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 dat of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
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 20, 1999
The Annual Meeting of the shareholders of SUMMIT FINANCIAL CORPORATION (the
Company") will be held on Tuesday, April 20, 1999, 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, 1999; 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 March 10, 1999, 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 1998 Annual Report to
Shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
J. RANDOLPH POTTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 19, 1999
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.
1
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 20, 1999
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 Tuesday, April 20, 1999, 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 19, 1999.
B. REVOCATION OF PROXY
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the Annual 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 Annual 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 Annual 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 Annual Meeting. The Company is not aware of any other matters
to be proposed at the Annual 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 2000 Annual Meeting must be received by the Company no later than
November 21, 1999, and any such proposals, as well as any questions related
thereto, should be directed to the Secretary of the Company. In addition, if
any shareholder's proposal is received after January 30, 2000, the Company's
Proxies for the 2000 Annual Meeting may exercise discretionary authority with
respect to such proposal at the 2000 Annual Meeting without any reference to
such proposal being made in the proxy statement for such meeting.
D. VOTING SECURITIES - RECORD DATE
Only shareholders of record at the close of business on March 10, 1999 (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
3,047,044 shares of common stock, par value $1.00 per share (the "Common
Stock"), held of record by approximately 415 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.
2
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 1999 Annual Meeting. The nominees
are as follows: John W. Houser, Larry A. McKinney, David C. Poole, and George O.
Short, Jr
In 1998, each Director who was not an officer of the Company or of its
subsidiaries, received a fee of $400 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 1998 was $49,800. There were no stock options granted to
Directors during 1998 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 1998, 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 March 10, 1999, 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 following 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 March 10, 1999, Mr. Block
owned 222,712 shares, or 6.5%, of the Company's outstanding common stock. Mr.
Block's holdings include exercisable options to purchase 10,211 shares of the
Company's common stock granted under the 1995 Non-Employee Stock Option Plan.
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, on March 10, 1999 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.
3
C. INFORMATION CONCERNING NOMINEES FOR DIRECTORS, CONTINUING DIRECTORS, AND
EXECUTIVE OFFICERS - CONTINUED:
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED; PERCENTAGE
PRINCIPAL OCCUPATIONS; OF COMPANY
POSITIONS WITH DIRECTOR COMMON STOCK
NAME [AGE] THE COMPANY SINCE OUTSTANDING (1)
- -------------------------------- -------------------------------------- -------- ------------------
NOMINEES FOR DIRECTORS
FOR THREE YEAR TERMS EXPIRING IN 2002
--------------------------------------
John W. Houser [55] President, Piedmont Management of 1989 92,316 2.7% (2)
Fairforest, Inc.; Duncan, SC
Larry A. McKinney [57] President & CEO, ElDeCo, Inc.; 1993 96,991 2.8% (3)
Greenville, SC
David C. Poole [60] President, David C. Poole Co., Inc.; 1989 153,151 4.5% (4)
Greenville, SC, Secretary,
Summit Financial Corporation
George O. Short, Jr. [66] President, George O. Short & 1989 61,955 1.8% (3)
Associates, CPA, PA;
Greenville, SC
CONTINUING DIRECTORS
TERMS EXPIRING IN 2000
--------------------------------------
C. Vincent Brown [59] President, Brown, Massey, Evans, 1989 141,715 4.2% (5)
McLeod & Haynesworth,
Attorneys at Law, P.A.; Greenville, SC
Chairman, Summit Financial
Corporation
Charles S. Houser [55] Managing Director, Seruus 1989 66,312 2.0% (3)
Capital Partners, LLC;
Greenville, SC
John A. Kuhne [54] Private Investor; Greenville, SC 1989 54,707 1.6% (6)
Vice Chairman, Summit
Financial Corporation
J. Randolph Potter [52] President & CEO, Summit 1989 125,198 3.7% (7)
Financial Corporation;
Greenville, SC
TERMS EXPIRING IN 2001
--------------------------------------
Ivan E. Block [53] Chairman & CEO, Crown 1989 222,712 6.5% (8)
Metro, Inc.;
Greenville, SC
John A. Burgess [58] President & CEO, Southeastern 1993 119,148 3.5% (3)
Products, Inc.; Greenville, SC
J. Earle Furman, Jr. [51] President, Earle Furman & 1989 64,130 1.9% (3)
Associates, Inc.;
Greenville, SC
T. Wayne McDonald [59] Physician, Highlands Center 1989 66,491 2.0% (3)
for Women; Greenville, SC
NAMED EXECUTIVE OFFICERS
James B. Schwiers [40] Executive Vice President & N.A. 85,472 2.5% (9)
COO, Summit National Bank;
Greenville, SC
Blaise B. Bettendorf [36] Senior Vice President & CFO, N.A. 74,999 2.2% (10)
Summit Financial Corporation;
Greenville, SC
All Directors and Executive
officers as a Group (14 persons) 1,425,297 41.9% (11)
<FN>
FOOTNOTES ON FOLLOWING PAGE
4
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. Shares presented have been adjusted for the two-for-one stock split paid in August 1998 and
all 5% stock distributions.
(2) - Includes exercisable options to purchase 10,211 shares of common stock at from $4.60 - $6.17 granted
under the 1995 Non-Employee Stock Option Plan. Does not include 2,324 shares held by related parties to which Mr.
John Houser disclaims beneficial ownership.
(3) - Includes exercisable options to purchase 10,211 shares of common stock at from $4.60 - $6.17 granted
under the 1995 Non-Employee Stock Option Plan.
(4) - Includes exercisable options to purchase 10,211 shares of common stock at from $4.60 - $6.17 granted
under the 1995 Non-Employee Stock Option Plan. Does not include 558 shares held by a related party to which Mr.
Poole disclaims beneficial ownership.
(5) - Includes exercisable options to purchase 20,420 shares of common stock at from $4.60 - $6.17 granted
under the 1995 Non-Employee Stock Option Plan.
(6) - Includes exercisable options to purchase 15,316 shares of common stock at from $4.60 - $6.17 granted
under the 1995 Non-Employee Stock Option Plan.
(7) - Includes exercisable options to purchase 95,227 shares of common stock at from $2.75 - $6.80 granted
under the Incentive Stock Option Plan. Does not include 1,400 shares held by a related party to which Mr. Potter
disclaims beneficial ownership.
(8) - Includes exercisable options to purchase 10,211 shares of common stock at from $4.60 - $6.17 granted
under the 1995 Non-Employee Stock Option Plan. Does not include 16,869 shares held by related parties to which Mr.
Block disclaims beneficial ownership.
(9) - Includes exercisable options to purchase 67,085 shares of common stock at from $2.75 - $6.80 granted
under the Incentive Stock Option Plan.
(10) - Includes exercisable options to purchase 62,454 shares of common stock at from $2.75 - $6.80 granted
under the Incentive Stock Option Plan.
(11) - Includes exercisable options to purchase 352,401 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
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,
McLeod and Haynesworth, 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.
5
JOHN A. KUHNE served as the president of Belk-Simpson Co. Department Stores
from 1983 until its sale in 1998. He is currently a private investor.
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.
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.
NOTE - Biographical information concerning the named executive officers 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 1998. Each
Director attended at least 75% of the Board and Committee meetings held by the
Company except Mr. David C. Poole.
The Board of Directors has a standing Audit Committee comprised of the
following Directors during 1998: George O. Short, Jr. (Chairman), Ivan E. Block,
J. Earle Furman, Jr., 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 1998.
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 1998, Mr. Ivan E.
Block sat on the Committee for the rotating position. The Executive Committee
met 12 times during 1998.
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.
6
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 52, 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 40, joined Summit National Bank, a wholly-owned
subsidiary of the Company, as Executive Vice President in March 1990. He was
promoted to Chief Operating Officer in 1997. Prior to joining Summit National
Bank, Mr. Schwiers was a senior vice president and area executive for First
Union National Bank.
BLAISE B. BETTENDORF, age 36, joined the Company in February 1990 as Senior
Vice President/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, 1998, 1997
and 1996, 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 (collectively the "Named Executive Officers") for services rendered in
all capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------------------- AWARDS -----------
OTHER -------------- SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK AWARDS OPTIONS/ COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($) ($) SARS(#) SATION($)
J. Randolph Potter, 1998 $ 190,000 $ 50,000 (1) - - $87,022 (4)
President/CEO 1997 $ 173,250 $ 50,000 (1) $ 168,400 (2) - $ 14,272
1996 $ 165,000 - (1) - 46,305 (3) $ 11,922
James B. Schwiers,
Executive Vice 1998 $ 129,600 $ 38,000 (1) - - $15,745 (6)
President/COO, 1997 $ 120,000 $ 34,000 (1) $ 126,300 (5) - $ 7,743
Summit National Bank 1996 $ 104,000 $ 15,000 (1) - 46,305 (3) $ 4,551
Blaise B. Bettendorf, 1998 $ 105,000 $ 30,000 (1) - - $13,475 (8)
Senior Vice 1997 $ 96,000 $ 25,000 (1) $ 105,250 (7) - $ 8,080
President/CFO 1996 $ 87,950 $ 10,000 (1) - 34,729 (3) $ 6,032
<FN>
FOOTNOTES ON FOLLOWING PAGE
7
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 10% of the annual salary and bonus of such executive officer.
(2) - Pursuant to the Company's Restricted Stock Plan, in 1997, Mr. Potter was awarded 17,640
(adjusted for the stock split and distributions) 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, 1998, Mr. Potter held 17,640 shares of restricted stock, the market
value of which was $255,780. Also at December 31, 1998, restrictions on 3,528 shares of the restricted
stock had lapsed. Dividends are payable on the restricted stock to the extent paid on the Company's
common stock generally.
(3) - Adjusted for the two-for-one stock split paid in August 1998 and all 5% stock distributions.
(4) - The amount for 1998 is comprised of (i) $10,000 contributed to the Company 401(k) Plan by the
Company on behalf of Mr. Potter to match fiscal 1998 pre-tax deferral contributions, all of which was
vested; (ii) $8,527 in insurance premiums paid by the Company on behalf of Mr. Potter; and (iii) $68,495
which represents the accrued vested benefit to Mr. Potter of retirement benefits pursuant to a
nonqualified salary continuation agreement.
(5) - Pursuant to the Company's Restricted Stock Plan, in 1997, Mr. Schwiers was awarded 13,230
(adjusted for the stock split and distributions) 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, 1998, Mr. Schwiers held 13,230 shares of restricted stock, the market
value of which was $191,835. Also at December 31, 1998, restrictions on 2,646 shares of the restricted
stock had lapsed. Dividends are payable on the restricted stock to the extent paid on the Company's common
stock generally.
(6) - The amount for 1998 is comprised of (i) $7,776 contributed to the Company 401(k) Plan by the
Company on behalf of Mr. Schwiers to match fiscal 1998 pre-tax deferral contributions, all of which was
vested; (ii) $3,252 in insurance premiums paid by the Company on behalf of Mr. Schwiers; and (iii) $4,717
which represents the accrued vested benefit to Mr. Schwiers of retirement benefits pursuant to a
nonqualified salary continuation agreement.
(7) - Pursuant to the Company's Restricted Stock Plan, in 1997, Ms. Bettendorf was awarded 11,025
(adjusted for the stock split and distributions) 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, 1998, Ms. Bettendorf held 11,025 shares of restricted stock, the
market value of which was $159,862. Also at December 31, 1998, restrictions on 2,205 shares of the
restricted stock had lapsed. Dividends are payable on the restricted stock to the extent paid on the
Company's common stock generally.
(8) - The amount for 1998 is comprised of (i) $6,214 contributed to the Company 401(k) Plan by the
Company on behalf of Ms. Bettendorf to match fiscal 1998 pre-tax deferral contributions, all of which was
vested; (ii) $4,702 in insurance premiums paid by the Company on behalf of Ms. Bettendorf; and (iii)
$2,559 which represents the accrued vested benefit to Ms. Bettendorf of retirement benefits pursuant to a
nonqualified salary continuation agreement.
8
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES
(1) (2)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END($)
NAME AND EXERCISABLE/ EXERCISABLE/
PRINCIPAL POSITION UNEXERCISABLE UNEXERCISABLE
J. Randolph Potter,
President/CEO 95,227 / 32,888 1,006,100 / $264,500
James B. Schwiers,
Executive Vice President/COO 67,085 / 32,888 $ 675,500 / $264,500
Blaise B. Bettendorf,
Senior Vice President/CFO 62,454 / 25,942 $ 639,800 / $211,000
<FN>
(1) - Adjusted for the two-for-one stock split paid in August 1998 and all
stock distributions.
(2) - "Value" is calculated as the market price of the underlying securities
on December 31, 1998 minus the grant price which ranges from $2.75 - $6.80 (as
adjusted for the stock split and all 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 $14.50 on December 31, 1998.
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 over a three-year period as provide 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 his is receiving
payments following a change in control.
In addition, during 1998, the Company established a salary continuation
plan pursuant to agreements with certain executives of the Company 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 Company after attaining the age of 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 Company
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 Company that currently provide annual benefits
at age 65 of $113,200, $29,562, and $21,624, respectively.
9
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 1998, the following non-employee Directors
served on the Committee: Mr. C. Vincent Brown, Mr. John A. Kuhne, Mr. David C.
Poole, 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 1998
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
and retirement benefits pursuant to salary continuation agreements with each
officer.
Compensation Paid in 1998
- ----------------------------
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 1998 consisted of the
following elements: base salary, bonus, matching contribution paid with respect
to the Company's 401(k) Plan, certain insurance plan premiums, and benefits
under the salary continuation agreements. 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 insurance plans. The value of these items is set forth in the
Summary Compensation Table previous 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 1998. Except for bonuses, the foregoing benefits and
compensation are not directly or indirectly tied to Company performance.
During 1998, total assets of the Company grew 6%, net income increased 20%
and return on average assets and average equity increased 8% and 4%,
respectively. The Company's nonperforming assets, past due loans, and net
charge-off ratios all remained low in 1998 in comparison to peers as management
continued to maintain high loan quality while achieving growth goals. Based on
Company performance, the Named Executive Officers received bonuses ranging from
26% to 29% of their annual base salaries. All bonuses were determined on a
subjective basis by the Committee.
10
- ------
Mr. Potter's 1998 Compensation
- ---------------------------------
Mr. Potter's 1998 compensation consisted of (1) a base salary; (2) a cash
bonus; (3) certain perquisites including personal use of a company car (the
total of all perquisites did not exceed 10% of his base salary and bonus); (4)
premiums paid by the Company on behalf of Mr. Potter with respect to insurance
not generally available to all Company employees; (5) vested amounts of
retirement benefits pursuant to the nonqualified salary continuation agreement;
and (6) the various forms of other compensation set forth above which were
available generally to all employees. Mr. Potter's base salary of $190,000 for
1998 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 1997 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 1998 was determined based on a
subjective evaluation by the Committee of the Company's performance factors
during 1998.
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 1997 and 1998.
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 1998 salary increase were the
Company's 1997 increases in total loans, deposits, and assets of 16%, 20%, and
19%, respectively, and the continued low percentage of nonperforming assets.
The Committee awarded Mr. Potter a cash bonus for 1998 of $50,000. This
compensation was based primarily on the Company's performance in 1998 when
record earnings were reported. Net income for 1998 increased 20% from 1997.
Further, during 1998, average earning assets increased 11% to leave the Company
well positioned for future increases in net income. Other performance factors
considered related to the cash bonus to Mr. Potter, were the Company's increase
in total loans of 10% during 1998; the expansion of the Company's bank franchise
with the opening of a new branch facility in 1998; technology enhancements
employed during 1998; 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.
COMPENSATION COMMITTEE:
C. Vincent Brown David C. Poole
John A. Kuhne Ivan E. Block
E. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the following persons served on the Compensation Committee:
Mr. C. Vincent Brown (Chairman), Mr. John A. Kuhne (Vice Chairman), Mr. David C.
Poole (Secretary), and Mr. Ivan E. Block. 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 Company 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 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.
11
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, 1993 through
December 31, 1998, 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 the
Assistant Director for Banking at the Securities and Exchange Commission. A
copy of the graph will be provided upon written request to the Company at the
address included in Section VI below.
COMPANY 1993 1994 1995 1996 1997 1998
- ---------------------------- ------ ------ ------ ------ ------ ------
Summit Financial Corporation 100.00 131.30 154.47 176.75 316.51 389.55
Peer Group Index 100.00 119.10 172.82 210.44 346.15 346.43
Nasdaq Market Index 100.00 104.99 136.18 169.23 207.00 291.96
Note regarding the preceding table:
- --------------------------------------
The data included in the foregoing graph was prepared by Media General Financial
Services. The peer group selected for the cumulative returns comparison is
publicly traded Southeastern banks with total assets < $250 million. The
following companies included in the comparative data for 1998 which have
previously been in the peer group are: American Bancshares (FL); Bank of South
Carolina; Carolina Southern Bank; Central Virginia Bankshares; Community
Bankshares (SC); Community Financial Corporation; First Georgia Holdings; First
West Virginia Bancorporation; FNB Financial Service (NC); Golden Isles Financial
Holdings; Marathon Financial Corporation; Merit Holding Corp.; Resource
Bankshares Corp.; Savannah Bancorporation, Inc.; Security Bank Corporation;
Security First Tech Corp.; Southwest Georgia Financial Corporation; Suburban
Bancshares, Inc.; and Summit Bank Corporation (GA).
Companies which meet the criteria to be included in the peer group for the first
time in 1998 are: Britton & Koontz Capital Corp.; Community Capital Corp.;
Eufaula Banccorp, Inc.; and Midsouth Bancorp
The following institutions which were previously in the peer group, no longer
meet the criteria for inclusion: Comsouth Bancshares, Inc.; First Community
Banking Services, Inc.; Mid-Atlantic Community Bankgroup; and Tyson's Financial
Corporation.
12
IV. CERTAIN TRANSACTIONS
Certain of the executive officers and Directors 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.
During 1998, John A. Burgess, a Director of the Company, extended an
unsecured term loan to the Company in the amount of $320,000. This loan had an
original maturity of six months and paid interest at 6.00%. The loan matured in
January 1999 and was repaid.
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, 1999. 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 the year 2000. 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 1998 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 1999 Annual
Meeting. However, if any other matter should be presented for consideration and
voting at the 1999 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
J. RANDOLPH POTTER
PRESIDENT & CHIEF EXECUTIVE OFFICER
March 19, 1999
Greenville, South Carolina
13
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
March 10, 1999 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 Tuesday, April 20, 1999, 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: John W. Houser; Larry A. McKinney; David C. Poole; George O Short,
Jr.
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, 1999;
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 March 10, 1999, 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.