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 15, 1998
The Annual Meeting of the shareholders of SUMMIT FINANCIAL CORPORATION
("the Company") will be held on Wednesday, April 15, 1998, at 10:00 a.m. at
the Greenville Chamber of Commerce Board Room, 24 Cleveland Street,
Greenville, South Carolina for the purpose of considering and voting upon the
following:
1) To elect four directors to the Board of Directors for terms of three
years and thereafter until their successors are duly elected and qualified;
2) To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants for the Company for the fiscal year ending December 31, 1998; and
3) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only those holders of record of the Common Stock of the Company at the
close of business on February 25, 1998, are entitled to notice of and to vote
at the Annual Meeting or any adjournment thereof.
A Proxy Statement and a Proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the Proxy promptly in the
enclosed reply envelope. IF YOU ATTEND THE MEETING YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
Also enclosed is a copy of the Company's 1997 Annual Report to
Shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. Randolph Potter
J. RANDOLPH POTTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 12, 1998
Greenville, South Carolina
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.
SUMMIT FINANCIAL CORPORATION
POST OFFICE BOX 1087
937 NORTH PLEASANTBURG DRIVE
GREENVILLE, SOUTH CAROLINA 29602
(864) 242-2265
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
I. INTRODUCTION
A. PURPOSE OF SOLICITATION - TERMS OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Summit Financial Corporation ("the
Company") for use at the Annual Meeting of Shareholders of the Company ("the
Annual Meeting") to be held on Wednesday, April 15, 1998, and any adjournment
thereof, at the Greenville Chamber of Commerce Board Room, 24 Cleveland
Street, Greenville, South Carolina, at 10:00 a.m. for the purposes set forth
in the accompanying notice of the meeting. The enclosed Proxy is solicited BY
AND ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS. The expenses of this
solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by the Company. Copies of solicitation material may
be furnished to banks, brokerage houses and other custodians, nominees and
fiduciaries for forwarding to beneficial owners of shares of the Company's
common stock, and normal handling charges may be paid for such forwarding
service. Proxies will be solicited principally by mail, but Directors and
regular employees of the Company may solicit Proxies in person or by telephone
or telegraph. It is anticipated that this Proxy Statement and the
accompanying Proxy will first be mailed to shareholders on or about March 12,
1998.
B. REVOCATION OF PROXY
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives verbal notice of his or her
election to vote in person, without compliance with any other formalities. In
addition, any Proxy given pursuant to this solicitation may be revoked prior
to the meeting by delivering an instrument revoking it, or a duly executed
Proxy bearing a later date, to the Secretary of the Company. If the Proxy is
properly completed and returned by the shareholder and is not revoked, it will
be voted at the meeting in the manner specified thereon. If the Proxy is
returned without any choice being specified thereon, it will be voted FOR all
the nominees named below; FOR the appointment of KPMG Peat Marwick LLP; and,
in the discretion of the Proxies, on any other matter that may properly come
before the meeting.
C. SHAREHOLDER PROPOSALS
From time to time, the Company's shareholders may present proposals which
may be proper subjects for inclusion in the Company's proxy statements for
consideration at the Company's annual meetings. To be considered for
inclusion, shareholder proposals must be submitted on a timely basis.
Proposals for the Company's 1999 Annual Meeting must be received by the
Company no later than November 16, 1998, and any such proposals, as well as
any questions related thereto, should be directed to the Secretary of the
Company.
D. VOTING SECURITIES - RECORD DATE
Only shareholders of record at the close of business on February 25, 1998
("the Record Date"), are entitled to vote at the Annual Meeting, or any
adjournment thereof. As of that date, the Company had outstanding and
entitled to vote 1,440,310 shares of common stock, par value $1.00 per share
("the Common Stock"), held of record by approximately 430 persons. Each
shareholder is entitled to one vote per share that he or she owns. The number
of shareholders does not reflect the number of persons or entities who hold
their stock in nominee or "street" name through various brokerage firms.
II. ELECTION OF DIRECTORS
ITEM 1. ON THE PROXY
A. GENERAL INFORMATION
Pursuant to the Company's Bylaws, the Board of Directors has, by
resolution, fixed the number of Directors at twelve persons. The Company's
Bylaws provide for classification of the Directors into three classes, each
class as equal in number as possible. At the Annual Meeting, four Directors
are to be elected for a term of three years, to hold office until their
successors have been duly elected and qualified. All the nominees are
currently serving as Directors and their terms will expire at the 1998 Annual
Meeting. The nominees are as follows: Ivan E. Block, John A. Burgess, J.
Earle Furman, Jr., and T. Wayne McDonald.
In 1997, each Director who was not an officer of the Company or of its
subsidiaries, received an attendance fee of $300 for each board meeting
attended, and $100 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. The aggregate amount of all
payments by the Company to Directors during 1997 was $42,850. There were no
stock options granted to Directors during 1997 under the 1995 Summit Financial
Corporation Non-Employee Stock Option Plan.
B. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and executive officers, and persons who own more than 10%
of the Company'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 Company with copies of all Section
16(a) forms they file. Based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports
were required, the Company believes that, during 1997, all filing requirements
applicable to its officers, Directors and greater than 10% beneficial owners
were complied with.
C. INFORMATION CONCERNING NOMINEES FOR DIRECTORS, CONTINUING DIRECTORS,
AND EXECUTIVE OFFICERS
The Board of Directors recommends the election as Directors of the
nominees set forth in the table on the following page. All such persons are
currently serving as Directors. Unless authority to vote with respect to the
election of one or more Directors is "WITHHELD", the individuals named as
Proxies will vote to elect as Directors the nominees listed in the table
following. Directors are elected by a plurality of votes cast by the holders
of the Company's Common Stock. "Plurality" means that the individuals who
receive the largest number of votes cast are elected as directors up to the
maximum number of directors to be elected at the Annual Meeting.
Consequently, any shares not voted (whether by abstention, broker non-vote, or
otherwise) have no impact in the election except to the extent the failure to
vote for an individual results in another individual receiving a larger number
of votes. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES FOR
DIRECTORS.
As of February 25, 1998, there were no persons (as that term is defined
by the Securities and Exchange Commission), other than Mr. Ivan E. Block, P.O.
Box 5857, Greenville, South Carolina 29606, specified in the foregoing table
of Director information, who are known to the Company to be the beneficial
owners of more than 5% of the Company's common stock. As of February 25,
1998, Mr. Block owned 120,651 shares, or 7.4%, of the Company's outstanding
common stock.
The following table sets forth the names, ages and present occupations of
the nominees for Director of the Company, the Directors continuing in office,
and named executive officers. It also sets forth the number of shares and
percentage of outstanding shares of the Company's Common Stock beneficially
owned, directly or indirectly, as of February 25, 1998 by such nominees,
continuing Directors, and named executive officers individually, and by such
nominees, continuing Directors, and named executive officers of the Company as
a group.
NAME [AGE] PRINCIPAL PERCENTAGE (1)
- ---------- OCCUPATIONS; DIRECTOR SHARES OF COMMON OF COMPANY
POSITIONS WITH SINCE STOCK COMMON
THE COMPANY BENEFICIALLY STOCK
--------------- OWNED OUTSTANDING
--------- ---------------- ------------
Ivan E. Block [52]. . . . . . . Chairman & CEO, 1989 120,651 7.4% (2)
Crown Metro, Inc.;
Greenville, SC
John A. Burgess [57]. . . . . . President & CEO, 1993 56,521 3.5% (2)
Southeastern Products, Inc.;
Greenville, SC
J. Earle Furman, Jr. [50] . . . President, Earle Furman 1989 29,322 1.8% (2)
& Associates, Inc.;
Greenville, SC
T. Wayne McDonald [58]. . . . . Physician, Highlands 1989 31,661 1.9% (2)
Center for Women PA;
Greenville, SC
John W. Houser [54]
President, Piedmont 1989 42,744 2.6% (3)
Management of Fairforest,
Inc.; Duncan, SC
Larry A. McKinney [56]. . . . . President & CEO, 1993 44,970 2.8% (2)
ElDeCo, Inc.;
Greenville, SC
David C. Poole [59] . . . . . . President, David C. Poole Co., Inc.; 1989 71,713 4.4% (4)
Greenville, SC
Secretary, Summit
Financial Corporation
George O. Short, Jr. [65] . . . President, George O. 1989 28,286 1.7% (2)
Short & Associates, CPA, PA
Greenville, SC
C. Vincent Brown [58] . . . . . President, Brown, Massey, 1989 68,353 4.2% (5)
Evans & McLeod, Attorneys
at Law, P.A.; Greenville, SC
Chairman, Summit
Financial Corporation
Charles S. Houser [54]. . . . . Managing Director, Seruus 1989 30,361 1.9% (2)
Capital Partners, LLC;
Greenville, SC
John A. Kuhne [53]. . . . . . . President, Belk-Simpson Co. 1989 24,229 1.5% (6)
Department Stores;
Greenville, SC
Vice Chairman, Summit
Financial Corporation
J. Randolph Potter [51] . . . . President & CEO, Summit 1989 61,089 3.7% (7)
Financial Corporation;
Greenville, SC
James B. Schwiers [39]
Executive Vice President N.A. 33,860 2.1% (8)
& COO, Summit National
Bank; Greenville, SC
Blaise B. Bettendorf [35] . . . Senior Vice President & N.A. 29,921 1.8% (9)
CFO, Summit Financial
Corporation; Greenville, SC
All Directors and Executive 673,681 41.2% (10)
officers as a Group (14 persons)
<FN>
FOOTNOTES TO PRECEDING TABLE:
(1) - Beneficial owners have sole voting and investment powers with respect to the shares of stock included in the
foregoing table. Certain of these shares are held by corporations or retirement accounts controlled by the individual
reporting.
(2) - Includes exercisable options to purchase 3,646 shares of common stock at from $9.67 - $12.96 granted under
the 1995 Non-Employee Stock Option Plan.
(3) - Includes exercisable options to purchase 3,646 shares of common stock at from $9.67 - $12.96 granted under
the 1995 Non-Employee Stock Option Plan. Does not include 1,107 shares held by related parties to which Mr. John
Houser disclaims beneficial ownership.
(4) - Includes exercisable options to purchase 3,646 shares of common stock at from $9.67 - $12.96 granted under
the 1995 Non-Employee Stock Option Plan. Does not include 266 shares held by a related party to which Mr. Poole
disclaims beneficial ownership.
(5) - Includes exercisable options to purchase 7,293 shares of common stock at from $9.67 - $12.96 granted under
the 1995 Non-Employee Stock Option Plan.
(6) - Includes exercisable options to purchase 5,471 shares of common stock at from $9.67 - $12.96 granted under
the 1995 Non-Employee Stock Option Plan. Does not include 10,718 shares held by a related foundation to which Mr.
Kuhne disclaims beneficial ownership.
(7) - Includes exercisable options to purchase 38,505 shares of common stock at from $5.78 - $14.29 granted under
the Incentive Stock Option Plan. Does not include 667 shares held by a related party to which Mr. Potter disclaims
beneficial ownership.
(8) - Includes exercisable options to purchase 25,104 shares of common stock at from $5.78 - $14.29 granted under
the Incentive Stock Option Plan.
(9) - Includes exercisable options to purchase 24,001 shares of common stock at from $5.78 - $14.29 granted under
the Incentive Stock Option Plan.
(10) -Includes exercisable options to purchase 133,188 shares of common stock held by the Directors and named
executive officers of the Company as a group.
D. BUSINESS EXPERIENCE OF NOMINEES AND CONTINUING DIRECTORS
IVAN E. BLOCK has been 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, for over 18 years. Mr. Block
is also CEO of AXON Aerospace Coatings, Inc.
JOHN A. BURGESS has been president and CEO of Southeastern Products, Inc., a
designer and manufacturer of custom displays and fixtures, since he founded
that company in 1978.
J. EARLE FURMAN, JR. has been a realtor in Greenville, South Carolina, for
over 25 years. He is president of Earle Furman & Associates, Inc., a
commercial and industrial real estate brokerage firm which he formed in 1986.
T. WAYNE MCDONALD is a physician specializing in gynecology since 1970 in
Greenville, South Carolina. He is currently associated with the Highlands
Center for Women, P.A.
JOHN W. HOUSER has been the president of Piedmont Management of Fairforest,
Inc., a consulting firm, since 1981. He is a partner in Piedmont Brokerage
and a partner in Universal Packaging. Both of these companies are involved in
the manufacturing and sales of corrugated boxes.
LARRY A. MCKINNEY is president and CEO of ElDeCo, Inc., an electrical
contracting firm. Mr. McKinney founded the company in 1972.
DAVID C. POOLE has been president of David C. Poole Co., Inc., a dealer in
synthetic fibers and polymers, since 1973.
GEORGE O. SHORT, JR. is president of George O. Short & Associates, Certified
Public Accountants, P.A. and has been active in this practice for over 30
years.
C. VINCENT BROWN is an attorney and is president of Brown, Massey, Evans and
McLeod, Attorneys at Law, P.A., in Greenville, South Carolina where he has
practiced tax and corporate law for over 30 years.
CHARLES S. HOUSER is currently Managing Director of Seruus Capital Partners,
LLC. He served as Senior Vice President of LCI International, a long-distance
company, from September 18, 1995 until May 31, 1996. Prior to that date, he
was Chairman and CEO of Corporate Telemanagement Group from its inception in
November 1989 until its sale to LCI International in September 1995.
JOHN A. KUHNE has been with Belk-Simpson Co. Department Stores since 1966. He
served as vice president of Belk-Simpson from 1969 until 1983 and was named
its president in 1983.
J. RANDOLPH POTTER is president and chief executive officer of the Company,
Summit National Bank, and Freedom Finance, Inc., both wholly-owned
subsidiaries of the Company. Prior to his joining the Company at its
inception in May 1989, he had 11 years of banking experience with Southern
Bank and Trust Company in Greenville, South Carolina.
NOTE - Biographical information concerning the named executive officers who
are not directors of the Company is contained in Section III of this Proxy
Statement.
E. MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held four meetings during 1997.
Each Director attended at least 75% of the Board and Committee meetings held
by the Company except Mr. John A. Burgess and Mr. Charles S. Houser.
The Board of Directors has a standing Audit Committee comprised of the
following Directors during 1997: George O. Short, Jr. (Chairman), Ivan E.
Block, John A. Burgess, J. Earle Furman, Jr., Charles S. Houser, John W.
Houser, and David C. Poole. The Audit Committee has the primary
responsibility of (1) reviewing the audit plan and results of the audit
engagement of the independent public accountants; (2) reviewing the scope and
the results of the Company's procedures relating to internal controls and
compliance reviews; (3) reviewing the Company's consolidated financial
statements, reports from regulatory authorities on their examinations, and
reports from external consultants on various work performed; and (4)
recommending the appointment of the independent accountants. The Audit
Committee reports its findings directly to the Board of Directors. The Audit
Committee met three times during 1997.
The Executive Committee is comprised of C. Vincent Brown (Chairman), John
A. Kuhne (Vice Chairman), David C. Poole (Secretary), J. Randolph Potter and
one additional Director who rotates on a one year term. During 1997, Mr. Ivan
E. Block and Dr. T. Wayne McDonald sat on the Committee for the rotating
positions. The Executive Committee met 12 times during 1997.
At the present time, the Company does not have standing nominating or
compensation committees of the Board of Directors. However, the Executive
Committee performs the functions of the nominating committee and the Executive
Committee, exclusive of Mr. Potter, performs the functions of the Compensation
Committee.
In its capacity as nominating committee, the Executive Committee oversees
the nominations for annual election of Directors. The Bylaws of the Company
provide that any shareholder entitled to vote for the election of Directors
may make nominations for the election of Directors only by giving written
notice to the Company of such nominations at least 30 days prior to the
meeting at which Directors are to be elected.
III. EXECUTIVE OFFICERS AND COMPENSATION
A. EXECUTIVE OFFICERS
Set forth below are the names, ages, titles, and descriptions of business
experience of the executive officers of the Company.
J. RANDOLPH POTTER, age 51, has been President and Chief Executive Officer of
the Company since its incorporation in May 1989. From June 1986 until May
1989, Mr. Potter was vice president of administration and marketing for IH
Services, Inc., a Greenville, South Carolina firm specializing in industrial
maintenance. He served as executive vice president of Southern Bank and Trust
Company in Greenville, South Carolina from 1985 to 1986. Prior to 1985, he
held similar executive positions with Southern Bank and Trust Company.
JAMES B. SCHWIERS, age 39, joined the Company as Executive Vice President in
March 1990. He was promoted to Chief Operating Officer in 1997. Prior to
joining the Company, Mr. Schwiers was a senior vice president and area
executive for First Union National Bank.
BLAISE B. BETTENDORF, age 35, joined the Company in February 1990 as Chief
Financial Officer and Assistant Secretary/Treasurer. Prior to that, she was
with the Greenville, South Carolina office of Price Waterhouse for six years
and held the position of audit manager.
B. REMUNERATION OF EXECUTIVE OFFICERS
The following table sets forth, for the years ended December 31, 1997,
1996 and 1995, the cash compensation paid by the Company 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 other that the CEO (collectively the "Named Executive
Officers") for services rendered in all capacities to the Company and its
subsidiaries.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- ---------------------------------
NAME AND YEAR SALARY ($) BONUS ($) OTHER AWARDS AWARDS ALL OTHER
PRINCIPAL POSITION ---- ---------- --------- ANNUAL RESTRICTED SECURITIES COMPEN-
- ------------------ COMPEN- STOCK UNDERLYING SATION ($)
SATION ($) AWARDS ($) OPTIONS/ -----------
---------- ----------- SARS (#)
-------------------
J. Randolph Potter, . 1997 $ 173,250 $ 50,000 (1) $168,400 (3) - $ 7,782 (4)
President/CEO . . . . 1996 $ 165,000 - (1) - 22,050 (2) $ 8,656
1995 $ 152,600 $ 10,000 (1) - - $ 2,934
James B. Schwiers,. . 1997 $ 120,000 $ 34,000 (1) $126,300 (5) - $ 4,788 (6)
Executive Vice. . . . 1996 $ 104,600 $ 15,000 (1) - 16,538 (2) $ 4,135
President/COO . . . . 1995 $ 96,900 $ 28,000 (1) - - $ 2,342
Blaise B. Bettendorf, 1997 $ 96,000 $ 25,000 (1) $105,250 (7) - $ 3,778 (6)
Senior Vice . . . . . 1996 $ 87,950 $ 10,000 (1) - 16,538 (2) $ 3,995
President/CFO . . . . 1995 $ 78,500 $ 12,000 (1) - - $ 2,071
<FN>
FOOTNOTES TO PRECEDING TABLE:
(1) - Certain amounts may have been expended by the Company which may have had value as a personal benefit to the
executive officer. However, the total value of such benefits for any year presented did not exceed the lesser of $50,000 or
10% of the annual salary and bonus of such executive officer.
(2) Adjusted for all 5% stock distributions.
(3) Pursuant to the Company's Restricted Stock Plan, Mr. Potter was awarded 8,400 (adjusted for the 5% stock distribution
issued December 30, 1997) shares of the Company's common stock. This award was granted for nominal consideration and
restrictions lapse 20% each year over a period of 5 years from the date of the award. At December 31, 1997, Mr. Potter held
8,400 shares of restricted stock, the market value of which was $207,900. Dividends are payable on the restricted stock to
the extent paid on the Company's common stock generally.
(4) - This amount is comprised of (i) $6,006 contributed to the Company 401(k) Plan by the Company on behalf of Mr. Potter
to match fiscal 1997 pre-tax deferral contributions, all of which was vested; and (ii) $1,776 in premiums paid by the Company
on behalf of Mr. Potter with respect to insurance not generally available to all Company employees.
(5) Pursuant to the Company's Restricted Stock Plan, Mr. Schwiers was awarded 6,300 (adjusted for the 5% stock
distribution issued December 30, 1997) shares of the Company's common stock. This award was granted for nominal consideration
and restrictions lapse 20% each year over a period of 5 years from the date of the award. At December 31, 1997, Mr. Schwier's
held 6,300 shares of restricted stock, the market of which was $155,925. Dividends are payable on the restricted stock to the
extent paid on the Company's common stock generally.
(6) - Amount consists of contributions to the Company 401(k) Plan by the Company on behalf of the Named Executive Officers
to match fiscal 1997 pre-tax deferral contributions, all of which was vested.
(7) Pursuant to the Company's Restricted Stock Plan, Ms. Bettendorf was awarded 5,250 (adjusted for the 5% stock
distribution issued December 30, 1997) shares of the Company's common stock. This award was granted for nominal consideration
and restrictions lapse 20% each year over a period of 5 years from the date of the award. At December 31, 1997, Ms.
Bettendorf held 5,250 shares of restricted stock, the market value of which was $129,940. Dividends are payable on the
restricted stock to the extent paid on the Company's common stock generally.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES
NAME AND NUMBER OF SECURITIES (1)
PRINCIPAL POSITION UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
- ------------------ OPTIONS/SARS AT IN-THE-MONEY
FY-END (#) OPTIONS/SARS AT
FY-END ($)
EXERCISABLE/
UNEXERCISABLE EXERCISABLE/
--------------- UNEXERCISABLE
----------------------
J. Randolph Potter,
President/CEO . . . . 38,505 / 22,502 $ 665,500 / $257,800
James B. Schwiers,
Executive Vice. . . . 25,104 / 22,502 $ 410,300 / $257,800
President/COO
Blaise B. Bettendorf,
Senior Vice . . . . . 24,001 / 18,093 $ 398,800 / $211,700
President/CFO
<FN>
(1) - "Value" is calculated as the market price of the underlying
securities on December 31, 1997 minus the grant price which ranges from $5.78
- - $14.29 (as adjusted for all 5% stock distributions). The market price has
been determined as the closing price of the Company's stock as quoted on the
NASDAQ Small Cap Market, which was equal to $24.75 on December 31, 1997.
C. EMPLOYEE AGREEMENTS
The Company has entered into substantially similar noncompetition,
severance, and employment agreements ("the Agreement" individually) with J.
Randolph Potter, James B. Schwiers, and Blaise B. Bettendorf (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 Company 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 Company'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 Company, the Company'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 Company shall terminate the Executive's employment
without cause (as defined in the agreement), the Company 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 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 as provide for in the Agreement.
D. COMPENSATION COMMITTEE REPORT
Decisions with respect to the compensation of the Company's Named
Executive Officers are made by the Executive Committee in its capacity as
Compensation Committee ("the Committee"). During 1997, the following
non-employee Directors served on the Committee: Mr. C. Vincent Brown, Mr.
John A. Kuhne, Mr. David C. Poole, Dr. T. Wayne McDonald, and Mr. Ivan E.
Block. All decisions of the Committee relating to compensation are reviewed
by the full Board of Directors. The report of the Committee presented below
addresses the Company's compensation policies for 1997 with respect to Mr.
Potter as CEO, as well as the Named Executive Officers as a group.
General Compensation Policies
- -------------------------------
The Company has no formal compensation plan. However, the Company's
compensation programs and practices are designed to compensate executives for
actions deemed to promote long-term shareholder value. These beliefs require
that compensation arrangements be structured to: (1) provide competitive
levels of compensation opportunity which are reflective of the degree of risk
inherent in the Company's business plan and the contributions expected from
senior executives; (2) integrate pay with the Company's business strategies,
short-term and long-term performance goals, and results; (3) reward corporate
performance achievements; and (4) recognize and reward individual initiative,
responsibility and achievements. 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. Base salaries are set by the Board, after
recommendation by the Committee, and are intended to reflect individual
performance and responsibility and to represent compensation believed by the
Committee to be appropriate if the Named Executive Officers perform in a fully
acceptable manner. In setting base salaries, consideration is also given to
compensation paid to executives of financial institutions and other public
companies similar in size and character to the Company.
The Committee has established a compensation package consisting of base
salary, short-term incentive compensation in the form of cash bonuses based on
the performance of the Company, and long-term incentive compensation in the
form of stock options and restricted stock awards which vest over five-year
periods.
Compensation Paid in 1997
- ----------------------------
The Company's policy as to compensation of its executive officers,
including the CEO, has to date been based upon 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 Company in laying a foundation for future
revenue enhancements, income improvements, growth of the Company, and quality
of the loan portfolio.
Compensation paid the Named Executive Officers in 1997 consisted of the
following elements: base salary, bonus, restricted stock awards which will
become transferrable starting in 1998, and matching contributions paid with
respect to the Company's 401(k) Plan. Contributions made by the Company under
the 401(k) Plan are made to all participating employees on a nondiscriminatory
basis. The Company also has certain broad based employee benefit plans in
which Named Executive Officers participate, as well as certain executive
officer life insurance plans. The value of these items is set forth in the
Summary Compensation Table above under "All Other Compensation." Named
Executive Officers also may have received perquisites in connection with their
employment. However, such perquisites totaled less than 10% of their cash
compensation in 1997. Except for bonuses and restricted stock, the foregoing
benefits and compensation are not directly or indirectly tied to Company
performance.
During 1997, total assets of the Company grew 19%, net income increased
57% and return on average assets and average equity increased 28% and 39%,
respectively. The Company's nonperforming assets, past due loans, and net
charge-off ratios all dropped in 1997 as management continued to maintain
excellent loan quality while achieving growth goals. Based on Company
performance, the Named Executive Officers received bonuses ranging from 26% to
28% of their annual base salaries. All bonuses were determined on a
subjective basis by the Committee.
Mr. Potter's 1997 Compensation
- ---------------------------------
Mr. Potter's 1997 compensation consisted of (1) a base salary; (2) cash
bonus; (3) restricted stock awards which will become transferrable starting in
1998; (4) certain perquisites including personal use of a company car (the
total of all perquisites did not exceed 10% of his base salary and bonus); (5)
premiums paid by the Company on behalf of Mr. Potter with respect to insurance
not generally available to all Company employees; and (6) the various forms of
other compensation set forth above which were available generally to all
employees. Mr. Potter's base salary of $173,250 for 1997 was determined by
the Committee at the beginning of the year. It was based on (1) the Company's
overall growth and strong performance during 1996 and (2) compensation levels
of other chief executive officers from financial institutions and other public
companies which the Committee believes to be comparable to Summit. Mr
Potter's cash bonus for 1997 was determined based on a subjective evaluation
by the Committee of the Company's strong performance factors during 1997.
The Committee assessed that Mr. Potter had provided the Company with
continued strong leadership in overseeing corporate growth and expansion for
both Summit National Bank and Freedom Finance Inc. throughout 1996 and into
1997. This growth left the Company well positioned for continued increases in
profitability measures. Other performance factors of particular significance
to the Committee in determining Mr. Potter's 1997 salary increase were the
Company's 1996 increases in total loans, deposits, and assets of 36%, 17%, and
17%, respectively, and the continued low percentage of nonperforming assets.
The Committee awarded Mr. Potter 8,400 restricted shares (adjusted for
stock distributions) of the Company's common stock in November 1997 for
nominal consideration and a cash bonus of $50,000. These compensation amounts
were based primarily on the Company's strong performance in 1997 when record
earnings were reported. Net income for 1997 increased 57% from 1996.
Further, during 1997, earning assets increased 19% to leave the Company well
positioned for future increases in net income. Other performance factors
considered related to the cash bonus and restricted stock award to Mr. Potter,
were the Company's increase in total loans, deposits, and assets of 16%, 20%,
and 19%, respectively, during 1997; the continued high asset quality as
determined by all loan loss and nonperforming asset measures; and the
continued growth and improved profitability of the Company's consumer finance
subsidiary which added 2 branches in 1997 to end the year with 12 locations.
COMPENSATION COMMITTEE:
C. Vincent Brown David C. Poole John A. Kuhne Ivan E. Block
T. Wayne McDonald
E. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the following persons served on the Compensation Committee:
Mr. C. Vincent Brown (Chairman), Mr. John A. Kuhne (Vice Chairman), Mr. David
C. Poole (Secretary), Dr. T. Wayne McDonald, and Mr. Ivan E. Block. Mr. Brown
is a member of the law firm of Brown, Massey, Evans and McLeod, Attorneys at
Law, P.AThis firm serves as general counsel for the Company and its
subsidiaries. This firm receives payment for legal services provided in the
normal course of business.
F. STOCK PERFORMANCE GRAPH
The following table provides a graphic comparison of the cumulative total
shareholder return (calculated based upon the stock appreciation) on the
Common Stock of the Company for the five year period from December 31, 1992
through December 31, 1997, as compared with the cumulative total return on the
NASDAQ Market Index and a Company selected peer group over the same period.
All cumulative returns assume an initial investment of $100 in each of the
Company's shares, the NASDAQ Market Index and the peer group and the
reinvestment of all dividends.
For informational purposes, a copy of the actual graph was provided to
Assistant Director for Banking at the Securities and Exchange Commission. A
copy of the graph will be provided upon written request to the Company address
included in Section VI below.
COMPANY 1992 1993 1994 1995 1996 1997
Summit Financial Corp. 100 137.76 180.88 202.59 231.80 415.09
Peer Group Index . . . 100 129.07 156.98 228.56 280.88 453.82
Nasdaq Market Index. . 100 119.95 125.94 163.35 202.99 248.30
Note regarding the preceding table:
The data included in the foregoing table was prepared by Media General
Financial Services. The peer group selected for the cumulative returns
comparison is publicly traded South Atlantic banks with total assets < $250
million. The following companies included in the comparative data for 1997
which have previously been in the peer group are: Bank of South Carolina;
Carolina Southern Bank; Central Virginia Bankshares; Community Financial
Corporation; First Community Banking Services, Inc.; First Georgia Holdings;
First West Virginia Bancorporation; FNB Financial Service NC; Merit Holding
Corp.; Mid-Atlantic Community Bankgroup; Savannah Bancorporation, Inc.; and
Suburban Bancshares, Inc
Companies which meet the criteria to be included in the peer group for the
first time in 1997 are: American Bancshares; Community Bankshares; Comsouth
Bancshares, Inc.; Golden Isles Financial Holdings; Marathon Financial
Corporation; Resource Bank; Security Bank Corporation; Security First Network
Bank; Southwest Georgia Financial Corporation; and Tyson's Financial
Corporation.
The following institutions which were previously in the peer group, no longer
meet the criteria for inclusion: Bedford Bancshares, Inc.; Central & Southern
Holdings; County Bank Chesterfield; First Patriot Bankshares; First United
Bancorporation; Habersham Bancorp.; James River Bankshares; KS Bancorporation
Inc.; Peoples Bank of North Carolina; Piedmont Bancorp, Inc.; Union Bankshares
Corp.; and West Coast Bancorporation of Florida.
IV. CERTAIN TRANSACTIONS
Certain of the executive officers, Directors and principal shareholders
of the Company, and members of the immediate family and affiliates of such
persons, have from time to time engaged in banking transactions with the
Company's subsidiary bank and are expected to continue such relationships in
the future. All loans or other extensions of credit made by the Company'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.
V. INDEPENDENT PUBLIC ACCOUNTANTS
ITEM 2. ON THE PROXY
KPMG Peat Marwick LLP has served as the independent accountants of the
Company since its organization in 1989. The Board of Directors of the Company
recommends that the shareholders of the Company ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent accountants for the fiscal year
ending December 31, 1998. Representatives of KPMG Peat Marwick LLP are
expected to be present at the Annual Meeting and will be available to respond
to appropriate questions and will have the opportunity to make a statement if
they desire to do so. Approval of this proposal requires the affirmative vote
of a majority of the shares present or represented at the Annual Meeting.
Consequently, abstentions (whether by broker non-vote or otherwise) on the
proposal will have the same effect as a negative vote. If the shareholders do
not ratify the appointment of KPMG Peat Marwick, the Board of Directors will
consider a change in auditors for 1999. THE BOARD UNANIMOUSLY RECOMMENDS A
VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP.
VI. FINANCIAL INFORMATION
A copy of the Company's 1997 Annual Report to Shareholders is enclosed
with this Proxy Statement. SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF
THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION (FORM
10-K) BY SUBMITTING A WRITTEN REQUEST TO:
Summit Financial Corporation
Blaise B. Bettendorf, Chief Financial Officer
Post Office Box 1087
Greenville, South Carolina 29602
VII. OTHER MATTERS
The Board of Directors and management of the Company knows of no matters
other than those stated above that are to be brought before the 1998 Annual
Meeting. However, if any other matter should be presented for consideration
and voting at the 1998 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 Company.
By Order of the Board of Directors
/s/ J. Randolph Potter
J. Randolph Potter
President & Chief Executive Officer
March 12, 1998
Greenville, South Carolina
APPENDIX - FORM OF PROXY
PROXY
SUMMIT FINANCIAL CORPORATION
937 No. Pleasantburg Drive
Post Office Box 1087
Greenville, South Carolina 29602
(864) 242-2265
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS IN CONNECTION WITH theAnnual
Meeting of the Shareholders of SUMMIT FINANCIAL CORPORATION (the"Company").
The undersigned hereby appoints Blaise B. Bettendorf and James B. Schwiers, or
either of them, as Proxies of the undersigned, with full power of substitution
to vote, as designated on the reverse side of this proxy, the number of
shares of common stock of the Company held of record by the undersigned on
February 25, 1998 on the proposals set forth on the reverse and described in
the accompanying proxy statement at the Annual Meeting of Shareholders of the
Company to be held on Wednesday, April 15, 1998, at 10:00 a.m. at the
Greenville Chamber of Commerce Board Room, 24 Cleveland Street, Greenville,
South Carolina.
THIS PROXY WILL BE VOTED AS DIRECTED. IF YOU EXECUTE AND RETURN THIS PROXY
BUT DO NOT SPECIFY OTHERWISE, THIS PROXY WILL BE VOTED FOR ALL OF THE
NOMINEES, FOR PROPOSAL 2 LISTED ON THE REVERSE, AND IN THE PROXIES'
DISCRETION, ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY IS REVOCABLE PRIOR TO ITS EXERCISE.
(1) To elect four directors to the Board of Directors for terms of three
years and thereafter until their successors are duly elected and qualified;
FOR ALL NOMINEES (except as indicated to the contrary below) [ ]
WITHHOLD AUTHORITY to vote for nominees listed below [ ]
NOMINEES: Ivan E. Block; John A. Burgess; J. Earle Furman, Jr.; T. Wayne
McDonald
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that person's name(s) below.
(2) To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants for the Company for the fiscal year ending December 31, 1998;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only those holders of record of the Common Stock of the Company at the close
of business on February 25, 1998, are entitled to notice of and the vote at
the Annual Meeting or any adjournment thereof.
A Proxy Statement is enclosed herewith. Please sign, date and return this
Proxy promptly in the enclosed envelope. IF YOU ATTEND THE MEETING YOU MAY,
IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE IN PERSON.
Signature: Date:
Signature (if held jointly): Date:
NOTE: Your signature should correspond with your name as it appears hereon.
Joint owners should each sign. When signing for a corporation or partnership
or an agent, attorney, executor, administrator, trustee, or guardian, please
set forth full title as it appears hereon.