Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS ________
Summit Bancshares, Inc. (the "Company") is a one-bank holding company registered under the Bank Holding Company Act of 1956, as amended. It was incorporated under the laws of the State of California on July 22, 1981. Its principal office is located at 2969 Broadway, Oakland, California 94611, and its telephone number is (510) 839-8800.
On March 1, 1985, the Bank opened a banking facility at 112 La Casa Via, Walnut Creek, California 94596, which moved into new quarters located at 1700 N. Main, Walnut Creek, California 94598 in September, 1990. The telephone number is (510) 935-9220. In addition, a full service branch began operation in December, 1985, in the Watergate III Tower at 2000 Powell Street, Emeryville, California 94608. The telephone number is (510) 428-1868.
Summit Bancshares, Inc. owns all of the capital stock of Summit Bank (the "Bank"), its subsidiary bank, and its activities during 1994 were limited to acting as the Bank's holding company.
The Bank has conducted the business of a commercial bank since July 1, 1982. The Bank provides commercial credit and other banking services to small and mid-sized businesses and professionals, including professional firms of physicians, attorneys, accountants, retailers and service firms, wholesalers and distributors. Because of the concentration of medical facilities and related organizations in the Bank's primary service area, the Bank primarily focuses its marketing efforts on health service businesses; however, the Bank also offers a broad spectrum of financial services to the business community at large. The Bank offers a variety of loan products as well as money market investment services to attract and retain commercial customers. The Bank offers various checking and savings accounts for both personal and business purposes, time certificates of deposit, cashier's checks, money orders, travelers checks, safe deposit boxes, installment collection services, night depository, depository pickup and courier services, telephone transfers, collection services for notes, Individual Retirement and Business Planning (formerly Keogh) Accounts. The Bank has not requested and does not have regulatory approval to offer trust services, although it may provide such services in the future. The Bank assists customers requiring services not offered by the Bank in obtaining such services from its correspondent banks and other financial services firms. Although the Bank does not actively solicit consumer business from the general public, it does offer banking services and facilities compatible with the need of its consumer customers.
The banking office in Walnut Creek offers virtually the same services listed above with the exception of safe deposit boxes. The Emeryville Office offers all the same services as the Oakland Office.
On March 30, 1989, the State Banking Department approved the Bank's application to establish a new subsidiary, Summit Equities, Inc, whose purpose is to engage in real property investment activities as authorized by Section 751.3 of the California Financial Code. On November 13, 1992 the FDIC imposed regulations limiting real estate investment to those authorized by national banks, thus no real estate transactions are allowed to be transacted under this subsisdiary. The corporation is exploring other avenues or types of approved investment activities. As of this date, the subsidiary has not conducted any business.
SERVICE AREA ____________
The primary geographic market served by the Bank encompasses the "Pill Hill" area of the City of Oakland and extends to the northern portion of Alameda County to the Contra Costa County line along the boundary cities of Richmond and Albany; running south along the bay front (including the city of Alameda) to Highway 238/580 to the Castro Valley "Y"; east along Highway 580 to encompass the communities of Livermore and Blackhawk; northerly along Highway 680 to the Highway 24 corridor to encompass the cities of Walnut Creek and Concord and west to the starting point in northern Alameda County. This area includes a substantial number of commercial businesses, a large health services complex and substantial residential population. In Alameda County, the health services complex includes two major hospitals, approximately 500 physicians and a wide variety of health related and other professionals, and small and medium-sized businesses.
The Walnut Creek office is about 16 miles northeast of the head office in Oakland and located in the central business district in Walnut Creek. The site is approximately 1 mile west of John Muir Hospital, which is a 343-bed hospital employing approximately 1150 people and accommodates a large staff of approximately 325 visiting physicians. The surrounding service area includes 4 convalescent hospitals, an acute psychiatric care facility, and the 204-bed Kaiser Foundation Hospital, which employs over 1150 people in downtown Walnut Creek and is staffed by approximately 95 physicians.
The Emeryville branch is a further extension of the Bank's plan to expand into areas which will further utilize specialized services directed at medium-sized businesses and professionals. Located west of Interstate 80 at 2000 Powell Street, it is servicing a commercial sector and an up-scale employee population.
The Bank also obtains business clients from areas adjacent to the Pill Hill area in Oakland, the John Muir and Kaiser areas of Walnut Creek and in Emeryville, and from other sections of those metropolitan areas. The Bank's customers are primarily business and professional persons working in the vicinity of each branch, officers and employees of businesses and professional firms serviced by the Bank, and residents of areas close to the Bank.
COMPETITION ___________
The banking business in the Oakland/East Bay metropolitan area is very competitive with respect to both loans and deposits, and is dominated by relatively few major banks which have offices operating throughout California. Among the advantages such banks have are their ability to finance wide-ranging advertising campaigns, to offer certain services (for example, trust services) which are not offered directly by the Bank, and to have substantially higher legal lending limits due to their greater capitalization. There are six other independent banks in Oakland, six in Walnut Creek and none in Emeryville.
In competing for deposits, the Bank is subject to certain limitations not applicable to non-bank financial institution competitors. Over the past years, legislative changes have enabled the Bank to compete more effectively for deposits with savings and loan institutions but still remains at a competitive disadvantage when competing with money market funds.
To compete with major financial institutions and other independent banks in its primary service areas, the Bank relies upon the experience of its executive officers in serving business clients, its specialized services, local promotional activity, personal contacts by its officers, directors, employees, and organizers of the Company. For customers whose loan demands exceed the Bank's legal lending limit, the Bank arranges for such loans on a participation basis with correspondent banks as well as other independent banks.
REGULATION AND SUPERVISION __________________________
THE COMPANY. The Company is a bank holding company within ___________ the meaning of the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and is registered as such with the Federal Reserve Board (FRB). A bank holding company is required to file with the FRB annual reports and other information regarding its business operations and those of its subsidiaries. It is also subject to examination by the FRB and is required to obtain FRB approval before acquiring, directly or indirectly, ownership or control of any voting shares of any bank, if after such acquisition, it would directly or indirectly own or control more than 5% of the voting stock of that bank. The BHC Act further provides that the FRB shall not approve any such acquisition that would result in or further the creation of a monopoly, or the effect of which may be to substantially lessen competition, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the probable effect in meeting the convenience and needs of the community to be served.
Furthermore, under the BHC Act, a bank holding company is, with limited exceptions, prohibited from (i) acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank, or (ii) engaging in any activity other than managing or controlling banks. With the prior approval of the FRB, however, a bank holding company may own shares of a company engaged in activities which the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
The FRB has by regulation determined that certain activities are so closely related to banking as to be a proper incident thereto within the meaning of the BHC Act. These activities include, but are not limited to: operating an industrial loan company, industrial bank, Morris Plan Bank, savings association, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing investment and financial advice; operating as a trust company in certain instances, selling traveler's checks, United States savings bonds and certain money orders; providing certain courier services; providing management consulting advice to nonaffiliated depository institutions in some instances; acting as insurance agent for certain types of credit-related insurance; leasing property or acting as agent, broker or advisor for leasing property on a "full pay-out basis"; acting as a consumer financial counselor, including tax planning and return preparation; performing futures and options advisory services, check guarantee services and discount brokerage activities; operating a collection or credit bureau; or performing personal property appraisals. The Company has no present intention to engage in any of such permitted activities at this time.
The FRB also has determined that certain activities are not so closely related to banking to be a proper incident thereto within the meaning of the BHC Act. Such activities include: real estate brokerage and syndication; land development; property management; underwriting of life insurance not related to credit transactions; and with certain exceptions, securities underwriting and equity funding. In the future, the FRB may add or delete from the list of activities permissible for bank holding companies. Under the BHC Act, a bank holding company and its subsidiaries are prohibited from acquiring any voting shares of or interest in all or substantially all of the assets of any bank located outside the state in which the operations of the bank holding company's banking subsidiaries are principally conducted, unless the acquisition is specifically authorized by the law of the state in which the bank to be acquired is located or unless the transaction qualifies under federal law as an "emergency interstate acquisition" of a closed or failing bank. The California interstate banking bill is described under "Interstate Banking" (below).
A bank holding company and its subsidiaries are prohibited from certain tie-in arrangements in connection with any extension of credit, sale or lease of a property or furnishing of services. For example, with certain exceptions, a bank may not condition an extension of credit on a promise by its customer to obtain other services provided by it, its holding company or other subsidiaries, or on a promise by its customer not to obtain other services from a competitor. In addition, federal law imposes certain restrictions on transactions between the Company and its subsidiaries, including the Bank. As an affiliate of the Bank, the Company is subject, with certain exceptions, to provisions of federal law imposing limitations on, and requiring collateral for, extensions of credit by the Bank to its affiliates.
Directors of the Company, and the companies with which they are associated, have had and will continue to have banking transactions with the Bank in the ordinary course of the Bank's business. It is the firm intention of the Company that any loans and commitments to loan included in such transactions be made in accordance with applicable
law, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons of similar creditworthiness, and on terms not involving more than the normal risk of collectability or presenting other unfavorable features. At December 31, 1994, loans to directors totalled $.8 million or 7.4% of the Company's shareholders' equity.
THE BANK. The Bank is a member of the FDIC which currently ________ insures the deposits of each member bank to a maximum of $100,000 per depositor. For this protection, the Bank pays a semi-annual assessment and is subject to the rules and regulations of the FDIC pertaining to deposit insurance and other matters.
The Bank is subject to regulation, supervision and regular examination by the California State Banking Department (the "Department"). Although the Bank is a non-member of the Federal Reserve System, it is subject to regulation, supervision, but not examination by the FRB. The regulations of these agencies govern most aspects of the Bank's business, including the making of periodic reports by the Bank and the Bank's activities, branching, mergers and acquisitions, reserves against deposits and numerous other areas.
Subject to the regulations of the California Superintendent of Banks (the "Superintendent"), the Bank may invest in capital stock, obligations or other securities of other corporations, provided such corporations are not insurance companies, agents or brokers. In addition, the Bank may acquire any or all of the securities of a company that engages in activities that the Bank may engage in directly under California law without the prior approval of the FRB. California state-chartered banks are also specifically authorized to provide real estate appraisal services, management consulting and advisory services and electronic data processing services.
The Company's primary source of income (other than interest earned on Company capital) is the receipt of dividends and management fees from the Bank. The ability of the Bank to pay management fees and dividends to the Company and its affiliates is subject to restrictions set forth in the California Financial Code and, under certain circumstances, is subject to approval of the Department. The board of directors of a state-chartered bank may declare a dividend out of so much of net profits as such board deems appropriate, subject to California law which restricts the amount available for cash dividends to the lesser of retained earnings or the bank's net income for its last three fiscal years (less any distributions to shareholders made during such period).
In the event that a bank has no retained earnings or net income for the prior three fiscal years, cash dividends may be paid out of net income for such bank's last preceding fiscal year or current fiscal year upon the prior approval of the Department. Although there are not specific regulations restricting dividend payments by bank holding companies other than state corporation law, supervisory concern focuses on the holding company's capital position, its ability to meet its financial obligations as they come due and the capacity to act as a source of financial strength to its subsidiary banks.
The FRB and the Superintendent have authority to prohibit a bank from engaging in business practices which are considered to be unsafe or unsound. Depending upon the financial condition of the Bank and upon other factors, the FRB or Superintendent could assert that the payments of dividends or other payments by the Bank to the Company might be such an unsafe or unsound practice. Also, if the Bank were to experience either significant loan losses or rapid growth in loans or deposits, or some other event resulting in a depletion or deterioration of the Bank's capital account were to occur, the Company might be compelled by federal banking authorities to invest additional capital in the Bank necessary to return the capital account to a satisfactory level.
Impact of Economic Conditions and Monetary Policies. The earnings ___________________________________________________ and growth of the Company are and will be affected by general economic conditions, both domestic and international, and by the monetary and fiscal policies of the United States Government and its agencies, particularly the FRB. One function of the FRB is to regulate the national supply of bank credit in order to mitigate recessionary and inflationary pressures. Among the instruments of monetary policy used to implement those objectives are open market transactions in United States Government securities and changes in the discount rate on member bank borrowings. The monetary policies of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. However, the effect, if any, of such policies on the future business and earnings of the Company cannot be accurately predicted.
Accounting Changes. In May 1993, the FASB issued Statement of __________________ Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan as amended by SFAS No. 118. This statement is applicable to all creditors and to all loans, uncollateralized as well as collateralized, except large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment and loans that are measured at fair value or at the lower of cost or fair value. The statement also applies to all loans that are restructured in a troubled debt restructuring involving a modification of terms. The statement requires that impaired loans that are within the scope of this statement be measured based on the present value of expected cash flows discounted at the loan's effective interest rate, or as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company adopted this statement effective January 1, 1995. The Company does not expect that the adoption of the accounting prescribed by this statement will have a material impact on its financial position or results of operations.
In May 1993, the FASB issued Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. This statement requires that investments in debt and equity securities be classified as "held-to-maturity," "trading securities" or "available -for-sale." It requires that investments classified as held-to-maturity be reported at amortized cost, that investments classified as trading securities be reported at fair value with unrealized gains and losses
included in earnings and that investments classified as available-for-sale be reported at fair value with unrealized gains and losses, net of related tax, if any, reported as a separate component of stockholders' equity. The Company adopted this statement effective January 1, 1994. This statement specifically precludes retroactive application to prior years' financial statements. As the Company generally holds its investments until maturity, the impact of this accounting statement has been immaterial.
Legislation and Proposed Changes. From time to time, legislation ________________________________ is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial institutions. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies and other financial institutions are frequently made in Congress, in the California legislature and before various bank regulatory agencies. No prediction can be made as to the likelihood of any major changes or the impact such changes might have on the Company. Certain changes of potential significance to the Company which have been enacted recently or others which are currently under consideration by Congress or various regulatory or professional agencies are discussed below.
Financial Institutions Reform, Recovery and Enforcement Act of 1989. ___________________________________________________________________
On August 9, 1989, President Bush signed into law the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). FIRREA contains provisions, which among other things: (1) establish two separate financial industry insurance funds, both administered by the FDIC - the Bank Insurance Fund and the Savings Association Fund; (2) abolish the Federal Home Loan Bank Board and establish the Office of Thrift Supervision as an office of the Treasury Department, with responsibility for examination and supervision of all savings and loan associations; (3) increase the insurance premiums paid by FDIC-insured institutions; (4) permit bank holding companies to acquire healthy savings and loan associations; (5) enhance federal banking agencies' enforcement authority over the operations of all insured depository institutions and increase the civil and criminal penalties that may be imposed in connection with violations of laws and regulations; (6) curtail investments and certain activities of state-chartered savings and loan associations; and (7) increase the capital requirements of savings and loan associations. Management of the Company does not believe that the provisions of FIRREA have had or will have a material adverse impact on the Company's consolidated financial position or results of operations.
Competitive Equality Banking Act. The Competitive Equality ________________________________ Banking Act of 1987 contained provisions which, among other things: (1) permanently closed the loophole which formerly allowed for the creation of "non-bank banks"; (2) limited the restrictions imposed on banks on the availability of funds deposited by check; and (3) provided explicit leasing authority for national banks. The enactment of this legislation has not had a material adverse effect on the Company's consolidated financial condition or results of operations.
Interstate Banking. In September, 1986, California adopted an __________________ interstate banking law. The law allows California banks and bank holding companies to be acquired by banking organizations in other states on a reciprocal basis (i.e., provided the other state's laws permit California banking organizations to acquire banking organizations in that state on substantially the same terms and conditions applicable to banking organizations solely within that state). The law took effect in two stages. The first stage, which
became effective July 1, 1987, allowed acquisitions on a reciprocal basis within a region consisting of all 11 states (Alaska, Arizona, Colorado, Hawaii, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington) which currently permit acquisitions by California banking organizations of banks and bank holding companies in such states. The second stage, which became effective January 1, 1991, allows interstate acquisitions on a national reciprocal basis. The Company believes that this legislation will further increase competition as out-of-state financial institutions enter the California market.
Capital Adequacy Guidelines. The FRB has issued capital adequacy ___________________________ guidelines establishing a risk-based capital framework consisting of a definition of capital comprised of a core component (essentially shareholders' equity less goodwill) ("Tier 1 capital"), a supplementary component ("Tier 2 capital"), a system for assigning assets & off- balance sheet items to four weighted risk categories (with higher levels of capital being required for the categories being perceived as representing greater credit risk ) and a schedule for achieving a minimum risk-based capital ratio of 7.25% by the end of 1990 (which at least 3.625% should be in the form of common shareholders' equity) and 8% by the end of 1992 (which at least 4% should be in the form of common shareholders' equity). An institution's risk-based capital would be determined by dividing its qualifying capital by its risk - weighted assets.
The guidelines make regulatory capital requirements more sensitive to the differences in risk profiles among banking institutions, take off-balance sheet items into account when assessing capital adequacy and minimize disincentives to holding liquid low-risk assets. In addition, the guidelines may require some banking institutions to increase the level of their common shareholders' equity. It is not anticipated that the guidelines will have a material adverse effect on the Company's financial condition or results of operations over the short term. At the end of 1994, the guidelines provided for a minimum risk-based capital ratio of 8%, and this provision may limit the Company's ability to increase its assets or require the Company to raise additional equity to facilitate growth.
On August 2, 1990, the FRB adopted standards for compliance by banking organizations with risk-based capital guidelines to include a minimum leverage ratio of 3% of Tier 1 capital to total average assets (the "leverage ratio") based upon the definition of Tier 1 capital for 1994.
The FRB emphasized that the leverage ratio constitutes a minimum requirement for well-run banking organizations having diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and a favorable composite rating under the applicable regulatory rating system. Banking organizations experiencing or anticipating significant growth, as well as those organizations which do not exhibit the characteristics of a strong well-run banking organization described above, will be required to maintain minimum capital ranging from 100 to 200 basis points in excess of the leverage ratio.
The FRB leverage ratio establishes a new limit on the ability of banking organizations to increase assets and liabilities without increasing capital proportionately. In management's opinion, the leverage ratio will have no material effect on its capital needs in the foreseeable future. The Bank's leverage ratio at December 31, 1994 was 10.4% (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Adequacy" under Item #8).
EMPLOYEES _________
On December 31, 1994 the Bank employed 31 full time employees and 3 part time employees for a total equivalent of 32.7 full time employees. At the present time there are no salaried employees of the Company.
STATISTICAL DATA ________________
The following statistical data relating to the Company should be read in conjunction with the Consolidated Financial Statements which are included elsewhere in this 10-K Annual Report.
Distribution of Assets, Liabilities and Shareholders' Equity ____________________________________________________________
The following table summarizes the distribution, by amount (in thousands) and percentage of the daily average assets, liabilities, and shareholders' equity of Summit Bancshares, Inc. (consolidated) for the year ended December 31, 1994. Comparative figures for the years ended December 31, 1993 and 1992, are also provided:
The following is an analysis of Net Interest Income for 1994. Comparative figures for 1993 and 1992 are also presented on the following pages. Non-accrual loans are included in the average balances. Balances are expressed in thousands of dollars.
*Includes loan fees of $490,000
1.) Investment income rate is not calculated on a tax equivalent basis.
*Includes loan fees of $596,000
1.) Investment income rate is not calculated on a tax equivalent basis.
*Includes loan fees of $630,000
1.) Investment income rate is not calculated on a tax equivalent basis.
Following is an analysis of changes in Interest Income and Expense (in thousands of dollars) for 1994 over 1993. A similar comparison for 1993 over 1992 is on the following page. Changes not solely attributed to volume or rates have been allocated proportionately to volume and rate components.
INVESTMENT SECURITIES _____________________
The following table sets forth the book value as of December 31 for the securities indicated:
The increase or decrease in municipal bonds in 1994, 1993 and 1992 was brought about by by a corresponding increase or decrease in interest rates in the marketplace. The amortized cost and estimated fair values of investment in debt securties for 1994 are as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ____ _____ ______ _____
U.S. Treasury securities $ 8,981,172 $ 0 $103,445 $ 8,877,727
Obligations of states and political subdivisions 1,343,820 0 2,913 1,340,907 _______________________________________________________________________________
TOTAL $10,324,992 $ 0 $106,358 $10,218,634 _______________________________________________________________________________
The amortized cost and estimated market value of debt securities at December 31, 1994 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There were no sales of investments in debt securities during 1994.
The following table is a summary of the relative maturities and yields of Summit Bancshares, Inc. investment securities as of December 31, 1994 and 1993. Yields on securities have been computed by dividing interest income, adjusted for amortization of premium and accretion of discount, by book values of the related securities. Investment yield is not calculated on a tax equivalent basis.
LOAN PORTFOLIO ______________
Composition of Loans ____________________
The following table shows the composition of loans (in thousands of dollars) of Summit Bancshares, Inc. as of December 31 for each respective year designated.
MATURITY, DISTRIBUTION AND INTEREST RATE ________________________________________ SENSITIVITY OF LOANS ____________________
The following table shows the maturity distribution of loans (in thousands of dollars) as of December 31, 1994.
All but one loan for $12,540 reported above which have maturities of over one year are at floating interest rates.
Commitments and Lines of Credit ___________ ___ _____ __ ______
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the statement of financial position. The contract amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Most all guarantees expire within a 1 year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
A part of the subsidiary Bank's marketing strategy is to offer quality financial services to the professional and small business communities. The Company has been especially successful in targeting health care professionals. This segment has traditionally provided high levels of deposits and low loan losses.
While approximately 20% of the Company's loans are concentrated with health care professionals, the Bank has had only two charge-offs totalling $133,206 since it was founded in 1982.
NON-PERFORMING LOANS AND ______________ _____ ___ SUMMARY OF LOAN LOSS EXPERIENCE _______ __ ____ ____ __________ (In thousands of dollars)
The subsidiary Bank's policy is to recognize interest income on an accrual basis unless the full collectibility of principal and interest is uncertain. Loans that are delinquent 90 days as to principal or interest are placed on a non-accrual basis, unless they are well secured and in the process of collection, and any interest earned but uncollected is reversed from income. Collectibility is determined by considering the borrower's financial condition, cash flow, quality of management, the existence of collateral or guarantees and the state of the local economy.
The increase in non-performing assets from 12-31-93 to 12-31-94 is due primarily to an increase in other real estate owned (OREO), which consists of 6 properties. Of the total OREO amount, $2,509,000 is related to two properties. One of the properties is a single family residence and is currently in escrow with a estimated closing date in the second quarter. The Bank estimates a $50,000 loss on the property due to extensive water damage to the structure which was not attended to over the years. The second property is two continguous parcels in the Danville/Diablo Mountain area of Alameda County. These two parcels are currently on the market for sale. In addition, two other properties are also in escrow which should also close in the second quarter. Once all escrows close, the OREO amount should be reduced to under $1,200,000. The remaining property in OREO is in the process of being sold with no loss anticipated.
Regarding the $572,000 placed on non-accrual status, this amount represents loans to three borrowers, of which one loan is $6,500 and has subsequently reduced to $3,500. Of the remaining two loans, one is secured by a single family dwelling and the other is partially secured by vacant land in the Oakland Hills.
The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. The reserve is increased by provisions and reduced by net charge-offs. The Bank makes credit reviews of the loan portfolio, considers current economic conditions, loan loss experience, and other factors in determining the adequacy of the reserve balance. The allowance for loan losses is based on estimates and ultimate losses may vary from current estimates. As adjustments become necessary, they are reported in earnings in the periods in which they become known.
Any loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed under Item III of Industry Guide 3 do not (i) represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources, or (ii) represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment program.
An analysis of activity in the allowance for loan losses for the years ended December 31 is as follows:
Although it cannot be accurately predicted, it is estimated that in 1995, Loan Losses in the Commercial loan category may approximate $315,000 while losses in the Instalment loan category may approximate $51,000. No losses are anticipated in the Real Estate Loan category.
Allocations for Loan Loss Reserves for the next two years are as follows:
TIME DEPOSITS IN THE AMOUNT OF $100,00 AND OVER ____ ________ __ ___ ______ __ _______ ___ ____
The following table sets forth by time remaining to maturity, Summit Bank's issuance of time deposits in the amount of $100,000 or more (in thousands of dollars) as of December 31 of the respective year designated:
RETURN ON EQUITY AND ASSETS ___________________________
The following table shows key financial ratios for the years ending December 31, 1994, 1993 and 1992:
INTEREST RATE SENSITIVITY/INTEREST RATE RISK ANALYSIS ________ ____ ____________________ ____ ____ ________
The following table provides an interest rate sensitivity and interest rate risk analysis for the year ended 1994. The table presents each major category of interest-earning assets and interest- bearing liabilities. In addition to illustrating the traditional GAP analysis, the table also provides an initial review of interest rate risk as defined in Section 305 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), Public Law 102-242. This section requires the federal banking agencies to revise their risk- based capital guidelines to ensure that those standards take adequate account of (1) interest rate risk, (2) concentration of credit risk, and (3) the risks of nontraditional activities. The agencies must publish final regulations implementing section 305 and establish reasonable transition rules to facilitate compliance with those regulations.
An underlying principle of the proposal for incorporating interest rate risk (IRR) into risk-based capital guidelines is that a certain amount of IRR is inherent and appropriate in commercial banking. In addition, the proposal acknowledges that the level of IRR in banks is difficult to measure with a high degree of confidence. Finally, the approach takes into consideration the fact that, to date, IRR has not been a principal threat to the financial health of commercial banks. Accordingly, the proposal targets the identification of insititutions with high or significant levels of risk. Institutions identified as having IRR exposure greater than a supervisor-determined threshold would be required to allocate additional capital to support their higher level of measures risk.
The methodology for measuring an institution's IRR exposure applies the principle of duration to a standard maturity GAP report in order to approximate the net change in the economic value of the institution arising from a change in interest rates. Institutions would slot their assets, liabilities and off-balance-sheet positions into a maturity ladder report based upon their remaining maturities or nearest repricing dates. The position reported in each maturity range would then be multiplied by an IRR weight that represents the interest rate sensitivity of the respective positions. The IRR weights would be established by the Banking Agencies and would be based on the modified duration of instruments with maturities, cash flows, coupons and yields that are assumed to be representative of the position being weighted.
Under the proposal, an institution with IRR exposure in excess of a threshold level would be required to allocate additional capital equal to the dollar amount of the estimated change in its economic value that is in excess of that level. This would provide complete coverage of any incremental exposure above the established threshold. For example, if threshold levels of IRR exposure were set at 1.00 percent of total assets, an institution with a measured exposure of 1.50 percent of assets would be required to allocate a dollar amount of capital equal to 0.50 percent of total assets.
As the following table illustrates, based on the initial review of the proposed regulation, the Bank would not be required to increase its capital level and is within proposed threshold levels.
ITEM 2.



ITEM 2. PROPERTIES
When the Bank first entered into its initial lease agreement it signed a ten-year lease which commenced September 1, 1981 (with options to extend the lease on the same terms and conditions for two additional five-year periods). This space housed the permanent Head Offices for the Bank and the Company at 2969 Broadway, Oakland, California 94611 at the intersection of Broadway and 30th Street in the "Pill Hill" area. The premises consisted of approximately 3,800 square feet located in a portion of a single story building on the southwest corner at the intersection. The Bank spent approximately $388,448 on leasehold improvements at this location. Improvements consisted of a complete remodeling of the facility, including a new roof, new facade, new floor, partitions and structural improvements.
In September, 1987 the Bank entered into an additional ten year lease for 6,010 sq. ft. adjacent to its location in Oakland. The Bank utilizes approximately 2,900 sq. ft. of this new area. The Bank's cost of leasehold improvements in this new location was approximately $294,000. Improvements consisted of a complete remodeling of the facility, including a new facade, new floor, partitions and structural improvements. The initial lease in the above paragraph has expired and has been rolled into this new lease. The current monthly rent for the entire 9,810 sq. ft. is $5,123.00 subject to yearly CPI adjustments.
Commencing on December 1, 1984, the Bank leased 720 square feet of office space in a new building at 112 La Casa Via in Walnut Creek, California. This location housed the Bank's initial branch office. The building was fully serviced and the base rental was $1,274 per month subject to cost-of-living adjustments on the anniversary of each rental year. Necessary leasehold improvements were completed within the landlord's authorized allowance. The term of this lease expired on November 30, 1989, however, the Bank negotiated a month to month lease pending its move to new quarters in September, 1990. Monthly rent was $1,502.83.
In September, 1989, the Bank entered into a new lease for 1,500 sq. ft. of office space located at the corner of No. Main Street and Civic Drive in downtown Walnut Creek. This new location is twice the physical size of the old location and is closer to the financial district of Walnut Creek. The Bank moved into this new location in September, 1990. The new lease is for a term of 12 years commencing November 1, 1989 and terminates January 14, 2001. The Bank's cost for leasehold improvement in this new location was approximately $210,000. Improvements consisted of a complete remodeling of the facility, including enclosing an existing drive through facility, partitions and structural improvements. The lease provides for a monthly rent of $4,769.80, fixed for 12 years and beginning January 1, 1991.
The Emeryville Branch began operations in December, 1985 on the ground floor of the Watergate III Building at 2000 Powell Street. The Bank currently occupies approximately 2,200 square feet of space at this location, at a base rent of $2.00 per net rentable square foot ($4,390 per month). The term of this lease expired August 31, 1992 with two successive options to extend the lease by one three year option and one five year option. The Bank renewed the lease at a base rent of $1.95 per net rentable square foot ($4,329 per month) with two three year options effective 1-1-93.
In September, 1990 the Company purchased two contiguous parcels totaling 10,000 sq. ft. adjacent to the Bank's Walnut Creek Office for a price of $544,644. Included on one of the parcels is a single story, 2,500 sq. ft. concrete block building suitable for a restaurant. The Company entered into a five year lease on April 1, 1991 with an individual who operates a Japanese restaurant at this location for a monthly rent of $4,350, triple net commencing April 1, 1992. The leasee in turn made improvements to the building to bring it to today's standards.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is a party to claims and legal proceedings arising in the ordinary course of business. Currently, the Company has no outstanding suits brought against it.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS __________ __ _______ __ _ ____ __ ________ _______
Neither the Company nor the Bank submitted any matter covered by this report to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF SUMMIT BANCSHARES, INC. _________ ________ __ ______ __________ ___
Pursuant to General Instruction G(3), the information required by Item 401(b) and (e) of Regulation S-K concerning executive officers of the Company and the Bank is presented here rather than in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 19, 1995.
The following individuals are the executive officers of the Company as of February 28, 1995:
Name Age Position Since
Shirley W. Nelson 53 Chairman and Chief 1982 Executive Officer
George H. Hollidge 51 Secretary 1981
Kikuo Nakahara 62 Chief Financial 1985 Officer
The following individuals are the executive officers of the Bank as of February 28, 1995:
Name Age Position Since
Shirley W. Nelson 53 Chairman, Chief 1982 Executive Officer and President
C. Michael Ziemann 50 CFO and Cashier 1987
Denise Dodini Senior Vice 1994 President
The business experience of the executive officers follows:
Shirley W. Nelson was President and Chief Executive Officer of the Bank and Holding Company since May, 1983 and was elected in July, 1989 to the position of Chairman. Prior to this assignment she was the Senior Vice President, Senior Loan Officer. She is currently a member of the Board of Directors' Audit Commitee, Asset and Liability Committee, Loan Committee, and Personnel Committee.
Kikuo Nakahara is Managing Director of IDS Tax and Business Services, a division of IDS Financial Services Inc. Prior to this positon he was a partner of Greene & Nakahara, an accounting firm in Walnut Creek since 1993, and which merged with IDS Financial Services Inc. in 1994. From 1978 to 1993 he was managing Director of Greene, Nakahara and Lew Accountancy Corporation in Oakland. He is a corporate member of Blue Shield and a speaker at continuing education courses sponsored by the California Society of Certified Public Accountants.
George H. Hollidge has been President of Hollidge Transmissions, Inc., Oakland, transmission specialists, since 1980. Prior to 1980, Mr. Hollidge was a partner in Hollidge Hydramatic, transmission specialists.
C. Michael Ziemann has been CFO and Cashier since April 1987. Prior to that he was active in the administration of the Bank and was the manager of the Bank's Walnut Creek Office since April 1985. Prior to joining the Bank, he held various positions during his 16 years with Bank of America in operations, branch management, and regional administration where he was a district administrator.
Denise Dodini has been the Senior Vice President - Senior Loan Officer at the Bank since July, 1994. Prior to joining the Bank, Denise had fifteen years of Banking experience with Bank of America, where she was involved in consumer, commercial, real estate, and corporate lending. Denise joined the Bank in October, 1989 as a Vice President, Loan Officer where she assisted clients in the Oakland Office.
PART II _______
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED ____________________________________________________ SECURITY HOLDER MATTERS _______________________
(a) MARKET INFORMATION. The stock of the Company is not listed __________________ on any stock exchange but is publicly traded in limited and infrequent transactions in the "over the counter" market. According to information made available to the Company by the Market Maker, Marc F.Arnett, Hoefer & Arnett, Investment Bankers, 100 Pine Street, San Francisco, CA., the range of high and low bids for such common stock for each calendar quarter since January 1993 is as follows:
As of February 28, 1995, there were 425,559 shares of common stock of the Company issued.
(b) SHAREHOLDERS. As of February 28, 1995, there were 346 shareholders ____________ of the common stock. There were no other classes of securities outstanding.
(c) DIVIDENDS. On June 8, 1994 and December 8, 1994 the Company _________ paid a 12 cent per share cash dividend. On August 26, 1994 the Company also paid a special 25 cent per share cash dividend . It is the present intention of the Company to issue semi-annual cash dividends so long as said dividends do not inhibit future development. Additionally, payment of cash dividends by the Company is dependent upon payment of dividends by the Bank to the Company. Payment of cash dividends by the Bank may under certain circumstances require approval of the California Superintendent of Banks, and as a matter of law, the Bank may only declare cash dividends from the lesser of its retained earnings or its undistributed net income from the last three years. In the event that the Bank does not have retained earnings or net income for the last three fiscal years, the Bank may declare dividends only with the prior written consent of the Superintendent.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information of Summit Bancshares, Inc. for the years from the period January 1, 1990 through December 31, 1994 should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this Annual Report.
ITEM 7:

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section is a review of Summit Bancshares, Inc.'s resultsas reflected in the Consolidated Financial Statements. It discusses the principal items of income and expense and the factors affecting the Company's financial position. This discussion should be read together with the Selected Financial Data and Consolidated Financial Statements included elsewhere in the Annual Report.
The Company's wholly owned subsidiary, Summit Bank (the "Bank"), has conducted the business of a commercial bank since 1982. It provides commercial credit and various checking and savings account products for small and midsized businesses and professionals as well as individual consumers.
SUMMARY OF EARNINGS
The Company's net income for 1994 was $908,000 compared to $847,000 in 1993 and $813,000 in 1992. The increase in 1994 net income from 1993 is mainly attributed to an increase in net interest margin. The increase in 1993 net income from 1992 is attributed to an increase in average earning assets, a decrease in the higher earning interest bearing time deposit accounts, and a decrease in overall operating expenses. The net income of $908,000 for 1994 represents $2.09 per share earnings, compared to $1.97 per share in 1993 and $1.76 per share in 1992.
The Company adopted Statement of Financial Accounting Standards No. 115 in the first quarter of 1994 and since the Company's adoption of this provision it has had no impact on the Company's financial position or results of operations.
NET INTEREST INCOME
The primary source of income for the Company is Net Interest Income or "Gross Margin" which is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities. In general, net interest income is affected by a change in interest rates. As interest rates rise or fall, so will the Company's net interest income, excluding changes in total assets. The primary reasons for this is that the Company's investment portfolio earns income on a fixed interest rate basis while a majority of the lending portfolio earns income on a floating interest rate basis. In addition, all investments are held to maturity and 52% of the investment portfolio matures in one year. Regarding loans, approximately 61% of the loans outstanding mature within one year, while the longest maturity is 5 years. In a declining interest rate environment interest income on loans will generally decline faster than the investment income and vice versa. To offset any decline in interest income due to a declining interest rate environment, the Company monitors closely its interest expense on deposits. Of the total time certificates of deposit outstanding at year end, all but
1% mature within one year while 62% mature within 90 days. Thus the Company is able to minimize the effects of a declining interest rate environment by repricing these instruments on a more frequent basis than if the average maturity were longer than 1 year. Most economists agree that interest rates may increase in the short term but should stabilize for the remainder of the year, if not decline. As such, net interest income should further increase in the short term and could further improve with asset growth.
Net interest income for 1994 was $4,677,000, an increase of 10.3% over the $4,240,000 posted in 1993, and as compared to $4,079,000 in 1992. The increase in 1994 was primarily the result of an increase in the average prime rate from 6.00% in 1993 to 7.14% in 1994. This increase partially offset the effects of the decline in average earning assets which decreased 5.5% from $71,785,000 in 1993 to $67,769,000 in 1994. This decline was partly caused by a decline in average total deposits which decreased 2.5% from $69,805,000 in 1993 to $68,022,000 in 1994. This decrease was a reflection of the marketplace which saw higher yielding treasury investments than standard bank investment products. In addition, the decline in average earning assets was brought about by a lack of quality credit requests in the marketplace.
The 1993 increase was primarily the result of an increase in average earning assets to $71,785,000, 7.8% more than the $66,565,000 posted in 1992, and a decrease in the average outstanding time certificates of deposit accounts to $17,100,000, a 18.3% decrease from the $20,937,000 posted in 1992. Although average deposits increased 7.6% to $69,805,000 in 1993 from $64,850,000 in 1992, the increase was in lower cost accounts. This decrease in deposit expense partially offset the decrease in the average prime rate of .3% in 1993 versus 1992.
Average loans outstanding decreased by 2.8% in 1994 to $49,583,000 as compared to $51,037,000 in 1993 and $51,775,000 in 1992. Average outstanding investments decreased 12.3% to $18,186,000 in 1994 as compared to $20,748,000 in 1993 and $14,790,000 in 1992. The average loan to deposit ratio declined in 1994 to 72.9% as compared to 73.1% in 1993 and 79.8% in 1992. The yield on average earning assets was 8.6% in 1994 as compared to 7.7% in 1993 and 8.7% in 1992. The increase in 1994 was caused by the rise in the prime rate. The decrease in 1993 was primarily caused by the decrease in the loan to deposit ratio, the decrease in the average prime lending rate and more earning assets being invested in the investment portfolio versus the lending portfolio.
Interest expense decreased 12.9% to $1,148,000 in 1994 from $1,318,000 in 1993 and $1,753,000 in 1992. Average interest-bearing deposits decreased 7.5% in 1994 to $48,140,000 as compared to $52,065,000 in 1993 and $49,986,000 in 1992 and were primarily centered in the less expensive interest bearing accounts. Average non-interest bearing deposits increased 6.4% in 1994 to $18,882,000 as compared to $17,740,000 in 1993 and $15,719,000 in 1992. Overall cost of funds in 1994 was 2.4% as compared to 2.5% in 1993 and 2.7% in 1992.
NON-INTEREST INCOME AND EXPENSE
Non-interest income, consisting primarily of service charges on deposit accounts, other customer fees and charges including rents and gain on sale of other real estate owned, was $682,000 in 1994, up from $620,000 in 1993 and $522,000 in 1992. Total service charge income from deposit accounts decreased by 4.5% from $374,000 in 1993 to $357,000 in 1994 while total income from other charges increased 32.1% from $246,000 in 1993 to $325,000 in 1994. This compares to 1992 figures of $329,000 in deposit accounts income and $193,000 in income from other charges. The deposit income decline in 1994 was primarily related to a reduction in service charges related to return check charges which was $12,000 less than 1993 receipts. The increase in other income charges in 1994 was related to sale of an other real estate owned property for a gain of $192,000. The deposit income increase in 1993 was associated with an account analysis program for business accounts instituted in late 1991, and service charges related to check return fees. The increase in 1993 in other charges was primarily related to increases from Visa/Mastercard merchant fees and gain on sale of other real estate owned in the amount of $62,000.
Non-interest expenses increased 4.1% to $3,142,000 in 1994, from $3,019,000 in 1993 and $3,126,000 in 1992. The increase in 1994 can be attributed to an increase in foreclosure and real estate owned expense which increased from $7,000 in 1993 to $84,000 in 1994, and was related to carrying costs on properties. Salary expense increased 4.2% from $1,613,000 in 1993 to $1,681,000 in 1994 and was due to normal staffing needs. In addition, legal expense increased 26.5% from the 1993 figure of $98,000 to $124,000 in 1994 and was related to other real estate owned, pursuing charged-off loans, taking legal action against those clients who had filed under bankruptcy protection and other general legal related expenses. The decrease in non-interest expense in 1993 was attributed primarily to total salary and employee benefits decreasing 5.3% from $1,703,000 in 1992 to $1,613,000 in 1993. In addition, legal expenses decreased 36.8% from $155,000 in 1992 to $98,000 in 1993.
Occupancy and equipment expense increased slightly to $484,000 in 1994 from $480,000 in 1993 and decreased from $500,000 in 1992. The decrease in 1993 was related to decreases in F & E depreciation and F & E repairs.
The Bank's allowance for loan losses as a percent of loans was 1.9% and 1.4% as of December 31, 1994 and 1993, respectively. The average in the industry for banks our size is approximately 1.9%. Total gross loans charged off in 1994 were $518,000 compared to $617,000 in 1993 and $160,000 in 1992.
Operating expenses increased 5.6% to $977,000 in 1994 compared to $925,000 in 1993 and $923,000 in 1992. Increases in legal expense and foreclosure and REO expense was the primary reason for the increase in 1994.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects a combined Federal and California effective tax rate of 41.3% in 1994, compared to 40.2% in 1993 and 37.2% in 1992 as described in Note 6 to the Financial Statements.
LIQUIDITY AND CAPITAL
Liquidity is defined as the ability to meet present and future obligations either through the sale or maturity of existing assets or by the acquisition of funds through liability management. Additionally, the Bank's investment portfolio is managed to provide liquidity as well as appropriate rates of return. It is the Bank's practice to hold securities until maturity rather than actively trade its portfolio. As of December 31, 1994 the Bank had $9,246,000 in cash and cash equivalents compared to $10,387,000 as of December 31, 1993, and $13,109,000 as of December 31, 1992. The ratio of net loans to deposits as of December 31, 1994, was 68.8% compared to 71.7% as of December 31, 1993, and 73.9% as of December 31, 1992.
The Bank maintains a portion of its assets in loans and investments with short-term maturities. More specifically, loans and investments due within one year totaled $44,482,000 at December 31, 1994, as compared to $54,915,000 at December 31, 1993, and $49,098,000 at December 31, 1992, which is equivalent to 56.7%, 68.3%, and 61.5% of total assets at the corresponding year ends, respectively.
During 1994, the Company repurchased 3,717 shares of its common stock for a total price of $57,187. The Company plans to continue its repurchase program as an additional avenue for liquidity for its shareholders as long as it is economically appropriate to do so. The program has not affected the Company's liquidity or capital positions or its ability to operate as the Company's capital growth has exceeded its asset growth. In addition, the Company's subsidiary Bank remains more than well capitalized under current regulatory requirements.
CREDIT CONCENTRATION
A part of the subsidiary Bank's marketing strategy is to offer quality financial services to the professional and small business communities. The Bank has been especially successful in targeting health care professionals. This segment has traditionally provided high levels of deposits and low loan losses. While approximately 20.0% of the Bank's loans are concentrated with health care professionals, the Bank has had only two charge-offs related to this business segment totaling $133,206 since it was founded in 1982. Health care reform has received close scrutiny over the past year as the Clinton administration attempted to restructure the method by which health care is provided to the public. To date it appears that such reform is not likely to occur in the immediate future. However, over the past few years, the doctors and health care providers in the Company's
communities have been adjusting to the emerging trends in this industry. This includes higher percentages of patients on Medicare; closer scrutiny from insurance carriers; and movement to managed care and "capitation" contracts. Through this process, the Bank has not experienced any noticeable deterioration in credit quality. The Bank cannot predict the ultimate outcome of health care reform. However, the Bank closely monitors the status of reform and considers the potential impact of any reform on its current customers and its underwriting of loans to health care professionals.
NON-PERFORMING ASSETS
The increase in non-performing assets from December 31, 1993 to December 31, 1994 is due primarily to an increase in other real estate owned (OREO). Of the total OREO amount, two properties compose the majority of this amount. One is a single family dwelling and the other is vacant land comprised of approximately 90 acres. Both properties are being actively marketed. Current comparables favor a complete recovery at the time of sale. Of the remaining three properties one is being actively marketed and two are in the process of being sold as offers have been accepted with no principal loss anticipated.
At December 31, 1994 the $572,000 placed on non-accrual status represents loans to three borrowers. Two borrowers' loans total $565,000 and are secured by a single family home and vacant land in the Alameda/ Contra Costa County area and no principal loss is anticipated.
CAPITAL ADEQUACY
In 1989, the Federal Deposit Insurance Corporation (FDIC) established risk-based capital guidelines requiring banks to maintain certain ratios of "qualifying capital" to "risk-weighted assets". Under the guidelines, qualifying capital is classified into two tiers, referred to as Tier 1 (core) and Tier 2 (supplementary) capital. Currently, the Bank's Tier 1 capital consists of shareholders' equity, while Tier 2 capital consists of eligible allowance for loan losses. Risk-weighted assets are calculated by applying the risk percentage specified by the FDIC to categories of both balance-sheet assets and off-balance-sheet assets.
The Bank's Tier 1 and total risk-based capital (which includes Tier 1 and Tier 2) ratios exceeded the current regulatory minimum at both December 31, 1994 and December 31, 1993.
At year-end 1990, the FDIC also adopted a leverage ratio requirement. This ratio supplements the risk-based capital ratios and is defined as Tier 1 capital divided by the quarterly average assets during the reporting period.
The following table shows the risk-based capital ratios and the leverage ratios for 1994 and 1993, as well as the minimum regulatory requirements. The Bank does not foresee any material or significant impact to its manner of operation in the foreseeable future that would prevent it from meetings these requirements.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated statement of financial position as of December 31, 1994 and 1993 and the consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 1994, 1993, and 1992, together with the report of independent public accountant, follow:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Summit Bancshares, Inc. (the Company) and its wholly owned subsidiary, Summit Bank (the Bank), a California state-chartered bank, conform with generally accepted accounting principles and general practice within the banking industry. The following are descriptions of the more significant of these policies.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany transactions have been eliminated in consolidation. Certain prior years amounts have been reclassified to conform with present year presentation.
INVESTMENT SECURITIES:
Investment securities are carried at cost, adjusted for amortization of premium and accretion of discount using a method that approximates the effective interest method. Gains and losses on sale or redemption of securities are determined using the specific identification method.
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. This statement requires that investments in debt and equity securities be classified as "held-to-maturity," "trading securities" or "available -for-sale." The Company adopted this provision in the first quarter of 1994 and since the Company classified all investments as held to maturity the adoption of this provision has no impact on the Company's financial position or results of operation.
PREMISIS AND EQUIPMENT:
Premises and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation on furniture and equipment is calculated on a straight-line basis over the estimated useful life of the property, generally seven years for furniture and three to fifteen years for equipment. Leasehold improvements are amortized over the life of the related lease or the estimated life of the improvements, whichever is shorter.
LOANS:
Loans are stated at the principal amount outstanding. Interest income is accrued daily on a simple interest basis. Loans that are delinquent 90 days or more as to principal or interest are placed on a nonaccrual basis, unless they are well secured and in the process of collection, and any interest earned but uncollected is reversed from income. Loan origination costs and fees are being deferred and amortized as an adjustment of the related loan's yield. The Bank is generally amortizing these amounts over the contractual life of the related loans.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. The allowance is increased by provisions and reduced by net charge-offs. The Bank performs credit reviews of the loan portfolio and considers current economic conditions, loan loss experience, and other factors in determining the adequacy of the allowance balance. The allowance for loan losses is based on estimates, and ultimate losses may vary from current estimates. As adjustments become necessary, they are reported in earnings in the periods in which they become known.
OTHER REAL ESTATE OWNED:
Other real estate owned is comprised of properties acquired through foreclosure. These properties are carried at the lower of the recorded loan balance or their estimated fair market value based on appraisal. When the loan balance plus accrued interest exceeds the fair value of the property, the difference is charged to the allowance for loan losses at the time of acquisition. Subsequent declines in value from the recorded amount, if any, and gains or losses upon disposition are included in noninterest expense. Operating expenses related to other real estate owned are charged to noninterest expense in the period incurred.
INCOME TAXES:
Income taxes reported in the statements of income are computed at current tax rates, including deferred taxes resulting from timing differences between the recognition of items for tax and financial reporting purposes.
In February, 1992 the FASB issued a new standard (SFAS 109) on accounting for income taxes. In 1993 the Bank adopted the new accounting standard which did not have a significant effect on its financial position or results of operations.
CASH AND CASH EQUIVALENTS:
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds sold are purchased and sold for one-day periods.
2. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investments in debt secuirites held-to-maturity as of December 31, 1994 are as follows:
The amortized cost and estimated market values of investments in debt securities held to maturity as of December 31, 1993 are as follows:
The amortized cost and estimated fair value of debt securities at December 31, 1994 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
There were no sales of investments in debt securities during 1994 or 1993. At December 31, 1994, securities carried at $6,989,247 were pledged to secure public deposits, as required by law.
3. LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES A summary of loans as of December 31, 1994 and 1993 (net of unearned loan fees of $228,286 and $250,497, respectively), is as follows:
The changes in the allowance for loan losses for the years ended December 31, 1994, 1993 and 1992 are as follows:
The following table provides information with respect to the subsidiary Bank's past due loans and components for non-performing assets at the dates indicated.
The subsidiary Bank's policy is to recognize interest income on an accrual basis unless the full collectibility of principal and interest is uncertain. As mentioned previously, loans that are delinquent 90 days as to principal or interest are placed on a non-accrual basis, unless they are well secured and in the process of collection, and any interest earned but uncollected is reversed from income. Collectibility is determined by considering the borrower's financial condition, cash flow, quality of management, the existence of collateral or guarantees and the state of the local economy.
As of December 31, 1994 and 1993, loans totalling $571,500 and $966,593, respectively, were on nonaccrual. Interest foregone on nonaccrual loans as of December 31, 1994 and December 31, 1993 were $144,577 and $151,110, respectively. The Bank grants commercial, construction and installment loans to customers mainly in the California counties of Alameda and Contra Costa. Although the Bank has a diversified loan portfolio, a substantial portion of its commercial loan portfolio is concentrated in loans to customers in or related to the medical profession. The greater portion of these loans are secured by real estate located within the two counties. The amount in other real estate owned is comprised of six properties, of which three are single family dwellings, one is vacant land in the Grizzly Peak area of the Oakland Hills and two are contiguous land parcels in the Danville/Diablo Mountain area of Alameda county.
4. RELATED PARTY TRANSACTIONS
The Bank has, and expects to have in the future, banking transactions in the oridinary course of its business with directors, officers, principal shareholders and their associated. In management's opinion and as required by federal law, loans to related parties are granted on the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactionw with others, and do not involve more than normal risk of collectibility or present other unfavorable features. As of December 31, 1994 and 1993, loans outstanding to directors, officers and principal shareholders and their known associates were $775,993 and $574,771 respectively. In 1994 advances on such loans were $283,208 and collections were $307,700. In 1993 advances on such loans were $350,748 and collections were $398,457. In 1994 a new director was appointed to the Board of Directors who had outstanding loans as if December 31, 1994 and were not included in the 1993 totals.
5. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
Depreciation and amoritization included in occupancy and equipment expenses were $155,284, $178,678 and $185,632 for the years ended December 31, 1994, 1993 and 1992, respectively.
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
The Company adopted SFAS No. 109, Accounting for Income Taxes in 1993. This statement changed the method of computing income taxes for financial statement purposes by adopting the liability or balance sheet method under which the net deferred tax liability or asset is determined based on the tax effects of the differences between the book and tax bases of the various balance sheet assets and liabilities. Under this method, the computation of the net deferred tax liability or asset gives current recognition to changes in tax laws and rates.
The adoption of SFAS No. 109 did not have a material impact on the Company's financial position or results of operations.
The components of the net deferred tax asset of the Company as of December 31, 1994 and 1993 were as follows:
The provisions for income taxes applicable to operating income differ from the amount computed by applying the statutory federal tax rate to operating income before taxes.
The reasons for these differences are as follows:
7. SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
The Company has 2,000,000 authorized shasres of no par value, serial preferred stock of which no shares have been issued. Earnings per share amounts have been computed on the basis of the weighted average number of shares of common stock and common stock equivalents outstanding during the years, including the effect of stock options.
8. STOCK OPTION PLAN
The Company adopted an incentive stock option plan in 1982 and reserved 40,000 shares of the Company's common stock for issuance under this plan. In 1986 the directors and shareholders approved inreasing the number of shares in this plan 90,000. The additional shares were registered in accordance with federal and state securities laws in 1987. In 1987, the Company issued a 10% stock dividend which increased the number of shares in this plan to 99,000. Options may be granted at a price not less than the fair market value of the stock at the date of grant, become exercisable in cumulative 10% annual installments commencing one year after the date of grant and expire 10 years from the date of grant.
In 1992, the shareholders approved the 1992 Employee and Consultant Stock Option Plan ( the "1992 Plan") which was designed to replace the 1982 Incentive Stock Option Plan which expired on February 28, 1992, after which no new unallocated stock options may be granted. The 1992 Plan was designed to carryforward the remaining 82,995 options issued but not exercised under the 1982 Incentive Plan at the new current market price. No new additonal shares of the Company have been reserved for issuance under the 1992 Plan.
Following is a summary of stock option activity under the 1982 Incentive Stock Option Plan during the years ended December 31, 1992, 1993 and 1994:
Options for 28,384 shares at an average price of $10.82 per share were exercisable at December 31, 1994.
Following is a summary of stock option activity under the 1992 Employee and Consultant Stock Option Plan during the years ended December 31, 1992, 1993 and 1994:
In addition to the above plan, shareholders approved, in 1989, the 1989 Non- Qualified Stock Option Plan for Directors, including Advisory Board members, and reserved 35,000 shares of the Company's common stock for issuance under this plan. The plan was established to give appropriate recognition to this group of individuals for their continuing responsibility for the Company's growth and profitability. As of December 31, 1994, of the 10,750 options granted at an excercise price of $11.00 per share, 4,250 were exercised and the remainder forfeited leaving 30,750 shares available for options under this plan.
9. RESTRICTIONS
The Bank is regulated by the Federal Deposit Insurance Corporation, whose regulations do not specifically limit payment of dividends, and the California State Banking Department. California banking laws limit dividends to the lesser of retained earnings or net income less cash dividends to the Company of up to approximately $1,661,028 without regulatory approval.
Generally, banks are required to maintain reserves with the Federal Reserve Bank equal to a percentage of their reservable deposits. In 1993 and 1994 the Bank was required to maintain average reserve balances of $7,000 and $23,000, respectively.
10. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is obligated for rental payments under certain operating lease and contract agreements. Total rental expense for all leases included in occupancy and equipment expenses was $182,974, $177,072 and $181,077 for the years ended December 31, 1994, 1993 and 1992. At December 31, 1994, the approximate future minimum payments for noncancelable leases with initial or remaining terms in excess of one year were as follows:
The Company is subject to various pending and threatened legal actions which arise out of the normal course of business. In the opinion of management, the disposition of claims currently pending will not have a material adverse effect on the Company's financial position.
11. PENSION PLAN
The Company provides pension benefits for all its eligible employees through a 401(k) Profit Sharing Program which was adopted in 1984. Under the terms of the plan, eligible employees are allowed to contribute, under the 401(k) portion of the plan, up to 15% of their salaries. The Comapny in turn will match 25% of the employee's contribution up to a maximum of $500 annually. Under this part of the plan, $3,608 was contributed in 1994, $5,403 in 1993 and $4,572 in 1992.
In addition, the Company may contribute up to 15% of eligible employees' annual compensation to the profit sharing portion of this plan. Such contributions were $56,650 in 1994, $49,715 in 1993, and $45,460 in 1992. Employees' interest in the contributions made by the Company on their behalf become 100% vested in accordance with a 7 year program. Any forfeited amounts are redistributed among the remaining participants in the plan.
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the statement of financial position. The contract amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
At December 31, 1994, financial instruments CONTRACT AMOUNT whose contract amounts represent credit risk:
Commitments to extend credit in the future $13,904,287
Standby letters fo credit 991,600
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commerical properties.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Most all guarantees expire within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Approximately 20.0% of the Company's loans are concentrated with health care professionals.
13. NEW ACCOUNTING PRONOUNCEMENTS
In May 1993, the FASB issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan as amended by SFAS 118. The statement requires that impaired loans that are within the scope of this statement be measured based on the present value of expected cash flows discounted at the loan's effective interest rate, or as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company plans on adopting this statement no later than January 1, 1995. The Company does not expect that the adoption of the accounting prescribed by this statement will have a material impact on its financial position or results of operations.
14. SUMMIT BANCSHARES, INC. (PARENT COMPANY ONLY)
The following are the statements of financial position as of December 31, 1994 and 1993 and the related statements of income and cash flows for the years ended December 31, 1994, 1993 and 1992 for Summit Bancshares, Inc. (parent company only):
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Summit Bancshares, Inc.:
We have audited the accompanying consolidated statements of financial position of SUMMIT BANCSHARES, INC. (a California corporation) AND SUBSIDIARY as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Summit Bancshares, Inc. and subsidiary as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
San Francisco, California
January 13, 1995
/s/ _______________________________
ITEM 9.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE _____________ __ __________ ___ _________ __________
Since the date of organization of the Company, there have been no disagreements on accounting and financial disclosures or changes in accountants.
PART III ________
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT _________ ___ _________ ________ __ ___ __________
The information required by paragraphs (a), (c) (d), (f) and (g) of this item is presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held on April 19, 1995 under "Election of Directors," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year. The information concerning executive officers requested by paragraphs (b) and (e) is set forth under Part I in a separate Item captioned Executive Officers of Summit Bancshares, Inc.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION _________ ____________
The information required by this item in presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held on April 19, 1995. under "Executive Compensation," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ___________________________________________________ MANAGEMENT __________
The information required by this item is presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held on April 19, 1995, under "Principal Security Holders" and "Security Ownership of Management," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS _______ _____________ ___ _______ ____________
The information required by this item is presented in the Company's Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 19, 1995, under "Certain Relationships and Related Transactions," which is incorporated in this Report by reference thereto and will be filed within 120 days after the end of the Company's fiscal year.
PART IV _______
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. CONSOLIDATED FINANCIAL STATEMENTS.
The following Financial Statements are included in this Report in Item 8.
Consolidated Statement of Financial Position - December 31, 1994 and 1993
Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992
Statements of Changes in Shareholders' Equity (Consolidated and Parent Company Only) for the years ended December 31, 1994, 1993 and 1992, and
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements
Auditors' Report
(B) 2. FINANCIAL STATEMENT SCHEDULES. _________ _________ _________
Not Applicable
In accordance with the rules of Regulation S-X, the required schedules are not submitted because they are not applicable to or required of the Company.
(C) 3. INDEX TO EXHIBITS.
The following exhibits are incorporated by reference pursuant to Item 601 of Regulation S-K:
Exhibit Number Exhibit ______________ _______
3.1 Articles of Incorporation Footnote #1 of Summit Bancshares, Inc.
3.2 Bylaws of Summit Bancshares, Inc. Footnote #2
Exhibit Number Exhibit ______________ _______
4.1 Specimen Stock Certificate Footnote #3
10.1 Lease - Broadway Property Footnote #4
10.2 Summit Bancshares, Inc. Incentive Stock Option Plan Footnote #5
10.3 Organizational Stock Agreement Footnote #6
10.4 Employment Agreement/ Shirley W. Nelson Footnote #7
10.5 Agreement for Sale of Stock Footnote #8
10.6 Lease-Walnut Creek Property Footnote #9
10.7 Lease-Emeryville Property Footnote #10
10.8 Lease-Oakland Office Expansion Footnote #11
10.9 Lease-Walnut Creek New Premises Footnote #12
10.10 Lease-Emeryville Renegotiated Footnote #13
10.11 Summit Bancshares, Inc. 1989 Non-Qualified Stock Option Plan for Directors Footnote #14
10.12 Stock Option Agreement Form Summit Bancshares, Inc. Incentive Stock Option Plan Footnote #15
10.13 Stock Option Agreement Form 1989 Non-Qualified Stock Option Plan for Directors Footnote #16
10.14 Amendment to By-Laws of Summit Bancshares, Inc. Footnote #17
Exhibit Number Exhibit ______________ ________
10.15 Lease - Walnut Creek Summit Banchsares, Inc. owned Property . Footnote #18
10.16 Lease - Emeryville Renegotiated Footnote #19
11 Statement Re: Computation of Per Share Earnings Filed herewith
21 Wholly Owned Subsidiary of Filed herewith Summit Bank - Summit Equities, Inc.
24.1 Power of Attorney - see Signature Page Filed herewith
27 Financial Data Schedule Filed herewith
________________
1. Incorporated by reference to Exhibit 2.1 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
2. Incorporated by reference to Exhibit 2.2 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
3. Incorporated by reference to Exhibit 3.1 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
4. Incorporated by Reference to Exhibit 9.1 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
5. Incorporated by reference to Exhibit 9.2 of Registrant's Exhibits to Post-Effective Amendment No. 1 to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on March 11, 1982.
6. Incorporated by reference to Exhibit 9.4 of Registrant's Exhibits to Post-Effective Amendment No. 1 to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on March 11, 1982.
7. Incorporated by reference to Exhibit 10.4 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1983.
8. Incorporated by reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1984.
9. Incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985.
10. Incorporated by reference to Exhibit 10.10 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985.
11. Incorporated by reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987.
12. Incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
13. Incorporated by reference to Exhibit 10.10 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
14. Incorporated by reference to Exhibit 10.11 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
15. Incorporated by reference to Exhibit 10.12 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
16. Incorporated by reference to Exhibit 10.13 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.
17. Incorporated by reference to Exhibit 2.2 of Registrant's Exhibits to Form S-18 Registration Statement, as filed with the Securities and Exchange Commission on December 21, 1981.
18. Incorporated by reference to Exhibit 10.15 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
19. Incorporated by reference to Exhibit 10.16 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
(B) REPORTS ON FORM 8-K
None submitted for the year.
Exhibit 11
WEIGHTED AVERAGE SHARES Twelve Months Ended December 31, 1994
PRIMARY FULLY _______ _____
A. Common Stock 1994 WEIGHTED AVERAGE 414,217 414,217 (4TH QTR) 416,292 416,292 414,402 12-31-93 (Bal. Fwd.) 414,402 to 01-07-94 6 days = 2,486,412 414,302 to 02-02-94 26 days = 10,771,852 413,972 to 03-03-94 29 days = 12,005,188 413,175 to 03-14-94 11 days = 4,544,925 412,465 to 06-30-94 109 days = 44,958,685 413,565 to 07-18-94 17 days = 7,030,605 AVG FOR 413,015 to 07-21-94 3 days = 1,239,045 4th QTR 412,555 to 07-25-94 4 days = 1,650,220 416,292 415,055 to 07-26-94 1 day = 415,055 415,155 to 08-31-94 36 days = 14,945,580 414,385 to 12-16-94 107 days = 44,339,195 420,885 to 12-23-94 7 days = 2,946,195 427,485 to 01-01-95 9 days = 3,856,365
365 days = 151,189,322
Average shares outstanding for period = 414,217
B. Stock Options
12-31-93 year end price $13.50 12-31-94 quarter end $21.00 12-31-94 end of quarter average $20.50 (18.00 - 23.00)
Fully $17.44 end of quarter average Primary $17.25 year end to end of quarter (13.50 + 21.00) _______________
MARKET PRICES @ 3-31-94 14.00 @ 6-30-94 16.25 @ 9-30-94 18.50 AVERAGE $17.44 @ 12-31-94 21.00
(14.00 +16.25 +18.50 +21.00) ______________________________ 4.00
Options - Primary 20,399 _______ _______
MZ 1,100 X (17.25 - 12.27) = 318 _______________ 17.25
FD 550 X (17.25 - 12.27) = 159 _______________ 17.25
SN 8,250 X (17.25 - 10.45) = 3,252 _______________ 17.25
MZ 1,000 X (17.25 - 10.00) = 420 _______________ 17.25
SN 10,000 X (17.25 - 10.00) = 4,203 _______________ 17.25
SN 15,689 X (17.25 - 10.00) 6,594 _______________ 17.25
SN 8,333 X (17.25 - 12.00) = 2,536 _______________ 17.25
MZ 2,900 X (17.25 - 13.50) = 630 _______________ 17.25
TW 400 X (17.25 - 12.25) = 116 _______________ 17.25
SN 978 X (17.25 - 13.25) = 227 _______________ 17.25
SJ 500 X (17.25 - 13.00) = 123 _______________ 17.25
DD 2,500 X (17.25 - 13.00) = 615 _______________ 17.25
MZ 1,045 X (17.25 - 13.00) = 257 _______________ 17.25
FD 1,950 X (17.25 - 13.00) = 480 _______________ 17.25
AC 400 X (17.25 - 13.00) = 99 _______________ 17.25
TW 1,500 X (17.25 - 13.00) = 370 _______________ 17.25
Options - Fully 28,637 _______ _____
MZ 1,100 X (21.00 - 12.27) = 457 _______________ 21.00
FD 550 X (21.00 - 12.27) = 505 _______________ 21.00
SN 8,250 X (21.00 - 10.45) = 4,145 _______________ 21.00
MZ 1,000 X (21.00 - 10.00) = 524 _______________ 21.00
SN 10,000 X (21.00 - 10.00) = 5,238 _______________ 21.00
SN 15,689 X (21.00 - 10.00) 8,218 _______________ 21.00
SN 8,333 X (21.00 - 12.00) = 3,571 _______________ 21.00
MZ 2,900 X (21.00 - 13.50) = 1,036 _______________ 21.00
TW 400 X (21.00 - 12.25) = 167 _______________ 21.00
SN 978 X (21.00 - 13.25) = 361 _______________ 21.00
SJ 500 X (21.00 - 13.00) = 190 _______________ 21.00
DD 2,500 X (21.00 - 13.00) = 952 _______________ 21.00
MZ 1,045 X (21.00 - 13.00) = 398 _______________ 21.00
FD 1,950 X (21.00 - 13.00) = 743 _______________ 21.00
AC 400 X (21.00 - 13.00) = 152 ______________ 21.00
TW 1,500 X (21.00 - 13.00) = 571 _______________ 21.00
SN 4,000 X (21.00 - 17.75) = 620 _______________ 21.00
MZ 2,000 X (21.00 - 17.75) = 310 ______________ 21.00
DD 1,000 X (21.00 - 17.75) = 155 _______________ 21.00
TW 1,000 X (21.00 - 17.75) = 155 _______________ 21.00
FD 500 X (21.00 - 17.75) = 77 _______________ 21.00
SJ 500 X (21.00 - 17.75) = 77 _______________ 21.00
AC 100 X (21.00 - 17.75) = 15 _______________ 21.00
TOTAL SHARES 4TH QUARTER 436,691 444,929 ======= =======
TOTAL SHARES YEAR END 434,616 442,854 ======= =======
NET INCOME 4TH QUARTER $267,537 $267,537 ======= =======
NET INCOME YTD $907,603 $907,603 ======= =======
EARNINGS PER SHARE 4TH QTR $0.61 $0.60 ======= =======
EARNINGS PER SHARE YTD $2.09 $2.04 ======= =======
Exhibit 22
SUMMIT EQUITIES. INC. (PARENT COMPANY ONLY) DECEMBER 31, 1994
==========================================================================
ASSETS ========
CASH $10,348.00
TOTAL ASSETS $10,348.00 ================= ==============
LIABILITIES AND SHAREHOLDERS EQUITY ============================================
LIABILITIES ==============
RESERVE FOR FED TAXES $0.00 RESERVE FOR STATE TAXES $0.00 TOTAL RESERVE FOR TAXES $0.00 --------------
TOTAL LIABILITIES $0.00 ====================
SHAREHOLDERS EQUITY ===================
COMMON STOCK $10,000.00 RETAINED EARNINGS $113.00 PROFIT/LOSS YEAR-TO-DATE $235.00 ---------------- $10,348.00
TOTAL SHAREHOLDERS EQUITY $10,348.00 ------------------------- --------------
TOTAL LIABILITIES & SHAREHOLDERS EQUITY $10,348.00 ======================= ==============
SUMMIT EQUITIES, INC. (PARENT COMPANY ONLY) DECEMBER 31, 1994 ===========================================================================
INCOME ========
INTEREST INCOME - MMA & TCD $235.00 INTEREST INCOME - LOANS $0.00 OTHER INCOME $0.00 --------
TOTAL INCOME $235.00 ============
EXPENSE ========
BUILDING DEPRECIATION $0.00 ANNUAL REPORT & MEETING EXPENSE $0.00 MISCELLANEOUS EXPENSE $0.00 LEGAL $0.00 PROPERTY/TAXES $0.00 --------
TOTAL EXPENSES $0.00 ================== --------
INCOME BEFORE TAXES & EARNINGS OF SUBSIDIARY $235.00 ======================
PROVISION FOR TAXES ==================
FEDERAL INCOME TAX PROVISION $0.00 STATE INCOME TAX PROVISION $0.00 TOTAL TAX PROVISION $0.00 -------
NET INCOME $235.00 ========== =======
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SUMMIT BANCSHARES, INC.
Date: March 22, 1995 By: /s/ Shirley W. Nelson ____________________________ Shirley W. Nelson, Chief Chairman and CEO (Principle Executive Officer)
Date: March 22, 1995 By: /s/ Kikuo Nakahara ____________________________ Kikuo Nakahara (Chief Financial Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints SHIRLEY W. NELSON and KIKUO NAKAHARA, and each or any one of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney- in-fact and agents or any of them, or their substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been executed in Oakland, California, by the following persons on behalf of the Registrant on the capacities and on the dates indicated.
Signature Title Date
/S/ SHIRLEY W. NELSON Chairman of the Board, 3-22-95 _________________________ Chief Executive Officer SHIRLEY W. NELSON and President
/S/ KIKUO NAKAHARA Chief Financial 3-22-95 _________________________ Officer and Director KIKUO NAKAHARA
/S/ GEORGE H. HOLLDIGE Secretary and Director 3-22-95 _________________________ GEORGE H. HOLLIDGE
Director _________________________ THOMAS F. LOUDERBACK, JR.
/S/ THOMAS H. STATE Director 3-22-95 _________________________ THOMAS H. STATE
/S/ BARBARA J. WILLIAMS Director 3-24-95 _________________________ BARBARA J. WILLIAMS