UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission File Number 0-16587
Summit Financial Group, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 55-0672148
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
223 N. Main Street
Moorefield, West Virginia 26836
(Address of principal executive offices) (Zip Code)
(304) 538-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g)
of the Act:
Common
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K [ss.229.405 of this chapter] is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K. |X|
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 23,2001, was approximately $24,311,000. The number of shares
of the Registrant's Common Stock outstanding on March 23, 2001, was 877,155.
Documents Incorporated by Reference
The following lists the documents which are incorporated by reference in the
Annual Report Form 10-K, and the Parts and Items of the Form 10-K into which the
documents are incorporated.
Part of Form 10-K into which
Document document is incorporated
Portions of the Registrant's Part II - Items 5, 6, 7, 7A, and 8
2000 Annual Report to Shareholders
Portions of the Registrant's Proxy Part III - Items 10, 11, 12 and 13
Statementfor the Annual Meeting of
Shareholders to be held May 15, 2001
SUMMIT FINANCIAL GROUP, INC
Form 10-K Index
Page
PART I.
Item 1. Business 3-8
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Shareholders 8
PART II.
Item 5. Market for the Registrant's Common Stock and
Related Shareholder Matters 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations and Related Statistical Disclosures 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 9
PART III.
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management 10
Item 13. Certain Relationships and Related Transactions 10
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11-12
SIGNATURES 13-14
2
PART I.
Item 1. Business
Organized in 1987 as a West Virginia Corporation, Summit Financial Group, Inc.
("Company" or "Summit") is a $481million financial holding company headquartered
in Moorefield, West Virginia. Summit changed its name from South Branch Valley
Bancorp, Inc. effective December 30, 1999.
At the close of business on December 31, 1987, Summit merged its wholly owned
subsidiary, South Branch Valley National Bank Inc., with South Branch Valley
National Bank ("South Branch"), a commercial bank located in Moorefield, West
Virginia.
During the first half of 1997, the Company purchased approximately 40% of the
outstanding common shares of Capital State Bank, Inc. ("Capital State"), located
in Charleston, West Virginia. To facilitate the funding of this investment, the
Company issued and sold 34,317 shares of its common stock at $43.50 per share to
seven directors of the Company in a limited stock offering. Additionally, the
Company obtained two long-term borrowings from two unaffiliated financial
institutions totaling $3,500,000. On March 31, 1998, Summit acquired the
remaining 60% of Capital State's outstanding common shares for 183,465 shares of
Summit common stock valued at approximately $7.91 million.
Effective April 22, 1999, Capital State purchased three branch banking
facilities located in Greenbrier County, West Virginia. The transaction included
the Branches' facilities and associated loan and deposit accounts. Total
deposits assumed approximated $47.4 million and total loans acquired
approximated $8.9 million.
On May 14, 1999, Shenandoah Valley National Bank ("Shenandoah"), a newly
organized subsidiary of Summit located in Winchester, Virginia, was granted a
national bank charter. Shenandoah was initially capitalized with $4,000,000,
funded by a special dividend in the amount of $3,000,000 from the Company's
subsidiary bank, South Branch, and from a $1,000,000 term loan from the then
unaffiliated institution, Potomac Valley Bank. Shenandoah opened for business on
May 17, 1999.
On December 30, 1999, Summit merged with Potomac Valley Bank ("Potomac"), a $94
million asset bank in Petersburg, West Virginia. Summit issued 290,110 shares of
common stock to the shareholders of Potomac based upon an exchange ratio of
3.4068 shares of Summit common stock for each outstanding share of Potomac
common stock.
Summit's business activities are conducted principally through its four bank
subsidiaries, South Branch, Capital State, Shenandoah and Potomac (collectively,
the "Bank Subsidiaries"). The Bank Subsidiaries account for substantially all of
the consolidated assets, revenues and earnings of Summit. Each Bank Subsidiary
is a full service, FDIC insured institution engaged in commercial and retail
banking.
Summit offers a wide variety of banking services to its customers. Summit
accepts deposits and has night depositories and automated teller machines for
the convenience of its customers. The Company offers its customers various
deposit arrangements with a variety of maturities and yields, including
non-interest bearing and interest bearing demand deposits, savings deposits,
time certificates of deposit, club accounts, and individual retirement accounts.
Summit offers a full spectrum of lending services to their customers, including
commercial loans and lines of credit, residential real estate loans, and
consumer loans. The Company also offers credit cards, the balances of which are
insignificant to total loans. Loan terms, including interest rates, loan to
value ratios, and maturities are tailored as much as possible to meet the needs
of the borrower. Commercial loans, which represented approximately 38.1% of
total loans at December 31, 2000, are generally secured by various collateral
including commercial real estate, accounts receivable and business machinery and
equipment. Residential real estate loans represented approximately 46.7% of
total loans as of December 31, 2000 and consist primarily of mortgages on the
borrower's personal residence, and are typically secured by a first lien on the
subject property. Consumer loans are generally secured, often by first liens on
automobiles, consumer goods or depository accounts. See Note 5 of the
accompanying Consolidated Financial Statements, included in Part II, Item 8 of
this Form 10-K, for a summary of the Summit's loan balances at December 31, 2000
and 1999. Indirect lending represents less than 1.0% of the Company's total
loans. A special effort is made to keep loan products as flexible as possible
within the guidelines of prudent banking practices in terms of interest rate
risk and credit risk. Company lending personnel adhere to established lending
limits and authorities based on each individual's lending expertise and
experience. Summit does not currently originate loans for sale.
3
When considering loan requests, the primary factors taken into consideration by
the Company are the cash flow and financial condition of the borrower, the value
of the underlying collateral, if any, and the character and integrity of the
borrower. These factors are evaluated in a number of ways including an analysis
of financial statements, credit reviews and visits to the borrower's place of
business.
Summit's subsidiary bank, South Branch also serves as trustee where appointed by
a court or under a private trust agreement. As trustee, South Branch invests the
trust assets and makes disbursements according to the terms and conditions of
the governing trust document and state and Federal law. For the year ended
December 31, 2000, fees generated from the operation of the South Branch's Trust
Department comprised less than one percent of gross revenues earned during the
year.
In order to compete with other financial service providers, the Company
principally relies upon personal relationships established by officers,
directors, and employees with its customers, and specialized services tailored
to meet its customer's needs. Summit also has a marketing program that primarily
utilizes local radio and newspapers to advertise.
Supervision and Regulation
General
Summit, as a financial holding company, is subject to the restrictions of the
Bank Holding Company Act of 1956 ("BHCA"), and is registered pursuant to its
provisions. As a registered financial holding company, Summit is subject to the
reporting requirements of the Federal Reserve Board of Governors ("FRB"), and is
subject to examination by the FRB.
The BHCA prohibits the acquisition by a financial holding company of direct or
indirect ownership of more than five percent of the voting shares of any bank
within the United States without prior approval of the FRB. With certain
exceptions, a financial holding company is prohibited from acquiring direct or
indirect ownership or control or more than five percent of the voting shares of
any company which is not a bank, and from engaging directly or indirectly in
business unrelated to the business of banking or managing or controlling banks.
The BHCA permits Summit to purchase or redeem its own securities. However,
Regulation Y provides that prior notice must be given to the FRB if the gross
consideration for such purchase or consideration, when aggregated with the net
consideration paid by the company for all such purchases or redemptions during
the preceding 12 months is equal to 10 percent or more of the company's
consolidated net worth. Prior notice is not required if (i) both before and
immediately after the redemption, the financial holding company is
well-capitalized; (ii) the financial holding company is well-managed and (iii)
the financial holding company is not the subject of any unresolved supervisory
issues.
The FRB, in its Regulation Y, permits financial holding companies to engage in
non-banking activities closely related to banking or managing or controlling
banks. Approval of the FRB is necessary to engage in these activities or to make
acquisitions of corporations engaging in these activities as the FRB determines
whether these acquisitions or activities are in the public interest. In
addition, by order, and on a case by case basis, the FRB may approve other
non-banking activities.
As a financial holding company doing business in West Virginia, Summit is also
subject to regulation by the West Virginia Board of Banking and Financial
Institutions and must submit annual reports to the West Virginia Division of
Banking.
Federal law restricts subsidiary banks of a financial holding company from
making certain extensions of credit to the parent financial holding company or
to any of its subsidiaries, from investing in the holding company stock, and
limits the ability of a subsidiary bank to take its parent company stock as
collateral for the loans of any borrower. Additionally, federal law prohibits a
financial holding company and its subsidiaries from engaging in certain tie-in
arrangements in conjunction with the extension of credit or furnishing of
services.
The operations of South Branch and Shenandoah, as national banking associations,
are subject to federal statutes and regulations which apply to national banks,
and are primarily regulated by the OCC. Capital State and Potomac are subject to
similar West Virginia statutes and regulations, and are primarily regulated by
the West Virginia Division of Banking. The Bank Subsidiaries are also subject to
regulations promulgated by the FRB and the FDIC. As members of the FDIC, the
deposits of the Bank Subsidiaries are insured as required by federal law. Bank
regulatory authorities regularly examine revenues, loans, investments,
management practices, and other aspects of the Bank Subsidiaries. These
examinations are conducted primarily to protect depositors and not shareholders.
In addition to these regular examinations, the Bank Subsidiaries must furnish to
regulatory authorities quarterly reports containing full and accurate statements
of their affairs.
4
Permitted Non-banking Activities
The FRB permits, within prescribed limits, financial holding companies to engage
in non-banking activities closely related to banking or to managing or
controlling banks. Such activities are not limited to the state of West
Virginia. Some examples of non-banking activities which presently may be
performed by a financial holding company are: making or acquiring, for its own
account or the account of others, loans and other extensions of credit;
operating as an industrial bank, or industrial loan company, in the manner
authorized by state law; servicing loans and other extensions of credit;
performing or carrying on any one or more of the functions or activities that
may be performed or carried on by a trust company in the manner authorized by
federal or state law; acting as an investment or financial advisor; leasing real
or personal property; making equity or debt investments in corporations or
projects designed primarily to promote community welfare, such as the economic
rehabilitation and the development of low income areas; providing bookkeeping
services or financially oriented data processing services for the holding
company and its subsidiaries; acting as an insurance agent or a broker, to a
limited extent, in relation to insurance directly related to an extension of
credit; acting as an underwriter for credit life insurance which is directly
related to extensions of credit by the financial holding company system;
providing courier services for certain financial documents; providing management
consulting advice to nonaffiliated banks; selling retail money orders having a
face value of not more than $1,000, traveler's checks and U. S. savings bonds;
performing appraisals of real estate; arranging commercial real estate equity
financing under certain limited circumstances; providing securities brokerage
services related to securities credit activities; underwriting and dealing in
government obligations and money market instruments; providing foreign exchange
advisory and transactional services; and acting under certain circumstances, as
futures commission merchant for nonaffiliated persons in the execution and
clearance on major commodity exchanges of futures contracts and options.
Credit and Monetary Policies and Related Matters
The Bank Subsidiaries are affected by the fiscal and monetary policies of the
federal government and its agencies, including the FRB. An important function of
these policies is to curb inflation and control recessions through control of
the supply of money and credit. The operations of the Bank Subsidiaries are
affected by the policies of government regulatory authorities, including the FRB
which regulates money and credit conditions through open market operations in
United States Government and Federal agency securities, adjustments in the
discount rate on member bank borrowings, and requirements against deposits and
regulation of interest rates payable by member banks on time and savings
deposits. These policies have a significant influence on the growth and
distribution of loans, investments and deposits, and interest rates charged on
loans, or paid for time and savings deposits, as well as yields on investments.
The FRB has had a significant effect on the operating results of commercial
banks in the past and is expected to continue to do so in the future. Future
policies of the FRB and other authorities and their effect on future earnings
cannot be predicted.
The FRB has a policy that a financial holding company is expected to act as a
source of financial and managerial strength to each of its subsidiary banks and
to commit resources to support each such subsidiary bank. Under the source of
strength doctrine, the FRB may require a financial holding company to contribute
capital to a troubled subsidiary bank, and may charge the financial holding
company with engaging in unsafe and unsound practices for failure to commit
resources to such a subsidiary bank. This capital injection may be required at
times when Summit may not have the resources to provide it. Any capital loans by
a holding company to any of the subsidiary banks are subordinate in right of
payment to deposits and to certain other indebtedness of such subsidiary bank.
In addition, the Crime Control Act of 1990 provides that in the event of a
financial holding company's bankruptcy, any commitment by such holding company
to a Federal bank or thrift regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
In 1989, the United States Congress enacted the Financial Institutions Reform,
Recovery and Enforcement Act ("FIRREA"). Under FIRREA depository institutions
insured by the FDIC may now be liable for any losses incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution, or
(ii) any assistance provided by the FDIC to commonly controlled FDIC-insured
depository institution in danger of default. "Default" is defined generally as
the appointment of a conservator or receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
"default" is likely to occur in the absence of regulatory assistance.
Accordingly, in the event that any insured bank or subsidiary of Summit causes a
loss to the FDIC, other bank subsidiaries of Summit could be liable to the FDIC
for the amount of such loss.
Under federal law, the OCC may order the pro rata assessment of shareholders of
a national bank whose capital stock has become impaired, by losses or otherwise,
to relieve a deficiency in such national bank's capital stock. This statute also
provides for the enforcement of any such pro rata assessment of shareholders of
such national bank to cover such impairment of capital stock by sale, to the
extent necessary, of the capital stock of any assessed shareholder failing to
pay the assessment. Similarly, the laws of certain states provide for such
assessment and sale with respect to the subsidiary banks chartered by such
states. Summit, as the sole stockholder of its subsidiary banks, is subject to
such provisions.
5
Capital Requirements
As a financial holding company Summit is subject to FRB risk-based capital
guidelines. The guidelines establish a systematic analytical framework that
makes regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposures into
explicit account in assessing capital adequacy, and minimizes disincentives to
holding liquid, low-risk assets. Under the guidelines and related policies,
financial holding companies must maintain capital sufficient to meet both a
risk-based asset ratio test and leverage ratio test on a consolidated basis. The
risk-based ratio is determined by allocating assets and specified off-balance
sheet commitments into four weighted categories, with higher levels of capital
being required for categories perceived as representing greater risk. The Bank
Subsidiaries are subject to substantially similar capital requirements adopted
by adopted by its applicable regulatory agencies.
Generally, under the applicable guidelines, a financial institution's capital is
divided into two tiers. "Tier 1", or core capital, includes common equity,
noncumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangibles. "Tier 2", or supplementary capital, includes,
among other things, cumulative and limited-life preferred stock, hybrid capital
instruments, mandatory convertible securities, qualifying subordinated debt, and
the allowance for loan losses, subject to certain limitations, less required
deductions. "Total capital" is the sum of Tier 1 and Tier 2 capital. Financial
holding companies are subject to substantially identical requirements, except
that cumulative perpetual preferred stock can constitute up to 25% of a
financial holding company's Tier 1 capital.
Financial holding companies are required to maintain a risk-based ratio of 8%,
of which 4% must be Tier 1 capital. The appropriate regulatory authority may set
higher capital requirements when an institution's particular circumstances
warrant. For purposes of the leverage ratio, the numerator is defined as Tier 1
capital and the denominator is defined as adjusted total assets (as specified in
the guidelines). The guidelines provide for a minimum leverage ratio of 3% for
financial holding companies that meet certain specified criteria, including
excellent asset quality, high liquidity, low interest rate exposure and the
highest regulatory rating. Financial holding companies not meeting these
criteria are required to maintain a leverage ratio which exceeds 3% by a cushion
of at least 1 to 2 percent.
The guidelines also provide that financial holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the FRB's guidelines
indicate that the FRB will continue to consider a "tangible Tier 1 leverage
ratio" in evaluating proposals for expansion or new activities. The tangible
Tier 1 leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
On August 2, 1995, the FRB and other banking agencies issued their final rule to
implement the portion of Section 305 of FDICIA that requires the banking
agencies to revise their risk-based capital standards to ensure that those
standards take adequate account of interest rate risk. This final rule amends
the capital standards to specify that the banking agencies will include, in
their evaluations of a bank's capital adequacy, an assessment of the exposure to
declines in the economic value of the bank's capital due to changes in interest
rates.
Failure to meet applicable capital guidelines could subject the financial
holding company to a variety of enforcement remedies available to the federal
regulatory authorities, including limitations on the ability to pay dividends,
the issuance by the regulatory authority of a capital directive to increase
capital and termination of deposit insurance by the FDIC, as well as to the
measures described under the "Federal Deposit Insurance Corporation Improvement
Act of 1991" as applicable to undercapitalized institutions.
As of December 31, 2000, the regulatory capital ratios of Summit and each of the
Bank Subsidiaries are set forth in the table in Note 13 of the notes of the
accompanying consolidated financial statements
Federal Deposit Insurance Corporation Improvement Act of 1991
In December, 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), which substantially revised the bank
regulatory and funding provisions of the Federal Deposit Insurance Corporation
Act and made revisions to several other banking statues.
FDICIA establishes a new regulatory scheme, which ties the level of supervisory
intervention by bank regulatory authorities primarily to a depository
institution's capital category. Among other things, FDICIA authorizes regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.
6
By regulation, an institution is "well-capitalized" if it has a total risk-based
capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or
greater and a Tier 1 leverage ratio of 5% or greater and is not subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any capital measure. Each of the Bank Subsidiaries were "well
capitalized" institutions as of December 31, 2000. As well-capitalized
institutions, they are permitted to engage in a wider range of banking
activities, including among other things, the accepting of "brokered deposits,"
and the offering of interest rates on deposits higher than the prevailing rate
in their respective markets.
Another requirement of FDICIA is that Federal banking agencies must prescribe
regulations relating to various operational areas of banks and financial holding
companies. These include standards for internal audit systems, loan
documentation, information systems, internal controls, credit underwriting,
interest rate exposure, asset growth, compensation, a maximum ratio of
classified assets to capital, minimum earnings sufficient to absorb losses, a
minimum ratio of market value to book value for publicly traded shares and such
other standards as the agency deems appropriate.
Reigle-Neal Interstate Banking Bill
In 1994, Congress passed the Reigle-Neal Interstate Banking Bill (the
"Interstate Bill"). The Interstate Bill permits certain interstate banking
activities through a holding company structure, effective September 30, 1995. It
permits interstate branching by merger effective June 1, 1997 unless states
"opt-in" sooner, or "opt-out" before that date. States may elect to permit de
novo branching by specific legislative election. In March, 1996, West Virginia
adopted changes to its banking laws so as to permit interstate banking and
branching to the fullest extent permitted by Interstate Bill. The Interstate
Bill will permit consolidation of banking institutions across state lines and,
perhaps, de novo entry. As its provisions become effective, it is likely that
the resulting restructurings and interstate activities will result in the
realization of economies of scale within those institutions with entities in
more than one state. One result could be increased competitiveness, due to the
realization of economies of scale and, where permitted, de novo market entrants.
Community Reinvestment Act
Financial holding companies and their subsidiary banks are also subject to the
provisions of the Community Reinvestment Act of 1977 ("CRA"). Under the CRA, the
Federal Reserve Board (or other appropriate bank regulatory agency) is required,
in connection with its examination of a bank, to assess such bank's record in
meeting the credit needs of the communities served by that bank, including low
and moderate income neighborhoods. Further such assessment is also required of
any financial holding company which has applied to (i) charter a national bank,
(ii) obtain deposit insurance coverage for a newly chartered institution, (iii)
establish a new branch office that will accept deposits, (iv) relocate an
office, or (v) merge or consolidate with, or acquire the assets or assume the
liabilities of a federally-regulated financial institution. In the case of a
financial holding company applying for approval to acquire a bank or other
financial holding company, the FRB will assess the record of each subsidiary of
the applicant financial holding company, and such records may be the basis for
denying the application or imposing conditions in connection with approval of
the application. On December 8, 1993, the Federal regulators jointly announced
proposed regulations to simplify enforcement of the CRA by substituting the
present twelve categories with three assessment categories for use in
calculating CRA ratings (the "December 1993 Proposal"). In response to comments
received by the regulators regarding the December 1993 Proposal, the federal
bank regulators issued revised CRA proposed regulations on September 26, 1994
(the "Revised CRA Proposal"). The Revised CRA Proposal, compared to the December
1993 Proposal, would essentially broaden the scope of CRA performance
examinations and more explicitly consider community development activities.
Moreover, in 1994, the Department of Justice, became more actively involved in
enforcing fair lending laws.
In the most recent CRA examinations by the applicable bank regulatory
authorities, each of the Bank Subsidiaries were given "satisfactory" or better
CRA ratings.
Graham-Leach-Bliley Act of 1999
The enactment of the Graham-Leach-Bliley Act of 1999 (the "GLB Act") represents
a pivotal point in the history of the financial services industry. The GLB Act
sweeps away large parts of a regulatory framework that had its origins in the
Depression Era of the 1930s. Effective March 11, 2000, new opportunities were
available for banks, other depository institutions, insurance companies and
securities firms to enter into combinations that permit a single financial
services organization to offer customers a more complete array of financial
products and services. The GLB Act provides a new regulatory framework for
regulation through the financial holding company, which have as its umbrella
regulator the FRB. Functional regulation of the financial holding company's
separately regulated subsidiaries are conducted by their primary functional
regulator. The GLB Act makes satisfactory or above Community Reinvestment Act
compliance for insured depository institutions and their financial holding
companies necessary in order for them to engage in new financial activities. The
GLB Act provides a Federal right to privacy of non-public personal information
of individual customers.
7
Deposit Acquisition Limitation
Under West Virginia banking law, an acquisition or merger is not permitted if
the resulting depository institution or its holding company, including any
depository institutions affiliated therewith, would assume additional deposits
to cause it to control deposits in the State of West Virginia in excess of
twenty five percent (25%) of such total amount of all deposits held by insured
depository institutions in West Virginia. This limitation may be waived by the
Commissioner of Banking for good cause shown.
Competition
Summit competes primarily with numerous other banks and financial institutions
within its primary market area of the Eastern Panhandle and South Central
counties of West Virginia and the northern counties of Virginia. It can be
expected that with the liberalization of the branch banking laws in West
Virginia, additional financial institutions may compete with the Company. Summit
takes an aggressive competitive posture, and intends to continue vigorously
competing for its share of the market within its service area by offering
competitive rates and terms on both loans and deposits.
Employees
At March 15, 2001, Summit employed 129 full-time equivalent employees.
Item 2. Properties
Summit's headquarters office is located in Moorefield, West Virginia in a
building owned by the Company. Additionally, Summit's subsidiaries banks'
headquarters and branch locations occupy offices which are either owned or
operated under long-term lease arrangements. At December 31, 2000, Summit's
subsidiary banks operated 11 banking offices as follows:
Number of
Subsidiary / Office Location Offices
- ---------------------------- -------
South Branch Valley National Bank
Moorefield, West Virginia 1
Mathias, West Virginia 1
Franklin, West Virginia 1
Capital State Bank, Inc.
Charleston, West Virginia 2
Rainelle, West Virginia 1
Rupert, West Virginia 1
Shenandoah Valley National Bank
Winchester, Virginia 2
Potomac Valley Bank
Petersburg, West Virginia 2
Management believes that the premises occupied by Summit and its subsidiaries
are well-located and suitably equipped to serve as financial services
facilities. See Note 7 of the accompanying consolidated financial statements for
additional disclosures related to the Company's properties and other fixed
assets.
Item 3. Legal Proceedings
Summit is involved in various pending legal proceedings, all of which are
regarded by management as normal litigation incident to the business of banking
and are not expected to have a materially adverse effect on the business or
financial condition of the Company.
Item 4. Submission of Matters to a Vote of Shareholders
No matters were submitted during the fourth quarter of 2000 to a vote of Company
shareholders.
8
PART II.
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
Information required by this item is set forth under the captions "COMMON STOCK
LISTING" and "COMMON STOCK DIVIDEND AND MARKET PRICE INFORMATION" on page 16 of
Summit's 2000 Annual Report, and is incorporated herein by reference.
Item 6. Selected Financial Data
Information required by this item is set forth under the heading "SELECTED
FINANCIAL DATA" on page 2 of Financial Information 2000 included as a supplement
to Summit's 2000 Annual Report, and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations and Related Statistical Disclosures
Information required by this item is set forth under the heading "MANAGEMENT'S
DISCUSSION AND ANALYSIS" on pages 3 through 12 of Financial Information 2000
included as a supplement to Summit's 2000 Annual Report, and is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Information required by this item is set forth under the caption "MARKET RISK
MANAGEMENT" on page 12 of Financial Information 2000 included as a supplement to
Summit's 2000 Annual Report, and is incorporated herein by reference.
Item 8. Financial Statements and Supplement Data
Information required by this item is set forth under the heading "QUARTERLY
FINANCIAL INFORMATION" on page 13, under the heading "REPORT OF INDEPENDENT
AUDITORS" on page 14, and under the headings "CONSOLIDATED FINANCIAL STATEMENTS"
and "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" on pages 15 through 36 of
Financial Information 2000 included as a supplement to Summit's 2000 Annual
Report, and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
There has been no Form 8-K filed within 24 months prior to the date of the most
recent financial statements reporting a change of accountants and/or reporting
disagreements on any matter of accounting principle or financial statement
disclosure.
9
PART III.
Item 10. Directors and Executive Officers
Information required by this item is set forth under the captions "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 2, "Security Ownership of
Directors and Officers" on pages 4 through 5, under the captions "NOMINEES FOR
DIRECTOR WHOSE TERMS WILL EXPIRE IN 2004", "DIRECTORS WHOSE TERMS EXPIRE IN
2003" and "DIRECTORS WHOSE TERMS EXPIRE IN 2002" on pages 6 through 11, and
under the caption "EXECUTIVE OFFICERS" on page 14 of Summit's 2001 Proxy
Statement, and is incorporated herein by reference.
Item 11. Executive Compensation
Information required by this item is set forth under the caption "EXECUTIVE
COMPENSATION" on pages 15 through 23, and under the caption "Fees and Benefit
Plans for Directors" on pages 3 through 4 of Summit's 2001 Proxy Statement, and
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is set forth under the caption "Security
Ownership of Directors and Officers" on pages 4 through 5, under the captions
"NOMINEES FOR DIRECTOR WHOSE TERMS WILL EXPIRE IN 2004", "DIRECTORS WHOSE TERMS
EXPIRE IN 2003", and "DIRECTORS WHOSE TERMS EXPIRE IN 2002" on pages 6 through
11, and under the caption "EXECUTIVE OFFICERS" on page 14 of Summit's 2001 Proxy
Statement, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required by this item is set forth under the caption "Related
Transactions" on page 3 of Summit's 2001 Proxy Statement, and is incorporated
herein by reference.
10
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
All financial statements and financial statement schedules required to be filed
by this Form or by Regulation S-X, which are applicable to the registrant, have
been presented in the financial statements and notes thereto in Item 8 in
management's discussion and analysis of financial condition and results of
operation in Item 7 or elsewhere in this filing where appropriate. The listing
of exhibits follows:
A. Exhibits
INDEX TO EXHIBITS
Page(s) in
Form 10-K or
Prior Filing
Exhibit Description Reference
Number ----------- ------------
- ------
(3) Articles of Incorporation and By-laws:
(i) Articles of Incorporation of Summit (a)
Financial Group, Inc. as last amended
on May 2, 2000
(ii) By-laws of Summit Financial Group, Inc. (b)
as last amended, effective December 31, 1999
(10) Material Contracts
(i) Agreement with H. Charles Maddy, III (c)
(ii) Agreement with Ronald F. Miller (d)
(iii) Agreement with C. David Robertson (e)
(iv) Agreement with Patrick N. Frye (f)
(v) 1998 Officers Stock Option Plan (g)
(11) Statement Re: Computation of Earnings per Share 15
(13) Portions of 2000 Annual Report to Shareholders
Incorporated by Reference into this Form 10-K 16
(21) Subsidiaries of Registrant 57
(23) Consent of Arnett & Foster, P.L.L.C. 58
(a) Incorporated by reference to Exhibit 3(i) of Summit Financial Group,
Inc.'s filing on Form 10-Q dated June 30, 2000.
(b) Incorporated by reference to Exhibit 3(b) of Summit financial
Group, Inc.'s filing on Form 10-Q dated June 30, 2000.
(c) Incorporated by reference to Exhibit 10 to South Branch Valley Bancorp,
Inc.'s filing on Form 10-KSB dated December 31, 1995.
(d) Incorporated by reference to Exhibit 10(ii) to South Branch Valley
Bancorp, Inc.'s filing on Form 10-KSB dated December 31, 1998.
(e) Incorporated by reference to Exhibit 10 to South Branch Valley Bancorp,
Inc.'s filing on Form 10-QSB dated June 30, 1999.
(f) Incorporated by reference to Exhibit 10(b) of South Branch Valley
Bancorp, Inc.'s filing on Form S-4 dated October 13, 1999.
(g) Incorporated by reference to Exhibit 10 to South Branch Valley Bancorp,
Inc.'s filing on Form 10-QSB dated June 30, 1998.
11
B. Reports on Form 8-K
No reports of Form 8-K were filed by Summit during the fourth quarter
of the year ended December 31, 2000.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 FINANCIAL GROUP, INC.
a West Virginia Corporation
(registrant)
By: /s/ Oscar M. Bean 3/23/2001 By: /s/ H. Charles Maddy, III 3/23/2001
------------------------------ --------------------------------------
Oscar M. Bean Date H. Charles Maddy, III Date
Chairman of the Board President & Chief Executive Officer
By: /s/ Robert S. Tissue 3/28/2001 By: /s/ Julie R. Cook 3/27/2001
------------------------------ --------------------------------------
Robert S. Tissue Date Julie R. Cook Date
Vice President Director of Accounting
&Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Title Date
----- ----
/s/ Oscar M. Bean Director 3/23/2001
- ---------------------------------- ---------
Oscar M. Bean
Director ________
- ----------------------------------
Frank A. Baer, III
Director ________
- ----------------------------------
Dewey F. Bensenhaver, M.D.
/s/ James M. Cookman Director 3/23/2001
- ---------------------------------- ---------
James M. Cookman
Director ________
- ----------------------------------
John W. Crites
/s/ Patrick N. Frye Director 3/23/2001
- ---------------------------------- ---------
Patrick N. Frye
Director ______
- ----------------------------------
James Paul Geary
/s/ Thomas J. Hawse, III Director 3/23/2001
- ---------------------------------- ---------
Thomas J. Hawse, III
13
SIGNATURES - continued
Title Date
----- ----
/s/ Phoebe Fisher Heishman Director 3/23/2001
- ------------------------------- ---------
Phoebe Fisher Heishman
/s/ Gary L. Hinkle Director 3/23/2001
- ------------------------------- ---------
Gary L. Hinkle
Director ________
- -------------------------------
Gerald W. Huffman
/s/ H. Charles Maddy, III Director 3/23/2001
- ------------------------------- ---------
H. Charles Maddy, III
Director ________
- -------------------------------
Duke A. McDaniel
Director ________
- -------------------------------
Harold K. Michael
/s/ Ronald F. Miller Director 3/23/2001
- ------------------------------- ---------
Ronald F. Miller
/s/ George R. Ours Director 3/23/2001
- ------------------------------- ---------
George R. Ours
Director ________
- -------------------------------
Charles S. Piccirillo
/s/ Harry C. Welton, Jr. Director 3/23/2001
- ------------------------------- ---------
Harry C. Welton, Jr.
14