<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 March 31, 1999; 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 March 31,
1999 was 6,506,347 shares.
<PAGE>
SUMMIT BANCSHARES, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1999 and
1998 and at December 31, 1998 4
Consolidated Statements of Income for the Three Months
Ended March 31, 1999 and 1998 and for the Year Ended
December 31, 1998 5
Consolidated Statements of Changes in Shareholders' Equity
for the Three Months Ended March 31, 1999 and 1998 and
for the Year Ended December 31, 1998 6
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 and for the Year Ended
December 31, 1998 7-8
Notes to Consolidated Financial Statements for the Three
Months Ended March 31, 1999 and 1998 and for the Year
Ended December 31, 1998 9-20
The March 31, 1999 and 1998 and the December 31, 1998 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 Three Months Ended
March 31, 1999 and 1998 21-27
</TABLE>
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) (Unaudited)
March 31, December 31,
--------------------
1999 1998 1998
-------- -------- ----------
ASSETS (In Thousands)
<S> <C> <C> <C>
CASH AND DUE FROM BANKS - NOTE 1 $ 23,371 $ 25,574 $ 26,735
FEDERAL FUNDS SOLD 16,800 43,390 38,706
INVESTMENT SECURITIES - NOTE 2
Securities Available-for-Sale, at fair value 117,953 59,503 121,417
Securities Held-to-Maturity, at cost (fair value of 30,344 47,946 26,595
$30,424,000, $48,268,000 and $26,959,000 at
March 31, 1999 and 1998 and December 31, 1998,
respectively)
LOANS - NOTE 3
Loans, Net of Unearned Discount 318,795 287,632 305,833
Allowance for Loan Losses (4,749) (4,192) (4,724)
-------- -------- --------
LOANS, NET 314,046 283,440 301,109
PREMISES AND EQUIPMENT - NOTE 4 9,136 7,857 9,082
ACCRUED INCOME RECEIVABLE 3,995 3,827 3,823
OTHER REAL ESTATE - NOTE 5 1,711 151 281
OTHER ASSETS 3,902 3,673 5,016
-------- -------- --------
TOTAL ASSETS $521,258 $475,361 $532,764
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS - NOTE 6
Noninterest-Bearing Demand $128,232 $114,454 $141,170
Interest-Bearing 327,151 303,889 324,330
-------- -------- --------
TOTAL DEPOSITS 455,383 418,343 465,500
SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE - NOTE 7 16,533 12,138 17,839
ACCRUED INTEREST PAYABLE 603 691 1,037
OTHER LIABILITIES 2,167 2,018 2,153
-------- -------- --------
TOTAL LIABILITIES 474,686 433,190 486,529
-------- -------- --------
COMMITMENTS AND CONTINGENCIES - NOTE 11, 13 and 17
SHAREHOLDERS' EQUITY - NOTES 12, 14 AND 18
Common Stock - $1.25 Par Value; 20,000,000 shares
authorized; 6,506,347, 6,518,094 and 6,471,827 shares
issued and outstanding at March 31, 1999 and 1998 and
at December 31, 1998, respectively 8,133 8,148 8,090
Capital Surplus 6,412 6,214 6,329
Retained Earnings 32,835 27,594 31,271
Accumulated Other Comprehensive Income-Unrealized Gain on
Available-for-Sale Investment Securities, Net of Tax 273 314 560
Treasury Stock at Cost (61,700 shares at March 31, 1999) (1,081) (99) (15)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 46,572 42,171 46,235
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $521,258 $475,361 $532,764
======== ======== ========
</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) (Unaudited)
For the Three Months Ended March 31, Year Ended December 31,
------------------------------------ -----------------------
1999 1998 1998
-------- -------- --------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 7,009 $ 6,678 $ 28,000
Interest and Dividends on Investment Securities:
Taxable 2,072 1,624 6,963
Exempt from Federal Income Taxes 10 13 50
Interest on Federal Funds Sold 303 558 2,052
-------- -------- --------
TOTAL INTEREST INCOME 9,394 8,873 37,065
-------- -------- --------
INTEREST EXPENSE
Interest on Deposits 3,094 3,086 12,786
Interest on Securities Sold Under
Agreements to Repurchase 160 163 692
-------- -------- --------
TOTAL INTEREST EXPENSE 3,254 3,249 13,478
-------- -------- --------
NET INTEREST INCOME 6,140 5,624 23,587
LESS: PROVISION FOR LOAN LOSSES - NOTE 3 220 158 785
-------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,920 5,466 22,802
-------- -------- --------
NON-INTEREST INCOME
Service Charges and Fees on Deposits 478 486 2,018
Loss on Sale of Investment Securities -0- -0- 35
Other Income 553 384 1,797
-------- -------- --------
TOTAL NON-INTEREST INCOME 1,031 870 3,850
-------- -------- --------
NON-INTEREST EXPENSE
Salaries and Employee Benefits 2,141 2,041 8,576
Occupancy Expense - Net 245 239 928
Furniture and Equipment Expense 283 295 1,150
Other Real Estate Owned (Income) Expense - Net 27 (3) (1)
Other Expense - NOTE 8 1,042 934 3,520
-------- -------- --------
TOTAL NON-INTEREST EXPENSE 3,738 3,506 14,173
-------- -------- --------
INCOME BEFORE INCOME TAXES 3,213 2,830 12,479
APPLICABLE INCOME TAXES - NOTE 9 1,117 966 4,333
-------- -------- --------
NET INCOME $ 2,096 $ 1,864 $ 8,146
======== ======== ========
NET INCOME PER SHARE - NOTE 14
Basic $ .33 $ .29 $ 1.25
Diluted .31 .27 1.20
</TABLE>
The accompanying Notes should be read with these financial statements.
5
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CONSOLIDATED AND COMPANY ONLY
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income -
Net Unrealized
Gain (Loss) on Total
Common Stock Capital Retained Investment Treasury Shareholders'
------------------
Shares Amount Surplus Earnings Securities Stock Equity
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1998 6,501,332 $ 8,127 $ 6,251 $ 26,491 $ 243 $ -0- $ 41,112
Purchases of Stock Held
in Treasury (494) (494)
Retirement of Stock
Held in Treasury (20,000) (25) (370) 395 -0-
Stock Options Exercised 36,762 46 (37) 9
Cash Dividend -
$.06 Per Share (391) (391)
Net Income for the
Three Months Ended
March 31, 1998 1,864 1,864
Securities Available-
for-Sale Adjustment 71 71
--------
Total Comprehensive
Income 1,935
--------- ------- ------- ------- ----- -------- --------
BALANCE AT
MARCH 31, 1998 6,518,094 8,148 6,214 27,594 314 (99) 42,171
Purchases of Stock Held
in Treasury (1,454) (1,454)
Retirement of Stock
Held in Treasury (81,700) (102) (1,436) 1,538 -0-
Stock Options Exercised 35,433 44 115 159
Cash Dividend -
$.18 Per Share (1,169) (1,169)
Net Income for the
Nine Months Ended
December 31, 1998 6,282 6,282
Securities Available-
for-Sale Adjustment 246 246
--------
Total Comprehensive
Income 6,528
--------- ------- ------- ------- ----- -------- --------
BALANCE AT
DECEMBER 31, 1998 6,471,827 8,090 6,329 31,271 560 (15) 46,235
Purchases of Stock Held
in Treasury (1,081) (1,081)
Retirement of Stock
Held in Treasury (800) (1) (14) 15 -0-
Stock Options Exercised 35,320 44 83 127
Cash Dividend -
$.08 Per Share (518) (518)
Net Income for the
Three Months Ended
March 31, 1999 2,096 2,096
Securities Available-
for-Sale Adjustment (287) (287)
--------
Total Comprehensive
Income 1,809
--------- ------- ------- ------- ----- -------- --------
BALANCE AT
MARCH 31, 1999 6,506,347 $8,133 $6,412 $32,835 $ 273 $(1,081) $ 46,572
========= ====== ======= ======= ===== ======== ========
</TABLE>
The accompanying Notes should be read with these financial statements.
6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
March 31, December 31,
-------------------------
1999 1998 1998
---------- ------------- -----------
(In Thousands)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 2,096 $ 1,864 $ 8,146
-------- -------- ---------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 260 298 1,037
Net Premium Amortization (Discount Accretion)
of Investment Securities (121) 30 (31)
Provision for Loan Losses 220 158 785
Deferred Income Taxes (Benefit) (10) (97) (465)
Loss on Sale of Investment Securities -0- -0- (35)
Net Gain From Sale of Other Real Estate -0- -0- (2)
Net Gain on Sale of Premises and Equipment -0- (1) (3)
Decrease (Increase) in Accrued Income and Other Assets 1,204 504 (523)
Increase (Decrease) in Accrued Expenses and Other Liabilities (420) 440 921
-------- -------- ---------
Total Adjustments 1,133 1,332 1,684
-------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,229 3,196 9,830
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in Federal Funds Sold 21,906 (7,630) (2,946)
Proceeds from Matured and Prepaid Investment Securities
. Held-to-Maturity 2,280 7,279 21,627
. Available-for-Sale 36,413 9,206 63,334
Proceeds from Sales of Investment Securities -0- -0- 11,992
Purchase of Investment Securities
. Held-to-Maturity (6,037) (10,111) (20,644)
. Available-for-Sale (33,254) (8,119) (118,148)
Loans Originated and Principal Repayments, Net (14,731) (11,705) (30,482)
Recoveries of Loans Previously Charged-Off 39 16 217
Proceeds from Sale of Premises and Equipment -0- 2 6
Proceeds from Sale of Other Real Estate -0- -0- 82
Purchases of Premises and Equipment (314) (240) (2,206)
-------- -------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 6,302 (21,302) (77,168)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Demand Deposits, Savings
Accounts and Interest Bearing Transaction Accounts (7,814) 15,593 60,585
Net Increase (Decrease) in Certificates of Deposit (2,303) 1,027 3,191
Net Increase (Decrease) in Repurchase Agreements (1,306) (2,551) 3,150
Payments of Cash Dividends (518) (391) (1,560)
Proceeds from Stock Options Exercised 127 9 168
Purchase of Treasury Stock (1,081) (494) (1,948)
-------- -------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (12,895) 13,193 63,586
-------- -------- ---------
NET DECREASE IN CASH AND DUE FROM
BANKS (3,364) (4,913) (3,752)
CASH AND DUE FROM BANKS AT BEGINNING
OF PERIOD 26,735 30,487 30,487
-------- -------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 23,371 $ 25,574 $ 26,735
======== ======== =========
</TABLE>
7
<PAGE>
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONT'D
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
March 31, December 31,
-------------------------
1999 1998 1998
----------- ------------ -----------
(In Thousands)
<S> <C> <C> <C>
(1) Interest Paid $3,689 $3,236 $13,120
(2) Income Taxes Paid (Refund Received) -0- 10 4,815
(3) Other Real Estate Acquired in Settlement of Loans 1,430 -0- 210
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 1998 (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 the generally
accepted accounting principles and the prevailing practices within the
banking industry. 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
three months of 1999 the average cash balance maintained at the Federal
Reserve Bank was $1,003,000. Compensating balances held at correspondent
banks, to minimize service charges, averaged approximately $ 17,382,000
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 at the time
of purchase of securities, 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 1999 and
1998 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.
9
<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 simple
interest method. Generally, loan origination and commitment fees are
recognized at the time of funding and are considered adjustments to
interest income. Related direct costs are not separately allocated to
loans but are charged to non-interest expense in the period incurred. The
net effect of not recognizing such fees and related costs over the life of
the related loan is not considered to be material to the financial
statements. 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. After loans are placed on non-accrual all
payments received are applied to 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 has adopted 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 charged against the allowance for loan losses
when management believes that the collectibility of the principal is
unlikely.
The evaluation of the adequacy of loan collateral is often based upon
estimates and appraisals. Because of changing economic conditions, the
valuations determined from such estimates and appraisals may also change.
Accordingly, the Corporation may ultimately incur losses which vary from
management's current estimates. Adjustments to the allowance for loan
losses will be reported in the period such adjustments become known or are
reasonably estimable.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated depreciation and
amortization. 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 non-interest expenses.
Renewals and betterments are added to the asset accounts and depreciated
over the periods benefited. 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, less estimated costs to
sell, of the real estate acquired is less than the Corporation'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."
10
<PAGE>
Reclassification
----------------
Certain reclassifications have been made to the 1998 financial statements
to conform to the 1999 presentation.
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, 1998, and the
consolidated statements of income, changes in shareholders' equity and cash
flows for the year ended December 31, 1998 are headed "unaudited" in these
financial statements. These statements were reported in the Securities
Exchange Commission Form 10-K as of December 31, 1998 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>
March 31, 1999
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Investment Securities - Held-to-Maturity
U.S. Treasury Securities $ 9,991 $184 $ -0- $ 10,175
U.S. Government Agencies
and Corporations 20,062 25 (132) 19,955
Obligations of States and
Political Subdivisions 291 3 -0- 294
-------- ---- ------ --------
Total Held-to-Maturity Securities 30,344 212 (132) 30,424
-------- ---- ------ --------
Investment Securities - Available-for-Sale
U.S. Treasury Securities 28,035 374 (1) 28,408
U.S. Government Agencies
and Corporations 70,813 133 (144) 70,802
U.S. Government Agency Mortgage
Backed Securities 17,057 71 (26) 17,102
Obligations of States and Political Subdivisions 455 7 -0- 462
Federal Reserve and Federal Home Loan Bank Stock 1,179 -0- -0- 1,179
-------- ---- ------ --------
Total Available-for-Sale Securities 117,539 585 (171) 117,953
-------- ---- ------ --------
Total Investment Securities $147,883 $797 $ (303) $148,377
======== ==== ====== ========
</TABLE>
In the above schedule the amortized cost of Total Held-to-Maturity
Securities of $30,344,000 and the fair value of Total Available-for-Sale
Securities of $117,953,000 are reflected in Investment Securities on the
consolidated balance sheet as of March 31, 1999 for a total of $148,297,000. A
net unrealized gain of $414,000 is included in the Available-for-Sale Investment
Securities balance. The unrealized gain, net of tax, is included in
Shareholders' Equity.
11
<PAGE>
NOTE 2 - Investment Securities (cont'd)
- ------
A summary of amortized cost and estimated fair values of investment
securities is as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 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 $ 17,988 $209 $ (5) $ 18,192
U.S. Government Agencies
and Corporations 21,823 135 (67) 21,891
U.S. Government Agency Mortgage
Backed Securities 6,996 51 (7) 7,040
Obligations of States and
Political Subdivisions 1,139 6 -0- 1,145
-------- ---- ----- --------
Total Held-to-Maturity Securities 47,946 401 (79) 48,268
-------- ---- ----- --------
Investment Securities - Available-for-Sale
U.S. Treasury Securities 44,534 456 (25) 44,965
U.S. Government Agencies
and Corporations 7,068 13 (22) 7,059
U.S. Government Agency Mortgage
Backed Securities 6,499 55 -0- 6,554
Federal Reserve and Federal Home Loan Bank Stock 925 -0- -0- 925
-------- ---- ----- --------
Total Available-for-Sale Securities 59,026 524 (47) 59,503
-------- ---- ----- --------
Total Investment Securities $106,972 $925 $(126) $107,771
======== ==== ===== ========
</TABLE>
In the above schedule the amortized cost of Total Held-to-Maturity
Securities of $47,946,000 and the fair value of Total Available-for-Sale
Securities of $59,503,000 are reflected in Investment Securities on the
consolidated balance sheet as of March 31, 1998 for a total of $107,449,000. A
net unrealized gain of $477,000 is included in the Available-for-Sale Investment
Securities balance. The unrealized gain, net of tax, is included in
Shareholders' Equity.
Effective October 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards Board No. 133 "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133") which establishes accounting and reporting
standards for derivative instruments and requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. At the effective date, the Corporation
transferred approximately $17,448,000 of securities from Held-to-Maturity to
Available-for-Sale classification. At the time of transfer the securities had
an approximate unrealized gain of $349,000.
NOTE 3 - Loans and Allowance for Loan Losses
- ------
The book values of loans by major type follow (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------
1999 1998 1998
---------- ------------- -----------
<S> <C> <C> <C>
Commercial $147,991 $126,722 $133,066
Real Estate Mortgage 102,444 100,360 100,421
Real Estate Construction 36,917 28,774 40,456
Loans to Individuals 31,836 32,343 32,388
Less: Unearned Discount (393) (567) (498)
-------- -------- --------
318,795 287,632 305,833
Allowance for Loan Losses (4,749) (4,192) (4,724)
-------- -------- --------
Loans - Net $314,046 $283,440 $301,109
======== ======== ========
</TABLE>
12
<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>
Year Ended
Three Months Ended March 31, December 31,
--------------------------------
1999 1998 1998
-------- -------- -----------
<S> <C> <C> <C>
Balance, Beginning of Period $4,724 $4,065 $4,065
Provisions, Charged to Income 220 158 785
Loans Charged-Off (234) (47) (343)
Recoveries of Loans Previously
Charged-Off 39 16 217
------ ------ ------
Net Loans (Charged-Off) Recovered (195) (31) 126
------ ------ ------
Balance, End of Period $4,749 $4,192 $4,724
====== ====== ======
</TABLE>
The provisions for loan losses charged to operating expenses during the
three months ended March 31, 1999 and March 31, 1998 of $220,000 and $158,000,
respectively, were considered adequate to maintain the allowance in accordance
with the policy discussed in Note 1. For the year ended December 31, 1998, a
provision of $785,000 was recorded.
At March 31, 1999, the recorded investment in loans that are considered to
be impaired under Statement of Financial Accounting Standards No. 114 was
$3,776,000 (of which $3,776,000 were on non-accrual status). The related
allowance for loan losses for these loans was $1,155,000. The average recorded
investment in impaired loans during the three months ended March 31, 1999 was
approximately $3,523,000. 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>
March 31, December 31,
-------------------
1999 1998 1998
-------- --------- ------------
<S> <C> <C> <C>
Land $ 2,783 $ 1,446 $ 2,783
Buildings and Improvements 7,549 7,526 7,537
Furniture & Equipment 7,536 6,693 7,234
------- ------- -------
Total Cost 17,868 15,665 17,554
Less: Accumulated Amortization and Depreciation 8,732 7,808 8,472
------- ------- -------
Net Book Value $ 9,136 $ 7,857 $ 9,082
======= ======= =======
</TABLE>
NOTE 5 - Other Real Estate
- ------
The carrying value of other real estate is as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1999 1998 1998
---------- ------------- -------------
<S> <C> <C> <C>
Other Real Estate $1,711 $ 185 281
Valuation Reserve -0- (34) -0-
------ ----- -----
Net Other Real Estate $1,711 $ 151 281
====== ===== =====
</TABLE>
13
<PAGE>
NOTE 5 - Other Real Estate (cont'd.)
- ------
Transactions in the valuation reserve are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended
Three Months Ended March 31, December 31,
----------------------------
1999 1998 1998
------ ------ ---------
<S> <C> <C> <C>
Balance, Beginning of Period $ -0- $ 34 $ 35
Provisions Charged to Income -0- -0- -0-
Reductions from Sales -0- -0- 35
------ ----- -----
Balance, End of Period $ -0- $ 34 $ -0-
====== ===== =====
</TABLE>
There were no direct writedowns of other real estate charged to income for
the three months ended March 31, 1999 or March 31, 1998, respectively, or for
the year ended December 31, 1998.
NOTE 6 - Deposits
- ------
The book values of deposits by major type follow (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
----------------------- ------------
1999 1998 1998
--------- ------------ ------------
<S> <C> <C> <C>
Noninterest-Bearing Demand Deposits $128,232 $114,454 $141,170
-------- -------- --------
Interest-Bearing Deposits:
Interest-Bearing Transaction
Accounts and Money Market Funds 153,347 142,351 151,557
Savings 84,836 72,431 81,503
Savings Certificates - Time 52,665 51,774 53,394
Certificates of Deposits $100,000 or more 35,525 36,328 37,099
Other 778 1,005 777
-------- -------- --------
Total 327,151 303,889 324,330
-------- -------- --------
Total Deposits $455,383 $418,343 $465,500
======== ======== ========
</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>
Year Ended
Three Months Ended March 31, December 31,
-----------------------------
1999 1998 1998
---------- ------------ -------------
<S> <C> <C> <C>
Securities Sold Under Repurchase Agreements:
Average $17,235 $14,201 $15,742
Period-End 16,533 12,138 17,839
Maximum Month-End Balance During Period 19,734 15,249 19,354
Interest Rate
Average 3.77% 4.66% 4.40%
Period-End 4.10 4.56 3.83
</TABLE>
14
<PAGE>
NOTE 8 - Other Non-Interest Expense
- ------
The significant components of other non-interest expense are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended
Three Months Ended March 31, December 31,
-------------------------------
1999 1998 1998
------- ------- --------
<S> <C> <C> <C>
Business Development $ 124 $ 144 $ 611
Legal and Professional Fees 167 131 511
Printing and Supplies 105 95 387
Regulatory Fees and Assessments 46 40 169
Other 600 524 1,842
------ ----- ------
Total $1,042 $ 934 3,520
====== ===== ======
</TABLE>
NOTE 9 - Income Taxes
- ------
Federal income taxes included in the consolidated balance sheets were as
follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
--------------------
1999 1998 1998
--------- --------- -----------
<S> <C> <C> <C>
Current Tax Asset (Liability) $(1,117) $(963) $ 10
Deferred Tax Asset 1,130 635 973
------- ----- -----
Total Included in Other Assets/
(Other Liabilities) $ 13 $(328) $ 983
======= ===== =====
</TABLE>
The deferred tax asset at March 31, 1999 of $1,130,000 included $141,000
related to unrealized gains on Available-for-Sale Securities.
The components of income tax expense were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
Three Months Ended March 31, December 31,
------------------------------
1999 1998 1998
--------- ----------- -------------
<S> <C> <C> <C>
Federal Income Tax Expense
Current $1,127 $1,063 $4,798
Deferred (10) (97) (465)
------ ------ ------
Total Federal Income Tax Expense $1,117 $ 966 $4,333
====== ====== ======
Effective Tax Rates 34.7% 34.1% 34.7%
====== ====== ======
</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>
Year Ended
Three Months Ended March 31, December 31,
------------------------------
1999 1998 1998
--------------- ------------- -------------
<S> <C> <C> <C>
Federal Income Taxes at Statutory
Rate of 34.3% $1,102 $ 962 $4,278
Effect of Tax Exempt Interest Income (4) (5) (19)
Non-deductible Expenses 12 10 58
Other 7 (1) 16
------ ------ ------
Income Taxes Per Income Statement $1,117 $ 966 $4,333
====== ====== ======
</TABLE>
15
<PAGE>
NOTE 9 - Income Taxes (con't)
- ------
<TABLE>
<CAPTION>
Year Ended
Three Months Ended March 31, December 31,
----------------------------
1999 1998 1998
-------- -------- ----------
<S> <C> <C> <C>
Federal Deferred Tax Assets:
Allowance for Loan Losses $1,183 885 $1,107
Valuation Reserves - Other Real Estate -0- 35 1
Interest on Non-accrual Loans 166 91 199
Deferred Compensation 411 365 414
Other 19 37 18
------ ------ ------
Gross Federal Deferred Tax Assets 1,779 1,413 1,739
------ ------ ------
Federal Deferred Tax Liabilities:
Depreciation and Amortization 298 250 301
Accretion 68 133 78
Unrealized Gains on Available-for-Sale Securities 141 162 289
Other 142 233 98
------ ------ ------
Gross Federal Deferred Tax Liabilities 649 778 766
------ ------ ------
Net Deferred Tax Asset $1,130 $ 635 $ 973
====== ====== ======
</TABLE>
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 $2,848,000 at December 31, 1998.
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 March 31, 1999, outstanding documentary and standby letters of credit
totaled $3,790,000 and commitments to extend credit totaled $104,189,000.
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 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, 1998, and the three months ended March 31, 1999.
16
<PAGE>
NOTE 12 - Stock Option Plans (con't)
- -------
The following is a summary of transactions during the periods presented:
<TABLE>
<CAPTION>
Shares Under Option
------------------------------------
Three Months
Ended Year Ended
March 31, 1999 December 31, 1998
---------------- ------------------
<S> <C> <C>
Outstanding, Beginning of Period 461,717 543,112
Additional Options Granted During
the Period 34,500 3,000
Forfeited During the Period -0- (5,400)
Exercised During the Period (35,320) (78,995)
------- -------
Outstanding, End of Period 460,897 461,717
======= =======
</TABLE>
Options outstanding at March 31, 1999 ranged in price from $3.00 to $19.25
per share with a weighted average exercise price of $8.32 and 333,935 shares
exercisable. At March 31, 1999, there remained 498,800 shares reserved for
future grants of options under the 1997 Plan. There are no shares available for
grant under the 1993 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.
Effective August 31, 1998, the accrual of benefits under this plan were
suspended. In February 1999, the Board of Directors chose to terminate the plan
effective April 15, 1999. The assets held in trust will be distributed to the
plan participants under terms of the plan as soon as administratively possible.
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.
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>
1998 1997
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $1,719 in 1998 and $2,240 in 1997 $1,852 $2,420
====== ======
Projected benefit obligation for service rendered to date $2,958 $3,035
Plan assets at fair value, primarily listed stocks
and U.S. bonds 2,176 2,883
------ ------
Projected benefit obligation in excess of (less than) plan assets 782 152
Unrecognized net loss from past experience
different from that assumed and effect of
changes in assumptions (930) (396)
Prior service cost not yet recognized in net
periodic pension cost (10) 12
------ ------
Prepaid pension cost included in other assets $ 158 $ 232
====== ======
</TABLE>
Prepaid pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997
-------- -------
<S> <C> <C>
Service Cost - benefits earned during the period $ 355 $ 227
Interest cost on projected benefit obligation 170 157
Less: Actual return on plan assets (126) (196)
Net amortization and deferral 39 5
------ ------
Net periodic pension cost $ 438 $ 193
====== ======
</TABLE>
17
<PAGE>
NOTE 13 - Employee Benefit Plans (con't)
- -------
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 March 31, 1999 was $2,097,000. There
has not been a contribution to the plan during 1999. Prepaid pension cost at
March 31, 1999 was $215,000.
401(k) Plan
- -----------
The Corporation implemented a 401(k) plan in December 1997 covering
substantially all employees. The Corporation has not matched the employee's
contributions to date nor made any other contribution to the plan.
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 $54,000 and $55,000 during the first three months of 1999 and
1998, respectively, and $237,000 for the year 1998.
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).
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>
March 31, December 31,
------------------------
1999 1998 1998
---------- ------------ ------------
<S> <C> <C> <C>
Net income $ 2,096 $ 1,864 $ 8,146
========== ========== ==========
Weighted average number of common
shares used in Basic EPS 6,460,003 6,504,173 6,496,595
Effect of dilutive stock options 254,682 348,946 316,702
---------- ---------- ----------
Weighted number of common shares
and dilutive potential common
stock used in Diluted EPS 6,714,685 6,853,119 6,813,297
========== ========== ==========
</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>
March 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Financial Instruments Whose
Contract Amounts Represent
Credit Risk:
Commitments to Extend Credit $104,189 $94,074
Documentary and Standby
Letters of Credit 3,790 5,152
</TABLE>
18
<PAGE>
NOTE 15 - Financial Instruments with Off-Balance Sheet Risk (con't)
- -------
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.
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 20, 1999, the Board of Directors approved a stock repurchase plan.
The plan authorized management to purchase up to 322,232 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 three months of 1999, 61,700 shares were purchased by the
Corporation through a similar repurchase plan through the open market.
NOTE 19 - Subsequent Event
- -------
On April 20, 1999, the Board of Directors of the Corporation approved a
quarterly dividend of $.08 per share to be paid on May 14, 1999 to shareholders
of record on April 30, 1999.
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.
19
<PAGE>
The estimated fair values of the Corporation's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
March 31,
------------------------------------------
1999 1998
-------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial Assets
Cash and due from banks $ 23,371 $ 23,371 $ 25,574 $ 25,574
Federal funds sold 16,800 16,800 43,390 43,390
Securities 148,297 148,377 107,449 107,771
Loans 318,795 321,144 287,632 287,653
Reserve for loan losses (4,749) (4,749) (4,192) (4,192)
Financial Liabilities
Deposits 455,383 455,868 418,343 418,571
Securities sold under repurchase
agreements 16,533 16,533 12,138 12,138
Off-balance Sheet Financial Instruments
Loan commitments 104,189 94,074
Letters of credit 3,790 5,152
</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 Three Months Ended March 31, Year Ended
-------------------------------------
1999 1998 December 31, 1998
------------------ ----------------- -----------------
<S> <C> <C> <C>
Net Income $2,096 $1,864 $8,146
Other Comprehensive Income:
Unrealized gain (loss) on securities
available-for-sale, net of tax (287) 71 317
------ ------ ------
Comprehensive Income $1,809 $1,935 $8,463
====== ====== ======
</TABLE>
20
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Summary
- -------
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Corporation analyzes the major elements of the Corporation's
consolidated balance sheets and statements of income. This discussion should be
read in conjunction with the consolidated financial statements and accompanying
notes.
Net income for the first quarter of 1999 was $2,096,000, or $.31 diluted
earnings per share, compared with $1,864,000, or $.27 diluted earnings per
share, for the first quarter of 1998. Per share amounts are based on average
shares outstanding of 6,714,685 for the first quarter of 1999 and 6,853,119 for
the comparable period of 1998 adjusted to reflect stock options granted. On a
per share basis, diluted earnings per share increased 14.8% over the first
quarter of the prior year.
Outstanding loans at March 31, 1999 of $318.8 million represented an
increase of $31.2 million, or 10.8%, over March 31, 1998 and an increase of
$13.0 million, or 4.2%, from December 31, 1998.
Total deposits at March 31, 1999 of $455.4 million represented an increase
of $37.0 million, or 8.9%, over March 31, 1998 and a decrease of $10.1 million,
or 2.2%, from December 31, 1998.
In the first quarter, net interest income increased 9.1% over the previous
year. An increase in non-interest expense of 6.6% partially offset the
increase in net interest income.
The following table summarizes the Corporation's performance for the three
months ended March 31, 1999 and 1998 (tax equivalent basis and dollars in
thousands).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Interest Income $9,399 $8,881
Interest Expense 3,254 3,249
------ ------
Net Interest Income 6,145 5,632
Provision for Loan Loss 220 158
------ ------
Net Interest Income After
Provision for Loan Loss 5,925 5,474
Non-Interest Income 1,031 870
Non-Interest Expense 3,738 3,506
------ ------
Income Before Income Tax 3,218 2,838
Income Tax Expense 1,122 974
------ ------
Net Income $2,096 $1,864
====== ======
Net Income per Share -
Basic $ .33 $ .29
Diluted .31 .27
Return on Average Assets 1.63% 1.65%
Return on Average Shareholders' Equity 18.27% 18.18%
</TABLE>
21
<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 first quarter of 1999 and 1998 (rates on tax equivalent basis).
<TABLE>
<CAPTION>
Three Months ended March 31,
--------------------------------------------------------------------
1999 1998
--------------------------------- ---------------------------------
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 $ 25,408 $ 303 4.84% $ 41,105 $ 559 5.52%
Investment Securities (Taxable) 145,391 2,072 5.78 106,387 1,623 6.19
Investment Securities (Tax-exempt) 890 15 7.06 1,141 20 7.11
Loans, Net of Unearned Discount(1) 311,326 7,009 9.13 277,001 6,679 9.78
-------- ------ -------- ------
Total Earning Assets 483,015 9,399 7.89 425,634 8,881 8.46
------ ------
Non-interest Earning Assets:
Cash and Due From Banks 23,278 22,355
Other Assets 18,890 15,475
Allowance for Loan Losses (4,789) (4,141)
-------- --------
Total Assets $520,394 $459,323
======== ========
Interest-Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Money Market Funds $154,753 1,212 3.18 $136,772 1,215 3.60
Savings 82,923 815 3.99 66,082 728 4.47
Savings Certificates 53,227 614 4.68 51,667 648 5.09
Certificates of Deposit
$100,000 or more 36,099 443 4.98 36,765 482 5.32
Other Time 778 10 5.22 905 13 5.70
Other Borrowings 17,235 160 3.77 14,201 163 4.66
-------- ------ -------- ------
Total Interest-Bearing Liabilities 345,015 3,254 3.83 306,392 3,249 4.30
------ ------
Non-interest Bearing Liabilities:
Demand Deposits 126,505 109,092
Other Liabilities 2,360 2,253
Shareholders' Equity 46,514 41,586
-------- --------
Total Liabilities and
Shareholders' Equity $520,394 $459,323
======== ========
Net Interest Income and Margin
(Tax-equivalent Basis)(2) $6,145 5.16 $5,632 5.37
====== ======
</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.
22
<PAGE>
Net Interest Income
- -------------------
Net interest income (tax equivalent) for the first quarter of 1999 was
$6,145,000 which represented an increase of $513,000, or 9.1%, over the first
quarter of 1998. This increase was heavily contributed to by a 12.4% increase
in average loans and a 36.5% increase in average investment securities for the
first quarter of 1999 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 March 31, 1999 and 1998.
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Dollars in Thousands)
1st Qtr. 1999 vs. 1st Qtr. 1998 1st Qtr. 1998 vs. 1st Qtr. 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 $ (194) $ (62) $ (256) $ 348 $ 8 $ 356
Investment Securities (Taxable) 1,115 (666) 449 (254) 141 (113)
Investment Securities (Tax-exempt) (4) (1) (5) 16 -0- 16
Loans, Net of Unearned Discount 2,555 (2,225) 330 1,212 80 1,292
------ ------- ---- ------ ---- -----
Total Interest Income 3,472 (2,954) 518 1,322 229 1,551
------ ------- ---- ------ ---- -----
Interest-Bearing Liabilities:
Deposits 1,310 (1,302) 8 471 200 671
Other Borrowings 132 (135) (3) 16 22 38
------ ------- ---- ------ ---- -----
Total Interest Expense 1,442 (1,437) 5 487 222 709
------ ------- ----- ------ ---- -----
Net Interest Income $2,030 $(1,517) $ 513 $ 835 $ 7 $ 842
====== ======= ===== ====== ==== =====
</TABLE>
Allowance for Loan Losses and Non-Performing Assets
- ---------------------------------------------------
The Corporation's allowance for loan losses was $4,749,000, or 1.49% of
total loans, as of March 31, 1999 compared to $4,192,000, or 1.46% of total
loans, as of March 31, 1998.
Transactions in the allowance for loan losses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
-------- -----
<S> <C> <C>
Balance, Beginning of Period $4,724 $4,065
Provisions, Charged to Income 220 158
Loans Charged-Off (234) (47)
Recoveries of Loans Previously
Charged-Off 39 16
----- -----
Net Loans (Charged-Off) Recovered (195) (31)
----- -----
Balance, End of Period $4,749 $4,192
===== =====
</TABLE>
For the three months ended March 31, 1999 and 1998, net charge-offs were
.06% and .01%, respectively, not annualized.
The following table summarizes the non-performing assets as of the end of
the last five quarters (in thousands)
<TABLE>
<CAPTION>
March 31, December 31, September 30, June 30, March 31,
1999 1998 1998 1998 1998
---------- ------------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans $4,207 $5,049 $6,213 $6,830 $2,885
Other Real Estate Owned 1,711 281 71 71 151
------ ------ ------ ------ ------
Total Non-Performing Assets $5,918 $5,330 $6,284 $6,901 $3,036
====== ====== ====== ====== ======
</TABLE>
23
<PAGE>
Allowance for Loan Losses and Non-Performing Assets (con't)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31, September 30, June 30, March 31,
1999 1998 1998 1998 1998
--------- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
As a Percent of:
Total Assets 1.14% 1.00% 1.28% 1.48% .64%
Total Loans and Other Assets 1.85 1.74 2.08 2.36 1.06
Loans Past Due 90 days or
More and Still Accruing $ 7 $ 3 $ 269 $ 6 $ 23
</TABLE>
Non-accrual loans to total loans were 1.32% at March 31, 1999 and non-
performing assets were 1.85% of loans and other real estate owned at the same
date.
As of March 31, 1999, loans to five borrowers represent approximately 92%
of the loans on non-accrual and three of these borrowers are current as to
payment of principal and interest on their loans. The Corporation does not see
the increase in non-accrual loans in mid 1998 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>
March 31, December 31, September 30, June 30, March 31,
1999 1998 1998 1998 1998
---------- ------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Non-Performing Loans $ 4,207 $ 5,055 $ 6,482 $ 6,830 $ 2,885
Criticized Loans 9,597 10,468 11,524 11,737 12,484
Allowance for Loan Losses 4,749 4,724 4,663 4,413 4,192
Allowance for Loan Losses
as a Percent of:
Non-Performing Loans 129% 94% 72% 65% 145%
Criticized Loans 50 45 0 38 34
</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 March 31,
-----------------------------
1999 1998 % Change
-------- ------- ----------
<S> <C> <C> <C>
Service Charges on Deposit Accounts $ 478 $ 486 (1.7)%
Non-recurring Income 198 66 -
Other Non-interest Income 355 318 11.6
------ -----
Total Non-interest Income $1,031 $ 870 18.5
====== =====
</TABLE>
Non-recurring income is primarily franchise tax refunds, interest recovered
on loans charged-off in prior years and gains on sales of assets taken in
satisfaction of debt in prior years. The increase in other non-interest income
in the first quarter of 1999 is primarily due to increases in mortgage
brokerage/origination fees and fees earned on investment services to customers.
24
<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 March 31,
------------------------------
1999 1998 % Change
-------- --------- ---------
<S> <C> <C> <C>
Salaries & Employee Benefits $2,141 $2,041 4.9%
Occupancy Expense - Net 245 239 2.5
Furniture and Equipment Expense 283 295 (4.1)
Other Real Estate Expense - Net 27 (3) --
Other Expenses:
Business Development 124 144 (13.9)
Insurance - Other 35 25 40.0
Legal & Professional Fees 167 131 27.5
Taxes - Other 65 85 (23.5)
Postage & Courier 78 72 8.3
Printing & Supplies 105 95 10.5
Regulatory Fees & Assessments 46 40 15.0
Other Operating Expenses 422 342 23.3
------ ------ -----
Total Other Expenses 1,042 934 11.6
------ ------ -----
Total Non-interest Expense $3,738 $3,506 6.6%
====== ====== =====
</TABLE>
Total non-interest expense increased 6.6% in the first quarter of 1999
over 1998, reflecting increases in salaries and benefits, occupancy expense,
legal and professional expense, and other operating expenses. As a percent of
average assets, non-interest expenses were 2.87% in the first quarter of 1999
and 3.10% in the same period of 1998. The "efficiency ratio" (non-interest
expenses divided by total non-interest income plus net interest income) was
52.1% for the first quarter of 1999. 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 first quarter of 1999
is due to salary merit increases and additions to staff. The average number of
full-time equivalent employees increased by 7 to an average full-time
equivalent of 169.5 from the number twelve months prior. This increase in
number of employees was required because of the increase in assets over the past
year.
The increase in occupancy expense is primarily due to increased repairs and
increased property taxes.
Legal and professional fees increased due to increased legal fees related
to substandard loans and increased audit fees.
Other operating expenses increased in the first quarter of 1999 due to
increases in various miscellaneous operating costs.
25
<PAGE>
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.
The following table, commonly referred to as a "static gap report",
indicates the interest rate sensitivity position at March 31, 1999 and may not
be reflective of positions in subsequent periods (dollars in thousands):
<TABLE>
<CAPTION>
Total Repriced
Rate After
Matures or Reprices within: 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 $184,025 $ 16,771 $ 12,103 $212,899 $105,896 $318,795
Investment Securities 13,660 15,266 29,118 58,044 90,253 148,297
Federal Funds Sold 16,800 -0- -0- 16,800 -0- 16,800
-------- -------- -------- -------- -------- --------
Total Earning Assets 214,485 32,037 41,221 287,743 196,149 483,892
-------- -------- -------- -------- -------- --------
Interest Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Savings 238,183 -0- -0- 238,183 -0- 238,183
Certificate of Deposits
Less than $100,000 11,022 10,161 12,033 33,216 2,309 35,525
Other Time Deposits 10,100 17,327 20,879 48,306 5,137 53,443
Repurchase Agreements 16,533 -0- -0- 16,533 -0- 16,533
-------- -------- -------- -------- -------- --------
Total Interest Bearing
Liabilities 275,838 27,488 32,912 336,238 7,446 343,684
-------- -------- -------- -------- -------- --------
Interest Sensitivity
Gap $(61,353) $ 4,549 $ 8,309 $(48,495) $188,703 $140,208
======== ======== ======== ======== ======== ========
Cumulative Gap $(61,353) $(56,804) $(48,495)
======== ======== ========
Cumulative Gap to
Total Earning Assets (12.68%) (11.74%) (10.02%)
Cumulative Gap to
Total Assets (11.77%) (10.90%) (9.30%)
</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 (9.3%) was reversed to a positive 11.1% "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.
26
<PAGE>
Capital (con't)
- -------
At March 31, 1999, total capital to total assets was 8.94%.
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 March 31, 1999, the Corporation's Tier I
capital represented 14.0% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented 15.3% of risk weighted assets. Both ratios are
well above current regulatory guidelines.
Also, as of March 31, 1999, the Corporation and its Subsidiary Banks met
the criteria for classification as a "well-capitalized" institution under the
rules of the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA").
Impact of the Year 2000 Issue
- -----------------------------
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Corporation's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in normal business activities.
Based on assessments, the Corporation determined that it would be required
to modify or replace portions of its software so that its computer systems will
properly utilize dates beyond December 31, 1999. The Corporation presently
believes that with modifications to existing software, the Year 2000 Issue can
be mitigated. However, if such modifications are not made, or are not completed
timely, the Year 2000 Issue could have material impact on the operations of the
Corporation.
The Corporation has utilized both internal and external resources to
correct and test the software for Year 2000 modifications. The Corporation has
substantially completed the Year 2000 project. The remaining work on the project
includes finalization of the Corporation's contingency plans should any area not
function as tested or any external event impact the operation of the
Corporation. The total cost of the Year 2000 project has not been material to
the financial condition of the Corporation.
Forward-Looking Statements
- --------------------------
The Corporation may from time to time make forward-looking statements
(within the meaning of the Private Securities Litigation Reform Act of 1995)
with respect to earnings per share, credit quality, expected Year 2000
compliance program, corporate objectives and other financial and business
matters. The Corporation cautions the reader that these forward-looking
statements are subject to numerous assumptions, risks and uncertainties,
including economic conditions; actions taken by the Federal Reserve Board;
legislative and regulatory actions and reforms; competition; as well as other
reasons, all of which change over time. Actual results may differ materially
from forward-looking statements.
27
<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
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) No Report on Form 8-K were filed during the period ending March
31, 1999
28
<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: April 30, 1999 By: /s/ Philip E. Norwood
-------------- -------------------------------------------
Philip E. Norwood, Chairman
Date: April 30, 1999 By: /s/ Bob G. Scott
-------------- -------------------------------------------
Bob G. Scott, Executive Vice President
and Chief Operating Officer
(Chief Accounting Officer)
29
<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 Three Months Ended March 31, 1999 and
1998 (unaudited) and the Year Ended December 31, 1998 (audited), contained in
the Quarterly Report on Form 10-Q of registrant for the quarter Ended March 31,
1999.
<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 March 31, 1999,
and the related statements of income, changes in shareholders' equity and cash
flows for the period ending March 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 23,371
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 16,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 117,953
<INVESTMENTS-CARRYING> 148,297
<INVESTMENTS-MARKET> 148,377
<LOANS> 318,795
<ALLOWANCE> 4,749
<TOTAL-ASSETS> 521,258
<DEPOSITS> 455,383
<SHORT-TERM> 16,533
<LIABILITIES-OTHER> 2,770
<LONG-TERM> 0
0
0
<COMMON> 8,133
<OTHER-SE> 38,439
<TOTAL-LIABILITIES-AND-EQUITY> 521,258
<INTEREST-LOAN> 7,009
<INTEREST-INVEST> 2,082
<INTEREST-OTHER> 303
<INTEREST-TOTAL> 9,394
<INTEREST-DEPOSIT> 3,094
<INTEREST-EXPENSE> 3,254
<INTEREST-INCOME-NET> 6,140
<LOAN-LOSSES> 220
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,738
<INCOME-PRETAX> 3,213
<INCOME-PRE-EXTRAORDINARY> 2,096
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,096
<EPS-PRIMARY> .33
<EPS-DILUTED> .31
<YIELD-ACTUAL> 5.16
<LOANS-NON> 4,207
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 9,597
<ALLOWANCE-OPEN> 4,724
<CHARGE-OFFS> 234
<RECOVERIES> 39
<ALLOWANCE-CLOSE> 4,749
<ALLOWANCE-DOMESTIC> 4,749
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
