provision for loan losses and income tax expense.
The following table summarizes the changes in non-interest expense during
the periods presented (dollars in thousands).
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
1998 1997 % Change 1998 1997 % Change
-------- -------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Salaries & Employee Benefits $2,061 $1,828 12.7% $4,102 $3,575 14.7%
Occupancy Expense - Net 232 190 22.1 471 387 21.7
Furniture and Equipment Expense 289 220 31.4 584 431 35.5
Other Real Estate Expense - Net 3 (5) 160.0 -0- (8) --
Other Expenses:
Business Development 159 172 (7.6) 303 273 11.0
Insurance - Other 21 20 5.0 46 47 (2.1)
Legal & Professional Fees 121 139 (12.9) 252 248 1.6
Taxes - Other 82 45 82.2 167 73 128.8
Postage & Courier 69 64 7.8 141 132 6.8
Printing & Supplies 107 97 10.3 202 174 16.1
Regulatory Fees & Assessments 44 43 2.3 84 85 (1.2)
Other Operating Expenses 247 263 (6.1) 589 505 16.6
------ ------ ------ ------
Total Other Expenses 850 843 .8 1,784 1,537 16.1
------ ------ ------ ------
Total Non-interest Expense $3,435 $3,076 11.7 $6,941 $5,922 17.2
====== ====== ====== ======
</TABLE>
Total non-interest expense increased 11.7% in the second quarter of 1998
over 1997, reflecting increases in salaries and benefits, occupancy expense,
furniture and equipment expenses, taxes-other and printing and supplies. As a
percent of average assets, non-interest expenses were 2.97% in the second
quarter of 1998 and 3.07% in the same period of 1997. The "efficiency ratio"
(non-interest expenses divided by total non-interest income plus net interest
income) was 51.00% for the second quarter of 1998. These measures of operating
efficiency compare very favorably to other financial institutions in the
Corporation's peer group.
The increase in salaries and employee benefits for the second quarter of
1998 is due to salary merit increases, incentive compensation accrual increases,
and an increase in pension plan expense. Also, the average number of full-time
equivalent employees increased by 26.5 to an average full-time equivalent of
167.0 from the number twelve months prior. This increase in number of employees
reflects the opening of a new banking office in 1997 in addition to the adding
of several lending officers in 1997.
The increase in occupancy expense is primarily due to the cost of a new
branch facility that was occupied in late 1997.
The increase in furniture and equipment expense is primarily a result of
increased depreciation for new technology related equipment acquired in the last
half of 1997.
Taxes-other increased due to increased state franchise taxes paid on
higher levels of taxable capital and the loss of certain tax credits that were
available in prior periods.
Printing and supplies expenses increased primarily due to expenses
related to new customer services such as debit cards and imaged customer account
statements.
Interest Rate Sensitivity
- -------------------------
Interest rate sensitivity is the relationship between changes in market
interest rates and net interest income due to the repricing characteristics of
assets and liabilities.
27
<PAGE>
The following table, commonly referred to as a "static gap report",
indicates the interest rate sensitivity position at June 30, 1998 and may not be
reflective of positions in subsequent periods (dollars in thousands):
<TABLE>
<CAPTION>
Total Repriced
Matures or Reprices within: Rate After
------------------------------- Sensitive 1 Year or
30 Days 31-180 181 to One Year Non-interest
or Less Days One Year or Less Sensitive Total
- -------------------------------- ---------- --------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans $156,142 $ 17,959 $ 13,721 $187,822 $105,024 $292,846
Investment Securities 3,306 14,613 24,034 41,953 66,019 107,972
Federal Funds Sold 27,675 -0- -0- 27,675 -0- 27,675
-------- -------- -------- -------- -------- --------
Total Earning Assets 187,123 32,572 37,755 257,450 171,043 428,493
-------- -------- -------- -------- -------- --------
Interest Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Savings 199,601 -0- -0- 199,601 -0- 199,601
Certificate of Deposits
>$100,000 7,923 14,947 11,203 34,073 2,537 36,610
Other Time Deposits 4,172 27,469 16,004 47,645 5,294 52,939
Repurchase Agreements 13,728 -0- -0- 13,728 -0- 13,728
-------- -------- -------- -------- -------- --------
Total Interest Bearing
Liabilities 225,424 42,416 27,207 295,047 7,831 302,878
-------- -------- -------- -------- -------- --------
Interest Sensitivity
Gap $(38,301) $ (9,844) $ 10,548 $(37,597) $163,212 $125,615
======== ======== ======== ======== ======== ========
Cumulative Gap $(38,301) $(48,145) $(37,597)
======== ======== ========
Cumulative Gap to
Total Earning Assets (8.94%) (11.24%) (8.77%)
Cumulative Gap to
Total Assets (8.23%) (10.34%) (8.07%)
</TABLE>
The preceding static gap report reflects a cumulative liability sensitive
position during the one year horizon. An inherent weakness of this report is
that it ignores the relative volatility any one category may have in relation to
other categories or market rates in general. For instance, the rate paid on NOW
accounts typically moves slower than the three month T-Bill. Management attempts
to capture this relative volatility by utilizing a simulation model with a "beta
factor" adjustment which estimates the volatility of rate sensitive assets
and/or liabilities in relation to other market rates.
Beta factors are an estimation of the long term, multiple interest rate
environment relation between an individual account and market rates in general.
For instance, NOW, savings and money market accounts, which are repriceable
within 30 days will have considerably lower beta factors than variable rate
loans and most investment categories. Taking this into consideration, it is
quite possible for a bank with a negative cumulative gap to total asset ratio to
have a positive "beta adjusted" gap risk position.
As a result of applying the beta factors established by management to the
earning assets and interest bearing liabilities in the static gap report via a
simulation model, the negative cumulative gap to total assets ratio at one year
of (8.07%) was reversed to a positive 13.78% "beta adjusted" gap position.
Management feels that the "beta adjusted" gap risk technique more
accurately reflects the Corporation's gap position.
Capital
- -------
The Federal Reserve Board has guidelines for capital to total assets
(leverage) and capital standards for bank holding companies. The Comptroller of
the Currency also has similar guidelines for national banks. These guidelines
require a minimum level of Tier I capital to total assets of 3 percent. A
banking organization operating at or near these levels is expected to have well-
diversified risk, excellent asset quality, high liquidity, good earnings and in
general be considered a strong banking organization. Organizations not meeting
these characteristics are expected to operate well above these minimum capital
standards. Thus, for all but the most highly rated organizations, the minimum
Tier I leverage ratio is to be 3 percent plus minimum additional cushions of at
least 100 to 200 basis points. At the discretion of the regulatory authorities,
additional capital may be required.
At June 30, 1998, total capital to total assets was 9.28%.
28
<PAGE>
The Federal Reserve Board and Comptroller of the Currency also have risk-
adjusted capital adequacy guidelines. Capital under these new guidelines is
defined as Tier I and Tier II. At Summit Bancshares, Inc. the only components of
Tier I and Tier II capital are shareholders' equity and a portion of the
allowance for loan losses, respectively.
The guidelines also stipulate that four categories of risk weights (0,
20, 50 and 100 percent), primarily based on the relative credit risk of the
counterparty, be applied to the different types of balance sheet assets. Risk
weights for all off-balance sheet exposures are determined by a two-step process
whereby the face value of the off-balance sheet item is converted to a "credit
equivalent amount" and that amount is assigned to the appropriate risk category.
The regulatory minimum ratio for total qualifying capital is 8.00% of
which 4.00% must be Tier I capital. At June 30, 1998, the Corporation's Tier I
capital represented 14.20% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented 15.45% of risk weighted assets. Both ratios
are well above current regulatory guidelines.
29
<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: July 25, 1998 By: /s/ Philip E. Norwood
---------------------- -------------------------------------
Philip E. Norwood, Chairman
Date: July 25, 1998 By: /s/ Bob G. Scott
---------------------- -------------------------------------
Bob G. Scott, Executive Vice President
and Chief Operating Officer
(Chief Accounting Officer)
30
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Change in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the Corporation's annual shareholders' meeting, held on April 21,
1998, the shareholders of the Corporation:
. ratified the appointment by the Board of Directors of Stovall,
Grandey & Whatley as independent auditors of the Corporation for
its fiscal year ending December 31, 1998. The shareholder vote in
this matter was 5,265,865 for, 3,220 against, and none
abstaining.
. elected the Board of Directors, consisting of thirteen (13)
persons. The following directors, constituting the entire Board
of Directors, were elected:
For Against Abstain
--------- ------- -------
Robert E. Bolen 5,269,949 2,000 8,540
Elliott S. Garsek 5,258,789 13,160 8,540
Ronald J. Goldman 5,270,749 1,200 8,540
F.S. Gunn 5,271,549 400 8,540
Jeffrey M. Harp 5,271,949 -0- 8,540
Robert L. Herchert 5,269,949 2,000 8,540
William W. Meadows 5,263,727 8,222 8,540
Edward P. Munson, Jr. 5,269,949 2,000 8,540
James L. Murray 5,271,949 -0- 8,540
Philip E. Norwood 5,271,949 -0- 8,540
Byron B. Searcy 5,271,949 -0- 8,540
Edgar Snelson 5,269,949 2,000 8,540
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
(a) Exhibits
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
(b) No Reports on Form 8-K were filed during the period ending
June 30, 1998
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
- ------- --------
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
The details of computation of earnings per common share are disclosed in the
Consolidated Statements of Income and Note 14 of the Notes to Consolidated
Financial Statements for the Periods of Six Months Ended June 30, 1998 and 1997
(unaudited) and the Year Ended December 31, 1997 (audited), contained in the
Quarterly Report on Form 10-Q of registrant for the quarter Ended June 30, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF SUMMIT BANCSHARES, INC., AS OF JUNE 30, 1998 AND
THE RELATED STATEMENTS OF INCOME, CHANGES IN SHAREHOLDERS' EQUITY AND CASH FLOWS
FOR THE PERIOD ENDING JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 25,602
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,675
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,223
<INVESTMENTS-CARRYING> 107,972
<INVESTMENTS-MARKET> 108,234
<LOANS> 292,846
<ALLOWANCE> 4,413
<TOTAL-ASSETS> 465,615
<DEPOSITS> 405,972
<SHORT-TERM> 0
<LIABILITIES-OTHER> 16,296
<LONG-TERM> 0
0
0
<COMMON> 8,143
<OTHER-SE> 35,204
<TOTAL-LIABILITIES-AND-EQUITY> 465,615
<INTEREST-LOAN> 13,653
<INTEREST-INVEST> 3,298
<INTEREST-OTHER> 989
<INTEREST-TOTAL> 17,940
<INTEREST-DEPOSIT> 6,230
<INTEREST-EXPENSE> 6,537
<INTEREST-INCOME-NET> 11,403
<LOAN-LOSSES> 408
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,941
<INCOME-PRETAX> 5,880
<INCOME-PRE-EXTRAORDINARY> 3,867
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,867
<EPS-PRIMARY> .59
<EPS-DILUTED> .56
<YIELD-ACTUAL> 5.38
<LOANS-NON> 6,830
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 11,737
<ALLOWANCE-OPEN> 4,065
<CHARGE-OFFS> 115
<RECOVERIES> 55
<ALLOWANCE-CLOSE> 4,413
<ALLOWANCE-DOMESTIC> 4,413
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
