<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 205492
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 June 30, 2000
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 000-21267
SUMMIT BANK CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1722476
(State or other jurisdiction of (IRS 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.
<TABLE>
<CAPTION>
Class Outstanding at August 1, 2000
----- -----------------------------
<S> <C>
Common Stock. $.0l par value 1,655,263
</TABLE>
The Exhibit Index Appears on Page 12
Page 1 of 14
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT BANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 2000 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 14,707 $ 16,721
Federal funds sold 450 14,440
Interest-bearing deposits in other banks 205 446
Investment securities available for sale, at fair value 64,531 69,269
Other investments 1,171 1,171
Loans, net of unearned income 174,767 164,144
Loans held for sale 3,265 3,575
Less: allowance for loan losses (3,070) (2,525)
-----------------------------------------------------------------------------------------------------
Net loans 174,962 165,194
-----------------------------------------------------------------------------------------------------
Premises and equipment, net 2,860 4,351
Customers' acceptance liability 2,787 2,030
Goodwill, net 1,665 1,708
Other assets 6,573 5,938
-----------------------------------------------------------------------------------------------------
Total assets $269,911 $281,268
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand $ 60,188 $ 53,958
Interest-bearing:
Demand 40,606 44,310
Savings 9,281 8,648
Time, $100,000 and over 49,274 53,498
Other time 60,382 72,527
-----------------------------------------------------------------------------------------------------
Total deposits 219,731 232,941
-----------------------------------------------------------------------------------------------------
Federal Home Loan Bank advance 10,000 10,000
Other borrowed funds 11,916 11,371
Acceptances outstanding 2,787 2,030
Other liabilities 1,667 2,111
-----------------------------------------------------------------------------------------------------
Total liabilities 246,101 258,453
-----------------------------------------------------------------------------------------------------
Minority interest in non-bank subsidiary 24 29
STOCKHOLDERS' EQUITY:
Common stock 18 18
Additional paid-in capital 13,498 13,498
Retained earnings 11,891 10,565
Accumulated other comprehensive loss (1,621) (1,295)
-----------------------------------------------------------------------------------------------------
Total stockholders' equity 23,786 22,786
-----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $269,911 $281,268
=====================================================================================================
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
Page 2 of 14
<PAGE> 3
SUMMIT BANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
(Dollars in thousands, except share and per share amounts) 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 4,498 $ 3,578 $ 8,820 $ 6,785
Interest-bearing deposits in other banks 4 2 7 5
Federal funds sold 49 69 192 204
Investment securities 392 334 764 848
Mortgage-backed securities 703 816 1,438 1,517
----------------------------------------------------------------------------------------------------------------------------------
Total interest income 5,646 4,799 11,221 9,359
----------------------------------------------------------------------------------------------------------------------------------
Interest expense
Time deposits, $100,000 and over 673 485 1,410 1,004
Other deposits 1,081 1,134 2,211 2,400
Federal Home Loan Bank advance 157 124 305 247
Short-term borrowings and obligation under capital lease 140 65 258 115
----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,051 1,808 4,184 3,766
----------------------------------------------------------------------------------------------------------------------------------
Net interest income 3,595 2,991 7,037 5,593
Provision for loan losses 200 325 625 424
----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,395 2,666 6,412 5,169
----------------------------------------------------------------------------------------------------------------------------------
Non-interest income
Fees for international banking services 343 314 720 617
SBA loan servicing fees 56 69 114 136
Service charge income 140 118 287 233
Non-sufficient funds charges 156 143 327 283
Gains on sales of loans -- -- -- 79
Net losses on sales of investment securities (39) (6) (54) (5)
Other 181 150 489 287
----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 837 788 1,883 1,630
----------------------------------------------------------------------------------------------------------------------------------
Non-interest expenses
Salaries and employee benefits 1,306 1,197 2,592 2,407
Equipment 177 184 339 350
Net occupancy 208 191 417 380
Other operating expenses 916 969 1,978 1,786
----------------------------------------------------------------------------------------------------------------------------------
Minority interest in non-bank subsidiary (4) -- (5) --
----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expenses 2,603 2,541 5,321 4,923
----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,629 913 2,974 1,876
----------------------------------------------------------------------------------------------------------------------------------
Income tax expense 584 320 1,052 661
----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,045 $ 593 $ 1,922 $ 1,215
----------------------------------------------------------------------------------------------------------------------------------
Basic net income per common share $ .63 $ .34 $ 1.16 $ .69
Diluted net income per common share and
common share equivalents $ .63 $ .34 $ 1.16 $ .69
----------------------------------------------------------------------------------------------------------------------------------
Weighted-average shares outstanding - basic 1,655,263 1,727,128 1,655,263 1,749,006
----------------------------------------------------------------------------------------------------------------------------------
Weighted-average shares outstanding - diluted 1,655,263 1,727,128 1,655,263 1,749,006
----------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $ .18 $ .12 $ .36 $ .22
==================================================================================================================================
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 14
<PAGE> 4
SUMMIT BANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months
ended June 30,
----------------------------
(In thousands) 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,922 $ 1,215
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of premises and equipment 244 199
Net amortization of premiums/discounts on investment securities 131 350
Amortization of goodwill 43 43
Provision for loan losses 625 424
Proceeds from sales of loans -- 1,419
Gains on sales of loans -- (79)
Losses on sales of other real estate owned -- 21
Net losses on sales of investment securities 54 5
Changes in other assets and liabilities:
Net decrease (increase) in loans held for sale 310 (754)
Decrease in other assets 143 1,261
(Decrease) increase in other liabilities (444) 23
-----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,028 4,127
-----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities -- 26,997
Principal collections on investment securities 3,214 12,199
Proceeds from sales of investment securities 6,386 8,498
Purchases of investment securities available for sale (5,556) (29,233)
Loans made to customers, net of principal collected on loans (10,703) (24,807)
Proceeds from sales of premises 824 --
Purchases of premises and equipment (172) (128)
-----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (6,007) (6,474)
-----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in demand and savings deposits 3,159 6,423
Net decrease in time deposits (16,369) (10,153)
Purchase of treasury shares -- (1,350)
Dividends paid (596) (387)
Net increase in borrowed funds 545 2,767
Net decrease in minority interest in non-bank subsidiary (5) --
-----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (13,266) (2,700)
-----------------------------------------------------------------------------------------------------------------
Net (decrease) in cash and cash equivalents (16,245) (5,047)
Cash and cash equivalents at beginning of period 31,607 21,440
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 15,362 $ 16,393
=================================================================================================================
Supplemental disclosures of cash paid during the period:
Interest $ 4,485 $ 3,989
Income taxes $ 1,716 $ 634
Supplemental disclosures of noncash investing activities:
Transfer of branch office to other real estate owned $ 595 --
=================================================================================================================
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
Page 4 of 14
<PAGE> 5
SUMMIT BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
Summit Bank Corporation and Subsidiaries (the "Company") prepared the
consolidated financial statements included herein, 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 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. You
should read these consolidated financial statements in conjunction with
the Company's audited financial statements and the notes thereto as of
December 31, 1999, included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
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 (inactive), as well as an
80%-owned subsidiary, CashMart, Inc. All intercompany accounts and
transactions have been eliminated in consolidation.
The Company primarily operates through one segment, providing a full range
of banking services to individual and corporate customers through its
subsidiary bank.
During 1999, the Company invested $120,000 in a newly created subsidiary,
CashMart, Inc. ("CashMart"), a check cashing company. In the first quarter
of 2000, the Company received regulatory approval for and began operation
of the subsidiary. The consolidated subsidiary is 80% owned by the
Company. CashMart's business plan is to provide payroll check cashing
services, through several locations throughout metropolitan Atlanta.
CashMart generates revenues from fees charged to customers for cashing
payroll checks. The subsidiary currently operates from two locations in
metropolitan Atlanta, occupying leased space inside convenience stores.
CashMart's operations are wholly separate and apart from the Bank's
operations.
2. ACCOUNTING POLICIES
We refer to the Company's accounting policies 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, 1999.
3. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130") establishes standards for reporting and
displaying of comprehensive income and its components in a full set of
general-purpose financial statements. For interim period financial
statements, enterprises are required to disclose a total for comprehensive
income in those financial statements. The term "comprehensive income" is
used in SFAS 130 to describe the total of all components of comprehensive
income including net income. "Other comprehensive income" refers to
revenues, expenses, gains, and losses that are included in comprehensive
income but excluded from earnings under current accounting standards.
Currently, "other comprehensive income" for the Company consists solely of
items previously recorded as a component of stockholders' equity under
SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company adopted the interim-period disclosure
requirements of SFAS 130 effective March 31, 1998 and adopted the annual
financial statement reporting and disclosure requirements of SFAS 130
effective December 31, 1998.
The total comprehensive income for the six months ended June 30, 2000 was
$1,596,000 compared to $186,000 for the six months ended June 30, 1999.
The total comprehensive income for the three months ended June 30, 2000
was $1,099,000 compared to a total comprehensive loss of $245,000 for the
three months ended June 30, 1999.
Page 5 of 14
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This quarterly report contains forward-looking statements and information
relating to our subsidiaries and us. The words "believes," "expects," "may,"
"will," "should," "projects," "contemplates," "anticipates," "forecasts,"
"intends" or similar terminology identify forward-looking statements. These
statements reflect management's beliefs and assumptions, and are based on
information currently available to management. Because these statements reflect
the current views of management concerning future events, they involve risks,
uncertainties and assumptions. Actual results may differ significantly from the
results discussed in the forward-looking statements. We undertake no obligation
to update publicly any forward-looking statement for any reason, even if new
information becomes available. Performance Overview
The Company reported net income of $1,045,000 for the second quarter of 2000,
compared to $593,000 in the second quarter of 1999. There were several factors
contributing to the 76% increase for the comparable quarters, including a very
strong net interest margin, lower loan loss provision in the current quarter,
and improved overhead efficiencies. The net interest margin was 5.68% for the
current year to date compared to 4.80% through June 1999. Improvement in the
margin is a direct result of continuing loan growth accompanied by a rising
interest rate environment. The loan to deposit ratio at June 30, 2000 was 80%
while the same ratio at June 30, 1999 was 71%. In addition to growth in loan
volume as a percent of deposits, loan portfolio quality has improved as
evidenced by fewer delinquencies and non-accrual loans. Consequently, our loan
loss provision in second quarter 2000 was $200,000, compared to $325,000 in
second quarter 1999. Non-interest expenses increased 2% to $2.6 million in
second quarter 2000 compared to the same quarter in 1999. This reflects
management's efforts to control overhead. Net earnings per share for second
quarter 2000 were $.63 (basic and diluted) compared to $.34 (basic and diluted)
for second quarter 1999.
Net earnings for the six months ended June 30, 2000 were $1,922,000, a 58%
increase over the net earnings through June 1999 of $1,215,000. In addition to
the reasons cited above for the quarterly increase, which also apply to the 2000
year to date earnings included recoveries from a charge-off related to the
California Security Bank acquisition in 1998. These recoveries totaled $258,000
and were recorded in other noninterest income. The annualized return on average
stockholders' equity for the 2000 six-month period was 16.8% versus 10.1% for
the 1999 six-month period, and the return on average assets was 1.4% compared to
.9% in 1999. Book value per share was $14.37 at June 30, 2000 compared to $13.76
at December 31, 1999 and $13.43 at June 30, 1999. In second quarter 2000, the
Company paid a cash dividend of $.18 per share compared to $.12 per share for
the same period last year, for an increase of 50%.
Total assets at June 30, 2000 were $270 million, an increase of 4%, or $10
million, during the last twelve months, although a decline of 4% from December
31, 1999. The decline in total assets from December 31, 1999 was due to the
increased liquidity in the form of cash and federal funds sold that were
available at year-end in preparation for the century date change. The excess
funds were reduced in January 2000. The twelve-month increase was largely due to
growth in the loan portfolio during that period. Total loans at the end of the
current quarter were $178 million. This represents a net increase of 4%, or $6
million, in loans during second quarter 2000 and a net increase of 14%, or $22
million, during the past twelve months. As the loan portfolio grew, the
investment security portfolio, containing lower yielding assets, declined. At
June 30, 2000, investment securities totaled $66 million, a decrease of 5%, or
$4 million, during second quarter 2000 and a net of 13%, or $10 million during
the past twelve months.
Total deposits have grown $5 million, or 2%, during the last twelve months.
However, total deposits declined in the second quarter of 2000 by $7.6 million,
due primarily to maturing Certificates of Deposits ("CD's") held through
year-end as additional funding for the century date change. On the other hand,
non-interest-bearing demand deposits have grown to $60 million at June 30, 2000
from $55 million at June 30, 1999. Average non-interest-bearing demand deposits
for the year to date represent over 26% of total deposits, which is considerably
higher than the Bank's peers. In fact, at March 31, 2000, based on data from the
FDIC, the ratio of non-interest-bearing deposits to total deposits was 15% for
all commercial banks located in Georgia, having between $100 million and $1
billion in assets.
Net interest income increased 27%, or $729,000 in second quarter 2000, compared
to second quarter 1999 to a total of $3.4 million. The increase was due to the
increased volume of loans for the twelve months ended June 30, 2000.
Page 6 of 14
<PAGE> 7
For the six months ended June 30, 2000, net interest income increased 26%
compared to the same period in 1999, due to strong commercial loan growth and
increases in rates over the past three quarters on the Bank's floating rate
portfolio, which is primarily tied to the prime rate.
The decline in the provision for loan losses in second quarter compared to
second quarter last year, as mentioned above, was due primarily to improvement
in credit quality indicators. Gross charged off loans for the year to date
through June 2000 totaled $297,000 while recoveries for the period totaled
$217,000, for an annualized net charge-off rate of .1% of total loans. This rate
compares quite favorably to the annualized charge-off rate of .56% for the first
half of 1999. The total provision for loan losses for the year to date was
$625,000 compared to last year to date through June of $424,000, primarily due
to loan growth earlier this year.
Non-interest income increased 6% in second quarter 2000 to $837,000 compared to
$788,000 in the same period in 1999. With the growth in demand deposits, service
charge income, including overdraft charges, improved 13%. The international
department of the Bank realized an increase in fee income of 9%, comparing the
current quarter with second quarter 1999, as a result of higher transaction
volume. Total international fee income for the year to date was $720,000, a 17%
increase over last year to date. While there were no sales of SBA-guaranteed
loans to date in 2000, there was a gain recognized in first quarter 1999 of
$79,000. Net losses from sales of investment securities totaled $54,000 to date
in 2000, while net losses for the second quarter in 1999 were $5,000. Without
these loan and investment sales, non-interest income would have increased 22% in
the second quarter of 2000 compared to the same period last year.
For second quarter 2000, non-interest expenses were only 2% higher than second
quarter last year, showing marked improvement in containing what have been
overhead costs. For the year to date, non-interest expenses increased 8% over
last year to date. In past years, the rate of increase in non-interest expenses
from year to year has been in the double digits. In second quarter of this year,
salaries and benefits increased 9% over second quarter last year while equipment
and occupancy costs were flat. Additionally, comparing second quarter 2000 with
second quarter 1999, other non-interest expenses declined by 5%. Specific
expense categories that decreased during the comparable second quarters
included: data processing costs, resulting from contract renewal savings, other
professional fees, due to additional information technology consulting costs in
1999 resulting from Year 2000 costs, other real estate owned expenses related to
a property liquidated in 1999, and various miscellaneous expenses primarily
related to the operation of the Asian Banking Center which were also higher in
1999 than this year. For the year to date through June, the Company's efficiency
ratio improved significantly to 60% from 68% for the same period last year,
primarily due to the stronger net interest income this year, as well as the
stabilization of overhead costs.
In June 2000, the Bank closed its East Marietta branch office in Cobb County and
transferred remaining deposit relationships to its Vinings location. The Bank
closed the office due to the inadequate generation of new business.
CashMart had a total net operating loss of $21,100 for the second quarter of
2000, of which 80%, or $16,900 was recorded as Summit Bank Corporation's
portion. Revenues of the Company were negligible during the quarter because
check cashing fees are being waived during the first few months of operation at
each location to build transaction volume. Operating costs consisted mainly of
personnel costs and lease payments on space and equipment.
Asset Quality
Non-performing assets were flat at $1.3 million at June 30, 2000 compared to the
total at year-end 1999 and lower than the total of $3.2 million at June 30,
1999. Non-performing assets represented .74% of total loans and other real
estate owned as of June 30, 2000 compared to .77% at December 31, 1999.
Non-performing loans at June 30, 2000 consist of one fully guaranteed SBA credit
for $54,000, and a real estate credit for $665,000. Subsequent to June 30, 2000,
this credit was sold in July 2000, resulting in a loss of $5,000. Non-performing
assets also included the premises that housed the East Marietta branch office
until June 2000. The balance of $595,000 was reclassified as other real estate
owned at the time of closure. There were no loans past due 90 days or more as to
principal or interest payments and still accruing at June 30, 2000.
Page 7 of 14
<PAGE> 8
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
(Dollars in thousands) 2000 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
Loans on non-accrual
SBA guaranteed $ 54 $ 494
Non-SBA guaranteed 665 795
Other real estate 595 --
Restructured loans - SBA guaranteed -- --
----------------------------------------------------------------------------------------
Total non-performing assets $1,314 $1,289
========================================================================================
Loans 90 days past due and still accruing interest $ -- $ --
Total non-performing assets as a
percentage of total loans and ORE .74% .77%
Loans 90 days past due and still accruing
interest as a percentage of total loans --% --%
</TABLE>
The allowance for loan losses increased to $3,070,000 at June 30, 2000 from
$2,525,000 at year-end 1999, an increase of 22%. The increase was primarily due
to the growth in the loan portfolio. Loan losses have declined this year to date
compared to the first six months of 1999, with gross charge-offs of $297,000
offset by recoveries of $217,000, resulting in a net annualized charge-off rate
of .1% of average total loans. This is a strong improvement over the first six
months of 1999, during which the net annualized charge-off rate was .56%. The
allowance for loan losses represented 1.72% and 1.67%, respectively, of total
loans outstanding at June 30, 2000 and December 31, 1999.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES AT JUNE 30, 2000
<TABLE>
<CAPTION>
(In thousands)
-------------------------------------------------------------------
<S> <C>
Allowance for loan losses at December 31, 1999 $2,525
-------------------------------------------------------------------
Charge-offs:
Commercial, financial, and agricultural 248
SBA 42
Real estate --
Installment loans to individuals 7
-------------------------------------------------------------------
Total 297
-------------------------------------------------------------------
Recoveries:
Commercial, financial, and agricultural 80
SBA 111
Real estate --
Installment loans to individuals 26
-------------------------------------------------------------------
Total 217
------------------------------------------------------------------
Net charge-offs (recoveries) 80
-------------------------------------------------------------------
Provision for loan losses charged to income 625
-------------------------------------------------------------------
Allowance for loan losses at June 30, 2000 $3,070
===================================================================
</TABLE>
Page 8 of 14
<PAGE> 9
Management regularly analyzes our loan portfolio 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 June 30, 2000 to be
adequate to cover loan losses in the portfolio as of that date. However, because
of the inherent uncertainty of the assumptions we use in our loan analyses,
management cannot assure 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.
Liquidity and Capital Adequacy
Liquidity has remained fairly stable since the end of 1999. At June 30, 2000,
the Company's average net loan to average deposit ratio was 77%, up from 72% at
year-end. Management also analyzes the level of off-balance sheet assets and
liabilities 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 ensure that no potential shortfall exists.
Additionally, the Bank has $25 million of borrowing capacity under a secured
line of credit available from the Federal Home Loan Bank of Atlanta, of which
$10 million was being utilized at June 30, 2000. Based on this analysis,
management believes that the Company has adequate liquidity to meet short-term
operational requirements. Stockholders' equity of the Company increased $1
million during second quarter 2000, to $24 million. This total also represented
an increase of $832,000 at June 30, 1999. Offsetting normal earnings growth, the
Company's capital decreased over the past twelve months as a result of the
repurchase of common stock under the Company's stock repurchase plan.
Other comprehensive income declined as well during the trailing twelve months.
The capital level of the Bank exceeds all prescribed regulatory capital
guidelines. Regulations require that the most highly rated 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 intangible assets. The Bank's Tier 1 leverage ratio increased to 8.2% at
June 30, 2000 compared to 7.6% at year-end 1999. 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 June 30, 2000, the Bank had a risk-weighted
total capital ratio of 12.9% and a Tier 1 risk-weighted capital ratio of 11.7%
which compares favorably to year end 1999 ratios of 12.5% and 11.2%,
respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2000, there were no substantial changes from the interest rate
sensitivity analysis or the market value of portfolio equity for various changes
in interest rates calculated as of December 31, 1999. The foregoing disclosures
related to the market risk of the Company should be read in conjunction with the
Company's audited consolidated financial statements, related notes and
management's discussion and analysis of financial condition and results of
operations for the year ended December 31, 1999 included in the Company's 1999
Annual report on Form 10K.
Page 9 of 14
<PAGE> 10
PART II. - OTHER INFORMATION
ITEM 1. Legal Proceedings - Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds
a) Not Applicable
b) Not Applicable
c) Not Applicable
d) Not Applicable
ITEM 3. Defaults Upon Senior Securities - Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders -
The 2000 Annual Meeting of the Shareholders (the "Meeting") of the
Company was held on April 29, 2000. Proxies were solicited prior to the
meeting from shareholders of record at the close of business on March
15, 2000, for the primary purposes of electing seven members to the
Board of Directors.
Article Fourteen of the Company's Amended and Restated Articles of
Incorporation provides that the Board of Directors shall be divided
into three classes with each class to be as nearly equal in number as
possible. Article Fourteen also provides that the three classes of
directors are to have staggered terms, so that the terms of only
approximately one-third of the Board will expire at each annual meeting
of shareholders and each director serves a three-year term. Seven Class
II Directors were nominated at the meeting to serve until the Annual
Shareholders Meeting in 2003: Peter M. Cohen, Donald R. Harkleroad,
Daniel T. Huang, Shafik H. Ladha, Paul C. Y. Chu, Howard H. L. Tai, and
P. Carl Unger. All seven nominees were elected.
Proxies for 87%, or 1,431,260 of the 1,655,263 outstanding common
shares, were received prior to the meeting. A quorum was present by
proxy. Votes were cast as follows:
<TABLE>
<CAPTION>
Votes Votes
Director For Withheld
-------- --- --------
<S> <C> <C>
Peter M. Cohen 1,431,260 0
Donald R. Harkleroad 1,418,623 12,637
Daniel T. Huang 1,431,260 0
Shafik H. Ladha 1,431,160 100
Paul C. Y. Chu 1,431,260 0
Howard H. L. Tai 1,431,260 0
P. Carl Unger 1,300,072 130,188
</TABLE>
The following Class I and Class III directors, whose terms did not
expire at the Annual Shareholders Meeting, continued to serve as
directors following the meeting: Aaron I. Alembik, Jack N. Halpern,
Sion Nyen (Francis) Lai, Shih Chien (Raymond) Lo, W. Clayton Sparrow,
Jr., Pin Pin Chau, Gerald L. Allison, Jose Gonzalez, James S. Lai, Nack
Paek, Carl L. Patrick, Jr., and David Yu.
Pursuant to Rule 14a-4(c)(1) promulgated under the Securities Exchange
Act of 1934, as amended, shareholders desiring to present a proposal
for consideration at the Company's 2001 Annual Meeting of Shareholders
must notify the Company in writing at its principal office at 4360
Chamblee Dunwoody Road, Atlanta, Georgia, 30341 of the contents of such
proposal no
Page 10 of 14
<PAGE> 11
later than February 15, 2001. Failure to timely submit such a proposal
will enable the proxies appointed by management to exercise their
discretionary voting authority when the proposal is raised at the
Annual Meeting of Shareholders without any discussion of the matter in
the proxy statement.
ITEM 5. Other Information - Not Applicable
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
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/ Pin Pin Chau
--------------------------------------
Pin Pin Chau
Chief Executive Officer
BY: /s/ Gary K. McClung
--------------------------------------
Gary K. McClung
Executive Vice President
(Principal Financial Officer
and Principal Accounting Officer)
DATE: August 9, 2000
-----------------------------------
Page 11 of 14
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
11.1 Statement Regarding Computation of Per Share Earnings 13
27.1 Financial Data Schedule (for SEC use only) 14
</TABLE>
Page 12 of 14
