##### Table of Contents




SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D. C. 20549





FORM 10-Q





---




QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





FOR QUARTER ENDED:    MARCH 31, 2002





COMMISSION FILE NUMBER:    0-11108





---




SUMMIT BANCSHARES, INC.





STATE OF CALIFORNIA





2969 BROADWAY, OAKLAND CALIFORNIA 94611


(510) 839-8800





I.R.S. IDENTIFICATION NUMBER


94-2767067





---




Indicate by the check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   x     NO  ̈





The number of shares
outstanding of the registrants common stock was 1,854,328 shares of no par value common stock issued as of March 31, 2002




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PagePART IFINANCIAL INFORMATIONITEM 1SUMMIT BANCSHARES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS

3Consolidated Balance Sheets

3Consolidated Statements of Income

4Consolidated Statement of Cash Flows

5Consolidated Statement of Changes in Shareholders Equity

6Notes to Financial Statements

7Interest Rate Risk Reporting Schedule

9ITEM 2Managements Discussion and Analysis of Financial Condition and Results of Operations

10PART IIOTHER INFORMATION

17ITEMS 1-6

17




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SUMMIT BANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF BALANCE SHEETS





MARCH 31, 2002 AND DECEMBER 31, 2001


03/31/02

12/31/01Unaudited

UnauditedASSETSCash and due from banks

$
7,444,298

$
5,532,202Federal funds sold


31,650,000


20,070,000Cash and cash equivalents


39,094,298


25,602,202Time deposits with other financial institutions


24,717,026


27,189,613Investments held to maturity, at cost (fair value of $2,053,438 at March 31, 2002 and $2,074,688 at December 31, 2001)


2,025,758


2,029,750Loans


95,614,036


88,648,893Less: allowance for loan losses


1,534,304


1,506,750Net Loans


94,079,732


87,142,143Premises and equipment, net


852,526


804,115Interest receivable and other assets


4,780,568


4,884,324Total Assets

$
165,549,908

$
147,652,147LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Demand

$
40,869,264

$
38,484,086Interest-bearing transaction accounts


50,090,393


48,553,348Savings


2,609,322


2,566,402Time certificates $100,000 and over


37,099,470


32,420,495Other time certificates


15,245,759


6,719,637Total Deposits


145,914,208


128,743,968Interest payable and other liabilities


1,035,898


698,311Total Liabilities


146,950,106


129,442,279Shareholders EquityPreferred Stock, no par value:2,000,000 shares authorized, no shares outstanding


0


0Common Stock, no par value:3,000,000 shares authorized;1,854,328 shares outstanding at March 31, 2002 and 1,850,492 at December 31, 2001


3,764,953


3,752,486Retained Earnings


14,834,849


14,457,382Total Shareholders Equity


18,599,802


18,209,868Total Liabilities and Shareholders Equity

$
165,549,908

$
147,652,147








The accompanying notes are an integral part of
these consolidated financial statements







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SUMMIT BANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF INCOME





FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001





Unaudited Three Months Ended 3-31-02

Unaudited Three Months Ended 3-31-01Interest income:Interest and fees on loans

$
1,804,613

$
2,294,146Interest on time deposits with other financial institutions


312,188


391,851Interest on U.S. government treasury securities


22,258


111,864Interest on federal funds sold


110,446


331,051Total interest income


2,249,505


3,128,912Interest expense:Interest on deposits


499,877


863,719Total interest expense


499,877


863,719Net interest income


1,749,628


2,265,193Provision for loan losses


17,000


97,000Net interest income after provision for loan losses


1,732,628


2,168,193Non-interest income:Service charges on deposit accounts


63,019


55,121Other customer fees and charges


72,660


34,144Total non-interest income


135,679


89,265Non-interest expense:Salaries and employee benefits


806,260


711,973Occupancy expense


75,029


108,177Equipment expense


80,181


57,636Other


276,085


285,890Total non-interest expense


1,237,555


1,163,676Income before income taxes


630,752


1,093,782Provision for income taxes


253,285


458,007Net Income

$
377,467

$
635,775Earnings per share:Earnings per common share

$
0.20

$
0.35Earnings per common share assuming dilution

$
0.20

$
0.34Weighted average shares outstanding


1,851,941


1,837,548Weighted avg. shrs. outsdg. assuming dilution


1,867,379


1,867,896





The accompanying notes are an integral part of these consolidated financial statements




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SUMMIT BANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF CASH FLOWS





FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001


(UNAUDITED)


Three Months Ended 3-31-02


Three Months Ended 3-31-01Cash flows from operating activities:Interest received

$
1,925,464


$
2,479,642Fees received


425,305



268,559Interest paid


(530,300
)


(854,302
)Cash paid to suppliers and employees


(879,558
)


(885,151
)Income taxes paid


0



(473,764
)Net cash provided by operating activities


940,911



534,984Cash flows from investing activities:(Increase) decrease in time deposits withother financial institutions


2,472,587



4,502,167Maturity of investment securities


3,992



8,465,000Net (increase) decrease in loans to customers


(7,000,607
)


3,690,938(Increase) decrease in premises and equipment


(107,494
)


(8,098
)Net cash provided by (used in) investing activities


(4,631,522
)


16,650,007Cash flows from financing activities:Increase (decrease) in demand, interest bearing transaction, and savings deposits


3,965,143



6,714,589Net increase (decrease) in time deposits


13,205,097



(1,206,385
)Exercise of Stock Option


12,467



0Net cash provided by financing activities


17,182,707



5,508,204Net increase in cash and cash equivalents


13,492,096



22,693,195Cash and cash equivalents at the beginning of the period


25,602,202



18,809,372Cash and cash equivalents at the end of the period

$
39,094,298


$
41,502,567Reconciliation of net income to net cash provided by operating activities:Net Income

$
377,467


$
635,775Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


59,083



51,758Provision for loan losses and OREO losses


17,000



97,000(Increase) decrease in interest receivable & other assets


103,756



(602,285
)Increase (decrease) in unearned loan fees


46,018



(13,879
)Increase (decrease) in interest payable & other liabilities


337,587



366,615Total adjustments


563,444



(100,791
)Net cash provided by operating activities

$
940,911


$
534,984





The accompanying notes are an integral part of these consolidated financial statements




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SUMMIT BANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY





FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001


(UNAUDITED)





Number of Shares Outstanding

Common Stock

Retained Earnings

TotalBalance at December 31, 2000

1,837,548

$
3,699,018

$
13,136,106

$
16,835,124Net Income

0


0


635,775


635,775Balance at March 31, 2001

1,837,548


3,699,018


13,771,881


17,470,899Balance at December 31, 2001

1,850,492


3,752,486


14,457,380


18,209,868Stock Options Exercised

3,836


12,467


0


12,467Net Income

0


0


377,467


377,467Balance at March 31, 2002

1,854,328

$
3,764,953

$
14,834,849

$
18,599,802

















The accompanying notes are an integral part of these consolidated financial statements




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SUMMIT BANCSHARES, INC. AND SUBSIDIARY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.    Consolidated Financial Statements





In the opinion of management, the unaudited interim consolidated financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the Companys financial position at March 31, 2002 and the results of operations for the three months ended March 31, 2002 and 2001 and cash flows for the three months ended March 31, 2002 and
2001.





Certain information and footnote disclosures presented in the Companys annual consolidated financial statements are
not included in these interim financial statements. Accordingly, the accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the
Companys 2001 Annual Report to Shareholders, which is incorporated by reference in the Companys 2001 annual report on Form 10-K. The results of operations for the three months ended March 31, 2002 are not necessarily indicative of the
operating results for the full year.





2.    Comprehensive Income





The Company had no items of other comprehensive income for the three-month period ended March 31, 2002 and 2001. Accordingly, total comprehensive income was equal to net income for each
of those periods





3.    Segment Reporting





The Company is principally engaged in community banking activities through the three banking offices of its subsidiary bank. The community banking activities include accepting deposits,
providing loans and lines of credit to local individuals and businesses, and investing in investment securities and money market instruments. The three banking offices have been aggregated in to a single reportable segment. Because the
Companys financial information is internally evaluated as a single operating segment, no separate segment information is presented. The combined results are reflected in these financial statements.




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SUMMIT BANCSHARES, INC. AND SUBSIDIARY





NOTES TO CONSOLIDATED FINANCIAL STATEMENT(Continued)







4.    Earnings Per Share





The following table reconciles the numerator and denominator of the basic and diluted earnings per share computations:





Net Income (Loss)

Weighted Avg. Shares

Per Share AmountFor the quarter ended March 31, 2002Basic Earnings per share

$
377,000

1,854,328

$
.20Stock Options




17,438Diluted Earnings per share

$
377,000

1,871,766

$
.20Net Income

Weighted Avg. Shares

Per Share AmountFor the quarter ended March 31, 2001Basic Earnings per share

$
636,000

1,837,548

$
.35Stock Options




30,348Diluted Earnings per share

$
636,000

1,867,896

$
.34





For the periods reported, the Company had no reconciling items between net income
and income available to common shareholders.




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INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS





The following table provides an interest rate sensitivity and interest rate risk analysis for the quarter ended March 30, 2002. The table presents each
major category of interest-earning assets and interest bearing-liabilities.





INTEREST RATE RISK REPORTING SCHEDULE





REPORTING INSTITUTION: SUMMIT BANK


REPORTING DATE: 3-31-02





Remaining Time Before Maturity or Interest Rate Adjustment($000.00) Omitted Total

Up 3

>3 <1


>1 <3

>3 <5

>5 <10

Over 10 yearsI.

Earning assetsA.  Investments:1.  U. S. Treasuries

$
0

$
0

$
0


$
0

$
0

$
0

$
02.  U. S. Agencies


2,025


0


2,025



0


0


0


03.  Fed funds sold


31,650


31,650


0



0


0


0


04.  Purchased cds


24,717


3,760


10,853



10,104


0


0


0Total investments

$
58,392

$
35,410

$
12,878


$
10,104

$
0

$
0

$
0B.  Loans

$
92,628

$
74,102

$
4,916


$
4,603

$
3,417

$
5,590

$
0Total loans

$
92,628

$
74,102

$
4,916


$
4,603

$
3,417

$
5,590

$
0C.  Total earning assets

$
151,020

$
109,512

$
17,794


$
14,707

$
3,417

$
5,590

$
0II.

Cost of funds (deposits)A.  Certificate of deposits

$
52,345

$
24,710

$
26,506


$
1,129

$
0

$
0

$
0B.  Money market accounts


47,525


28,515


9,901



9,109


0


0


0C.  Transaction accounts


5,099


219


656



1,728


1,243


1,253


0D.  Savings accounts


2,609


112


335



885


636


641


0Total cost of funds

$
107,578

$
53,556

$
37,398


$
12,851

$
1,879

$
1,894

$
0III.

Interest sensitive assets

$
151,020

$
109,513

$
15,769


$
16,732

$
3,417

$
5,589

$
0IV.

Interest sensitive liabilities

$
107,578

$
53,556

$
37,398


$
12,851

$
1,879

$
1,894

$
0V.

Gap

$
43,442

$
55,957

($
21,629
)

$
3,882

$
1,538

$
3,694

$
0VI.

Cumulative gap

$
43,442

$
55,957

$
34,329


$
38,210

$
39,748

$
43,443

$
43,443VII.

Gap ratio


1.40


2.04


0.42



1.30


1.82


2.95


0.00VIII.

Cumulative ratio


1.40


2.04


1.38



1.37


1.38


1.40


1.40IX.

Gap as a % of total assets


26.98


34.57


-13.36



2.40


0.95


2.28


0.00X.

Cumulative gap as a % of total assets


26.98


34.57


21.21



23.60


24.56


26.84


2.68







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ITEM 2.





MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002





The registrant, Summit Bancshares, Inc. (the Company) is a bank holding company whose only operating subsidiary
is Summit Bank (the Bank). The following discussion primarily concerns the financial condition and results of operations of the Company on a consolidated basis including the subsidiary Bank. All adjustments made in the compilation of
this information are of a normal recurring nature.





FINANCIAL CONDITION





Liquidity Management





The consolidated loan-to-deposit ratio at March 31, 2002
was 64.5%, which was an increase from 59.8% for the same period in 2001. Net outstanding loans as of March 31, 2002 increased $14,138,000 compared to the same period a year ago while total deposits increased $12,319,000 versus the same time last
year. The increase in loans was mainly due to Summits effort in marketing its products and the continuing success of the Real Estate Capital Markets Group. The average loan-to-deposit ratio at the end of the first quarter of 2002 was 63.6%, a
decrease from 65.1% for the same period last year. This decrease was caused by an increase in average total deposits of $14,810,000 or 11.3% while average total loans increased $8,898,000 or 10.6%.





One of the Banks customers manages accounts for medical offices and physicians. This customer has brought approximately 80 of the accounts they
manage to the Bank. As of March 31, 2002 the aggregate monthly average balance in these accounts was approximately $16,000,000.





This customer has notified the Bank that due to the expiration of a contract, and its merger with an affiliated company, the relationship will be moving to the affiliates bank in Southern California. It was anticipated that the
movement of these funds would have occurred by the end of March 2002 but as of this date the transfer has not occurred.





In
anticipation of the transfer of those accounts by the end of the first quarter of 2002, the Bank purchased brokered CDs to assist in the immediate outflow of the funds. The increase in the deposit accounts is reflective of the purchase of the
brokered CDs.





Net liquid assets, which consists primarily of cash, due from banks, interest-bearing deposits with other
financial institutions, investment securities and federal funds sold totaled $65,837,000 on March 31, 2002. This amount represented 45.1% of total deposits in comparison to the liquidity ratio of 50.4% as of March 31, 2001. This increase is
primarily a result of a rise in deposit growth discussed previously. It is managements belief that the current liquidity level is appropriate given current economic conditions and is sufficient to meet current needs.





The following table sets forth book value of investments by category and the percent of total investments at the dates specified.





Investment Comparative


($000.00 Omitted)





3-31-02

%


12-31-01

%


3-31-01

%Fed funds sold

$
31,650

54
%

$
20,070

41
%

$
34,520

57
%Interest bearing deposits


24,717

42
%


27,189

55
%


21,846

36
%Securities


2,026

4
%


2,030

4
%


4,000

7
%







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##### Table of Contents

Interest bearing deposits are comprised of Time Certificates of Deposit with other banks and savings and loan institutions with no more
than $100,000 in any institution.





Securities on March 31, 2002 were comprised of U.S. Govt agencies.





Changes in Financial Position





As of
March 31, 2002, total deposits increased $17,170,000 from December 31, 2001 while at the same time net loans outstanding increased $6,937,000. Total deposits as of March 31, 2002 were $145,914,000, an increase of 9.2% from $133,595,000 as of March
31, 2001. Net loans as March 31, 2002 were $94,080,000, an increase of 17.7% from $79,942,000 as of March 31, 2001.





The
following table sets forth the amount of deposits by each category and the percent of total deposits at the dates specified.





Deposit
Comparative


($000.00 Omitted)





3-31-02

%


12-31-01

%


3-31-01

%Demand

$
40,869

28
%

$
38,484

30
%

$
36,829

28
%Savings


2,609

2
%


2,566

2
%


3,199

2
%Interest bearing Trans. Deposits


50,091

34
%


48,553

38
%


54,918

41
%Other time


52,345

36
%


39,140

30
%


38,649

29
%





The following table sets forth the amount of loans outstanding by category and
the percent of total loans outstanding at the dates specified.





Loan Comparative


($000.00 Omitted)





3-31-02

%


12-31-01

%


3-31-01

%Commercial

$
29,378

31
%

$
23,475

26
%

$
33,224

41
%Real estate-const


26,540

28
%


27,389

31
%


25,200

31
%Real estate-other


33,634

35
%


30,829

35
%


16,426

20
%Installment/other


6,062

6
%


6,956

8
%


6,658

8
%





Non-Performing Assets





The following table provides information with respect to the Banks past due loans and components for non-performing assets at the dates indicated.





Non-Performing Assets($000.00 Omitted)3-31-02


12-31-01


3-31-01Loans 90 days or more past due & still accruing

$
686


$
145


$
145Non-accrual loans


0



0



0Other real estate owned


0



0



0Total non-performing assets

$
686


$
145


$
145Non-performing assets to period end loans plus other real estate owned


0.71
%


0.16
%


0.18
%Allowance to non-performing loans


223.6
%


1,039
%


1,079
%




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The 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.





Other real estate owned (OREO)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, less estimated costs to sell. When the loan balance plus accrued interest exceeds the fair value of the property less disposal costs, the difference is charged to
the allowance for loan losses at the time of foreclosure. Subsequent declines in value from the recorded amount, if any, and gains or losses upon disposition are included in noninterest expense. Operating expenses related to other real estate owned
are charged to non-interest expense in the period incurred. The Bank did not have any OREO properties at the end of the period.





The increase in non-performing assets from March 31, 2001 to March 31, 2002 is due primarily to an increase in loans 90 days or more past due and still accruing. These loans are all secured by real estate.





Capital Position





As of March 31, 2002,
Shareholders Equity was $18,600,000. This represents an increase of $1,129,000 or 6.5% over the same period last year. Since the inception of the repurchase program in 1989, the Company has authorized the repurchase of $3,500,000 of its stock.
As of March 31, 2002, the Company has repurchased a total of 668,680 shares of the Company stock constituting 31.1% of the Companys original stock prior to the repurchase program, at a total cost of $2,667,714, or an average price per share of
$3.98. The Company plans to continue its repurchase program as an additional avenue for liquidity for its shareholders. The program has not significantly affected the Companys liquidity or capital position or its ability to operate. In
addition, the Companys subsidiary Bank remains more than well-capitalized under current regulations.





The following table
shows the risk-based capital and leverage ratios as well as the minimum regulatory requirements for the same as of March 31, 2002:





Capital Ratio


Minimum Regulatory requirementTier 1 Capital

14.07
%

4.00
%Total Capital

15.23
%

8.00
%Leverage Ratio

11.47
%

4.00
%





RESULTS OF OPERATIONS





Net Interest Income





Total interest income including loan fees decreased from
$3,129,000 for the first three months of 2001 to $2,250,000 for the same period in 2002.





Although loans increased in the first
quarter of 2002 versus the same period last year, the decrease in loan income was primarily centered in the decrease in the prime-lending rate. The prime lending rate decreased from an average rate of 8.51% in the first quarter of 2001 to an average
rate of 4.75% for the same period this year. Average outstanding loans increased from $83,760,000 in 2001 to $92,647,000 in 2002. The yield on loans and fees decreased from 11.11% in 2001 to 7.90% in 2002.




12




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##### Table of Contents




The decrease in interest income from investments was due to a decrease in the yield of .96%
compared to the same period in 2001. Average total investments were $6,344,000 lower than the same period last year.





Interest
expense decreased from $863,000 at the end of the first three months of 2001 to $500,000 in 2002. Although average interest-bearing deposit accounts grew $8,876,000 during the first three months of 2002 versus the same period last year, the decrease
in the interest expense was caused by the average cost of funds for the period ending March 31, 2002 decreasing 1.66% from the same period last year.





As a result of these factors, net interest margin for the first three months of 2002 was 4.75% compared to 6.20% for the same period last year.







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##### Table of Contents




Other Operating Income





Service charges on deposit accounts as of the end of the first three months of 2002 increased to $63,000 versus $55,000 for the same period in 2001. The increase was centered in fees collected on service charges
related to NSF fees on commercial accounts.





Other customer fees and charges for the first three months increased $38,000,
centered in CD early withdrawal fees.





Loan Loss Provision





The allowance for loan losses is maintained at a level that management of the Company considers adequate for losses that are inherent in the loan portfolio. The allowance is increased by
charges to operating expenses and reduced by net-charge-offs. The level of the allowance for loan losses is based on managements evaluation of losses in the loan portfolio, as well as prevailing economic conditions.





Management employs a systematic methodology on a monthly basis to determine the adequacy of the allowance for current loan losses. The credit
administrator grades each loan at the time of extension or renewal. Gradings are assigned a risk factor, which is calculated to assess the adequacy of the allowance for loan losses. Further, management considers other factors such as overall
portfolio quality, trends in the level of delinquent and classified loans, specific problem loans, and current economic conditions.





The following table summarizes the allocation of the allowance for loan losses by loan type for the years indicated and the percent of loans in each category to total loans dollar amounts in thousands:





3-31-02


12-31-01


3-31-01Amount

Loan Percent


Amount

Loan Percent


Amount

Loan PercentCommercial

$
610

39.8
%

$
580

38.4
%

$
580

37.1
%Construction


340

22.2
%


340

22.6
%


335

21.4
%Real Estate


295

19.2
%


300

19.9
%


340

21.7
%Consumer


50

3.2
%


48

3.2
%


60

3.8
%Unallocated


239

15.6
%


239

15.9
%


250

16.0
%$
1,534

100.0
%

$
1,507

100.0
%

$
1,565

100.0
%





The following table summarizes the activity in the Banks allowance for
credit losses for the three months ended March 31, 2002 and 2001.





Three Months Ended3/31/02

3/31/01(000.00 Omitted)Balance, beginning of the period

$
1,507

$
1,468Provision for loan losses


17


97Recoveries


10


0Loans Charged-off


0


0$
1,534

$
1,565





The balance in the allowance for loan losses at March 31, 2002 was 1.60% of loans
compared to 1.96% of loans at March 31, 2001. This level is considered appropriate and is approximately the same as the industry average.




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Other Operating Expenses





Total other operating expenses increased $74,000 as of the end of the first three months of 2002 compared to the same period last year. This increase was primarily due to an increase in
staff expense.





Provision for Income Taxes





The Companys provision for income taxes as of the end of the first three months of 2002 decreased from $458,000 in 2001 to $253,000. This decrease is attributable to decreased profits from operations as a result
of the decrease in the prime lending rate. For the same period in 2002 the Companys total effective tax rate was 40.2% compared to 41.9% in 2001.





Net Income





Net income for the first three months of 2002 decreased to $377,000 from $636,000 for the same
period in 2001, or a decrease of 40.7%.




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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Interest rate and credit risks are the most significant market risks impacting the Companys performance. Other types of market risk,
such as foreign currency exchanges rate risk and the commodity price risk, do not arise in the normal course of the Companys business activities. The Company relies on loan reviews, prudent loan underwriting standards and an adequate allowance
for loan losses to mitigate credit risk.





Interest rate risk is managed by subjecting the Companys balance sheet to
hypothetical interest rate shocks. The Companys primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Companys net interest income and capital, while structuring the
Companys asset/liability position to obtain the maximum yield-cost spread on that structure.





Rate shock is an
instantaneous and complete adjustment in market rates of various magnitudes on a static or level balance sheet to determine the effect such a change in rates would have on the Companys net interest income for the succeeding twelve months, and
the fair values of financial instruments.





Management has assessed these risks and has implemented an investment policy, a new
loan program and decreased interest rates it pays on deposit accounts commensurate with the marketplace to help mitigate the downward pressure on its net interest margin.





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 a 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.




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PART IIOTHER INFORMATION





ITEM 1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 2CHANGES IN
SECURITIES AND USE OF PROCEEDS





None





ITEM 3DEFAULTS UPON SENIOR SECURITIES





None





ITEM 4SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None





ITEM 5OTHER INFORMATION





None





ITEM 6EXHIBITS AND REPORTS ON FORM 8-K





(a)  Exhibits





(b)  Reports on Form
8-K





None




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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.





SUMMIT BANCSHARES, INC. RegistrantDATE:

May 13, 2002

By:

/s/    Shirley W.
NelsonShirley W. Nelson Chairman and CEO (Principal
Executive Officer)





DATE:

May 13, 2002

By:

/s/    Kikuo
NakaharaKikuo Nakahara Chief Financial Officer (Principal
Financial Officer)





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