NEWS from Summit Bancshares, Inc. For Immediate Release For Information Contact: October 14, 2003 Bob G. Scott, COO (817) 877-2660 SUMMIT BANCSHARES REPORTS THIRD QUARTER 2003 EARNINGS Fort Worth, Texas - Summit Bancshares, Inc. (NASDAQ: SBIT), a community-oriented bank holding company in Fort Worth, with assets of $778 million, reported third quarter earnings today. Philip E. Norwood, Chairman, President, and Chief Executive Officer stated, "Summit is very fortunate to be operating in a strong market such as Fort Worth and Tarrant County. Summit benefits by being able to continue to have good loan and deposit growth that more than offsets the negative pressure of what is and has been a low and declining interest rate environment." He further stated, "Summit was able to record a modest provision for loan losses for the quarter as the level of non-performing loans continued to improve. Recoveries, net of charge-offs of previously charged-off loans, totaled $25,000 in the third quarter and totaled $191,000 year-to-date. These results also contributed to our positive performance for the quarter and year-to-date and assisted in maintaining a strong loan loss reserve." Results of Operations - --------------------- For the quarter ended September 30, 2003, net income was $2,475,000 compared to $2,372,000 for the same quarter in 2002. Net income per diluted share was $0.39 for the three months ended September 30, 2003, compared to $0.37 for the three months ended September 30, 2002. Return on average assets and return on average stockholders' equity for the third quarter of 2003 were 1.29% and 14.38%, respectively. Both of these measures of overall profitability compare favorably to the Company's peers, particularly when considering the Company's strong capital position. The Company's average stockholders' equity-to-assets ratio was 9.0% for the quarter ended September 30, 2003. Net income for the nine months ended September 30, 2003 was $7,365,000 or $1.17 per diluted share, compared to $7,052,000, or $1.10 per diluted share for the same period last year. Return on average assets and return on average stockholder's equity for the nine months ended September 30, 2003 were 1.36% and 14.60%, respectively, again, strong returns when compared to Company's peers and considering the Company's strong capital position. Financial Results - ----------------- Net interest income for the third quarter of 2003 was $7.9 million compared to $7.6 million in the third quarter of last year. Since the Company is somewhat more sensitive to market interest rate changes than other community banks due to its heavier commercial lending focus, the net interest margin declined to 4.37% for the quarter compared to 4.53% for the third quarter of the prior year. Although the Company has experienced a decline in net interest margin over the last few quarters, the Company's current net interest income continues to increase quarter over quarter due to asset growth. The average prime rate in the third quarter of last year was 4.75% while the average prime rate for the third quarter of this year was 4.00%, a decline of 75 basis points. Because of the decline in this important market interest rate, the Company has continued to experience interest rate compression between what it earns on interest earning assets and pays on interest bearing liabilities. Also, the current low interest rate environment, which is the lowest in over 40 years, has had a negative impact on net interest income for that portion of earning assets supported by the Company's high levels of non-interest bearing deposits and stockholders' equity, when comparing results to periods when market interest rates were higher. When market interest rates begin to rise sometime in the future, the Company's current asset sensitive position will be positive to earnings growth. Non-interest income , excluding gains on sales of securities, increased $127,000 or 9.3% for the third quarter of 2003 compared to the same quarter in the prior year with a positive increase in service charges on deposit accounts. Growth of revenue in the area of non-interest income continues to be one of the Company's focus areas. Non-interest expenses for the third quarter increased $1.4 million or 34.2% over the same quarter of the previous year. After excluding a $319,000 insurance claim settlement on foreclosed property that reduced expenses for the third quarter of the prior year, the increase in expense would have been $1.1 million or 24.8%. This increase reflects costs associated with the Company's growth and included increases in salary and employee benefit expense, primarily for added staff, including three new-seasoned loan officers added in June of 2003, additions to the technology and operations staff, and staff additions for the Hulen Branch that opened in June and the Davis Branch that opened in January. Also included in this increase is the impact on occupancy and equipment expenses due to the addition of the two new branches, a new operations facility that was occupied in May, and the expense of the new core operating system added in October of last year. The provision for loan losses was $46,000 in the third quarter of 2003. This was a decrease of $1.3 million over the same quarter last year. In the quarter, the Company had net recoveries from prior loan charge-offs of $25,000. The growth in loans resulted in a decline of the Allowance for Loan Losses as a percent of outstanding loans to 1.45% at September 30, 2003 as compared to 1.48% at the end of the second quarter of 2003. For the first nine months of 2003, the Company has net recoveries of previously charged-off loans of $191,000. Non-performing assets totaled $1.5 million or 0.29% of loans and foreclosed assets at September 30, 2003, compared to $5.0 million or 1.04% at September 30, 2002. The Allowance for Loan Losses was 494% of non-performing loans at September 30, 2003. The Company has made significant progress in improving these measures of asset quality over the last several quarters. The Company's loans were $518 million at September 30, 2003, an increase of $44 million, or 9.2%, from a year ago and increased 3.6% from June 30, 2003. Deposits increased over the past year from $571 million to $638 million, an increase of $67 million, or 11.7% and increased 4.2% from June 30, 2003. Stockholders' equity at September 30, 2003 was $68.0 million compared to $64.8 million at September 30, 2002. Mr. Norwood also stated, "The Company is involved in several activities to improve top line revenue including new products and geographic expansion in the Fort Worth/Tarrant County Metro Area. In addition we have been successful in attracting some well qualified team members that we know will contribute to the Company's growth." The Company will host a conference call Wednesday, October 15th at 10:00 a.m. (CT). To access the live call, please call (800) 478-6251 and enter code 225023. A toll free replay of the call will be available starting Wednesday, October 15th, at 1:30 p.m. (CT) through midnight, October 29th, (CT) by calling (888) 203-1112 and entering confirmation code 225023. Certain statements contained in this press release, which are not historical in nature, including statements regarding the company's and/or management's intentions, strategies, beliefs, expectations, representations, plans, projections, or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions for forward-looking statements contained in such Act. We are including this statement for purposes of invoking these safe harbor provisions. Forward-looking statements are made based on assumptions involving certain known and unknown risks and uncertainties, many of which are beyond the company's control, and other important factors that could cause actual results, performance or achievements to differ materially from the expectations expressed or implied by such forward-looking statements. These risk factors and uncertainties are listed from time to time in the company's filings with the Securities and Exchange Commission, including but not limited to the annual report on Form 10-K for the year ended December 31, 2002. Summit Bancshares, Inc. o 3880 Hulen, Ste. 300 o Fort Worth, Texas 76107 Telephone (817) 336-6817 o FAX (817) 877-2672 o Web Site: www.summitbank.net SUMMIT BANCSHARES, INC. (Unaudited) (Dollars in thousands, except per share data) Quarter Ended Nine Months Ended September 30, September 30, --------------------- % ---------------------- % EARNINGS SUMMARY 2003 2002 Change 2003 2002 Change ------- ------- ------ -------- ------- ------- Interest income $ 9,709 $ 9,839 -1.3% $ 28,507 $ 29,054 -1.9% Interest expense 1,834 2,200 -16.6% 5,584 6,531 -14.5% ------- ------- ------ -------- ------- ------- Net interest income 7,875 7,639 3.1% 22,923 22,523 1.8% Provision for loan losses 46 1,350 -96.6% 586 2,365 -75.2% Service charges on deposits 914 793 15.3% 2,562 2,161 18.6% Gain on sale of investment securities 89 163 -45.4% 101 165 -38.8% Other Income 580 574 1.0% 1,865 1,786 4.4% Salaries and benefits expense 3,336 2,768 20.5% 9,332 8,508 9.7% Occupancy and equipment expense 1,064 673 58.1% 2,628 2,015 30.4% Other Expense 1,256 774 62.3% 3,739 3,016 24.0% ------- ------- ------ -------- ------- ------- Earnings before income taxes 3,756 3,604 4.2% 11,166 10,731 4.1% Provision for income taxes 1,281 1,232 4.0% 3,801 3,679 3.3% ------- ------- ------ -------- ------- ------- Net earnings $ 2,475 $ 2,372 4.3% $ 7,365 $ 7,052 4.4% ============ ============= ============= ============ ============= =========== Basic earnings per share $ 0.40 $ 0.38 5.3% $ 1.19 $ 1.13 5.3% ============ ============= ============= ============ ============= =========== Basic weighted average shares outstanding 6,160 6,234 6,163 6,252 Diluted earnings per share $ 0.39 $ 0.37 5.4% $ 1.17 $ 1.10 6.4% ============ ============= ============= ============ ============= =========== Diluted weighted average shares outstanding 6,341 6,413 6,310 6,432 Average for Quarter Ended -------------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, BALANCE SHEET SUMMARY 2003 2003 2003 2002 2002 -------------------------------------------------------------------------------------------- Total loans $ 503,936 $ 499,545 $ 476,298 $ 471,260 $ 471,888 Total investment securities 199,367 165,600 170,609 166,980 155,499 Earning assets 718,601 676,834 648,193 650,995 646,378 Total assets 761,278 719,070 688,522 693,064 685,389 Noninterest bearing deposits 176,478 170,234 160,011 165,756 156,742 Interest bearing deposits 452,325 429,420 411,313 413,657 420,000 Total deposits 628,803 599,654 571,324 579,413 576,742 Other borrowings 61,199 48,866 48,012 44,487 41,035 Shareholders' equity 68,273 67,739 66,253 64,369 64,273 Average for Nine Months Ended September 30, ------------------------------------- % BALANCE SHEET SUMMARY 2003 2002 Change ------------------------------------------------------- Total loans $ 493,361 $ 460,359 7.2% Total investment securities 178,631 149,310 19.6% Earning assets 681,468 622,736 9.4% Total assets 723,223 660,768 9.5% Noninterest bearing deposits 168,968 153,873 9.8% Interest bearing deposits 431,169 403,024 7.0% Total deposits 600,137 556,897 7.8% Other borrowings 52,741 37,756 39.7% Shareholders' equity 67,429 62,792 7.4% Ending Balance ------------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, BALANCE SHEET SUMMARY 2003 2003 2003 2002 2002 ------------------------------------------------------------------------------------------- Total loans $ 517,994 $ 500,040 $ 489,352 $ 469,145 $ 474,401 Total investment securities 210,048 178,241 163,639 173,512 168,250 Total earning assets 728,766 693,257 653,066 642,919 642,765 Allowance for loan losses (7,483) (7,412) (7,365) (6,706) (6,334) Premises and equipment 13,237 13,391 11,652 11,486 10,011 Total assets 777,558 738,916 697,893 687,733 682,605 Noninterest bearing deposits 180,765 176,603 165,220 167,745 157,519 Interest bearing deposits 456,706 435,143 421,699 414,204 413,391 Total deposits 637,471 611,746 586,919 581,949 570,910 Other borrowings 69,230 55,627 41,317 37,255 43,871 Total liabilities 709,546 670,187 631,313 622,795 617,832 Shareholders' equity 68,012 68,729 66,580 64,938 64,773 SUMMIT BANCSHARES, INC. (Unaudited) (Dollars in thousands) September 30, June 30, March 31, December 31, September 30, NONPERFORMING ASSETS 2003 2003 2003 2002 2002 ================ ================== ================ =============== =============== Nonaccrual loans $ 1,514 $ 1,458 $ 2,226 $ 2,135 $ 4,635 Restructured loans - - - - - Other real estate & foreclosed assets - 125 125 1,268 288 ---------------- ------------------ ---------------- --------------- --------------- Accruing loans past due 90 days or more - 14 80 16 37 Total nonperforming assets $ 1,514 $ 1,597 $ 2,431 $ 3,419 $ 4,960 ================ ================== ================ =============== =============== Total nonperforming assets as a percentage of loans and foreclosed assets 0.29% 0.32% 0.50% 0.73% 1.04% ================ ================== ================ =============== =============== Quarter Ended ======================================================================================== September 30, June 30, March 31, December 31, September 30, ALLOWANCE FOR LOAN LOSSES 2003 2003 2003 2002 2002 ================ ================== ================ =============== =============== Balance at beginning of period $ 7,412 $ 7,365 $ 6,706 $ 6,334 $ 6,394 Loans charged off (24) (272) (80) (637) (1,492) Loan recoveries 49 79 439 234 82 ---------------- ------------------ ---------------- --------------- --------------- Net (charge-offs) recoveries 25 (193) 359 (403) (1,410) Provision for loan losses 46 240 300 775 1,350 ---------------- ------------------ ---------------- --------------- --------------- Balance at end of period $ 7,483 $ 7,412 $ 7,365 $ 6,706 $ 6,334 ================ ================== ================ =============== =============== Allowance for loan losses as a percentage of total loans 1.45% 1.48% 1.50% 1.43% 1.34% ================ ================== ================ =============== =============== Allowance for loan losses as a percentage of nonperforming loans 494.39% 503.53% 319.38% 311.76% 135.57% ================ ================== ================ =============== =============== Net charge-offs as a percentage of average loans -0.01% 0.04% -0.07% 0.09% 0.30% ================ ================== ================ =============== =============== Provision for loan losses as a percentage of average loans 0.01% 0.05% 0.06% 0.16% 0.29% ================ ================== ================ =============== =============== Quarter Ended ===================================================================================== September 30, June 30, March 31, December 31, September 30, SELECTED RATIOS 2003 2003 2003 2002 2002 ================= ================= =============== =============== =============== Return on average assets (annualized) 1.29% 1.37% 1.43% 1.30% 1.37% ================= ================= =============== =============== =============== eturn on average equity (annualized) 14.38% 14.55% 14.89% 13.96% 14.64% ================= ================= =============== =============== =============== Average shareholder's equity to average assets 8.97% 9.42% 9.62% 9.29% 9.38% Yield on earning assets 5.38% 5.68% 5.81% 5.87% 6.06% ================= ================= =============== =============== =============== Cost of interest bearing funds 1.42% 1.62% 1.60% 1.71% 1.89% ================= ================= =============== =============== =============== Net interest margin (tax equivalent) 4.37% 4.53% 4.67% 4.67% 4.71% ================= ================= =============== =============== =============== Efficiency ratio 59.57% 56.74% 54.41% 52.95% 45.82% ================= ================= =============== =============== =============== End of period book value per common share $ 11.04 $ 11.15 $ 10.81 $ 10.58 $ 10.42 ================= ================= =============== =============== =============== End of period common shares outstanding 6,165 6,166 6,179 6,159 6,275 ================= ================= =============== =============== =============== SUMMIT BANCSHARES, INC. (Unaudited) (Dollars in thousands) Three Months Ended ---------------------------------------- ------------------------------------------- September 30, 2003 September 30, 2002 ---------------------------------------- ------------------------------------------- Average Average YIELD ANALYSIS Balance Interest Yield Balance Interest Yield ------------- ------------ ---------- --------------- -------------- --------------- Interest Earning Assets: Federal funds sold & Due from time $ 15,298 $ 37 0.97% $ 18,991 $ 80 1.66% Investment securities (taxable) 193,232 1,865 3.83% 151,925 1,774 4.63% 6,135 Investment securities (tax-exempt) 82 5.27% 3,574 52 5.79% Loans 503,936 7,762 6.11% 471,888 7,963 6.70% ---------- --------- --------- --------- Total Interest Earning Assets 718,601 9,746 5.38% 646,378 9,869 6.06% Noninterest Earning Assets: Cash and due from banks 26,189 25,641 Other assets 23,926 19,942 Allowance for loan losses (7,438) (6,572) ---------- --------- Total Noninterest Earning Assets 42,677 39,011 ---------- --------- Total Assets $ 761,278 685,389 ========== ========= Interest Bearing Liabilities: Transaction and money market accounts $ 207,787 566 1.08% $ 184,680 626 1.35% Savings deposits 120,124 380 1.26% 114,851 480 1.66% Certificates and other time deposits 124,414 779 2.48% 120,469 918 3.02% Other borrowings 61,199 109 0.70% 41,035 176 1.70% ---------- --------- --------- --------- Total Interest Bearing Liabilities 513,524 1,834 1.42% 461,035 2,200 1.89% Noninterest Bearing Liabilities: Demand deposits 176,478 156,742 Other liabilities 3,003 3,339 Shareholders' Equity 68,273 64,273 ---------- --------- Total Noninterest Bearing Liabilities 247,754 224,354 ========== ========= Total Liabilities and Shareholders' Equity $ 761,278 $ 685,389 ========== ========= Net Interest Income and Margin (tax equivalent) $ 7,912 4.37% $ 7,669 4.71% ========== ======== ========= ====== SUMMIT BANCSHARES, INC. (Unaudited) (Dollars in thousands) Nine Months Ended ---------------------------------------- ------------------------------------------- September 30, 2003 September 30, 2002 ---------------------------------------- ------------------------------------------- Average Average YIELD ANALYSIS Balance Interest Yield Balance Interest Yield ------------- ------------ ---------- --------------- -------------- --------------- Interest Earning Assets: Federal funds sold & Due from time $ 9,476 $ 74 1.05% $ 13,067 $ 170 1.74% Investment securities (taxable) 173,216 5,175 3.99% 146,831 5,284 4.81% Investment securities (tax-exempt) 5,415 224 5.53% 2,479 109 5.87% Loans 493,361 23,139 6.27% 460,359 23,560 6.84% ---------- --------- --------- --------- Total Interest Earning Assets 681,468 28,612 5.61% 622,736 29,123 6.25% Noninterest Earning Assets: Cash and due from banks 26,601 25,183 Other assets 22,428 19,252 Allowance for loan losses (7,274) (6,403) ---------- --------- Total Noninterest Earning Assets 41,756 38,032 ---------- --------- Total Assets $ 723,223 $ 660,768 ========== ========= Interest Bearing Liabilities: Transaction and money market accounts $ 192,650 1,599 1.11% $ 179,378 1,852 1.38% Savings deposits 116,997 1,187 1.36% 111,196 1,463 1.76% Certificates and other time deposits 121,522 2,380 2.62% 112,450 2,750 3.27% Other borrowings 52,741 418 1.06% 37,756 466 1.65% ---------- --------- --------- --------- Total Interest Bearing Liabilities 483,910 5,584 1.54% 440,780 6,531 1.98% Noninterest Bearing Liabilities: Demand deposits 168,968 153,873 Other liabilities 2,916 3,323 Shareholders' Equity 67,429 62,792 ---------- --------- Total Noninterest Bearing Liabilities 239,313 219,988 ---------- --------- Total Liabilities and Shareholders' Equity $ 723,223 $ 660,768 ========== ========= --------- Net Interest Income and Margin (tax equivalent) $ 23,028 4.52% $ 22,592 4.85% ========= ===== ========= ===== SUMMIT BANCSHARES, INC. (Unaudited) (Dollars in thousands, except per share data) September 30, September 30, LOAN PORTFOLIO 2003 % 2002 % =================== =================== ================ ============== Commercial and industrial $ 211,616 40.8% $ 197,346 41.6% Real estate: Commercial 142,317 27.5% 131,874 27.8% Residential 61,676 11.9% 51,327 10.8% Construction and development 69,840 13.5% 59,996 12.7% Consumer 32,545 6.3% 33,859 7.1% ------------------ ------------------- ---------------- -------------- Total loans (gross) 517,994 100.0% 474,402 100.0% Unearned discounts - 0.0% (1) 0.0% ------------------ ------------------- ---------------- -------------- Total loans (net) 517,994 100.0% 474,401 100.0% =================== =================== ================ ============== September 30, September 30, REGULATORY CAPITAL DATA 2003 2002 =================== =================== Tier 1 Capital $ 66,856 $ 62,290 Tier 1 Ratio 11.96% 12.21% Total Capital (Tier 1 + Tier 2) $ 73,850 $ 68,624 Total Capital Ratio 13.21% 13.45% Total Risk-Adjusted Assets $ 559,062 $ 510,077 Tier 1 Leverage Ratio 8.54% 9.13% September 30, September 30, OTHER DATA 2003 2002 =================== ==================== Full Time Equivalent Employees (FTE's) 218 202 Stock Price Range (For the Quarter Ended): High $ 28.50 $ 24.59 Low $ 23.47 $ 20.22 Close $ 27.00 $ 21.05