SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 (S)240.14a-11(c) or (S)240.14a-12
SUMMIT BANCSHARES, INC.
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(Name of Registrant as Specified In Its Charter)
SUMMIT BANCSHARES, INC.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[_] 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:
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Notes:
SUMMIT BANCSHARES, INC.
1300 SUMMIT AVENUE
FORT WORTH, TEXAS 76102
________________________________________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 17, 2001
________________________________________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Summit
Bancshares, Inc. (the "Corporation") will be held at Fort Worth Botanic Garden
at 3220 Botanic Garden Boulevard, Fort Worth, Texas on April 17, 2001 at 3:30
p.m., for the following purposes:
1. To elect a Board of Directors of the Corporation consisting of eleven
(11) persons.
2. To ratify the appointment by the Board of Directors of Stovall,
Grandey & Whatley as independent auditors of the Corporation for its
fiscal year ending December 31, 2001
3. To transact such other business as may properly come before the Annual
Meeting of Shareholders or any adjournment or adjournments thereof.
Only those shareholders of record at the close of business on March 12,
2001, are entitled to notice of and to vote at the Annual Meeting of
Shareholders or at any adjournment or adjournments thereof.
IMPORTANT
---------
All shareholders are urged to sign, date and return as promptly as possible
the enclosed proxy in the enclosed postage-paid envelope. It is important that
as many shares as possible be represented at the Annual Meeting of Shareholders.
Any person executing the accompanying proxy may revoke it at any time prior to
the actual voting thereof by filing with the Secretary of the Corporation a
written revocation thereof or a duly executed proxy bearing a later date.
Consequently, whether or not you expect to be present, please execute and return
the enclosed proxy.
By Order of the Board of Directors,
/s/ Philip E. Norwood
Philip E. Norwood, Chairman of the Board
March 14, 2001
Fort Worth, Texas
SUMMIT BANCSHARES, INC.
1300 SUMMIT AVENUE
FORT WORTH, TEXAS 76102
TELEPHONE (817) 336-6817
PROXY STATEMENT FOR ANNUAL
MEETING OF SHAREHOLDERS
To Be Held April 17, 2001
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of SUMMIT BANCSHARES, INC. (the "Board") to be used at
the Annual Meeting of Shareholders of SUMMIT BANCSHARES, INC. (the
"Corporation", which term, where the context requires, includes subsidiaries of
Summit Bancshares Inc.) to be held at Fort Worth Botanic Garden at 3220 Botanic
Garden Boulevard, Fort Worth, Texas on April 17, 2001, at 3:30 p.m., and at any
adjournment or adjournments thereof. This Proxy Statement and accompanying proxy
are being mailed on or about March 14, 2001, to the shareholders of the
Corporation.
The Corporation's Annual Report to Shareholders for the year ended December 31,
2000, is being furnished with this Proxy Statement to the shareholders of record
on March 12, 2001. The Annual Report to Shareholders does not constitute a part
of the proxy soliciting material.
GENERAL INFORMATION
The close of business on March 12, 2001, has been fixed as the record date
for determining the shareholders entitled to vote at the Annual Meeting of
Shareholders to be held on April 17, 2001.
The Annual Meeting of Shareholders has been called for the purposes of (i)
electing directors of the Corporation for the coming year, (ii) ratifying the
appointment by the Board of Stovall, Grandey & Whatley as independent auditors
of the Corporation for its fiscal year ending December 31, 2001, and (iii)
transacting such other business as may properly come before the Annual Meeting
of Shareholders or any adjournment or adjournments thereof.
Whether you can attend the meeting or not, your vote is important. Shares
can be voted at the meeting only if the owner is present or represented by
proxy. Accordingly, it is requested that you sign and return the enclosed proxy
in the envelope provided.
Any person executing the accompanying proxy may revoke it at any time prior
to the actual voting thereof by filing with the Secretary of the Corporation a
written revocation thereof or a duly executed proxy bearing a later date.
1
The cost of soliciting proxies will be borne by the Corporation. The
solicitation will be made by mail. The Corporation will also supply brokerage
firms and other custodians, nominees and fiduciaries with such number of proxy
materials as they may require for mailing to beneficial owners, and will
reimburse them for their reasonable expenses in connection therewith. Certain
directors, officers and employees of the Corporation, not specifically employed
for the purpose, may solicit proxies, without remuneration therefore, by mail,
telephone, telegraph or personal interview.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on March 12, 2001, the record date for determining
the shareholders of the Corporation entitled to notice of and to vote at the
Annual Meeting of Shareholders, the Corporation had 6,379,478 shares of common
stock, $1.25 par value (the "Common Stock"), issued and outstanding.
The presence, in person or by proxy duly authorized in writing, of the
holders of a majority of the issued and outstanding shares of Common Stock of
the Corporation is necessary to constitute a quorum at the Annual Meeting of
Shareholders.
Each holder of shares of Common Stock will be entitled to one vote, in
person or by proxy, for each share of Common Stock of the Corporation owned of
record at the close of business on March 12, 2001. Cumulative voting for
directors is not permitted. Directors are elected by plurality vote and,
therefore, the eleven (11) nominees receiving the highest number of affirmative
votes shall be elected as directors provided a quorum is present. The
affirmative vote of the holders of a majority of the shares of Common Stock of
the Corporation represented and voting at the annual meeting of shareholders on
the appointment of Stovall, Grandey & Whatley as independent auditors of the
Corporation is required to ratify that appointment.
All shares represented at the Annual Meeting in person or by proxy shall be
counted in determining the presence of a quorum. Abstentions and broker non-
votes (shares held by a broker or nominee as to which a broker or nominee
indicates on the proxy that it does not have the authority, either express or
discretionary, to vote on a particular matter) are counted for the purpose of
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting but will not be considered part of the voting power
present with respect to any matter on which such shares are not voted.
2
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The bylaws of the Corporation provide that the Board shall be comprised of
not more than twenty-five (25) members and that each director shall be elected
to serve until the next Annual Meeting of Shareholders and until his successor
shall be elected and shall qualify. Any vacancies on the Board may be filled by
a majority vote of the Board and any director so elected shall hold office for
the unexpired term of his predecessor or until the next election of directors by
the shareholders of the Corporation.
The Board of Directors has set the number of directors at eleven (11) and
has nominated the eleven (11) persons named below for election to the Board of
Directors of the Corporation.
Names of the nominees for directors and other information about them appear
in the following table. All of the nominees are now directors of the Corporation
and have consented to serve if elected. If for any unforeseen reason a nominee
is unable to serve if elected, the persons named in the accompanying proxy may
exercise their discretion to vote for a substitute nominee selected by the
Board. However, the Board has no reason to anticipate that any of the nominees
will not be able to serve, if elected.
Name and Age of
Nominee; Years Principal Occupation for Past
Served as Director Five Years; Other Directorships
------------------ -------------------------------
Philip E. Norwood Mr. Norwood for at least the last five years has been an
Age 51 officer and director of the Corporation. His positions with
Director Since 1984 the Corporation are or have been as follows:
Position Term
-------- ----
Summit Bancshares, Inc.
Chairman of the Board January 1998 to present
President/CEO January 2001 to present
President/CEO October 1993 to January 1998
Director March 1984 to present
Summit Community Bank, N.A.
Chairman of the Board January 1998 to present
President July 1994 to present
Director January 1990 to present
Summit National Bank
President and Director January 2001 to present
Director March 1983 to January 1996
3
D. Jerrell Farr Mr. Farr for at least the last five years has served as
Age 66 President and Chief Executive Officer of FJW Co., Inc., a
Director Since 1999 general contracting firm operating in the commercial
construction industry. His positions with the Corporation
include:
Summit Bancshares, Inc.
Director April 1999 to present
Summit Community Bank, N.A.
Director April 1999 to present
Summit National Bank
Director March 1998 to present
Elliott S. Garsek Mr. Garsek for at least the last five years has served as
Age 52 Chairman of the Board and as a practicing attorney with the
Director Since 1987 law firm of Barlow & Garsek, a Professional Corporation. His
positions with the Corporation include:
Summit Bancshares, Inc.
Director April 1987 to present
Summit Community Bank, N.A.
Director June 1984 to present
Summit National Bank
Director May 1999 to present
Ronald J. Goldman Mr. Goldman for at least the last five years has served as
Age 58 President of Ronnie's LLC, a corporation engaged in retail
Director Since 1984 sales of fine wines and gourmet foods or involved in personal
investments. His positions with the Corporation include:
Summit Bancshares, Inc.
Director April 1984 to present
Summit Community Bank, N.A.
Director January 1981 to present
Summit National Bank
Director January 1975 to present
4
F. S. Gunn Mr. Gunn has been retired since his retirement from the
Age 67 Corporation as an employee on December 31, 1997. He holds or
Director Since 1979 has held the following positions with the Corporation:
Summit Bancshares, Inc.
Vice Chairman of the Board October 1993 to January 1998
President January 1990 to January 1993
Director January 1979 to present
Summit Community Bank, N.A.
Director April 1999 to present
Director January 1990 to January 1996
Summit National Bank
Chairman of the Board January 1991 to present
Director January 1975 to present
Robert L. Herchert Mr. Herchert for at least the last five years has served as
Age 58 President and Chief Executive Officer of Freese & Nichols,
Director Since 1998 Inc., a consulting engineering company. His positions with
the Corporation include:
Summit Bancshares, Inc.
Director April 1998 to present
Summit Community Bank, N.A.
Director April 1996 to present
Summit National Bank
Director May 1999 to present
Jay J. Lesok Mr. Lesok for at least the last five years has served as
Age 54 President of Cashmire Financial Services, a mortgage company
Director Nominee servicing real estate mortgages in Fort Worth, Texas. His
position with the Corporation is:
Summit Community Bank, N.A.
Director July 1995 to present
5
William W. Meadows Mr. Meadows for at least the last five years has served as
Age 48 Executive Vice President of Wm. Rigg Insurance Co., an
Director Since 1991 insurance agency. His positions with the Corporation include:
Summit Bancshares, Inc.
Director April 1991 to present
Summit Community Bank, N.A.
Director June 1984 to present
Summit National Bank
Director May 1999 to present
James L. Murray Mr. Murray has been retired since his retirement from the
Age 68 Corporation as an employee on December 31, 1997. He holds or
Director Since 1979 has held the following positions with the Corporation:
Summit Bancshares, Inc.
Chairman of the Board January 1985 to January 1998
Director January 1979 to present
Summit Community Bank, N.A.
Chairman of the Board January 1990 to January 1998
Director April 1985 to present
Summit National Bank
Director May 1999 to present
Director January 1975 to January 1996
Byron B. Searcy Mr. Searcy for at least the last five years has served as
Age 65 President of Kelly, Geren, & Searcy, Inc. a corporation
Director Since 1984 engaged in the real estate brokerage business in Fort Worth,
Texas, or its predecessor company. His positions with the
Corporation include:
Summit Bancshares, Inc.
Director April 1984 to present
Summit Community Bank, N.A.
Director April 1981 to present
Summit National Bank
Director January 1975 to present
6
Roderick D. Stepp Mr. Stepp for at least the last five years has served as
Age 63 President of M & M Manufacturing. L.P., a local company
Director Nominee manufacturing metal products in Fort Worth, Texas. His
position with the Corporation is:
Summit National Bank
Director February 1998 to present
No family relationships exist among the named Executive Officers and
directors of the Corporation. No director of the Corporation is a director of
any other company with a class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934, as amended, or subject to the
requirements of Section 15(d) of that Act or of any company registered as an
investment company under the Investment Corporation Act of 1940, as amended.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION AS DIRECTORS
OF THE ELEVEN (11) PERSONS NAMED ABOVE.
7
BOARD OF DIRECTORS
Directors are elected annually by the shareholders of the Corporation for
one year and hold office until their successors are elected and have qualified.
Various meetings of the Board are held each year, including an annual meeting
following the conclusion of the Annual Meeting of Shareholders. The Board has
established an Executive Committee, an Audit Committee, a Compensation and
Benefits Committee (the "Compensation Committee"), an Asset/Liability Management
Committee (the "ALCO Committee"), a Nominating Committee and a Special
Committee.
Executive Committee
Members: Elliott S. Garsek (Chairman), Ronald J. Goldman, F. S. Gunn,
Jeffrey M. Harp, William W. Meadows, James L. Murray, Philip E. Norwood and
Byron B. Searcy.
The Executive Committee, during intervals between meetings of the Board,
has the authority to exercise all the powers of the full Board other than
matters coming specifically within the purview of other committees of the Board
and certain extraordinary corporate matters.
Audit Committee
Members: Robert L. Herchert (Chairman), D. Jerrell Farr and Byron B.
Searcy.
The primary functions of the Audit Committee are to (i) meet with the
independent auditors of the Corporation to review the annual audit and its
results, (ii) review internal audit controls and procedures of the Corporation
and its subsidiaries, Summit National Bank and Summit Community Bank, N.A.
(collectively referred to as the "Subsidiary Banks"), and Summit Bancservices,
Inc., and (iii) make recommendations to the Board as to the engagement of the
independent auditors of the Corporation.
Compensation and Benefits Committee
Members: William W. Meadows (Chairman), Ronald J. Goldman, F. S. Gunn,
Robert L. Herchert and James L. Murray.
The function of the Compensation Committee is to make recommendations to
the Board with regard to the remuneration of the executive officers and
directors of the Corporation and the Subsidiary Banks. The Compensation
Committee is also responsible for the administration of the Incentive Stock
Option Plans, the 401(k) Plan, the Management Security Plan, the Severance
Agreements and the Performance Compensation Plans of the Corporation. See
"EXECUTIVE COMPENSATION AND OTHER INFORMATION."
8
Asset/Liability Management Committee
Members: Philip E. Norwood (Chairman), D. Jerrell Farr, Ronald J. Goldman,
F.S. Gunn, Jeffrey M. Harp and James L. Murray.
The functions of the Asset/Liability Management Committee are to review the
implementation of the Corporation's asset and liability management functions and
assure that those functions are carried out in a workable and productive
fashion. The Committee is also responsible for monitoring asset and liability
management objectives while working within the range of operating guidelines set
forth in the Asset/Liability Management Policy.
Nominating Committee
Members: Byron B. Searcy (Chairman), Ronald J. Goldman, Jeffrey M. Harp,
William W. Meadows and Philip E. Norwood.
The function of the Nominating Committee is to make recommendations to the
Board with regard to prospective new members of the Board of Directors.
Special Committee
Members: Elliott S. Garsek (Chairman), Ronald J. Goldman, James L. Murray
and Byron B. Searcy.
In June 2000 the Board of Directors appointed a Special Committee to
explore, examine and analyze the possible sale of the Corporation as an
alternative for increasing shareholder value. The Committee was authorized to
engage all appropriate consultants and counsels required for its assignment. The
assignment of this Committee was completed in January 2001 with the
recommendation to the Board that the Corporation not be sold and that remaining
independent will provide the best opportunity for delivering long-term
shareholder value.
Mr. Harp served on the Executive, Asset/Liability Management and Nominating
Committees until he exited the Company in January 2001.
Directors' Compensation
During 2000 the Corporation paid each of its directors $100 for attendance
at each meeting of the Board and $200 per committee meeting attended. In
addition, each director was paid a quarterly retainer of $500. The Corporation
paid a total of $30,000 in directors' fees and $21,300 in committee fees during
2000.
During 2000 Summit National Bank paid each of its directors $300 for
attendance at a meeting of the Board of Directors and $200 per committee meeting
attended. Summit National Bank paid a total of $35,400 in directors' fees and
$20,400 in committee fees during 2000.
9
During 2000 Summit Community Bank, N.A. paid each of its directors $300 for
attendance at a meeting of the Board of Directors and $200 per committee meeting
attended. Summit Community Bank, N.A. paid a total of $77,700 in directors'
fees and $74,300 in committee fees during 2000.
Attendance at Board and Committee Meetings
During 2000 there were eleven (11) meetings (including regularly scheduled
and special meetings) of the Board, five (5) meetings of the Executive
Committee, two (2) meetings of the Audit Committee, four (4) meetings of the
ALCO Committee, no (0) meetings of the Nominating Committee, two (2) meetings of
the Compensation Committee and fourteen (14) meetings of the Special Committee.
Each director attended at least seventy-five percent (75%) of the total number
of meetings of the Board and Committees of the Board of which he was a member
during 2000.
10
Board Audit Committee Report
The Audit Committee is made up of Robert H. Herchert, Chairman, and D.
Jerrell Farr and Byron B. Searcy. All members are independent as that term is
defined in Rule 4200(a)(14) of the National Association of Securities Dealers
listing standards.
The Company's Board of Directors has adopted an audit charter, "Statement
of Audit Policy." A copy of the full text of that charter is attached as
Exhibit A.
The Audit Committee has:
(1) Reviewed and discussed the audited financial statements with
management;
(2) Discussed with its independent auditors the matters required to
be discussed by SAS 61.
(3) Received the written disclosures and the letter from the
independent accountants required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees.
Based on the review and discussions referred to in the preceding paragraph,
the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
its year ended December 31, 2000.
March 13, 2001 THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
Robert L. Herchert, Chairman
D. Jerrell Farr
Byron B. Searcy
11
PROPOSAL NO. 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval by the shareholders, the Board has selected the firm of
Stovall, Grandey & Whatley, Certified Public Accountants, as independent
auditors of the Corporation for its fiscal year ending December 31, 2001.
Stovall, Grandey & Whatley has acted in such capacity for the Corporation since
1979 and has reported that neither the firm nor any of its partners has any
material direct or indirect financial interest in the Corporation, other than as
independent auditors.
Representatives of Stovall, Grandey & Whatley will be present at the Annual
Meeting of Shareholders with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF STOVALL, GRANDEY & WHATLEY AS INDEPENDENT AUDITORS OF THE
CORPORATION.
12
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
By Management
The following table shows beneficial ownership of shares of Common Stock of
the Corporation by each current director and Named Executive Officers,
individually, and, together with all current executive officers of the
Corporation, as a group, at March 12, 2001.
Amount and
Name of Beneficial Nature of Percent
Owner or Number Beneficial of
of Persons in Group Ownership/(1)/ Class(2)
------------------- -------------- --------
Philip E. Norwood 153,730 shares/(3)/ 2.4%
D. Jerrell Farr 11,000 shares *
Elliott S. Garsek 43,700 shares/(4)/ *
Ronald J. Goldman 266,820 shares 4.2%
F. S. Gunn 274,128 shares/(5)/ 4.3%
Robert L. Herchert 3,070 shares *
Jay J. Lesok 9,700 shares *
William W. Meadows 17,474 shares/(6)/ *
James L. Murray 150,126 shares 2.3%
Bob G. Scott 41,400 shares/(7)/ *
Byron B. Searcy 41,540 shares/(8)/ *
Rod D. Stepp 4,000 shares *
All directors and 1,016,688 shares/(9)/ 15.9%
executive officers as
a group (12 persons)
* Less than one percent (1%) of all of the issued and outstanding shares of
Common Stock.
(1) Based on information furnished by persons named and, except as otherwise
indicated below, each person has sole voting power and investment power
with respect to all shares of Common Stock owned by such person.
(2) Based on 6,414,478 shares of Common Stock issued and outstanding as of
March 12, 2001, as adjusted for options exercisable within sixty (60) days
of March 12, 2001 which are deemed outstanding for those shareholders who
hold such options, pursuant to Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934.
13
(3) Includes 149,954 shares of Common Stock owned of record and 3,776 shares of
Common Stock owned by Mr. Norwood's children.
(4) Includes 41,700 shares of Common Stock owned of record and 2,000 shares of
Common Stock owned by Mr. Garsek's children.
(5) Includes 194,000 shares of Common Stock owned of record and 80,128 shares
of Common Stock held by a trust for which Mr. Gunn serves as a co-trustee.
(6) Includes 16,948 shares of Common Stock owned of record and 526 shares of
Common Stock held in trust for the benefit of Mr. Meadows' children.
(7) Includes 6,400 shares of Common Stock owned of record and 35,000 shares of
Common Stock which Mr. Scott has the right to acquire within sixty (60)
days of March 12, 2001 pursuant to options granted to him under the 1993
Stock Plan. See "EXECUTIVE COMPENSATION AND OTHER INFORMATION - Option
Exercises and Holdings."
(8) Includes 40,300 shares of Common Stock owned of record and 1,240 shares of
Common Stock owned by Mr. Searcy's wife.
(9) Includes 35,000 shares of Common Stock with respect to which certain named
Executive Officers of the Corporation have the right to acquire beneficial
ownership within sixty (60) days of March 12, 2001 pursuant to options
granted to them under the 1993 Stock Plan. See "EXECUTIVE COMPENSATION AND
OTHER INFORMATION - Option Exercises and Holdings."
By Others
As of March 12, 2001 there were no known beneficial owners of more than
five percent (5%) of the outstanding shares of Common Stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers, directors and persons who own more than ten
percent (10%) of a registered class of the Corporation's equity securities to
file reports of ownership with the Securities and Exchange Commission.
Based upon a review of Forms 3, 4 and 5 and amendments thereto furnished to
the Corporation, to the best knowledge of management of the Corporation, during
2000 no directors, officers, or ten percent (10%) beneficial shareholder of
Common Stock of the Corporation failed to timely file with the Securities and
Exchange Commission one or more required reports on Form 3, 4 or 5 regarding
transactions in securities of the Corporation.
14
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The Board of Directors of Summit Bancshares, Inc. on January 15, 2001
approved consolidation of its two banking subsidiaries, Summit National Bank and
Summit Community Bank, N.A., to a unified structure to be named Summit Bank,
N.A.
As part of the internal reorganization, Jeffery M. Harp has exited,
effective January 15, 2001, his positions with the organization in accordance
with a pre-existing and approved severance agreement.
As part of the transition to a one bank charter, Philip E. Norwood, who
already serves as chairman of the board of the Corporation and chairman of the
board and president of Summit Community Bank, N.A., will also serve as president
of Summit National Bank until the consolidation is complete. Mr. Norwood will
become president of the merged bank. He has also assumed the title of president
of the Corporation.
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning
compensation paid or accrued by the Corporation and its subsidiaries, to or on
behalf of the three most highly compensated executive officers of the
Corporation, who were the only executive officers of the Corporation,
(determined as of the end of the last fiscal year) (referred to in this Proxy
Statement as the "Named Executive Officers") for the fiscal years ended December
31, 1998, 1999 and 2000:
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------
Name and
Principal Annual Compensation All Other
Position Salary Bonus Compensation
as of December 31, 2000 Year ($)/(1)/ ($)/(2)/ ($)/(3)/
- -------------------------------------------------------------------------------------------------------------------
Philip E. Norwood 2000 $227,812 $ 39,461(4) $3,464/(7)/
Chairman of the Board 1999 $226,200 $ 34,198(4) $3,482/(8)/
of the Corporation 1998 $207,792 $ 43,282(4) $3,114/(9)/
Jeffrey M. Harp 2000 $227,012 $ 48,082(5) $ 414
President of the Corporation 1999 $224,550 $ 46,404(5) $ 504
1998 $199,550 $ 52,155(5) $ 864
Bob G. Scott 2000 $130,000 $ 24,723(6) $1,188
Executive Vice President and Chief 1999 $125,000 $ 17,831(6) $ 504
Operating Officer of the Corporation 1998 $116,480 $ 22,442(6) $2,106
(1) Includes salary and directors' fees, if applicable.
(2) The bonus amounts were paid pursuant to the Corporation's Performance
Compensation Plans. (See detailed discussion beginning on page 19 of this
Proxy Statement under "Board
15
Compensation and Benefits Committee Report on Executive Compensation"). The
amounts for 2000 were in recognition of achievements performed in 1999. The
amounts for 1999 were in recognition of achievements performed in 1998. The
amounts for 1998 were in recognition of achievements performed in 1997.
(3) Except as otherwise noted, "All Other Compensation" consists of premium
payments with respect to term life insurance for the benefit of the Named
Executive Officer.
(4) Consists of bonuses in 2000, 1999, and 1998 in the amounts of:
Year Amount Payment Source
---- ------ --------------
2000 $39,461 Summit Community Bank, N.A.
1999 $34,198 Summit Community Bank, N.A.
1998 $43,282 Summit Community Bank, N.A. ($18,885)
Summit Bancshares, Inc. ($24,397)
(5) Consists of bonuses in 2000, 1999, and 1998 in the amounts of:
Year Amount Payment Source
---- ------ --------------
2000 $48,082 Summit National Bank
1999 $46,404 Summit National Bank
1998 $52,155 Summit National Bank ($34,030)
Summit Bancshares, Inc. ($18,125)
(6) Consists of bonuses from the Corporation.
(7) Consists of premium payments with respect to term life insurance in the
amount of $414 and premium payments with respect to dependent health
coverage for the benefit of the Named Executive Officer in the amount of
$3,050.
(8) Consists of premium payments with respect to term life insurance in the
amount of $504 and premium payments with respect to dependent health
coverage for the benefit of the Named Executive Officer in the amount of
$2,978.
(9) Consists of premium payments with respect to term life insurance in the
amount of $522 and premium payments with respect to dependent health
coverage for the benefit of the Named Executive Officer in the amount of
$2,592.
Option Exercises and Holdings
The following table provides information with respect to the Named
Executive Officers concerning the exercise of stock options during the last
fiscal year and unexercised stock options held as of the end of December 31,
2000:
16
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- -------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 2000(#) December 31, 2000($)
---------------------------------------------------
Shares
Acquired on Value Realized ($)/(1)/ Exercisable/ Exercisable/
Name Exercise (#) Unexercisable Unexercisable/(2)/
- ---------------------------------------------------------------------------------------------------------------------
Philip E. Norwood 40,000 $690,000 -0-/-0- -0-/-0-
Jeffrey M. Harp 14,000 $262,500 -0-/-0- -0-/-0-
Bob G. Scott 1,000 $ 21,688 35,000/-0-/(3)/ $601,580/-0-
(1) Market value of underlying securities at exercise, minus the exercise
price.
(2) Market value of underlying securities as of December 31, 2000 ($21.688),
minus the exercise price. These values, unlike the amounts set forth in
the column headed, "Value Realized", have not been, and may never be,
realized. The underlying options have not been, and may not be, exercised.
Actual gains, if any, on exercise will depend on the value of the Company's
stock on the date of exercise. There can be no assurance that the value
shown will be realized.
(3) These options are exercisable at $4.50 per share.
401(k) Plan
Effective December 1, 1997, the Corporation established a contributory plan
pursuant to Internal Revenue Code Section 401(k) covering substantially all
employees (the "401(k) Plan"). Each year the Corporation determines, at its
discretion, the amount, if any, of matching contributions. In 1997, 1998 and
1999, the Corporation did not make any matching contributions. For 2000 and 2001
the Board of Directors has approved matching contributions of 100% of a
participants deferral of annual compensation up to and including 6% of annual
compensation.
17
Management Security Plan
Effective September 1, 1992 the Board adopted a plan now known as the
Restated Management Security Plan of Summit Bancshares, Inc. (the "Security
Plan"). The purpose of the Security Plan is to provide specified benefits to a
select group of management and highly compensated employees, including the
Corporation's Named Executive Officers, who contribute materially to the
continued growth, development and future business success of the Corporation and
the Subsidiary Banks. The Security Plan, and the individual agreements
established thereunder (each a "Security Plan Agreement"), are intended to be
administered by the Compensation Committee as unfunded welfare benefit plans
established and maintained for the participants.
Under the Security Plan, if a participant remains an employee until his or
her normal retirement date, the Corporation shall pay to the participant a
retirement benefit in the amount specified in the participant's Security Plan
Agreement (the "Retirement Benefit"). Payment of the Retirement Benefit under
the Security Plan shall begin on the normal retirement date and will continue
for one hundred eighty (180) months. If a participant continues employment
beyond his or her normal retirement date, the Compensation Committee shall
specify the amount of the Retirement Benefit due to the participant upon
retirement, which shall not be less than the Retirement Benefit such participant
would otherwise have received had the participant retired at normal retirement
age.
If a participant dies after retirement but before the applicable Retirement
Benefit is paid in full, the unpaid Retirement Benefit payments to which that
participant is entitled shall continue and be paid to the participant's
beneficiary. No Death Benefit will be paid to the beneficiary of a participant
who dies after attaining normal retirement age.
Under the Security Plan, if a participant dies prior to attaining normal
retirement age and the Security Plan is in effect at that time, the Corporation
will pay a death benefit to such participant's beneficiary, provided the
participant was not retired, disabled or on an authorized leave of absence at
the time of death (the "Death Benefit").
The Death Benefit is (i) a sum equal to one hundred percent (100%) of the
participant's covered salary, an amount specified in the Security Plan
Agreement, paid monthly for the first twelve (12) months after death, and (ii)
fifty percent (50%) of the covered salary for the next one hundred eight (108)
months. The payments commence on the first day of the month following the date
of death.
A participant who ceases to be an employee after enrollment in the Security
Plan, unless such termination is for just cause (defined in the Security Plan as
theft, fraud, embezzlement or willful misconduct causing significant property
damage to the Corporation or personal injury to another employee) or has less
than five (5) years of employment from date of enrollment in the Security Plan
or employment, shall receive all or a pro-rated portion of the benefit of the
Retirement Benefit provided in the Security Plan upon the earlier of the
participant's death or attainment of normal retirement age, if the Security Plan
is in effect at that time (the "Deferred Termination Benefit"). Any increase in
benefit from that first established at date of entering the Security Plan would
be prorated relative to the years employed under the Security Plan to the
maximum years that could be served to retirement. Should a participant be
terminated for just cause or not remain employed at
18
least five (5) years from enrollment in the Security Plan, such participant will
not be eligible for benefits. Mr. Norwood and Mr. Harp have met the requirement
of service and are eligible to receive the full benefits. Mr. Scott's benefits
are subject to proration should he leave the Corporation before retirement.
A Security Plan Agreement may be terminated by the participant upon written
notice not less than thirty (30) days prior to an anniversary date of the date
of execution of the Participant's Security Plan Agreement. In such case a
participant's entitlement to receive the Death Benefit will cease, but the
participant will still be entitled to receive the Deferred Termination Benefit.
The Security Plan may be terminated by the Corporation at any time provided
thirty (30) days notice is given to the participant and provided no payment of
benefits has been commenced and not completed. However, as to Mr. Norwood and
Mr. Harp, the Security Plan can not be terminated, amended, modified or
supplemented except by joint agreement between the Corporation and the
participant.
In the event the Corporation undergoes a change of control, as defined in
the Security Plan, and the surviving corporation takes action to terminate the
Security Plan or a specific Security Plan Agreement as a result of the change in
control, the participant will, nevertheless, be entitled to receive the
Retirement Benefit, the Death Benefit, or the Deferred Termination Benefit as
described in the Security Plan.
The Corporation has entered into Security Plan Agreements with the following
executive officers:
Participant and Death Benefits Retirement
Position as of Date of -------------- Benefit
December 31, 2000* Agreement Year 1 Years 2-10 Years 1-15
----------------- --------- ------ ---------- ----------
(per year) (per year)
Philip E. Norwood Jan. 1, 1995 $180,500 $90,250 $72,000
Chairman of the Board
Jeffrey M. Harp Jan. 1, 1995 187,300 93,650 72,000
President
Bob G. Scott Sept. 1, 1995 112,000 56,000 36,000
Executive Vice President &
Chief Operating Officer
*Mr. Harp exited the Corporation effective January 15, 2001 and these benefits
are fixed.
Amounts payable under the Security Plan shall be paid exclusively from the
general assets of the employer. However, under the Security Plan, the
Corporation may invest in any specific asset or fund in order to provide the
means for the payment of any benefits under the Security Plan. Security Plan
participants will have no interest whatsoever in any such fund or asset. The
Corporation has purchased life insurance policies insuring the lives of the
individual participants with the Corporation as owner, premium payor and
beneficiary of each policy, in order to indemnify itself against the liability
for the payment of any benefits under the Security Plan. The face or policy
value of these policies are as follows:
19
Policy
Participant Amount
- ----------- ------
Philip E. Norwood $ 862,939
Jeffrey M. Harp 1,009,407
Bob G. Scott 842,957
Severance Agreements
Effective October 24, 2000, the Board adopted Severance Agreements
("Agreements") with Mr. Norwood and Mr. Harp, individually. The Agreements
provide certain benefits to these individuals in the event their employment is
terminated for any reason other than for cause, which is fully defined in the
Agreements.
In the event of termination, other than for cause, Mr. Harp would receive one
years' salary. In the case of Mr. Norwood's termination, he would receive two
years' salary. In addition to salary, the individuals would also continue to
receive certain insurance benefits for themselves and their families plus other
perquisites, the same as they were receiving prior to termination.
As a condition to receiving the salary and benefits these individuals agree to
not compete with the Corporation in Tarrant County or disclose any confidential,
proprietary or sensitive corporate information relating to the business of the
Corporation for the period that they receive compensation from the Corporation.
Also, pursuant to a related amendment to the Management Security Plan the
Corporation gave up the right to terminate, amend, modify or supplement the
Security Plan as it relates to these parties.
These Agreements provide the Corporation with assurance that two of its primary
executives would continue to serve as an executive of the Corporation or a
successor in a change of control situation.
Board Compensation and Benefits Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the Performance Graph shall not be incorporated by reference into any
such filings.
As of December 31, 2000, the Compensation and Benefits Committee (the
"Committee") is comprised of the following non-employee members of the Board:
William W. Meadows (Chairman), Ronald J. Goldman, F.S. Gunn, Robert L. Herchert
and James L. Murray. Among other duties, the Committee makes recommendations to
the Board with regard to the remuneration of the executive officers and
directors of the Corporation and the Subsidiary Banks.
Compensation Philosophy. The Corporation's executive compensation policy
incorporates the fundamental principle that executive compensation should be
linked directly to corporate performance and increases in shareholder value,
while concurrently ensuring that key employees are
20
motivated and retained. The following objectives set forth the Committee's
general guidelines for compensation decisions:
- The Corporation must provide a competitive total compensation package
that enables the Corporation to attract and retain key executives.
- All of the Corporation's compensation programs must be integrated with
the Corporation's annual and long-term business objectives so that
executives remain focused on the fulfillment of these objectives.
- The Corporation's compensation package must include a variable
component that directly links compensation with the overall
performance of the Corporation, thereby expressly aligning executive
compensation with the interest of shareholders.
Elements of Executive Compensation. The Committee regularly reviews the
Corporation's compensation programs to ensure that remuneration levels and
incentive opportunities are competitive and reflect performance. The various
components of the compensation programs for executive officers are discussed
below.
(i) Base Salary. Base salary levels are largely determined through
comparison with banking organizations of a size similar to the Corporation's.
Surveys are utilized to establish base salaries that are within the range of
those persons holding positions of comparable responsibility at other banking
organizations of a size and complexity similar to the Corporation. Actual base
salaries also are intended to reflect individual performance contributions as
determined through performance evaluations. In addition to individual job
performance and the above-referenced market comparisons, other factors may be
taken into consideration, such as cost of living increases as well as an
individual's perceived potential with the Corporation. All executive officer
base salary levels, which are reviewed annually, are considered by the Committee
to be competitive and within a necessary and reasonable range.
(ii) Performance Compensation Plan. The Board has approved Performance
Compensation Plans (the "Plans") for use within the Corporation and its
subsidiaries. The Plans are administered by the Committee. The objective of the
Plans is to create competitive levels of compensation tied directly to the
attainment of performance objectives which the Committee believes are important
for achieving long-term shareholder value. The Plans reward all employees based
on the attainment of certain goals of the Corporation and/or its individual
subsidiaries. The executive officers of the Corporation are eligible to
participate at the same level as all employees in relationship to their
respective base salaries. In addition, the executive officers through a related
program earn additional compensation for achievement of those goals. The
Committee annually determines the executive officers eligible to participate in
the supplemental program of the Plan and the potential awards to be made for
various levels of achievement under the Plan. The performance goals effective
for 2000 included specific goals for growth, profits, asset quality and
operational productivity or return on equity. In 2000, Philip E. Norwood and Bob
G. Scott participated in the supplemental program for executive officers of the
Corporation.
21
All awards under the Plans are contingent on the Corporation and the
subsidiaries attaining certain basic financial objectives such as return on
assets and/or return on equity. For the most senior executives a portion of each
years annual reward is deferred and held by the Corporation for payment at a
later date. Under the Plan the deferral period is two years. The accumulated
deferred payments may be reduced because of less than satisfactory performance
in any one year.
(iii) Stock Options. In 1993 the Board adopted the 1993 Incentive Stock
Option Plan of Summit Bancshares, Inc. which was ratified by the shareholders of
the Corporation at the 1993 annual meeting. In 1997 the Board adopted the 1997
Incentive Stock Option Plan of Summit Bancshares, Inc. which was ratified at the
1997 annual meeting. It is the Corporation's philosophy that awarding stock
options to officers of the Corporation and the Subsidiary Banks based upon their
respective positions and contributions to the Corporation's and each Subsidiary
Bank's overall success will help attract and retain high quality, results-
oriented professionals committed to creating long-term shareholder value. The
activity for 2000 of these plans can be found in Note 12 to the Financial
Statements in the Annual Report to Shareholders.
(iv) Management Security Plan. Certain executive officers of the
Corporation and its Subsidiary Banks participate in a Management Security Plan
that was approved by the Board of Directors of the Corporation in 1992 and is
administered by the Committee. This plan is more fully described in this proxy
statement beginning on page 17.
(v) Severance Agreement. Severance Agreements have been structured for
two executive officers of the Corporation. These agreements are more fully
described in this proxy statement on page 19.
Through the programs described above, a significant portion of the
Corporation's executive compensation program is linked directly to individual
and corporate performance and long-term shareholder return. The Committee will
continue to review all elements of executive compensation to ensure that the
total compensation program, and each element therein, meets the Corporation's
objectives and philosophy, as discussed above.
22
2000 Compensation of the Chairman of the Board
Mr. Norwood served as the chairman of the board of the Corporation and as
the chairman of the board, president and chief executive officer of Summit
Community Bank, N.A. Mr. Norwood's 2000 base salary was established by the Board
of the Corporation on the Committee's recommendation, which was based on a
survey of peer group institutions. Mr. Norwood participates in the Performance
Compensation Plan at the all employee level and the executive officer level.
Based on the performance of the Corporation and/or it's subsidiaries in 2000, he
earned an award of $37,711of which 45% was from the supplemental executive
program. Also, 20% of the earned award is deferred for a period of two years.
The award, net of the deferral and appropriate taxes, was paid in January 2001.
This performance award was equal to 18% of Mr. Norwood's 2000 base salary.
In April 1993 the Committee granted options to the executive officers of
the Corporation and the Subsidiary Banks under the Stock Plan. At that time Mr.
Norwood was granted an option to purchase 80,000 shares at a price of $3.00 per
share (adjusted for stock splits). These options vested rateably in 1993, 1994
and 1995. The Committee based its decision on the Corporation's improved
performance, including net income, return on assets, reduction in classified and
non-performing assets and improved expense control. No stock options were
granted to Mr. Norwood subsequent to 1993.
December 31, 2000 THE COMPENSATION AND BENEFITS
COMMITTEE OF THE BOARD OF
DIRECTORS
William W. Meadows, Chairman
Ronald J. Goldman
F. S. Gunn
Robert L. Herchert
James L. Murray
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Board of Directors of the
Corporation as it was constituted in 2000 was an officer or employee of the
Corporation or any of its subsidiaries, or, except for Mr. Murray and Mr. Gunn,
the retired Chairman and Vice Chairman of the Board of Directors of the
Corporation, was formerly an officer of the Corporation or any of its
subsidiaries or had any relationships requiring disclosure by the Corporation
under Item 404 of Regulation S-K. During 2000 no executive officer of the
Corporation (i) served as a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Compensation Committee of the Corporation, (ii)
served as a director of another entity, one of whose executive officers served
on the Compensation Committee of the Corporation, or (iii) was a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Corporation.
23
Performance Graph
The following graph compares the cumulative total shareholder return on the
Common Stock of the Corporation with that of the CRSP Total Return Index ("Total
Return") for The Nasdaq Stock Market (US) Index, a broad market index published
by the Center for Research in Security Prices at the University of Chicago, and
the NASDAQ Bank Stocks Index ("Bank Stock"), a bank industry stock index also
published by the Center for Research in Security Prices at the University of
Chicago. The comparison for each of the periods assumes that $100 was invested
on December 31, 1995 in each of the Common Stock of the Corporation, the stocks
included in the CRSP Total Return Index for The NASDAQ Stock Market (US) Index
and the NASDAQ Bank Stocks Index. These indexes, which reflect formulas for
dividend reinvestment and weighing of individual stocks, do not necessarily
reflect returns that could be achieved by individual investors.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE CORPORATION, THE CRSP TOTAL RETURN INDEX
FOR THE NASDAQ STOCK MARKET (US) INDEX,
AND THE NASDAQ BANK STOCKS INDEX
[GRAPH]
At December 31, 1995 1996 1997 1998 1999 2000
- ------------------------------------------------------------------------------------------------
Summit Bancshares, Inc. $100.00 $142.67 $267.61 $239.24 $243.38 $289.35
- ------------------------------------------------------------------------------------------------
Total Return $100.00 $173.88 $212.96 $300.32 $558.11 $335.80
- ------------------------------------------------------------------------------------------------
Bank Stocks $100.00 $196.77 $329.43 $327.32 $314.65 $359.27
- ------------------------------------------------------------------------------------------------
24
CERTAIN TRANSACTIONS
Loans
Certain of the officers, directors and principal shareholders (and their
affiliates) of the Corporation and the Subsidiary Banks have deposit accounts
and other transactions with the Subsidiary Banks, including loans in the
ordinary course of business. All loans or other extensions of credit made by the
Subsidiary Banks to officers, directors and principal shareholders of the
Corporation and the Subsidiary Banks, and to affiliates of such persons, 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 independent third parties and did not involve more
than the normal risks of collectibility or present other unfavorable features.
The Subsidiary Banks expect to continue to enter into such transactions in
the ordinary course of business on similar terms with officers, directors and
principal shareholders (and their affiliates) of the Corporation and the
Subsidiary Banks.
Other Transactions
During the year ended 2000 the Corporation and Summit Community Bank, N.A.
retained Barlow & Garsek, a Professional Corporation, to perform legal services
on behalf of each. Elliott S. Garsek, a director of the Corporation, is a
shareholder of Barlow & Garsek. Also in 2000, the Corporation and its
subsidiaries engaged Kelly, Geren & Searcy as real estate brokers or advisors on
certain real estate transactions. Byron B. Searcy, a director of the
Corporation, is the President and a shareholder of Kelly, Geren & Searcy.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying proxy will be voted "FOR" election of the nominees for
director and Proposal No. 2 unless the proxy is marked in such a manner as to
withhold authority to so vote.
The accompanying proxy will also be voted in connection with the
transaction of such other business as may properly come before the Annual
Meeting of Shareholders, or any adjournment or adjournments thereof. Management
knows of no other matters to be considered at the Annual Meeting of
Shareholders. If, however, any other matters properly come before the Annual
Meeting of Shareholders, or any adjournment or adjournments thereof, the persons
named in the accompanying proxy will vote such proxy in accordance with their
best judgment on any such matter. The persons named in the accompanying proxy
will also, if in their judgment it is deemed to be advisable, vote to adjourn
the meeting from time to time.
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Corporation at its principal
executive offices not later than
25
December 20, 2001 for inclusion in the Corporation's Proxy Statement and
accompanying proxy relating to the next Annual Meeting of Shareholders. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Securities Exchange Act of 1934, as amended. It is anticipated that the next
Annual Meeting of Shareholders will be held on April 16, 2002
ANNUAL REPORTS
Form 10-K. A copy of the Corporation's 2000 Annual Report on Form 10-K,
including the financial statements and schedules thereto, required to be filed
with the Securities and Exchange Commission, may be obtained without charge
(except for exhibits to such Annual Report, which will be furnished upon payment
of the Corporation's reasonable expenses in furnishing such exhibits) by any
shareholder whose proxy is solicited upon written request to:
Summit Bancshares, Inc.
P.O. Box 2665
Fort Worth, Texas 76113
Attention: Mr. Bob G. Scott
2000 Annual Report to Shareholders. The Annual Report to Shareholders of
the Corporation for the Fiscal Year ended December 31, 2000, is enclosed
herewith. The Annual Report, which includes audited financial statements, does
not form any part of the material for the solicitation of Proxies.
BY ORDER OF THE BOARD OF DIRECTORS
By: /s/ Philip E. Norwood
-------------------------------------
Philip E. Norwood, Chairman of the Board
Fort Worth, Texas
March 14, 2001
26
EXHIBIT A
STATEMENT OF AUDIT POLICY
The Audit Committee
The oversight duties of the Board of Directors in regard to financial reporting
and to protecting the company's assets through internal controls shall be
carried out through the Audit Committee appointed by the Board. The Committee
shall consist of three or more independent members.
The independence of any nominee to this committee shall be specifically
addressed by the Board of Directors. A director who has customary commercial,
industrial, banking or underwriting relationships which are carried on in the
ordinary course of business on an arm's-length basis may qualify for membership
unless, in the opinion of the Board of Directors, such director is not
independent of management or the relationship would interfere with the exercise
of independent judgment as a committee member. A director serving as
professional adviser, legal counsel or consultant to management, would not
qualify, if in the opinion of the Board of Directors, such relationship is
material to the Company, the organization represented or the director or if the
director was deemed as not independent of management. A director who might
qualify as a large customer as defined by banking regulations would not qualify.
It is the responsibility of the Audit Committee to retain qualified internal and
external auditors to provide sufficient audit coverage in all major risk areas,
to ensure adequate internal controls, to judge compliance with policies and
procedures, and compliance with generally accepted accounting principles.
The Audit Committee shall be provided with sufficient resources to carry out its
assigned duties and shall have access to legal counsel.
It is the duty of the holding company audit committee to coordinate the overall
audit committee functions with the audit committees of the bank subsidiaries.
Internal Auditor
The internal auditor will remain independent of all line functions and report
directly to the Audit Committee. The internal auditor may be a third party
contractor of audit services. The auditor should have the following
qualifications:
College degree in accounting
Obtained or in process of obtaining CPA certification
Bank auditing experience
Commitment to continuing education
The internal auditor will maintain independence by reporting directly to the
audit committee and not performing any line duties. The duties of the internal
auditor should serve as a complement to
27
sound management decisions, a good internal control system, and external audit
support.
The duties of the internal auditor include but are not limited to the following:
Review for compliance with policies, plans, procedures, and all
applicable laws and regulations, including generally accepted
accounting principles.
Determine whether the systems in place are adequate and operating
properly to ensure compliance on an ongoing basis.
Review the systems in place to safeguard assets and, in certain
instances, to verify the existence of assets.
Analyze various operations or plans to determine that they reflect the
established goals of the board of directors and management.
Perform testing in the end stage of new policy and procedure
implementation to ensure that goals and objectives are met and that
compliance with laws and regulations is achieved.
Communicate the results of the internal audits, both positive and
negative, to appropriate levels of management and the audit committee.
The report will include:
- Summary of results, using ratings of "satisfactory," "needs
improvement," and "unsatisfactory" to judge the condition of the
area.
- Specific deficiencies.
- Recommendations for corrective action.
- Timetable for correction
A follow-up report is required (unless it is a part of the original report),
which must include an acknowledgment and response from the area manager, within
an appropriate time. Corrective follow-up of deficiencies will continue until
all matters are resolved.
Participate on a consultative basis in the planning stages of new
policies, procedures, and control systems for new product offerings
and for new laws and regulations affecting operations, to offer input
on strengthening control and compliance factors.
Review procedures, as set forth in Schedule A to Appendix A of 12 CFR
363,, to test the extent of compliance with the Designated Laws as
required by FDIA section 36(e)(1) and (2). (The Designated Laws
include loans to insiders and dividend restrictions.) This review
will be completed in cooperation with Compliance Auditor of the
Company and the Company's independent accountants.
The internal auditor will coordinate the work of the internal audit function
with that performed by external auditors to ensure adequate audit coverage and
to minimize the duplication of audit efforts.
The internal auditor will consult with the external auditors to establish and
maintain sufficient scope and audit frequency of all major risk areas.
28
The internal audit schedules will be rotating, although an element of surprise
should be maintained. Risk-based auditing assessment and schedule management
will be used. The schedule should not be available to anyone within the bank.
The following areas will be audited within every 12-month period:
Loans (all areas and reserve)
Deposits
Investments
Electronic data processing
Capital
Accounting
Correspondent bank accounts
Operations (proof, cash, tellers, note cage)
Off-balance sheet - accounting and reporting
The scope of the audit will be left to the discretion of the internal auditor.
The scope should be sufficient to test:
Compliance with adopted policies and procedures
Appraisal of soundness and adequacy of accounting, operating, and
administrative controls
Detection of irregularities from proof detail and reconcilements
The internal auditor will be responsible for developing policies and procedures
to guide internal audit staff in the audit of various areas of the bank. The
internal auditor will also develop checklists, questionnaires, and flow charts
to aid the internal audit staff.
It is a requisite that the internal auditor have access to any area or records
required. He or she will maintain control of those records until such time as
the audit is completed and will maintain sufficient work papers to verify scope
and deficiencies and to support conclusions. Work papers may be provided to
external auditors, regulators, and the audit committee if requested.
External Auditors
The board of directors and management of the Company take responsibility for the
financial statements of the Company. The Audit Committee will engage external
auditors to perform an annual audit and to render an opinion on the financial
statements based on their audit.
An engagement letter will be obtained and must be sufficient in scope to render
an opinion on the consolidated financial statements.
29
An external auditor will be chosen that participates in a peer review consistent
with the American Institute of Certified Public Accountants (AICPA) standards.
Prior to engaging an external auditor, it must be verified that the external
audit firm has met the general qualifications, the terms of independence, and a
review by a peer committee, per AICPA standards and the standards of
independence as set forth by Independence Standards Board.
An outside independent audit will be performed on an annual basis. After the
audit is performed, the external auditors are to issue a report containing their
opinion of whether the financial statements fairly present in all material
respects the financial position of the Company and the results of its operations
and of its cash flow for the fiscal year, in conformity with GAAP. Should
management desire a second opinion about any accounting issue, the Audit
Committee must be notified immediately.
The directors of the Company will also require that the external auditors
provide at the conclusion of the independent audit a management letter, if
appropriate.
If a management letter, or any document prepared by the external auditor that
contains significant suggestions or recommendations regarding the Company's
financial statements and reporting, is received from the external auditor, a
copy of this document must be made available to the Audit Committee as soon as
possible.
All findings of the outside independent audit will be reported directly by the
external auditors to the audit committee and the board of directors, as
appropriate.
The external auditor may be engaged to provide support in scope and
methodologies for the internal auditor. Such assistance will pertain to the
establishment of stronger internal controls and audits of management information
systems, in addition to consulting on the establishment of operating policies
and procedures.
The independence of the external auditor is also vital. Therefore, the board
will require the following to ensure that the external auditor's independence is
not impaired:
The company will not extend unsecured credit to the external auditor's
firm or individuals employed by that firm.
At no time will external auditors make management decisions.
Members of the external audit firm must not hold stock in the Company.
Compliance Officer
The Board of Directors shall designate an officer of the corporation to serve as
the Corporate Compliance Officer. The duties of the Compliance Officer shall
include the following:
1. Conduct compliance audits to ensure procedures are in place and being
followed that result in compliance with regulatory requirements of
consumer credit and deposit accounts. Report findings to management and
make suggestions of corrective action, when needed.
30
2. Establish and maintain an ongoing program of compliance training for
all employees, where appropriate.
3. Assist in updating and reviewing bank policies and procedures in light
of regulatory changes, internal audits, and examinations by the
Comptroller of the Currency.
4. Monitor the Bank's CRA compliance and community involvement activities
along with consumer complaints.
5. Assist in establishing and maintaining record keeping procedures in
regards to compliance.
6. Assist bank personnel during examinations by the Comptroller of the
Currency and monitor implementation of needed corrective action.
7. Continue with regulatory education to maintain proficient knowledge to
assist employees and officers in research.
The compliance audits will be completed in a timely manner. The following areas
will be audited every 12 months:
. Deposits & Wires
. CRA & Fair Lending
. Lending (Consumer, Real Estate, Open End)
. Marketing/Advertising
. Financial Record-keeping
. Non-Deposit Investments
. Reg. O (Lending Limits and Insider Lending)
. Safe Deposit Boxes
. Network Banking
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The scope of the audits should be sufficient to test compliance with bank
policies and procedures and to detect areas where training is needed.
The Compliance Officer shall have unrestrained access to the Audit Committee
which shall serve also as a Compliance Committee. The Committee should be
contacted immediately on any matter that might be deemed urgent.
The Compliance Officer shall have unrestrained access to all areas within the
bank to complete the audits and have the full cooperation of employees when
needed.
The Compliance Officer shall submit examination reports directly to the
appropriate bank officers and concurrently send copies to the Audit Committee.
31
Management Reporting Responsibilities
The Company will submit to its primary regulator audited consolidated financial
statements prepared in accordance with generally accepted principles (GAAP).
A management report signed by the Company's chief financial officer will be
prepared as of the end of the most recent fiscal year. It will contain a
statement regarding the following management responsibilities:
Preparation of the Company's annual financial statement.
Establishment and maintenance of adequate internal controls and
procedures for financial reporting, including a description of the
activities the controls encompass.
Compliance with the laws and regulations relating to safety and
soundness that are designated by the Company's primary regulators.
32
SUMMIT BANCSHARES, INC.
Proxy Solicited on Behalf of the Board of Directors of the Corporation
For Annual Meeting of Shareholders
April 17, 2001
The undersigned hereby constitutes and appoints James L. Murray, F. S. Gunn
and Elliott S. Garsek, and each of them, proxies with full power of substitution
to vote, as directed below, all the shares of Common Stock of Summit Bancshares,
Inc. (the "Corporation") held of record by the undersigned at the close of
business on March 12, 2001, at the Annual Meeting of Shareholders to be held at
Fort Worth Botanic Gardens, 3220 Botanic Garden Boulevard, Fort Worth, Texas, at
3:30 p.m. on April 17, 2001, and at any adjournment or adjournments thereof.
1. ELECTION OF DIRECTORS - Nominees: D. Jerrell Farr, Elliott S. Garsek,
Ronald J. Goldman, F.S. Gunn, Robert L. Herchert, Jay J. Lesok,
William W. Meadows, James L. Murray, Philip E. Norwood, Byron B.
Searcy and Roderick D. Stepp.
MARK ONLY ONE BOX [_] VOTE FOR all nominees listed above, except
vote to be withheld from the following
nominees, if any:
__________________________________________________
[_] VOTE TO BE WITHHELD from all nominees
2. APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS. Proposal to approve
the appointment of Stovall, Grandey & Whatley as independent auditors
of the Corporation for the fiscal year ending December 31, 2001, as
described in PROPOSAL NO. 2 of the Proxy Statement dated March 14,
2001.
FOR ____ AGAINST ____ ABSTAIN ____
3. OTHER BUSINESS. In their discretion upon such other business as may
properly come before the meeting, or any adjournment or adjournments
thereof.
FOR ____ AGAINST ____ ABSTAIN ____
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL THE NOMINEES LISTED ABOVE, "FOR" PROPOSAL NO. 2, AND, IN THE
DISCRETION OF THE PERSONS DESIGNATED HEREIN AS PROXIES, UPON SUCH OTHER BUSINESS
AS MAY COME BEFORE THE MEETING AND ANY ADJOURNMENT OR ADJOURNMENTS THEREOF. The
undersigned hereby revokes any proxy or proxies heretofore given and hereby
confirms all that said attorneys and proxies, or any of them, or their
substitutes may do by virtue hereof. In addition, receipt of the 2000 Annual
Report, the Notice of Annual Meeting and the Proxy Statement of Summit
Bancshares, Inc. dated March 14, 2001, is hereby acknowledged.
SHARES OF COMMON STOCK: _________ DATED: ______________, 2001
Please date this proxy and sign your name
exactly as it appears hereon, and mail today.
Where there is more than one owner, each
should sign. When signing as an attorney,
administrator, executor, guardian, or trustee,
please add your title as such. If executed by
a corporation, this proxy should be signed by
a duly authorized officer. _________________________________
Signature of Shareholder(s)
_________________________________
Street Address
_________________________________
City State Zip Code
NOTE: I ___ WILL ___ WILL NOT ATTEND THE SHAREHOLDERS MEETING
ON APRIL 17,2001.