<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

Mark One

[X]  Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the quarterly period ended June 30, 1997; or

[ ]  Transition report pursuant to section 13 or 15(d) of the Securities 
     Exchange Act of 1934

     For the Transition period from __________ to __________.


                        COMMISSION FILE NUMBER 0-11986


                            SUMMIT BANCSHARES, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)


        Texas                                                   75-1694807
------------------------                                  ----------------------
(State of Incorporation)                                     (I.R.S. Employer
                                                            Identification No.)

                  1300 Summit Avenue, Fort Worth, Texas 76102
                  -------------------------------------------
                   (Address of principal executive offices)


                                (817) 336-6817
             ----------------------------------------------------
             (Registrant's telephone number, including area code)


                                   No Change
              ---------------------------------------------------
             (Former name, former address and former fiscal year 
                         if changed since last report)


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

The number of shares of common stock, $1.25 par value, outstanding at June 30, 
1997 was 3,236,286 shares.


<PAGE>
 
                            SUMMIT BANCSHARES, INC.



                                     INDEX


PART I - FINANCIAL INFORMATION                                          PAGE NO.

 
Item 1.   Financial Statements
 
          Consolidated Balance Sheets at June 30, 1997
          and 1996 and at December 31, 1996                                 4
 
          Consolidated Statements of Income for the Three Months
          and Six Months Ended June 30, 1997 and 1996 and for
          the Year Ended December 31, 1996                                 5-6
 
          Consolidated Statements of Changes in Shareholders'
          Equity for the Six Months Ended June 30, 1997 and
          1996 and for the Year Ended December 31, 1996                     7
 
          Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 1997 and 1996 and for the
          Year Ended December 31, 1996                                     8-9
 
          Notes to Consolidated Financial Statements for the Six
          Months Ended June 30, 1997 and 1996 and for the
          Year Ended December 31, 1996                                    10-21

The June 30, 1997 and 1996 and the December 31, 1996 financial statements
included herein are unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management of the registrant, necessary to a fair statement of
the results for the interim periods.

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations for the Six Months
          Ended June 30, 1997 and 1996                                    22-28

2
<PAGE>
 
PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

Item 2.   Change in Securities

Item 3.   Defaults Upon Senior Securities

Item 4.   Submission of Matters to a Vote of Security Holders

Item 5.   Other Information

Item 6.   Exhibits and Reports on Form 8-K

                                                                               3
<PAGE>
 
                        PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
-----------------------------
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 (Unaudited)        
                                                                   June 30,         (Unaudited) 
                                                            ----------------------  December 31, 
                                                               1997        1996         1996
                                                            ----------  ----------  ------------
                          ASSETS                                       (In Thousands)
<S>                                                         <C>         <C>         <C>
 
CASH AND DUE FROM BANKS - NOTE 1                             $ 28,170    $ 21,854       $ 28,339
FEDERAL FUNDS SOLD                                             10,900      14,815         20,350
INVESTMENT SECURITIES - NOTE 2
 Securities Available-for-Sale, at fair value                  61,276      59,700         58,576
 Securities Held-to-Maturity, at cost (fair value of           52,379      66,420         58,437
 $52,462,000, $65,797,000, and $58,629,000
   June 30, 1997 and 1996 and December 31, 1996,
   respectively)
LOANS - NOTE 3
  Loans, Net of Unearned Discount                             246,816     201,973        220,006
      Allowance for Loan Losses                                (3,512)     (2,829)        (2,972)
                                                             --------    --------       --------
     LOANS, NET                                               243,304     199,144        217,034
 
PREMISES AND EQUIPMENT - NOTE 4                                 7,665       7,320          7,105
ACCRUED INCOME RECEIVABLE                                       3,310       3,491          3,189
OTHER REAL ESTATE - NOTE 5                                        151         172            166
OTHER ASSETS                                                    2,776       2,033          2,052
                                                             --------    --------       --------
 
     TOTAL ASSETS                                            $409,931    $374,949       $395,248
                                                             ========    ========       ========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
DEPOSITS - NOTE 6
  Noninterest-Bearing Demand                                 $105,226    $ 94,051       $103,695
  Interest-Bearing                                            255,723     235,419        241,328
                                                             --------    --------       --------
 
     TOTAL DEPOSITS                                           360,949     329,470        345,023
 
SECURITIES SOLD UNDER
 AGREEMENTS TO REPURCHASE - NOTE 7                              9,027      11,514         13,209
ACCRUED INTEREST PAYABLE                                          616         581            638
OTHER LIABILITIES                                               1,466       1,391          1,298
                                                             --------    --------       --------
 
     TOTAL LIABILITIES                                        372,058     342,956        360,168
                                                             --------    --------       --------
 
COMMITMENTS AND CONTINGENCIES - NOTE 11
 
SHAREHOLDERS' EQUITY - NOTES 12, 14 AND 18
  Common Stock - $1.25 Par Value; 20,000,000 shares
   authorized; 3,236,286, 3,209,386 and 3,233,036 shares
   issued and outstanding at June 30, 1997 and 1996 and
   at December 31, 1996, respectively                           4,045       4,012          4,041
  Capital Surplus                                               4,183       4,121          4,167
  Retained Earnings                                            29,505      23,979         26,644
  Unrealized Gain (Loss) on Investment Securities
    Available for Sale, Net of Tax                                140        (119)           228
                                                             --------    --------       --------
 
     TOTAL SHAREHOLDERS' EQUITY                                37,873      31,993         35,080
                                                             --------    --------       --------
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   $409,931    $374,949       $395,248
                                                             ========    ========       ========
</TABLE>

The accompanying Notes should be read with these financial statements.


4
<PAGE>
 
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
 
 
                                                        (Unaudited)            
                                                     For the Six Months        (Unaudited)
                                                       Ended June 30,          Year Ended
                                                     ------------------       December 31,
                                                       1997       1996            1996
                                                     -------    -------         -------
                                                     (In Thousands, Except Per Share Data)
<S>                                                  <C>        <C>           <C>
INTEREST INCOME
 Interest and Fees on Loans                          $11,330    $ 9,060         $19,274
 Interest and Dividends on Investment Securities:               
   Taxable                                             3,538      3,666           7,405
   Exempt from Federal Income Taxes                        9          1               1
 Interest on Federal Funds Sold                          319        492             897
                                                     -------    -------         -------
                                                                           
    TOTAL INTEREST INCOME                             15,196     13,219          27,577
                                                     -------    -------         -------
                                                                           
INTEREST EXPENSE                                                           
 Interest on Deposits                                  4,996      4,488           9,243
 Interest on Securities Sold Under                                         
  Agreements to Repurchase                               257        236             528
                                                     -------    -------         -------
                                                                           
    TOTAL INTEREST EXPENSE                             5,253      4,724           9,771
                                                     -------    -------         -------
                                                                           
    NET INTEREST INCOME                                9,943      8,495          17,806
LESS: PROVISION FOR LOAN LOSSES - NOTE 3                 352        288             819
                                                     -------    -------         -------
                                                                           
    NET INTEREST INCOME AFTER                                              
     PROVISION FOR LOAN LOSSES                         9,591      8,207          16,987
                                                     -------    -------         -------
                                                                           
NON-INTEREST INCOME                                                        
 Service Charges and Fees on Deposits                    900        787           1,645
 Loss on Sale of Investment Securities                   -0-         (7)            (14)
 Other Income                                            682        680           1,345
                                                     -------    -------         -------
                                                                           
    TOTAL NON-INTEREST INCOME                          1,582      1,460           2,976
                                                     -------    -------         -------
                                                                           
NON-INTEREST EXPENSE                                                       
 Salaries and Employee Benefits                        3,575      3,352           6,753
 Occupancy Expense - Net                                 387        387             772
 Furniture and Equipment Expense                         431        400             800
 Other Real Estate Owned Expense - Net                    (8)        16              10
 Other Expense                                         1,537      1,425           2,582
                                                     -------    -------         -------
                                                                           
    TOTAL NON-INTEREST EXPENSE                         5,922      5,580          10,917
                                                     -------    -------         -------
                                                                           
    INCOME BEFORE INCOME TAXES                         5,251      4,087           9,046
                                                                           
APPLICABLE INCOME TAXES - NOTE 9                       1,807      1,407           3,103
                                                     -------    -------         -------
                                                                           
    NET INCOME                                       $ 3,444    $ 2,680         $ 5,943
                                                     =======    =======         =======
                                                                           
    NET INCOME PER SHARE - NOTE 14                   $  1.06    $   .84         $ $1.86
                                                     =======    =======         =======
</TABLE>



The accompanying Notes should be read with these financial statements.


                                                                               5
<PAGE>
 
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
 
                                                                (Unaudited)
                                                         For the Three Months Ended
                                                                  June 30,
                                                         --------------------------
                                                          1997                1996
                                                         ------              ------
                                                    (In Thousands, Except Per Share Data)                             
<S>                                                 <C>                     <C> 
INTEREST INCOME                                                   
 Interest and Fees on Loans                              $5,946              $4,627
 Interest and Dividends on Investment Securities:                 
   Taxable                                                1,802               1,876
   Exempt from Federal Income Taxes                           6                 -0-
 Interest on Federal Funds Sold                             116                 218
                                                         ------              ------
                                                                  
   TOTAL INTEREST INCOME                                  7,870               6,721
                                                         ------              ------
                                                                  
INTEREST EXPENSE                                                  
 Interest on Deposits                                     2,586               2,242
 Interest on Securities Sold Under Agreements                     
  to Repurchase                                             127                 119
                                                         ------              ------
                                                                  
   TOTAL INTEREST EXPENSE                                 2,713               2,361
                                                         ------              ------
                                                                  
   NET INTEREST INCOME                                    5,157               4,360
LESS: PROVISION FOR LOAN LOSSES - NOTE 3                    197                 164
                                                         ------              ------
                                                                  
   NET INTEREST INCOME AFTER                                      
    PROVISION FOR LOAN LOSSES                             4,960               4,196
                                                         ------              ------
                                                                  
NON-INTEREST INCOME                                               
 Service Charges and Fees on Deposits                       463                 402
 Loss on Sale of Investment Securities                      -0-                 (10)
 Other Income                                               357                 339
                                                         ------              ------
                                                                  
   TOTAL NON-INTEREST INCOME                                820                 731
                                                         ------              ------
                                                                  
NON-INTEREST EXPENSE                                              
 Salaries and Employee Benefits                           1,828               1,697
 Occupancy Expense - Net                                    190                 207
 Furniture and Equipment Expense                            220                 203
 Other Real Estate Owned Expense - Net                       (5)                 21
 Other Expense                                              843                 674
                                                         ------              ------
                                                                  
   TOTAL NON-INTEREST EXPENSE                             3,076               2,802
                                                         ------              ------
                                                                  
   INCOME BEFORE INCOME TAXES                             2,704               2,125
                                                                  
APPLICABLE INCOME TAXES - NOTE 9                            932                 730
                                                         ------              ------
                                                                  
   NET INCOME                                            $1,772              $1,395
                                                         ======              ======
                                                                  
   NET INCOME PER SHARE  - NOTE 14                       $  .54              $  .43
                                                         ======              ======
</TABLE>



The accompanying Notes should be read with these financial statements.


6
<PAGE>
 
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                   AND FOR THE YEAR ENDED DECEMBER 31, 1996
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                          Unrealized 
                                  Common Stock                            Gain (Loss)
                              --------------------  Capital   Retained   on Investment   Treasury 
                                Shares     Amount   Surplus   Earnings  Securities-Net    Stock      Total
                              ----------  --------  --------  --------  ---------------  --------  ---------
                                              (Dollars in Thousands, Except Per Share Data)
<S>                           <C>         <C>       <C>       <C>       <C>              <C>       <C>
BALANCE AT
 JANUARY 1, 1996              3,149,886    $3,937    $4,109    $21,745       $  334      $ -0-      $30,125
                                                                                                  
Net Income for the                                                                                
 Six Months Ended                                                                                 
 June 30, 1996                                                   2,680                                2,680
                                                                                                  
Stock Options Exercised          59,500        75        12                                              87     
                                                                                                  
Cash Dividend $.14                                                                                
 Per Share                                                        (446)                                (446)
                                                                                                  
Securities Available-for-                                                                         
 Sale Adjustment                                                               (453)                   (453)
                              ---------    ------    ------    -------        -----      -----      -------
BALANCE AT                                                                                        
 JUNE 30, 1996                3,209,386     4,012     4,121     23,979         (119)       -0-       31,993
                                                                                                  
Net Income for the                                                                                
 Six Months Ended                                                                                 
 December 31, 1996                                               3,263                                3,263
                                                                                                  
Stock Options Exercised          32,650        40        46                                              86     
                                                                                                  
Purchases of Stock Held in                                                                        
 Treasury                                                                                 (157)        (157)
                                                                                                  
Retirement of Stock Held                                                                          
   In Treasury                   (9,000)      (11)                (146)                    157          -0-                
                                                                                                  
Cash Dividend $.14                                                                                
 Per Share                                                        (452)                                (452)
                                                                                                  
Securities Available-for-                                                                         
 Sale Adjustment                                                                347                     347
                              ---------    ------    ------    -------        -----      -----      -------
BALANCE AT                                                                                        
 DECEMBER 31, 1996            3,233,036     4,041     4,167     26,644          228        -0-       35,080
                                                                                                  
Net Income for the                                                                                
 Six Months Ended                                                                                 
 June 30, 1997                                                   3,444                                3,444
                                                                                                  
Stock Options Exercised           3,250         4        16                                              20     
                                                                                                  
Cash Dividend $.18                                                                                
 Per Share                                                        (583)                                (583)
                                                                                                  
Securities Available-for-                                                                         
 Sale Adjustment                                                                (88)                    (88)
                              ---------    ------    ------    -------        -----      -----      -------
BALANCE AT                                                                                        
 JUNE 30, 1997                3,236,286    $4,045    $4,183    $29,505       $  140      $ -0-      $37,873
                              =========    ======    ======    =======       ======      =====      =======
</TABLE>



The accompanying Notes should be read with these financial statements.

                                                                               7
<PAGE>
 
                    SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                    AND FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
 
                                                                  (Unaudited)         
                                                                   June 30,            (Unaudited)
                                                             ---------------------    December 31, 
                                                                1997       1996           1996
                                                              ---------  ---------    ------------
                                                                       (In Thousands)
<S>                                                           <C>        <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                                  $  3,444   $  2,680       $  5,943
  Adjustments to Reconcile Net Income to Net
   Cash Provided by Operating Activities:
    Depreciation and Amortization                                  396        376            762
    Net Premium Amortization of Investment Securities               44        180            310
    Provision for Loan Losses                                      352        288            819
    Deferred Income Taxes (Benefit)                                 48        (13)          (159)
    Loss on Sale of Investment Securities                          -0-          7             14
    Writedown of Other Real Estate                                   4          6             12
    Net Gain on Sale of Other Real Estate                          (21)       -0-            -0-
    Net (Gain) Loss on Sale of Premises and Equipment               (1)         1             (1)
    Increase in Accrued Income and Other Assets                   (887)      (548)          (270)
    Increase in Accrued Expenses and Other Liabilities             146        317            280
                                                              --------   --------       --------
 
      Total Adjustments                                             81        614          1,767
                                                              --------   --------       --------
 
      NET CASH PROVIDED BY OPERATING ACTIVITIES                  3,525      3,294          7,710
                                                              --------   --------       --------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net Decrease in Federal Funds Sold                             9,450     10,865          5,330
  Proceeds from Matured and Prepaid Investment Securities
    . Held-to-Maturity                                           9,494     12,150         20,001
    . Available-for-Sale                                         8,172     10,438         20,486
  Proceeds from Sales of Investment Securities                   3,505      9,016         14,527
  Purchase of Investment Securities
    . Held-to-Maturity                                          (7,029)   (15,164)       (19,174)
    . Available-for-Sale                                       (10,961)   (24,066)       (33,969)
  Loans Originated and Principal Repayments, Net               (26,842)   (23,677)       (42,171)
  Recoveries of Loans Previously Charged-Off                       259         68            115
  Proceeds from Sale of Other Real Estate                           32        -0-            -0-
  Proceeds from Sale of Premises and Equipment                       1          1              1
  Purchases of Premises and Equipment                             (956)      (539)          (710)
                                                              --------   --------       --------
 
      NET CASH USED BY INVESTING ACTIVITIES                    (14,875)   (20,908)       (35,564)
                                                              --------   --------       --------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net Increase in Demand Deposits, Savings
   Accounts and Interest Bearing Transaction Accounts           10,341     20,467         36,011
  Net Increase (Decrease) in Certificates of Deposit             5,585     (1,106)        (1,097)
  Net Decrease in Repurchase Agreements                         (4,182)    (2,014)          (319)
  Payments of Cash Dividends                                      (583)      (446)          (898)
  Purchase of Treasury Stock                                       -0-        -0-           (157)
  Proceeds from Stock Options Exercised                             20         87            173
                                                              --------   --------       --------
 
       NET CASH PROVIDED BY FINANCING ACTIVITIES                11,181     16,988         33,713
                                                              --------   --------       --------
 
NET INCREASE (DECREASE) IN CASH AND DUE FROM
 BANKS                                                            (169)      (626)         5,859
 
CASH AND DUE FROM BANKS AT BEGINNING
  OF PERIOD                                                     28,339     22,480         22,480
                                                              --------   --------       --------
 
CASH AND DUE FROM BANKS AT END OF PERIOD                      $ 28,170   $ 21,854       $ 28,339
                                                              ========   ========       ========
</TABLE>

8
<PAGE>
 
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONT'D
                FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                   AND FOR THE YEAR ENDED DECEMBER 31, 1996
                                  (Unaudited)



SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES:

<TABLE>
<CAPTION>
 
                                                           (Unaudited)    
                                                             June 30,      (Unaudited)
                                                          --------------   December 31, 
                                                           1997     1996       1996
                                                          ------   ------  ------------    
                                                          (In Thousands)
<S>                                                       <C>      <C>     <C>
 
(1)  Interest Paid                                         $5,275  $4,778     $9,769
(2)  Income Taxes Paid                                      1,866   1,468      3,285
(3)  Other Real Estate Acquired in Settlement of Loans        -0-      65         65
</TABLE>


                                                                               9
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
          FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
             AND FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)

NOTE 1 - Summary of Significant Accounting Policies
------                                             

     The accounting and reporting policies of Summit Bancshares, Inc. (the
"Corporation") and  Subsidiaries are in accordance with generally accepted
accounting principles.  A summary of the more significant policies follows:

     Basis of Presentation and Principles of Consolidation
     -----------------------------------------------------

     The consolidated financial statements of the Corporation include its
     accounts and those of its wholly-owned subsidiaries, Summit National Bank
     and Summit Community Bank, National Association (the "Subsidiary Banks")
     and Summit Bancservices, Inc., a wholly-owned operations subsidiary.   All
     significant intercompany balances and transactions have been eliminated in
     consolidation.
 
     Use of Estimates
     ----------------

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting periods.  Actual results could differ from those
     estimates.

     Cash and Due From Banks
     -----------------------

     The Subsidiary Banks are required to maintain certain balances at the
     Federal Reserve Bank based on their levels of deposits. During the first
     six months of 1997 the average cash balance maintained at the Federal
     Reserve Bank was $3,876,000. Compensating balances held at correspondent
     banks, to minimize service charges, averaged approximately $14,075,000
     during the same period.

     Investment Securities
     ---------------------

     The Corporation follows Statement of Financial Accounting Standards No.
     115, "Accounting for Certain Investments in Debt and Equity Securities" in
     the accounting and reporting for investments in equity securities that have
     readily determined fair values and for all investments in debt securities.
     Those investments are to be classified in three categories and accounted
     for as follows:

     -    Debt securities that the Corporation has the positive intent and
          ability to hold to maturity are classified as held-to-maturity
                                                        ----------------
          securities and reported at amortized cost.

     -    Debt and equity securities that are bought and held principally for
          the purpose of selling them in the near term are classified as trading
                                                                         -------
          securities and reported at fair value, with unrealized gains and
          losses included in earnings.

     -    Debt and equity securities not classified as either held-to-maturity
          securities or trading securities are classified as available-for-sale
                                                             ------------------
          securities and reported at fair value, with unrealized gains and
          losses excluded from earnings and reported in a separate component of
          shareholders' equity.

     The Corporation has the ability and intent to hold to maturity its
     investment securities classified as held-to-maturity; accordingly, no
     adjustment has been made for the excess, if any, of amortized cost over
     market.  In determining the investment category classifications, management
     considers its asset/liability strategy, changes in interest rates and
     prepayment risk, the need to increase capital and other factors.  Under
     certain circumstances (including the deterioration of the issuer's
     creditworthiness, a change in tax law, or statutory or regulatory
     requirements), the Corporation may change the investment security
     classification.  In 1997 and 1996 the Corporation held no securities that
     would have been classified as trading securities.

     All investment securities are adjusted for amortization of premiums and
     accretion of discounts.  Amortization of premiums and accretion of
     discounts are recorded to income over the contractual maturity or estimated
     life of the individual investment on the level yield method.  Gain or loss
     on sale of investments is based upon the specific identification method and
     the gain or loss is recorded in non-interest income.  Income earned on the
     Corporation's investments in state  and political subdivisions is not
     taxable.


10
<PAGE>
 
NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
------                                                       

     Loans and Allowance for Loan Losses
     -----------------------------------

     Loans are stated at the principal amount outstanding less unearned discount
     and the allowance for loan losses.  Unearned discount on installment loans
     is recognized as income over the terms of the loans by a method
     approximating the interest method.  Interest income on all  other loans is
     recognized based upon the principal amounts outstanding.  The accrual of
     interest on a loan is discontinued when, in the opinion of management,
     there is doubt about the ability of the borrower to pay interest or
     principal.  Interest previously earned, but uncollected on such loans, is
     written off.  When loans are put on non-accrual all payments received are
     applied to the principal and no interest income is recorded until the loan
     is returned to accrual status or the principal has been reduced to zero.

     The Corporation follows Statement of Financial Accounting Standards No.
     114, "Accounting by Creditors for Impairment of a Loan," as amended by
     Statement of Financial Accounting Standards No. 118, "Accounting by
     Creditors for Impairment of a Loan - Income Recognition and Disclosure."
     Under this standard, the allowance for loan losses related to loans that
     are identified for evaluation in accordance with Statement No. 114
     (impaired loans) is based on discounted cash flows using the loan's initial
     effective rate or the fair value of the collateral for certain collateral
     dependent loans.

     The allowance for loan losses is comprised of amounts charged against
     income in the form of a provision for loan losses as determined by
     management.  Management's evaluation is based on a number of factors,
     including the Subsidiary Banks' loss experience in relation to outstanding
     loans and the existing level of the allowance, prevailing and prospective
     economic conditions, and management's continuing review of the discounted
     cash flow values of impaired loans and its evaluation of the quality of the
     loan portfolio.  Loans are placed on non-accrual status when management
     believes that the borrower's financial condition, after giving
     consideration to economic and business conditions and collection efforts,
     is such that collection of interest is doubtful.  Loans are charged against
     the allowance for loan losses when management believes that the
     collectibility of the principal is unlikely.

     Premises and Equipment
     ----------------------

     Premises and equipment are stated at cost less accumulated depreciation.
     Depreciation expense is computed on the straight-line method based upon the
     estimated useful lives of the assets ranging from three to forty years.
     Maintenance and repairs are charged to operating expenses.  Renewals and
     betterments are added to the asset accounts and depreciated over the
     periods benefitted.  Depreciable assets sold or retired are removed from
     the asset and related accumulated depreciation accounts and any gain or
     loss is reflected in the income and expense accounts.

     Other Real Estate
     -----------------

     Other real estate is foreclosed property held pending disposition and is
     valued at the lower of its fair value or the recorded investment in the
     related loan.  At foreclosure, if the fair value of the real estate
     acquired is less than the bank's recorded investment in the related loan, a
     writedown is recognized through a charge to the allowance for loan losses.
     Any subsequent reduction in value is recognized by a charge to income.
     Operating expenses of such properties, net of related income, and gains and
     losses on their disposition are included in non-interest expense.

     Federal Income Taxes
     --------------------

     The Corporation joins with its Subsidiaries in filing a consolidated
     federal income tax return.  The Subsidiaries pay to the parent a charge
     equivalent to their current federal income tax based on the separate
     taxable income of the Subsidiaries.

     The Corporation and the Subsidiaries maintain their records for financial
     reporting and income tax reporting purposes on the accrual basis of
     accounting.  Deferred income taxes are provided in accordance with
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes".  Deferred income taxes are provided for accumulated temporary
     differences due to basic differences for assets and liabilities for
     financial reporting and income tax purposes.

     Realization of net deferred tax assets is dependent on generating
     sufficient future taxable income.  Although realization is not assured,
     management believes it is more likely than not that all of the net deferred
     tax assets will be realized.  The amount of the net deferred tax asset
     considered realizable, however, could be reduced in the near term if
     estimates of future taxable income are reduced.

     Cash and Cash Equivalents
     -------------------------

     For the purpose of presentation in the Statements of Cash Flows, cash and
     cash equivalents are defined as those amounts included in the balance sheet
     caption "Cash and Due from Banks."

     Reclassification
     ----------------

     Certain reclassifications have been made to the 1996 financial statements
     to conform to the 1997 presentation.


                                                                              11
<PAGE>
 
NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
------                                                       

     Audited Financial Statements
     ----------------------------

     The consolidated balance sheet as of December 31, 1996, and the
     consolidated statements of income, changes in shareholders' equity and cash
     flows for the year ended December 31, 1996 are headed "unaudited" in these
     financial statements.  These statements were reported in the Securities
     Exchange Commission Form 10-K as of December 31, 1996 as "audited" but are
     required to be reflected in these statements as unaudited because of the
     absence of an independent auditor's report.

NOTE 2 - Investment Securities
------                        

     A summary of amortized cost and estimated fair values of investment
     securities is as follows (in thousands):

<TABLE>
<CAPTION>
                                                              June 30, 1997
                                              ---------------------------------------------
                                                            Gross        Gross           
                                              Amortized  Unrealized  Unrealized     Fair
                                                Cost       Gains       Losses       Value
                                              ---------  ----------  -----------  ---------
<S>                                           <C>        <C>         <C>          <C>
 
Investment Securities - Held-to-Maturity
  U.S. Treasury Securities                     $ 23,980     $108       $ (57)      $ 24,031
  U.S. Government Agencies                                                        
   and Corporations                              18,113       28         (40)        18,101
  U.S. Government Agency Mortgage                                                 
   Backed Securities                              9,693       59         (18)         9,734
  Obligations of States and                                                       
   Political Subdivisions                           593        3         -0-            596
                                               --------     ----       -----       --------
                                                                                  
    Total Held-to-Maturity Securities            52,379      198        (115)        52,462
                                               --------     ----       -----       --------
                                                                                  
Investment Securities - Available-for-Sale                                        
  U.S. Treasury Securities                       55,445      249        (113)        55,581
  U.S. Government Agencies                                                        
    and Corporations                              2,988       20         -0-          3,008
  U.S. Government Agency Mortgage                                                 
    Backed Securities                             2,377       56         -0-          2,433
  Federal Reserve Bank Stock                        254      -0-         -0-            254
                                               --------     ----       -----       --------
                                                                                  
     Total Available-for-Sale Securities         61,064      325        (113)        61,276
                                               --------     ----       -----       --------
                                                                                  
        Total Investment Securities            $113,443     $523       $(228)      $113,738
                                               ========     ====       =====       ========
</TABLE>

     In the above schedule the amortized cost of Total Held-to-Maturity
                               --------------                          
Securities of $52,379,000 and the fair value  of Total Available-for-Sale
                                  ----------                             
Securities of $61,276,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 1997 for a total of $113,655,000.  A
net unrealized gain of $212,000 is included in the Available-for-Sale Investment
Securities balance.  The unrealized gain, net of tax, is included in
Shareholders' Equity.


12
<PAGE>
 
NOTE 2 - Investment Securities (cont'd.)
------                                  

     Investment securities with carrying value of $35,498,000 at June 30, 1997,
were pledged to secure federal, state and municipal deposits and for other
purposes as required or permitted by law.  The fair value of these pledged
securities totaled $35,499,000 at June 30, 1997.
<TABLE>
<CAPTION>
                                                              June 30, 1996
                                              ---------------------------------------------
                                                           Gross       Gross
                                              Amortized  Unrealized  Unrealized     Fair
                                                Cost       Gains       Losses       Value
                                              ---------  ----------  -----------  ---------
<S>                                           <C>        <C>         <C>          <C>
 
Investment Securities - Held-to-Maturity
  U.S. Treasury Securities                     $ 31,044     $109     $  (243)      $ 30,910
  U.S. Government Agencies                                                        
   and Corporations                              24,802        4        (344)        24,462
  U.S. Government Agency Mortgage                                                 
   Backed Securities                             10,574        5        (154)        10,425
                                               --------     ----     -------       --------
                                                                                  
    Total Held-to-Maturity Securities            66,420      118        (741)        65,797
                                               --------     ----     -------       --------
                                                                                  
Investment Securities - Available-for-Sale                                        
  U.S. Treasury Securities                       51,530      160        (396)        51,294
  U.S. Government Agencies                                                        
    and Corporations                              4,490       35         (18)         4,507
  U.S. Government Agency Mortgage                                                 
    Backed Securities                             3,606       49         (10)         3,645
  Federal Reserve Bank Stock                        254      -0-         -0-            254
                                               --------     ----     -------       --------
                                                                                  
     Total Available-for-Sale Securities         59,880      244        (424)        59,700
                                               --------     ----     -------       --------
                                                                                  
        Total Investment Securities            $126,300     $362     $(1,165)      $125,497
                                               ========     ====     =======       ========
</TABLE>

     In the above schedule the amortized cost of Total Held-to-Maturity
                               --------------                          
Securities of $66,420,000 and the fair value  of Total Available-for-Sale
                                  ----------                             
Securities of $59,700,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 1996 for a total of $126,120,000.  A
net unrealized loss of $180,000 is included in the Available-for-Sale Investment
Securities balance.  The unrealized loss, net of tax, is included in
Shareholders' Equity.

     Proceeds from sales of securities were $3,505,000 and $9,016,000 during the
first six months of 1997 and 1996, respectively and $14,527,000 during the year
1996.  In the six months ended June 30, 1997, gains of $2,000 and losses of
$2,000 were realized.  In the six months ended June 30, 1996, gains of $11,000
and losses of $18,000 were realized.  For the year ended December 31, 1996,
losses from sales of securities of $27,000 were realized, but were partially
offset by gains of $13,000.


NOTE 3 - Loans and Allowance for Loan Losses
------                                      

     The book values of loans by major type follow (in thousands):

<TABLE>
<CAPTION>
                                    June 30,         
                             ----------------------  December 31, 
                                1997        1996         1996
                                ----        ----         ----       
<S>                          <C>         <C>         <C>
 
Commercial                    $118,311    $ 94,263     $103,414
Real Estate Mortgage            78,459      69,730       76,771
Real Estate Construction        21,430      13,258       12,862
Loans to Individuals            29,370      25,412       27,674
Less:  Unearned Discount          (754)       (690)        (715)
                              --------    --------     --------
                               246,816     201,973      220,006
Allowance for Loan Losses       (3,512)     (2,829)      (2,972)
                              --------    --------     --------
                                                       
     Loans - Net              $243,304    $199,144     $217,034
                              ========    ========     ========
 
</TABLE>


                                                                              13
<PAGE>
 
NOTE 3 - Loans and Allowance for Loan Losses (cont'd.)
------                                                

     Transactions in the allowance for loan losses are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                           
                                               Six Months Ended June 30,             Year Ended
                                               --------------------------           December 31,
                                                1997                1996                1996
                                               ------              ------           ------------  
<S>                                            <C>                 <C>              <C>
                                                                          
Balance, Beginning of Period                   $2,972              $2,500              $2,500
Provisions, Charged to Income                     352                 288                 819
                                                                                       
Loans Charged-Off                                 (71)                (27)               (462)
Recoveries of Loans Previously                                                         
 Charged-Off                                      259                  68                 115
                                               ------              ------              ------
                                                                                       
          Net Loans (Charged-Off) Recovered       188                  41                (347)
                                               ------              ------              ------
                                                                                       
Balance, End of Period                         $3,512              $2,829              $2,972
                                               ======              ======              ======
</TABLE>

    The provisions for loan losses charged to operating expenses during the six
months ended June 30, 1997 and June 30, 1996 of $352,000 and $288,000,
respectively, were considered adequate to maintain the allowance in accordance
with the policy discussed in Note 1.  For the year ended December 31, 1996, a
provision of $819,000 was recorded.

    At June 30, 1997, the recorded investment in loans that are considered to be
impaired under Statement of Financial Accounting Standards No. 114 was $433,000
(of which $433,000 were on non-accrual status).  The related allowance for loan
losses for these loans was $183,000.  The average recorded investment in
impaired loans during the six months ended June 30, 1997 was approximately
$426,000.  For this period the Corporation recognized interest income of $2,000
on these impaired loans.


NOTE 4 - Premises and Equipment
------                         

    The investment in premises and equipment stated at cost and net of
accumulated amortization and depreciation is as follows (in thousands):

<TABLE>
<CAPTION>
                                                         June 30,        
                                                    ------------------   December 31, 
                                                      1997      1996         1996
                                                    --------  --------   ------------
<S>                                                 <C>       <C>        <C>
 
Land                                                 $ 2,170   $ 1,446      $ 1,446
Buildings and Improvements                             7,375     7,359        7,375
Furniture & Equipment                                  5,415     5,146        5,182
                                                     -------   -------      -------
                                                                            
    Total Cost                                        14,960    13,951       14,003
Less:  Accumulated Amortization and Depreciation      (7,295)   (6,631)      (6,898)
                                                     -------   -------      -------
                                                                            
    Net Book Value                                   $ 7,665   $ 7,320      $ 7,105
                                                     =======   =======      =======
</TABLE>

NOTE 5 - Other Real Estate
------                    

    The carrying value of other real estate is as follows (in thousands):

<TABLE>
<CAPTION>
                                   June 30,        
                             -------------------   December 31, 
                               1997       1996        1996
                             --------   --------   ------------
<S>                          <C>        <C>        <C>
 
Other Real Estate               $ 186    $ 207        $ 201
Valuation Reserve                 (35)     (35)         (35)
                                -----    -----        -----
                                                      
    Net Other Real Estate       $ 151    $ 172        $ 166
                                =====    =====        =====
</TABLE>

14
<PAGE>
 
NOTE 5 - Other Real Estate (cont'd.)
------                              

    Transactions in the valuation reserve are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
                                                           
                                Six Months Ended June 30,            Year Ended 
                                -------------------------           December 31,
                                 1997               1996                1996    
                                ------             ------           ------------
<S>                             <C>                <C>              <C>
                                                               
Balance, Beginning of Period     $ 35               $ 35                $ 35
Provisions Charged to Income      -0-                -0-                 -0-
Reductions from Sales             -0-                -0-                 -0-
                                 ----               ----                ----
                                                                         
Balance, End of Period           $ 35               $ 35                $ 35
                                 ====               ====                ====
 
</TABLE>

    Direct writedowns of other real estate charged to income were $4,000 for the
six months ended June 30, 1997 and $6,000 for the six months ended June 30, 1996
and $12,000 for the year ended December 31, 1996.


NOTE 6 - Deposits
------           

    The book values of deposits by major type follow (in thousands):
<TABLE>
<CAPTION>
 
                                                    June 30,        
                                              --------------------- December 31,
                                                 1997        1996       1996
                                              ---------- ---------- ------------
<S>                                           <C>        <C>        <C>
 
Noninterest-Bearing Demand Deposits            $105,226   $ 94,051    $103,695
                                               --------   --------    --------
Interest-Bearing Deposits:                                            
 Interest-Bearing Transaction                                         
     Accounts and Money Market Funds            128,077    115,327     119,316
 Savings                                         49,600     47,641      49,048
 Savings Certificates - Time                     47,503     47,581      47,025
 Certificates of Deposits $100,000 or more       29,838     24,431      25,434
 Other                                              705        439         505
                                               --------   --------    --------
   Total                                        255,723    235,419     241,328
                                               --------   --------    --------
       Total Deposits                          $360,949   $329,470    $345,023
                                               ========   ========    ========
 
</TABLE>

NOTE 7 - Securities Sold Under Repurchase Agreements
------                                              

     Securities sold under repurchase agreements generally represent borrowings
with maturities ranging from one to thirty days. Information relating to these
borrowings is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                Six Months Ended June 30,    Year Ended 
                                                -------------------------   December 31, 
                                                  1997             1996         1996
                                                --------         --------   -------------
<S>                                             <C>              <C>        <C>
 
Securities Sold Under Repurchase Agreements:
    Average                                      $12,038          $11,059      $12,181
    Period-End                                     9,027           11,514       13,209
    Maximum Month-End Balance During Period       13,212           12,199       14,453
Interest Rate                                                  
    Average                                         4.28%            4.31%        4.33%
    Period-End                                      4.50             4.31         4.35
</TABLE>


                                                                              15
<PAGE>
 
NOTE 8 - Other Non-Interest Expense
------                             

    The significant components of other non-interest expense are as follows (in
thousands):

<TABLE>
<CAPTION>
                                   Six Months Ended June 30,   Year Ended 
                                   -------------------------  December 31, 
                                    1997               1996       1996
                                   ------             ------  ------------
<S>                                <C>                <C>     <C>
 
Business Development               $  273             $  218     $  426
Legal and Professional Fees           248                205        442
Printing and Supplies                 174                154        303
Regulatory Fees and Assessments        85                102        134
Other                                 757                746      1,277
                                   ------             ------     ------
                                                                 
  Total                            $1,537             $1,425     $2,582
                                   ======             ======     ======
</TABLE>

NOTE 9 - Income Taxes
------               

  Federal income taxes included in the consolidated balance sheets were as
follows (in thousands):

<TABLE>
<CAPTION>
                                         June 30,  
                                      --------------   December 31,             
                                      1997      1996       1996
                                      ----      ----   ------------
<S>                                 <C>       <C>      <C>
                                                       
Current Tax Asset                     $ 37      $ 46       $ 26
Deferred Tax Asset                     542       481        449
                                      ----      ----       ----
                                                            
  Total Included in Other Assets      $579      $527       $475
                                      ====      ====       ====
</TABLE>
  The deferred tax asset at June 30, 1997 of $542,000 included $72,000 related
to unrealized gains on Available-for-Sale Securities.

  The components of income tax expense were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   
                                       Six Months Ended June 30,    Year Ended 
                                       --------------------------  December 31, 
                                        1997                1996       1996
                                       ------              ------  ------------
<S>                                    <C>                 <C>     C>
 
Federal Income Tax Expense
 Current                               $1,857              $1,420     $3,240
 Deferred                                 (50)                (13)      (137)
                                       ------              ------     ------
                                                                      
   Total Federal Income Tax Expense    $1,807               1,407     $3,103
                                       ======              ======     ======
                                                                      
   Effective Tax Rates                   34.4%               34.4%      34.3%
                                       ======              ======     ======
</TABLE>

     The reasons for the difference between income tax expense and the amount
computed by applying the statutory federal income tax rate to operating earnings
are as follows (in thousands):

<TABLE>
<CAPTION>
 
                                                                    
                                        Six Months Ended June 30,    Year Ended 
                                        -------------------------   December 31,
                                         1997               1996        1996
                                        ------             ------   ------------
<S>                                     <C>                <C>      <C>
 
Federal Income Taxes at Statutory 
 Rate of 34%                            $1,785             $1,389      $3,076
Effect of Tax Exempt Interest Income        (5)                (5)         (8)
Non-deductible Expenses                     23                 24          39
Other                                        4                 (1)         (4)
                                        ------             ------      ------
                                                                     
 Income Taxes Per Income Statement      $1,807             $1,407      $3,103
                                        ======             ======      ======
</TABLE>


16
<PAGE>
 
NOTE 10 - Related Party Transactions
-------                             

     The Subsidiary Banks have transactions made in the ordinary course of
business with certain of its officers, directors and their affiliates. All loans
included in such transactions are made on substantially the same terms,
including interest rate and collateral, as those prevailing at the time for
comparable transactions with other persons. Total loans outstanding to such
parties amounted to approximately $3,819,000 at December 31, 1996.


NOTE 11 - Commitments and Contingent Liabilities
-------                                         

     In the normal course of business, there are various outstanding commitments
and contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the financial statements.  No losses are anticipated
as a result of these transactions.  Commitments are most frequently extended for
real estate, commercial and industrial loans.

     At June 30, 1997, outstanding documentary and standby letters of credit
totaled $3,098,000 and commitments to extend credit totaled $82,853,000.


NOTE 12 - Stock Option Plans
-------                     

     The Corporation adopted an Incentive Stock Option Plan ("1993 Plan") with
300,000 shares (adjusted for the April 1993 and December 1995 two-for-one stock
splits) of common stock reserved for grants thereunder.  The Board of Directors
and the Shareholders have approved a new plan, the 1997 Incentive Stock Option
Plan ("1997 Plan").  The 1997 Plan reserved 300,000 shares for grants
thereunder.   These plans provide for the granting to management employees of
Summit Bancshares, Inc. and subsidiaries, incentive stock options, as defined
under the current tax law.  The options will be exercisable for ten years from
the date of grant and generally vest ratably over a five year period.


     Options under both plans will be granted at prices which will not be less
than 100-110% of the fair market value of the underlying common stock at the
date of grant. The Corporation applies APB Opinion No. 25 and related
Interpretations in accounting for its plans. Since the option prices are
considered to approximate fair market value at date of grant, no compensation
expense has been reported. Had compensation cost for these plans been determined
consistent with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" the Corporation's net income and earnings per
share would have been reduced by insignificant amounts on a proforma basis for
the year ended December 31, 1996, or the six months ended June 30, 1997.

    The following is a summary of transactions during the periods presented:

<TABLE>
<CAPTION>
                                            Shares Under Option
                                     ----------------------------------
                                       Six Months
                                         Ended           Year Ended
                                     June 30, 1997   December 31, 1996
                                     --------------  ------------------
<S>                                  <C>             <C>
 
Outstanding, Beginning of Period        232,050            301,400
Additional Options Granted During                          
  the Period                             36,076             29,800
Forfeited During the Period                (400)            (1,000)
Exercised During the Period              (3,250)           (98,150)
                                        -------            -------
                                                           
  Outstanding, End of Period            264,476            232,050
                                        =======            =======
</TABLE>

     Options outstanding at June 30, 1997 ranged in price from $6.00 to $26.38
per share with a weighted average exercise price of $8.12 and with 188,975
shares exercisable.  At June 30, 1997, there remained 94 shares reserved for
future grants of options under the 1993 Plan and 288,750 shares reserved for
future grants of options under the 1997 Plan.


NOTE 13 - Employee Benefit Plans
-------                         

     The Corporation has a defined benefit pension plan covering substantially
all of its employees.  The benefits are based on years of service and the
employee's compensation history.  The employee's compensation used in the
benefit calculation is the highest average for any five consecutive years of
employment within the employee's last ten years of employment.

     Funding for the plan is provided by employer contributions to trust funds
in amounts determined by actuarial assumptions and valuation of the plan.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.


                                                                              17
<PAGE>
 
NOTE 13 - Employee Benefit Plans (cont'd.)
-------                                   

     The table below sets forth the plan's funded status and amounts recognized
in the Corporation's consolidated balance sheets at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                                      1996      1995
                                                                                    --------  -------- 
<S>                                                                                 <C>       <C>
 
Actuarial present value of benefit obligations:
 Accumulated benefit obligation, including vested
  benefits of $1,647,000 in 1996 and $1,152,000 in 1995                              $1,762    $1,183
                                                                                     ======    ======
 
Projected benefit obligation for service rendered
 to date                                                                             $1,997    $1,912
Plan assets at fair value, primarily listed stocks
 and U.S. bonds                                                                       2,192     1,786
                                                                                     ------    ------
 
Plan assets in excess of (less than) projected benefit obligation                       195      (126)
Unrecognized net loss from past experience
 different from that assumed and effect of
 changes in assumptions                                                                  21       197
Prior service cost not yet recognized in net
 periodic pension cost                                                                   15        17
                                                                                     ------    ------
 
Net pension cost included in other assets/(other liabilities)                        $  231    $  (88)
                                                                                     ======    ======
 
Prepaid (accrued) pension cost included the following components (in thousands):
                                                                                  Year Ended December 31,
                                                                                  -----------------------
                                                                                      1996      1995
                                                                                    --------  -------- 
 
Service Cost - benefits earned during the period                                     $  195    $  154
Interest cost on projected benefit obligation                                           131       140
Less: Actual return on plan assets                                                     (153)     (260)
Net amortization and deferral                                                            (2)      145
                                                                                     ------    ------
 
   Net periodic pension cost                                                         $  171    $  179
                                                                                     ======    ======
</TABLE>

     The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligation
were 8 percent and 5 percent, respectively.  The expected long-term rate of
return on plan assets was 8 percent.

     The market value of plan assets at June 30, 1997 was $2,747,000.  There was
a contribution to the plan during 1997 of $370,000 and prepaid pension cost at
June 30, 1997 was $479,000.

Management Security Plan
------------------------

     In 1992, the Corporation established a Management Security Plan to provide
key employees with retirement, death or disability benefits in addition to those
provided by the Pension Plan.  The expense charged to operations for such future
obligations was $168,000 and $112,000 during the first six months of 1997 and
1996, respectively, and $239,000 for the year 1996.

Other Post Retirement Benefits
------------------------------

     The Corporation provides certain health care benefits for certain retired
employees who bear all costs of these benefits. These benefits are covered under
the "Consolidated Omnibus Budget Reconciliation Act" (COBRA).


18
<PAGE>
 
NOTE 14 - Earnings per Share
-------                     

     Earnings per share of common stock are based on the weighed average number
of shares outstanding during the periods as follows:

<TABLE>
<CAPTION>
                                 Shares
                                ---------
<S>                             <C>
Periods of Six Months Ended:
 
  June 30, 1997                 3,235,245
  June 30, 1996                 3,173,646
 
Year Ended December 31, 1996    3,199,480
</TABLE>

NOTE 15 - Financial Instruments with Off-Balance Sheet Risk
-------                                                    

     The Corporation is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers.  These financial instruments include loan commitments, standby
letters of credit and documentary letters of credit.  The instruments involve,
to varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the financial statements.

     The Corporation's exposure to credit loss in the event of non-performance
by the other party of these loan commitments and standby letters of credit is
represented by the contractual amount of those instruments. The Corporation uses
the same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments.

     The total contractual amounts of financial instruments with off-balance
sheet risk are as follows (in thousands):

<TABLE>
<CAPTION>
                                           June 30,
                                      -----------------
                                        1997      1996
                                      -------   -------
<S>                                   <C>       <C>
 
Financial Instruments Whose
  Contract Amounts Represent
     Credit Risk:

     Commitments to Extend Credit     $82,853   $72,199  

     Documentary and Standby
       Letters of Credit                3,098     6,128
</TABLE>

     Since many of the loan commitments may expire without being drawn upon, the
total commitment amount does not necessarily represent future cash requirements.
The Corporation evaluates each customer's credit worthiness on a case-by-case
basis.  The amount of collateral obtained, if deemed necessary by the
Corporation upon extension of credit, is based on management's credit evaluation
of the counterparty.  Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, owner occupied real estate
and income-producing commercial properties.

     The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers.


NOTE 16 - Concentrations of Credit Risk
-------                                

     The Subsidiary Banks  grant commercial, consumer and real estate loans in
their direct market  which is defined as Fort Worth and its surrounding area.
The Board of Directors of each Subsidiary Bank monitors concentrations of credit
by purpose, collateral and industry at least quarterly.  Certain limitations for
concentration are set by the Boards.  Additional loans in excess of these limits
must have prior approval of the bank's directors' loan committee.  Although its
Subsidiary Banks have diversified loan portfolios, a substantial portion of its
debtors' abilities to honor their contracts is dependent upon the strength of
the local and state economy.


NOTE 17 - Litigation
-------             

     Certain of the Subsidiary Banks are involved in legal actions arising in
the ordinary course of business. It is the opinion of management, after
reviewing such actions with outside legal counsel, that the settlement of these
matters will not materially affect the Corporation's financial position.


                                                                              19
<PAGE>
 
NOTE 18 - Stock Repurchase Plan
-------                        

     On April 15, 1997, the Board of Directors approved a stock repurchase plan.
The plan authorized management to purchase up to 161,782 shares of the
Corporation's common stock over the next twelve months through the open market
or in privately negotiated transactions in accordance with all applicable state
and federal laws and regulations.

     In 1996, 9,000 shares were purchased by the Corporation through a similar
repurchase plan through the open market.  Such shares were canceled and returned
to authorized and unissued status.  In the first six months of 1997, no shares
were purchased.


NOTE 19 - Subsequent Event
-------                   

     On July 16, 1997, the Board of Directors of the Corporation approved a
quarterly dividend of $.09 per share to be paid on August 15, 1997 to
shareholders of record on August 1, 1997.


NOTE 20 - Fair Values of Financial Instruments
-------                                       

     The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:

     Cash and cash equivalents:  The carrying amounts reported in the balance
     sheet for cash and due from banks and federal funds sold approximate those
     assets' fair values.

     Investment securities (including mortgage-backed securities):  Fair values
     for investment securities are based on quoted market prices, where
     available.  If quoted market prices are not available, fair values are
     based on quoted market prices of comparable instruments.

     Loans:  For variable-rate loans, fair values are based on carrying values.
     The fair values for fixed rate loans such as mortgage loans (e.g., one-to-
     four family residential) and installment loans are estimated using
     discounted cash flow analysis.  The carrying amount of accrued interest
     receivable approximates its fair value.

     Deposit liabilities:  The fair value disclosed for interest bearing and
     noninterest-bearing demand deposits, passbook savings, and certain types of
     money market accounts are, by definition, equal to the amount payable on
     demand at the reporting date or their carrying amounts.  Fair values for
     fixed-rate certificates of deposit are estimated using a discounted cash
     flow calculation that applies interest rates currently being offered on
     certificates to a schedule of aggregated expected monthly maturities on
     time deposits.

     Short-term borrowings:  The carrying amounts of borrowings under repurchase
     agreements approximate their fair values.


20
<PAGE>
 
NOTE 20 - Fair Values of Financial Instruments (cont'd.)
-------                                                 

     The estimated fair values of the Corporation's financial instruments are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                             June 30,
                                              --------------------------------------
                                                      1997               1996
                                              ------------------  ------------------
                                              Carrying    Fair    Carrying    Fair
                                               Amount    Value     Amount    Value
                                              --------  --------  --------  --------
<S>                                           <C>       <C>       <C>       <C>
   Financial Assets
     Cash and due from banks                  $ 28,170  $ 28,170  $ 21,854  $ 21,854
     Federal funds sold                         10,900    10,900    14,815    14,815
     Securities                                113,655   113,738   126,120   125,497
     Loans                                     246,816   245,620   201,973   202,477
 
   Financial Liabilities
     Deposits                                  360,949   361,026   329,470   329,648
     Securities sold under repurchase
      agreements                                 9,027     9,027    11,514    11,514
 
   Off-balance Sheet Financial Instruments
     Loan commitments                                     82,853              72,199
     Letters of credit                                     3,098               6,128
</TABLE>


                                                                              21
<PAGE>
 
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

Summary
-------

     Net income for the second quarter of 1997 was $1,772,000, or $.54 per
share, compared with $1,395,000, or $.43 per share, for the second quarter of
1996.  On a per share basis, net income increased 25.6% over the second quarter
of the prior year.

     Net income for the first six months of 1997 was $3,444,000, or $1.06 per
share, compared with $2,680,000, or $.84 per share for the first six months of
1996.  Per share amounts are based on average shares outstanding of 3,235,245
for the first six months of 1997 and 3,173,646 for the first six months of 1996.

     Outstanding loans at June 30, 1997 of $246.8 million represented an
increase of $44.8 million, or 22.2%, over June 30, 1996 and an increase of $26.8
million, or 12.2%, from December 31, 1996.

     Total deposits at June 30, 1997 of $361.0 million represented an increase
of $31.5 million, or 9.6%, over June 30, 1996 and an increase of $15.9 million,
or 4.6%, from December 31, 1996.
 
     In the second quarter, net interest income increased 18.3% over the
previous year.  An increase in non-interest expense of 9.8% partially offset the
increase in net interest income.

     The following table summarizes the Corporation's performance for the six
months ended June 30, 1997 and 1996 (tax equivalent basis and dollars in
thousands).

<TABLE> 
<CAPTION> 
                                          Three Months Ended    Six Months Ended
                                                June 30,            June 30,
                                          ------------------   ------------------
                                            1997      1996       1997      1996
                                          --------  --------   --------  --------
<S>                                       <C>       <C>        <C>       <C>
Interest Income                            $7,874    $6,725     $15,204   $13,226
Interest Expense                            2,713     2,361       5,253     4,724
                                           ------    ------     -------   -------
 Net Interest Income                        5,161     4,364       9,951     8,502
Provision for Loan Loss                       197       164         352       288
                                           ------    ------     -------   -------
                                                                          
 Net Interest Income After                                                
   Provision for Loan Loss                  4,964     4,200       9,599     8,214
Non-Interest Income                           820       731       1,582     1,460
Non-Interest Expense                        3,076     2,802       5,922     5,580
                                           ------    ------     -------   -------
                                                                          
 Income Before Income Tax                   2,708     2,129       5,259     4,094
Income Tax Expense                            936       734       1,815     1,414
                                           ------    ------     -------   -------
                                                                          
   Net Income                              $1,772    $1,395     $ 3,444   $ 2,680
                                           ======    ======     =======   =======
                                                                          
Net Income per Share                       $  .54    $  .43     $  1.06   $   .84
                                                                          
Return on Average Assets                     1.76%     1.53%       1.75%     1.50%
                                                                          
Return on Average Stockholders' Equity*     19.15%    17.86%      19.07%    17.41%
</TABLE>

*    Before adjustment for unrealized gains and losses on Available-for-Sale
     securities.


22
<PAGE>
 
Summary of Earning Assets and Interest-Bearing Liabilities
----------------------------------------------------------

  The following schedule presents average balance sheets that highlight earning
assets and interest-bearing liabilities and their related rates earned and paid
for the first quarter of 1997 and 1996 (rates on tax equivalent basis).

<TABLE>
<CAPTION>
                                                              Three Months ended June 30,
                                          -------------------------------------------------------------------
                                                        1997                                 1996
                                          --------------------------------   --------------------------------
                                           Average                Average     Average                Average
                                           Balances   Interest  Yield/Rate    Balances   Interest  Yield/Rate
                                          ----------  --------  ----------   ----------  --------  ----------
                                                                 (Dollars in Thousands)
<S>                                       <C>         <C>       <C>          <C>         <C>       <C>
Earning Assets:
  Federal Funds Sold                       $  8,442     $  116        5.44%   $ 16,523     $  218        5.25%
  Investment Securities (Taxable)           115,598      1,801        6.25     124,817      1,875        6.04
  Investment Securities (Tax-exempt)            595         10        6.45          25          1        8.12
  Loans, Net of Unearned Discount/(1)/      245,235      5,947        9.73     194,352      4,631        9.58
                                           --------     ------                --------     ------
    Total Earning Assets                    369,870      7,874        8.54     335,717      6,725        8.05
                                                        ------                             ------
 
Non-interest Earning Assets:
  Cash and Due From Banks                    24,083                             21,074
  Other Assets                               13,056                             12,189
  Allowance for Loan Losses                  (3,413)                            (2,714)
                                           --------                           --------
    Total Assets                           $403,596                           $366,266
                                           ========                           ========
 
Interest-Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Money Market Funds        $128,018      1,133        3.55    $115,116        925        3.23
  Savings                                    49,882        516        4.15      45,729        455        4.00
  Savings Certificates                       47,008        571        4.87      48,069        563        4.71
  Certificates of Deposit
    $100,000 or more                         28,184        358        5.09      24,339        295        4.87
  Other Time                                    566          8        5.43         380          4        4.54
  Other Borrowings                           11,248        127        4.49      11,283        119        4.26
                                           --------     ------                --------     ------
    Total Interest-Bearing Liabilities      264,906      2,713        4.11     244,916      2,361        3.88
                                                        ------                             ------
 
Non-interest Bearing Liabilities:
  Demand Deposits                            99,359                             87,939
  Other Liabilities                           2,210                              2,093
  Shareholders' Equity                       37,121                             31,318
                                           --------                           --------
    Total Liabilities and
      Shareholders' Equity                 $403,596                           $366,266
                                           ========                           ========
 
Net Interest Income and Margin
 (Tax-equivalent Basis)/(2)/                            $5,161        5.60                 $4,364        5.23
                                                        ======                             ======
</TABLE>

(1)  Loan interest income includes fees and loan volumes include loans on non-
     accrual.
(2)  Presented on a tax equivalent basis ("T/E") using a federal income tax rate
     of 34% in both years.


                                                                              23
<PAGE>
 
<TABLE>
<CAPTION>
                                                              Six Months ended June 30,
                                          ------------------------------------------------------------------
                                                        1997                              1996
                                          --------------------------------  --------------------------------
                                           Average               Average     Average               Average
                                          Balances   Interest  Yield/Rate   Balances   Interest  Yield/Rate
                                          ---------  --------  -----------  ---------  --------  -----------
                                                                (Dollars in Thousands)
<S>                                       <C>        <C>       <C>          <C>        <C>       <C>
Earning Assets:
  Federal Funds Sold                       $ 11,863   $   320        5.35%   $ 18,423   $   492        5.34%
  Investment Securities (Taxable)           115,436     3,537        6.18     121,778     3,666        6.03
  Investment Securities (Tax-exempt)            413        13        6.50          47         1        8.12
  Loans, Net of Unearned Discount/(1)/      236,007    11,334        9.68     189,403     9,067        9.63
                                           --------   -------                --------   -------
    Total Earning Assets                    363,719    15,204        8.43     329,651    13,226        8.06
                                                      -------                           -------
 
Non-interest Earning Assets:
  Cash and Due From Banks                    23,371                            20,407
  Other Assets                               12,980                            12,037
  Allowance for Loan Losses                  (3,273)                           (2,630)
                                           --------                          --------
    Total Assets                           $396,797                          $359,465
                                           ========                          ========
 
Interest-Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts & Money Market Funds          $125,331     2,169        3.49    $114,182     1,853        3.26
  Savings                                    50,113     1,013        4.08      43,174       864        4.03
  Savings Certificates                       47,059     1,127        4.83      48,473     1,161        4.82
  Certificates of Deposit
    $100,000 or more                         27,123       679        5.05      24,398       600        4.95
  Other Time                                    538        14        5.09         359        10        4.94
  Other Borrowings                           12,038       251        4.28      11,059       236        4.31
                                           --------   -------                --------   -------
    Total Interest-Bearing Liabilities      262,202     5,253        4.04     241,645     4,724        3.93
                                                      -------                           -------
 
Non-interest Bearing Liabilities:
  Demand Deposits                            96,001                            85,064
  Other Liabilities                           2,180                             2,039
  Shareholders' Equity                       36,414                            30,717
                                           --------                          --------
    Total Liabilities and
      Shareholders' Equity                 $396,797                          $359,465
                                           ========                          ========
 
Net Interest Income and Margin
 (Tax-equivalent Basis)/(2)/                          $ 9,951        5.52               $ 8,502        5.18
                                                      =======                           =======
</TABLE>

(1)  Loan interest income includes fees and loan volumes include loans on non-
     accrual.
(2)  Presented on a tax equivalent basis ("T/E") using a federal income tax rate
     of 34% in both years.


24
<PAGE>
 
Net Interest Income
-------------------

      Net interest income (tax equivalent) for the second quarter of 1997 was
$5,161,000 which represented an increase of $797,000, or 18.3%, over the second
quarter of 1996.  This increase was heavily contributed to by a 26.2% increase
in average loans for the second quarter of 1997 versus the same quarter last
year.

      The following table summarizes the effects of changes in interest rates,
average volumes of earning assets and interest bearing liabilities on net
interest income ( tax equivalent) for the periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
 
                                           ANALYSIS OF CHANGES IN NET INTEREST INCOME
                                                        (Dollars in Thousands)

                                    2nd Qtr. 1997 vs. 2nd Qtr. 1996     Six Mos. 1997 vs. Six Mos. 1996
                                           Increase (Decrease)                 Increase (Decrease)
                                           Due to Changes in:                  Due to Changes in:
                                    -------------------------------     ------------------------------- 
                                         Volume   Rate   Total              Volume   Rate   Total
                                        --------  ----   ------            --------  ----  ------- 
<S>                                     <C>       <C>    <C>               <C>       <C>   <C>
Interest Earning Assets:                                         
 Federal Funds Sold                     $ (153)   $ 51   $ (102)            $ (175)  $  3  $ (172)
 Investment Securities (Taxable)          (407)    333      (74)              (335)   206    (129)
 Investment Securities (Tax-exempt)         10      (1)       9                 13     (1)     12
 Loans, Net of Unearned Discount         1,242      74    1,316              2,220     47   2,267
                                        ------    ----   ------             ------   ----  ------ 
 
 Total Interest Income                     692     457    1,149              1,723    255   1,978
                                        ------    ----   ------             ------   ----  ------ 
 
Interest-Bearing Liabilities:
 Deposits                                  203     141      344                378    136     514
 Other Borrowings                           (2)     10        8                 20     (5)     15
                                        ------    ----   ------             ------   ----  ------ 
 Total Interest Expense                    201     151      352                398    131     529
                                        ------    ----   ------             ------   ----  ------  

Net Interest Income                     $  491    $306   $  797             $1,325   $124  $1,449
                                        ======    ====   ======             ======   ====  ======
 
</TABLE>

Provision for Loan Losses and Non-Performing Assets
---------------------------------------------------

  The Corporation's provision for loan losses was $3,512,000, or 1.42% of total
loans, as of June 30, 1997 compared to $2,829,000, or 1.40% of total loans, as
of June 30, 1996.

 Transactions in the provision for loan losses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
 
                                       Three Months Ended    Six Months Ended
                                            June 30,              June 30,
                                      --------------------  ------------------- 
                                        1997       1996       1997      1996
                                      ---------  ---------  --------  --------- 
<S>                                   <C>        <C>        <C>       <C>
Balance, Beginning of Period            $3,327     $2,653    $2,972     $2,500
Provisions, Charged to Income              197        164       352        288
Loans Charged-Off                          (52)       (27)      (71)       (27)
Recoveries of Loans Previously
   Charged-Off                              40         39       259         68
                                        ------     ------    ------     ------
           Net Loans (Charged-Off)
              Recovered                    (12)        12       188         41
                                        ------     ------    ------     ------
 
Balance, End of Period                  $3,512     $2,829    $3,512     $2,829
                                        ======     ======    ======     ======
</TABLE>

                                       25
<PAGE>
 
   The following table summarizes the non-performing assets as of the end of the
last five quarters (in thousands).
<TABLE>
<CAPTION>
 
                                 June 30,  March 31,  December 31,  September 30,  June 30,
                                   1997      1997         1996          1996         1996
                                 --------  ---------  ------------  -------------  --------
<S>                              <C>       <C>        <C>           <C>            <C>
 
Non-Accrual Loans                  $  901     $1,005        $1,102         $1,282    $1,356
Other Real Estate Owned               151        163           166            169       172
                                   ------     ------        ------         ------    ------
 
  Total Non-Performing Assets      $1,052     $1,168        $1,268         $1,451    $1,528
                                   ======     ======        ======         ======    ======
</TABLE>
     Non-accrual loans to total loans were .37% at June 30, 1997 and non-
performing assets were .43% of loans and other real estate owned at the same
date.

Non-interest Income
-------------------

     The major component of non-interest income is service charges on deposits.
Other service fees are the majority of other non-interest income.

     The following table reflects the changes in non-interest income during the
periods presented (dollars in thousands).
<TABLE>
<CAPTION>
 
                                             Three Months Ended           Six Months Ended
                                                  June 30,                    June 30,
                                          ------------------------  ---------------------------- 
                                          1997    1996   % Change    1997      1996    % Change
                                          -----  ------  ---------  -------  --------  --------- 
<S>                                       <C>    <C>     <C>        <C>      <C>       <C>
 
Service Charges on Deposit Accounts       $ 463  $ 402       15.2%   $  900   $  787       14.4%
Loss on Sale of Investment  Securities      -0-    (10)        --       -0-       (7)        --
Non-recurring Income                         34     37       (8.1)       87       69       26.1
Other Non-interest Income                   323    302        7.0       595      611       (2.6)
                                          -----  -----               ------   ------
 
  Total Non-interest Income               $ 820  $ 731       12.2    $1,582   $1,460        8.4
                                          =====  =====               ======   ======
</TABLE>

   Non-recurring income is primarily interest recovered on loans charged-off in
prior years.  The decrease in other non-interest income for the six months ended
June 30, 1997 was primarily due to decreases in fees earned from investment
brokerage services and issuances of letters of credit.

Non-interest Expense
--------------------

     Non-interest expenses include all expenses other than interest expense,
provision for loan losses and income tax expense.

     The following table summarizes the changes in non-interest expense during
the periods presented (dollars in thousands).
<TABLE>
<CAPTION>
 
                                          Three Months Ended June 30,   Six Months Ended June 30,
                                          --------------------------  ----------------------------
                                           1997     1996   % Change     1997     1996    % Change
                                          ------   ------  --------   --------  -------  ---------
<S>                                       <C>      <C>     <C>        <C>       <C>      <C>
                                                   
Salaries & Employee Benefits              $1,828   $1,697      7.7%   $3,575    $3,352       6.7%
Occupancy Expense - Net                      190      207     (8.2)      387       387        --
Furniture and Equipment Expense              220      203      8.4       431       400       7.8
Other Real Estate Expense - Net               (5)      21       --        (8)       16        --
Other Expenses:                                              
 Business Development                        172      113     52.2       273       218      25.2
 Insurance - Other                            20       24    (16.7)       47        51      (7.8)
 Legal & Professional Fees                   139      107     29.9       248       205      21.0
 Taxes - Other                                45       24     87.5        73        47      55.3
 Postage & Courier                            64       56     14.3       132       130       1.5
 Printing & Supplies                          97       74     31.1       174       154      13.0
 Regulatory Fees & Assessments                43       51    (15.7)       85       102     (16.7)
 Other Operating Expenses                    263      225     16.9       505       518      (2.5)
                                          ------   ------             ------    ------
                                                             
   Total Other Expenses                      843      674     25.1     1,537     1,425       7.9
                                          ------   ------             ------    ------
                                                             
   Total Non-interest Expense             $3,076   $2,802      9.8    $5,922    $5,580       6.1
                                          ======   ======             ======    ======
</TABLE>

                                       26
<PAGE>
 
  Total non-interest expense increased 9.8% in the second quarter of 1997 over
1996, reflecting increases in salaries and benefits, furniture and equipment
expenses, business development, legal and professional expense, taxes-other and
printing and supplies.  As a percent of average assets, non-interest expenses
were 3.07% in the second quarter of 1997, the same as in the second quarter of
1996.  The "efficiency ratio" (non-interest expenses divided by total non-
interest income plus net interest income) was 51.5% for the second quarter of
1997.  These measures of operating efficiency compare very favorably to other
financial institutions in the Corporation's peer group.

  The increase in salaries and employee benefits for the second quarter of 1997
is due to salary merit increases, incentive compensation accrual increases, and
an increase in pension plan expense.  Also, the average number of full-time
equivalent employees increased by three in the second quarter of 1997 to an
average full-time equivalent of 138 compared to the same quarter last year.

  The increase in furniture and equipment expense is primarily a result of
increased depreciation for new furniture and equipment acquired in the past
year.

  Business development expense increased as a result of increased advertising
expenses related to the new name for Summit Community Bank.

  Legal and professional fees increased due to increased miscellaneous legal
fees and miscellaneous other professional fees.

  Taxes-other increased due to additional state franchise taxes paid on
increased levels of capital and additional taxes due as a result of audits of
franchise tax returns of all SBI entities for the four years prior to 1996.

  The increase in printing and supplies was also primarily related to the
expenses of the Summit Community Bank name change.

  Other operating expenses increased in the second quarter of 1997 due to
increases in various miscellaneous operating costs.

Interest Rate Sensitivity
-------------------------

    Interest rate sensitivity is the relationship between changes in market
interest rates and net interest income due to the repricing characteristics of
assets and liabilities.

    The following table, commonly referred to as a "static gap report",
indicates the interest rate sensitivity position at June 30, 1997 and may not be
reflective of positions in subsequent periods (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                        
                                                                                        Total        Repriced  
                                           Matures or Reprices within:                   Rate          After    
                                    ----------------------------------------------     Sensitive     1 Year or 
                                    30 Days       31-90      91-180        181 to      One Year    Non-interest
                                    or Less        Days       Days        One Year      or Less      Sensitive     Total
                                    --------    --------    --------     ---------     --------    ------------  --------
<S>                                 <C>         <C>         <C>          <C>           <C>         <C>           <C> 
Earning Assets:
  Loans                             $137,717    $  6,538    $  9,775     $ 15,744      $169,774     $ 77,042      $246,816
  Investment Securities                  367       4,118       6,617       19,172        30,274       83,381       113,655
  Federal Funds Sold                  10,900         -0-         -0-          -0-        10,900          -0-        10,900
                                    --------    --------    --------     --------      --------     --------      --------
 
   Total Earning Assets              148,984      10,656      16,392       34,916       210,948      160,423       371,371
                                    --------    --------    --------     --------      --------     --------      --------
 
Interest Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Savings             177,677         -0-         -0-          -0-       177,677          -0-       177,677
  Certificate of Deposits
    >$100,000                          6,399       5,638       7,668        8,564        28,269        1,569        29,838
  Other Time Deposits                  6,038       9,661      11,136       16,034        42,869        5,339        48,208
  Repurchase Agreements                9,027         -0-         -0-          -0-         9,027          -0-         9,027
                                    --------    --------    --------     --------      --------     --------      --------
 
   Total Interest Bearing
    Liabilities                      199,141      15,299      18,804       24,598       257,842        6,908       264,750
                                    --------    --------    --------     --------      --------     --------      --------
 
Interest Sensitivity
 Gap                                $(50,157)   $ (4,643)   $ (2,412)    $ 10,318      $(46,894)    $153,515      $106,621
                                    ========    ========    ========     ========      ========     ========      ========
Cumulative Gap                      $(50,157)   $(54,800)   $(57,212)    $(46,894)
                                    ========    ========    ========     ========
 
Cumulative Gap to
 Total Earning Assets                 (13.5%)     (14.8%)     (15.4%)      (12.6%)
 
Cumulative Gap to
 Total Assets                         (12.2%)     (13.4%)     (14.0%)      (11.4%)
</TABLE>

                                       27
<PAGE>
 
    The preceding static gap report reflects a cumulative liability sensitive
position during the one year horizon.  An inherent weakness of this report is
that it ignores the relative volatility any one category of assets liability may
have in relation to other categories or market rates in general.  For instance,
the rate paid on NOW accounts typically moves slower than the six month T-Bill.
Management attempts to capture this relative volatility by utilizing a
simulation model with a "beta factor" adjustment which estimates the volatility
of rate sensitive assets and/or liabilities in relation to other market rates.

    Beta factors are an estimation of the long term, multiple interest rate
environment relation between an individual account and market rates in general.
For instance, NOW, savings and money market accounts, which are repriceable
within 30 days will have considerably lower beta factors than variable rate
loans and most investment categories.  Taking this into consideration, it is
quite possible for a bank with a negative cumulative gap to total asset ratio to
have a positive "beta adjusted" gap risk position.

    As a result of applying the beta factors established by management to the
earning assets and interest bearing liabilities in the static gap report via a
simulation model, the negative cumulative gap to total assets ratio at one year
of (11.4%) was reversed to a positive 13.3% "beta adjusted" gap position.

    Management feels that the "beta adjusted" gap risk technique more accurately
reflects the Corporation's gap position.

Capital
-------

    The Federal Reserve Board has guidelines for capital to total assets
(leverage) and capital standards for bank holding companies.  The Comptroller of
the Currency also has similar guidelines for national banks.  These guidelines
require a minimum level of Tier I capital to total assets of 3 percent.  A
banking organization operating at or near these levels is expected to have well-
diversified risk, excellent asset quality, high liquidity, good earnings and in
general be considered a strong banking organization. Organizations not meeting
these characteristics are expected to operate well above these minimum capital
standards.  Thus, for all but the most highly rated organizations, the minimum
Tier I leverage ratio is to be 3 percent plus minimum additional cushions of at
least 100 to 200 basis points.  At the discretion of the regulatory authorities,
additional capital may be required.

    At June 30, 1997, total capital to total assets was 9.24%.

    The Federal Reserve Board and Comptroller of the Currency also have risk-
adjusted capital adequacy guidelines.  Capital under these new guidelines is
defined as Tier I and Tier II.  At Summit Bancshares, Inc. the only components
of Tier I and Tier II capital are shareholders' equity and a portion of the
allowance for loan losses, respectively.

    The guidelines also stipulate that four categories of risk weights (0, 20,
50 and 100 percent), primarily based on the relative credit risk of the
counterparty,  be applied to the different types of balance sheet assets.  Risk
weights for all off-balance sheet exposures are determined by a two-step process
whereby the face value of the off-balance sheet item is converted to a "credit
equivalent amount" and that amount is assigned to the appropriate risk category.

    The regulatory minimum ratio for total qualifying capital is 8.00% of which
4.00% must be Tier I capital.  At June 30, 1997, the Corporation's Tier I
capital represented 14.41% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented 15.66% of risk weighted assets.  Both ratios
are well above current regulatory guidelines.

                                       28
<PAGE>
 
                          PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

          Not applicable

Item 2.   Change in Securities

          Not applicable

Item 3.   Defaults Upon Senior Securities

          Not applicable

Item 4.   Submission of Matters to a Vote of Security Holders

          At the Corporation's annual shareholders' meeting, held on April 15,
          1997, the shareholders of the Corporation:

          .    ratified the appointment by the Board of Directors of Stovall,
               Grandey & Whatley as independent auditors of the Corporation for
               its fiscal year ending December 31, 1997. The shareholder vote in
               this matter was 2,724,299 for, 99,366 against, and none
               abstaining.

          .    ratified the adoption of the 1997 Incentive Stock Option Plan of
               the Corporation. The shareholder vote in this matter was
               2,390,398 for, 427,107 against, and 6,160 abstaining.

          .    elected the Board of Directors, consisting of thirteen (13)
               persons. The following directors, constituting the entire Board
               of Directors, were elected:


                                           For          Against       Abstain
                                        ---------       -------       -------
               Robert E. Bolen          2,749,565           -0-        74,100
               Joe L. Bussey, M.D.      2,711,009        38,556        74,100
               Elliott S. Garsek        2,749,565           -0-        74,100
               Ronald J. Goldman        2,748,069         1,496        74,100
               F.S. Gunn                2,746,565         3,000        74,100
               Jeffrey M. Harp          2,746,565         3,000        74,100
               William W. Meadows       2,705,565        44,000        74,100
               Edward P. Munson, Jr.    2,748,669           896        74,100
               James L. Murray          2,746,565         3,000        74,100
               Philip E. Norwood        2,746,565         3,000        74,100
               Byron B. Searcy          2,749,565           -0-        74,100
               Edgar Snelson            2,749,565           -0-        74,100
               Lloyd J. Weaver          2,749,565           -0-        74,100

                                                                              29
<PAGE>
 
Item 5.   Other Information

          Not applicable

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

          10   1997 Incentive Stock Option Plan of Summit Bancshares, Inc.

          11   Computation of Earnings Per Common Share

          27   Financial Data Schedule

          (b)  No Reports on Form 8-K were filed during the period ending
               June 30, 1997

30
<PAGE>
 
                                  SIGNATURES



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

                                       SUMMIT BANCSHARES, INC.
                                             Registrant



Date:    July 31, 1997                 By: /s/  Philip E. Norwood
     --------------------                 --------------------------------------
                                            Philip E. Norwood, President and
                                            Chief Executive Officer

Date:    July 31, 1997                 By: /s/  Bob G. Scott
     --------------------                 --------------------------------------
                                            Bob G. Scott, Senior Vice President
                                            and Chief Financial Officer

                                                                              31
<PAGE>
 
                                 EXHIBIT INDEX

Exhibit                                                                 Page No.
-------                                                                 --------



10             1997 Incentive Stock Option Plan of
               Summit Bancshares, Inc.

11             Computation of Earnings Per Common Share

27             Financial Data Schedule