<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 33-16366
SUMMIT BANK CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1722476
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4360 Chamblee-Dunwoody Road
Atlanta, Georgia 30341
(Address of principal executive offices, including Zip Code)
(770) 454-0400
(Registrant's telephone number, including area code)
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
--- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of capital stock, as of the latest practicable date.
Class Outstanding at May 13, 1996
---------- -----------------------------
Common Stock. $.01 par value 1,407,688
The Exhibit Index Appears on Page 13
PAGE 1 OF 15
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT BANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
March 31, December 31,
(In thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 4,978 $ 7,220
Federal funds sold 7,800 3,525
Interest-bearing deposits in other banks 59 60
Investment securities available for sale, at fair value 35,610 32,110
Other investments 680 592
Loans, net of unearned income 81,058 76,695
Loans held for sale 1,027 1,482
Less: allowance for loan losses (1,822) (1,686)
- ---------------------------------------------------------------------------------------------------------
Net loans 80,263 76,491
- ---------------------------------------------------------------------------------------------------------
Premises and equipment, net 3,494 2,932
Customers' acceptance liability 2,654 1,907
Other real estate -- --
Deferred income tax 342 205
Other assets 2,713 5,034
- ---------------------------------------------------------------------------------------------------------
Total Assets $138,593 $130,076
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILTIES:
Deposits:
Noninterest-bearing demand $ 25,630 $ 24,080
Interest-bearing:
Demand 29,589 29,193
Savings 8,011 7,734
Time, $100,000 and over 25,967 22,766
Other time 27,192 26,043
- ---------------------------------------------------------------------------------------------------------
Total deposits 116,389 109,816
- ---------------------------------------------------------------------------------------------------------
Obligation under capital lease 144 152
Other borrowed funds 1,000 --
Acceptances outstanding 2,654 1,907
Other liabilities 2,716 2,788
- ---------------------------------------------------------------------------------------------------------
Total liabilities 122,903 114,663
- ---------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 14 14
Additional paid-in capital 12,123 12,123
Retained earnings 3,442 2,939
Net unrealized holding gains on investment securities
available for sale, net of income taxes 111 337
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 15,690 15,413
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $138,593 $130,076
=========================================================================================================
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
PAGE 2 OF 15
<PAGE> 3
SUMMIT BANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
(Unaudited)
Three months
ended March 31,
(Dollars in thousands, except share and per share amounts) 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Loans, including fees $ 2,130 $ 1,858
Interest-bearing deposits in other banks 1 1
Federal funds sold 56 90
Investment securities-taxable 112 158
Mortgage-backed securities 463 181
- -------------------------------------------------------------------------------------------
Total interest income 2,762 2,288
- -------------------------------------------------------------------------------------------
Interest expense
Time deposits, $100,000 and over 375 161
Other deposits 702 720
Short-term borrowings and obligation
under capital lease 8 5
- -------------------------------------------------------------------------------------------
Total interest expense 1,085 886
- -------------------------------------------------------------------------------------------
Net interest income 1,677 1,402
Provision for loan losses 141 164
- -------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 1,536 1,238
- -------------------------------------------------------------------------------------------
Non-interest income
Fees for international banking services 275 280
SBA loan servicing fees 111 118
Service charge income 52 59
Overdraft and NSF charges 80 71
Gains on sales of loans 167 93
Net gains on sales of investment securities 116 --
Other 92 70
- -------------------------------------------------------------------------------------------
Total non-interest income 893 691
- -------------------------------------------------------------------------------------------
Non-interest expenses
Salaries and employee benefits 829 680
Equipment 115 94
Net occupancy 97 96
Other operating expenses 414 493
- -------------------------------------------------------------------------------------------
Total non-interest expenses 1,455 1,363
- -------------------------------------------------------------------------------------------
Income before income taxes 974 566
- -------------------------------------------------------------------------------------------
Income tax expense 373 202
- -------------------------------------------------------------------------------------------
Net income $ 601 $ 364
- -------------------------------------------------------------------------------------------
Net income per common share and common share equivalents $ .38 $ .24
- -------------------------------------------------------------------------------------------
Weighted-average common shares outstanding and
common share equivalents 1,630,610 1,630,610
- -------------------------------------------------------------------------------------------
Dividends declared per common share $ .07 $ .07
===========================================================================================
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
PAGE 3 OF 15
<PAGE> 4
SUMMIT BANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three months
ended March 31,
(In thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income: $ 601 $ 364
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of leasehold improvements 64 54
Deferred tax benefit -- (196)
Net amortization of premiums/discounts on
investment securities 25 18
Amortization of negative goodwill (27) (27)
Provision for loan losses 141 164
Gains on sales of loans (167) (93)
Proceeds from sales of loans 1,014 1,790
Net gains on sales of investment securities (116) --
Changes in other assets and liabilities:
Decrease in other assets 2,907 81
Decrease in other liabilities (45) (35)
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,397 2,120
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities available for sale 1,350 250
Principal collections on investment securities available for sale 1,061 --
Proceeds from sales of investment securities available for sale 1,920 --
Purchases of investment securities available for sale (8,191) --
Purchases of investment securities held to maturity -- (9,481)
Proceeds from maturities and principal collections on investment
securities held to maturity -- 415
Loans made to customers, net of principal collected on loans (5,346) 2,314
Purchases of premises and equipment (626) (298)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities (9,832) (6,800)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in demand and savings deposits 2,223 (150)
Net increase in time deposits 4,350 4,416
Principal payments for obligation under capital lease (8) (7)
Dividends paid (98) (98)
Net increase in borrowed funds 1,000 --
- -----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 7,467 4,161
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,032 (519)
Cash and cash equivalents at beginning of period 10,805 9,872
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,837 $ 9,353
=====================================================================================================
Supplemental disclosures of cash paid during the period:
Interest $ 1,212 $ 774
Income taxes $ 0 $ 470
=====================================================================================================
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
PAGE 4 OF 15
<PAGE> 5
SUMMIT BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by Summit
Bank Corporation and Subsidiaries (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of management, the
information furnished in the condensed consolidated financial statements
reflects all adjustments necessary to present fairly the Company's
financial position, results of operations and cash flows for such interim
periods. Management believes that all interim period adjustments are of
a normal recurring nature. These consolidated financial statements
should be read in conjunction with the Company's audited financial
statements and the notes thereto as of December 31, 1995, included in the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, The Summit National Bank (the "Bank")
and The Summit Merchant Banking Corporation. All intercompany accounts
and transactions have been eliminated in consolidation.
2. ACCOUNTING POLICIES
Reference is made to the accounting policies of the Company described in
the notes to consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
3. RECLASSIFICATIONS
Certain 1995 amounts have been reclassified for comparative purposes in
order to conform the prior period to the 1996 presentation.
PAGE 5 OF 15
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three-month periods ended March 31, 1996 and 1995
Performance Overview
- ---------------------
Summit Bank Corporation and Subsidiaries (the "Company") reported net income
of $601,000 for the first quarter of 1996, a 65% increase over $364,000 in
earnings for the same period last year. The earnings improvement is attributed
to higher net interest income resulting from a higher volume of earning assets
and increased non-interest income. Net earnings per share for first quarter
1996 were $.38 as compared to $.24 for first quarter 1995. The Company's
annualized return on average stockholders' equity for 1996 was 15.5% compared
to 15.1% for 1995, while the return on average assets increased to 1.8%
compared to 1.7% in 1995. Book value per share increased to $11.15 at March
31, 1996 from $10.95 at December 31, 1995.
Net interest income increased 20% to $1.7 million, in the quarter ended March
31, 1996 as compared to the same period last year primarily as a result of a
higher level of earning assets. Interest from investment securities,
specifically mortgage-backed securities, increased to $463,000 for the first
quarter of 1996 compared to $181,000 for the comparable period last year. The
Company's net interest margin declined slightly to 5.57% in first quarter 1996
compared to 5.62% in first quarter 1995.
Provision for loan losses declined slightly to $141,000 from $164,000 for the
respective first quarters of 1996 and 1995. Gross charged off loans for the
first quarter were $70,000 offset by recoveries of $65,000, resulting in an
annualized net charge-off rate of .02% of total loans. This compares to a net
recovery during the same period last year of $51,000. Non-interest income
increased $202,000 to $893,000 for the three-month period ended March 31, 1996
from $691,000 in the comparable period last year. Net gains on sales of
investment securities accounted for $116,000 of this increase, and gains on
sales of loans also accounted for $74,000 of this increase.
Non-interest expenses increased 6.8% in the first three months of 1996 as
compared to the prior year period, mostly as a result of increased personnel
expenses. Significant growth during the latter half of 1995 and early 1996
prompted the addition of several new positions including additional lending
staff, a Marketing Director and the new positions created from the fourth
branch scheduled to open in second quarter 1996. Equipment expenses increased
$21,000 to $115,000 as a result of depreciation on new computer equipment
installed during second quarter 1995. Other operating expenses declined to
$414,000 in first quarter 1996 from $493,000 during the same period last year
which is largely attributed to the suspension of insurance premiums by Federal
Deposit Insurance Corporation ("FDIC") for the Bank Insurance Fund. This
resulted in a first quarter savings in FDIC insurance premiums of $51,000 as
compared to the first quarter of last year. Offsetting the savings from FDIC
premiums, data/item processing expenses increased to $81,500 compared to
$35,200 for the same period last year. This additional cost was a result of
the conversion to a new computer system in second quarter 1995 which
significantly expanded the Company's technological capabilities and allowed the
Bank to offer more competitively advanced products to its market. These new
products include corporate cash management, 24-hour telephone banking and
multi-lingual ATM's, all of which will be introduced in 1996. The Bank also
elected to outsource all check processing tasks to a third party in an effort
to improve efficiencies within the Company. The Company's efficiency ratio for
first quarter 1996 was 56.6%, a significant improvement compared to 62.1% for
1995.
Total assets at March 31, 1996 were $139 million, an increase of 7% from year
end 1995 and 24% from first quarter 1995. Total loans increased $3.9 million,
or 5% from year-end, while investment securities and federal funds sold
increased $3.6 million and $4.3 million, respectively. The Company's
PAGE 6 OF 15
<PAGE> 7
asset growth was funded primarily by a $6.6 million increase in deposits during
the first quarter, an increase of 6%. Additionally, the Company borrowed $1
million under an advance from the Federal Home Loan Bank. Investment in
premises and equipment increased $562,000 in the quarter ended March 31, 1996
resulting from the Bank's purchase of a new branch facility located in
Marietta, Georgia. The Bank plans to open this new office, its fourth branch,
in May 1996 to further expand the small business market. Other assets declined
to $2.7 million at March 31, 1996, from $5 million at year-end 1995, as a
result of the completion of SBA loan sales.
Asset Quality
- --------------
Non-performing assets increased to $162,000 at March 31, 1996 compared to
$111,000 at year end 1995. Non-performing assets represented .20% of total
loans as of March 31, 1996 compared to .14% at December 31, 1995. The Company
had $107,000 of loans 90 days or more past due at March 31, 1996.
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
---------------------
March 31, December 31,
(Dollars in thousands) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Loans on nonaccrual $ 162 $ 111
Other real estate -- --
Restructured loans -- --
- ---------------------------------------------------------------------
Total non-performing assets $ 162 $ 111
=====================================================================
Loans 90 days past due $ 107 $ --
Total non-performing assets as a
percentage of total loans and ORE .20% .14%
Loans ninety days past due as a
percentage of total loans .13% --%
</TABLE>
PAGE 7 OF 15
<PAGE> 8
The allowance for loan losses increased to $1,822,000 at March 31, 1996 from
$1,686,000 at year end 1995, an increase of 8.1%. Gross chargeoffs of $70,000
offset by recoveries of $65,000, resulted in a net annualized chargeoff rate of
.02% of average total loans compared to .43% for the entire year 1995. The
allowance for loan losses represented 2.22% of total loans outstanding at March
31, 1996.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES AT MARCH 31, 1996
<TABLE>
<CAPTION>
(In thousands)
------------------------------------------------------------
<S> <C>
Allowance for loan losses at December 31, 1995 $1,686
------------------------------------------------------------
Charge-offs:
Commercial, financial, and agricultural 53
Real estate --
Installment loans to individuals 17
------------------------------------------------------------
Total 70
------------------------------------------------------------
Recoveries:
Commercial, financial, and agricultural 56
Real estate --
Installment loans to individuals 9
------------------------------------------------------------
Total 65
------------------------------------------------------------
Net charge-offs 5
------------------------------------------------------------
Provision for loan losses charged to income 141
------------------------------------------------------------
Allowance for loan losses at March 31, 1996 $1,822
============================================================
</TABLE>
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses and internal credit ratings. Based on this analysis,
management considers the allowance for loan losses at March 31, 1996 to be
adequate to cover possible loan losses in the portfolio as of that date.
However, because of the inherent uncertainty of assumptions made during the
evaluation process, there can be no assurance that loan losses in future
periods will not exceed the allowance for loan losses or that additional
allocations to the allowance will not be required.
PAGE 8 OF 15
<PAGE> 9
Liquidity and Capital Adequacy
- --------------------------------
Liquidity has continued to improve during 1996 as a result of the sharp growth
in deposits. At March 31, 1996, the Company's net loan to deposit rate was
65.9%, down from 71.1% at year end. The Bank's liquid assets as a percent of
total deposits was 40% at March 31, 1996. Management also analyzes the level
of off-balance sheet assets such as unfunded loan commitments and outstanding
letters of credit as they relate to the levels of cash, cash equivalents,
liquid investments, and available federal funds lines to to ensure that no
potential shortfall exists. Additionally, the Bank has $15,000,000 of
borrowing capacity under a secured line of credit available from the Federal
Home Loan Bank of Atlanta. Based on this analysis, management believes that
the Company has adequate liquidity to meet short-term operational requirements.
Stockholders' equity of the Company increased $277,000 to $15.7 million at
March 31, 1996, an increase of 1.8% from December 31, 1995, and 18% from March
31, 1995. The capital level of the Bank exceeds all prescribed regulatory
capital guidelines. Regulations require that most highly rated national banks
maintain a minimum Tier 1 leverage ratio of 3%, and require other banks to
maintain a minimum Tier 1 leverage ratio of 3% plus an additional cushion of at
least 1 to 2 percentage points. Tier 1 capital consists of stockholders'
equity less certain intangibles. The Bank's Tier 1 leverage ratio was 9.86 %
at March 31, 1996 compared to 11.9% at year end 1995 as a result of asset
growth. Regulations require that the Bank maintain a minimum total risk
weighted capital ratio of 8% with 50%, or 4%, of this amount made up of Tier 1
capital. Risk-weighted assets consist of balance sheet assets adjusted by risk
category and off-balance sheet asset equivalents similarly adjusted. At March
31, 1996, the Bank had a risk-weighted total capital ratio of 15.4 % compared
to 14.8% at year end 1995, and a Tier 1 risk-weighted capital ratio of 14.2%
compared to 13.6% at year end 1995.
PAGE 9 OF 15
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes 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
PAGE 10 OF 15
<PAGE> 11
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
Exhibit 27.1
Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K - none
PAGE 11 OF 15
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed by the undersigned,
thereunto duly authorized.
SUMMIT BANK CORPORATION
BY: /S/ David Yu
--------------------------------------
David Yu
President and Chief Executive Officer
BY: /S/ Gary K. McClung
--------------------------------------
Gary K. McClung
Executive Vice President
(Principal Financial Officer
and Principal Accounting Officer)
DATE: May 13, 1996
--------------------------------
PAGE 12 OF 15
<PAGE> 13
INDEX TO EXHIBITS
Exhibit Page
------- ------
11.1 Statement Regarding Computation of Per Share Earnings 14
27.1 Financial Data Schedule (for SEC use only) 15
PAGE 13 OF 15
<PAGE> 1
Exhibit 11.1
STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Statement Regarding Computation of Three months
Per Share Earnings ended March 31,
- ---------------------------------- -------------------------
1996 1995
---- ----
<S> <C> <C>
Earnings per share:
Weighted average shares outstanding 1,407,688 1,407,688
Net income per share $ .43 $ .26
Primary earnings per share:
Weighted average shares outstanding 1,407,688 1,407,688
Dilutive warrants 463,235 463,235
Dilutive stock options 41,225 41,225
Repurchased under treasury stock
method(1) (281,538) (281,538)
--------- ---------
Weighted average common shares
outstanding and common share
equivalents 1,630,610 1,630,610
========= =========
$ 601,000 $ 364,000
Net income
Imputed interest income under the
treasury stock method (net of tax) 18,000 21,761
--------- ---------
Imputed net income 619,000 385,761
========= =========
Net income per share $ .38 $ .24
========= =========
</TABLE>
(1) Dilutive warrants and options calculated up to 20% of total shares
outstanding in the applicable periods.
PAGE 14 OF 15
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1996 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,978
<INT-BEARING-DEPOSITS> 90,759
<FED-FUNDS-SOLD> 7,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,610
<INVESTMENTS-CARRYING> 680
<INVESTMENTS-MARKET> 680
<LOANS> 82,085
<ALLOWANCE> 1,822
<TOTAL-ASSETS> 138,593
<DEPOSITS> 116,389
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 5,514
<LONG-TERM> 0
14
0
<COMMON> 0
<OTHER-SE> 15,676
<TOTAL-LIABILITIES-AND-EQUITY> 138,593
<INTEREST-LOAN> 2,130
<INTEREST-INVEST> 575
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 2,762
<INTEREST-DEPOSIT> 1,077
<INTEREST-EXPENSE> 1,085
<INTEREST-INCOME-NET> 1,677
<LOAN-LOSSES> 141
<SECURITIES-GAINS> 116
<EXPENSE-OTHER> 1,455
<INCOME-PRETAX> 974
<INCOME-PRE-EXTRAORDINARY> 974
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 601
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
<YIELD-ACTUAL> 5.57
<LOANS-NON> 162
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,686
<CHARGE-OFFS> 70
<RECOVERIES> 65
<ALLOWANCE-CLOSE> 1,822
<ALLOWANCE-DOMESTIC> 1,822
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
