SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
SUMMIT FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
SUMMIT FINANCIAL CORPORATION
March 21, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Summit Financial Corporation. The meeting will be held at Thornblade Club, 1275
Thornblade Boulevard, Greer, South Carolina on Tuesday, April 23, 2002, at 10:00
a.m.
The Notice of Annual Meeting and Proxy Statement appearing on the following
pages describe the formal business to be transacted at the meeting. During the
meeting, we will also report on the operations of the Corporation. Directors
and officers of the Corporation, as well as representatives of KPMG LLP, the
Corporation's independent auditors, will be present to respond to appropriate
questions from shareholders.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card. If you attend the meeting, you may vote in person
even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ J. Randolph Potter
J. Randolph Potter
President and Chief Executive Officer
SUMMIT FINANCIAL CORPORATION
POST OFFICE BOX 1087
937 NORTH PLEASANTBURG DRIVE
GREENVILLE, SOUTH CAROLINA 29602
(864) 242-2265
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 2002
The Annual Meeting of the shareholders of SUMMIT FINANCIAL CORPORATION will
be held at Thornblade Club, 1275 Thornblade Boulevard, Greer, South Carolina on
Tuesday, April 23, 2002, at 10:00 a.m. for the following purpose:
1) To elect four directors to the Board of Directors of the Corporation; and
2) To transact any other business that may properly come before the meeting.
The Board of Directors is not aware of any other business to come before
the meeting.
Shareholders of record at the close of business on March 12, 2002 are
entitled to receive notice of the meeting and to vote at the meeting and any
adjournment or postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The
proxy will not be used if you attend the meeting and vote in person.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE
AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE WHICH HAS BEEN PROVIDED
SO THAT YOUR VOTE MAY BE RECORDED.
Also enclosed is a copy of the Corporation's 2001 Annual Report to
Shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. Randolph Potter
J. RANDOLPH POTTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 21, 2002
Greenville, South Carolina
SUMMIT FINANCIAL CORPORATION
POST OFFICE BOX 1087
937 NORTH PLEASANTBURG DRIVE
GREENVILLE, SOUTH CAROLINA 29602
(864) 242-2265
PROXY STATEMENT
---------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2002
---------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Summit Financial Corporation ("Summit
Financial" , "the Corporation") to be used at the Annual Meeting of Shareholders
of the Corporation. The Corporation is the parent holding company for Summit
National Bank ("the Bank") and Freedom Finance Inc. ("the Finance Company").
The Annual Meeting will be held at Thornblade Club, 1275 Thornblade Boulevard,
Greer, South Carolina, on Tuesday, April 23, 2002, at 10:00 a.m. The enclosed
proxy is solicited BY AND ON BEHALF OF THE CORPORATION'S BOARD OF DIRECTORS.
This Proxy Statement and the enclosed proxy card are being first mailed to
shareholders on or about March 21, 2002.
VOTING AND PROXY PROCEDURE
--------------------------
WHO CAN VOTE AT THE MEETING
You are entitled to vote your Summit Financial Corporation common stock if
the records of the Corporation showed that you held your shares as of the close
of business on March 12, 2002. As of the close of business on that date, a
total of 3,796,395 shares of Summit Financial Corporation common stock were
outstanding. Each share of common stock has one vote on each matter to come
before the meeting.
HOW ARE VOTES COUNTED
The Annual Meeting will be held if a majority of the outstanding shares of
common stock entitled to vote is present in person or represented by proxy at
the meeting. If you return valid proxy instructions or attend the meeting in
person, your shares will be counted for purposes of determining whether there is
a quorum, even if you abstain from voting. Broker non-votes also will be
counted for purposes of determining the existence of a quorum. A broker
non-vote occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because they do not have
discretionary voting power with respect to that item and have not received
voting instructions from the beneficial owner.
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees, or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors.
Directors must be elected by a plurality of the votes cast at the Annual
Meeting. This means that the nominees receiving the greatest number of votes
will be elected. Votes that are withheld and broker non-votes will have no
effect on the outcome of the election.
HOW YOU CAN VOTE
You may vote your shares in person by attending the Annual Meeting or by
completing, signing, dating and mailing the enclosed proxy card in the envelope
provided. If your Summit Financial common stock is held in "street name"
(through a broker or other nominee), you will receive instructions from your
broker or other nominee on how to vote your shares. Your broker may allow you
to deliver your voting instructions via the telephone or the Internet.
ATTENDING THE MEETING
If you are a beneficial owner of Summit Financial common stock held by a
broker, bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the Annual Meeting. A recent brokerage statement or
letter from a bank or broker are examples of proof of ownership. If you want to
vote your shares of Summit Financial common stock held in street name in person
at the meeting, you will have to get a written proxy in your name from the
broker, bank or other nominee which holds your shares.
VOTING BY PROXY
This Proxy Statement is being sent to you by the Board of Directors of
Summit Financial for the purpose of requesting that you allow your shares of
Summit Financial common stock to be represented at the Annual Meeting by the
persons named in the enclosed proxy card. All shares of Summit Financial common
stock represented at the meeting by properly executed proxies will be voted in
accordance with the instructions indicated on the proxy card. If you sign and
return a proxy card without giving voting instructions, your shares will be
voted "FOR" all nominees for Director.
If any matters not described in this Proxy Statement are properly presented
at the Annual Meeting, the persons named in the proxy card will use their
judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the meeting in order to solicit additional proxies. If the
Annual Meeting is postponed or adjourned, your Summit Financial common stock
may be voted by the persons named in the proxy card on the new meeting date as
well, unless you have revoked your proxy. The Corporation does not know of any
other matters to be presented at the meeting.
HOW YOU MAY REVOKE YOUR PROXY OR CHANGE YOUR VOTE
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Secretary of the
Corporation in writing before your shares have been voted at the Annual Meeting,
submit a later dated vote either by telephone, Internet or a later dated proxy,
or attend the meeting, notify the Secretary and vote your shares in person.
Attendance at the Annual Meeting will not in itself constitute revocation of
your proxy.
STOCK OWNERSHIP
---------------
The following table provides information as of March 12, 2002 with respect to
persons known to the Corporation to be the beneficial owners of more than 5% of
the Corporation's outstanding common stock. A person may be considered to
beneficially own any share of common stock over which he or she has, directly or
indirectly, sole or shared voting or investing power.
PERCENTAGE OF
NUMBER OF SHARES OF COMPANY
COMMON STOCK COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING
- --------------------- ------------------- ------------
Ivan E. Block
210 League Road
Simpsonville, SC 29681 279,611 6.6%
The following table sets forth the names and present occupations of the
nominees for director of the Corporation, the directors continuing in office,
and the named executive officers. It also sets forth the number of shares and
percentage of outstanding shares of the Corporation's common stock beneficially
owned, directly or indirectly, on March 12, 2002 by the nominees, continuing
directors, and named executive officers individually, and by directors and named
executive officers of the Corporation as a group. Refer also to the following
section of this Proxy Statement for additional information about the nominees
for director and continuing directors.
Shares of Common Stock
Beneficially Owned;
Percentage of
Principal Occupation; Company Common Stock
Name Positions with the Company Outstanding (1)
- -------------------- ---------------------------------------------------- -------------------
NOMINEES FOR ELECTION AS DIRECTORS
FOR THREE YEAR TERMS EXPIRING IN 2005 (2)
----------------------------------------------------
John W. Houser . . . President, Piedmont Management of 97,816 2.3% (3)
Fairforest, Inc.; Duncan, SC
Larry A. McKinney. . President & CEO, ElDeCo, Inc.; Greenville, SC 121,142 2.9% (3)
David C. Poole . . . President, David C. Poole Co., Inc.; Greenville, SC 177,281 4.2% (3)
Secretary, Summit Financial Corporation
James B. Schwiers. . Executive Vice President & COO, 150,326 3.5% (4)
Summit National Bank; Greenville, SC
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2003
----------------------------------------------------
C. Vincent Brown . . President, Brown, Massey, Evans, McLeod &
Haynsworth, Attorneys at Law, P.A.; 178,449 4.2% (5)
Greenville, SC
Chairman, Summit Financial Corporation
John A. Kuhne. . . . Private Investor; Greenville, SC 76,625 1.8% (6)
Vice Chairman, Summit Financial Corporation
Allen H. McIntyre. . President, ChemPro, Inc.; Spartanburg, SC 13,310 *
J. Randolph Potter . President & CEO, Summit Financial 150,029 3.5% (7)
Corporation; Greenville, SC
TERMS EXPIRING IN 2004
----------------------------------------------------
James G. Bagnal, III Regional President, Summit National Bank; 28,491 * (8)
Greenville, SC
Ivan E. Block. . . . Chairman & CEO, Crown Metro, Inc.; 279,611 6.6% (3)
Greenville, SC
J. Earle Furman, Jr. President, NAI Earle Furman, LLC; 83,100 2.0% (3)
Greenville, SC
T. Wayne McDonald. . Physician, Highlands Center for Women; 85,821 2.0% (3)
Greenville, SC
NAMED EXECUTIVE OFFICERS (11)
----------------------------------------------------
Blaise B. Bettendorf Senior Vice President & CFO, Summit Financial 118,796 2.8% (9)
Corporation; Greenville, SC
All Directors and named executive officers
as a group (13 persons) 1,560,797 36.6% (10)
<FN>
FOOTNOTES TO PRECEDING TABLE:
* - Less than 1% beneficial ownership.
(1) - Pursuant to Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of the
Corporation's common stock if he or she has voting and/or investment power with
respect to such security or has a right to acquire, through the exercise of
outstanding options or otherwise, beneficial ownership at any time within 60
days from March 12, 2002. The table includes certain shares owned by spouses,
other immediate family members, closely-held corporations, shares held in
retirement accounts for the benefit of the named individuals, and other forms of
ownership, over which shares the named persons possess sole or shared voting
and/or investment power.
(2) - Based on 3,796,395 shares of common stock of the Corporation
outstanding and entitled to vote at the Annual Meeting, plus the number of
shares that may be acquired within 60 days by each individual (or group of
individuals) by exercising options.
(3) - Includes exercisable options to purchase 20,684 shares of common stock
at from $3.98 - $5.33 granted under the 1995 Non-Employee Stock Option Plan.
(4) - Includes exercisable options to purchase 83,153 shares of common stock
at from $3.98 - $5.88 granted under the Incentive Stock Option Plan and 11,108
vested shares in the Summit Financial Corporation 401K Plan for Mr. Schwiers.
(5) - Includes exercisable options to purchase 41,369 shares of common stock
at from $3.98 - $5.33 granted under the 1995 Non-Employee Stock Option Plan.
(6) - Includes exercisable options to purchase 31,027 shares of common stock
at from $3.98 - $5.33 granted under the 1995 Non-Employee Stock Option Plan.
(7) - Includes exercisable options to purchase 83,153 shares of common stock
at from $3.98 - $5.88 granted under the Incentive Stock Option Plan and 675
vested shares in the Summit Financial Corporation 401K Plan for Mr. Potter.
Does not include 1,620 shares held by a related party to which Mr. Potter
disclaims beneficial ownership.
(8) - Includes exercisable options to purchase 11,025 shares of common stock
at $8.62 granted under the Incentive Stock Option Plan.
(9) - Includes exercisable options to purchase 69,752 shares of common stock
at from $3.98 - $5.88 granted under the Incentive Stock Option Plan and 1,501
vested shares in the Summit Financial Corporation 401K Plan for Ms. Bettendorf.
(10) - Includes 443,583 shares of common stock subject to stock options
exercisable within 60 days from March 12, 2002 held by the Directors and the
named executive officers of the Corporation as a group.
(11) - Under the Securities and Exchange Commission regulation, the term
"named executive officers" is defined to include the "chief executive officer"
regardless of compensation level, and the four most highly compensated executive
officers (as defined), other than the chief executive officer, whose total
annual salary and bonus for the last completed fiscal year exceeded $100,000.
PROPOSAL 1 - ELECTION OF DIRECTORS
----------------------------------
As provided in the Corporation's Bylaws, the Board of Directors has fixed
the number of directors at twelve. The Board is divided into three classes with
three-year staggered terms, with approximately one-third of the directors
elected each year. Four directors have been nominated for election at the
Annual Meeting to serve for a three-year term or until their respective
successors have been elected and qualified. The nominees are John W. Houser,
Larry A. McKinney, David C. Poole, and James B. Schwiers, all of whom are
currently directors of the Corporation and Summit National Bank. Each has
consented to being named a nominee in this Proxy Statement and has agreed to
serve as a director if elected at the Annual Meeting.
It is intended that the proxies solicited by the Board of Directors will be
voted for the election of the nominees named above. If any nominee is unable to
serve, the persons named in the proxy card would vote your shares to approve the
election of any substitute proposed by the Board of Directors. Alternatively,
the Board of Directors may adopt a resolution to reduce the size of the Board.
At this time, the Board of Directors knows of no reason why any nominee might be
unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL OF THE
NOMINEES.
Information regarding each nominee's and continuing director's age,
business experience, standing committees on which they serve, and how long each
has been a director is provided below. Unless otherwise stated, each individual
has held his current occupation for at least the last five years.
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2005
JOHN W. HOUSER, age 58, is the president of Piedmont Management of
Fairforest, Inc., a consulting firm. He is a partner in Piedmont Brokerage and
Universal Packaging, which are involved in the manufacturing and sales of
corrugated boxes. Mr. Houser serves on the Audit Committee and has been a
director since 1989.
LARRY A. MCKINNEY, age 60, is president and CEO of ElDeCo, Inc., an
electrical contracting firm. Mr. McKinney serves on the Audit Committee and has
been a director since 1993.
DAVID C. POOLE, age 63, is president of David C. Poole Co., Inc., a dealer
in synthetic fibers and polymers. Mr. Poole serves on the Executive Committee,
is Secretary of the Corporation, and has been a director since 1989.
JAMES B. SCHWIERS, age 43, is the executive vice president and chief
operating officer of Summit National Bank. He has been a director since 2000.
DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 2003
C. VINCENT BROWN, age 62, is an attorney and is president of Brown, Massey,
Evans, McLeod and Haynsworth, Attorneys at Law, P.A., where he has practiced tax
and corporate law for over 30 years. Mr. Brown is the Chairman of the
Corporation and Summit National Bank, serves on the Executive Committee, and has
been a director since 1989.
JOHN A. KUHNE, age 58, served as the president of Belk-Simpson Co.
Department Stores from 1983 until its sale in 1998. He is currently a private
investor. Mr. Kuhne, Vice Chairman of the Corporation and Summit National Bank,
serves on the Executive Committee and has been a director since 1989.
ALLEN H. MCINTYRE, age 45, is president of ChemPro, Inc., a company in the
consumer packaged goods industry. He serves on the Executive Committee and has
been a director since 2000.
J. RANDOLPH POTTER, age 55, is president and chief executive officer of
the Corporation and its two subsidiaries, Summit National Bank, and Freedom
Finance, Inc. Mr. Potter serves on the Executive Committee and has been a
director since 1989.
DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING IN 2004
JAMES G. BAGNAL, III, age 57, joined Summit Financial Corporation as
regional president of Summit National Bank during 2000. He served as regional
president in Spartanburg, South Carolina for Regions Bank from 1998 to 2000 and
president of Spartanburg National Bank in Spartanburg, South Carolina prior to
1998. Mr. Bagnal has been a director since 2000.
IVAN E. BLOCK, age 56, is chairman and CEO of the Crown Metro, Inc. group
of companies, which are engaged in the production and supply of fine organic
chemicals and specialty wood and floor coatings. Mr. Block serves on the Audit
Committee and has been a director since 1989.
J. EARLE FURMAN, JR., age 54, is president of NAI Earle Furman, LLC, a
commercial and industrial real estate brokerage firm which he formed in 1986.
He has been a director since 1989.
T. WAYNE MCDONALD, age 63, is a physician specializing in gynecology. He
is currently associated with the Highlands Center for Women. Dr. McDonald
serves on the Audit Committee and has been a director since 1989.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation and Summit National Bank conduct
their business through meetings of the Boards and through their committees.
During the year ended December 31, 2001, the Board of Directors of the
Corporation held four meetings and the Board of Summit National Bank held 12
meetings. In 2001, all directors of the Corporation attended more than 75% of
the aggregate meetings of the Board and committees on which they served during
this period.
The Executive Committee of the Board of Directors, consisting of Directors
Brown, Kuhne, Poole, Potter, Furman (through January 2002), and McIntyre
(commencing in February 2002) generally meets monthly and met 11 times during
2001. The members of the Executive Committee are also members of the Executive
Committee of Summit National Bank and their meetings are held jointly. The
Executive Committee, exclusive of Mr. Potter, serves as the Compensation
Committee. In its capacity as Compensation Committee, the Executive Committee
is responsible for approval of compensation arrangements of senior management,
adoption of compensation plans, and granting options or other benefits under
compensation plans.
The Board of Directors of the Corporation has an Audit Committee which
consists of Directors Houser, McIntyre and McDonald through December 2001, and
added Directors Block and McKinney in January 2002. The Audit Committee
oversees the scope of the Corporation's internal audit program, the independence
of the outside accountants, the adequacy of the Corporation's systems of
internal controls and procedures, and the adequacy of management's action with
respect to recommendations arising from those auditing activities. The Audit
Committee also oversees the Corporation's regulatory compliance. The functions
of the Audit Committee include recommending the appointment of the Corporation's
independent accountants, overseeing the Internal Auditor, and initiating and
supervising examinations of the financial statements or activities of the
Corporation. The members of the Audit Committee are also members of the Audit
Committee of the Bank and customarily hold joint meetings of both Committees.
The Board of Directors has determined that all of the members of the Audit
Committee satisfy the independence and other applicable requirements of the
NASDAQ listing standards. The Audit Committee met three times during the year
ended December 31, 2001. The Audit Committee's report is included later in this
Proxy Statement.
The Board has no standing nominating committee. The Board of Directors of
the Corporation as a whole acts as a nominating committee for selecting the
nominees for recommendation to the shareholders for election as directors. The
Board of Directors met one time in its capacity as the nominating committee
during the year ended December 31, 2001. The Corporation s Bylaws provide for
shareholder nomination of directors.
DIRECTORS' COMPENSATION
During 2001, members of the Board of Directors of Summit Financial, who are
not officers of the Corporation or of its subsidiaries, received a fee of $1,000
for each board meeting attended, and $150 for each committee meeting attended,
except for the Chairman and Vice Chairman who received two times and
one-and-one-half times, respectively, the standard attendance fees. Total fees
paid to Directors of Summit Financial Corporation during 2001 was $132,450.
There were no stock options granted to Directors during 2001 under the 1995
Summit Financial Corporation Non-Employee Stock Option Plan.
EXECUTIVE OFFICERS AND COMPENSATION
----------------------------------------
Set forth below are the names, ages, titles, and business experience of the
executive officers of the Corporation and its subsidiaries.
J. RANDOLPH POTTER, age 55, has been President and Chief Executive Officer
of the Corporation since its incorporation in May 1989.
JAMES B. SCHWIERS, age 43, was named Chief Operating Officer of Summit
National Bank, a wholly-
owned subsidiary of the Corporation in 1997. He has been Executive Vice
President of Summit since March 1990.
BLAISE B. BETTENDORF, age 39, is a certified public accountant and has been
Senior Vice President/Chief Financial Officer and Assistant Secretary/Treasurer
for the Corporation since February 1990.
JAMES G. BAGNAL, III, age 57, has been Regional President of Summit
National Bank since joining the Corporation in April 2000. He served as
regional president in Spartanburg, South Carolina for Regions Bank from 1998 to
2000 and president of Spartanburg National Bank in Spartanburg, South Carolina
for 10 years prior to 1998.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the years ended December 31, 2001, 2000
and 1999, the cash compensation paid by the Corporation and its subsidiaries, as
well as other compensation paid or accrued for each of these years, to the chief
executive officer and to each of the other most highly compensated executive
officers (collectively the "Named Executive Officers") for services rendered in
all capacities to the Corporation and its subsidiaries. All compensation,
including fringe benefits, is paid by Summit National Bank.
SUMMARY COMPENSATION TABLE
------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- ----------------------
AWARDS
Other ----------
Annual AWARDS Securities
Com- ---------- Underlying
pensa- Restricted Options/ All Other
Name and Bonus tion Stock Awards SARS Compen-
Principal Position Year Salary ($) ($) (1) ($) ($)(3) (#)(5) sation ($)
- -------------------- ---- ----------- ------- --- ---------- ------ ------------
J. Randolph Potter, . 2001 $ 235,000 $23,000 (2) - - $10,861 (6)
President/CEO . . . . 2000 $ 220,000 $66,000 (2) $22,240 (4) - $ 10,861
1999 $ 204,000 $61,000 (2) - - $ 10,461
James B. Schwiers,. . 2001 $ 165,000 $16,000 (2) - - $10,961 (7)
Executive Vice. . . . 2000 $ 151,000 $52,000 (2) $22,240 (4) - $ 10,961
President/COO . . . . 1999 $ 140,000 $40,000 (2) - - $ 8,861
Blaise B. Bettendorf, 2001 $ 137,000 $14,000 (2) - - $ 8,451 (8)
Senior Vice . . . . . 2000 $ 125,000 $37,000 (2) $22,240 (4) - $ 7,795
President/CFO . . . . 1999 $ 114,000 $34,000 (2) - - $ 7,237
James G. Bagnal, III. 2001 $ 140,000 $14,000 (2) - - $ 9,091 (9)
Regional President. . 2000 $94,000 (10) $30,000 (2) - 55,125 $ 2,836
<FN>
FOOTNOTES FOR PRECEDING TABLE:
(1) - Reflects bonuses awarded for the current year which may be paid in the
subsequent year.
(2) - Certain amounts may have been expended by the Corporation which may have had
value as a personal benefit to the executive officer. However, the total value of such
perquisites and other personal benefits for any year presented did not exceed, in the
aggregate, 10% of the annual salary and bonus of such executive officer.
(3) - The value of restricted stock awards is based on the closing price of common
stock on the date of each grant, rather than the year end closing price.
(4) - In 2000, pursuant to the Corporation's Restricted Stock Plan, certain officers
were awarded 2,205 (adjusted for stock dividends) shares of the Corporation's common
stock. The awards were granted for nominal consideration and restrictions lapse 20% each
year over a period of 5 years from the date of the award. The amount and 2001 year end
value (based on the closing market prices of $10.00 at December 31, 2001) of all
restricted stock held by the Named Executive Officers are: Mr. Potter held 22,626 shares
of restricted stock, of which 16,777 shares had vested, with a market value of $226,300;
Mr. Schwiers held 17,520 shares of restricted stock, of which 12,693 shares had vested,
with a market value of $175,200; and, Ms. Bettendorf held 14,968 shares of restricted
stock, of which 10,651 shares had vested, with a market value of $149,700. Dividends are
payable on the restricted stock to the extent paid on the Corporation s common stock
generally. If a change in control of the Corporation (as defined in the Plan) were to
occur, the restricted stock would immediately vest in full.
(5) - Option grants have been adjusted for all 5% stock dividends issued.
(6) - The amount for 2001 is comprised of (i) $10,400 contributed by the Corporation
to the Summit Financial Corporation 401(k) Plan to match fiscal 2001 pre-tax deferral
contributions, all of which was vested; and (ii) $461 of term life insurance premiums,
not generally available to other employees, paid by the Corporation on behalf of Mr.
Potter.
(7) - The amount for 2001 is comprised of (i) $10,500 contributed by the Corporation
to the Summit Financial Corporation 401(k) Plan to match fiscal 2001 pre-tax deferral
contributions, all of which was vested; and (ii) $461 in term life insurance premiums,
not generally available to other employees, paid by the Corporation on behalf of Mr.
Schwiers.
(8) - The amount for 2001 is comprised of (i) $8,054 contributed by the Corporation
to the Summit Financial Corporation 401(k) Plan to match fiscal 2001 pre-tax deferral
contributions, all of which was vested; and (ii) $397 in term life insurance premiums,
not generally available to other employees, paid by the Corporation on behalf of Ms.
Bettendorf.
(9) - The amount for 2001 is comprised of (i) $8,169 contributed by the Corporation
to the Summit Financial Corporation 401(k) Plan to match fiscal 2001 pre-tax deferral
contributions, which was partially vested; (ii) $403 in term life insurance premiums, not
generally available to other employees, paid by the Corporation on behalf of Mr. Bagnel;
and (iii) $519 imputed income on the term portion of split-dollar life insurance coverage
paid by the Corporation on behalf of Mr. Bagnal.
(10) - Mr. Bagnal joined the Corporation in April 2000. Compensation received by Mr.
Bagnal as reported for 2000 is related to the partial year based on an annual salary of
$130,000.
OPTION EXERCISE TABLE
There were no stock option grants made during 2001. Further, none of the
Named Executive Officers exercised any of their vested options during 2001.
The following table includes the number of shares (adjusted for stock
dividends) covered by both exercisable and non-exercisable options as of
December 31, 2001. Also reported are the values for in-the-money options, which
represent the positive spread between the exercise price of any such existing
options and the year-end market price of Summit Financial Corporation common
stock.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Number of at FY-End at FY-End
Shares (#) (1) ($) (2)(3)
Acquired on $ Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ------------------- --------- -------- ---------------- ---------------
J. Randolph Potter . - - 83,153 / - $ 399,000/ -
James B. Schwiers. . - - 83,153 / - $ 399,000/ -
Blaise B. Bettendorf - - 69,752 / - $ 345,000/ -
James G. Bagnal, III - - 11,025 / 44,100 $15,200 / $60,800
<FN>
(1) - The number of exercisable and unexercisable options have been adjusted
for all 5% stock dividends issued.
(2) - Values are based on the fair market of the common stock on December
31, 2001 ($10.00 as quoted on the NASDAQ Small Cap Market), minus the grant
price.
(3) - The value of unexercised in-the-money stock options at December 31,
2001 is presented to comply with SEC regulations. The actual amount realized
upon any exercise of stock options will depend upon the excess of the fair
market value of the common stock over the grant price at the time the stock
option is exercised. There is no assurance that the values of unexercised stock
options reflected in this table will be realized.
DEFINED BENEFIT PLAN
During 1998, the Corporation established a salary continuation plan
pursuant to agreements with certain executives of the Corporation and its bank
subsidiary. Under the Salary Continuation Agreements, an executive will be
entitled to a stated annual benefit for a period of 20 years (i) upon retirement
from the Corporation after attaining the normal retirement age defined in the
plan as age 65, or (ii) upon the executive's death or disability, in which case
the benefits would be payable immediately to the executive's beneficiary. If
the executive's employment is terminated voluntarily or is terminated as a
result of a change in control of the Corporation as defined in the agreement, a
reduced annual benefit will be payable at the age of 65 pursuant to the early
termination terms of the agreement. Mr. Potter, Mr. Schwiers and Ms. Bettendorf
have entered into Salary Continuation Agreements with the Corporation that
currently provide annual benefits at age 65 of $113,200, $48,500 and $38,400,
respectively.
EMPLOYEE AGREEMENTS
The Corporation has entered into substantially similar noncompetition,
severance, and employment agreements (the "Agreement" individually) with J.
Randolph Potter, James B. Schwiers, Blaise B. Bettendorf, and James G. Bagnal,
III (each an "Executive"). The Agreement is summarized below, however, this
summary is qualified in its entirety by reference to the Agreement itself.
Under the Agreement, the Executive is given duties and authority typical of
similar executives and the Corporation is obligated to pay the Executive an
annual salary determined by the Board, such incentive compensation as may become
payable to the Executive under the Corporation's bonus plans, and certain other
typical executive benefits. The provisions of the Agreement are to continue
until such time as the Executive's employment is terminated as provided for in
the Agreement. In the event the Executive voluntarily terminates his employment
with the Corporation, the Corporation's obligations under the Agreement cease as
of the date of such termination and the Executive is subject to a 12 month
non-competition provision as defined in the Agreement. In the event that the
Corporation shall terminate the Executive's employment without cause (as defined
in the Agreement), the Corporation is obligated to continue monthly salary
payments for a minimum period of 1 year up to a maximum of 3 years. The
Executive is subject to a non-competition provision as defined in the Agreement
for the entire period severance payments are made. In the event of termination
associated with a change in control as defined by the Agreement, the Executive
is entitled to an amount equal to 3 times his annual base pay amount computed
and paid over a three-year period as provided for in the Agreement. The
Executive is subject to a non-competition provision as defined in the Agreement
for a period of up to 3 years while he/she is receiving payments following a
change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2001, the following persons served on the Executive Committee in its
capacity as Compensation Committee: Mr. C. Vincent Brown (Chairman), Mr. John
A. Kuhne (Vice Chairman), Mr. David C. Poole (Secretary), and Mr. Earle Furman.
Mr. Allen McIntyre joined the Executive Committee effective February 2002. Mr.
Brown is a member of the law firm of Brown, Massey, Evans, McLeod, and
Haynesworth, Attorneys at Law, P.AThis firm serves as general counsel for the
Corporation and its subsidiaries. This firm receives payment for legal services
provided in the normal course of business.
Certain of the Directors who are members of the Compensation Committee, and
members of the immediate family and affiliates of such Directors, have from time
to time engaged in banking transactions with the Corporation's subsidiary bank
and are expected to continue such relationships in the future. All loans or
other extensions of credit made by the Corporation's subsidiary bank to such
individuals were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated third parties and did not
involve more than the normal risk of collectability or present other unfavorable
features.
COMPENSATION COMMITTEE REPORT
-----------------------------
The Executive Committee, exclusive of Mr. Potter, functions as the
Compensation Committee of the Board of Directors of the Corporation and the
Bank. The Compensation Committee is responsible for establishing, implementing
and monitoring all compensation policies of the Corporation and its primary
operating subsidiary, Summit National Bank. The Committee is also responsible
for evaluating the performance of the Chief Executive Officer of the Corporation
and recommending appropriate compensation levels. The Chief Executive Officer
evaluates the performance of other executive officers of the Corporation and
recommends individual compensation levels to the Compensation Committee for
their approval.
Compensation Philosophy
- ------------------------
The Compensation Committee believes that a compensation plan for executive
officers should take into account management skills, long-term performance
results and shareholder returns. Compensation policies must be maintained to
promote: 1) the attraction and retention of highly qualified executives; 2)
motivation of executives that is related to the performance of the individual
and the Corporation; 3) compensation opportunities that are comparable to those
offered by peer organizations; 4) current and long-term performance; and 5) a
financial interest in the success of the Corporation similar to the interest of
its shareholders.
The Corporation's current compensation plan involves a combination of
salary and bonus to reward short-term performance; grants of stock options or
restricted stock, both of which vest over five-year periods, to encourage
long-term performance; and retirement benefits pursuant to salary continuation
agreements with certain officers. These key elements provide a competitive,
well-balanced total compensation program that is supportive of the Corporation's
strategies and goals.
The base salary levels and annual bonus incentives of the executive
officers are designed to be competitive within the financial services industry
and are intended to reflect individual performance and responsibility, as well
as annual corporate performance and results. Awards of stock options or
restricted stock are intended to provide executives with increased motivation
and incentive to exert their best efforts on behalf of the Corporation by
enlarging their personal stake in its success through the opportunity to
increase their stock ownership in the Corporation. The Committee believes that
stock ownership by management and stock-based performance compensation
arrangements are beneficial in aligning managements' and shareholders' interest
in the enhancement of shareholder value and focusing on long-term results. In
granting stock awards to the executive officers, the Committee takes into
account the executive's level of responsibility and the common industry
practices among financial institutions of similar size and age.
Compensation Paid in 2001
- ----------------------------
The Corporation's policy as to compensation of its executive officers,
including the CEO, is based upon the level of performance in relation to the
responsibilities and accomplishments incident to the individual's job
description. In determining compensation, the Committee considers the progress
made by the Corporation in laying a foundation for future revenue enhancements,
income improvements, growth of the Corporation, quality of the loan portfolio,
and growth of shareholder value.
Compensation paid J. Randolph Potter, Chief Executive Officer and President
of the Corporation, and the other named executive officers in 2001 consisted of
the following elements: (1) a base salary; (2) a cash bonus; (3) certain
perquisites, the total of all which did not exceed 10% of base salary and bonus
amounts; (4) premiums paid by the Corporation on behalf of the executives with
respect to insurance not generally available to all employees; (5) vested
amounts of retirement benefits pursuant to the nonqualified salary continuation
agreement for certain officers; and (6) the various forms of other compensation
set forth in the Summary Compensation Table above.
During 2001, total assets of the Corporation grew 9%, average earning
assets grew 24%, and net income increased 2% despite reductions in net interest
margin related to the dramatic declines in short-term interest rates throughout
2001. Return on average assets and average equity were reported at 1.03% and
11.71%, respectively, and the market value of the Corporation's stock increased
14%. The Corporation's nonperforming assets, past due loans, and net charge-off
ratios all remained low in 2001 in comparison to peers as management continues
to maintain high loan quality while achieving growth goals.
During the year 2001, the base compensation for Mr. Potter was $235,000. For
2002, Mr. Potter's base compensation was increased 3% to $242,000. Mr. Potter
was also awarded a cash bonus (determined on a subjective basis) of $23,000 for
the year ended 2001 based on the Corporation's performance in 2001. The
Committee assessed that Mr. Potter continues to provide the Corporation with
strong leadership in overseeing growth, expansion, profitability improvements,
and strategic positioning for both Summit National Bank and Freedom Finance,
Inc. Growth achieved has positioned the Corporation for continued increases in
the profitability measures discussed above.
Based upon the factors discussed above, the Compensation Committee
continues to believe that Mr. Potter's compensation package as Chief Executive
Officer and President of the Corporation appropriately reflects the
Corporation's short-term and long-term performance goals.
COMPENSATION COMMITTEE:
C. Vincent Brown David C. Poole
John A. Kuhne J. Earle Furman, Jr.
STOCK PERFORMANCE GRAPH
-----------------------
The following chart provides a graphic comparison of the cumulative total
shareholder return (calculated based upon the stock appreciation) on the common
stock of the Corporation for the five year period from December 31, 1996 through
December 31, 2001, as compared with the cumulative total return on the NASDAQ
Composite Market Index and the NASDAQ Bank Index over the same period. Prior to
2001, the Corporation compared its returns to a selected peer group described
below rather than the NASDAQ Bank Index. All cumulative returns assume an
initial investment of $100 on December 31, 1996 in each of the Corporation's
shares, the NASDAQ Market Index, the NASDAQ Bank Index and the custom peer group
and the reinvestment of all dividends.
COMPANY 1996 1997 1998 1999 2000 2001
Summit Financial
Corporation 100.00 178.42 219.65 191.05 154.56 175.44
Nasdaq Bank Index 100.00 152.93 148.57 147.58 159.40 175.34
Nasdaq Composite
Market Index 100.00 122.48 172.68 320.89 193.01 153.15
Previous Custom
Peer Group Index 100.00 161.63 164.89 128.07 127.13 169.25
<FN>
[GRAPHIC OMITED]
Note regarding the preceding chart
- --------------------------------------
The data related to the custom peer group included in the foregoing
graph was prepared by Media General Financial Services. Due to the
Corporation's size, prior to 2001, the Corporation's selected peer group
was publicly traded Southeastern and Mid-Atlantic banks with total assets
less than $250 million. The custom peer group was replaced with the NASDAQ
Bank Index for the year ended 2001 based on the Corporation's asset growth.
As required by SEC regulations, in the year of change both comparative groups
have been presented in the graph.
The following companies are included in the comparative data for 2001 for
the previous peer group: Abigail Adams National Bancorporation; Annapolis
Bancorporation, Inc.; Bank of South Carolina; Capital Bank Corporation; Central
Virginia Bankshares; Community Bankshares; Cowlitz Bancorporation; Dearborn
Bancorp Inc.; Eagle Bancorp, Inc.; ECB Bancorp Inc.; First Georgia Holdings;
First West Virginia Bancorporation; Great Pee Dee Bancorporation; Premier
Community Bankshares; Shore Financial Corporation; Southwest Georgia Financial
Corporation; and Union Community Bancorporation.
The following institutions which were previously in the peer group, no
longer meet the criteria for inclusion: Carolina Southern Bank; Century
Bancshares, Inc.; Community Financial Corporation; and Golden Isles Financial
Holdings.
TRANSACTIONS WITH MANAGEMENT
----------------------------
Certain of the executive officers and Directors of the Corporation, and
members of the immediate family and affiliates of such persons, have from time
to time engaged in banking transactions with the Corporation' subsidiary bank
and are expected to continue such relationships in the future. All loans or
other extensions of credit made by the Corporation' subsidiary bank to such
individuals were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated third parties and did not
involve more than the normal risk of collectability or present other unfavorable
features.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Directors and executive officers, and persons who own more than
10% of the Corporation's common stock, to file with the Securities and Exchange
Commission (the "SEC") reports of ownership and changes in ownership of the
common stock. Officers, Directors and greater than 10% shareholders are required
by SEC regulation to furnish the Corporation with copies of all Section 16(a)
forms they file.
Based solely on its review of the copies of the reports it received and
written representations provided to the Corporation from the individuals
required to file the reports, the Corporation believes that, for the year ended
December 31, 2001, each of the Corporation's executive officers and Directors
has complied with applicable reporting requirements for transactions in Summit
Financial Corporation common stock.
SHAREHOLDER PROPOSALS AND NOMINATIONS
-------------------------------------
The 2003 Annual Meeting is expected to be held on April 22, 2003.
Proposals that shareholders seek to have included in the proxy statement for the
Corporation's next Annual Meeting must be received by the Corporation no later
than November 21, 2002. Any such proposals will be subject to the requirements
of the proxy rules adopted by the Securities and Exchange Commission. If any
shareholder proposal is received after February 4, 2003, the Corporation's
proxies for the 2003 Annual Meeting may exercise discretionary authority with
respect to such proposal at the 2003 Annual Meeting without any reference to
such proposal being made in the proxy statement for that meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------
KPMG LLP has significant experience in bank accounting and auditing and has
served as the independent accountants of the Corporation since its organization
in 1989. KPMG LLP has advised the Corporation that they are independent, within
the meaning of the rules and guidelines of the SEC, the American Institute of
Certified Public Accountants, and the Independence Standards Board.
Representatives of KPMG LLP are expected to be present at the Annual Meeting,
will be available to respond to appropriate questions, and will have the
opportunity to make a statement if they desire to do so. The Board of Directors
has selected KPMG LLP as the independent public accountants for the Corporation
for the year ending December 31, 2002.
AUDIT FEES
Aggregate fees paid to KPMG LLP for the audit of the Corporation's annual
financial statements for the year ended 2001 and the related reviews of
financial statements included in the Corporation's Form 10-Qs for the year 2001
totaled $35,000. There were no out-of-pocket expenses incurred related to the
2001 audit. KPMG LLP did not perform any other services for the Corporation
during the year ended December 31, 2001 and the Corporation did not pay any
other fees to KPMG LLP. The Audit Committee considered KPMG LLP to be
independent with regard to the audit services provided to the Corporation during
the year.
AUDIT COMMITTEE REPORT
----------------------
The Audit Committee of the Board of Directors is responsible for, among
other things, providing independent, objective oversight of the scope of Summit
Financial's internal audit program, the independence of outside accountants,
accounting functions and the system of internal controls and procedures, and the
adequacy of management's actions with respect to recommendations arising from
those auditing activities. The Audit Committee is composed of at least three
directors, each of whom is independent under the National Association of
Securities Dealers' listing standards. The Audit Committee acts under a written
charter adopted by the Board of Directors. Additional responsibilities that are
handled by the Audit Committee are also discussed under "Meetings and Committees
of the Board of Directors" in this Proxy Statement.
The Audit Committee reviewed and discussed the audited annual financial
statements of the Corporation contained in the 2001 Annual Report on SEC Form
10-K with the Corporation's management and with KPMG LLP, the independent
accountants. As part of this process, management represented to the Audit
Committee that the financial statements were prepared in accordance with
generally accepted accounting principles. The Audit Committee also received and
reviewed written disclosures and a letter from the accountants concerning their
independence as required under applicable standards for auditors of public
companies. The Audit Committee discussed with the accountants the contents of
such materials, the accountant's independence and the additional matters
required under Statement on Auditing Standards No. 61, "Communication With Audit
Committees". Based on such review and discussion, the Audit Committee
recommended that the Board of Directors include the audited consolidated
financial statements in Summit Financial's Annual Report on Form 10-K for the
year ended December 31, 2001 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE:
Ivan E. Block John W. Houser
T. Wayne McDonald Larry McKinney
OTHER MATTERS
-------------
The Board of Directors and management of the Corporation knows of no
matters other than those stated above that are to be brought before the 2002
Annual Meeting. However, if any other matter should be presented for
consideration and voting at the 2002 Annual Meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the proxy in accordance with
their judgment of what is in the best interest of the Corporation.
The Corporation will pay the cost of this proxy solicitation. The
Corporation will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Summit Financial Corporation common stock. In
addition to soliciting proxies by mail, directors, officers and regular
employees of the Corporation or Summit National Bank may solicit proxies
personally or by telephone. None of these persons will receive additional
compensation for these activities.
The Corporation's Annual Report to Shareholders is included with this Proxy
Statement and is being mailed to shareholders of record as of the close of
business on March 12, 2002. Any shareholder who has not received a copy of the
Annual Report may obtain a copy by writing to the Secretary of the Corporation.
If your Summit Financial Common stock is held in "street name" through a
broker or other nominee, only one Annual Report and Proxy Statement may be
delivered to multiple shareholders of record located at a shared address. The
Corporation will furnish, upon written or verbal request, a separate copy of the
Annual Report or Proxy Statement to a shareholder of record located at a shared
address that did not receive an individual copy of the document. To request an
individual copy of the document, or to request delivery of a single copy of
documents for shareholders with a shared address, contact Corporate Secretary,
Summit Financial Corporation, Post Office Box 1087, Greenville, South Carolina,
29602.
A COPY OF THE CORPORATION'S FORM 10-K, WITHOUT EXHIBITS, FOR THE YEAR ENDED
DECEMBER 31, 2001, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED WITHOUT CHARGE TO SHAREHOLDERS OF RECORD AS OF THE CLOSE OF BUSINESS
ON MARCH 12, 2002 UPON WRITTEN REQUEST TO CORPORATE SECRETARY, SUMMIT FINANCIAL
CORPORATION, POST OFFICE BOX 1087, GREENVILLE, SOUTH CAROLINA, 29602.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J/ Randolph Potter
J. RANDOLPH POTTER
PRESIDENT & CHIEF EXECUTIVE OFFICER
March 21, 2002
Greenville, South Carolina