ITEM 1. BUSINESS --------
Summit Bancshares, Inc. (the "Company") is a one-bank holding company registered under the Bank Holding Company Act of 1956, as amended. It was incorporated under the laws of the State of California on July 22, 1981. Its principal office is located at 2969 Broadway, Oakland, California 94611, and its telephone number is (510) 839-8800.
On March 1, 1985, the Bank opened a banking facility at 112 La Casa Via, Walnut Creek, California 94596, which moved into new quarters located at 1700 N. Main, Walnut Creek, California 94598 in September, 1990. The telephone number is (510) 935-9220. In addition, a full service branch began operation in December, 1985, in the Watergate III Tower at 2000 Powell Street, Emeryville, California 94608. The telephone number is (510) 428-1868.
Summit Bancshares, Inc. owns all of the capital stock of Summit Bank (the "Bank"), its subsidiary bank, and its activities during 1996 were limited to acting as the Bank's holding company.
The Bank has conducted the business of a commercial bank since July 1, 1982. The Bank provides commercial credit and other banking services to small and mid-sized businesses and professionals, including professional firms of physicians, attorneys, accountants, retailers and service firms, wholesalers and distributors. Because of the concentration of medical facilities and related organizations, the growth of real estate opportunities and commercial/industrial businesses in the Bank's service area, the Bank primarily focuses its marketing efforts on health service businesses, real estate construction and commercial industrial loans; however, the Bank also offers a broad spectrum of financial services to the business community at large. The Bank offers various checking and savings accounts for both personal and business purposes, time certificates of deposit, cashier's checks, money orders, travelers checks, safe deposit boxes, installment collection services, night depository, depository pickup and courier services, telephone transfers, collection services for notes, Individual Retirement and Business Planning (formerly Keogh) Accounts. The Bank has not requested and does not have regulatory approval to offer trust services, although it may provide such services in the future. The Bank
assists customers requiring services not offered by the Bank in obtaining such services from its correspondent banks and other financial services firms. Although the Bank does not actively solicit consumer business from the general public, it does offer banking services and facilities compatible with the need of its consumer customers.
The banking office in Walnut Creek offers virtually the same services listed above with the exception of safe deposit boxes. The Emeryville Office offers all the same services as the Oakland Office.
On March 30, 1989, the State Banking Department approved the Bank's application to establish a new subsidiary, Summit Equities, Inc, whose purpose is to engage in real property investment activities as authorized by Section 751.3 of the California Financial Code. On November 13, 1992 the FDIC imposed regulations limiting real estate investment to those authorized by national banks, thus no real estate transactions are allowed to be transacted under this subsidiary. The corporation is exploring other avenues or types of approved investment activities. As of this date, the subsidiary has not conducted any business.
SERVICE AREA - ------------
The primary geographic market served by the Bank encompasses the "Pill Hill" area of the City of Oakland and extends to the northern portion of Alameda County to the Contra Costa County line along the boundary cities of Richmond and Albany; running south along the bay front (including the city of Alameda) to Highway 238/580 to the Castro Valley "Y"; east along Highway 580 to encompass the communities of Livermore and Blackhawk; northerly along Highway 680 to the Highway 24 corridor to encompass the cities of Walnut Creek and Concord and west to the starting point in northern Alameda County. This area includes a substantial number of commercial businesses, a large health services complex and substantial residential population. In Alameda County, the health services complex includes two major hospitals, approximately 463 physicians and a wide variety of health related and other professionals, and small and medium-sized businesses.
The Walnut Creek office is about 16 miles northeast of the head office in Oakland and located in the central business district in Walnut Creek. The site is approximately 1 mile west of John Muir Hospital, which is a 343-bed hospital employing approximately 1165 people and accommodates a large staff of approximately 290 visiting physicians. The surrounding service area includes 4 convalescent hospitals, an acute psychiatric care facility, and the 204-bed Kaiser Foundation Hospital, which employs over 1100 people in downtown Walnut Creek and is staffed by approximately 89 physicians.
The Emeryville branch is a further extension of the Bank's plan to expand into areas which will further utilize specialized services directed at medium-sized businesses and professionals. Located west of Interstate 880 at 2000 Powell Street, it is servicing a commercial sector and an up-scale employee population.
The Bank also obtains business clients from areas adjacent to the Pill Hill area in Oakland, the John Muir and Kaiser areas of Walnut Creek and in Emeryville, and from other sections of those metropolitan areas. The Bank's customers are primarily business and professional persons working in the vicinity of each branch, officers and employees of businesses and professional firms serviced by the Bank, and residents of areas close to the Bank.
COMPETITION - -----------
The banking business in the Oakland/East Bay metropolitan area is very competitive with respect to both loans and deposits, and is dominated by relatively few major banks which have offices operating throughout California. Among the advantages such banks have are their ability to finance wide-ranging advertising campaigns, to offer certain services (for example, trust services) which are not offered directly by the Bank, and to have substantially higher legal lending limits due to their greater capitalization. There are six other independent banks in Oakland, in Walnut Creek and none in Emeryville.
In competing for deposits, the Bank is subject to certain limitations not applicable to non-bank financial institution competitors. Over the past years, legislative changes have enabled the Bank to compete more effectively for deposits with savings and loan institutions but still remains at a competitive disadvantage when competing with money market funds.
To compete with major financial institutions and other independent banks in its primary service areas, the Bank relies upon the experience of its executive officers in serving business clients, its specialized services, local promotional activity, personal contacts by its officers, directors, and employees of the Company. For customers whose loan demands exceed the Bank's legal lending limit, the Bank arranges for such loans on a participation basis with correspondent banks as well as other independent banks.
REGULATION AND SUPERVISION - --------------------------
The Company. The Company is a bank holding company within the meaning of ----------- the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and is registered as such with the Federal Reserve Board (FRB). A bank holding company is required to file with the FRB annual reports and other information regarding its business operations and those of its subsidiaries. It is also subject to examination by the FRB and is required to obtain FRB approval before acquiring, directly or indirectly, ownership or control of any voting shares of any bank, if after such acquisition, it would directly or indirectly own or control more than 5% of the voting stock of that bank. The BHC Act further provides that the FRB shall not approve any such acquisition that would result in or further the creation of a monopoly, or the effect of which may be to substantially lessen competition, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the probable effect in meeting the convenience and needs of the community to be served.
Furthermore, under the BHC Act, a bank holding company is, with limited exceptions, prohibited from (i) acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank, or (ii) engaging in any activity other than managing or controlling banks. With the prior approval of the FRB, however, a bank holding company may own shares of a company engaged in activities which the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
The FRB has by regulation determined that certain activities are so closely related to banking as to be a proper incident thereto within the meaning of the BHC Act. These activities include, but are not limited to: operating an industrial loan company, industrial bank, Morris Plan Bank, savings association, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing investment and financial advice; operating as a trust company in certain instances, selling traveler's checks, United States savings bonds and certain money orders; providing certain courier services; providing management consulting advice to nonaffiliated depository institutions in some instances; acting as insurance agent for certain types of credit-related insurance; leasing property or acting as agent, broker or advisor for leasing property on a "full pay-out basis"; acting as a consumer financial counselor, including tax planning and return preparation; performing futures and options advisory services, check guarantee services and discount brokerage activities; operating a collection or credit bureau; or performing personal property appraisals. The Company has no present intention to engage in any of such permitted activities at this time.
The FRB also has determined that certain activities are not so closely related to banking to be a proper incident thereto within the meaning of the BHC Act. Such activities include: real estate brokerage and syndication; land development; property management; underwriting of life insurance not related to credit transactions; and with certain exceptions, securities underwriting and equity funding. In the future, the FRB may add or delete from the list of activities permissible for bank holding companies. Under the BHC Act, a bank holding company and its subsidiaries are prohibited from acquiring any voting shares of or interest in all or substantially all of the assets of any bank located outside the state in which the operations of the bank holding company's banking subsidiaries are principally conducted, unless the acquisition is specifically authorized by the law of the state in which the bank to be acquired is located or unless the transaction qualifies under federal law as an "emergency interstate acquisition" of a closed or failing bank. The California interstate banking bill is described under "Interstate Banking" (below).
A bank holding company and its subsidiaries are prohibited from certain tie-in arrangements in connection with any extension of credit, sale or lease of a property or furnishing of services. For example, with certain exceptions, a bank may not condition an extension of credit on a promise by its customer to obtain other services provided by it, its holding company or other subsidiaries, or on a promise by
its customer not to obtain other services from a competitor. In addition, federal law imposes certain restrictions on transactions between the Company and its subsidiaries, including the Bank. As an affiliate of the Bank, the Company is subject, with certain exceptions, to provisions of federal law imposing limitations on, and requiring collateral for, extensions of credit by the Bank to its affiliates.
Directors of the Company, and the companies with which they are associated, have had and will continue to have banking transactions with the Bank in the ordinary course of the Bank's business. It is the firm intention of the Company that any loans and commitments to loan included in such transactions be made in accordance with applicable law, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons of similar creditworthiness, and on terms not involving more than the normal risk of collectability or presenting other unfavorable features. At December 31, 1996, loans to directors totalled $.4 million or 3.1% of the Company's shareholders' equity.
THE BANK. The Bank is a member of the FDIC which currently insures the -------- deposits of each member bank to a maximum of $100,000 per depositor. For this protection, the Bank pays a semi-annual assessment and is subject to the rules and regulations of the FDIC pertaining to deposit insurance and other matters.
The Bank is subject to regulation, supervision and regular examination by the California State Banking Department (the "Department"). Although the Bank is a non-member of the Federal Reserve System, it is subject to regulation, supervision, but not examination by the FRB. The regulations of these agencies govern most aspects of the Bank's business, including the making of periodic reports by the Bank and the Bank's activities, branching, mergers and acquisitions, reserves against deposits and numerous other areas.
Subject to the regulations of the California Superintendent of Banks (the "Superintendent"), the Bank may invest in capital stock, obligations or other securities of other corporations, provided such corporations are not insurance companies, agents or brokers. In addition, the Bank may acquire any or all of the securities of a company that engages in activities that the Bank may engage in directly under California law without the prior approval of the FRB. California state-chartered banks are also specifically authorized to provide real estate appraisal services, management consulting and advisory services and electronic data processing services.
The Company's primary source of income (other than interest earned on Company capital) is the receipt of dividends and management fees from the Bank. The ability of the Bank to pay management fees and dividends to the Company and its affiliates is subject to restrictions set forth in the California Financial Code and, under certain circumstances, is subject to approval of the Department. The board of directors of a state-chartered bank may declare a dividend out of so much of net profits as such board deems appropriate, subject to California law which restricts the amount available for cash dividends to the lesser of retained earnings or the bank's net income less cash dividends paid for its last three fiscal years.
In the event that a bank has no retained earnings or net income for the prior three fiscal years, cash dividends may be paid out of net income for such bank's last preceding fiscal year or current fiscal year upon the prior approval of the Department. Although there are not specific regulations restricting dividend payments by bank holding companies other than state corporation law, supervisory concern focuses on the holding company's capital position, its ability to meet its financial obligations as they come due and the capacity to act as a source of financial strength to its subsidiary banks.
The FRB and the Superintendent have authority to prohibit a bank from engaging in business practices which are considered to be unsafe or unsound. Depending upon the financial condition of the Bank and upon other factors, the FRB or Superintendent could assert that the payments of dividends or other payments by the Bank to the Company might be such an unsafe or unsound practice. Also, if the Bank were to experience either significant loan losses or rapid growth in loans or deposits, or some other event resulting in a depletion or deterioration of the Bank's capital account were to occur, the Company might be compelled by federal banking authorities to invest additional capital in the Bank necessary to return the capital account to a satisfactory level.
IMPACT OF ECONOMIC CONDITIONS AND MONETARY POLICIES. The earnings and --------------------------------------------------- growth of the Company are and will be affected by general economic conditions, both domestic and international, and by the monetary and fiscal policies of the United States Government and its agencies, particularly the FRB. One function of the FRB is to regulate the national supply of bank credit in order to mitigate recessionary and inflationary pressures. Among the instruments of monetary policy used to implement those objectives are open market transactions in United States Government securities and changes in the discount rate on member bank borrowings. The monetary policies of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. However, the effect, if any, of such policies on the future business and earnings of the Company cannot be accurately predicted.
ACCOUNTING CHANGES. In May 1993, the FASB issued Statement of Financial ------------------- Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan as amended by SFAS No. 118. This statement is applicable to all creditors and to all loans, uncollateralized as well as collateralized, except large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment and loans that are measured at fair value or at the lower of cost or fair value. The statement also applies to all loans that are restructured in a troubled debt restructuring involving a modification of terms. The statement requires that impaired loans that are within the scope of this statement be measured based on the present value of expected cash flows discounted at the loan's effective interest rate, or as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company adopted this statement effective January 1, 1995, and the impact of this statement on the Company's financial position or results of operation has been immaterial.
In May 1993, the FASB issued Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. This statement requires that investments in debt and equity securities be classified as "held-to-maturity," "trading securities" or "available - -for-sale." It requires that investments classified as held-to-maturity be reported at amortized cost, that investments classified as trading securities be reported at fair value with unrealized gains and losses included in earnings and that investments classified as available-for-sale be reported at fair value with unrealized gains and losses, net of related tax, if any, reported as a separate component of stockholders' equity. The Company adopted this statement effective January 1, 1994. This statement specifically precludes retroactive application to prior years' financial statements. As the Company generally holds its investments until maturity, the impact of this accounting statement has been immaterial.
Statement of Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock Based Compensation," is effective for transactions entered into for fiscal years beginning after December 15, 1995, and applies to awards made in fiscal years beginning after December 15, 1994. This statement defines a fair-value method of accounting for stock-based compensation. As permitted by SFAS No. 123, the Company accounts for stock options under APB Opinion No. 25, under which no compensation cost has been recognized. The Company has made no awards under its stock option plans subsequent to January 1, 1995. As such, pro forma net income and earnings per share data as if compensation cost for these plans had been determined consistent with SFAS No. 123 would not differ from the reported amounts in the Company's income statement.
LEGISLATION AND PROPOSED CHANGES. From time to time, legislation is enacted -------------------------------- which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial institutions. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies and other financial institutions are frequently made in Congress, in the California legislature and before various bank regulatory agencies. No prediction can be made as to the likelihood of any major changes or the impact such changes might have on the Company. Certain changes of potential significance to the Company which have been enacted recently or others which are currently under consideration by Congress or various regulatory or professional agencies are discussed below.
FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989. On -------------------------------------------------------------------- August 9, 1989, President Bush signed into law the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). FIRREA contains provisions, which among other things: (1) establish two separate financial industry insurance funds, both administered by the FDIC - the Bank Insurance Fund and the Savings Association Fund; (2) abolish the Federal Home Loan Bank Board and establish the Office of Thrift Supervision as an office of the Treasury Department, with responsibility for examination and supervision of all savings and loan associations; (3) increase the insurance premiums paid by FDIC-insured institutions; (4) permit bank holding companies to acquire healthy savings and loan associations; (5) enhance federal banking agencies' enforcement authority over the operations of all insured depository institutions and increase the civil and criminal penalties that may be imposed in connection with violations of laws and regulations; (6) curtail investments and certain activities of state-chartered savings and loan associations; and (7) increase the capital requirements of savings and loan associations. Management of the Company does not believe that the provisions of FIRREA have had or will have a material adverse impact on the Company's consolidated financial position or results of operations.
COMPETITIVE EQUALITY BANKING ACT. The Competitive Equality Banking Act of --------------------------------- 1987 contained provisions which, among other
things: (1) permanently closed the loophole which formerly allowed for the creation of "non-bank banks"; (2) limited the restrictions imposed on banks on the availability of funds deposited by check; and (3) provided explicit leasing authority for national banks. The enactment of this legislation has not had a material adverse effect on the Company's consolidated financial condition or results of operations.
INTERSTATE BANKING. In September, 1986, California adopted an interstate ------------------- banking law. The law allows California banks and bank holding companies to be acquired by banking organizations in other states on a reciprocal basis (i.e., provided the other state's laws permit California banking organizations to acquire banking organizations in that state on substantially the same terms and conditions applicable to banking organizations solely within that state). The law took effect in two stages. The first stage, which became effective July 1, 1987, allowed acquisitions on a reciprocal basis within a region consisting of all 11 states (Alaska, Arizona, Colorado, Hawaii, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington) which currently permit acquisitions by California banking organizations of banks and bank holding companies in such states. The second stage, which became effective January 1, 1991, allows interstate acquisitions on a national reciprocal basis. The Company believes that this legislation will further increase competition as out-of-state financial institutions enter the California market. Most recently U.S. Bancorp purchased California Bancshares, Inc., a community-based holding company with approximately 21 independent banks in the surrounding area in which the Bank operates. It is anticipated that such a purchase may in fact be beneficial to the Bank as it may open opportunities to prospects that enjoy dealing with a community bank. If there is a negative effect on the Bank it might be that this merger may increase the resources available to the 21 independent banks being purchased.
CAPITAL ADEQUACY GUIDELINES. The FRB has issued capital adequacy guidelines ---------------------------- establishing a risk-based capital framework consisting of a definition of capital comprised of a core component (essentially shareholders' equity less goodwill) ("Tier 1 capital"), a supplementary component ("Tier 2 capital"), a system for assigning assets & off-balance sheet items to four weighted risk categories (with higher levels of capital being required for the categories being perceived as representing greater credit risk ) and a schedule for achieving a minimum risk-based capital ratio of 7.25% by the end of 1990 (which at least 3.625% should be in the form of common shareholders' equity) and 8% by the end of 1992 (which at least 4% should be in the form of common shareholders' equity). An institution's risk-based capital would be determined by dividing its qualifying capital by its risk weighted assets.
The guidelines make regulatory capital requirements more sensitive to the differences in risk profiles among banking institutions, take off-balance sheet items into account when assessing capital adequacy and minimize disincentives to holding liquid low-risk assets. In addition, the guidelines may require some banking institutions to increase the level of their common shareholders' equity. It is not
anticipated that the guidelines will have a material adverse effect on the Company's financial condition or results of operations over the short term. At the end of 1996, the guidelines provided for a minimum risk-based capital ratio of 8%, and this provision may limit the Company's ability to increase its assets or require the Company to raise additional equity to facilitate growth.
On August 2, 1990, the FRB adopted standards for compliance by banking organizations with risk-based capital guidelines to include a minimum leverage ratio of 3% of Tier 1 capital to total average assets (the "leverage ratio") based upon the definition of Tier 1 capital for 1996.
The FRB emphasized that the leverage ratio constitutes a minimum requirement for well-run banking organizations having diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and a favorable composite rating under the applicable regulatory rating system. Banking organizations experiencing or anticipating significant growth, as well as those organizations which do not exhibit the characteristics of a strong well-run banking organization described above, will be required to maintain minimum capital ranging from 100 to 200 basis points in excess of the leverage ratio.
The FRB leverage ratio establishes a new limit on the ability of banking organizations to increase assets and liabilities without increasing capital proportionately. In management's opinion, the leverage ratio will have no material effect on its capital needs in the foreseeable future. The Bank's leverage ratio at December 31, 1996 was 9.6% (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Adequacy" under Item #7).
EMPLOYEES - ---------
On December 31, 1996 the Bank employed 40 full time employees and 2 part time employees for a total equivalent of 41.2 full time employees. At the present time there are no salaried employees of the Company.
STATISTICAL DATA - ----------------
The following statistical data relating to the Company should be read in conjunction with the Consolidated Financial Statements which are included elsewhere in this 10-K Annual Report.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------------------------------
The following table summarizes the distribution, by amount (in thousands) and percentage of the daily average assets, liabilities, and shareholders' equity of Summit Bancshares, Inc. (consolidated) for the year ended December 31, 1996. Comparative figures for the years ended December 31, 1995 and 1994, are also provided:
The following is an analysis of Net Interest Income for 1996. Comparative figures for 1995 and 1994 are also presented on the following pages. Non-accrual loans are included in the average balances. Balances are expressed in thousands of dollars.
*Includes loan fees of $457,000
1.) Investment income rate is not calculated on a tax equivalent basis.
For the year ended December 31, 1995 ------------------------------------
*Includes loan fees of $483,000
1.) Investment income rate is not calculated on a tax equivalent basis.
For the year ended December 31, 1994 ------------------------------------
*Includes loan fees of $490,000
1.) Investment income rate is not calculated on a tax equivalent basis.
Following is an analysis of changes in Interest Income and Expense (in thousands of dollars) for 1996 over 1995. A similar comparison for 1995 over 1994 is on the following page. Changes not solely attributed to volume or rates have been allocated proportionately to volume and rate components.
INVESTMENT SECURITIES - ---------------------
The following table sets forth the book value as of December 31 for the securities indicated:
The amortized cost and estimated fair values of investment in debt securities for 1996 are as follows:
The amortized cost and estimated market value of debt securities at December 31, 1996 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There were no sales of investments in debt securities during 1996.
The following table is a summary of the relative maturities and yields of Summit Bancshares, Inc. investment securities as of December 31, 1996 and 1995. Yields on securities have been computed by dividing interest income, adjusted for amortization of premium and accretion of discount, by book values of the related securities. Investment yield is not calculated on a tax equivalent basis.
LOAN PORTFOLIO - --------------
COMPOSITION OF LOANS - --------------------
The following table shows the composition of loans (in thousands of dollars) of Summit Bancshares, Inc. as of December 31 for each respective year designated.
MATURITY, DISTRIBUTION AND INTEREST RATE - ---------------------------------------- SENSITIVITY OF LOANS - --------------------
The following table shows the maturity distribution of loans (in thousands of dollars) as of December 31, 1996.
All but two loans for $1,384,064 reported above which have maturities of over one year are at floating interest rates.
COMMITMENTS AND LINES OF CREDIT - -------------------------------
The Company 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 commitments to extend credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the statement of financial position. The contract amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. At December 31, 1996, financial instruments whose contract amounts represent credit risk:
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Most all guarantees expire within a 1 year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
A part of the subsidiary Bank's marketing strategy is to offer quality financial services to the professional and small business communities. The Company has been especially successful in targeting health care professionals. This segment has traditionally provided high levels of deposits and low loan losses. While approximately 10% of the Company's loans are concentrated with health care professionals, the Bank has had only two charge-offs totalling $133,206 since it was founded in 1982.
NON-PERFORMING LOANS AND - ------------------------ SUMMARY OF LOAN LOSS EXPERIENCE - ------------------------------- (In thousands of dollars)
The subsidiary Bank's policy is to recognize interest income on an accrual basis unless the full collectibility of principal and interest is uncertain. Loans that are delinquent 90 days as to principal or interest are placed on a non-accrual basis, unless they are well secured and in the process of collection, and any interest earned but uncollected is reversed from income. Collectibility is determined by considering the borrower's financial condition, cash flow, quality of management, the existence of collateral or guarantees and the state of the local economy.
The total OREO amount, $1,291,000, is related to two properties. One of the properties is vacant land in the Oakland Hills. The second property is two continguous parcels in the Danville/Diablo Mountain area of Alameda County. These two parcels are currently on the market for sale.
The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. The reserve is increased by provisions and reduced by net charge-offs. The Bank makes credit reviews of the loan portfolio, considers current economic conditions, loan loss experience, and other factors in determining the adequacy of the reserve balance. The allowance for loan losses is based on estimates and ultimate losses may vary from current estimates. As adjustments become necessary, they are reported in earnings in the periods in which they become known.
Any loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed under Item III of Industry Guide 3 do not (i) represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources, or (ii) represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment program.
An analysis of activity in the allowance for loan losses for the years ended December 31 is as follows:
Although it cannot be accurately predicted, it is estimated that in 1996, loan losses in the Commercial loan category may approximate $250,000 while losses in the Instalment loan category may approximate $50,000. No losses are anticipated in the Real Estate Loan category.
Allocations for Loan Loss Reserves for the next two years are as follows:
TIME DEPOSITS IN THE AMOUNT OF $100,000 AND OVER - ---- -------- -- --- ------ -- -------- --- ----
The following table sets forth by time remaining to maturity, Summit Bank's issuance of time deposits in the amount of $100,000 or more (in thousands of dollars) as of December 31 of the respective year designated:
RETURN ON EQUITY AND ASSETS - --------------------------- The following table shows key financial ratios for the years ending December 31, 1996, 1995 and 1994
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS - -------- ---- -------------------- ---- ---- --------
The following table provides an interest rate sensitivity and interest rate risk analysis for the year ended 1996. The table presents each major category of interest-earning assets and interest-bearing liabilities.
ITEM 2.
ITEM 2. PROPERTIES
When the Bank first entered into its initial lease agreement it signed a ten-year lease which commenced September 1, 1981 (with options to extend the lease on the same terms and conditions for two additional five-year periods). This space housed the permanent Head Offices for the Bank and the Company at 2969 Broadway, Oakland, California 94611 at the intersection of Broadway and 30th Street in the "Pill Hill" area. The premises consisted of approximately 3,800 square feet located in a portion of a single story building on the southwest corner at the intersection. The Bank spent approximately $388,448 on leasehold improvements at this location. Improvements consisted of a complete remodeling of the facility, including a new roof, new facade, new floor, partitions and structural improvements.
In September, 1987 the Bank entered into an additional ten year lease for 6,010 sq. ft. adjacent to its location in Oakland. The Bank utilizes approximately 2,900 sq. ft. of this new area. The Bank's cost of leasehold improvements in this new location was approximately $294,000. Improvements consisted of a complete remodeling of the facility, including a new facade, new floor, partitions and structural improvements. The initial lease in the above paragraph has expired and has been rolled into this new lease. The current monthly rent for the entire 9,810 sq. ft. is $5,226.00 subject to yearly CPI adjustments.
Commencing on December 1, 1984, the Bank leased 720 square feet of office space in a new building at 112 La Casa Via in Walnut Creek, California. This location housed the Bank's initial branch office. The building was fully serviced and the base rental was $1,274 per month subject to cost-of-living adjustments on the anniversary of each rental year. Necessary leasehold improvements were completed within the landlord's authorized allowance. The term of this lease expired on November 30, 1989, however, the Bank negotiated a month to month lease pending its move to new quarters in September, 1990. Monthly rent was $1,502.83.
In September, 1989, the Bank entered into a new lease for 1,400 sq. ft. of office space located at the corner of No. Main Street and Civic Drive in downtown Walnut Creek. This new location is twice the physical size of the old location and is closer to the financial district of Walnut Creek. The Bank moved into this new location in September, 1990. The new lease is for a term of 12 years commencing November 1, 1989 and terminates January 14, 2001. The Bank's cost for leasehold improvement in this new location was approximately $210,000. Improvements consisted of a complete remodeling of the facility, including enclosing an existing drive through facility, partitions and structural improvements. The lease provides for a monthly rent of $4,769.80, fixed for 12 years and beginning January 1, 1991.
The Emeryville Branch began operations in December, 1985 on the ground floor of the Watergate III Building at 2000 Powell Street. The Bank currently occupies approximately 2,200 square feet of space at this location, at a base rent of $2.00 per net rentable square foot ($4,390 per month). The term of this lease expired August 31, 1992 with two successive options to extend the lease by one three year option and one
five year option. The Bank renewed the lease at a base rent of $1.95 per net rentable square foot ($4,329 per month) with two three year options effective 1-1-93 which expired December 31, 1995. The Bank subsequently renewed the lease at a base rent of $2.05 per net rentabel square foot ($4,651 per month) with two three year options effective 1-1-96.
In September, 1990 the Company purchased two contiguous parcels totaling 10,000 sq. ft. adjacent to the Bank's Walnut Creek Office for a price of $544,644. Included on one of the parcels is a single story, 2,500 sq. ft. concrete block building suitable for a restaurant. The Company entered into a five year lease on April 1, 1991 with an individual who operates a Japanese restaurant at this location for a monthly rent of $4,350, triple net commencing April 1, 1992. The leasee in turn made improvements to the building to bring it to today's standards. On April 1, 1996, the Bank entered into a three year lease agreement with the son of the same Japanese restaurant for a monthly rent of $4,350, triple net ending on March 31, 1999.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is a party to claims and legal proceedings arising in the ordinary course of business. Currently, the Company has no outstanding suits brought against it.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ---------- -- ------- -- - ---- -- -------- -------
Neither the Company nor the Bank submitted any matter covered by this report to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 1996.
EXECUTIVE OFFICERS OF SUMMIT BANCSHARES, INC. --------- -------- -- ------ ----------- ----
Pursuant to General Instruction G(3), the information required by Item 401(b) and (e) of Regulation S-K concerning executive officers of the Company and the Bank is presented here rather than in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 24, 1997.
The following individuals are the executive officers of the Company as of February 28, 1997:
The following individuals are the executive officers of the Bank as of February 28, 1997:
The business experience of the executive officers follows:
Shirley W. Nelson was President and Chief Executive Officer of the Bank and ----------------- Holding Company since May, 1983 and was elected in July, 1989 to the position of Chairman. Prior to this assignment she was the Senior Vice President, Senior Loan Officer. She is currently a member of the Board of Directors' Audit Commitee, Asset and Liability Committee, Loan Committee, and Personnel Committee.
Kikuo Nakahara is Managing Director of American Express Tax and Business -------------- Services Inc. in Walnut Creek, California. Prior to this position he was a partner of Greene & Nakahara, an accounting firm in Walnut Creek since 1993, and which merged with IDS Financial Services Inc. in 1994. From 1978 to 1993 he was managing Director of Greene, Nakahara and Lew Accountancy Corporation in Oakland. He was a corporate member of Blue Shield and a speaker at continuing education courses sponsored by the California Society of Certified Public Accountants.
George H. Hollidge has been President of Hollidge Transmissions, Inc., ------------------ Oakland, transmission specialists, since 1980. Prior to 1980, Mr. Hollidge was a partner in Hollidge Hydramatic, transmission specialists.
C. Michael Ziemann has been President and Chief Operating Officer since ------------------ January 1, 1996. Prior to this position he was Chief Administrative Officer subsequent to his position as CFO and Cashier to which he was appointed in April, 1987. Prior to that he was active in the administration of the Bank and was the manager of the Bank's Walnut Creek Office since April 1985. Prior to joining the Bank, he held various positions during his 16 years with Bank of America in operations, branch management, and regional administration where he was a district administrator.
Denise Dodini has been the Senior Vice President - Senior Loan Officer at ------------- the Bank since July, 1994. Prior to joining the Bank, Denise had fifteen years of Banking experience with Bank of America, where she was involved in consumer, commercial, real estate, and corporate lending. Denise joined the Bank in October, 1989 as a Vice President, Loan Officer where she assisted clients in the Oakland Office.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED ------ --- --- ------------ ------ ----- --- ------- SECURITY HOLDER MATTERS -------- ------ -------
(a) MARKET INFORMATION. The stock of the Company is not listed on any stock ------------------- exchange but is publicly traded in limited and infrequent transactions in the "over the counter" market. According to information made available to the Company by the Market Maker, Marc F.Arnett, Hoefer & Arnett, Investment Bankers, 100 Pine Street, San Francisco, CA., the range of high and low bids for such common stock for each calendar quarter since January 1994 is as follows:
As of February 28, 1997, there were 429,224 shares of common stock of the Company issued.
(b) SHAREHOLDERS. As of February 28, 1997, there were 316 shareholders ------------- of the common stock. There were no other classes of securities outstanding.
(c) DIVIDENDS. On June 8, 1996 the Company paid a 75 cent per share cash --------- dividend in addition to a similar 75 cent per share dividend on December 8, 1996. It is the present intention of the Company to issue semi-annual cash dividends so long as said dividends do not inhibit future development. Additionally, payment of cash dividends by the Company is dependent upon payment of dividends by the Bank to the Company. Payment of cash dividends by the Bank may under certain circumstances require approval of the California Superintendent of Banks, and as a matter of law, the Bank may only declare cash dividends from the lesser of its retained earnings or its undistributed net income from the last three years. less any dividends paid during those three years. In the event that the Bank does not have retained earnings or net income for the last three fiscal years, the Bank may declare dividends only with the prior written consent of the Superintendent.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information of Summit Bancshares, Inc. for the years from the period January 1, 1992 through December 31, 1996 should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this Annual Report.
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The matters addressed in this Annual Report, with the exception of the historical information presented, may incorporate certain forward-looking statements involving risks and uncertainties, including the risks discussed under the heading "Certain Factors That May Affect Future Results" and elsewhere in this Report.
This section is a review of Summit Bancshares, Inc.'s (the Company) results as reflected in the Consolidated Financial Statements. It discusses the principal items of income and expense and the factors affecting the Company's financial position. This discussion should be read together with the Selected Financial Data and Consolidated Financial Statements included elsewhere in the Annual Report.
The Company's wholly owned subsidiary, Summit Bank (the "Bank"), has conducted the business of a commercial bank since 1982. It provides commercial credit and various checking and savings account products for small and midsized businesses and for professionals as well as individual consumers.
SUMMARY OF EARNINGS
The Company's net income for 1996 was $1,412,000 compared to $1,316,000 in 1995 and $908,000 in 1994. The increase in 1996 net income from 1995 is mainly attributed to decrease in the provision for loan losses due to improved loan quality. The increase in 1995 net income from 1994 was mainly attrubuted to an increase in net interest margin. The net income of $1,412,000 for 1996 represents $3.08 per share earnings, compared to $2.86 per share in 1995 and $2.09 per share in 1994.
NET INTEREST INCOME
The primary source of income for the Company is Net Interest Income or "Gross Margin" which is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities. In general, net interest income is affected by a change in interest rates. As interest rates rise or fall, so will the Company's net interest income, excluding changes in total assets. The primary reasons for this is that the Company's investment portfolio earns income on a fixed interest rate basis while a majority of the lending portfolio earns income on a floating interest rate basis. In addition, all investments are held to maturity and 43% of the investment portfolio matures in one year. Regarding loans, approximately 63% of the loans outstanding mature within one year, while the longest maturity is 18 years. In a declining interest rate environment interest income on loans will generally decline faster than the investment income and vice versa. To offset any decline in interest income due to a declining interest rate environment, the Company monitors closely its interest expense on deposits. Of the total time certificates of deposit outstanding at year end, all but 1% mature within one year while 63% mature within 90 days. Thus the Company is able to minimize the effects of a declining interest rate environment by repricing these instruments on a more frequent basis than if the average maturity were longer than 1 year. Should interest rates fall slightly 1997 net interest income may further decrease in the short term, however, that potential decrease would be minimized by an increase in assets.
Net interest income for 1996 was $5,439,000, a decrease of .5% over the $5,464,000 posted in 1995, and as compared to $4,677,000 in 1994. The decrease in 1996 was primarily the result of a decrease in the average prime rate which decreased from 8.85% in 1995 to 8.25% in 1996. While average earning assets increased 9.6% from $71,245,000 in 1995 to $78,107,000 in 1996, average total deposits also increased 9.1% from $68,492,000 in 1995 to $74,752,000 in 1996, and as compared to $68,022,000 in 1994. $3,123,000 of the 1996 increase was centered in interest bearing accounts.
The increase in 1995 was primarily the result of an increase in the average prime rate which increased from 7.14% in 1994 to 8.85% in 1995. In addition, net interest income improved due to an increase in average earning assets which increased 5.1% from $67,769,000 in 1994 to $71,245,000 in 1995. Average total deposits also increased .7% from $68,022,000 in 1994 to $68,492,000 in 1995. $459,000 of the 1995 increase was centered in interest bearing accounts.
Average loans outstanding increased by 2.7% in 1996 to $48,355,000 as compared to $47,083,000 in 1995 and $49,583,000 in 1994. Average outstanding investments increased 19% to $29,989,000 in 1996 as compared to $24,222,000 in 1995 and $18,186,000 in 1994. The average loan to deposit ratio declined in 1996 to 65.2% as compared to 67.2% in 1995 and 72.9% in 1994. The yield on average earning assets was 9.3% in 1996 as compared to 9.8% in 1995 and 8.6% in 1994.
Interest expense increased 26% to $1,938,000 in 1996 from $1,536,000 in 1995 and $1,148,000 in 1994. Average interest-bearing deposits increased 8.5% in 1996 to $52,715,000 as compared to $48,599,000 in 1995 and $48,140,000 in 1994 and were primarily centered in the more expensive time certificate deposit accounts. Average non-interest bearing deposits increased 10.8% in 1996 to $22,037,000 as compared to $19,893,000 in 1995 and $18,882,000 in 1994. Overall cost of funds in 1996 was 2.5% as compared to 3.2% in 1995 and 2.4% in 1994.
NON-INTEREST INCOME AND EXPENSE
Non-interest income, consisting primarily of service charges on deposit accounts, and other customer fees and charges including rents, was $539,000 in 1996, a decrease from $550,000 in 1995 and $682,000 in 1994. Total service charge income from deposit accounts decreased by15.5% from $368,000 in 1995 to $311,000 in 1996 while total income from other charges increased 25.3% from $182,000 in 1995 to $228,000 in 1996. This compares to 1994 figures of $357,000 in deposit accounts income and $325,000 in income from other charges. The deposit income decrease in 1996 was primarily related to a decrease in service charges related to return check charges which was $31,000 less than 1995 receipts and decrease in income from service charges on demand deposit accounts. The increase in other income charges in 1996 was related to a 102% increase in wire transfer fees due to volume and charges on early withdrawal penalties.
The deposit income increase in 1995 was primarily related to an increase in service charges related to return check charges which was $25,000 more than 1994 receipts. The decrease in other income charges in 1995 was related to the sale of an other real estate owned property for a gain of $192,000 in 1994.
Non-interest expenses increased 1.6% to $3,408,000 in 1996, from $3,355,000 in 1995 and $3,142,000 in 1994. Salary expense increased 5.2% from $1,786,000 in 1995 to $1,878,000 in 1996 and was due to normal staffing needs. In addition, director fees increased from $76,000 in 1995 to $103,000 in 1996 which is comparative to fees paid to directors of other banks of a similiar size, and consulting fees which increased from $78,000 in 1995 to $98,000 in 1996 and was due to the implementation of a sales culture program for all bank calling officers. These increases where partially offset by the decrease in FDIC assessment which decrease from $84,000 in 1995 to $2,000 in 1996 and a decrease in foreclosure expense related to the carrying value of foreclosed properties.
The increase in 1995 can be attributed to an increase in foreclosure and real estate owned expense which increased from $84,000 in 1994 to $118,000 in 1995, and was related to carrying costs on properties. Salary expense increased 6.2% from $1,681,000 in 1994 to $1,786,000 in 1995 and was due to normal staffing needs. In addition, data processing expense increased from $56,000 in 1994 to $90,000 in 1995 primarily due to a enhancement to our in-house computer system. Occupancy and equipment expense decreased to $453,000 in 1996 from $457,000 in 1995 and $484,000 in 1994. The decrease was primarily related to a reduction in utilies expense and maintenance.
The Bank's allowance for loan losses as a percent of loans was 2.1% and 2.1% as of December 31, 1996 and 1995, respectively. The average in the industry for banks our size is approximately 1.9%. Total gross loans charged off in 1996 were $83,000 compared to $334,000 in 1995 and $518,000 in 1994.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects a combined Federal and California effective tax rate of 42.2% in 1996, compared to 41.4% in 1995 and 41.3% in 1994 as described in Note 6 to the Financial Statements.
LIQUIDITY AND CAPITAL
Liquidity is defined as the ability to meet present and future obligations either through the sale or maturity of existing assets or by the acquisition of funds through liability management. Additionally, the Bank's investment portfolio is managed to provide liquidity as well as appropriate rates of return. It is the Company's practice to hold securities until maturity rather than actively trade its portfolio. As of December 31, 1996 the Company had $19,169,000 in cash and cash equivalents compared to $16,428,000 as of December 31, 1995, and $9,246,000 as of December 31, 1994. The ratio of net loans to deposits as of December 31, 1996, was 63.9% compared to 66.0% as of December 31, 1995, and 68.8% as of December 31, 1994.
The Bank maintains a portion of its assets in loans, time deposits with other financial institutions and investments with short-term maturities. More specifically, loans, time deposits with other financial institutions and investments due within one year totaled $56,323,000 at December 31, 1996, as compared to $52,455,000 at December 31, 1995, and $44,482,000 at December 31, 1994, which is equivalent to 60.6%, 60.4%, and 56.7% of total assets at the corresponding year ends, respectively. During 1996, the Company repurchased 1,830 shares of its common stock for a total price of $55,288. The Company plans to continue its repurchase program as an additional avenue for liquidity for its shareholders as long as it is economically appropriate to do so. The program has not affected the Company's liquidity or capital positions or its ability to operate as the Company's capital growth has exceeded its asset growth. In addition, the Company's subsidiary Bank remains more than well capitalized under current regulatory requirements.
CREDIT CONCENTRATION
A part of the subsidiary Bank's marketing strategy is to offer quality financial services to the professional and small business communities. The Company has been especially successful in targeting health care professionals. This segment has traditionally provided high levels of deposits and low loan losses. While approximately 10.4% of the Company's loans are concentrated with health care professionals, the Bank has had only two charge-offs related to this business segment totaling $133,206 since it was founded in 1982. Health care reform has received close scrutiny over the past few years as the Clinton administration continues to attempt to restructure the method by which health care is provided to the public. To date it appears that such reform is not likely to occur in the immediate future. However, over the past few years, the doctors and health care providers in the Company's communities have been adjusting to the emerging trends in this industry. This includes higher percentages of patients on Medicare; closer scrutiny from insurance carriers; and movement to managed care and "capitation"contracts. Through this process, the Company has not experienced any noticeable deterioration in credit quality. The Company cannot predict the ultimate outcome of health care reform. However, the Company closely monitors the status of reform and considers the potential impact of any reform on its current customers and its underwriting of loans to healthcare professionals.
NON-PERFORMING ASSETS
The decrease in non-performing assets from December 31, 1995 to December 31, 1996 is due primarily to a decrease in loans 90 days or more past due and still accruing. Other real estate owned consists of 3 vacant land parcels in the California counties of Alameda and Contra Costa. All properties are being actively marketed. Current comparables favor a complete recovery at the time of sale. At December 31, 1996 no loans were on non-accrual status.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The primary factor which may affect future results is the fluctuation of interest rates in the market place more commonly referred to as interest rate risk. Interest rate risk is the exposure of a bank's current and future earnings and equity capital arising from adverse movements in interest rates. It results from the possibility that changes in interest rates may have an adverse effect on a bank's earnings and its underlying economic value. Changes in interest rates affect a bank's earnings by changing its net interest income and the level of other interest-sensitive income and operating expenses. As mentioned previously, the potential decrease in an declining interest rate environment would be minimized by an increase in assets. In addition, earnings and growth of the company are and will be affected by general economic conditions, both domestic and international, and by monetary and fiscal policies of the United States Government, particularly the Federal Reserve Bank.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated statement of financial position as of December 31, 1996 and 1995 and the consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 1996, 1995, and 1994, together with the report of independent public accountant, follow:
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 1996 AND 1995
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
SUMMIT BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Summit Bancshares, Inc. (the Company) and its wholly owned subsidiary, Summit Bank (the Bank), a California state-chartered bank, conform with generally accepted accounting principles and general practice within the banking industry. The following are descriptions of the more significant of these policies.
NATURE OF OPERATIONS
The Bank has conducted the business of a commercial bank since July 1, 1982. The Bank operates 3 branches and provides commercial credit and other banking services to small and mid-sized businesses and professionals, including professional firms of physicians, attorneys, accountants, real estate developers, retailers and service firms, wholesalers and distributors.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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 period. Actual results could differ from those estimates.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany transactions have been eliminated in consolidation. Certain prior years' amounts have been reclassified to conform with present year presentation.
INVESTMENT SECURITIES
All investment securities are classified as held to maturity and are carried at cost, adjusted for amortization of premium and accretion of discount using a method that approximates the effective interest method. Gains and losses on sale or redemption of securities are determined using the specific identification method.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation on furniture and equipment is calculated on a straight-line basis over the estimated useful life of the property, generally seven years for furniture and three to fifteen years for equipment. Leasehold improvements are amortized over the life of the related lease or the estimated life of the improvements, whichever is shorter.
LOANS
Loans are stated at the principal amount outstanding. Interest income is accrued daily using the simple interest method. Loans are placed on nonaccrual status when management believes that there is serious doubt as to the collection of principal or interest, or when they become contractually past-due 90 days or more with respect to principal or interest, except for loans that are well secured and in the process of collection. When loans are placed on nonaccrual status, any accrued but uncollected interest is reversed from current income, and additional income is recorded only as payments are received and where future collection of principal is probable. Loan origination and commitment fees, offset by certain direct loan origination costs, are deferred and amortized as yield adjustments over the contractual lives of the related loans.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based upon estimates of potential loan losses and is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. The allowance is increased by provisions charged to expense and reduced by net charge-offs. The Bank considers its past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, current economic conditions and other factors in periodic evaluations of the adequacy of the allowance balance. The allowance for loan losses is based on estimates, and ultimate losses may vary from current estimates.
OTHER REAL ESTATE OWNED
Other real estate owned is comprised of properties acquired through foreclosure. These properties are carried at the lower of the recorded loan balance or their estimated fair market value based on appraisal. When the recorded loan balance exceeds the fair value of the property, the difference is charged to the allowance for loan losses at the time of acquisition. Subsequent declines in value from the recorded amount, if any, and gains or losses upon disposition are included in noninterest expense or income as appropriate. Operating expenses related to other real estate owned are charged to noninterest expense in the period incurred.
INCOME TAXES
Income taxes reported in the statements of income are computed at current tax rates, including deferred taxes resulting from timing differences between the recognition of items for tax and financial reporting purposes.
The Company records deferred taxes based on the liability method. The net deferred tax liability or asset is determined based on the tax effects of the differences between the book and tax bases of the various balance sheet assets and liabilities. Under this method, the computation of the net deferred tax liability or asset gives current recognition to changes in tax laws and rates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds sold are purchased and sold for one-day periods.
2. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investments in debt securities held-to-maturity as of December 31, 1996 are as follows:
The amortized cost and estimated fair values of investments in debt securities held-to-maturity as of December 31, 1995 are as follows:
The amortized cost and estimated fair value of debt securities at December 31, 1996 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There were no sales of investments in debt securities during 1996 or 1995. At December 31, 1996, securities carried at $994,449 were pledged to secure public deposits, as required by law.
3. LOANS AND ALLOWANCE FOR LOAN LOSSES
A summary of loans as of December 31, 1996 and 1995 (net of unearned loan fees of $273,755 and $253,535, respectively), is as follows:
The changes in the allowance for loan losses for the years ended December 31, 1996, 1995 and 1994 are as follows:
The following table provides information with respect to the subsidiary Bank's past due loans and components for non-performing assets at the dates indicated.
The subsidiary Bank's policy is to recognize interest income on an accrual basis unless the full collectibility of principal and interest is uncertain. As mentioned previously, loans that are delinquent 90 days as to principal or interest are placed on a non-accrual basis, unless they are well secured and in the process of collection, and any interest earned but uncollected is reversed from income. Collectibility is determined by considering the borrower's financial condition, cash flow, quality of management, the existence of collateral or guarantees and the state of the local economy.
The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan,"and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan Income Recognition and Disclosures," as of January 1, 1995. A loan is impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's original effective interest rate. As a practical expedient, impairment may be measured based on the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. When the measure of the impaired loan is less then the recorded investment in the loan,the impairment is recorded through a valuation allowance.
The Company had previously measured the allowance for credit losses using methods similar to those prescribed in SFAS No. 114. As a result of adopting these statements, no additional allowance for loan losses was required as of January 1, 1995. The recorded investment in impaired loans was not material as of December 31, 1996 and 1995. Interest payments received on impaired loans are recoreded as interest income unless collection of the remaining recorded investment is doubtful at which time payments received are recorded as reductions of principal. The average recorded investment in impaired loans and interest recognized on impaired loans were not material for the years ended December 31, 1996 and 1995.
The Bank grants commercial, construction and installment loans to customers mainly in the California counties of Alameda and Contra Costa. Although the Bank has a diversified loan portfolio, a substantial portion of its commercial loan portfolio is concentrated in loans to customers in or related to the medical profession. The greater portion of these loans are secured by real estate located within the two counties. The amount in other real estate owned is comprised of three vacant land parcels.
4. RELATED PARTY TRANSACTIONS
The Bank has, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal shareholders and their associates. In management's opinion and as required by federal law, loans to related parties are granted on the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with others, and do not involve more than normal risk of collectibility or present other unfavorable features. As of December 31, 1996 and 1995, loans outstanding to directors, officers, and principal shareholders and their known associates were $372,087 and $243,355, respectively. In 1996, advances on such loans were $656,898 and collections were $406,978. In 1995 advances on such loans were $443,709 and collections were $319,930.
During 1995, two directors resigned with loans outstanding of $168,686 at December 31, 1996 and whose balance is not included in the 1996 loan total. In addition, one newly elected director had loans totalling $47,498 at December 31, 1995 and is not included in the 1995 total but whose activity is included in the 1996 activity.
5. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
Depreciation and amortization included in occupancy and equipment expenses were $141,061, $142,154 and $155,284 for the years ended December 31, 1996, 1995 and 1994, respectively.
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
The components of the net deferred tax asset of the Company as of December 31, 1996 and 1995 were as follows:
The provisions for income taxes applicable to operating income differ from the amount computed by applying the statutory federal tax rate to operating income before taxes. The reasons for these differences are as follows:
7. SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE The Company has 2,000,000 authorized shares of no par value, serial preferred stock of which no shares have been issued. Earnings per share amounts have been computed on the basis of the weighted average number of shares of common stock and common stock equivalents outstanding during the years, including the effect of stock options.
8. REGULATORY CAPITAL ------------------
The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 1996, that the Company and the Bank meet all capital adequacy requirements to which they are subject.
As of December 31, 1996, the most recent notification from Federal Deposit Insurance Corporation categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.
The consolidated and Bank's actual capital amounts and ratios are also presented in the table.
9. STOCK OPTION PLAN -----------------
The Company adopted an incentive stock option plan in 1982 and reserved 40,000 shares of the Company's common stock for issuance under this plan. In 1986, the Directors and shareholders approved increasing the number of shares in this plan to 90,000. The additional shares were registered in accordance with federal and state securities laws in 1987. In 1987, the Company issued a 10% stock dividend which increased the number of shares in this plan to 99,000. Options may be granted at a price not less than the fair market value of the stock at the date of grant, become exercisable in cumulative 10% annual installments commencing one year after the date of grant and expire 10 years from the date of grant.
In 1992, the Shareholders approved the 1992 Employee and Consultant Stock Option Plan (the "1992 Plan") which was designed to replace the 1982 Incentive Stock Option Plan that expired on February 28, 1992, after which no new unallocated stock options may be granted. The 1992 Plan was designed to carry forward the remaining 82,995 options issued but not exercised under the 1982 Incentive Plan at the then current market price. No new additional shares of the Company have been reserved for issuance under the 1992 Plan.
In addition to the above plan, Shareholders approved, in 1989, the 1989 Non- Qualified Stock Option Plan for Directors, including Advisory Board members, and reserved 35,000 shares of the Company's common stock for issuance under this plan. The plan was established to give appropriate recognition to this group of individuals for their continuing responsibility for the Company's growth and profitability.
Statement of Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock Based Compensation," is effective for transactions entered into for fiscal years beginning after December 15, 1995, and applies to awards made in fiscal years beginning after December 15, 1994. This statement defines a fair-value method of accounting for stock-based compensation. As permitted by SFAS No. 123, the Company accounts for stock options under APB Opinion No. 25, under which no compensation cost has been recognized. The Company has made no awards under its stock option plans subsequent to January 1, 1995. As such, pro forma net income and earnings per share data as if compensation cost for these plans had been determined consistent with SFAS No. 123 would not differ from the reported amounts in the Company's income statement.
The following table summarizes the stock option activity under the 1982 Incentive Stock Option Plan for the years ended December 31, 1996, 1995, and 1994.
As of December 31, 1996, 1995, and 1994, 29,429, 33,623, and 28,384 of the options, respectively, were exercisable. The options outstanding at December 31, 1996, have exercise prices between $10.00 and $13.50 with a weighted average exercise price of $11.14 and a weighted average remaining contractual life of 4.2 years.
The following table summarizes the stock option activity under the 1992 Employee and Consultant Stock Option Plan during the years ended December 31, 1996, 1995, and 1994.
As of December 31, 1996, 1995, and 1994, 1,620, 860, and 0 of the options, respectively, were exercisable. All of the options outstanding at December 31, 1996, have an exercise price of $17.75 and a weighted average remaining contractual life of 7.6 years.
There have been no grants, exercises, expirations, or forfeitures during the years ended December 31, 1996, 1995, and 1994 under the 1989 Non-Qualified Stock Option Plan. As of December 31, 1996, 1995, and 1994, no options were outstanding under this Plan.
10. RESTRICTIONS
The Bank is regulated by the Federal Deposit Insurance Corporation, whose regulations do not specifically limit payment of dividends, and the California State Banking Department. California banking laws limit dividends to the lesser of retained earnings or net income less dividends paid for the last three years. Under these restrictions, at December 31, 1996, the Bank could pay dividends to the Company of up to approximately $1,266,053 without prior regulatory approval.
11. COMMITTMENTS AND CONTINGENT LIABILITIES
The Company is obligated for rental payments under certain operating lease and contract agreements. Total rental expense for all leases included in occupancy and equipment expenses was $208,665, $208,215, and $182,974 for the years ended December 31, 1996, 1995 and 1994.
At December 31, 1996, the approximate future minimum payments for noncancelable leases with initial or remaining terms in excess of one year were as follows:
1997 $158,151 1998 113,055 1999 57,238 2000 57,238 2001 4,770
The Company is subject to various pending and threatened legal actions which arise out of the normal course of business. In the opinion of management, the disposition of claims currently pending will not have a material adverse effect on the Company's financial position.
12. PENSION PLAN
The Company provides pension benefits for all its eligible employees through a 401(k) Profit Sharing Program which was adopted in 1984. Under the terms of the plan, eligible employees are allowed to contribute, under the 401(k) portion of the plan, up to 15% of their salaries. The Company in turn will match 25% of the employee's contribution up to a maximum of $500 annually. Under this part of the plan, $7,018 was contributed in 1996, $4,425 in 1995 and $3,608 in 1994.
In addition, the Company may contribute up to 15% of eligible employees' annual compensation to the profit sharing portion of this plan. Such contributions were $78,398 in 1996, $92,156 in 1995, and $56,650 in 1994. Employees' interest in the contributions made by the Company on their behalf become 100% vested in accordance with the seven year program. Any forfeited amounts are redistributed among the remaining participants in the plan.
13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company 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 commitments to extend credit, and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the statement of financial position. The contract amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. At December 31, 1996, financial instruments whose contract amounts represent credit risk: Contract Amount -------- ------ Commitments to extend credit in the future $13,987,233 Standby letters of credit 1,407,830
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Most all guarantees expire within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Approximately 10.4% of the Company's loans are concentrated with health care professionals.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS No.107), "Disclosures about Fair Value of Financial Instruments," requires the Bank to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the balance sheet, for which it is practical to estimate fair value. Following is a summary of the estimated fair value for each class of financial instrument as of December 31, 1996 and the methods and assumptions used to evaluate them:
Cash and due from banks have a relatively short period of time between their origination and their expected realization and are valued at their carrying amounts. The fair value of investment securities and due from banks - time were estimated using quoted market prices or dealer quotes. The allowance for loan losses and overdrafts are valued at the carrying amount. All other loans are valued by loan type. Loans are spread monthly by maturity and repricing date. To determine the fair value the interest rate used to discount the cash flows is the current market rate for a like class of loans. Loan fees were not taken into consideration. The fair value of noninterest-bearing, interest-bearing transaction accounts and savings deposits is the amount payable on demand as of December 31, 1996. The fair value of fixed-maturity certificates of deposits is estimated using the rates currently offered for deposits of similar remaining maturities.
The Bank has off balance sheet commitments comprising of letters of credit and loan commitments with a contract amount of $1,407,830, and $13,987,233, respectively. The fair value of these off balance sheet commitments is not material.
SUMMIT BANCSHARES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Summit Bancshares, Inc.:
We have audited the accompanying consolidated statements of financial position of SUMMIT BANCSHARES, INC. (a California corporation) AND SUBSIDIARY as of December 31, 1996 and 1995, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Summit Bancshares, Inc. and subsidiary as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN & COMPANY - ------------------------------- San Francisco, California January 10, 1997
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ------------- -- ---------- --- --------- ----------
Since the date of organization of the Company, there have been no disagreements on accounting and financial disclosures or changes in accountants.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT --------- --- --------- -------- -- --- ----------
The information required by paragraphs (a), (c) (d), (f) and (g) of this item is presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held on April 24, 1997 under "Election of Directors," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year. The information concerning executive officers requested by paragraphs (b) and (e) is set forth under Part I in a separate Item captioned Executive Officers of Summit Bancshares, Inc.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION --------- ------------
The information required by this item in presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held on April 24, 1997. under "Executive Compensation," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND -------- --------- -- ------- ---------- ------ --- MANAGEMENT ----------
The information required by this item is presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held on April 24, 1997, under "Principal Security Holders" and "Security Ownership of Management," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------- ------------- --- ------- ------------
The information required by this item is presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 24, 1997, under "Certain Relationships and Related Transactions," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. CONSOLIDATED FINANCIAL STATEMENTS. ------------ --------- -----------
The following Financial Statements are included in this Report in Item 8.
Consolidated Statement of Financial Position - December 31, 1996 and
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994
Statements of Changes in Shareholders' Equity (Consolidated and Parent Company Only) for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements
Auditors' Report
(b) 2. FINANCIAL STATEMENT SCHEDULES. --------- --------- ----------
Not Applicable
In accordance with the rules of Regulation S-X, the required schedules are not submitted because they are not applicable to or required of the Company.
(c) 3. INDEX TO EXHIBITS. ----- -- ---------
The following exhibits are incorporated by reference pursuant to Item 601 of Regulation S-K:
- ----------------
1. Incorporated by reference to Exhibit 2.1 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
2. Incorporated by reference to Exhibit 2.2 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
3. Incorporated by reference to Exhibit 3.1 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
4. Incorporated by Reference to Exhibit 9.1 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
5. Incorporated by reference to Exhibit 9.2 of Registrant's Exhibits to Post-Effective Amendment No. 1 to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on March 11, 1982.
6. Incorporated by reference to Exhibit 9.4 of Registrant's Exhibits to Post-Effective Amendment No. 1 to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on March 11, 1982.
7. Incorporated by reference to Exhibit 10.4 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1983.
8. Incorporated by reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1984.
9. Incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985.
10. Incorporated by reference to Exhibit 10.10 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985.
11. Incorporated by reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987.
12. Incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
13. Incorporated by reference to Exhibit 10.10 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
14. Incorporated by reference to Exhibit 10.11 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
15. Incorporated by reference to Exhibit 10.12 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
16. Incorporated by reference to Exhibit 10.13 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
17. Incorporated by reference to Exhibit 2.2 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
18. Incorporated by reference to Exhibit 10.15 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
19. Incorporated by reference to Exhibit 10.16 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
(b) Reports on Form 8-K -------------------
None submitted for the year.
SIGNATURES
Pursuant to the requirements of Section 13 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.
/s/ Shirley W. Nelson Date: March 28, 1997 By: ------------------------- Shirley W. Nelson, Chief Chairman and CEO (Principle Executive Officer)
/s/ Kikuo Nakahara Date: March 28, 1997 By: -------------------------- Kikuo Nakahara (Chief Financial Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints SHIRLEY W. NELSON and KIKUO NAKAHARA, and each or any one of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents or any of them, or their substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been executed in Oakland, California, by the following persons on behalf of the Registrant on the capacities and on the dates indicated.