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 September 30, 2001; 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
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(Address of principal executive offices)
(817) 336-6817
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(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 September
30, 2001 was 6,317,773 shares.
SUMMIT BANCSHARES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2001
and 2000 and at December 31, 2000 4
Consolidated Statements of Income for the Three Months
and Nine Months Ended September 30, 2001 and 2000
and for the Year Ended December 31, 2000 5-6
Consolidated Statements of Changes in Shareholders'
Equity for the Nine Months Ended September 30, 2001
and 2000 and for the Year Ended December 31, 2000 7
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000 and for
the Year Ended December 31, 2000 8
Notes to Consolidated Financial Statements for the Nine
Months Ended September 30, 2001 and 2000 and for the
Year Ended December 31, 2000 9-20
The September 30, 2001 and 2000 and the December 31, 2000 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 Nine Months
Ended September 30, 2001 and 2000 21-28
2
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
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Unaudited)
September 30, December 31,
----------------------
2001 2000 2000
--------- --------- -----------
ASSETS (In Thousands)
CASH AND DUE FROM BANKS - NOTE 1 $ 28,992 $ 26,614 $ 27,595
FEDERAL FUNDS SOLD & DUE FROM TIME
INVESTMENT SECURITIES - NOTE 2 1,116 29,165 46,461
Securities Available-for-Sale, at fair value 161,223 123,882 127,626
Securities Held-to-Maturity, at cost (fair value of $22,673,000
and $21,949,000 September 30, 2000 and -0- 23,025 22,021
December 31, 2000, respectively)
LOANS - NOTE 3 AND 11
Loans, Net of Unearned Discount 421,048 379,259 380,016
Allowance for Loan Losses (6,190) (6,918) (5,399)
--------- --------- ---------
LOANS, NET 414,858 372,341 374,617
PREMISES AND EQUIPMENT - NOTE 4 8,024 8,218 8,124
ACCRUED INCOME RECEIVABLE 4,417 5,136 5,133
OTHER REAL ESTATE - NOTE 5 -0- 1,329 286
OTHER ASSETS 4,897 6,592 7,258
--------- --------- ---------
TOTAL ASSETS $ 623,527 $ 596,302 $ 619,121
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS - NOTE 6
Noninterest-Bearing Demand $ 139,981 $ 137,721 $ 146,083
Interest-Bearing 395,874 383,876 393,583
--------- --------- ---------
TOTAL DEPOSITS 535,855 521,597 539,666
SHORT TERM BORROWINGS - NOTE 7 23,590 18,671 19,910
NOTE PAYABLE - NOTE 8 300 -0- -0-
ACCRUED INTEREST PAYABLE 737 1,010 1,091
OTHER LIABILITIES 3,083 2,416 2,883
--------- --------- ---------
TOTAL LIABILITIES 563,565 543,694 563,550
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES - NOTE 12, 14, 16 AND 18
SHAREHOLDERS' EQUITY - NOTES 13, 15 AND 19
Common Stock - $1.25 Par Value; 20,000,000 shares authorized; 6,317,773,
6,354,678 and 6,362,278 shares issued and outstanding at September 30, 2001
and 2000 and at December 31, 2000, respectively 7,897 7,943 7,953
Capital Surplus 6,844 6,649 6,678
Retained Earnings 43,967 38,652 40,655
Accumulated Other Comprehensive Income - Unrealized Gain
(Loss) on Available-for-Sale Investment Securities, Net of Tax 2,217 (636) 285
Treasury Stock at Cost (47,912 shares at September 30, 2001) (963) -0- -0-
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 59,962 52,608 55,571
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 623,527 $ 596,302 $ 619,121
========= ========= =========
The accompanying Notes should be read with these financial statements.
4
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (Unaudited)
For the Nine Months Ended Year Ended
September 30, December 31,
----------------------------------
2001 2000 2000
---------- ----------- -------------
(In Thousands, Except Per Share Data)
INTEREST INCOME
Interest and Fees on Loans $ 26,643 $ 27,178 $ 36,768
Interest and Dividends on Investment Securities:
Taxable 5,949 6,892 9,253
Exempt from Federal Income Taxes 9 14 17
Interest on Federal Funds Sold and Due From Time 1,936 847 1,571
---------- ---------- ----------
TOTAL INTEREST INCOME 34,537 34,931 47,609
---------- ---------- ----------
INTEREST EXPENSE
Interest on Deposits 12,411 12,381 17,470
Interest on Short Term Borrowings 491 1,138 1,400
Interest on Notes Payable 1 -0- -0-
---------- ---------- ----------
TOTAL INTEREST EXPENSE 12,903 13,519 18,870
---------- ---------- ----------
NET INTEREST INCOME 21,634 21,412 28,739
LESS: PROVISION FOR LOAN LOSSES - NOTE 3 860 2,305 2,606
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 20,774 19,107 26,133
---------- ---------- ----------
NON-INTEREST INCOME
Service Charges and Fees on Deposits 1,740 1,475 1,998
Loss on Sale of Investment Securities -0- -0- (2)
Other Income 1,554 1,269 1,782
---------- ---------- ----------
TOTAL NON-INTEREST INCOME 3,294 2,744 3,778
---------- ---------- ----------
NON-INTEREST EXPENSE
Salaries and Employee Benefits - NOTE 14 7,753 7,044 9,480
Occupancy Expense - Net 996 750 993
Furniture and Equipment Expense 1,118 1,048 1,391
Other Real Estate Owned and Foreclosed Asset
Expense - Net 174 384 324
Merger Related Expense - NOTE 9 598 -0- -0-
Other Expense - NOTE 9 3,009 2,924 3,982
---------- ---------- ----------
TOTAL NON-INTEREST EXPENSE 13,648 12,150 16,170
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 10,420 9,701 13,741
APPLICABLE INCOME TAXES - NOTE 10 3,601 3,364 4,765
---------- ---------- ----------
NET INCOME $ 6,819 $ 6,337 $ 8,976
========== ========== ==========
NET INCOME PER SHARE - NOTE 15
Basic $ 1.08 $ 1.00 $ 1.41
Diluted 1.05 0.97 1.38
The accompanying Notes should be read with these financial statements.
5
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
September 30,
-------------------------------------
2001 2000
-------------- -------------
(In Thousands, Except Per Share Data)
INTEREST INCOME
Interest and Fees on Loans $ 8,592 $ 9,460
Interest and Dividends on Investment Securities:
Taxable 1,824 2,322
Exempt from Federal Income Taxes 3 4
Interest on Federal Funds Sold and Due From Time 478 444
-------------- ------------
TOTAL INTEREST INCOME 10,897 12,230
-------------- ------------
INTEREST EXPENSE
Interest on Deposits 3,617 4,568
Interest on Short Term Borrowings 113 417
Interest on Note Payable 1 -0-
-------------- ------------
TOTAL INTEREST EXPENSE 3,731 4,985
-------------- ------------
NET INTEREST INCOME 7,166 7,245
LESS: PROVISION FOR LOAN LOSSES - NOTE 3 370 577
-------------- ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,796 6,668
-------------- ------------
NON-INTEREST INCOME
Service Charges and Fees on Deposits 594 505
Other Income 551 413
-------------- ------------
TOTAL NON-INTEREST INCOME 1,145 918
-------------- ------------
NON-INTEREST EXPENSE
Salaries and Employee Benefits - NOTE 14 2,621 2,355
Occupancy Expense - Net 372 245
Furniture and Equipment Expense 391 356
Other Real Estate Owned and Foreclosed Asset
Expense - Net 47 28
Other Expense 942 724
-------------- ------------
TOTAL NON-INTEREST EXPENSE 4,373 3,708
-------------- ------------
INCOME BEFORE INCOME TAXES 3,568 3,878
APPLICABLE INCOME TAXES - NOTE 10 1,236 1,338
-------------- ------------
NET INCOME $ 2,332 $ 2,540
============== ============
NET INCOME PER SHARE - NOTE 15
Basic $ 0.37 $ 0.40
Diluted 0.36 0.39
The accompanying Notes should be read with these financial statements.
6
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND FOR THE YEAR ENDED DECEMBER 31, 1999
(Unaudited)
Accumulated
Other
Comprehensive
Income - Net
Unrealized Gain Total
Common Stock (Loss) on Share-
---------------------------- Capital Retained Investment Treasury Holder's
Shares Amount Surplus Earnings Securities Stock Equity
----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Data)
BALANCE AT
January 1, 2000 6,361,247 $ 7,952 $ 6,469 $ 35,474 $ (1,186) $ -0- $ 48,709
Stock Options Exercised 73,638 91 180 271
Purchases of Stock Held
in Treasury (1,348) (1,348)
Retirement of Stock Held
in Treasury (80,207) (100) (1,248) 1,348 -0-
Cash Dividend
$.30 Per Share (1,911) (1,911)
Net Income for the
Nine Months Ended
September 30, 2000 6,337 6,337
Securities Available-
for-Sale Adjustment 550 550
------------
Total Comprehensive
Income NOTE 22 6,887
------------- ------------ ----------- ------------ ------------- ---------- ------------
BALANCE AT
September 30, 2000 6,354,678 7,943 6,649 38,652 (636) $ -0- 52,608
Stock Options Exercised 7,600 10 29 39
Purchases of Stock Held
in Treasury -0-
Retirement of Stock Held
in Treasury -0-
Cash Dividend -
$.10 Per Share (636) (636)
Net Income for the
Three Months Ended
December 31, 2000 2,639 2,639
Securities Available-
for-Sale Adjustment 921 921
-------------
Total Comprehensive
Income NOTE 22 3,560
------------- ------------ ----------- ------------ ------------- ---------- ------------
BALANCE AT
December 31, 2000 6,362,278 7,953 6,678 40,655 285 -0- 55,571
Stock Options Exercised 33,600 42 166 208
Purchases of Stock Held
in Treasury (2,474) (2,474)
Retirement of Stock
in Treasury (78,105) (98) (1,413) 1,511 -0-
Cash Dividend -
$.33 Per Share (2,094) (2,094)
Net Income for the
Nine Months Ended
September 30, 2001 6,819 6,819
Securities Available-
for-Sale Adjustment 1,932 1,932
------------
Total Comprehensive
Income NOTE 22 8,751
-------------- ----------- ---------- ----------- ------------ --------- ------------
BALANCE AT
September 30, 2001 6,317,773 $ 7,897 $ 6,844 $ 43,967 $ 2,217 $ (963) $ 59,962
============== =========== ========== =========== ============ ========= ============
The accompanying Notes should be read with these financial statements.
7
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
AND FOR THE YEAR ENDED DECEMBER 31, 2000
(Unaudited) (Unaudited)
For Nine Months Ended Year Ended
September 30, December 31,
----------------------
2001 2000 2000
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 6,819 $ 6,337 $ 8,976
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 782 788 1,054
Net Premium Amortization (Accretion)
of Investment Securities 42 (56) (142)
Provision for Loan Losses 860 2,305 2,606
Deferred Income Taxes (Benefit) (575) (167) (194)
Net (Gain) Loss on Sale of Investment Securities -0- 2 2
Writedown of Other Real Estate 11 423 426
Writedown of Foreclosed Assets 301 -0- -0-
Net Gain From Sale of Premises and Equipment -0- (2) -0-
Net Gain From Sale of Other Real Estate (308) (77) (151)
Net Decrease (Increase) in Accrued Income and Other Assets 1,839 (1,458) (1,280)
Net Decrease (Increase) in Accrued Expenses
and Other Liabilities (154) (14) 232
--------- --------- ---------
Total Adjustments 2,798 1,744 2,553
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,617 8,081 11,529
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in Federal Funds Sold and Due From Time 45,345 (11,153) (28,449)
Proceeds from Matured and Prepaid Investment Securities
. Held-to-Maturity 15,000 285 1,285
. Available-for-Sale 76,401 17,144 82,218
Proceeds from Sales of Investment Securities 9,987 59,922 59,922
Purchase of Investment Securities
. Available-for-Sale (110,080) (66,933) (134,263)
Loans Originated and Principal Repayments, Net (41,265) (24,730) (27,367)
Recoveries of Loans Previously Charged-Off 192 202 224
Proceeds from Sale of Premises and Equipment 126 25 23
Proceeds from Sale of Other Real Estate/Foreclosed Assets 1,073 503 666
Purchases of Premises and Equipment (808) (467) (639)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (4,029) (25,202) (46,380)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Demand Deposits, Savings
Accounts and Interest Bearing Transaction Accounts 13,450 (846) 14,728
Net Increase (Decrease)in Certificates of Deposit (17,261) 41,897 44,392
Net Increase (Decrease) in Federal Funds Purchased and
Repurchase Agreements 3,680 (13,420) (12,181)
Proceeds from Notes Payable 300 -0- -0-
Payments of Cash Dividends (2,094) (1,911) (2,547)
Proceeds from Stock Options Exercised 208 271 310
Purchase of Treasury Stock (2,474) (1,348) (1,348)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (4,191) 24,643 43,354
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS 1,397 7,522 8,503
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 27,595 19,092 19,092
--------- --------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 28,992 $ 26,614 $ 27,595
========= ========= =========
SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES
Interest Paid $ 13,257 $ 13,085 $ 18,355
Income Taxes Paid 2,607 3,651 5,097
Other Real Estate Acquired in Settlement of Loans -0- 230 1,538
Bank Financed Sales of Other Real Estate -0- -0- 1,250
The accompanying Notes should be read with these financial statements.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 2000 (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 accounting principles
generally accepted in the United States of America 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. Effective May 14,
2001, Summit Community Bank, N.A. merged with and into Summit National Bank and
Summit National Bank changed its name to Summit Bank, National Association (the
"Bank" or "Subsidiary"). Also Summit Bancservices, Inc. was liquidated effective
May 14, 2001 and its assets were contributed by the Corporation to Summit Bank,
N.A. All operations of Summit Bancservices will be continued in the Bank. 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 Bank is required to maintain certain balances at the Federal Reserve
Bank based on their levels of deposits. During the first nine months of 2001 the
average cash balance maintained at the Federal Reserve Bank was $874,000.
Compensating balances held at correspondent banks, to minimize service charges,
averaged approximately $19,481,000 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 2001 and 2000 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.
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. Direct costs related to loan originations 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
9
NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
------
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 Bank's
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 expense. 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 Subsidiary in filing a consolidated federal
income tax return. The Subsidiary pays to the parent a charge equivalent to its
current federal income tax based on the separate taxable income of the
Subsidiary.
The Corporation and the Subsidiary maintain their records for financial
reporting and income tax reporting purposes on the accrual basis of accounting.
Deferred income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Deferred income
taxes are provided for accumulated temporary differences due to basic
differences for assets and liabilities for financial reporting and income tax
purposes.
Realization of net deferred tax assets is dependent on generating
sufficient future taxable income. Although realization is not assured,
management believes it is more likely than not that all of the net deferred tax
assets will be realized. The amount of the net deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced.
Cash and Cash Equivalents
-------------------------
For the purpose of presentation in the Statements of Cash Flows, cash and
cash equivalents are defined as those amounts included in the balance sheet
caption "Cash and Due from Banks."
Reclassification
----------------
Certain reclassifications have been made to the 2000 financial statements
to conform to the 2001 presentation.
10
NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
------
Earnings Per Common and Common Equivalent Share
-----------------------------------------------
Earnings per common and common equivalent share is calculated by dividing net
income by the weighted average number of common shares and common share
equivalents. Stock options are regarded as common share equivalents and are
therefore considered in earnings per share calculations, if dilutive. The number
of common share equivalents is determined using the treasury stock method.
Audited Financial Statements
----------------------------
The consolidated balance sheet as of December 31, 2000, and the consolidated
statements of income, changes in shareholders' equity and cash flows for the
year ended December 31, 2000 are headed "unaudited" in these financial
statements. These statements were reported in the Securities Exchange Commission
Form 10-K as of December 31, 2000 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):
September 30, 2001
---------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ------------- ------------- -----------
Investment Securities - Available-for-Sale
U.S. Treasury Securities $ 10,040 $ 225 $ -0- $ 10,265
U.S. Government Agencies
and Corporations 124,077 2,841 -0- 126,918
U.S. Government Agency Mortgage
Backed Securities 22,291 290 -0- 22,581
Obligations of States and Political Subdivisions 125 2 -0- 127
Federal Reserve and Federal Home Loan Bank Stock 1,332 -0- -0- 1,332
------------- ----------- --------- ----------
Total Available-for-Sale Securities 157,865 3,358 -0- 161,223
------------- ----------- --------- ----------
Total Investment Securities $ 157,865 $ 3,358 $ -0- $ 161,223
============= =========== ========= ==========
During the second quarter of 2001, $7 million of securities previously
classified as Held-to-Maturity Securities were reclassified to Available-for
Sale Securities related to the merger of the two bank subsidiaries. The
unrealized gain on the reclassified securities of $52,000 was added to the
Available-for-Sale Investment Securities balance. All Investment Securities are
now carried on the consolidated balance sheet as of September 30, 2001 at fair
value. The unrealized gain of $3,358,000 is included in the Available-for-Sale
Investment Securities balance. The unrealized gain, net of tax, is included in
Shareholders' Equity.
11
NOTE 2 - Investment Securities (cont'd)
------
A summary of amortized cost and estimated fair values of investment
securities is as follows (in thousands):
September 30, 2000
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------- -------------- -----------
Investment Securities - Held-to-Maturity
U.S. Treasury Securities $ 5,000 $ 7 $ -0- $ 5,007
U.S. Government Agencies
and Corporations 18,025 -0- (359) 17,666
--------- ------- --------- ---------
Total Held-to-Maturity Securities 23,025 7 (359) 22,673
--------- ------- --------- ---------
Investment Securities - Available-for-Sale
U.S. Treasury Securities 17,081 51 (31) 17,101
U.S. Government Agencies
and Corporations 95,106 117 (967) 94,256
U.S. Government Agency Mortgage
Backed Securities 11,160 5 (139) 11,026
Obligations of States and Political Subdivisions 240 -0- (1) 239
Federal Reserve and Federal Home Loan Bank Stock 1,260 -0- -0- 1,260
--------- ------- --------- ---------
Total Available-for-Sale Securities 124,847 173 (1,138) 123,882
--------- ------- --------- ---------
Total Investment Securities $ 147,872 $ 180 $ (1,497) $ 146,555
========= ======= ========= =========
In the above schedule the amortized cost of Total Held-to-Maturity
Securities of $23,025,000 and the fair value of Total Available-for-Sale
Securities of $123,882,000 are reflected in Investment Securities on the
consolidated balance sheet as of September 30, 2000 for a total of $146,907,000.
A net unrealized loss of $965,000 is included in the Available-for-Sale
Investment Securities balance. The unrealized loss, net of tax benefit, is
included in Shareholders' Equity.
NOTE 3 - Loans and Allowance for Loan Losses
------
The book values of loans by major type follow (in thousands):
September 30, December 31,
-------------
2001 2000 2000
------------- ---------- ----------
Commercial $ 183,111 $ 167,404 $ 167,818
Real Estate Mortgage 144,138 129,675 132,062
Real Estate Construction 61,040 47,934 47,183
Loans to Individuals 32,774 34,308 32,996
Less: Unearned Discount (15) (62) (43)
--------- --------- ---------
421,048 379,259 380,016
Allowance for Loan Losses (6,190) (6,918) (5,399)
--------- --------- ---------
Loans - Net $ 414,858 $ 372,341 $ 374,617
========= ========= =========
12
NOTE 3 - Loans and Allowance for Loan Losses (cont'd.)
------
Transactions in the allowance for loan losses are summarized as follows
(in thousands):
Nine Months Ended Year Ended
September 30, December 31,
--------------------------------
2001 2000 2000
-------------- -------------- ----------------
Balance, Beginning of Period $ 5,399 $ 5,169 $ 5,169
Provisions, Charged to Income 860 2,305 2,606
Loans Charged-Off (261) (758) (2,600)
Recoveries of Loans Previously
Charged-Off 192 202 224
-------------- -------------- ----------------
Net Loans (Charged-Off) Recovered (69) (556) (2,376)
-------------- -------------- ----------------
Balance, End of Period $ 6,190 $ 6,918 $ 5,399
============== ============== ================
The provisions for loan losses charged to operating expenses during the
nine months ended September 30, 2001 and September 30, 2000 of $860,000 and
$2,305,000, respectively, were considered adequate to maintain the allowance in
accordance with the policy discussed in Note 1. For the year ended December 31,
2000, a provision of $2,606,000 was recorded.
At September 30, 2001 the recorded investment in loans that are considered
to be impaired under Statement of Financial Accounting Standards No. 114 was
$2,392,000 (of which $2,392,000 were on non-accrual status). The related
allowance for loan losses for these loans was $888,000. The average recorded
investment in impaired loans during the nine months ended September 30, 2001 was
approximately $2,471,000. 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):
September 30, December 31,
--------------------------
2001 2000 2000
----------- ------------- ----------------
Land $ 2,317 $ 2,320 $ 2,320
Buildings and Improvements 8,150 7,816 7,845
Furniture & Equipment 7,454 8,068 8,134
----------- ------------- ---------------
Total Cost 17,921 18,204 18,299
Less: Accumulated Amortization and Depreciation (9,897) (9,986) (10,175)
----------- ------------- ----------------
Net Book Value $ 8,024 $ 8,218 $ 8,124
=========== ============= ================
NOTE 5 - Other Real Estate
------
The carrying value of other real estate is as follows (in thousands):
September 30, December 31,
---------------------------
2001 2000 2000
----------- ----------- ---------------
Other Real Estate $ -0- $ 1,329 $ 286
=========== =========== ===============
There were direct writedowns of other real estate charged to income for
the nine months ended September 30, 2001 of $11,000. There were direct
writedowns of other real estate for the nine months ended September 30, 2000 of
$423,000. For the year ended December 31, 2000, writedowns of other real estate
of $426,000 were recorded.
13
NOTE 6 - Deposits
------
The book values of deposits by major type follow (in thousands):
September 30, December 31,
------------------------------
2001 2000 2000
------------ ------------ --------------
Noninterest-Bearing Demand Deposits $139,981 $137,721 $ 146,083
Interest-Bearing Deposits:
Interest-Bearing Transaction
Accounts and Money Market Funds 170,793 145,999 156,348
Savings 99,121 97,152 94,014
Savings Certificates - Time 69,910 79,889 82,248
Certificates of Deposits $100,000 or more 55,322 60,058 60,195
Other 728 778 778
------------ ------------ --------------
Total 395,874 383,876 393,583
------------ ------------ --------------
Total Deposits $535,855 $521,597 $ 539,666
============ ============ ==============
NOTE 7 - Short Term Borrowings
------
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):
September 30, December 31,
------------------------------
2001 2000 2000
------------ ------------ -------------
Securities Sold Under Repurchase Agreements:
Average $ 17,935 $ 21,387 $ 20,797
Period-End 15,590 18,671 19,910
Maximum Month-End Balance During Period 20,374 25,019 25,019
Interest Rate:
Average 3.49% 5.10% 5.19%
Period-End 2.10% 5.63% 5.44%
Federal Funds Purchased
Average $ 170 $ 29 $ 22
Period-End 8,000 -0- -0-
Maximum Month-End Balance During Period 8,000 950 950
Interest Rate:
Average 3.54% 5.96% 5.96%
Period-End 3.65% -0- -0-
The Corporation, through its Subsidiary, has available a line of credit
with the Federal Home Loan Bank of Dallas which allows the subsidiary to borrow
on a collateralized basis at a fixed term. At September 30, 2001, the subsidiary
had no borrowings outstanding. For the nine months ended September 30, 2001, the
subsidiary no borrowings. For the year ended December 31, 2000, the subsidiary
had borrowed an average of $4,929,000 under the line of credit, bearing an
average interest rate of 6.49%.
NOTE 8 - Notes Payable
------
On July 15, 2001, the Corporation obtained lines of credit from a bank
under which the Corporation may borrow $11,000,000 at prime rate. The lines of
credit are secured by stock of the Subsidiary Bank and matures on August 15,
2002, whereupon, if balances are outstanding, the lines convert to term notes
having five year terms. The Corporation will not pay a fee for any unused
portion of the lines. As of September 30, 2001, $300,000 had been borrowed under
these lines.
14
NOTE 9 - Other Non-Interest Expense
------
The significant components of other non-interest expense are as follows
(in thousands):
Nine Months Ended Year Ended
September 30, December 31,
------------- -------------
2001 2000 2000
------------- ------------- ---------------
Business Development $ 458 $ 387 $ 601
Legal and Professional Fees 477 604 866
Printing and Supplies 260 281 369
Regulatory Fees and Assessments 191 175 237
Other 1,623 1,477 1,909
------------- ------------- ---------------
Total $ 3,009 $ 2,924 $ 3,982
============= ============= ===============
The Merger Related Expenses reported in the first quarter of 2001 include
expenses, accrued and incurred, related to the merger or the Corporation's
subsidiaries as reported in Note 1 Basis of Presentation and Principles of
---------------------------------------
Consolidation. The expenses include the cost of severance payments to a former
-------------
chief executive officer of one of the units and legal and professional fees and
other expenses related to the merger and to the name change of Summit Bank, N.A.
NOTE 10 - Income Taxes
-------
Federal income taxes included in the consolidated balance sheets were as
follows (in thousands):
September 30, December 31,
------------------------------
2001 2000 2000
------------- -------------- ---------------
Current Tax Asset (Liability) $ (1,505) $ 49 $ 68
Deferred Tax Asset 1,277 2,143 1,693
------------- -------------- ---------------
Total Included in Other Assets (Liabilities) $ (228) $ 2,192 $ 1,761
============= ============== ===============
The deferred tax asset at September 30, 2001 of $1,277,000 included
$1,142,000 related to unrealized gains on Available-for-Sale Securities.
The components of income tax expense were as follows (in thousands):
Nine Months Ended Year Ended
September 30, December 31,
------------------------------
2001 2000 2000
------------ ------------- ---------------
Federal Income Tax Expense:
Current $ 4,176 $ 3,531 $ 4,959
Deferred (benefit) (575) (167) (194)
------------ ------------ --------------
Total Federal Income Tax Expense $ 3,601 $ 3,364 $ 4,765
============ ============ ==============
Effective Tax Rates 34.56% 34.67% 34.70%
============ ============ ==============
15
NOTE 10 - Income Taxes (con't)
-------
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):
Nine Months Ended Year Ended
September 30, December 31,
-----------------------
2001 2000 2000
--------- --------- ------------
Federal Income Taxes at Statutory
Rate of 34.3% $ 3,576 $ 3,333 $ 4,716
Effect of Tax Exempt Interest Income (3) (5) (6)
Non-deductible Expenses 47 40 66
Other (19) (4) (11)
--------- --------- ------------
Income Taxes Per Income Statement $ 3,601 $ 3,364 $ 4,765
========= ========= ============
September 30, December 31,
-----------------------
2001 2000 2000
--------- --------- -------------
Federal Deferred Tax Assets:
Allowance for Loan Losses $ 1,881 $ 1,354 $ 1,494
Valuation Reserves - Other Real Estate 105 145 5
Interest on Non-accrual Loans 306 264 238
Deferred Compensation 527 473 505
Unrealized Losses on Available-for-Sale Securities -0- 329 -0-
Other 26 17 20
--------- --------- -------------
Gross Federal Deferred Tax Assets 2,845 2,582 2,262
--------- --------- -------------
Federal Deferred Tax Liabilities:
Depreciation and Amortization 278 319 318
Accretion 128 98 104
Unrealized Gain on Available-for Sale Securities 1,142 -0- 147
Other 20 22 -0-
--------- --------- -------------
Gross Federal Deferred Tax Liabilities 1,568 439 569
--------- --------- -------------
Net Deferred Tax Asset $ 1,277 $ 2,143 $ 1,693
========= ========= =============
NOTE 11 - Related Party Transactions
-------
The Bank has made transactions in the ordinary course of business with
certain of its officers, directors and their affiliates. All loans included in
such transactions are made on substantially the same terms, including interest
rate and collateral, as those prevailing at the time for comparable transactions
with other persons. Total loans outstanding to such parties amounted to
approximately $3,241,000 at December 31, 2000.
NOTE 12 - 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 September 30, 2001, outstanding documentary and standby letters of
credit totaled $4,709,000 and commitments to extend credit totaled $132,112,000.
16
NOTE 13 - 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 its subsidiary 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, 2000, and the nine months ended September 30, 2001.
The following is a summary of transactions during the periods
presented:
Shares Under Option
-----------------------------------------
Nine Months Ended Year Ended
September 30, 2001 December 31, 2000
-------------------- -----------------
Outstanding, Beginning of Period 359,559 445,497
Additional Options Granted During
the Period 20,500 15,000
Forfeited During the Period -0- (19,700)
Exercised During the Period (33,600) (81,238)
-------------------- -----------------
Outstanding, End of Period
346,459 359,559
==================== ==================
Options outstanding at September 30, 2001 ranged in price from $3.00 to
$20.10 per share with a weighted average exercise price of $10.88 and 293,659
shares exercisable. At September 30, 2001, there remained 466,800 shares
reserved for future grants of options under the 1997 Plan. There are no shares
available for grant under the 1993 Plan.
NOTE 14 - Employee Benefit Plans
-------
401(k) Plan
-----------
The Corporation implemented a 401(k) plan in December 1997 covering
substantially all employees. The Corporation made no contribution to this plan
in 1999 or 1998. In 2001, the Corporation will make matching contributions to
the participant's deferrals of compensation up to 100% of the employee
contributions not to exceed 6% of the employee's annual compensation.
The Corporation expensed $254,100 and $274,700 in support of the plan
during the first nine months of 2001 and 2000, respectively, and $333,500 for
the year 2000.
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 $144,000 and $136,000 during the first nine months
of 2001 and 2000, respectively, and $203,000 for the year 2000.
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).
17
NOTE 15 - 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 (dollars in thousands).
September 30, December 31,
-------------------------
2001 2000 2000
---------- ---------- -----------
Net income $ 6,819 $ 6,337 $ 8,976
========== ========== ===========
Weighted average number of common
shares used in Basic EPS 6,338,469 6,366,865 6,364,492
Effect of dilutive stock options 157,701 151,426 159,467
---------- ---------- -----------
Weighted number of common shares
and dilutive potential common
stock used in Diluted EPS 6,496,170 6,518,291 6,523,959
========== ========== ===========
NOTE 16 - 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):
September 30,
---------- ----------
2001 2000
---------- ----------
Financial Instruments Whose Contract Amounts Represent Credit Risk:
Loan Commitments Including Unfunded Lines of Credit $ 132,112 $ 127,345
Standby Letters of Credit 4,709 2,866
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 17 - Concentrations of Credit Risk
-------
The Bank grants commercial, consumer and real estate loans in its direct
market which is defined as Fort Worth and its surrounding area. The Board of
Directors of the Bank monitors concentrations of credit by purpose, collateral
and industry at least quarterly. Certain limitations for concentration are set
by the Board. Additional loans in excess of these limits must have prior
approval of the bank's director loan committee. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors' abilities to
honor their contracts is dependent upon the strength of the local and state
economy.
18
NOTE 18 - Litigation
-------
The Bank is 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 19 - Stock Repurchase Plan
-------
On April 17, 2001, the Board of Directors approved a stock repurchase
plan. The plan authorized management to purchase up to 318,973 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 nine months of 2001, 126,017 shares were purchased by the
Corporation through a similar repurchase plan through the open market.
NOTE 20 - Subsequent Event
-------
On October 16, 2001, the Board of Directors of the Corporation approved
a quarterly dividend of $.11 per share to be paid on November 15, 2001 to
shareholders of record on November 1, 2001.
19
NOTE 21 - 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.
The estimated fair values of the Corporation's financial instruments
are as follows (in thousands):
September 30,
---------------------------------------------------------------------------
2001 2000
----------------------------------- ----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------- --------------- ------------- ---------------
Financial Assets
Cash and due from banks $ 28,992 $ 28,992 $ 26,614 $ 26,614
Federal Funds Sold and Due From Time 1,116 1,116 29,165 29,165
Securities 161,223 161,223 146,907 146,555
Loans 421,048 432,268 379,259 376,909
Reserve for loan losses (6,190) (6,190) (6,918) (6,918)
Financial Liabilities
Deposits 535,855 537,256 521,597 521,426
Short Term Borrowings 23,890 23,891 18,671 18,672
Off-balance Sheet Financial Instruments
Loan commitments 132,112 127,345
Letters of credit 4,709 2,866
NOTE 22 - 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):
Nine Months Ended Year Ended
September 30, December 31,
-----------------------------------
2001 2000 2000
--------------- ---------------- ---------------
Net Income $ 6,819 $ 6,337 $ 8,976
Other Comprehensive Income:
Unrealized gain (loss) on securities
available-for-sale, net of tax 1,932 550 1,471
--------------- ---------------- ---------------
Comprehensive Income $ 8,751 $ 6,887 $ 10,447
=============== ================ ===============
20
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 third quarter of 2001 was $2,232,000, or $.36
diluted earnings per share, compared with $2,540,000, or $.39 diluted earnings
per share, for the third quarter of 2000. Net income for the first nine months
of 2001 was $6,819,000, or $1.05 diluted earnings per share, compared with
$6,337,000, or $.97 diluted earnings per share, for the first nine months of the
prior year. On a per share basis, diluted earnings per shares decreased 8.2%
over the third quarter of the prior year. Per share amounts are based on average
shares outstanding of 6,496,170 for the first nine months of 2001 and 6,518,291
for the comparable period of 2000 adjusted to reflect stock options granted.
Excluding the impact of merger related expenses, net income for the nine months
ended September 30, 2001 would have been $7,211,000, or $1.11 diluted earnings
per share.
Outstanding loans at September 30, 2001 of $421.0 million represented
an increase of $41.8 million, or 11.0%, over September 30, 2000 and an increase
of $41.0 million, or 10.8%, from December 31, 2000.
Total deposits at September 30, 2001 of $535.9 million represented an
increase of $14.3 million, or 2.7%, over September 30, 2000 but a decrease of
$3.8 million, or .7%, from December 31, 2000.
The following table summarizes the Corporation's performance for the
three months and nine months ended September 30, 2001 and 2000 (tax equivalent
basis and dollars in thousands).
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Interest Income $ 10,898 $ 12,231 $ 34,542 $ 34,938
Interest Expense
3,731 4,985 12,903 13,519
----------- ----------- ------------ ------------
Net Interest Income
7,167 7,246 21,639 21,419
Provision for Loan Loss
370 577 860 2,305
----------- ----------- ------------ ------------
Net Interest Income After
Provision for Loan Loss
6,797 6,669 20,779 19,114
Non-Interest Income
1,145 918 3,294 2,744
Non-Interest Expense
4,373 3,708 13,648 12,150
----------- ----------- ------------ ------------
Income Before Income Tax
3,569 3,879 10,425 9,708
Income Tax Expense
1,237 1,339 3,606 3,371
----------- ----------- ------------ ------------
Net Income $ 2,332 $ 2,540 $ 6,819 $ 6,337
=========== =========== ============ ============
Net Income per Share-
Basic $ 0.37 $ 0.40 $ 1.08 $ 1.00
Diluted
0.36 0.39 1.05 0.97
Return on Average Assets 1.47% 1.72% 1.46% 1.47%
Return on Average Stockholders' Equity 15.59% 19.71% 15.73% 16.89%
21
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 third quarter of 2001 and 2000 (rates on tax equivalent basis).
Three Months Ended September 30,
-------------------------------------------------------------------------------------
2001 2000
---------------------------------------- -----------------------------------------
Average Average Average Average
Balances Interest Yield/Rate Balances Interest Yield/Rate
------------ ----------- ----------- ------------- ------------ ------------
(Dollars in Thousands)
Earning Assets:
Federal Funds Sold & Due From Time $ 53,844 $ 477 3.51% $ 27,065 $ 443 6.51%
Investment Securities (Taxable) 128,320 1,825 5.64% 148,032 2,322 6.24%
Investment Securities (Tax-exempt) 206 4 7.55% 314 6 7.54%
Loans, Net of Unearned Discount/(1)/ 409,094 8,592 8.33% 378,302 9,460 9.95%
------------ ----------- ----------- ------------- ----------- ------------
Total Earning Assets 591,464 10,898 7.31% 553,713 12,231 8.79%
----------- -----------
Non-interest Earning Assets:
Cash and Due From Banks 24,405 23,787
Other Assets 17,404 18,801
Allowance for Loan Losses (5,928) (6,974)
------------ -------------
Total Assets $627,345 $ 589,327
============ =============
Interest-Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Money Market Funds $169,732 1,084 2.53% $ 158,913 1,603 4.01%
Savings 100,462 779 3.08% 89,356 1,110 4.94%
Savings Certificates 78,303 1,028 5.21% 69,136 1,008 5.80%
Certificates of Deposit
$100,000 or more 56,075 715 5.06% 54,755 836 6.07%
Other Time 773 11 5.84% 778 11 5.62%
Other Borrowings 17,414 114 2.59% 28,332 417 5.85%
------------ ----------- ----------- ------------- ----------- ------------
Total Interest-Bearing 422,759 3,731 3.50% 401,270 4,985 4.94%
----------- -----------
Liabilities
Non-interest Bearing Liabilities:
Demand Deposits 141,991 135,769
Other Liabilities 3,246 1,003
Shareholders' Equity 59,349 51,285
------------ -------------
Total Liabilities and $ 627,345 $ 589,327
============ =============
Shareholders' Equity
Net Interest Income and Margin
(Tax-equivalent Basis)/(2)/ $ 7,167 4.81% $ 7,246 5.21%
=========== ===========
(1) Loan interest income includes fees and loan volumes include loans on non-
accrual.
(2) Presented on tax equivalent basis ("T/E") using a federal income tax rate
of 34% both years.
22
Summary of Earning Assets and Interest-Bearing Liabilities (con't)
-----------------------------------------------------------------
The following schedule presents average balance sheets that highlight
earning assets and interest-bearing liabilities and their related rates earned
and paid for the nine months ended September 30, 2001 and 2000 (rates on tax
equivalent basis).
Nine Months Ended September 30,
---------------------------------------------------------------------------------------
2001 2000
------------------------------------------- -----------------------------------------
Average Average Average Average
Balances Interest Yield/Rate Balances Interest Yield/Rate
----------- ----------- ------------- ------------ ---------- ------------
(Dollars in Thousands)
Earning Assets:
Federal Funds Sold & Due From Time $ 57,763 $ 1,936 4.48% $ 18,074 $ 847 6.26%
Investment Securities (Taxable) 133,185 5,950 5.97% 147,881 6,892 6.23%
Investment Securities (Tax-exempt) 229 13 7.75% 385 21 7.29%
Loans, Net of Unearned Discount/(1)/ 395,972 26,643 9.00% 372,124 27,178 9.76%
----------- ----------- ----------- ---------- --------- --------
Total Earning Assets 587,149 34,542 7.87% 538,464 34,938 8.67%
----------- ---------
Non-interest Earning Assets:
Cash and Due From Banks 23,919 24,046
Other Assets 18,036 19,211
Allowance for Loan Losses (5,676) (5,939)
----------- ----------
Total Assets $ 623,428 $ 575,782
=========== ==========
Interest-Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Money Market Funds $ 165,589 3,573 2.89% $ 159,643 4,573 3.82%
Savings 100,502 2,803 3.73% 91,520 3,198 4.68%
Savings Certificates 81,582 3,473 5.69% 63,069 2,559 5.42%
Certificates of Deposit
$100,000 or more 59,147 2,527 5.71% 47,250 2,019 5.71%
Other Time 776 35 6.09% 778 32 5.52%
Other Borrowings 18,132 492 3.63% 28,000 1,138 5.43%
----------- ----------- ----------- ---------- --------- --------
Total Interest-Bearing Liabilities 425,728 12,903 4.05% 390,260 13,519 4.63%
----------- ---------
Non-interest Bearing Liabilities:
Demand Deposits 136,449 134,078
Other Liabilities 3,311 1,340
Shareholders' Equity 57,940 50,104
----------- ----------
Total Liabilities and
Shareholders' Equity $ 623,428 $ 575,782
=========== ==========
Net Interest Income and Margin
(Tax-equivalent Basis)/(2)/ $ 21,639 4.93% $ 21,419 5.31%
=========== ========
(1) Loan interest income includes fees and loan volumes include loans on
non-accrual.
(2) Presented on tax equivalent basis ("T/E") using a federal income tax rate
of 34% both years.
23
Net Interest Income
-------------------
Net interest income (tax equivalent) for the third quarter of 2001 was
$7,167,000 which represented a decrease of $79,000 or 1.1%, over the third
quarter of 2000. The decrease can be attributed to the sharp decrease in prime
rate over the past nine months. In the quarter the national prime rate declined
seventy-five (75) basis points to 6.00%. At the beginning of the year prime rate
was 9.50%.
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 September 30, 2001 and
2000.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Dollars in Thousands)
3rd Qtr. 2001 vs. 3rd Qtr. 2000 Nine Months 2001 vs. Nine Months 2000
Increase (Decrease) Increase (Decrease)
Due to Changes in: Due to Changes in:
------------------------------- ----------------------- ----------
Volume Rate Total Volume Rate Total
----------- --------- -------- -------------- -------- ----------
Interest Earning Assets:
Federal Funds Sold $ 441 $ (407) $ 34 $ 1,857 $ (768) $ 1,089
Investment Securities (Taxable) (310) (187) (497) (684) (258) (942)
Investment Securities (Tax-exempt) (2) -0- (2) (9) 1 (8)
Loans, Net of Unearned Discount 772 (1,640) (868) 1,740 (2,275) (535)
------- ------- ------- ------- ------- -------
Total Interest Income 901 (2,234) (1,333) 2,904 (3,300) (396)
------- ------- ------- ------- ------- -------
Interest-Bearing Liabilities:
Deposits 426 (1,377) (951) 1,766 (1,736) 30
Other Borrowings (161) (142) (303) (401) (245) (646)
------- ------- ------- ------- ------- -------
Total Interest Expense 265 (1,519) (1,254) 1,365 (1,981) (616)
------- ------- ------- ------- ------- -------
Net Interest Income $ 636 $ (715) $ (79) $ 1,539 $(1,319) $ 220
======= ======= ======= ======= ======= =======
Allowance for Loan Losses and Non-Performing Assets
---------------------------------------------------
The Corporation's allowance for loan losses was $6,190,000 or 1.47% of
total loans, as of September 30, 2001 compared to $6,918,000, or 1.82% of total
loans, as of September 30,2000.
Transactions in the provision for loan losses are summarized as follows (in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
2001 2000 2001 2000
------------ ----------- ----------- ----------
Balance, Beginning of Period $ 5,745 $ 6,899 $ 5,399 $ 5,169
Provisions, Charged to Income 370 577 860 2,305
Loans Charged-Off (36) (632) (261) (758)
Recoveries of Loans Previously
Charged-Off 111 74 192 202
---------- ---------- ----------- ----------
Net Loans (Charged-Off)
Recovered 75 (558) (69) (556)
---------- ---------- ----------- ----------
Balance, End of Period $ 6,190 $ 6,918 $ 6,190 $ 6,918
========== ========== =========== ==========
For the nine months ended September 30, 2001 and 2000, net charge-offs were
.02 and .15% of loans, respectively, not annualized.
24
The following table summarizes the non-performing assets as of the end of
the last five quarters (in thousands).
September 30, June 30, March 31, December 31, September 30,
2001 2001 2001 2000 2000
------------ ------------- ------------- ------------- --------------
Non-Accrual Loans $ 2,632 $ 2,611 $ 2,904 $ 2,182 $ 5,273
Renegotiated Loans -0- -0- -0- -0- -0-
Other Real Estate Owned and Other
Foreclosed Assets 511 643 1,348 1,595 1,329
------------ ------------- ------------- ------------- --------------
Total Non-Performing Assets $ 3,143 $ 3,254 $ 4,252 $ 3,777 $ 6,602
============ ============= ============= ============= ==============
As a Percent of:
Total Assets 0.50% 0.52% 0.62% 0.61% 1.11%
Total Loans and Other Real Estate and
Other Foreclosed Assets 0.75% 0.81% 1.10% 0.99% 1.73%
Loans Past Due 90 days or
More and Still Accruing $ 58 $ 315 $ 32 $ 10 $ -0-
Non-accrual loans to total loans were .63% at September 30, 2001 and
non-performing assets were .75% of loans and other real estate owned at the same
date.
As of September 30, 2001, the Company had four credits that were on
non-accrual loan status that represented 86% of the Company's non-performing
loans. The largest with a balance of approximately $1.1 million has been on
non-accrual status since the second quarter of 1998. The balance of this loan
has been reduced from approximately $2.2 million as the borrower has continued
to make monthly payments. These payments, principal and interest, have reduced
the balance. The total balance of non-accrual loans of $2.6 million is reported
before reducing the amount for SBA guarantees on cash collateral in the amount
of $294,000 on certain of the loans.
As of September 30, 2001 the Company has $511,000 in Other Foreclosed
Assets, reported in Other Assets on the Balance Sheet, which represents an
inventory of textbooks. These assets are in the process of liquidation, however
the process is expected to take several months. The cost of liquidation is
recorded as a current period expense and all proceeds from sale of inventory
reduces the carrying value of the inventory.
The following table summarizes the relationship between non-performing
loans, criticized loans and the allowance for loan losses (dollars in
thousands).
September 30, June 30, March 31, December 31, September 30,
2001 2001 2001 2000 2000
------------- ----------- ------------ -------------- ------------
Non-Performing Loans $ 2,632 $ 2,611 $ 2,904 $ 2,182 $ 5,273
Criticized Loans 18,713 11,677 11,586 11,536 16,562
Allowance for Loan Losses 6,190 5,745 5,537 5,399 6,918
Allowance for Loan Losses
as a Percent of:
Non-Performing Loans 235% 220% 191% 247% 131%
Criticized Loans 33% 49% 48% 47% 42%
25
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).
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
2001 2000 % Change 2001 2000 % Change
-------- -------- ---------- -------- -------- ----------
Service Charges on Deposit Accounts $ 594 $ 505 17.6% $ 1,740 $ 1,475 18.0%
Non-recurring Income -0- -0- -0- -0- 65 -0-
Other Non-interest Income 551 413 33.4 1,554 1,204 29.1
-------- -------- ---------- -------- -------- ----------
Total Non-interest Income $ 1,145 $ 918 24.7 $ 3,294 $ 2,744 20.0
======== ======== ========== ======== ======== ==========
Non-recurring income is primarily interest recovered on loans charged-off
in prior years and gains on sales of assets taken in satisfaction of debt in
prior years. The increase in other non-interest income in the third quarter of
2001 is primarily due to increases in mortgage brokerage/origination fees and
fees earned on investment services to customers.
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).
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
2001 2000 % Change 2001 2000 % Change
-------- -------- ---------- -------- -------- ----------
Salaries & Employee Benefits $ 2,621 $ 2,355 11.3 % $ 7,753 $ 7,044 10.1%
Occupancy Expense - Net 372 245 51.8 996 750 32.8
Furniture and Equipment Expense 391 356 9.8 1,118 1,048 6.7
Other Real Estate Expense - Net 47 28 257.1 174 384 (40.9)
Merger Related Expenses -0- -0- -0- 598 -0- -0-
Other Expenses:
Business Development 145 27 437.0 458 387 18.3
Insurance - Other 41 31 32.3 104 83 25.3
Legal & Professional Fees 163 214 (23.8) 477 604 (21.0)
Taxes - Other 31 30 3.3 103 130 (20.8)
Postage & Courier 104 78 33.3 266 243 9.5
Printing & Supplies 75 91 (17.6) 260 281 (7.5)
Regulatory Fees & Assessments 66 59 11.9 191 175 9.1
Other Operating Expenses 317 194 36.1 1,150 1,021 7.4
-------- -------- ---------- -------- -------- ----------
Total Other Expenses 942 724 22.8 3,009 2,924 1.1
-------- -------- ---------- -------- -------- ----------
Total Non-interest Expense $ 4,373 $ 3,708 17.9 $ 13,648 $ 12,150 12.3
======== ======== ========== ======== ======== ==========
Total non-interest expense increased 17.9% in the third quarter of 2001
over 2000, reflecting increases primarily in salary and benefits, occupancy
expenses, business development expense, and other operating expenses partially
offset by decreases in legal and professional expense and printing and supplies
expense. As a percent of average assets, non-interest expenses were 2.77% in the
third quarter of 2001 (annualized) and 2.50% in the same period of 2000. The
"efficiency ratio" (non-interest expenses divided by total non-interest income
plus net interest income) was 52.6% for the third quarter of 2001.
The increase in occupancy expense is primarily due to a decline in rent
income because of a vacancy earlier in the year at one bank owned facility
(which has subsequently been rented) plus repairs made in the third quarter at
another facility.
The Merger Related Expenses recorded in the first quarter of 2001 include
expenses, accrued and incurred, related to the merger of the Company's two
banking subsidiaries and its non-banking subsidiary to form one unit. The
expenses include the cost of severance payment to a former chief executive
officer of one of the units, legal and professional fees and expenses related to
the merger and to the name change of Summit Bank, N.A.
26
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 September 30, 2001 and may
not be reflective of positions in subsequent periods (dollars in thousands):
Total Repriced
Matures or Reprices within: Rate After
------------------------------------- Sensitive 1 Year or
30 Days 31-180 181 to One Year Non-interest
or Less Days One Year or Less Sensitive Total
--------- --------- --------- --------- ------------ ---------
Earning Assets:
Loans $ 251,301 $ 18,939 $ 13,666 $ 283,906 $ 137,142 $ 421,048
Investment Securities 11,243 31,739 31,281 74,263 86,960 161,223
Federal Funds Sold and
Due from Bank Time 1,116 -0- -0- 1,116 -0- 1,116
--------- --------- --------- --------- --------- ---------
Total Earning Assets 263,660 50,678 44,947 359,285 224,102 583,387
--------- --------- --------- --------- --------- ---------
Interest Bearing Liabilities:
Interest-Bearing Transaction
Accounts and Savings 269,914 -0- -0- 269,914 -0- 269,914
Certificate of Deposits
*$100,000 9,409 28,444 13,912 51,765 3,557 55,322
Other Time Deposits 7,370 34,613 21,836 63,819 6,819 70,638
Short Term Borrowings 23,890 -0- -0- 23,890 -0- 23,890
--------- --------- --------- --------- --------- ---------
Total Interest Bearing
Liabilities 310,583 63,057 35,748 409,388 10,376 419,764
--------- --------- --------- --------- --------- ---------
Interest Sensitivity Gap $ (46,923) $ (12,379) $ 9,199 $ (50,103) $ 213,726 $ 163,623
========= ========= ========= ========= ========= =========
Cumulative Gap $ (46,923) $ (59,302) $ (50,103)
========= ========= =========
Cumulative Gap to
Total Earning Assets (8.04)% (10.17)% (8.59)%
Cumulative Gap to
Total Assets (7.53) (9.51) (8.04)
* Greater Than
The preceding static gap report reflects a cumulative liability sensitive
position during the one year horizon. An inherent weakness of this report is
that it ignores the relative volatility any one category may have in relation to
other categories or market rates in general. For instance, the rate paid on NOW
accounts typically moves slower than the three month T-Bill. Management attempts
to capture this relative volatility by utilizing a simulation model with a "beta
factor" adjustment which estimates the volatility of rate sensitive assets
and/or liabilities in relation to other market rates.
Beta factors are an estimation of the long term, multiple interest rate
environment relation between an individual account and market rates in general.
For instance, NOW, savings and money market accounts, which are repriceable
within 30 days will have considerably lower beta factors than variable rate
loans and most investment categories. Taking this into consideration, it is
quite possible for a bank with a negative cumulative gap to total asset ratio to
have a positive "beta adjusted" gap risk position.
As a result of applying the beta factors established by management to the
earning assets and interest bearing liabilities in the static gap report via a
simulation model, the negative cumulative gap to total assets ratio at one year
of (8.0%) was reversed to a positive 7.9% "beta adjusted" gap position.
Management feels that the "beta adjusted" gap risk technique more
accurately reflects the Corporation's gap position.
27
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.
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 September 30, 2001, the Corporation's Tier I
capital represented 13.4% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented 14.7% of risk weighted assets. Both ratios are
well above current regulatory guidelines.
Also, as of September 30, 2001, 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").
The Corporation and Subsidiary Banks' regulatory capital positions as of
September 30, 2001, were as follows:
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
---------- --------- ---------- --------- --------- ---------
CONSOLIDATED:
As of September 30, 2001
Total Capital (to Risk Weighted Assets) $ 63,132 14.68% $ 34,410 8.00%
Tier I Capital (to Risk Weighted Assets) 57,745 13.43% 17,205 4.00%
Tier I Capital (to Average Assets) 57,745 9.26% 18,703 3.00%
SUMMIT BANK, N.A.:
As of September 30, 2001
Total Capital (to Risk Weighted Assets) $ 63,081 14.67% $ 34,407 8.00% $ 43,009 10.00%
Tier I Capital (to Risk Weighted Assets) 57,695 13.41% 17,204 4.00% 25,806 6.00%
Tier I Capital (to Average Assets) 57,695 9.27% 18,679 3.00% 31,131 5.00%
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 2001
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.
28
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
10 Loan Agreement dated August 15, 2001, between the
Corporation and The Frost National Bank
11 Computation of Earnings Per Common Share
(b) No Reports on Form 8-K were filed during the period ending
September 30, 2001
29
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: 11-01-01 By: /s/ Philip E. Norwood
------------- -----------------------------------------
Philip E. Norwood, Chairman, President & CEO
Date: 11-01-01 By: /s/ Bob G. Scott
------------- -----------------------------------------
Bob G. Scott, Executive Vice President
and Chief Operating Officer
(Chief Accounting Officer)
30
EXHIBIT INDEX
Exhibit Page No.
------- --------
10 Loan Agreement dated August 15, 2001, between the
Corporation and The Frost National Bank
11 Computation of Earnings Per Common Share
31