<PAGE>
RULE 424(b)(3)
SEC FILE NUMBER 333-38997
FIRST NATIONAL SUMMIT BANKSHARES, INC.
201 Main Street
Gunnison, CO 81230
(970) 641-1621
November 10, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
First National Summit Bankshares, Inc. ("Summit") to be held on Monday,
December 1, 1997, at 9:00 a.m., local time, at 201 Main Street,
Gunnison, Colorado.
The purpose of the meeting is to seek your approval of the Restated
Agreement and Plan of Merger, as amended, between Summit and Community First
Bankshares, Inc. ("CFB"), dated as of August 22, 1997 (the "Merger Agreement")
and the merger of Summit with and into CFB contemplated thereby (the "Merger").
If the Merger is consummated, each outstanding share of preferred stock, $100.00
par value per share, of Summit ("Summit Preferred Stock") will be converted into
the right to receive in cancellation thereof, the sum of $100.00 plus accrued
but unpaid dividends thereon. If the Merger is consummated, each outstanding
share of common stock, par value $.09 per share, of Summit ("Summit Common
Stock") (other than shares held by dissenting shareholders) will be converted
into shares of common stock, par value $.01 per share, of CFB ("CFB Common
Stock"). The number of shares of CFB Common Stock to be exchanged for shares of
Summit Common Stock will be determined by a formula set forth in the Merger
Agreement, which is more fully described in the accompanying Proxy
Statement-Prospectus. Fractional shares will not be issued. Cash will be paid
in lieu of fractional shares.
The accompanying Proxy Statement-Prospectus is a proxy statement for the
Special Meeting and a prospectus describing the shares of CFB Common Stock to be
issued in the Merger. The Proxy Statement-Prospectus and the copy of the Merger
Agreement attached as Appendix A describe the proposed Merger more fully and
include detailed information about Summit and CFB. Please read this information
carefully before voting on the proposed Merger.
AFTER CAREFUL CONSIDERATION OF THE TERMS OF THE PROPOSED MERGER, YOUR BOARD
OF DIRECTORS HAS CONCLUDED THAT THE ACQUISITION OF SUMMIT BY CFB IS IN THE BEST
INTERESTS OF SUMMIT AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE MERGER.
Your Board believes that the Merger will, among other things, give Summit
shareholders a fair price for their Summit Preferred Stock and Summit Common
Stock and the opportunity to convert their shares of Summit Common Stock on a
tax-free basis to shares in a larger, more diversified enterprise engaged in the
banking business in many areas, including our region. CFB Common Stock is
traded in the over-the-counter market on the Nasdaq National Market System.
Provided you are not an executive officer, director or significant shareholder
of Summit, your shares of CFB Common Stock will be freely tradable upon the
consummation of the Merger.
You should consult your own tax advisor concerning the federal income tax
consequences, and any applicable foreign, state, local or other tax
consequences, of the Merger.
We hope that you will be able to attend the Special Meeting. The Merger
Agreement must be approved by the holders of two-thirds of the outstanding
shares of Summit Common Stock. Whether or not you plan to attend, we urge you
to COMPLETE, SIGN, DATE AND RETURN the accompanying proxy card to make certain
that your shares will be represented at the Special Meeting. If you decide to
attend the Special Meeting and wish to vote your shares personally, you may
revoke your proxy at any time.
Sincerely,
/s/ James C. Noone, D.V.M.
James C. Noone, D.V.M.
CHAIRMAN
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
201 Main Street
Gunnison, CO 80123
(970) 846-4464
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 1, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of First
National Summit Bankshares, Inc. ("Summit") will be held on Monday,
December 1, 1997, at 9:00 a.m., local time, at 201 Main Street,
Gunnison, Colorado, for the following purposes:
1. To consider and vote upon a proposal to approve the Restated Agreement
and Plan of Merger, dated as of August 22, 1997 (the "Merger Agreement") between
Summit and Community First Bankshares, Inc. ("CFB"), a copy of which is
attached to the accompanying Proxy Statement-Prospectus as Appendix A, pursuant
to which Summit will be merged with and into CFB (the "Merger"). Upon
consummation of the Merger, each outstanding share of preferred stock, $100.00
par value per share of Summit ("Summit Preferred Stock") will be converted into
the right to receive in cancellation thereof, the sum of $100.00 plus accrued
but unpaid dividends thereon. Upon consummation of the Merger, each outstanding
share of common stock, $.09 per share par value, of Summit ("Summit Common
Stock") (other than shares held by dissenting shareholders) will be converted
into shares of CFB common stock, the number of which will be determined by a
formula set forth in the Merger Agreement, which is more fully described in the
accompanying Proxy Statement-Prospectus; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
If the Merger is consummated, the shareholders of Summit who dissent from
the proposed Merger and comply with the requirements of Article 113 of the
Colorado Business Corporation Act (the "COBCA") have the right to seek appraisal
for their shares. See "The Merger - Dissenters' Rights" in the accompanying
Proxy Statement-Prospectus for a statement of the rights of dissenting
shareholders and a description of the procedures required to be followed by them
to perfect their dissenters' rights. A copy of Article 113 of the COBCA is
attached as Appendix B to the accompanying Proxy Statement-Prospectus.
[A
The affirmative vote of two-thirds of the outstanding shares of Summit
Common Stock is required to approve the Merger Agreement.
Only holders of record of outstanding shares of Summit Common Stock at the
close of business on October 22, 1997 will be entitled to notice of, and to
vote at, the Special Meeting or any adjournment thereof. Shareholders will be
able to revoke their proxies by submitting a substitute proxy bearing a later
date or by attending the meeting, revoking their proxy and voting in person.
By Order of the Board of Directors
/s/ James C. Noone, D.V.M.
James C. Noone, D.V.M.
CHAIRMAN
Gunnison, Colorado
November 10, 1997
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THE PROXY CARD.
<PAGE>
PROXY STATEMENT-PROSPECTUS
____________________
PROXY STATEMENT FOR SPECIAL MEETING
OF
SHAREHOLDERS OF FIRST NATIONAL SUMMIT BANKSHARES, INC.
TO BE HELD ON DECEMBER 1, 1997
_________________________
PROSPECTUS OF COMMUNITY FIRST BANKSHARES, INC.
_________________________
This Proxy Statement-Prospectus constitutes the Proxy Statement of First
National Summit Bankshares, Inc. ("Summit") to be used in soliciting proxies of
Summit shareholders in connection with the Special Meeting of Shareholders of
Summit to be held on Monday, December 1, 1997. The purpose of the Special
Meeting is to consider and vote upon a proposal to approve the Restated
Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 22,
1997, between Summit and Community First Bankshares, Inc. ("CFB"), pursuant to
which Summit will be merged with and into CFB (the "Merger").
This Proxy Statement-Prospectus also constitutes the Prospectus of CFB with
respect to a maximum of 400,000 shares of CFB common stock, par value $.01 per
share ("CFB Common Stock"), to be issued in connection with the Merger. CFB has
filed a Registration Statement on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"), covering such shares of CFB Common Stock. When
the Merger becomes effective, each outstanding share of Summit common stock, par
value $.09 per share ("Summit Common Stock"), will be converted into shares of
CFB Common Stock, the number of which will be determined by a formula set forth
in the Merger Agreement, which is more fully described herein (the "Exchange
Rate"), and cash will be paid in lieu of fractional shares (cumulatively, the
"Merger Consideration"). See "The Merger - Conversion of Summit Common Stock".
The outstanding shares of CFB Common Stock are, and the shares of CFB
Common Stock offered hereby will be, traded on the Nasdaq National Market
System. The last reported sale price of CFB Common Stock on the Nasdaq National
Market System on November 6, 1997 was $48.75 per share.
This Proxy Statement-Prospectus and form of proxy are first being mailed to
shareholders of Summit on or about November 10, 1997.
THE CFB COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER AND RECEIVED BY
SUMMIT SHAREHOLDERS INVOLVES CERTAIN RISKS. SEE "SPECIAL CONSIDERATIONS
REGARDING CFB."
THE SECURITIES TO BE ISSUED PURSUANT TO THE MERGER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________
The date of this Proxy Statement-Prospectus is November 10, 1997.
<PAGE>
AVAILABLE INFORMATION
CFB has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the offering of CFB
Common Stock to be issued in connection with the Merger, and this Proxy
Statement-Prospectus constitutes a prospectus of CFB filed as part of the
Registration Statement. This Proxy Statement-Prospectus does not contain all of
the information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
CFB is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. Reports,
proxy statements and other information filed by CFB can be inspected and copies
of such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. CFB's Common Stock is quoted on the
Nasdaq National Market System, and such reports, proxy statements and other
information can also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006. The Commission also maintains an internet
web site at http://www.sec.gov containing reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission.
No person is authorized to give any information or make any representation
not contained in this Proxy Statement-Prospectus and if given or made, such
information or representation should not be relied upon. This Proxy
Statement-Prospectus shall not constitute an offer to sell or a solicitation of
an offer to buy any securities in any jurisdiction in which it would be unlawful
to make such offer or solicitation. Neither the delivery of this Proxy
Statement-Prospectus at any time, nor any offer or solicitation made hereunder,
shall under any circumstances imply that the information set forth herein is
correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by CFB with the Commission are incorporated
by reference in this Proxy Statement-Prospectus:
(i) CFB's Annual Report on Form 10-K for the year ended December 31,
1996, as amended on Form 10-K/A filed May 8, 1997;
(ii) CFB's Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 1997;
(iii) CFB's Form 8-K Report filed on July 29, 1997, as amended on
Form 8-K/A filed September 22, 1997;
(iv) CFB's Proxy Statement for the Annual Meeting of Shareholders held on
May 6, 1997 (except to the extent portions of such document are not deemed
incorporated by reference into any filing under the Securities Act or the
Exchange Act); and
(v) The description of CFB's securities set forth in CFB's Form 8-A
Registration Statement filed with the Commission on April 7, 1994 and amended on
September 19, 1994 and in CFB's Form 8-A Registration Statement filed with the
Commission on January 9, 1995.
All documents filed by CFB pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act on or after the date of this Proxy Statement-Prospectus and
prior to the termination of this offering shall be deemed to be incorporated by
reference into this Proxy Statement-Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Proxy Statement-Prospectus, except as
so modified or superseded.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM MARK A. ANDERSON, SECRETARY, COMMUNITY FIRST BANKSHARES, INC.,
520 MAIN AVENUE, FARGO, NORTH DAKOTA 58124-0001; TELEPHONE (701) 298-5600. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
NOVEMBER 21, 1997.
2
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.........................................................2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................2
SUMMARY.......................................................................5
Parties to the Merger:....................................................5
Special Meeting of Summit Shareholders....................................6
Terms of the Merger.......................................................7
SPECIAL CONSIDERATIONS REGARDING CFB.........................................18
Risks Involved in Acquisition Strategy...................................18
Need for Additional Financing............................................18
Regulation...............................................................19
Key Personnel............................................................19
Competition..............................................................19
Status of CFB Common Stock...............................................20
RECENT DEVELOPMENTS REGARDING CFB............................................21
Pending Acquisitions.....................................................21
Significant Acquisitions.................................................21
GENERAL INFORMATION..........................................................23
Purpose of the Special Meeting...........................................23
Vote Required; Shares Entitled to Vote...................................23
Voting and Revocation of the Proxies.....................................23
Solicitation of Proxies..................................................24
MARKET PRICES AND DIVIDEND POLICY............................................25
Market for CFB Common Stock..............................................25
Market for Summit Common Stock...........................................25
Shareholder Data.........................................................25
CFB Common Stock Dividend Payment History and Restrictions...............25
Summit Dividend Policy and Payment History...............................25
THE MERGER...................................................................26
General..................................................................26
Background of the Merger.................................................26
Reasons for the Merger...................................................26
Effective Time of the Merger.............................................27
Consequences of the Merger...............................................27
Conversion of Summit Common Stock........................................28
Indemnity and Escrow.....................................................29
Delivery of CFB Common Stock and Cash Consideration......................29
Certain Federal Income Tax Consequences..................................30
Dissenters' Rights.......................................................31
Representations and Warranties...........................................33
Covenants; Conduct of Summit's Business Pending the Merger...............33
Regulatory Approvals; Conditions to the Merger...........................34
Amendment; Waiver; Termination...........................................35
Effect on Summit Employee Benefit Plans..................................36
Expenses.................................................................36
Accounting Treatment.....................................................36
Interests of Certain Persons; Certain Transactions.......................37
Resale of CFB Common Stock...............................................37
3
<PAGE>
BUSINESS OF SUMMIT...........................................................39
General..................................................................39
First National Summit Bank...............................................39
Market Price of and Dividends on Summit Stock............................40
Legal Proceedings........................................................40
Investment Activities....................................................40
Directors and Executive Officers.........................................40
Transactions with Officers, Directors and Other Affiliates...............40
Supervision and Regulation...............................................41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SUMMIT..................43
Basis of Presentation....................................................43
Results of Operations....................................................43
Summit Condition.........................................................48
SUMMIT'S PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT.............................................59
MATERIAL DIFFERENCES IN RIGHTS OF SUMMIT SHAREHOLDERS........................61
Capital Stock............................................................61
Shareholders' Action Without a Meeting...................................61
Annual Meeting of Shareholders...........................................62
Special Meeting of Shareholders..........................................62
Proxies..................................................................62
Preemptive Rights........................................................62
Cumulative Voting........................................................62
Dissolution..............................................................63
Required Vote for Authorization of Certain Actions.......................63
Dissenters' Rights.......................................................63
Conflicts of Interest....................................................64
Dividends and Distributions..............................................64
Anti-takeover Provisions.................................................65
Charter Amendments.......................................................65
Amendment of Bylaws......................................................65
LEGAL MATTERS................................................................66
EXPERTS......................................................................66
INDEX TO FINANCIAL STATEMENTS...............................................F-1
Appendices:
Appendix A: Restated Agreement and Plan of Merger, dated as of August 22,
1997 between Summit and CFB .................................A-1
Appendix B: Agreement, as amended, dated as of August 22, 1997 between
Summit and CFB ...............................................B-1
Appendix C: Statutory Rights of Dissenting Shareholders (Article 113
of the Colorado Business Corporation Act) ....................C-1
Appendix D: Examples of Calculations of the Exchange Rate ................D-1
4
<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT-PROSPECTUS. REFERENCE IS MADE TO, AND THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS, THE APPENDICES HERETO
AND DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
General. . . . . . . . . . . CFB and Summit have entered into the Merger
Agreement which provides that Summit will be
merged with and into CFB, each outstanding
share of Summit Preferred Stock will be
exchanged for cash and each outstanding share
of Summit Common Stock, other than shares
held by shareholders who perfect statutory
dissenters' rights, will be converted at the
time the Merger becomes effective into shares
of CFB Common Stock, the number of which will
be determined by a formula set forth in the
Merger Agreement and more fully described
below. See "The Merger - Conversion of
Summit Common Stock." Subject to the terms
and conditions of the Merger Agreement, the
Merger will become effective on the date
articles of merger are filed with the
Secretary of State of the State of Colorado
and a certificate of merger is filed with the
Secretary of State of the State of Delaware.
It is presently contemplated that the Merger
will become effective as soon as practicable
after shareholder approval of the Merger.
See "The Merger".
PARTIES TO THE MERGER:
Community First
Bankshares, Inc. . . . . . . Community First Bankshares, Inc., a Delaware
corporation ("CFB"), is a multi-bank holding
company that as of August 31, 1997 operated
banks and bank branches (the "CFB Banks") in
103 communities in Colorado, Iowa, Minnesota,
Nebraska, North Dakota, South Dakota,
Wisconsin and Wyoming and which had total
assets as of August 31, 1997 of $4.2 billion.
CFB operates community banks that provide a
full range of commercial and consumer banking
services primarily to individuals and
businesses in small and medium-sized
communities and the surrounding market areas.
CFB's strategy is to operate and continue to
acquire banks with approximately $20 million
to $150 million in assets primarily in
selected communities with populations between
3,000 and 50,000 in its existing markets of
Colorado, Iowa, Minnesota, Nebraska, North
Dakota, South Dakota, Wisconsin and Wyoming
and in the additional states of Arizona,
Kansas, Montana and Utah. These communities
are believed to provide CFB with a stable,
relatively low-cost deposit base.
CFB provides the CFB Banks with the advantages
of affiliation with a multi-bank holding
company, such as data processing services,
credit policy formulation and review,
investment management and specialized staff
support, while granting substantial autonomy
to managers of the CFB Banks with respect to
day-to-day operations, customer service
decisions and marketing. The CFB Banks are
encouraged to participate in community
activities, support local charities and
community development, and otherwise serve
their communities.
CFB's principal executive offices are located
at 520 Main Avenue, Fargo, North Dakota
58124-0001 and its telephone number is (701)
298-5600.
5
<PAGE>
First National Summit
Bankshares, Inc. . . . . . . First National Summit Bankshares, Inc.
("Summit") was organized as a Colorado
corporation in 1993. It is registered as a
bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA"). Summit
operates within the state of Colorado and owns
all of the outstanding capital stock of First
National Summit Bank, Gunnison, Colorado, with
branches in Crested Butte, Mount Crested Butte
and Grand Junction, Colorado (the "Bank"). As
of June 30, 1997, Summit had consolidated
total assets of $86 million and total
stockholders' equity of $7.2 million.
Following the Merger, Summit will represent
1.65% of the assets, 2.28% of the equity,
2.98% of the revenues, (1.21)% of the net
income and 1.99% of the voting power of CFB,
using data as of June 30, 1997 and based upon
the assumptions set forth in "Actual and Pro
Forma Per Share Data" and "Unaudited Pro Forma
Combined Financial Information" below.
The Bank is a community bank that serves a
wide range of commercial, agricultural and
consumer borrowing needs within its market.
The Bank is primarily engaged in attracting
deposits and investing those funds in loans
and investment securities. The Bank extends
various types of loans, including short- and
long-term residential, agricultural and
commercial real estate mortgage loans to
individuals, farmers, and businesses; secured
and unsecured commercial loans; indirect
installment loans; and second mortgages and
home equity lines. Commercial lending
products include lines and letters of credit,
receivable and inventory financing and
equipment financing. The Bank provides a full
range of deposit products, including checking,
savings accounts, certificates of deposit, and
money market instruments. See "Business of
Summit."
Summit's main office is located at 201 Main
Street, Gunnison, Colorado 86723, and its
telephone number is (970) 641-1621.
SPECIAL MEETING OF SUMMIT SHAREHOLDERS:
Time and Date. . . . . . . . 9:00 a.m., local time, on Monday,
December 1, 1997.
Place. . . . . . . . . . . . 201 Main Street, Gunnison, Colorado.
Purposes of Special Meeting. To consider and vote upon a proposal to
approve the Merger Agreement attached hereto
as Appendix A, which provides for the merger
of Summit with and into CFB. Other terms and
provisions related to the Merger are set forth
in the Merger Agreement and are summarized in
this Proxy Statement-Prospectus. See "The
Merger."
Required Vote For the
Proposals; Record Date . . . Only holders of record of shares of Summit
Common Stock outstanding as of the close of
business on October 22, 1997 (the "Record
Date") are entitled to notice of and to vote
at the Summit Special Meeting. Approval of
the proposal will require the affirmative
vote of two-thirds of the shares of Summit
Common Stock outstanding as of the close of
business on the Record Date. See "General
Information -Vote Required; Shares Entitled to
Vote."
6
<PAGE>
Interests of
Certain Persons;
Certain Transactions . . . . As of the Record Date, the officers and
directors of Summit and their affiliates
beneficially owned 86,000 shares (or
approximately 12.7%) of the outstanding Summit
Common Stock. Pursuant to the Merger
Agreement, the Board of Directors of Summit
has agreed to use its best efforts to obtain
the requisite shareholder approval of the
Merger. See "The Merger - Interests of
Certain Persons; Certain Transactions" and
"Summit's Principal Shareholders and Security
Ownership of Management."
Dissenters' Rights . . . . . Each holder of Summit Common Stock or Summit
Preferred Stock has the right to dissent from
the Merger and obtain payment of the fair
value of such shareholder's stock in cash
pursuant to Article 113 of the Colorado
Business Corporation Act (the "COBCA") in lieu
of receiving the Merger Consideration in the
Merger. Any Summit shareholder contemplating
exercising the right to demand such payment
should carefully review Article 113 of the
COBCA, a copy of which is attached hereto as
Appendix C, and in particular the required
procedural steps. A shareholder who fails to
comply with these procedural requirements may
lose the right to dissent and to obtain
payment of the fair value of such
shareholder's stock. See "The Merger -
Dissenters' Rights."
Special Considerations
Regarding CFB. . . . . . . . For information regarding various risks and
other considerations associated with CFB
Common Stock, see "Special Considerations
Regarding CFB."
Board Recommendation . . . . THE BOARD OF DIRECTORS OF SUMMIT UNANIMOUSLY
RECOMMENDS APPROVAL OF THE MERGER.
TERMS OF THE MERGER:
Conversion of Summit
Shares . . . . . . . . . . . Upon consummation of the Merger, each
outstanding share of Summit Preferred Stock
will be converted into the right to receive in
cancellation thereof, the sum of $100.00 plus
accrued but unpaid dividends thereon. Upon
consummation of the Merger, each outstanding
share of Summit Common Stock (other than
shares subject to dissenters' rights) will be
converted into shares of CFB Common Stock, the
number of which (the "Exchange Rate") will be
determined by dividing 400,000 by the number
of outstanding shares of Summit Common Stock
as of the closing date. The Exchange Rate is
subject to adjustment based upon (i) the
average of the per-share closing price for the
CFB Common Stock on the Nasdaq Market System
for the 20 trading days ending at the end of
the fourth day immediately preceding the
Closing Date (as defined below under "-
Effective Time of the Merger") (the "Trading
Value of CFB Common Stock") and (ii) the
Summit Value, (as such terms are defined below
under "The Merger - Conversion of Summit
Shares") as of the last day of the month
immediately preceding the Effective Time of
the Merger (as defined below under "-
Effective Time of the Merger"). The Exchange
Rate formula is more fully described under
"The Merger - Conversion of Summit Common
Stock," and examples of calculations of the
Exchange Rate (based on various assumptions)
are attached hereto as Appendix D. Upon
consummation of the Merger, approximately
$350,000 in value of CFB Common Stock will be
retained in escrow to fund Summit common
7
<PAGE>
shareholders' obligations to indemnify CFB
against losses or expense attributable to
certain claims. (See "The Merger - Indemnity
and Escrow").
The following table illustrates the estimated
Exchange Rate, based on various assumed levels
of the Trading Value of CFB Common Stock,
various assumed Summit Values and other
assumptions set forth in Appendix D:
Assumed
Trading Value Assumed
of CFB Common Summit Hypothetical
Stock Value Exchange Rate
------------- ----- -------------
$13.706 $6,622,807 .3919:1
45.00 6,600,000 .3399:1
52.00 6,600,000 .2910:1
45.00 7,200,000 .3636:1
THE EXAMPLES IN APPENDIX D, SUMMARIZED IN THE
TABLE ABOVE, REPRESENT AN ESTIMATE OF THE DATA
THAT WILL BE USED TO DETERMINE THE EXCHANGE
RATE. THE ACTUAL EXCHANGE RATE MAY BE LOWER
THAN THE LOWEST AMOUNT PRESENTED. IF THE
ACTUAL SUMMIT VALUE IS $5,940,000 OR LESS
(I.E., 90% OR LESS OF THE LEVEL OF $6,600,000
USED TO CALCULATE THE ESTIMATED EXCHANGE RATES
SET FORTH IN APPENDIX D), THEN THE
SHAREHOLDERS OF SUMMIT WILL BE PROVIDED WITH
UPDATED INFORMATION AND RESOLICITED WITH
RESPECT TO THE APPROVAL OF THE MERGER
AGREEMENT.
Background of Merger . . . . The terms of the Merger were negotiated at
arm's length by the management personnel and
Boards of Directors of CFB and Summit during
the period from June 1, 1997 through August
22, 1997. The Board of Directors of Summit
believes that the Merger is in the best
interests of its shareholders. In reaching
that conclusion, the Board considered, among
other things, the Bank's current relationships
with its regulatory agencies, the greater size
and geographic diversity of CFB, CFB's access
to capital and opportunities for continued
growth in its larger market area, the
economies to be achieved by integrating the
operations of the Bank with the CFB Banks the
likelihood of increased competition as the
result of the rapidly changing environment in
the banking industry with regard to branch
banking, the present market price being paid
for bank stocks as a whole and the liquidity
of the CFB Common Stock which is publicly
traded in the national over-the-counter
market. See "The Merger - Background of the
Merger" and "- Reasons for the Merger."
Conditions to the Merger;
Termination. . . . . . . . . Consummation of the Merger is conditioned upon
the fulfillment of certain conditions set
forth in the Merger Agreement. In addition to
the requirement of regulatory approval, Summit
shareholder approval and certain other
conditions,
8
<PAGE>
the completion of the Merger is subject to the
continuing accuracy of the representations of
the parties made in the Merger Agreement, the
performance of the obligations of each party
under the Merger Agreement and the absence of
threatened or pending litigation challenging
the Merger. In addition, the Merger Agreement
may be terminated by the mutual consent of the
Boards of Directors of CFB and Summit; by
Summit or CFB if any requisite regulatory
approval is denied or if any governmental
entity of competent jurisdiction issues a
final nonappealable order enjoining or
otherwise prohibiting the Merger; by either
Summit or CFB if the Merger is not effective
by December 31, 1997; and by Summit or CFB if
the other party materially breaches any of the
covenants and agreements contained in the
Merger Agreement and such party does not cure
such breach within 20 business days after
receipt of proper notice of such breach.
Subject to certain limitations, CFB may also
terminate the Merger Agreement if CFB objects
to any exceptions in the title insurance
commitments for all real property owned by
Summit and such exceptions are not eliminated
by Summit, or if CFB does not approve the
Phase I Hazardous Waste Assessment of all real
properties owned by Summit and Summit does not
correct or satisfy CFB's objections to such
Assessment. See "The Merger - Regulatory
Approvals; Conditions to the Merger" and "-
Amendment; Waiver; Termination."
Regulatory Approvals . . . . The Merger is subject to approval by the
Federal Reserve Board and the Division of
Banking of the State of Colorado. CFB filed
the required application with the Federal
Reserve Board on September 12, 1997. CFB
filed the required application with the
Division of Banking on September 24, 1997.
See "The Merger - Regulatory Approvals;
Conditions to the Merger."
Effective Time of the Merger Subject to the terms and conditions of the
Merger Agreement, the Merger will be effective
upon the filing of a Certificate of Merger
with the Secretary of State of the State of
Colorado (the "Effective Time of the Merger").
Such filing shall be made following the
satisfaction or waiver of the conditions set
forth in the Merger Agreement or on such other
date upon which the parties may agree (the
"Closing Date"). The parties have agreed to
use their best efforts to cause the Merger to
be completed within thirty business days after
the satisfaction or waiver of the conditions
set forth in the Merger Agreement. The
parties expect the Merger to become effective
as soon as practicable following shareholder
approval of the Merger. See "The Merger -
Effective Time of the Merger."
Certain Federal Income
Tax Consequences . . . . . . The Merger is intended to qualify as a
reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). If the Merger so
qualifies, (i) no gain or loss will be
recognized by the holders of Summit Common
Stock upon their receipt of CFB Common Stock
in exchange for their shares of Summit Common
Stock, except with respect to cash received in
lieu of fractional shares which will result in
a taxable gain or loss, (ii) the aggregate
income tax basis of the CFB Common Stock
received generally will be equal to the
aggregate income tax basis of the Summit
Common Stock surrendered, and (iii) the
holding period of the CFB Common Stock
received generally will include the holding
period of the Summit Common Stock surrendered.
Holders of Summit Preferred Stock will
recognize gain or loss upon receipt of cash in
exchange therefor. Summit's obligation to
consummate the Merger is conditioned upon its
receipt of an opinion to the effect that the
Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code.
9
<PAGE>
EACH HOLDER OF SUMMIT COMMON STOCK OR SUMMIT
PREFERRED STOCK IS URGED TO CONSULT SUCH
HOLDER'S OWN TAX ADVISORS CONCERNING THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER,
AS WELL AS ANY APPLICABLE STATE, LOCAL,
FOREIGN OR OTHER TAX CONSEQUENCES, BASED UPON
SUCH HOLDER'S OWN PARTICULAR FACTS AND
CIRCUMSTANCES. See "The Merger - Certain
Federal Income Tax Consequences" and "-
Regulatory Approvals; Conditions to the
Merger."
Accounting Treatment . . . . The Merger is expected be accounted for as a
pooling of interests for financial reporting
purposes. CFB shall have received a letter,
prior to consummation, from CFB's independent
auditors regarding such firm's concurrence with
CFB management's and Summit management's
conclusions, respectively, as to the
appropriateness of pooling of interests
accounting for the merger under Accounting
Principles Board Opinion No. 16 if closed and
consummated in accordance with the Merger
Agreement. Among other considerations, such
letter will be subject to receipt by Ernst
& Young LLP and CFB of a letter from Summit's
independent auditors relating to the eligibility
of Summit to qualify for pooling treatment, and
to the condition that less than 10% of the
Merger Consideration will consist of cash,
including (i) cash paid to holders of
outstanding shares of Summit Preferred Stock,
(ii) cash paid to holders of outstanding shares
of Summit Common Stock who dissent from the
proposed Merger and received cash for their
shares of Common Stock, and (iii) cash paid in
the Merger in lieu of fractional shares of
Summit Common Stock. See "The Merger -
Accounting Treatment."
Surrender of
Certificates . . . . . . . . As soon as practicable after the Effective
Time of the Merger, a letter of transmittal
with instructions for submission of stock
certificates will be mailed to all Summit
shareholders of record as of the Closing Date
(other than Summit shareholders who have
exercised and not subsequently withdrawn or
lost statutory dissenters' rights).
SHAREHOLDERS SHOULD NOT SUBMIT THEIR SUMMIT
STOCK CERTIFICATES UNTIL SUCH TRANSMITTAL
LETTER AND INSTRUCTIONS ARE RECEIVED. See
"The Merger - Delivery of CFB Common Stock."
Resale of CFB
Common Stock . . . . . . . . The shares of CFB Common Stock issuable to
shareholders of Summit upon consummation of
the Merger will be registered under the
Securities Act. Such shares may be traded
freely and without restriction by those
shareholders not deemed to be "affiliates" of
CFB or Summit as that term is defined in the
rules under the Securities Act. CFB Common
Stock received by those shareholders of Summit
who are deemed to be "affiliates" of Summit
may be resold without registration only as
provided for by Rule 145 under the Securities
Act, or as otherwise permitted under the
Securities Act, following the public release
by CFB of its Summit results for a period that
includes thirty days of combined operations
following the Merger. See "The Merger -
Resale of CFB Common Stock."
Certain Differences in
Rights of Shareholders . . . Upon consummation of the Merger and the
subsequent merger of Summit with and into CFB,
the Summit common shareholders will become CFB
stockholders. As a result, their rights as
shareholders, which are now governed by
Colorado state law and by the Articles of
Incorporation and the Bylaws of Summit, will
be governed by Delaware state law and the
Certificate of Incorporation and the Bylaws of
CFB. See "Comparison of Delaware and Colorado
Corporate Laws" for a summary of certain
material differences between the rights of
holders of Summit Common Stock and the rights
of holders of CFB Common Stock.
10
<PAGE>
In addition, Delaware law substantially
restricts the ability of major shareholders to
effect business combinations with CFB in the
absence of prior approval by the Board of
Directors. Although this legislation should
not interfere with any merger or other
business combination approved by CFB's Board
of Directors, certain shareholders may
consider such legislation to have
disadvantageous effects. Such provisions may
deter the accumulation of sizable equity
interests in CFB and may deprive shareholders
of the benefits of stock price increases
typically associated with hostile tender
offers and other contests for control. CFB
also has adopted a shareholder rights plan
which could in certain circumstances serve as
a deterrent against a change of control not
approved by CFB's Board of Directors. The
existence of such provisions and plan may, in
turn, depress the market price of CFB Common
Stock. See "Comparison of Delaware and
Colorado Corporate Laws."
Market Prices. . . . . . . . The CFB Common Stock is traded in the
over-the-counter market on the Nasdaq National
Market System under the symbol "CFBX", while
the Summit Common Stock is traded sporadically
with no established trading market. The first
public announcement of the proposed Merger was
made during the trading day on August 22,
1997. On that date and on November 6, 1997,
the closing sales price of the CFB Common
Stock was $39.25 and $48.75, respectively.
For further market data, see "Market Prices
and Dividend Policy."
Summit shareholders are advised to obtain
current market quotations for CFB Common
Stock. The market price for CFB Common Stock
could fluctuate between the date of this Proxy
Statement-Prospectus and the Effective Time of
the Merger, which may be a period of several
weeks or months. As a result, the market
value of the CFB Common Stock that Summit
shareholders ultimately receive in the Merger
could be more or less than its market value on
the date of this Proxy Statement-Prospectus or
the date of the Summit Special Meeting. No
assurance can be given concerning the market
price of CFB Common Stock before or after the
Effective Time of the Merger.
11
<PAGE>
HISTORICAL AND PRO FORMA COMPARATIVE UNAUDITED PER SHARE DATA
The following tables present selected comparative unaudited per share
data for CFB on an historical and pro forma combined basis, and for Summit on
an historical and pro forma equivalent basis, giving effect to the Merger
using the pooling of interests method of accounting. See "The Merger -
Accounting Treatment." The pro forma combined per share data is based on an
assumed Exchange Rate of .3919:1 and an assumed Closing Date of June 30, 1997.
The per share data should be read in conjunction with the historical
consolidated financial statements (including the related notes thereto) and the
selected financial data regarding CFB and Summit presented elsewhere herein or
incorporated by reference herein. The per share data is not necessarily
indicative of the results of operations or combined financial position that
would have resulted had the Merger been consummated prior to the periods
indicated, nor is it necessarily indicative of the results of operations of
future periods or future combined financial position.
BOOK VALUE PER COMMON SHARE: June 30, 1997 December 31, 1996
------------- -----------------
CFB - Historical (A) . . . . . . . . . $ 14.00 $ 12.92
Summit - Historical (B). . . . . . . . 6.38 6.93
CFB and Summit pro forma (C) . . . . . 14.04 13.02
Summit pro forma equivalent (D). . . . 5.50 5.10
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE:
<TABLE>
<CAPTION>
Six months Year Ended December 31
Ended June 30, ----------------------------------
1997 1996 1995 1994
--------------- ---- ---- ----
<S> <C> <C> <C>
CFB - Historical (E) . . . . . . . . . $ 1.20 $ 1.85 $ 1.82 $ 1.48
Summit - Historical (F). . . . . . . . (0.27) 0.75 1.22 1.09
CFB and Summit pro forma (G) . . . . . 1.16 1.85 1.86 1.52
Summit pro forma equivalent (H). . . . 0.45 0.73 0.73 0.60
</TABLE>
FULLY DILUTED EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE:
<TABLE>
<CAPTION>
Six months Year Ended December 31,
Ended June 30, ----------------------------------
1997 1996 1995 1994
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
CFB - Historical (I) . . . . . . . . . $ 1.17 $ 1.79 $ 1.74 $ 1.42
Summit - Historical (J). . . . . . . . (0.27) 0.75 1.22 1.09
CFB and Summit pro forma (K) . . . . . 1.14 1.80 1.78 1.45
Summit pro forma equivalent (L). . . . 0.45 0.71 0.70 0.57
</TABLE>
12
<PAGE>
DIVIDENDS DECLARED PER COMMON AND
COMMON EQUIVALENT SHARE:
<TABLE>
<CAPTION>
Six months Year Ended December 31,
Ended June 30, ----------------------------------
1997 1996 1995 1994
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
CFB - Historical . . . . . . . . . . . $ 0.32 $ 0.58 $ 0.48 $ 0.44
Summit - Historical. . . . . . . . . . 0.31 0.62 0 0.34
CFB and Summit pro forma (M) . . . . . 0.32 0.58 0.48 0.44
Summit pro forma equivalent (N). . . . 0.13 0.23 0.19 0.17
</TABLE>
____________________
(A) Based on 18,672,914 and 17,151,874 shares of CFB's Common Stock outstanding
as of June 30, 1997 and December 31, 1996, respectively.
(B) Based on 953,708 and 949,708 shares of Summit's Common Stock outstanding as
of June 30, 1997 and December 31, 1996, respectively.
(C) Represents the pro forma combined net book value of CFB and Summit, divided
by the sum of (i) the number of shares of CFB's Common Stock outstanding as
of June 30, 1997 or December 31, 1996, plus (ii) the maximum number of
shares of CFB's Common Stock issuable pursuant to the Merger at an assumed
Exchange Rate of .3919:1. .
(D) Represents the amount computed pursuant to Note "C" above, at an assumed
Exchange Rate of .3919:1.
(E) Based on average shares of CFB's Common Stock and Common Stock equivalents
outstanding of 18,343,078 for the six months ended June 30, 1997 and for
the years ended December 31, 1996, 1995, and 1994 of 16,699,021, 15,543,129
and 14,580,309, respectively.
(F) Based on average shares of Summit's Common Stock and common share
equivalents outstanding of 950,781 for the six months ended June 30, 1997
and for the years ended December 31, 1996, 1995, and 1994 of 955,488,
1,015,931 and 913,202, respectively.
(G) Amount reflects net primary earnings per common share and common share
equivalents before extraordinary item and cumulative effect of accounting
change on a pro forma combined basis. Such amount is determined by
dividing pro forma combined net income by the weighted average number of
shares of CFB's Common Stock and common share equivalents outstanding
during the applicable period and the shares of CFB's Common Stock assumed
to be issued pursuant to the Merger at an assumed Exchange Rate of .3919:1.
(H) Represents the amount computed pursuant to Note "G" above, multiplied by
the assumed Exchange Rate of .3919:1.
(I) Based on average shares of CFB's Common Stock and Common Stock equivalents
outstanding on a fully diluted basis of 18,773,723 for the six months ended
June 30, 1997 and for the years ended December 31, 1996, 1995 and 1994 of
18,154,966, 17,276,050 and 16,136,433, respectively.
(J) Based on average shares of Summit's Common Stock and common share
equivalents outstanding on a fully-diluted basis of 965,708 for the six
months ended June 30, 1997 and for the years ended December 31, 1996, 1995,
and 1994 of 971,488, 1,027,442 and 913,202, respectively.
(K) Footnote "G" on a fully-diluted basis.
(L) Represents the amount computed pursuant to Note "K" above, multiplied by
the assumed Exchange Rate of .3919:1.
(M) The pro forma combined dividends declared assume no changes in the
historical dividends declared per CFB common share.
(N) Represents the amount computed pursuant to Note "M" above multiplied by the
assumed Exchange Rate of .3919:1.
13
<PAGE>
CFB SELECTED FINANCIAL DATA
The following table sets forth certain consolidated financial data
concerning CFB. The selected financial data for each of the five years ended
December 31, 1996 is derived from the audited consolidated financial statements
of CFB, and related notes thereto, incorporated herein by reference. The
selected financial data as of and for the six months ended June 30, 1997 and
1996 have been derived from CFB's unaudited consolidated financial statements.
The unaudited consolidated financial statements reflect, in the opinion of
management, all adjustments of a normal recurring nature necessary for a fair
presentation of financial condition and results of operations. The results for
the six months ended June 30, 1997 are not necessarily indicative of the results
to be expected for the entire year. The summary financial data should be read
in conjunction with the consolidated financial statements of CFB, and the
related notes thereto, and Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated by reference in CFB's Annual
Report on Form 10-K for the year ended December 31, 1996, which report is
incorporated herein by reference.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
----------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Interest income. . . . . . . . . . $ 126,903 $ 109,201 $ 229,426 $192,868 $ 143,237 $ 121,146 $ 115,309
Interest expense . . . . . . . . . 51,089 45,522 95,234 82,891 53,468 47,271 50,870
--------- --------- --------- --------- ---------
Net interest income. . . . . . . . 75,814 63,679 134,192 109,977 89,769 73,875 64,439
Provision for loan losses. . . . . 5,032 2,331 6,757 2,711 1,839 2,149 2,433
--------- --------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses . . . . 70,782 61,348 127,435 107,266 87,930 71,726 62,006
Noninterest income . . . . . . . . 19,968 12,617 27,370 22,488 18,992 18,158 14,640
Noninterest expense. . . . . . . . 57,716 46,657 104,288 82,593 70,241 60,854 52,992
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes,
extraordinary item and
cumulative effect of
accounting change . . . . . . . . 33,034 27,308 50,517 47,161 36,681 29,030 23,654
Provision for income taxes . . . . 11,102 9,439 18,007 17,208 13,952 10,775 8,546
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary
item and cumulative effect
of accounting change. . . . . . . 21,932 17,869 32,510 29,953 22,729 18,255 15,108
Extraordinary item, net of tax (1). . (265) -- -- -- -- -- --
Cumulative effect of accounting
change. . . . . . . . . . . . . . -- -- -- -- -- 359 --
--------- --------- --------- --------- --------- --------- ---------
Net income . . . . . . . . . . . . 21,667 17,869 32,510 29,953 22,729 18,614 15,108
Dividends on preferred stock (2) . -- 805 1,610 1,610 1,091 -- --
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to common
equity. . . . . . . . . . . . . . $ 21,667 $ 17,064 $ 30,900 $ 28,343 $ 21,638 $ 18,614 $ 15,108
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per common and common
equivalent share:
Primary earnings per share before
extraordinary item and cumulative
effect of accounting change. . . $ 1.20 $ 1.04 $ 1.85 $ 1.82 $ 1.48 $ 1.29 $ 1.07
Extraordinary item, net of tax (1) (0.02) -- -- -- -- -- --
Cumulative effect of accounting
change . . . . . . . . . . . . . -- -- -- -- -- 0.03 --
Primary earnings per share. . . . $ 1.18 $ 1.04 $ 1.85 $ 1.82 $ 1.48 $ 1.32 $ 1.07
Fully diluted earnings per share
before extraordinary item and
cumulative effect of accounting
change . . . . . . . . . . . . . $ 1.17 $ 1.00 $ 1.79 $ 1.74 $ 1.42 $ 1.27 $ 1.07
Extraordinary item, net of tax (1) (0.02) -- -- -- -- -- --
Cumulative effect of accounting
change . . . . . . . . . . . . . -- -- -- -- -- 0.03
Fully diluted earnings per share. $ 1.15 $ 1.00 $ 1.79 $ 1.74 $ 1.42 $ 1.30 $ 1.07
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Average common and common
equivalent shares outstanding:
Primary. . . . . . . . . . . . . . . . 18,343,078 16,451,408 16,699,021 15,543,129 14,580,309 14,098,585 14,080,526
Fully diluted. . . . . . . . . . . . . 18,773,723 17,923,147 18,154,966 17,276,050 16,136,433 14,396,532 14,087,606
HISTORICAL OPERATING RATIOS AND OTHER
DATA:
Return on average assets (3). . . . . . . 1.41% 1.30% 1.13% 1.24% 1.13% 1.10% 1.04%
Return on average common
shareholders' equity (3). . . . . . . . 18.22% 18.27% 15.69% 18.19% 16.77% 16.64% 15.10%
Net interest margin (3) . . . . . . . . . 5.53% 5.24% 5.32% 5.06% 4.95% 4.74% 4.85%
Net charge-offs to average loans (3). . . 0.21% 0.12% 0.22% 0.17% 0.00% 0.08% 0.33%
HISTORICAL FINANCIAL CONDITION DATA
(END OF PERIOD):
Assets. . . . . . . . . . . . . . . . . . $3,164,899 $2,818,818 $3,116,398 $2,769,976 $2,130,619 $1,883,794 $1,576,275
Loans . . . . . . . . . . . . . . . . . . 2,175,593 1,851,429 2,064,108 1,767,193 1,330,146 1,037,666 813,550
Investment securities (4) . . . . . . . . 711,357 723,213 729,236 717,342 613,239 653,722 579,078
Deposits. . . . . . . . . . . . . . . . . 2,470,691 2,322,394 2,537,440 2,359,716 1,794,565 1,627,989 1,374,859
Long-term debt. . . . . . . . . . . . . . 78,566 39,086 46,750 81,288 38,092 48,354 18,015
Preferred shareholders' equity (2). . . . -- 23,000 22,988 23,000 23,000 -- --
Common shareholders' equity . . . . . . . 261,385 190,999 221,583 181,004 134,701 125,071 103,911
Book value per common share . . . . . . . 14.00 11.80 12.92 11.25 9.23 8.78 7.64
Tangible book value per
common share. . . . . . . . . . . . . . 11.88 9.64 10.63 9.08 8.09 7.93 7.01
HISTORICAL FINANCIAL CONDITION RATIOS
(END OF PERIOD):
Nonperforming assets to total loans
and OREO. . . . . . . . . . . . . . . . 0.77% 0.38% 0.70% 0.31% 0.34% 0.62% 1.13%
Allowance for loan losses to
total loans . . . . . . . . . . . . . . 1.39% 1.30% 1.27% 1.29% 1.30% 1.38% 1.38%
Allowance for loan losses to
nonperforming loans . . . . . . . . . . 203% 479% 201% 608% 537% 296% 224%
REGULATORY CAPITAL RATIOS
(END OF PERIOD):
Tier 1 capital. . . . . . . . . . . . . . 11.26% 8.82% 8.88% 8.51% 10.64% 10.16% 10.97%
Total capital . . . . . . . . . . . . . . 15.34% 11.19% 11.10% 11.18% 13.46% 13.44% 12.47%
Leverage ratio. . . . . . . . . . . . . . 8.89% 6.53% 6.62% 6.10% 7.12% 6.12% 6.40%
NET INCOME AND RATIOS EXCLUDING
GOODWILL AND OTHER INTANGIBLE ASSETS
AMORTIZATION AND BALANCES:
Net income applicable to common
equity. . . . . . . . . . . . . . . . . $ 23,336 $ 18,365 $ 33,714 $ 30,522 $ 23,194 $ 19,948 $ 15,896
Fully diluted earnings per share. . . . . $ 1.24 $ 1.07 $ 1.95 $ 1.86 $ 1.50 $ 1.39 $ 1.13
Return on average assets (3). . . . . . . 1.53% 1.41% 1.25% 1.34% 1.22% 1.18% 1.10%
Return on average common
shareholders' equity (3). . . . . . . . 19.62% 19.67% 17.12% 19.58% 17.98% 17.83% 15.89%
</TABLE>
- ------------------------------------
(1) Represents the loss from early extinguishment of debt, less applicable
income taxes of $159,000.
(2) CFB redeemed its 7% Cumulative Convertible Preferred Stock in
March 1997.
(3) Annualized based on results for the six months ended June 30, 1997 and
1996.
(4) Includes available-for-sale securities and held-to-maturity securities.
15
<PAGE>
SUMMIT SELECTED FINANCIAL DATA
The following table sets forth certain consolidated financial data
concerning Summit. The historical selected financial data for each of the
three years ended December 31, 1996 is derived from the audited consolidated
financial statements of Summit, including notes thereto. The unaudited
consolidated financial statements reflect, in the opinion of management, all
adjustments of a normal recurring nature necessary for a fair presentation of
financial condition and results of operations. The results for the six
months ended June 30, 1997 are not necessarily indicative of the results to
be expected for the entire year. The financial data as of and for the six
months ended June 30, 1997 and 1996 are derived from Summit's unaudited and
consolidated financial statements. This information should be read in
conjunction with the consolidated financial statements of Summit, and the
related notes thereto, Management's Discussion and Analysis of Financial
Condition and Results of Operations appearing elsewhere in this Proxy
Statement-Prospectus.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
---------------- ---------------------------
1997 1996 1996 1995 1994
------ ------ ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Interest income . . . . . . . . . . . . . . . . . . . . 3,795 3,943 7,688 7,722 6,275
Interest expense. . . . . . . . . . . . . . . . . . . . 1,303 1,399 2,725 2,597 1,799
----- ----- ----- ----- -----
Net interest income . . . . . . . . . . . . . . . . . . 2,492 2,544 4,963 5,125 4,476
Provision for loan losses . . . . . . . . . . . . . . . 437 90 579 147 30
----- ----- ----- ----- -----
Net interest income after provision for loan losses . . 2,055 2,454 4,384 4,978 4,446
Noninterest income. . . . . . . . . . . . . . . . . . . 859 782 1,818 1,361 883
Noninterest expense . . . . . . . . . . . . . . . . . . 3,078 2,161 4,822 4,082 3,750
----- ----- ----- ----- -----
Income before income taxes. . . . . . . . . . . . . . . (164) 1,075 1,380 2,257 1,579
Provision for income taxes. . . . . . . . . . . . . . . (9) 384 517 855 580
----- ----- ----- ----- -----
Net income. . . . . . . . . . . . . . . . . . . . . . . (155) 691 863 1,402 999
Dividends on preferred stock. . . . . . . . . . . . . . 105 146 146 159 0
----- ----- ----- ----- -----
Net income applicable to common equity. . . . . . . . . (260) 545 717 1,243 999
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Earnings per common and common equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . . (0.27) 0.57 0.75 1.22 1.09
Fully diluted . . . . . . . . . . . . . . . . . . . . (0.27) 0.57 0.75 1.22 1.09
Average common and common equivalent shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . 950,781 961,300 955,488 1,015,931 913,202
Fully diluted . . . . . . . . . . . . . . . . . . . . 965,708 977,300 971,488 1,027,442 913,202
HISTORICAL OPERATING RATIOS AND OTHER DATA:
Return on average assets(1) . . . . . . . . . . . . . . (0.34)% 1.47% 0.92% 1.51% 1.23%
Return on average common shareholders' equity(1). . . . (8.32)% 17.76% 11.33% 19.10% 21.38%
Net interest margin(1). . . . . . . . . . . . . . . . . 6.22% 6.05% 5.96% 6.09% 6.31%
Net charge-offs to average loans(1) . . . . . . . . . . 0.74% 0.30% 0.49% 0.33% 0.03%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
---------------- ---------------------------
1997 1996 1996 1995 1994
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
HISTORICAL FINANCIAL CONDITION DATA (END OF PERIOD):
Assets. . . . . . . . . . . . . . . . . . . . . . . . . 86,013 92,498 97,184 94,908 94,436
Loans . . . . . . . . . . . . . . . . . . . . . . . . . 58,183 65,314 64,255 67,824 67,244
Investment securities (2) . . . . . . . . . . . . . . . 16,680 13,823 15,424 13,919 17,178
Deposits. . . . . . . . . . . . . . . . . . . . . . . . 77,349 79,915 85,675 85,308 85,882
Long-term debt. . . . . . . . . . . . . . . . . . . . . 468 2,450 2,616 626 -
Preferred shareholders' equity. . . . . . . . . . . . . 1,075 1,200 1,200 1,400 1,700
Common shareholders' equity . . . . . . . . . . . . . . 6,085 6,325 6,584 6,793 5,938
Book value per common share . . . . . . . . . . . . . . 6.38 6.66 6.93 6.93 5.82
Tangible book value per common share. . . . . . . . . . 5.32 5.65 5.91 5.93 5.39
HISTORICAL FINANCIAL CONDITION RATIOS (END OF PERIOD):
Nonperforming assets to total loans and OREO. . . . . . 3.78% 0.54% 3.00% 0.55% 0.29%
Allowance for loan losses to total loans. . . . . . . . 1.82% 0.89% 1.32% 0.87% 0.99%
Allowance for loan losses to nonperforming loans. . . . 48% 164% 44% 160% 344%
REGULATORY CAPITAL RATIOS:
Tier 1 capital . . . . . . . . . . . . . . . . . . . . 9.94% 11.65% 9.95% 10.63% 13.1%
Total capital. . . . . . . . . . . . . . . . . . . . . 11.19% 12.56% 11.19% 11.42% 12.7%
Leverage ratio . . . . . . . . . . . . . . . . . . . . 6.70% 7.84% 7.30% 7.89% 8.4%
- -------------------------------------
</TABLE>
(1) Annualized based on results for the six months ended June 30, 1997 and 1996.
(2) Includes available-for-sale securities and held-to-maturity securities.
17
<PAGE>
SPECIAL CONSIDERATIONS REGARDING CFB
IN ADDITION TO THE OTHER INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS,
SUMMIT'S SHAREHOLDERS SHOULD CONSIDER THE FOLLOWING FACTORS REGARDING CFB. THIS
PROXY STATEMENT-PROSPECTUS, INCLUDING THE INFORMATION INCORPORATED BY REFERENCE
HEREIN, CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934. ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT, IN PART, OF THE RISK FACTORS SET FORTH
BELOW. IN CONNECTION WITH THE FORWARD-LOOKING STATEMENTS WHICH APPEAR IN THESE
DISCLOSURES, PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD
CAREFULLY REVIEW THE FACTORS SET FORTH BELOW.
RISKS INVOLVED IN ACQUISITION STRATEGY
CFB has grown and intends to continue to grow primarily through
acquisitions of banks and other financial institutions. Such acquisitions
involve risks of adversely changing results of operations, unforeseen
liabilities or asset quality problems of the acquired entity and other
conditions beyond the control of CFB, such as adverse personnel relations, loss
of customers because of change of identity and deterioration in local economic
conditions. In connection with the acquisition of financial institutions, CFB
may from time to time acquire new businesses that are different from its core
business of commercial banking and which present operating and strategic
risks different from those confronted in its core business. These various
acquisition risks can be heightened by larger transactions. To date, KeyBank
Wyoming and Mountain Parks Financial Corp. are the largest institutions
acquired by CFB. The proposed acquisition of certain branches of banks
currently owned by Banc One Corporation (the "Bank One Branches") also
represents a large acquisition for CFB, and is expected to be consummated at
about the same time as CFB's proposed acquisitions of Summit and Republic
National Bancorp, Inc. These proposed acquisitions are subject to various
conditions, and there can be no assurance that they will be consummated. See
"Recent Developments -- Pending Acquisitions."
Managing growth through acquisitions, including absorption and training of
personnel, combination of office and operations procedures and related matters,
is a difficult process. In connection with its recent significant
acquisitions, CFB has experienced challenges with data and item processing
conversion, management training, staffing and other operational integration
areas. These issues have resulted in the need for management and support
personnel to allocate increased time to the integration process, in some cases
slowing the acquired institutions' marketing and business development efforts.
Although CFB has taken steps to address the issues resulting from recent
acquisitions, CFB may experience such issues in connection with future
acquisitions, and there can be no assurance that these problems will not result
in disruption or expense.
CFB's management believes future growth in the assets and earnings of CFB
will depend in significant part on consummation of further acquisitions. The
ability of CFB to pursue this strategy depends in part on its capital position
and, in the case of cash acquisitions, on its cash assets or ability to acquire
cash. Further, acquisition candidates may not be available in the future on
terms favorable to CFB. CFB must compete with a variety of individuals and
institutions, including major regional bank holding companies, for suitable
acquisition candidates. Although CFB has focused its attention on smaller
markets, in which CFB believed there was less competition from the money center
banks and major regional bank holding companies, CFB recently acquired
operations in metropolitan areas. CFB may make further acquisitions of
companies with operations in metropolitan areas, in which case it will face more
competition for such acquisitions from larger institutions. Further, certain
regional holding companies have focused on the smaller markets traditionally
targeted by CFB, and there can be no assurance that the acquisition activities
of competitors in these markets will not increase. Such competition is likely
to affect CFB's ability to make acquisitions, increase the price that CFB pays
for certain acquisitions and increase CFB's costs in analyzing possible
acquisitions.
NEED FOR ADDITIONAL FINANCING
CFB's ability to execute its business strategy depends to a significant
degree on its ability to obtain additional indebtedness and equity capital. CFB
is conducting an offering of $40 million of capital securities of a business
trust
18
<PAGE>
subsidiary and intends to offer $50 million of CFB Common Stock, both in
conjunction with the acquisition of the Bank One Branches. CFB has no other
commitments for additional borrowings or sales of equity capital and there can
be no assurance that CFB will be successful in consummating any such future
financing transactions on terms satisfactory to CFB, if at all. Factors which
could affect CFB's access to the capital markets, or the costs of such capital,
include changes in interest rates, general economic conditions and the
perception in the capital markets of the CFB's business, results of operations,
leverage, financial condition and business prospects. Each of these factors is
to a large extent subject to economic, financial, competitive and other factors
beyond CFB's control. In addition, covenants under CFB's current and future
debt securities and credit facilities may significantly restrict CFB's ability
to incur additional indebtedness.
REGULATION
As a bank holding company, CFB is subject to extensive regulation by the
Federal Reserve Board. This regulation limits the manner in which CFB and the
CFB Banks conduct their businesses and obtain financing and is designed
primarily to protect depositors and not to benefit holders of securities of
financial institutions. In addition, the CFB Banks are subject to extensive
regulation by various federal and state regulatory authorities. The banking
industry is subject to changing laws and regulations. Recent trends have
steadily expanded the geographic scope of services that may be offered by the
banking industry and have allowed additional competition in many geographic
regions. In September 1994, the Interstate Banking and Branching Efficiency
Act of 1994 ("IBBEA") was enacted. The IBBEA largely eliminated restrictions
on interstate banking and since June 1, 1997 has permitted interstate
branching, subject to certain options which states may enact by law. Certain
aspects of the IBBEA were clarified and amended in 1997, with the passage of
the Riegle-Neal Clarification Act. The Economics Growth and Regulatory
Paperwork Reduction Act of 1996 ("EGRPRA") streamlined application processes
and eased regulations in several areas, facilitating acquisitions and
expansion of non-banking activities. The IBBEA and EGRPRA may increase
competition by both out-of-state and in-state banking organizations or by
other financial institutions. There can be no assurance that implementation
of and changes in laws and regulations affecting banking will not adversely
affect CFB. See Item 1 of CFB's Annual Report on Form 10-K for the year
ended December 31, 1996, as amended, under the caption "Supervision and
Regulation."
KEY PERSONNEL
Continued profitability of the CFB Banks and CFB are dependent on a limited
number of key persons, including Donald R. Mengedoth, the President and Chief
Executive Officer, Mark A. Anderson, the Executive Vice President and Chief
Financial Officer, and Ronald K. Strand, the Executive Vice President,
Banking Group of CFB. There would likely be a difficult transition period in
case the services of any of these individuals were lost to CFB because of
death or other reasons. There is no assurance that CFB will be able to
retain its current key personnel or attract additional qualified key persons
as needed.
COMPETITION
Banking is a highly competitive industry. The CFB Banks compete directly
with other banks, and lending and financial institutions in their local
communities. The CFB Banks also compete indirectly with regional and national
financial institutions, especially in larger metropolitan market areas in which
CFB has increased its operations as a result of recent acquisitions. Further,
changes in government regulation of banking, particularly recent legislation
which removes restrictions on interstate banking and permits interstate
branching, are likely to increase competition by out-of-state banking
organizations or by other financial institutions in CFB's smaller markets as
well as its metropolitan market areas.
19
<PAGE>
STATUS OF CFB COMMON STOCK
CFB's Board of Directors is authorized, without stockholder approval, to
issue debt instruments or shares of classes or series of preferred stock with
terms and conditions to be determined by the Board of Directors, subject to
certain limitations. CFB is party to a shareholders' rights agreement which
could in certain circumstances serve as a deterrent against a possible change of
control not approved by CFB's Board of Directors. See "Material Differences in
Rights of Summit Shareholders -- Anti-Takeover Provisions."
20
<PAGE>
RECENT DEVELOPMENTS REGARDING CFB
PENDING ACQUISITIONS
CFB is in the process of completing the acquisitions described below.
REPUBLIC NATIONAL BANCORP, INC. On August 28, 1997, CFB executed an
Agreement and Plan of Merger (the "Republic Merger Agreement") with Republic
National Bancorp, Inc., Phoenix, Arizona ("Republic") and Republic Acquisition
Corporation. At June 30, 1997, Republic had one office location in Arizona and
had total assets of approximately $53 million, total deposits of approximately
$48 million and total stockholders' equity of approximately $5 million. On
completion of the merger, and subject to adjustments set forth in the Republic
Merger Agreement, CFB expects to issue approximately 368,500 shares of common
stock to the consenting former holders of Republic common stock. No fractional
shares will be issued in the merger. CFB expects to complete the acquisition of
Republic during the fourth quarter of 1997. The acquisition is expected to be
accounted for as a pooling of interests.
BANK ONE. On September 10, 1997, CFB entered into an Office Purchase and
Assumption Agreement (the "Branch Purchase Agreement") with three subsidiary
banks of Banc One Corporation. The Branch Purchase Agreement generally provides
for the conveyance of 37 branch banks (the "Bank One Branches") located in
Arizona (25 locations), Colorado (8 locations) and Utah (4 locations). At June
30, 1997, the Bank One Branches had total assets of $639 million and loans of
$70 million. Under the terms of the Branch Purchase Agreement, CFB will pay a
purchase price premium equal to 6% of Bank One Branches deposits, or
approximately $38.3 million. Consummation of the Branch Purchase Agreement is
contingent upon regulatory approval, among other things, and is anticipated to
occur during the fourth quarter of 1997. CFB intends to purchase the Arizona
and Utah branches through its newly-acquired Republic subsidiary bank, and
intends to purchase the Colorado branches through CFB's Colorado subsidiary
bank. The acquisition will be accounted for as an acquisition of assets and
assumption of liabilities and will result in the recognition by CFB of
approximately $38.3 million in deposit based intangibles.
CFB intends to capitalize the subsidiary banks that are acquiring the Bank
One Branches through two anticipated public offerings. First, CFB intends to
complete a public offering of CFB Common Stock with an aggregate offering price
of $50 million pursuant to a shelf registration statement filed on October 9,
1997 covering up to $150 million in undesignated debt and equity securities of
CFB. Second, on October 9, 1997, CFB filed a registration statement for a
public offering of $40 million in stated value of capital securities of a
business trust subsidiary of CFB. The principal purpose of these two offerings
is to provide additional Tier 1 capital to CFB to satisfy regulatory capital
requirements in connection with the proposed acquisition of the Bank One
Branches.
SIGNIFICANT ACQUISITIONS
In 1997 and 1996, CFB completed the acquisitions described below.
KEYBANK WYOMING. On July 14, 1997, CFB purchased KeyBank National
Association, Cheyenne, Wyoming ("KeyBank Wyoming"), from KeyCorp, its parent
corporation, for a purchase price of $135 million. KeyBank Wyoming has been
renamed "Community First National Bank." As of June 30, 1997, KeyBank Wyoming
had total assets of approximately $1.1 billion and 28 banking offices located in
24 communities in Wyoming, including Cheyenne, Laramie, Casper, Sheridan and
Jackson, providing a full range of commercial and consumer banking services
throughout the state. The transaction was accounted for as a business
combination using the purchase method of accounting and resulted in the
recognition of goodwill by CFB of approximately $60 million. CFB believes its
Wyoming banking network is the largest in Wyoming.
21
<PAGE>
MOUNTAIN PARKS FINANCIAL CORP. On December 18, 1996, CFB acquired Mountain
Parks Financial Corp. ("Mountain Parks"), a bank holding company that operated a
state chartered bank with full service commercial banking facilities in 17
Colorado communities. At September 30, 1996, Mountain Parks had total assets of
approximately $581.8 million and total stockholders' equity of approximately
$57.1 million. Upon completion of the merger, CFB issued approximately 5.2
million shares of common stock to the former holders of Mountain Parks common
stock. The market value of CFB's Common Stock issued in the merger was
approximately $142.2 million, based on the closing price of CFB's Common Stock
on the Nasdaq National Market on December 18, 1996. The transaction was
accounted for as a pooling of interests. The Mountain Parks banks are located
in winter ski and summer recreational areas in the Colorado mountains and in the
greater Denver/Boulder metropolitan area. Pursuant to commitments made with the
Federal Reserve to address resulting concentrations in certain Colorado banking
markets, CFB sold Mountain Parks banking offices in two Colorado communities.
Mountain Parks primary lending focus is on commercial loans, real estate
mortgage loans, residential real estate construction loans and, to a lesser
extent, consumer loans.
22
<PAGE>
GENERAL INFORMATION
This Proxy Statement-Prospectus is being furnished to the shareholders of
Summit in connection with the solicitation by the Board of Directors of
Summit of proxies to be voted at the Summit Special Meeting of Shareholders
to be held on Monday, December 1, 1997 at 9:00 a.m., local time, and at
any and all adjournments thereof. This Proxy Statement-Prospectus and the
enclosed form of proxy are first being sent to shareholders of Summit on or
about November 10, 1997.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of Summit Common Stock will be asked to
consider and vote upon the Merger Agreement providing for the Merger. Holders
of Summit Preferred Stock are not entitled to vote upon the Merger Agreement,
although they are entitled to exercise dissenter rights, discussed below. A
copy of the Merger Agreement is attached hereto as Appendix A. If any other
matters are properly presented at the Special Meeting for consideration,
including, among other things, consideration of a motion to adjourn the Special
Meeting to another time or place, the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
Pursuant to the Merger Agreement, each holder of Summit Common Stock will
be entitled to receive, for each share of Summit Common Stock held at the
Effective Time of the Merger (other than shares held by dissenting
shareholders), a certain number of shares of CFB Common Stock, the number of
such shares to be determined pursuant to a formula described more fully below.
Cash will be paid in lieu of fractional shares. See "The Merger - Conversion of
Summit Common Stock," "- Dissenters' Rights" and Article 113 of the COBCA
attached hereto as Appendix B.
VOTE REQUIRED; SHARES ENTITLED TO VOTE
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Summit Common Stock will constitute a quorum for the
transaction of business at the Summit Special Meeting. APPROVAL OF THE MERGER
WILL REQUIRE THE AFFIRMATIVE VOTE OF TWO-THIRDS OF THE OUTSTANDING SHARES OF
SUMMIT COMMON STOCK. Holders of record of Summit Common Stock at the close of
business on October 22, 1997 are entitled to receive notice of, and to vote
at, the Summit Special Meeting. At the close of business on October 22, 1997,
there were 965,708 shares of Summit Common Stock outstanding. Each share of
Summit Common Stock will be entitled to one vote.
As of the Record Date, directors and officers of Summit and their
affiliates owned beneficially an aggregate of 86,000 shares (or approximately
12.7%) of the outstanding Summit Common Stock.
VOTING AND REVOCATION OF THE PROXIES
The Board of Directors of Summit has unanimously approved the Merger.
Summit Common shareholders are solicited on behalf of the Board of Directors of
Summit to SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. Shares
represented by proxies properly signed, dated and returned will be voted at the
applicable Special Meeting in accordance with the instructions set forth
therein. If a proxy is properly signed but contains no such instructions, the
shares represented thereby will be voted FOR the Merger and at the discretion of
the proxyholders as to any other matters which may properly come before the
Special Meeting. If an executed proxy card is returned by a broker holding
shares of Summit Common Stock in street name which indicates that the broker
does not have discretionary authority as to certain shares to vote on any
matter, or if a Summit shareholder abstains from voting on any proposal, the
shares represented by such proxy will be considered present at the Special
Meeting for purposes of determining a quorum and for purposes of calculating the
vote, but will not be voted with respect to such matter.
23
<PAGE>
Because the Merger requires the affirmative vote of two-thirds of the total
number of outstanding shares of Summit Common Stock entitled to vote at the
Special Meeting, abstentions and "broker non-votes" will have the same effect as
votes against the proposal.
Holders of shares of Summit Preferred Stock are not entitled to vote on the
Merger.
Each proxy may be revoked at any time before it is voted by executing and
returning a proxy bearing a later date, by giving written notice of revocation
to the Secretary of the Special Meeting or by attending the Special Meeting and
voting in person.
SUMMIT SHAREHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES WITH THEIR
PROXY CARDS. See "The Merger - Delivery of CFB Common Stock."
SOLICITATION OF PROXIES
Following the mailing of proxy soliciting materials, directors, officers
and employees of Summit (who will not be specifically compensated for such
services) may solicit proxies by mail, telephone, telegraph and personal
interviews. Summit will bear the expenses of proxy solicitation, including
reimbursement of reasonable out-of-pocket expenses incurred by brokerage houses
and other custodians, nominees and fiduciaries in forwarding proxy soliciting
material to the beneficial owners of stock held of record by such persons.
24
<PAGE>
MARKET PRICES AND DIVIDEND POLICY
MARKET FOR CFB COMMON STOCK
CFB Common Stock has been traded in the Nasdaq National Market System under
the symbol CFBX since the initial public offering on August 13, 1991. The first
public announcement of the proposed Merger was made during the trading day on
August 22, 1997. On that date and on November 6, 1997, the closing sales
price per share of CFB Common Stock as quoted on the Nasdaq National Market
System was $39.25 and $48.75, respectively.
MARKET FOR SUMMIT COMMON STOCK
Summit Common Stock is not traded on any established public trading market
or in the over-the-counter market. Summit is aware of only limited transactions
involving the sale of Summit Common Stock. The prices for Summit Common Stock
in such transactions are not considered indicative of prices that could be
obtained in an active market involving a substantial number of shares.
SHAREHOLDER DATA
As of October 22, 1997, there were approximately 1,200 owners of record
of CFB Common Stock and an estimated 5,900 additional beneficial shareholders
whose stock was held in street name by brokerage houses.
As of October 22, 1997, there were 34 owners of record of Summit Common
Stock and 6 owners of record of Summit Preferred Stock. See "Summit's Principal
Shareholders and Security Ownership of Management."
CFB COMMON STOCK DIVIDEND PAYMENT HISTORY AND RESTRICTIONS
Since its initial public offering in August, 1991, CFB has paid quarterly
cash dividends on the CFB Common Stock. The final determination of the timing,
amount and payment of dividends on the CFB Common Stock is at the discretion of
the CFB Board of Directors and will depend on conditions then existing,
including CFB's profitability, financial condition, capital requirements and
other relevant factors, including the restrictions described below. The
principal source of CFB's income (including the funds needed to pay dividends on
the CFB Common Stock) is dividends from the CFB Banks. The payment of dividends
by the CFB Banks is subject to certain restrictions imposed by federal and state
banking laws and regulations.
CFB's ability to pay cash dividends on the CFB Common Stock is also subject
to statutory restrictions and restrictions arising under the terms of its
outstanding securities. Under applicable law, cash dividends may be paid only
from surplus, or, if there is no surplus, from net profits earned in the current
and/or preceding fiscal year. Applicable federal regulation of bank holding
companies may also impose restrictions on the ability of a bank holding company
to pay dividends. CFB does not believe that Delaware corporate law, applicable
banking law, or the terms of its securities will materially inhibit its plans to
pay cash dividends on the CFB Common Stock for the foreseeable future.
SUMMIT DIVIDEND POLICY AND PAYMENT HISTORY
The Merger Agreement prohibits Summit from declaring and paying dividends
after the Determination Date (as defined below under "The Merger - Conversion of
Summit Common Stock"). Summit does not intend to pay a dividend during the
term of the Merger Agreement.
25
<PAGE>
THE MERGER
THE FOLLOWING DESCRIPTION CONTAINS, AMONG OTHER INFORMATION, SUMMARIES OF
CERTAIN PROVISIONS OF THE MERGER AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT THEREOF, A COPY OF WHICH IS REPRODUCED AS APPENDIX A
TO THIS PROXY STATEMENT-PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE.
GENERAL
CFB and Summit have entered into the Merger Agreement, which provides that
Summit will be merged with and into CFB, and each outstanding share of Summit
Preferred Stock will be converted into the right to receive in cancellation
thereof the sum of $100.00 plus accrued but unpaid dividends. The Merger
Agreement further provides that each outstanding share of Summit Common Stock,
other than shares held by shareholders who perfect statutory dissenters' rights,
will be converted at the Effective Time of the Merger into shares of CFB Common
Stock, the number of which will be determined by a formula set forth in the
Merger Agreement and more fully described below. See "The Merger - Conversion
of Summit Common Stock." Subject to the terms and conditions of the Merger
Agreement, the Effective Time of the Merger will be on the date a Certificate of
Merger is filed with the Secretary of State of the State of Delaware and
Articles of Merger are filed with the Secretary of State of the State of
Colorado. It is presently contemplated that the Effective Time of the Merger
will be as soon as practicable after shareholder approval of the Merger.
BACKGROUND OF THE MERGER
As a result of Congressionally-enacted changes in the bank regulatory
environment, and as a result of a deterioration in the Bank's relations with its
regulatory agencies, management of Summit concluded that a sale of Summit would
be advisable and in the best interests of its shareholders.
In February, 1997, the executive committee of the Bank authorized Dr. Bob
L. Sellers to contact prospective purchasers. Dr. Sellers initially met with a
representative of CFB on February 17, 1997, and further discussions with CFB
followed later that month. As a result of those discussions, CFB provided
Summit an expression of interest on May 1, 1997. The Board of Summit determined
that the CFB offer was an acceptable basis for further discussions and permitted
on-site due diligence during June 1997. Further negotiations occurred during
the period June 1, 1997 to August 22, 1997. On July 11, 1997, the Board of
Summit approved the basic terms of the Merger and authorized the signing of the
Merger Agreement. On August 22, 1997, the Board of Summit ratified and approved
the Merger Agreement. The Merger Agreement was subsequently amended and
restated effective as of August 22, 1997.
REASONS FOR THE MERGER
The Summit Board of Directors believes the Merger with CFB is in the best
interests of the Summit shareholders. After careful consideration and review,
the Summit Board reached its decision based on an analysis of the following
critical factors:
- With the rapidly changing environment in the banking industry, Summit
would benefit from an association with a larger banking organization
and its resources.
- A business combination with a larger bank holding company would likely
be the most advantageous method for maximizing shareholder value.
- CFB's offer provides greater economic value to Summit shareholders
than Summit would likely be able to generate in the foreseeable future
by remaining independent, which value the Summit Boards deemed greater
than the other offers received by Summit.
26
<PAGE>
- The Summit Board analyzed the possible impact of the pending changes
in the Colorado branch banking operation laws and the likelihood of an
impact of increased competition from lower cost, non-capitalized
branches operating in the markets of the Bank.
- The Summit Board analyzed the present market and price being paid for
bank stocks as a whole.
- The Summit Board analyzed the business, financial condition, results
of operations and prospects of Summit on a stand-alone basis and a
pro-forma basis, assuming a combination of Summit with CFB. The
combined basis appeared to the Summit Board to be favorable to the
Summit shareholders.
- CFB's offer involved a merger on a tax-free basis, giving Summit
shareholders the option of either continuing to participate as a
shareholder in a larger, more geographically diverse regional banking
organization or liquidating their investment by selling their shares
of CFB Common Stock, which is publicly traded on the Nasdaq National
Market System, unlike Summit Common Stock, for which there is no
trading market.
- The Summit Board analyzed the combined strengths of Summit and CFB in
servicing the needs of the communities in Summit's markets, CFB's
management ability and the compatibility of Summit's and CFB's
operating philosophies.
- Summit's Board also considered the current market price of CFB Common
Stock. CFB's dividend payment history, book value and recent
earnings, the terms of the Merger Agreement and other factors.
Based on all of these factors and without attributing relative weights to
any of the foregoing, the Summit Board unanimously recommends that the
shareholders of Summit vote for approval of the Merger.
EFFECTIVE TIME OF THE MERGER
Subject to the terms and conditions of the Merger Agreement, the Effective
Time of the Merger will be on the date a Certificate of Merger is filed with the
Secretary of State of the State of Delaware and Articles of Merger are filed
with the Secretary of State of the State of Colorado. Such filing shall be made
following the satisfaction or waiver of certain conditions set forth in the
Merger Agreement or on such other date upon which the parties may agree. The
parties have agreed to use their best efforts to cause the Merger to be
completed within thirty business days after the satisfaction or waiver of the
conditions set forth in the Merger Agreement. The parties expect the Merger to
become effective as soon as practicable following approval of the Merger by the
shareholders of Summit.
CONSEQUENCES OF THE MERGER
At the Effective Time of the Merger, Summit will merge with and into CFB.
The surviving corporation will be CFB and the separate existence of Summit shall
cease. All properties and assets of every kind held by Summit at the Effective
Time of the Merger will become properties and assets of CFB and CFB will become
liable for all of the debts, liabilities and other obligations of Summit. CFB
will conduct its business under its existing Certificate of Incorporation and
Bylaws. The Board of Directors of CFB will consist of the existing directors of
CFB. The officers of CFB will be designated by its Board. Initially such
officers will consist of the current officers of CFB. At the Effective Time of
the Merger, the holders of certificates representing shares of Summit Common
Stock will cease to have any rights as shareholders of Summit except such
rights, if any, as they may have as a dissenter from the Merger and their sole
rights shall be their right to receive (i) the number of whole shares of CFB
Common Stock into which their shares of Summit Common Stock have been converted
in the Merger (as discussed below), and (ii) the cash value of any fraction of a
share of CFB Common Stock into which their shares of Summit Common Stock have
been converted. At the Effective Time of the Merger, the holders of
certificates representing shares of Summit
27
<PAGE>
Preferred Stock will cease to have any rights as shareholders of Summit, and
their sole rights shall be to receive in cancellation thereof the sum of $100.00
per share plus accrued but unpaid dividends thereon to the Effective Time.
CONVERSION OF SUMMIT COMMON STOCK
At the Effective Time of the Merger, each share of Summit Common Stock
which is not owned by a shareholder exercising dissenter's rights will be
converted at the Exchange Rate into a certain number of shares of CFB Common
Stock, determined as described in this section. Estimates of the Exchange Rate
given various assumptions are set forth in Appendix D.
Under the Merger Agreement, all of the issued and outstanding shares of
Summit Common Stock and any outstanding options, warrants or other rights to
Summit Common Stock shall be exchanged for 400,000 shares of CFB Common Stock.
This Exchange Rate is subject to adjustment based on CFB Trading Value and based
upon Summit Value.
The "Trading Value" of the CFB Common Stock shall be the average of the
per-share closing price for the CFB Common Stock as reported by the NASDAQ
National Market System for the 20 trading days ending at the end of the fourth
trading day immediately preceding the Closing Date. Calculations will be
rounded to three decimal places. If the CFB Trading Value is less than or equal
to $39.50 per share, then the Exchange Rate shall be as set forth above. If the
CFB Trading Value is greater than $39.50 per share, then the Exchange Rate shall
be reduced so that the product of the CFB Trading Value multiplied by the
Exchange Rate shall be $15,800,000.
The "Summit Value" is calculated by using financial statements prepared by
Summit that will be dated as of the last day of the month immediately preceding
the Effective Time of the Merger (the "Determination Date"), which financial
statements will be provided to CFB and its auditor, and which financial
statements shall include a consolidated balance sheet of Summit (the
"Determination Date Balance Sheet"). The "Summit Value" shall be equal to the
total consolidated assets of Summit minus the sum of the total consolidated
liabilities of Summit, as reflected on the Determination Date Balance Sheet.
Total consolidated liabilities of Summit shall include, without limitation,
provisions for taxes and the expenses of the preparation of the final tax return
for Summit. Certain non-recurring expenses of Summit to consummate the Merger,
currently estimated to be $75,000, will be the responsibility of Summit and
will have the effect of reducing the Summit Value. If the Summit Value is less
than $7,000,000, then the Exchange Rate is subject to reduction. The amount of
the reduction is determined by (i) multiplying the difference between the Summit
Value and $7,000,000 by 2.0857 (which is the ratio of the minimum transaction
value divided by the minimum equity requirement) and then (ii) dividing the
foregoing product by $36.50 (which is the minimum CFB Trading Value).
CFB and Summit agreed upon this formula in order to ensure that the shares
of Summit Common Stock are valued fairly to both Summit shareholders and to CFB.
If the Trading Value of the CFB Common Stock is $39.50 or greater, then under
the formula described above, the number of shares of CFB Common Stock received
by Summit shareholders for the share of Summit Common Stock will decline.
Summit Shareholders should note that virtually all components of the Summit
Value used in the above calculation may fluctuate and will not be determined
until after the Special Meeting of Shareholders. If the Summit Value is less
than $7,000,000, the number of shares of CFB Common Stock received by Summit
Shareholders for the Summit Common Stock will decline.
No fractional shares of CFB Common Stock will be issued in connection with
the Merger, but in lieu thereof each holder of shares of Summit Common Stock
otherwise entitled to a fraction of a share of CFB Common Stock will be paid in
cash. The amount paid for a fractional share shall be an amount equal to such
fraction multiplied by the Trading Value of the CFB Common Stock. No
shareholder will be entitled to voting or other rights in respect of any
fractional share.
28
<PAGE>
INDEMNITY AND ESCROW
By Agreement dated as of August 22, 1997, Summit, as agent for its common
shareholders ("Shareholders"), and CFB amended the Merger Agreement to provide
for certain limited indemnification of CFB by Shareholders in the event that, at
any time within five years after the Effective Time, CFB, Summit or the Bank
incurs expense, loss or liability attributable to certain specified actions or
occurrences. The first type of claim relates to: actions or omissions by
officers or directors of Summit or the Bank prior to the Effective Time which
constitute (or are alleged to constitute) (i) a violation of law or regulation,
(ii) a breach of fiduciary duty, or (iii) an unsafe or unsound practice which
caused or is likely to cause more than a minimum financial loss to the Bank (all
of the foregoing items are referred to as "Director/Officer Claims"). The
second type of claim relates to: any discharge, release, or actual or
constructive termination by Summit or the Bank of any officer or employee from
employment prior to the Effective Time who has informed the Bank of alleged
disability (all of the foregoing items are referred to as "Employee Claims").
In each case, specific circumstances support the likelihood of claims. Total
aggregate liability for Shareholders for the Director/Officer Claims and the
Employee Claims is $350,000 (the "Escrow") of which $325,000 is allocated to
Director/Officer Claims and $25,000 is allocated to Employee Claims. Liability
is pro rata among Shareholders, based upon their respective proportionate
ownership of Summit Common Stock. The Escrow will be established at the
Effective Time from a portion of the CFB Common Stock otherwise due the
Shareholders under the terms of the Merger Agreement. The Escrow will continue
until terminated by agreement of the parties or until the fifth anniversary of
the Effective Time, whichever occurs first. The Escrow will be administered by
Colorado Community First National Bank (the "Escrow Agent"). During the term of
the Escrow, each Shareholder will be permitted to direct the Escrow Agent to
sell their portion of the escrowed shares of CFB Common Stock at any time,
substituting the proceeds of sale for the shares in Escrow; however, once sold,
Shareholders will not be permitted to direct the Escrow Agent to reinvest the
cash proceeds into CFB Common Stock again. Claims against the Escrow will
result in the return to CFB of shares from the Escrow equal in value to the
claim. Throughout the term of the Escrow, the value of the shares of CFB Common
Stock in escrow will be deemed to remain at the original CFB Trading Value.
Upon termination of the Escrow, remaining shares of CFB Common Stock or cash
proceeds of sale thereof will be distributed to the respective Shareholders.
DELIVERY OF CFB COMMON STOCK AND CASH CONSIDERATION
Within five business days after the Closing Date, letters of transmittal
will be mailed to each holder of Summit Common Stock and Summit Preferred Stock.
Each such holder will be requested to complete the letter of transmittal and
return such letter, together with the stock certificates representing all of the
shares of Summit Common Stock or Summit Preferred Stock previously owned by such
holder, to the exchange agent designated in the letter of transmittal (the
"Exchange Agent"). The letter of transmittal will specify that delivery shall
be effective and risk of loss and title to Summit certificates shall pass only
upon delivery of the certificates to the Exchange Agent and shall include
instructions for effecting the surrender of the Summit Common Stock certificates
in exchange for a certificate representing shares of CFB Common Stock and the
cash to be paid in lieu of any fractional share. Certificates for CFB Common
Stock will be delivered to or for the account of a holder of Summit Common Stock
only after the Merger is consummated and the holder has surrendered to the
Exchange Agent the old certificates for such holder's Summit Common Stock,
accompanied by a duly executed letter of transmittal in proper form. Cash
considerations for Summit Preferred Stock will be delivered only after the
Merger is consummated and the holder has surrendered to the Exchange Agent the
old certificates for such holder's Summit Preferred Stock, accompanied by a
duly-executed letter of transmittal in proper form.
At the Closing, CFB shall deposit with the Exchange Agent (i) for the
benefit of the holders of shares of Summit Common Stock, certificates dated the
Closing Date representing the shares of CFB Common Stock and the cash to be paid
in lieu of fractional shares to be issued and paid in exchange for the
outstanding shares of Summit Common Stock, and (ii) for the benefit of the
holders of shares of Summit Preferred Stock, the cash to be paid in cancellation
thereof.
29
<PAGE>
If CFB declares a dividend or makes any other distribution declared or made
with respect to shares of CFB Common Stock to be issued or transferred to
holders of Summit Common Stock, no such dividend or distribution will be paid or
made to persons otherwise entitled to receive them until the certificates for
their Summit Common Stock have been surrendered following the Closing Date. The
Exchange Agent shall receive and hold such distributions in its name as agent.
No interest will be paid on the cash in lieu of fractional shares and unpaid
dividends and distributions, if any, payable to Summit shareholders. Holders of
unsurrendered Summit Common Stock certificates shall not be entitled to vote
after the Closing Date at any meeting of CFB shareholders until they have
exchanged their Summit Common Stock certificates.
No transfer taxes will be payable by Summit's shareholders in connection
with the exchange of old certificates representing Summit Common Stock for new
certificates representing CFB Common Stock except that if any new certificate is
to be issued in a name other than that in which the Summit certificate
surrendered in exchange therefor is registered, it will be a condition of such
exchange that the person requesting such exchange pay to the Exchange Agent any
transfer or other taxes required in connection therewith or satisfy the Exchange
Agent that such tax has been paid or is not applicable. At the Effective Time
of the Merger, the stock transfer books of Summit will be closed and no transfer
of Summit Common Stock will thereafter be made on such books.
SUMMIT SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
CFB and Summit expect that the Merger will be treated as a tax-free
reorganization within the meaning of Section 368(a) of the Code and that for
federal income tax purposes, no gain or loss will be recognized by any
shareholder of Summit upon receipt of CFB Common Stock pursuant to the Merger,
except upon receipt of cash in lieu of any fractional share interests of CFB
Common Stock or the exercise of dissenters' rights. The Internal Revenue
Service (the "Service") has not been and will not be asked to rule upon the tax
consequences of the Merger. However, it is a condition to the consummation of
the Merger that Summit receive the opinion of tax counsel that the Merger will
qualify as a tax-free reorganization. The opinion is being supplied by
Lindquist & Vennum P.L.L.P., counsel to CFB, and will be addressed to Summit and
CFB. The following summary of the material United States federal income tax
consequences of the Merger is set forth in reliance upon that opinion. The
conclusions discussed herein are based, in part, upon certain representations
made by Summit and CFB. These conclusions also are based upon the Code,
regulations now in effect thereunder, current administrative rulings practiced,
and judicial authority, all of which are subject to change. An opinion of
counsel is not binding upon the Service, and there can be no assurance, and none
is hereby given, that the Service will not take a position contrary to one or
more of the positions reflected herein or that the opinion will be upheld by the
courts if challenged by the Service. EACH HOLDER OF SUMMIT COMMON STOCK IS
URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF
SUCH FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS OR
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER FEDERAL TAX
CONSEQUENCES ARISING OUT OF THE MERGER.
Based upon the facts and representations provided to it, and subject to
various assumptions and qualifications, Lindquist & Vennum, P.L.L.P. will opine
substantially to the effect that, with regard to the shareholders of Summit, the
following federal income tax consequences will result from the Merger:
(a) The Merger will qualify as a reorganization within the meaning of
Sections 368(a) of the Code;
(b) No gain or loss will be recognized by shareholders of Summit upon the
exchange of their Summit Common Stock solely for CFB Common Stock (but see
clause (e) below for the tax consequences of payments in lieu of fractional
share interests);
(c) The aggregate income tax basis of CFB Common Stock received by each
shareholder of Summit will be equal to the aggregate income tax basis of
the Summit Common Stock surrendered in exchange therefor,
30
<PAGE>
less any amount of the basis allocable to any fractional share interest for
which cash is received, as described in (e), below;
(d) The holding period of CFB Common Stock received by each shareholder of
Summit (including any fractional share interest) will include the period
during which the Summit Common Stock surrendered therefor was held,
provided that such Summit Common Stock was held as a capital asset at the
Effective Time of the Merger;
(e) Each shareholder of Summit receiving cash in lieu of any fractional
share interest of CFB Common Stock will be treated as having received the
fractional share interest in the Merger and then having received the cash
payment as a distribution in full payment in exchange for the fractional
share interest as provided in Section 302(a) of the Code, resulting in a
taxable gain or loss equal to the amount of the cash received less the tax
basis allocated to the fractional share interest; and
(f) Gain or loss will be recognized by Summit shareholders upon the
receipt of cash in exchange for Summit Preferred Stock and any accrued but
unpaid dividends thereon. Any such gain or loss shall be treated as
ordinary gain or loss to the extent it relates to the payment of accrued
and unpaid dividends, and the remainder, if any, of the gain or loss
recognized shall be treated as gain or loss from the exchange of property.
The foregoing is only a general description of certain federal income tax
consequences of the Merger and does not discuss all the tax considerations that
may be relevant to particular Summit shareholders in light of their personal
investment circumstances, or to certain types of shareholders that may be
entitled to special treatment under the Code (such as insurance companies,
dealers in securities, exempt organizations or foreign holders) or to
shareholders of Summit who acquired their Summit Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation. The summary
set forth above does not purport to be a complete analysis of all potential tax
facts of the transactions contemplated by the Merger Agreement or the Merger
itself. No information is provided herein with respect to the tax consequences,
if any, of the Merger under state, local, foreign or other tax laws.
DISSENTERS' RIGHTS
Any common or preferred shareholder of Summit may, as an alternative to
receiving the consideration specified in the Merger Agreement, dissent from the
Merger and obtain of the fair value of such shareholder's Summit Common Stock or
Summit Preferred Stock, as the case may be, pursuant to Article 113 of the
COBCA. "Fair Value" with respect to a dissenter's shares means the value of the
shares immediately before the Effective Time of the Merger, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. Any Summit shareholder contemplating exercising
the right to demand such payment should carefully review Article 113 of the
COBCA, a copy of which is included as Appendix B to this Proxy
Statement-Prospectus, and in particular the required procedural steps. A
SHAREHOLDER WHO FAILS TO COMPLY WITH THESE PROCEDURAL REQUIREMENTS MAY LOSE THE
RIGHT TO DISSENT.
Set forth below, to be read in conjunction with the full text of Article
113 of the COBCA, is a summary of the procedures relating to the exercise of
dissenter's rights. The following summary does not purport to be complete and
is qualified in its entirety by reference to Appendix B. As used in the
following discussion, "Summit" means Summit before the Effective Time of the
Merger and "CFB" as Summit's successor after the Effective Time of the Merger.
A record shareholder may assert dissenter's rights as to fewer than all of
the shares registered in his name only if such shareholder dissents with respect
to all shares beneficially owned by any one person and notifies the corporation
in writing of the name and address of each person on whose behalf such
shareholder asserts dissenter's rights. In that event, such shareholder's
rights shall be determined as if the shares as to which such shareholder
31
<PAGE>
dissents and such shareholder's other shares were registered in the name of
different shareholders. A beneficial shareholder may assert dissenter's rights
as to shares held on such shareholder's behalf only if such shareholder submits
to the corporation a written consent by the record holder to the dissent not
later than the time the beneficial shareholder asserts dissenter's rights and
such shareholder does so with respect to all shares of which the shareholder is
the beneficial owner or over which such shareholder has power to direct the
vote.
Any Summit shareholder who wishes to dissent must deliver to Summit, prior
to the vote on the Merger Agreement, a written notice of intent to demand
payment for such shareholder's shares if the Merger is effected. In addition,
the shareholder must refrain from voting in favor of the Merger Agreement. A
shareholder who fails to deliver the notice on time or who votes in favor of the
Merger Agreement will not have any dissenter's rights. If a shareholder returns
a signed proxy but does not specify a vote against approval of the Merger
Agreement or a direction to abstain, the proxy will be voted for approval of the
Merger Agreement, which will have the effect of waiving that shareholder's
dissenter's rights. If the Merger Agreement is approved by the required vote,
Summit is required to deliver written dissenter's notice to all shareholders who
timely gave notice of intent to demand payment and who did not vote in favor of
the Merger Agreement. The notice must be sent no later than ten (10) days after
the Merger Agreement is approved and must (i) state where the payment demand
must be sent and where and when certificates for certificated shares must be
deposited, (ii) inform shareholders of uncertificated shares to what extent
transfer of the shares will be restricted after payment is received, (iii)
supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the person asserting dissenter's rights to
certify whether or not such shareholder acquired beneficial ownership of the
shares before that date, (iv) set a date by which Summit must receive the
payment demand and certificates for certificated shares, which date shall not be
less than 30 days after the date the required dissenter's notice is given, (v)
may require that, when a record shareholder dissents with respect to the shares
held by any one or more beneficial shareholders, each such beneficial
shareholder must certify to Summit that the beneficial shareholder and the
record shareholder or record shareholders of all of the shares owned
beneficially by the beneficial shareholder have asserted, or will timely assert,
dissenter's rights as to all such shares as to which there is no limitation on
the ability to exercise dissenter's rights, and (vi) be accompanied by a copy of
Article 113 of the COBCA.
A shareholder who is sent the dissenter's notice described above must
demand payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenter's notice,
and deposit such shareholder certificates in accordance with the terms of the
notice. A shareholder who does not demand payment or deposit certificates where
and when required is not entitled to payment for such shareholder's shares. A
shareholder who demands payment and deposits his certificates as requested by
the dissenter's notice retains all rights of a shareholder until such shares are
canceled or modified by the consummation of the Merger. Summit may restrict the
transfer of uncertificated shares from the date of demand for payment until the
Merger is consummated; however, the holder of uncertificated shares retains all
other rights of a shareholder until those rights are canceled or modified by the
consummation of the Merger. Except as provided in the following paragraph, as
soon as the Merger is effected or upon receipt of the payment demand, Summit
must pay each shareholder who has complied with the foregoing requirements the
amount Summit estimates to be the Fair Value of the dissenter's shares, plus
accrued interest. The payment must be accompanied by certain financial
information concerning Summit, a statement of Summit's estimate of the Fair
Value of the shares, an explanation of how the interest was calculated, a
statement of the dissenter's rights to demand payment if the dissenter is
dissatisfied with the payment or offer (as further described in the next
paragraph), and a copy of Article 113 of the COBCA. If the Merger does not
occur within 60 days after the date set in the dissenter's notice for demanding
payment and depositing certificates, Summit must return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares. Notwithstanding the foregoing, Summit may elect to withhold payment
from any dissenter with respect to shares which the dissenter or the person on
whose behalf the dissenter acts was not the beneficial owner before August 22,
1997, the date of the first announcement to news media of the terms of the
Merger. If Summit elects to withhold such payments, after the consummation of
the Merger, Summit must estimate the Fair Value of the shares, plus accrued
interest, and pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. Summit must send with its offer a statement of its
estimate of Fair Value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment if the
dissenter is dissatisfied with the offer.
32
<PAGE>
A dissenter may notify Summit in writing of the dissenter's own estimate of
the Fair Value of the dissenter's shares and the amount of interest with respect
thereto and may demand payment of the dissenter's estimate, less any previous
payments or reject Summit's offer and demand payment of the Fair Value of the
dissenter's shares and the interest due if (i) the dissenter believes the amount
paid or offered is less than the Fair Value of the dissenter's shares or that
the interest due is incorrectly calculated, (ii) Summit fails to make payment
within 60 days after the date set for demanding payment, or (iii) Summit having
failed to effect the Merger does not return the deposited certificates or
release the transfer restrictions on uncertificated shares within 60 days after
the date set for demanding payment. A dissenter waives the right to demand
payment unless the dissenter notifies the corporation of his demand in writing
within 30 days after Summit made or offered payment for the dissenter's shares.
Within 60 days after such subsequent demand is submitted by a shareholder,
if such demand remains unsettled, Summit is required to file in an appropriate
court in Colorado a petition to determine the Fair Value of the shares and
accrued interest. If Summit does not commence the proceeding within the 60-day
period, it is to pay each dissenter whose demand remains unsettled the amount
demanded. Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the Fair Value of the
dissenter's shares, plus interest, exceeds the amount paid by Summit or for the
Fair Value, plus accrued interest, of the dissenter's after-acquired shares for
which Summit elected to withhold payment. The costs and expenses of any such
court proceedings will be assessed against Summit, except that the court may
access any part of those costs as an expense against all or some of the
dissenters who are party to the proceeding and whose action in demanding payment
in addition to that offered by Summit, the court finds to be arbitrary vexatious
or not in good faith. The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the court finds
equitable, against Summit and in favor of any or all of the dissenters if the
court finds that Summit failed to comply substantially with the statutory
requirements or against either Summit or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith. If the court
finds that the services of counsel for any dissenter were of substantial benefit
to other dissenters similarly situated and should not be assessed against
Summit, it may award to the counsel reasonable fees to be paid out of the amount
awarded to the dissenters who are benefitted.
Summit shareholders considering exercising dissenter's rights should bear
in mind that the Fair Value of their Summit Common Stock or Summit Preferred
Stock determined under Article 113 of the COBCA could be more than, the same as,
or less than the value of consideration they will receive pursuant to the Merger
Agreement if they do not exercise their dissenter's rights.
REPRESENTATIONS AND WARRANTIES
Summit and CFB have made customary warranties and representations to each
other regarding, among other things, their businesses, assets, liabilities,
financial condition and results of operations. Generally, warranties,
representations and covenants will have no continuing legal effect after the
Merger is consummated, except for certain provisions, such as (i) CFB's
representation that, with certain exceptions, it has no plan or intention to
dispose of any assets of Summit, and (ii) CFB's obligation to file certain
reports with the Commission to permit affiliates of Summit to rely on certain
exemptions in selling CFB Common Stock.
COVENANTS; CONDUCT OF SUMMIT'S BUSINESS PENDING THE MERGER
Summit has agreed, among other things, that prior to the Effective Time of
the Merger, Summit and the Bank will carry on their respective businesses in the
usual and ordinary course. Summit has further agreed that neither it nor any of
the Bank will, among other things, (i) enter into any new material line of
business, (ii) increase or decrease the current number of the directors of
Summit and each of the Bank, (iii) change its or the Bank' lending, investment,
liability management or other material banking policies in any respect that is
material to such party; or (iv) incur or commit to any capital expenditures (or
any obligations of liabilities in connection therewith) other than capital
expenditures (and obligations or liabilities in connection therewith) incurred
or committed to in the ordinary course of business consistent with past
practices and certain specified items.
33
<PAGE>
In addition, Summit has also agreed to refrain from taking certain actions,
except with the prior written consent of CFB, including the following:
(i) selling any shares of its capital stock; (ii) redeeming any shares of its
capital stock; (iii) certain reclassifications of its capital stock;
(iv) borrowing for a material amount, except in the ordinary course of business;
(v) discharging any lien or encumbrance on the Bank properties other than in the
ordinary course of business; (vi) amending its or the Bank's articles of
association or bylaws; or (vii) declaring or paying any dividends after the
Determination Date.
Summit has also agreed with CFB that it will: (i) hold a special
shareholder meeting to approve the Merger Agreement not later than forty-five
(45) days following the effective date of the Registration Statement; (ii)
recommend by the affirmative vote of a majority of the Summit Board a vote in
favor of approval of the Merger Agreement and use its best efforts to solicit
proxies from its shareholders in favor of the Merger Agreement; (iii) provide
relevant information for, and cooperate in the preparation of, the Registration
Statement; (iv) hold in confidence all information concerning CFB furnished to
Summit; (v) take certain action with respect to its employee benefit plans and
employee compensation; (vi) with certain exceptions, not acquire a substantial
equity interest or a substantial portion of the assets of another entity; (vii)
maintain its current insurance coverage through the Effective Date; (viii) not
take any action which would disqualify the merger as a pooling of interests for
accounting purposes; (ix) prepare and submit certain statements to CFB; and (x)
not solicit any inquiries or proposals from any person or entity for the merger,
consolidation or acquisition of all or substantially all the assets of, or a
substantial equity interest in, Summit, or participate in any discussions or
negotiations, or provide third parties with any nonpublic information, relating
to any such inquiry or proposal. Summit is required to notify CFB promptly upon
receiving any such oral or written offer, giving all relevant details of such
offer. Summit has received no such oral or written offer as of the date hereof.
Summit and CFB have also agreed that between the date of the Merger
Agreement and the Effective Time of the Merger, with certain exceptions, (i)
neither party will amend its Certificate or Articles of Incorporation or Bylaws;
(ii) neither party shall take any action that is intended to result in any of
the representations or warranties in the Merger Agreement to be untrue or that
would adversely affect the ability of the parties to obtain the requisite
regulatory approvals; (iii) Summit will have delivered to CFB within 90 days of
the Merger Agreement, title insurance commitments for all Summit property
located in the State of Colorado. CFB and Summit have agreed to cooperate with
each other in obtaining the requisite regulatory approvals and generally to
afford to each other access to their books and records during each parties'
normal business hours. In addition, Summit and CFB must use their reasonable
best efforts to cause each director, executive officer or other person who may
be deemed an "affiliate" (for purposes of Rule 145 under the Securities Act) of
Summit or CFB to deliver to the other party at least 32 days prior to the
Closing Date, a written agreement providing that the affiliate will not engage
in certain transactions with respect to Summit Common Stock or CFB Common Stock
held by the affiliate.
REGULATORY APPROVALS; CONDITIONS TO THE MERGER
The Merger must be approved by applicable federal and state banking
regulators and by the affirmative vote of a majority of the outstanding shares
of Summit Common Stock. CFB submitted its application for approval of the
Merger to the Federal Reserve Board, the applicable federal regulator, on
September 12, 1997. CFB filed its application with the Division of Banking of
the State of Colorado on September 24, 1997. When received, the approvals of
these agencies reflect only the regulators' view that the transaction does not
contravene the competitive standards of the law and is consistent with
regulatory concerns relating to bank management and to the safety and soundness
of the subject banking organizations and banks. Such approvals are not to be
interpreted as an opinion by such regulators that the Merger is favorable to the
shareholders of CFB or Summit from a financial point of view or that the
regulators have considered the adequacy of the Exchange Rate. Such regulatory
approvals in no way constitute an endorsement or recommendation of the Merger by
such regulators.
CFB and Summit's obligations to consummate the Merger are further subject
to various other conditions set forth in the Merger Agreement, including, but
not limited to: (i) the shares of CFB Common Stock issuable to the Summit
shareholders pursuant to the Merger shall have been approved for listing on the
NASDAQ National Market System; (ii) all consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods imposed by,
any governmental entity (collectively, the "Consents") which are prescribed by
law as necessary for the
34
<PAGE>
consummation of the Merger and the other transactions contemplated pursuant to
the Merger Agreement (other than immaterial Consents) shall have been filed,
occurred or been obtained; (iii) the Registration Statement of which this Proxy
Statement-Prospectus is a part shall have become effective under the Securities
Act, and no stop order suspending the effectiveness of such Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the Commission; (iv) no order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or any of the transactions contemplated pursuant to the Merger Agreement
shall be in effect, nor shall any proceeding by any governmental entity seeking
any such Injunction be pending, and no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, or enforced by any
governmental entity which prohibits, restricts or makes illegal consummation of
the Merger; (v) there shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger or any of the transactions contemplated pursuant to the Merger Agreement,
by any federal or state governmental entity which, in connection with the grant
of a permit, consent or authorization by a governmental entity necessary to
consummate the Merger (a "Requisite Regulatory Approval"), imposes any condition
or restriction upon CFB, Summit, or any of their subsidiaries which would so
materially adversely impact the economic or business benefits of the transaction
contemplated by the Merger Agreement as to render inadvisable, in the reasonable
business judgment of the Board of Directors of either CFB or Summit, the
consummation of the Merger.
The obligation of CFB to consummate the Merger is also subject to certain
additional conditions set forth in the Merger Agreement, including but not
limited to: (i) the continued accuracy of the representations and warranties of
Summit set forth in the Merger Agreement; (ii) the performance by Summit in all
material respects of its obligations required to be performed under the Merger
Agreement; and (iii) CFB shall have received a letter from Ernst & Young
LLP expressing an opinion that the Merger shall qualify as a "pooling of
interests" in accordance with generally accepted accounting principles (see
"Accounting Treatment" below).
The obligation of Summit to consummate the Merger is also subject to
certain additional conditions set forth in the Merger Agreement, including but
not limited to: (i) the continued accuracy of the representations and
warranties of CFB set forth in the Merger Agreement; (ii) the performance by CFB
in all material respects of its obligations to be performed pursuant to the
Merger Agreement; (iii) CFB shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transactions contemplated thereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
CFB or any of its subsidiaries is a party or is otherwise bound, except those
for which failure to obtain such consents and approvals would not, in the
reasonable opinion of Summit, individually or in the aggregate, have a material
adverse effect on CFB or upon the consummation of the transactions contemplated
pursuant to the Merger Agreement; (iv) Summit shall have received the opinion of
tax counsel to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that CFB and Summit will each be a party to that reorganization within the
meaning of Section 368(b) of the Code and that shareholders of Summit who
exchange their shares of the Summit Common Stock for shares of CFB Common Stock
will not recognize a gain or loss, for purposes of federal income tax, except to
the extent of the cash received in lieu of fractional shares; (v) Summit shall
have received an opinion of CFB's legal counsel, Lindquist & Vennum P.L.L.P.,
confirming the due incorporation and good standing of CFB and SAC and authority
to consummate the transaction and that, when issued, the shares will be legally
issued, fully paid and non-assessable.
AMENDMENT; WAIVER; TERMINATION
The Merger Agreement may be amended by written instrument in such manner as
may be agreed upon by the parties, whether before or after approval of the
Merger by the shareholders of Summit, and any provision of the Merger Agreement
may be waived by the party entitled to the benefit thereof; provided, however,
that after the Special Meeting, no amendment may be made which by law requires
further approval of Summit shareholders. Notice of any material amendment or
modification will be sent to Summit shareholders.
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time of the Merger, notwithstanding approval of Summit's
shareholders, only in the following circumstances: (i) the
35
<PAGE>
mutual consent of the Board of Directors of CFB and Summit; (ii) by either party
if (a) any Requisite Regulatory Approval shall have been denied or (b) any
governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger; (iii) by
either party if the Effective Time of the Merger has not occurred by
December 31, 1997, unless such failure of consummation is due to the failure of
the party seeking termination to perform or observe in all material respects the
covenants and agreements to be performed or observed by it under the Merger
Agreement; (iv) by either party if the other party shall have materially
breached any of the covenants and agreements contained in the Merger Agreement
and such party does not cure such breach before the earliest of the Closing Date
or within twenty (20) business days following receipt by the breaching party of
written notice of such breach from the other party; or (v) by CFB in the event
(a) CFB objects to certain exceptions in the attorney's title opinion or title
insurance commitments delivered to CFB by Summit for all real property owned by
Summit or the Bank and such objected to exceptions are not eliminated or
satisfied to the reasonable satisfaction of CFB or (b) CFB does not approve the
Phase I Hazardous Waste Assessment of all real property owned by Summit and the
Bank and Summit does not correct or satisfy CFB's objections to the Assessment.
Upon termination, the Merger Agreement shall become null and void and, with
certain exceptions, shall have no effect, provided that no party will be
relieved from liabilities arising out of a willful breach of the Merger
Agreement.
EFFECT ON SUMMIT EMPLOYEE BENEFIT PLANS
Each person who is an employee of the Bank as of the Effective Time of the
Merger ("Bank Employees") shall be participants in the employee welfare plans,
and shall be eligible for participation in the pension plans of CFB, as in
effect from time to time, subject to any eligibility requirements (with full
credit for years of past service with the Bank, or to any
predecessor-in-interest of the Bank to the extent such service is presently
given credit under the current benefit plans of the Bank, for the purpose of
satisfying any eligibility and vesting requirements) applicable to such plans
(but not subject to any pre-existing condition exclusions). Such eligible
employees shall enter each welfare plan immediately after the Effective Time of
the Merger and shall enter each pension plan not later than the first day of the
calendar quarter which begins at least 32 days after the Effective Time. For
the purpose of determining each Bank Employee's benefit for the year in which
the Merger occurs under the CFB vacation program, vacation taken by a Bank
Employee in the year in which the Merger occurs will be deducted from the total
CFB benefit. Each Bank Employee shall be eligible for participation, as a new
employee, in the CFB Pension Plan under the terms thereof.
The Bank currently maintains the First National Summit Bankshares, Inc.
Employee Stock Ownership Plan (with 401(k) Provisions) ("KSOP"), a defined
contribution pension plan designed to invest primarily in Summit Common Stock,
which also contains a cash or deferred arrangement under IRC Section 401(k).
Participant accounts in the KSOP that currently hold shares of Summit Common
Stock will, as a result of the Merger, then hold CFB Common Stock. It is
contemplated that, shortly following the Effective Time of the Merger, the KSOP
will be merged into and combined with the CFB 401(k) Plan, and that the merged
Participant accounts will thereafter be subject to the terms and conditions of
the CFB 401(k) Plan.
EXPENSES
CFB and Summit will pay their own expenses in connection with the Merger
and the transactions contemplated thereby, including professional fees. Summit
has agreed to accrue on the Determination Date Balance Sheet all of the unpaid
expenses relating to the Merger, including the cost of the preparation of the
final tax return.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for using the pooling of
interests method of accounting. CFB shall have received a letter, prior to
consummation, from Ernst & Young LLP regarding such firm's concurrence with
CFB management's and Summit management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the merger under
Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with the Merger Agreement. Among other considerations, such
letter will be subject to receipt by Ernst & Young LLP and CFB of a
letter from Fortner, Bayens, Levkulich & Co. P.C., Summit's accountants, in
form and substance reasonably satisfactory to Ernst & Young, related to the
eligibility of Summit to qualify for pooling treatment, and to the condition
that less than 10% of the Merger Consideration will consist of cash,
including (i) cash paid to holders of outstanding shares of Summit Preferred
Stock, (ii) cash paid to holders
36
<PAGE>
of outstanding shares of Summit Common Stock who dissent from the proposed
Merger and receive cash for their shares of Common Stock, and (iii) cash paid
in the Merger in lieu of fractional shares of Summit Common Stock. In order to
satisfy certain conditions precedent for the qualification of the Merger as a
pooling of interests for accounting purposes, the affiliates of Summit will
enter into agreements with CFB providing that each such person will not sell or
otherwise reduce his or her risk relative to any shares of the CFB Common Stock
received pursuant to the Merger until financial results covering at least 30
days of post-Merger combined operations are published or until such later time
as such person is notified by CFB so as to ensure that the Merger qualifies as a
pooling of interests for accounting purposes. Pursuant to the Merger Agreement,
Summit has agreed that neither it nor the Bank shall take any action, with
certain exceptions, which would disqualify the Merger as a pooling of interests
for accounting purposes.
Under pooling of interests accounting, as of the Effective Time of the
Merger, the assets and liabilities of Summit will be added to those of CFB at
their recorded book values and the shareholders' equity account of Summit will
be included on CFB's consolidated balance sheet. The Merger will have an
immaterial impact on the consolidated financial statements of CFB. Accordingly,
the consolidated financial statements for preceding periods will not be
restated.
The unaudited pro forma combined financial data contained in this Proxy
Statement-Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "Summary - Historical and Pro Forma
Comparative Unaudited Per Share Data," "Summary - Unaudited Pro Forma Combined
Selected Financial Information" and "Unaudited Pro Forma Combined Financial
Information."
INTERESTS OF CERTAIN PERSONS; CERTAIN TRANSACTIONS
The Board of Directors of Summit is aware of the agreements and interests
of certain persons in the Merger described below and considered them, among
other matters, in recommending approval of the Merger and the transactions
contemplated thereby.
As of October 22, 1997, the officers and directors of Summit beneficially
owned 86,000 shares (or approximately 12.7%) of Summit Common Stock. Pursuant
to the Merger Agreement, the Board of Directors of Summit has agreed to use its
best efforts to obtain the requisite shareholder approval. See "Principal
Shareholders and Security Ownership of Management."
From and after the Effective Time of the Merger, CFB has agreed to
indemnify the directors and officers of Summit and the Bank (the "Indemnified
Parties") for all actions they take in the performance of their duties as
required by the Merger Agreement to the same extent that CFB indemnifies its
officers and directors for all actions they take in the performance of their
duties as required by the Merger Agreement.
RESALE OF CFB COMMON STOCK
The shares of CFB Common Stock issuable to common shareholders of Summit
upon consummation of the Merger have been registered under the Securities Act of
1933, as amended (the "Securities Act"). Such shares may be traded without
restriction on transferability by those shareholders not deemed to be
"affiliates" of Summit or CFB as that term is defined in the rules under the
Securities Act. "Affiliates" are generally defined as persons who control, are
controlled by or are under common control with Summit or CFB at the time of the
determination. Accordingly, "affiliates" generally will include directors and
executive officers of Summit. CFB Common Stock received by those shareholders
of Summit who are deemed to be "affiliates" of Summit or CFB may be resold
without registration as provided for by Rules 144 and 145, or as otherwise
permitted under the Securities Act; PROVIDED, that no such resale will be
permitted until the public release by CFB of its financial results for a period
that includes thirty days of combined operations following the Merger. Assuming
CFB continues to be subject to, and complies with, the Exchange Act reporting
requirements, Rule 145(d) allows limited resales by such affiliates without
registration if the holder: (i) has held the shares of CFB Common Stock for one
year and is not an affiliate of CFB at the time of sale; or (ii) has held the
shares of CFB Common Stock for three years and has not been an affiliate of CFB
for at least three months; or (iii) sells the shares in a Rule 144 brokers'
transaction in the manner and subject to the quantity limitations
37
<PAGE>
of such rule. In the Merger Agreement, CFB has agreed to file all reports and
data with the Commission necessary to permit the affiliates of Summit to sell
the CFB Common Stock received by them in the Merger pursuant to Rules 144 and
145 under the Securities Act. This Proxy Statement-Prospectus does not cover
any resales of CFB Common Stock received by affiliates of Summit, their family
members or related interests. CFB Common Stock is traded in the Nasdaq National
Market System under the symbol "CFBX." EACH SHAREHOLDER WHO MAY BE DEEMED TO BE
AN AFFILIATE IS URGED TO CONSULT INDEPENDENT COUNSEL CONCERNING APPLICABLE
RESTRICTIONS ON RESALE.
38
<PAGE>
BUSINESS OF SUMMIT
GENERAL
Summit is a one-bank holding company, organized as a Colorado corporation,
that owns all of the outstanding capital stock of the Bank. Originally named
"Crested Butte State Bank Holding Company," Summit received approval from the
Federal Reserve Board under the provisions of the Bank Holding Company Act of
1956, as amended, to become a bank holding company through its acquisition of
control of Crested Butte State Bank, Crested Butte, Colorado ("CBSB"). Summit
adopted its current name, First National Summit Bankshares, Inc., in August
1994. At June 30, 1997, Summit had consolidated assets of $86,017,000 and total
shareholders' equity of $7,160,000.
On April 12, 1994, CBSB acquired all of the common stock of the First
National Bankshares of Gunnison, Inc. ("FNBHC"), a bank holding company which
owned 100% of the common stock of the First National Bank of Gunnison ("FNB").
Subsequent to the purchase, FNBHC and FNB were merged into CBSB, and CBSB
changed its name to First National Summit Bank.
Summit derives substantially all of its revenues from cash dividends paid
to it by the Bank. Dividend payments by the Bank are determined on an
individual basis considering the Bank's earnings, deposit growth, expenses and
capital requirements.
Summit has no significant properties and operates no significant
independent business other than the banking business conducted by the Bank.
FIRST NATIONAL SUMMIT BANK
The First National Summit Bank (the "Bank") was chartered in 1880.
Gunnison is a community of approximately over 6,500 and is the largest city in
Gunnison County, Colorado. Major economic activities in the County are tourism,
ranching, education (Western State College is located in Gunnison) and, to a
much lesser degree, mining. The biggest of these is tourism with winter skiing
at Mount Crested Butte as one of the largest attractions.
Because of this market, the Bank is a small business and commercial retail
services lender. As of June 30, 1997, the Bank had $86 million in total assets
and $31 million in commercial loans outstanding. Also, the Bank is an active
consumer lender and mortgage lender for single-family homes. At June 30, 1997,
the Bank had $16 million in consumer loans and $9 million in mortgage loans.
The Bank's loan-to-deposit ratio averaged 79% and the investment-to-asset ratio
averaged 15% for 1996.
COMPETITION. Competitors of the Bank include Gunnison Bank & Trust with
assets of $25 million, Gunnison Savings and Loan Association with assets of $55
million, and Community Bank of Colorado with two branches in Summit's trade area
as of December 31, 1996. All these financial institutions are full service
institutions which directly compete with the Bank for deposits and loans. There
is also one small credit union in Gunnison.
EMPLOYEES. The Bank has 71 employees consisting of 18 officers and 53
non-officers. Twenty (20) percent of the employees have been associated with
the bank for a minimum of three years or more.
PROPERTIES. The physical assets of the Bank consist of a modern banking
facility located at 201 N. Main Street, Gunnison, Colorado, constructed in 1963
which has been subsequently remodeled to modernize its layout. The main
facility consists of 13,113 square feet including a second floor which has
several offices. In addition, the Bank has a branch in Crested Butte, Colorado
and and leases premises for two branches in Grand Junction, Colorado. There is
no debt on the physical properties.
39
<PAGE>
MARKET PRICE OF AND DIVIDENDS ON SUMMIT STOCK
There is no established trading market for the Summit Common Stock or
Summit Preferred Stock. Summit is aware of only limited transactions involving
the sale of Summit Stock. The prices for Summit Stock in such transactions are
not considered indicative of prices that could be attained on an active market
involving a substantial number of shares. As of October 22, 1997, there were
34 shareholders of record of Summit Common Stock and 6 shareholders of record of
Summit Preferred Stock. Summit is current on dividends on Summit Preferred
Stock. Summit declared its most recent cash dividend of $420,000 ($.30 per
share of Summit Common Stock) on April 14, 1997.
LEGAL PROCEEDINGS
Although neither Summit and Bank are presently involved as parties to any
material pending litigation or administrative proceedings, the Board of
Governors of the Federal Reserve System and the Comptroller of the Currency have
each instituted formal investigations of a major shareholder of Summit. These
investigations are currently pending. To date, Summit and Bank directors and
senior officers have appeared only as factual witnesses in the investigations.
Neither Summit nor the Bank nor any of their officers or directors have been
named as targets of the investigations, and it is not known at this time by
Summit or the Bank whether the investigations will result in further
proceedings, or the nature of such proceedings, or the role, if any, that Summit
or the Bank or their officers or directors would play in such proceedings. The
establishment of the escrow by CFB from proceeds of the Merger was attributable,
in part, to concern about the expense to the Bank of such continued proceedings.
INVESTMENT ACTIVITIES
Summit relies heavily on investment securities for more than half of its
earning assets. These investments are concentrated in United States treasuries,
federal agencies, mortgage-backed securities and, to a lesser degree, corporate
and municipal bonds. Summit and the Bank maintain a strong liquidity position
through federal funds sold in short-term U.S. Treasury and agency securities.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of Summit:
Name Age Positions Held Term of Service
---- --- -------------- ---------------
Ralph E. Peters 62 Chief Executive Officer Less than 1 year
Larry Heesch 50 Senior Vice President/
Chief Credit Administrator Less than 2 years
James C. Noone 44 Director Over 3 years
Allen F. Cox 59 Director Over 3 years
Alan Hegeman 60 Director Over 3 years
Dora Mae Trampe 72 Director Over 3 years
TRANSACTIONS WITH OFFICERS, DIRECTORS AND OTHER AFFILIATES
The Bank has entered into transactions with officers and directors and
their affiliates on terms which management believes are comparable to those
which the Bank would have offered to other non-related third parties.
40
<PAGE>
SUPERVISION AND REGULATION
To the extent the information below consists of summaries of certain
statutory provisions, it is qualified in its entirety by reference to the
statutory provisions so described.
HOLDING COMPANY. Summit is subject to provisions of the Bank Holding
Company Act of 1956, as amended (the "BHCA"), which requires a bank holding
company to register with the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") and be subject to its supervision. As a bank
holding company, Summit's activities are subject to the BHCA and Regulation Y of
the Federal Reserve Board. Transactions between Summit and the Bank are subject
to certain restrictions under the BHCA, the Federal Reserve Act and certain
other banking statutes.
As a bank holding company, the acquisition of control of Summit by an
individual or company is subject to the prior approval of the Federal Reserve
Board. The term "company" is broadly defined to include any corporation,
partnership, association or trust or similar organization, while the definition
of "control" for these purposes may be met by (i) the ownership or control or
power to vote 25% or more of the outstanding shares of any class of voting stock
of Summit, directly or indirectly, (ii) control over the election of a majority
of the directors of Summit, or (iii) the power to exercise directly or
indirectly a controlling influence over the management or policies of Summit.
In addition, under certain circumstances, the ownership, control or power to
vote in excess of 10%, but less than 25% of the shares of any class of voting
securities, of Summit, directly or indirectly, may require prior notice to the
Federal Reserve Board under the BHCA and Regulation Y.
The BHCA requires prior approval by the Federal Reserve Board of the
acquisition by a bank holding company of more than 5% of the voting stock or
substantially all of the assets of any bank, but does not require prior approval
before acquisition of any additional shares in banks, the majority of the shares
of which are already controlled by such bank holding company. A bank holding
company is prohibited, with certain limited exceptions, from acquiring direct or
indirect ownership or control of more than 5% of the voting shares of any
company that is not a bank and from engaging in activities other than those of
banking or of managing or controlling banks and other authorized subsidiaries
and providing services to its subsidiaries. One of the exceptions to this
prohibition permits ownership of the shares of a company, the activities of
which the Federal Reserve Board determines to be so closely related to the
business of banking or of managing or controlling banks as to be a proper
incident thereto. Summit does not currently engage in any non-banking
activities.
Summit is required to file periodic reports with the Federal Reserve Board
and such other information as may be required to keep the Federal Reserve Board
informed regarding Summit's compliance with the provisions of BHCA and the
rules, regulations and orders issued thereunder. The Federal Reserve Board
examines Summit periodically.
BANK. The Bank, as a national bank, is subject to the supervision and
regulation of, and is regularly examined by the Comptroller of the Currency (the
"Comptroller"). The Bank is also a member of the Federal Reserve. Among the
requirements and restrictions imposed upon national banks are the requirements
to maintain reserves against deposits, restrictions of nature and amounts of
loans that may be made, restrictions relating to investments, opening of bank
offices, and other activities. Federal law prohibits the payment of dividends
by national banks if such dividends would impair the bank's capital, or the
bank's surplus is not equal to its common capital. In addition, approval of the
Comptroller is required prior to payment of dividends by a national bank if the
dividends declared in any year exceed the total of net profits for that year
combined with retained net profits for the preceding two years, less any
required transfers to surplus or to a fund for the retirement of preferred
stock.
The Bank is required to comply with capital adequacy standards. There are
two basic measures of capital adequacy: a risk-based measure and a tier-one
leverage measure.
The risk-based capital measure was adopted to assist in the assessment of
capital adequacy of financial institutions by (i) making regulatory capital
requirements more sensitive to differences in risk portfolios among
41
<PAGE>
organizations, (ii) introducing off-balance sheet items into the assessment of
capital adequacy, (iii) reducing dis-incentives to holding liquid, low-risk
assets, and (iv) achieving greater consistency in evaluation of capital adequacy
of major banking organizations throughout the world. The risk-based measures
include both a definition of capital and a framework for calculating
risk-weighted assets by assigning assets and off-balance sheet items to
broad-risk categories. An institution's risk-based capital ratio is calculated
by dividing its qualifying capital by its risk-weighted assets.
An important component of qualifying capital is the core capital or
tier-one capital. Tier-one capital for a national bank generally consists of
(i) common shareholders equity, (ii) non-cumulative perpetual preferred stock
and related surplus, and (iii) minority interest in the equity accounts of
consolidated subsidiaries, less good will. The tier-one component of an
institution's qualifying capital must represent at least 50% of the qualifying
total capital. Supplementary capital (tier-two capital) consists of such
additional capital elements as (i) allowance for loan losses (subject to
limitations); (ii) cumulative perpetual preferred stock, convertible preferred
stock, and (iv) any related surplus (subject to certain conditions); (iii)
hybrid capital instruments and mandatory convertible debt securities; and (iv)
term subordinated debt and intermediate term preferred stock (subject to
limitations). The maximum amount of tier-two capital that may be included in
qualifying total capital is limited to 100% of tier-one capital (net of good
will).
The Bank's risk-based capital ratios are reviewed by the Comptroller by
analysis of the Bank's quarterly financial reports, review of any applications
filed by the Bank and through the examination process. Although the risk-based
capital ratio focuses on broad categories of credit risk and, to a lesser
extent, interest rate and market risk, the risk-based ratio does not incorporate
other factors that can affect an organization's financial condition. These
factors include overall interest rate exposure, liquidity, funding, and market
risks; the quality and level of earnings; investment or loan portfolio
concentration; the quality of loans and investments; the effectiveness of loan
and investment policy; and management's ability to monitor and control financial
and other operational risks.
The primary federal regulatory agencies have also adopted a minimum
leverage ratio, defined as a ratio of tier-one capital to total assets, which is
intended to be used as a supplement to the risk-based capital measure. An
institution must meet both capital adequacy standards to be in compliance.
Banking organizations considered to be among the most highly rated, based upon
examination results, must maintain a minimum leverage ratio of 3% and a minimum
risk-based capital ratio of 8%. Banks that are not among the most highly rated
are expected to maintain capital ratios of at least 100 to 200 basis points
above the minimum levels.
The Bank is in compliance with all capital standards currently applicable
to it.
The deposits of the Bank are insured under the provisions of the Federal
Deposit Insurance Act. The Bank is also subject to the supervision and
examination by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank
is subject to assessments by the FDIC.
On January 9, 1997, First National Summit Bank's Board of Directors entered
into a Memorandum of Understanding (Memorandum) with the Office of the
Comptroller of the Currency. Under the Memorandum, the Board agreed:
a) to review the Bank's management and staffing needs;
b) not to enter into any new business activity unless the Bank makes a
written assessment of the risks of the new activity;
c) to develop an effective loan administration program; and
d) to develop a written policy addressing dealing with insiders.
The Board and the management of the Bank believe that they are in
compliance with the Memorandum at June 30, 1997.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SUMMIT
BASIS OF PRESENTATION
The following is Summit's management discussion and analysis of the results
of operations and the historical financial condition of Summit and its
consolidated subsidiary. This should be read in conjunction with Summit's
audited financial statements and accompanying footnotes and other selected
financial data presented elsewhere herein.
The financial information discussed below reflects the operation of Bank
along with the parent company operations. Summit began operations in 1993 as
the holding company of the Bank.
RESULTS OF OPERATIONS
EARNINGS PERFORMANCE. Summit earned $999 thousand in 1994, $1.402 million
in 1995, and $863 thousand in 1996. The increase in earnings from 1994 to 1995
was largely due to the merger of First National Bankshares of Gunnison, Inc.
into Crested Butte State Bank in 1994. Earnings from 1995 to 1996 were impacted
by the increased provision to the allowance for loan losses. In May, 1997, the
Bank conducted a thorough examination of the loan portfolio, which necessitated
a significant provision to the allowance for loan losses. The number of
employees and the correlating compensation increased in 1996 due to increased
staffing in the loan administration area, as well as the opening of two branches
in Grand Junction, Colorado. Legal fees also increased significantly in 1996
due to a joint investigation of Summit by the Federal Reserve Board and the
Office of the Comptroller of the Currency. As noted below, loan interest and
fees decreased in 1996 due to a decrease in loan volume and demand.
The following is a condensed summary of the consolidated statement of
operations (dollars in thousands), along with selected profitability ratios:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF NET INCOME
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
----------------- ----------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net interest income. . . . . . . . . . 2,492 2,544 4,963 5,125 4,476
Provision for loan losses. . . . . . . 437 90 579 147 30
Other operating income . . . . . . . . 858 743 1,909 1,361 808
Net gains on sales of investments. . . 1 39 (91) 0 75
Other operating expense. . . . . . . . 3,078 2,161 4,822 4,082 3,750
Net income . . . . . . . . . . . . . . (155) 691 863 1,402 999
Return on average assets . . . . . . . (0.34)% 1.47% 0.92% 1.51% 1.23%
Return on average equity . . . . . . . (8.32)% 17.76% 11.33% 19.10% 21.38%
Dividend payout ratio. . . . . . . . . (257)% 106% 85% 11% 31%
Equity to assets . . . . . . . . . . . 8.16% 7.99% 8.16% 8.67% 8.18%
</TABLE>
43
<PAGE>
NET INTEREST INCOME Net interest income is affected by changes in both
interest rates and the volume of average earning assets and interest-bearing
liabilities. The following table presents Summit's average balance sheets,
interest earned or paid, and the related yields and rates on major categories
of Summit's earning assets and interest-bearing liabilities for the periods
indicated:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF AVERAGE RATES AND BALANCES
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- ---------------------------- -----------------------------
Interest Interest Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and Average Income/ Yields and
Balance Expense Rates (1) Balance Expense Rates (1) Balance Expense Rates (1)
------- ------- --------- ------- ------- --------- ------- ------- ----------
(Dollars in thousands)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (1)(2) . . . . . . . . . . . . 65,560 6,643 10.13% 66,448 6,724 10.12% 51,970 5,463 10.51%
Investment securities (2). . . . . . 14,024 849 6.05% 15,811 854 5.40% 15,689 704 4.49%
Federal funds sold . . . . . . . . . 3,695 196 5.30% 1,826 144 7.89% 3,325 108 3.25%
------ ------ ------ ------ ------ ------
Total interest earning assets. . . 83,279 7,688 9.23% 84,085 7,722 9.18% 70,984 6,275 8.84%
Noninterest earning assets . . . . 10,210 8,889 10,089
------ ------ ------
Total assets . . . . . . . . . . 93,489 92,974 81,073
------ ------ ------
LIABILITIES
Savings/int. bearing checking. . . . 41,138 1,403 3.41% 44,659 1,575 3.53% 41,116 1,247 3.03%
Time deposits. . . . . . . . . . . . 21,656 1,218 5.62% 17,208 907 5.27% 12,444 544 4.41%
Short-term borrowings. . . . . . . . 1,180 60 5.08% 1,632 107 6.86% 26 8 11.54%
Long-term borrowings . . . . . . . . 545 44 8.07% 100 8 8.00% 0 0 0.0%
------ ------ ------ ------ ------ ------
Total interest bearing liabilities 64,519 2,725 4.22% 63,599 2,597 4.09% 53,586 1,799 3.36%
Non-interest bearing
demand accounts . . . . . . . . . . 19,886 20,254 19,559
Other non-interest bearing
liabilities . . . . . . . . . . . . 1,453 1,064 1,556
------ ------ ------
Total liabilities. . . . . . . . . 85,858 84,917 74,701
Preferred Shareholders' equity . . . 1,300 1,550 1,700
Common Shareholders' equity. . . . . 6,331 6,507 4,672
------ ------ ------
Total liabilities & equity . . . . 93,489 92,974 81,073
------ ------ ------
Net interest income. . . . . . . . . 4,963 5,125 4,476
Net interest spread. . . . . . . . . 5.01% 5.09% 5.48%
Net interest margin. . . . . . . . . 5.96% 6.09% 6.31%
</TABLE>
- ------------------------
(1) Includes nonaccrual loans, includes loan fees.
(2) Interest yields on loans and investments are computed on a tax equivalent
basis to reflect the tax-exempt nature of certain assets. The incremental
tax rate applied was 36% in 1996, 1995 and 1994.
44
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF AVERAGE RATES AND BALANCES
SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
1997 1996
----------------------------- ----------------------------
Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and
Balance Expense Rates (1) Balance Expense Rates (1)
------- ------- --------- ------- ------- ---------
(Dollars in thousands)
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans (1)(2) . . . . . . . . . . . . . 61,396 3,221 10.58% 65,987 3,417 10.41%
Investment securities (2). . . . . . . 15,689 477 6.13% 13,713 399 5.85%
Federal funds sold . . . . . . . . . . 3,672 97 5.33% 4,845 127 5.27%
------ ------ ------ ------
Total interest earning assets. . . . 80,757 3,795 9.48% 84,545 3,943 9.38%
Noninterest earning assets . . . . . 10,775 10,210
------ ------
Total assets . . . . . . . . . . . 91,532 94,755
------ ------
LIABILITIES
Savings/int. bearing checking. . . . . 41,420 676 3.29% 42,427 724 3.43%
Time deposits. . . . . . . . . . . . . 20,323 567 5.63% 21,955 624 5.72%
Short-term borrowings. . . . . . . . . 1,033 34 6.64% 1,099 34 6.22%
Long-term borrowings . . . . . . . . . 625 26 8.39% 472 17 7.24%
------ ------ ------ ------
Total interest bearing liabilities . 63,401 1,303 4.14% 65,953 1,399 4.27%
Non-interest bearing demand
accounts . . . . . . . . . . . . . . 19,420 19,684
Other non-interest bearing liabilities 1,273 1,547
------ ------
Total liabilities. . . . . . . . . . 84,094 87,184
Preferred shareholders' equity . . . . 1,138 1,400
Common shareholders' equity. . . . . . 6,300 6,171
------ ------
Total liabilities & equity . . . . 91,532 94,755
------ ------
Net interest income. . . . . . . . . . 2,492 2,544
Net interest spread. . . . . . . . . . 5.34% 5.11%
Net interest margin. . . . . . . . . . 6.22% 6.05%
</TABLE>
- ------------------------
(1) Includes nonaccrual loans, includes loan fees.
(2) Interest yields on loans and investments are computed on a tax equivalent
basis to reflect the tax-exempt nature of certain assets. The incremental
tax rate applied was 36% for the 1997 and 1996 periods.
45
<PAGE>
The following table reflects changes in interest income and expense
attributable to changes in volume and interest rates of significant
interest-bearing assets and liabilities (in thousands):
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF VOLUME AND INTEREST RATES
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
Compared to 1996 Period 1996 compared to 1995 1995 compared to 1994
------------------------ ---------------------------- ---------------------------
Attributable to change Attributable to change Attributable to change
---------------------- ---------------------- ----------------------
Total in in Total in in Total in in
Change Volume Rate Change Volume Rate Change Volume Rate
------ ------ ---- ------ ------ ---- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans. . . . . . . . . . . . . . . . . (340) (237) (103) (81) (89) 8 1,261 1,521 (260)
Investment securities. . . . . . . . . 73 60 13 (5) (106) 101 150 8 142
Other interest earning assets. . . . . (30) (31) 1 52 147 (95) 36 (49) 85
Total interest income. . . . . . . . (297) (208) (89) (34) (48) 14 1,447 1,480 (33)
Interest Expense:
Savings/interest bearing deposits. . . (48) (17) (31) (172) (119) (53) 328 106 222
Time deposits. . . . . . . . . . . . . (57) (47) (10) 311 235 76 358 210 148
Short term borrowings. . . . . . . . . - - - (52) (31) (21) 109 185 (76)
Long term borrowings . . . . . . . . . 9 5 4 36 36 - 8 8 -
Total interest expense . . . . . . . (96) (59) (37) 123 121 2 803 509 294
Increase (decrease) in net
interest income. . . . . . . . . . . (201) (149) (52) (153) (165) 12 644 971 (327)
</TABLE>
The change in interest income/expense attributable to volume reflects
the change in volume times the prior year's rate and the change in interest
income/expense attributable to rate reflects the change in rates times the
current year's volume.
Net interest income in 1996 decreased $162,000 from 1995 due to
decrease in loan volume.
PROVISION FOR LOAN LOSSES. Summit made a provision to its "loan loss
reserve" in 1996 and 1995 of $579,000 and $147,000, respectively, and
provided $469,000 (including $439,000 FNB acquisition) in 1994. The
provisions were determined based on management's estimate of adequate
reserves for possible loan losses.
Management continually assesses the adequacy of the loan loss reserve
by evaluating the collectability of loans. This process includes assigning
risk rating to loans and reserving percentages of these balances according
to reserve allocation formulas. This evaluating process takes into
consideration such factors as changes in the nature and volume of Summit's
loan portfolio, prior loan loss experience, overall loan portfolio quality,
review of specific problem loans and current and anticipated economic
conditions that may affect a borrower's ability to pay. For the year 1996,
as with previous years, management utilized this process in evaluating the
adequacy of the allowance for loan loss.
SIGNIFICANT LOAN LOSS PROVISION. In May 1997, the Bank conducted a
thorough examination of the loan portfolio, which necessitated a
significant provision to the allowance for loan losses.
46
<PAGE>
NON-INTEREST INCOME. The following table presents a summary of
non-interest income (in thousands):
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF NON-INTEREST INCOME
Six Months
Ended June 30, Year Ended December 31,
----------------- -------------------------
1997 1996 1996 1995 1994
------- -------- -------- ------- -----
Service charges. . . . . . . . . . 288 348 686 704 572
Net gains on sales of investments. 1 39 (91) 0 75
Insurance commissions. . . . . . . 338 231 475 275 0
Other. . . . . . . . . . . . . . . 232 164 748 382 236
----- ----- ----- ----- -----
Total . . . . . . . . . . . . . . 859 782 1,818 1,361 883
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Non-interest Income continues to be a significant source of revenues for
Summit and increased $451,000 or 33% in 1996 over 1995 and $484,000 or 54% in
1995 over 1994. The major increase in non-interest income in 1996 is attributed
to new expanded insurance business and slight decrease in service charges due to
decrease in demand deposits. In 1995, increase in non-interest is mainly due to
new expanded insurance business.
NON-INTEREST EXPENSE. The following table presents a summary of
non-interest expense (in thousands):
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF NON-INTEREST EXPENSE
Six Months
Ended June 30, Year Ended December 31,
-------------- -----------------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
Salaries and benefits. . . . 1,384 998 2,198 1,976 1,537
Premises and equipment . . . 463 324 767 540 326
Other expenses . . . . . . . 1,231 839 1,857 1,566 1,887
----- ----- ----- ----- -----
Total . . . . . . . . . . . 3,078 2,161 4,822 4,082 3,750
----- ----- ----- ----- -----
----- ----- ----- ----- -----
The non-interest expense increased by $739,000 in 1996 over 1995 and
$333,000 in 1995 over 1994. The increase in 1996 is largely attributable to
salaries and wages due to branch expansion and related occupancy and other
expenses.
INCOME TAXES. Summit's income tax provision for 1996 was $517,000 compared
with $856,000 in 1995 and $580,000 in 1994. The effective tax rates were 37.5%
in 1996, 37.9% in 1995 and 36.8% in 1994. The effective tax rate differs from
the federal statutory rate primarily as a result of tax-exempt interest income
and state income taxes.
47
<PAGE>
SUMMIT CONDITION
OVERVIEW Summit's total consolidated assets were $97 million, $95 million
and $94 million for the years ending 1996, 1995 and 1994, respectively.
Summit's assets increased 2.4% from 1995 to 1996 and .05% from 1994 to 1995.
LOANS The following table presents the balance of each major category of
loans at the dates indicated:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF LOANS
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
------------------------------------- --------------------------------------------------------
1997 1996 1996 1995 1994
------------------ ------------------ ------------------ ------------------ ----------------
% of % of % of % of % of
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Category:
Commercial . . . . . . . 31,857 54.75 29,859 45.72 30,192 46.99 28,236 41.63 30,222 44.94
Real estate:
Construction . . . . . 2,464 4.23 3,254 4.98 3,526 5.49 4,583 6.76 8,929 13.28
Farmland . . . . . . . 303 0.52 207 .032 380 0.59 622 0.92 606 0.90
Residential. . . . . . 6,823 11.73 13,898 21.28 12,839 19.98 16,144 23.80 9,759 14.51
Other
Agricultural . . . . . . 180 0.31 764 1.17 147 0.23 595 0.88 768 1.14
Consumer/other . . . . . 16,556 28.46 17,332 26.54 17,171 26.72 17,644 26.01 16,960 25.22
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total loans. . . . . . 58,183 100.00 65,314 100.00 64,255 100.00 67,824 100.00 67,244 100.00
Less allowance for loan
losses. . . . . . . . . 1,061 582 850 592 667
------- ------- ------- ------- -------
Total net loans. . . . $57,122 $64,532 $63,405 $67,232 $66,577
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
A principal component of Summit's earning assets is its loan portfolio. On
December 31, 1996, total loans totaled $64.2 million. This represented a 5%
decrease over December 31, 1995 total loans of $67.8 million. December 31, 1995
total loans increased .8% over December 31, 1994 loans of $67.2 million. The
decrease in 1996 is mainly attributable to loan refinancing elsewhere and loans
sold by the Bank on the secondary market.
COMMERCIAL LOANS. Loans in this category principally include loans to
service, retail and wholesale businesses.
REAL ESTATE LOANS. The majority of Summit's real estate loan portfolio
consists of local residential first mortgages. The large majority of these
mortgages are fixed-rate mortgages with short-term balloon payments. The
practice had been for the real estate mortgages to be retained by the bank
rather than selling them on the secondary market. Recently, in 1997, Summit
began selling mortgage loans on the secondary market.
AGRICULTURAL LOANS. Loans classified as agricultural loans primarily
include operating and equipment loans to local farmers and ranchers. Loans
secured by farmland are listed in the real estate classification.
CONSUMER/OTHER LOANS. Loans classified as consumer and other include
automobile, home improvement, home equity, financing of business' receivables
and lease financing. Lease financing is offered on a very limited basis.
48
<PAGE>
NON-PERFORMING ASSETS. Summit follows regulatory guidelines with respect
to placing loans on non-accrual status. When a loan is placed on non-accrual
status, all previously accrued and uncollected interest is reversed. Certain
non-performing assets of Summit are summarized (in thousands) in the following
table:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
NONACCRUAL, RESTRUCTURED AND PAST DUE LOANS
Six Months
Ended June 30, Year Ended December 31,
---------------- -------------------------
1997 1996 1996 1995 1994
------ ------ ------ ------ ------
Nonaccrual loans. . . . . . . . . 2,202 354 1,928 370 115
Restructured loans. . . . . . . . 0 0 0 0 79
Loans past due 90 days or more. . 1,492 1,441 338 155 235
Interest which would have been
earned on nonaccrual loans if
they were on accrual basis . . . 149 22 45 18 18
ALLOWANCE FOR LOAN LOSSES. Summit's loan loss reserve is available to
absorb future loan losses. The current level of the loan loss reserve is a
result of management's assessment of the risk within the loan portfolio based on
the information revealed in the credit reporting processes. Summit utilizes a
risk-rating system on loans and a monthly credit review and reporting process
which results in the calculation of the guideline reserves based on the risk
within the portfolio. This assessment of risk takes into account the
composition of the loan portfolio, previous loan experience, current economic
conditions and other factors that, in management's judgment, deserve
recognition.
49
<PAGE>
The following table sets forth changes in Summit's loan loss reserve as of
the dates indicated (dollars in thousands):
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
------------------ ---------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance beginning of year . . . . . . . . . 850 592 592 667 211
Provision for loan losses . . . . . . . . . 436 90 579 147 30
Allowances added from acquisition . . . . . 439 (1)
Charge-offs:
Commercial. . . . . . . . . . . . . . . . (101) (79) (110) (21) (6)
Consumer. . . . . . . . . . . . . . . . . (161) (34) (238) (241) (18)
Real estate . . . . . . . . . . . . . . . -- (6) (27) -- (22)
------- ------- ------- ------- -------
Other
Total charge-offs . . . . . . . . . . . . (262) (119) (375) (262) (46)
------- ------- ------- ------- -------
Recoveries:
Commercial. . . . . . . . . . . . . . . . 1 10 15 40 33
Consumer. . . . . . . . . . . . . . . . . 9 9 34 -- --
Real estate . . . . . . . . . . . . . . . 27 -- 5 -- --
Other
------- ------- ------- ------- -------
Total loan recoveries . . . . . . . . . 37 19 54 40 33
------- ------- ------- ------- -------
Net charge-offs . . . . . . . . . . . . (225) (100) (321) (222) (13)
------- ------- ------- ------- -------
Increase in allowance for loan losses . . . 211 (10) 258 (75) 17
------- ------- ------- ------- -------
Balance end of year . . . . . . . . . . . . 1,061 582 850 592 667
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Allowance for loan losses to:
Total loans at year-end . . . . . . . . . 1.82% 0.89% 1.32% 0.87% 0.99%
Net charge-offs to average loans. . . . . . 0.74% 0.30% 0.49% 0.33% 0.03%
Average loans . . . . . . . . . . . . . . . 61,396 65,987 65,560 66,448 51,970
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
(1) On January 1, 1994, the one-bank holding company owned 100% of its
subsidiary, Crested Butte State Bank ("CBSB"). On April 12, 1994, CBSB
acquired all of the common stock of First National Bankshares of Gunnison,
Inc. ("FNBHC"), which owned 100% of the common stock of the First National
Bank of Gunnison ("FNB").
Subsequent to the purchase, FNBHC and FNB were merged into CBSB. CBSB
changed its name to First National Summit Bank. In 1994, allowance added
from FNB acquisition amounted to $439,000.
The loan loss reserve at June 30, 1997 was $1.06 million compared to
$850,000 at December 31, 1996 and $590,000 at December 31, 1995 and $.66 million
at December 31, 1994. Activity with the allowance for loan losses primarily
reflected charge offs of loans determined by management to be uncollectible.
However, management aggressively pursues recoveries. The loan loss reserve as a
percentage of total loans stood at 1.82% at June 30, 1997, a figure which
management believes is satisfactory.
The following table allocates the loan loss reserve based on management's
judgment of potential losses in the respective areas. While management has
allocated reserves to various portfolio segments for purposes of this table, the
reserve is general in nature and is available for the portfolio in its entirety:
50
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ALLOCATION OF ALLOWANCE OF LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
Real
Commercial Estate Consumer Unallocated Total
---------- ------ -------- ----------- -----
<S> <C> <C> <C> <C> <C>
Six Months Ended June 30,
- -------------------------
1997
- ----
Allowance for loan losses 209 110 500 242 1,061
% to loans in category 0.66% 1.15% 3.02% .42% 1.82%
1996
- ----
Allowance for loan losses 65 266 26 225 582
% to loans in category 0.22% 1.53% 0.15% .34% 0.89%
Years Ended December 31,
- ------------------------
1996
- ----
Allowance for loan losses 113 114 415 208 850
% to loans in category 0.37% 0.68% 2.42% .32% 1.32%
1995
- ----
Allowance for loan losses 222 56 195 119 592
% to loans in category 0.79% 0.26% 1.11% .18% 0.87%
1994
- ----
Allowance for loan losses 88 169 267 143 667
% to loans in category 0.29% 0.88% 1.57% .21% 0.99%
</TABLE>
INVESTMENT PORTFOLIO. The investment activities of Summit are designed to
provide an investment alternative for funds not presently required to meet loan
demand; assist the bank in meeting potential liquidity requirements; assist in
maximizing income consistent with quality and liquidity requirements; supply
collateral to secure public funds and retail repurchase agreements; provide a
means for balancing market and credit risks; and provide consistent income and
market value throughout changing economic times.
Summit's portfolio consists primarily of obligations of U.S. government,
U.S. government agency and corporate obligations, and state and local
governments, as well as agency collateralized obligation securities. Summit's
investment portfolio does not contain concentration of investments in any one
issuer in excess of 10% of Summit's total investment portfolio. Exempt from
this calculation are securities of the U.S. government and U.S. government
agencies.
51
<PAGE>
The following table sets forth the composition of Summit's investment
portfolio at the dates indicated:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
INVESTMENT PORTFOLIO
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
--------------------- --------------------------------
1997 1996 1996 1995 1994
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
U.S. Treasuries . . . . . . . 3,549 5,573 4,576 4,139 7,417
Agencies. . . . . . . . . . . 7,618 4,336 5,178 6,217 6,164
Municipal . . . . . . . . . . 2,656 2,525 2,761 2,488 2,872
Mortgage-backed securities. . 2,270 819 2,328 511 478
Other . . . . . . . . . . . . 587 570 581 564 247
------ ------ ------ ------ ------
Total investments . . . . . 16,680 13,823 15,424 13,919 17,178
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
For the investment portfolio as of December 31, 1996, the following tables
set forth a summary of yield and maturities:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF INVESTMENT YIELDS AND MATURITIES
DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
One year or Less One year through 5 Over 5 years through 10 Over Ten years Total
---------------- ------------------ ----------------------- ------------------ ------------------
Weighted Weighted Weighted Weighted Weighted
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries . . 2,532 6.21% 2,044 6.04% - 0.00% - 4,576 6.13%
Agencies. . . . . . 1,298 5.19% 3,390 5.53% 490 6.23% - 0.00% 5,178 5.58%
Municipals. . . . . 358 2.83% 1,673 5.25% 530 5.18% 200 5.18% 2,761 4.92%
Mortgage-backed
securities . . . - 0.00% - 0.00% 806 6.46% 1,522 8.00% 2,328 7.46%
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
Total . . . . . . 4,188 5.61% 7,107 5.66% 1,826 6.03% 1,722 7.67% 14,843 5.92%(1)
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
</TABLE>
(1) Excludes equity securities which have no stated maturity and no stated
yield.
52
<PAGE>
For the investment portfolio as of June 30, 1997, the following tables set forth
a summary of yield and maturities:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF INVESTMENT YIELDS AND MATURITIES
JUNE 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
One year or Less One year through 5 Over 5 years through 10 Over Ten years Total
---------------- ------------------ ----------------------- ------------------ ------------------
Weighted Weighted Weighted Weighted Weighted
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries . . 2,510 5.87% 1,039 6.31% 3,549 6.00%
Agencies. . . . . . 1,299 5.34% 5,391 6.19% 928 6.53% 7,618 6.09%
Municipals. . . . . 331 4.73% 938 6.56% 963 6.34% 424 6.96% 2,656 6.32%
Mortgage-backed
securities. . . . 782 6.46% 1,488 7.72% 2,270 7,29%
----- ----- ----- ----- ------ -----
Total . . . . . . 4,140 5.61% 8,150 6.28% 1,891 6.44% 1,912 7.55% 16,093 6.28%(1)
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
</TABLE>
(1) Excludes equity securities which have no stated maturity and no stated
yield.
In May of 1993, the FASB issued Statement of Summit Accounting
Standards No. 115 (SFAS No. 115), ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES. This statement addresses the accounting and
reporting for investments that have readily determinable fair market
values. Those investments are to be classified in three categories and
accounted for as follows:
1. Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost.
2. Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified
as trading securities and reported at fair market value, with
unrealized gains and losses included in earnings.
3. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified
as available-for-sale securities and reported at fair market
value, with unrealized gains and losses excluded from earnings
and reported in a separate component of shareholders' equity.
The statement does not apply to unsecuritized loans. However, after
mortgage loans are converted to mortgage-backed securities, they are
subject to its provisions. The Statement supersedes SFAS No. 12,
ACCOUNTING FOR CERTAIN MARKETABLE SECURITIES, and amends SFAS No. 65,
ACCOUNTING FOR CERTAIN MORTGAGE BANKING ACTIVITIES, to eliminate
mortgage-backed securities from its scope. SFAS No. 115 is effective for
fiscal years beginning after December 15, 1993.
Summit implemented SFAS No. 115 on December 31, 1994 by properly
classifying all securities into either held-to-maturity investment accounts
or the available-for-sale accounts.
53
<PAGE>
DEPOSITS. The following table sets forth a summary of Summit's deposits as
of the dates indicated and the maturity of time deposits over $100,000:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
ANALYSIS OF DEPOSITS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Years Ended December 31,
--------------------- ----------------------------------
1997 1996 1996 1995 1994
-------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Noninterest bearing . . . . . 16,565 17,194 24,854 20,247 22,428
Interest bearing:
Savings and NOW . . . . . . 40,395 39,380 40,660 44,682 48.025
Time Deposits
less than $100M. . . . . . 14,257 15,802 13,884 14,996 12,397
Time Deposits
greater than $100M . . . . 6,132 7,539 6,277 5,383 3,032
------ ------ ------ ------ ------
Total Deposits. . . . . . 77,349 79,915 85,675 85,308 85,882
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
(Dollars in thousands)
<TABLE>
<CAPTION>
< 3 months 3-6 months 6-12 months > 12 months Total
---------- ---------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
June 30, 1997 . . . . . . . . 838 1,695 1,165 2,434 6,132
December 31, 1996 . . . . . . 843 1,507 1,912 2,015 6,277
</TABLE>
ANALYSIS OF DEPOSITS. Year-end deposits for 1996 were $86 million, up from
$85 million in 1995. Year-end deposits for 1995 decreased $1 million from
year-end 1994 deposits of $86 million. June 30, 1997 deposits have decreased
due to the seasonality of the Gunnison economy.
CAPITAL. Bank regulatory agencies measure capital adequacy through
standardized risk-based capital guidelines which compare different levels of
capital (as defined by such guidelines) to risk-weighted asset and off-balance
sheet obligations. Under final rules effective December 31, 1992, all financial
institutions are required to maintain a level of core capital (known as Tier 1
capital), which must be at least 4.0% of risk-weighted assets, and a minimum
level of total capital of at least 8.0% of risk-weighted assets. The Federal
Reserve Board and the FDIC have adopted final regulations defining what capital
ratios were necessary to be "well capitalized." See: "Business of Summit" for
a detailed discussion of these capital ratios.
54
<PAGE>
The following table presents regulatory capital requirements and risk-based
capital levels:
REGULATORY CAPITAL REQUIREMENTS:
Tier 1 Total Leverage
Capital Risk-Based Capital Ratio
------- ------------------ -----
DECEMBER 31, 1996
Minimum . . . . . . 4.00% 8.00% 4.00%
Well capitalized. . 6.00% 10.00% 5.00%
Actual. . . . . . . 9.95% 11.19% 7.30%
JUNE 30, 1997
Minimum . . . . . . 4.00% 8.00% 4.00%
Well capitalized. . 6.00% 10.00% 5.00%
Actual. . . . . . . 9.94% 11.19% 6.70%
FIRST NATIONAL SUMMIT BANKSHARES, INC.
RISK BASED CAPITAL
(Dollars in thousands)
June 30, 1997 December 31, 1996
---------------- -------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
Capital Category:
Tier 1 Capital. . . . . . . $6,136 9.94% $6,823 9.95%
Tier 2 Capital. . . . . . . 772 1.25% 850 1.24%
Total risk weight assets. . . $61,730 N/A $68,577 N/A
Leverage ratio. . . . . . . . N/A 6.70% N/A 7.30%
As of June 30, 1997, Summit exceeded each of the capital requirements set
forth by federal or state banking regulatory agencies.
LIQUIDITY AND FUNDS MANAGEMENT. Liquidity management requires an ability
to meet financial commitments when contractually due and to respond to other
requirements for funds. The Bank has an Asset/Liability Management Committee
(ALCO) responsible for managing balance sheet and off-balance sheet commitments
to meet the needs of customers while achieving Summit's financial objectives.
The Bank's ALCO meets regularly to review funding capacities, current and
forecasted loan demand, and investment opportunities.
Asset liquidity is provided by regular maturities of loans and by
maintaining relatively short-term marketable investment securities and federal
funds. (See investment portfolio investment maturity table.) Summit's
investment securities due within one year and federal funds sold represented
INTEREST RATE SENSITIVITY. Significant changes in interest rates affect
the composition, yield and cost of balance sheet components. The rate
sensitivity of these assets and liabilities is monitored and matched to control
the risk associated with movements in rates. The ALCO for the Bank meets
regularly to monitor and formulate strategies and policies to provide sufficient
levels of net interest income while maintaining acceptable levels of interest
rate sensitivity, risk and liquidity. The primary object of rate sensitivity
management is to ensure earnings stability by minimizing the sensitivity of net
interest income to fluctuations in interest rates. The Bank mainly uses gap and
other systems to measure, monitor and adapt to changing interest rate
environments.
55
<PAGE>
The following table sets forth Summit's interest rate sensitivity analysis
by contractual repricing or maturity at December 31, 1996:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
INTEREST RATE SENSITIVITY
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Repricing or Maturing in
--------------------------------
1 Year Over 1 to Over 5
or Less 5 years years Total
------- ------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Rate Sensitive Assets:
Loans . . . . . . . . . . . . . . . . . . . . . 35,698 24,576 4,081 64,355
Investment securities . . . . . . . . . . . . . 5,328 6,081 3,323 14,732
Other interest-bearing assets . . . . . . . . . 6,503 0 0 6,503
------ ------ ------ ------
Total rate sensitive assets . . . . . . . . . 47,529 30,657 7,404 85,590
Rate Sensitive Liabilities:
Savings/interest
bearing checking. . . . . . . . . . . . . . . 40,660 0 0 40,660
Time deposits . . . . . . . . . . . . . . . . . 13,851 6,310 0 20,161
Short term borrowings . . . . . . . . . . . . . 2,270 0 0 2,270
Long term borrowings. . . . . . . . . . . . . . 0 166 0 166
------ ------ ------ ------
Total rate sensitive liabilities. . . . . . . 56,781 6,476 0 63,257
Rate sensitive gap. . . . . . . . . . . . . . . . (9,252) 24,181 7,404 22,333
Cumulative rate sensitive gap . . . . . . . . . . (9,252) 14,929 22,333 22,333
Rate sensitive gap %. . . . . . . . . . . . . . . (19.47)% 78.88% 100.00% 26.12%
Cumulative rate sensitive gap % . . . . . . . . . (19.47)% 18.99% 26.12% 26.12%
</TABLE>
56
<PAGE>
The following table sets forth Summit's interest rate sensitivity analysis
by contractual repricing or maturity at June 30, 1997:
FIRST NATIONAL SUMMIT BANKSHARES, INC.
INTEREST RATE SENSITIVITY
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Repricing or Maturing in
---------------------------------
1 Year Over 1 to Over 5
or Less 5 years years Total
------- ------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Rate Sensitive Assets:
Loans . . . . . . . . . . . . . . . . 19,028 34,053 5,102 58,183
Investment securities . . . . . . . . 5,270 6,985 3,725 15,980
Other interest-bearing assets . . . . 703 0 0 703
------ ------ ----- ------
Total rate sensitive assets . . . . 25,001 41,038 8,827 74,866
Rate Sensitive Liabilities:
Savings/interest
bearing checking. . . . . . . . . . 40,394 0 0 40,394
Time deposits . . . . . . . . . . . . 13,618 6,772 0 20,390
Short term borrowings . . . . . . . . 234 0 0 234
Long term borrowings. . . . . . . . . 0 163 0 163
------ ------ ----- ------
Total rate sensitive liabilities. . 54,246 6,935 0 61,181
Rate sensitive gap. . . . . . . . . . . (29,245) 34,103 8,827 13,685
Cumulative rate sensitive gap . . . . . (29,245) 4,858 13,685 13,685
Rate sensitive gap %. . . . . . . . . . (116.98)% 83.10% 100.00% 18.28%
Cumulative rate sensitive gap % . . . . (116.98)% 7.94% 18.28% 18.28%
</TABLE>
57
<PAGE>
The following tables set forth Summit's interest rate sensitivity analysis
at the dates indicated with respect to individual categories of loans and
provides separate analyses with respect to fixed interest rate loans and
floating interest rate loans (in thousands):
FIRST NATIONAL SUMMIT BANKSHARES, INC.
LOAN REPRICING OR MATURING
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Repricing or Maturing in
---------------------------------
1 Year Over 1 to Over 5
or Less 5 years years Total
------- ------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loan Category
Commercial . . . . . . . . . . . . . 21,012 7,899 1,281 30,192
Real Estate . . . . . . . . . . . . . 6,263 7,786 2,696 16,745
Agricultural. . . . . . . . . . . . . 13 134 147
Consumer and Other. . . . . . . . . . 8,310 8,757 104 17,171
--------------------------------------------
Total Loans . . . . . . . . . . . . 35,598 24,576 4,081 64,255
--------------------------------------------
--------------------------------------------
Rate Sensitive Loans
Fixed Interest Rate Loans . . . . . . 28,378 24,576 3,594 56,548
Floating Interest Rate Loans. . . . . 7,220 487 7,707
--------------------------------------------
Total Loans . . . . . . . . . . . . 35,598 24,576 4,081 64,255
--------------------------------------------
--------------------------------------------
</TABLE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
LOAN REPRICING OR MATURING
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Repricing or Maturing in
---------------------------------
1 Year Over 1 to Over 5
or Less 5 years years Total
------- ------- ----- -----
<S> <C> <C> <C> <C>
Loan Category
Commercial . . . . . . . . . . . . . 14,390 14,313 3,154 31,857
Real Estate . . . . . . . . . . . . . 2,457 5,221 1,912 9,590
Agricultural. . . . . . . . . . . . . 129 51 180
Consumer and Other. . . . . . . . . . 2,052 14,468 36 16,556
--------------------------------------------
Total Loans . . . . . . . . . . . . 19,028 34,053 5,102 58,183
--------------------------------------------
--------------------------------------------
Rate Sensitive Loans
Fixed Interest Rate Loans . . . . . . 2,014 11,173 2,045 15,232
Floating Interest Rate Loans. . . . . 17,014 22,880 3,057 42,951
--------------------------------------------
Total Loans . . . . . . . . . . . . 19,028 34,053 5,102 58,183
--------------------------------------------
--------------------------------------------
</TABLE>
58
<PAGE>
SUMMIT'S PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below are the names and addresses and the number of shares of
Summit Common Stock held as of the Record Date by the officers and directors of
Summit and each person known to the officers and directors to be the beneficial
owners of more than 5% of its outstanding common stock:
Number
Name and Address Position Held of Shares Percent
- ---------------- ------------- --------- -------
Trustees of FNS Bankshares, Inc.
Employee Stock Ownership Plan
P.O. Box 60
Gunnison, CO 81230 63,368 6.64%
First Southern Trust Co.
Trustees of FSTC & BCA Saving
& Investment Plan
6409 Quail Hollow Road
Memphis, TN 38120 69,998 7.34%
Paul P. Piper, Jr.
7578 Presidents Drive
Orlando, FL 32809-5608 488,618 (1) 51.23%
Bobby Sammons
2512 Thomas Pl.
Fort Worth, TX 76107-4323 48,768 5.11%
Dr. Bob L. Sellers
c/o Banking Consultants of America
6409 Quail Hollow Road
Memphis, TN 38120 128,210 (2) 13.44%
Beneficial Owner (Director):
Allen E. Cox
Trustee for Allen E. Cox Revocable
Trust
P.O. Box 939
Crested Butte, CO 81230 Director 30,508 (3) 3.19%
Alan Hegeman
#2 Maroon Ave.
Crested Butte, CO 81224 Director 35,084 (4) 3.79%
James Noone, DVM
135 Blackfoot Trail
Gunnison, CO 81230 Director 10,204 1.07%
Dora Mae Trampe
244 Tomichi Trail
Gunnison, CO 81230 Director 10,204 1.07%
59
<PAGE>
OFFICERS AND DIRECTORS
AS A GROUP (4 PERSONS): 86,000 12.6
- ----------------------------------------
(1) Includes 463,226 shares owned individually, 10,152 shares owned by his two
daughters (5,076 shares each by Jill Piper and Lynn (Piper) McCormack, and
15,240 shares owned by Shirley Piper, his wife.
(2) Includes 88,626 shares owned individually, 36,534 shares owned by his IRA,
and 3,050 shares owned by his wife, Marie F. Sellers' IRA.
(3) Includes 27,508 shares held by Allen E. Cox Revocable Trust and 3,000
shares held by his wife's Judy T. Cox Revocable Trust.
(4) Includes 29,384 shares owned individually, 3,420 shares held by his own IRA
and 2,280 shares held by his wife, Marcia Hegeman's IRA.
60
<PAGE>
MATERIAL DIFFERENCES IN RIGHTS OF SUMMIT SHAREHOLDERS
The rights of Summit shareholders are governed by the Articles of
Incorporation and Bylaws of Summit and the laws of the State of Colorado. The
rights of CFB stockholders are governed by the Certificate of Incorporation and
Bylaws of CFB and the laws of the State of Delaware. After the Merger becomes
effective and SAC is subsequently merged with and into CFB, the rights of Summit
shareholders who become CFB stockholders will be governed by the CFB
Certificate, the CFB Bylaws and the laws of the State of Delaware. In certain
respects, rights of Summit shareholders and CFB stockholders are similar. While
it is not practical to describe all changes in the rights of Summit shareholders
that will result from the application of Delaware law in lieu of Colorado law
and the differences between the Summit Articles and Bylaws and the CFB
Certificate and Bylaws, the following is a summary of certain significant
differences. It should be understood that such description of the differences
is a summary only and does not purport to be a complete description of the
differences between Delaware and Colorado corporation laws.
CAPITAL STOCK
The Summit Articles authorize the issuance of 100,000 shares of preferred
stock, $100.00 par value per share, and 2,000,000 shares of common stock, par
value $.09 per share. Summit currently has outstanding one class of preferred
stock and one class of common stock. All Summit common shareholders have equal
rights and preferences with respect to dividends and distributions upon
liquidation.
The CFB Certificate authorizes the issuance of 30,000,000 shares of common
stock, par value $.01 per share ("CFB Common Stock"), and 2,000,000 shares of
Preferred Stock, $.01 par value per share ("CFB Preferred Stock"). The Board of
Directors of CFB has designated 150,000 shares of Series A Junior Participating
Preferred Stock, par value $.01 per share (which may only be issued upon a
triggering event under the Rights Agreement described under "Recent Developments
Regarding CFB - Rights Agreement") and 270,000 shares of 7% Cumulative
Convertible Preferred Stock, par value $.01 per share, all of which were
redeemed in March 1997. See "Recent Developments Regarding CFB - Other Recent
Developments." As of October 13, 1997, 18,676,373 shares of CFB Common Stock
were outstanding and at June 30, 1997, $60,000,000 of company obligated
mandatorily redeemable preferred securities (the "Capital Securities") of CFB
Capital I, a wholly-owned business trust of CFB, were outstanding.
Holders of CFB Capital Note Securities have certain rights and preferences
with respect to dividends and upon liquidation that are superior to those of
holders of CFB Common Stock. The relative rights and preferences of any CFB
capital securities or preferred stock issued in the future may be established by
the CFB Board of Directors without stockholder action, and such shares, when and
if issued, could have dividend, liquidation, voting, and other rights superior
to those of CFB Common Stock.
SHAREHOLDERS' ACTION WITHOUT A MEETING
Delaware law provides that, unless otherwise provided in the certificate of
incorporation, any action which may be taken at any annual or special meeting of
shareholders of a corporation may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the actions so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
Colorado law also permits written actions by shareholders, but requires
that a written consent be signed by all of the shareholders entitled to vote
thereon.
61
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
If a Delaware corporation fails to hold an annual meeting for a period of
thirteen months after its last annual meeting, the Court of Chancery may
summarily order a meeting to be held upon the application of any shareholder or
director. The shares of stock represented at such meeting, either in person or
by a proxy, and entitled to vote thereat, shall constitute a quorum for the
purpose of such meeting.
Colorado law provides that if an annual meeting of shareholders has not
been held within the earlier of six months after the end of the corporation's
fiscal year or fifteen months after its last annual meeting, a shareholder may
demand an annual meeting of shareholders by written notice of demand to the
district court of the county where the corporation's principal office is
located.
SPECIAL MEETING OF SHAREHOLDERS
Delaware law provides that special meetings of the shareholders may be
called by the board of directors or by such person or persons as may be
authorized by the certificate of incorporation or by the bylaws. CFB's Bylaws
authorize the Chairman of the Board of Directors, the President or by any two or
more directors to call a special meeting of shareholders.
Colorado law provides that special meetings of the shareholders may be
called by any of the following: the board of directors; a person authorized in
the bylaws to call special meetings; or a shareholder or shareholders holding
10% or more of the voting power of all shares entitled to vote. Summit's Bylaws
also authorize Summit's President to call a special meeting of shareholders.
PROXIES
Both Delaware and Colorado law permit proxies of indefinite duration. In
the event that the proxy is indefinite as to its duration, Colorado law provides
that it will be valid for 11 months and Delaware law provides that it will be
valid for 3 years.
PREEMPTIVE RIGHTS
Under Delaware law, no shareholder shall have any preemptive right to
subscribe to an additional issue of stock or to any security convertible into
such stock unless, and to the extent that, such right is expressly granted in
the certificate of incorporation. CFB's Certificate does not grant preemptive
rights to CFB shareholders.
Under Colorado law, a shareholder of a corporation has a preemptive right
to acquire unissued shares or rights to purchase such shares of the corporation
before the corporation may offer them to other persons, unless such rights are
denied or limited in the articles of incorporation. Summit's Articles provide
that shareholders have no pre-emptive rights to purchase any shares or
securities of the corporation which it may issue or sell.
CUMULATIVE VOTING
Under Delaware law, shareholders do not have cumulative voting rights
unless the rights are granted to them in the corporation's certificate of
incorporation. If cumulative voting is provided for in the certificate or
articles of incorporation, each holder of stock shall be entitled to as many
votes as shall equal the number of votes which he or she would be entitled to
cast for the election of directors with respect to his or her shares of stock
multiplied by the number of directors to be elected by him or her, and that he
or she may cast all such votes for a single director or may distribute them
among the number to be voted for, or for any two or more of them as he or she
may see fit. CFB's Certificate provides for cumulative voting.
62
<PAGE>
Under Colorado law, cumulative voting is generally mandatory for
corporations incorporated after December 31, 1958 unless specifically prohibited
in the corporation's articles of incorporation. Summit's Articles prohibit
cumulative voting.
DISSOLUTION
A Delaware corporation may be dissolved by the voluntary action of the
holders of a majority of the outstanding stock of the corporation entitled to
vote thereon. Additionally, a Delaware corporation may be dissolved without the
action of the directors if all of the shareholders entitled to vote thereon
shall consent in writing. A Colorado corporation may be dissolved upon a
proposal of the corporation's board of directors and the affirmative vote of the
holders of a majority of the voting power of all shares entitled to vote.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
The COBCA generally requires the affirmative vote of the holders of a
majority of the outstanding shares of each class entitled to vote to approve a
merger or share exchange. In certain circumstances, the holders of outstanding
shares of a class of capital stock of a Colorado corporation are entitled to
vote as a separate voting group, regardless of whether the articles of
incorporation provide that such shares of capital stock are entitled to vote.
However, no vote of shareholders of a Colorado corporation is required to
approve a merger if (i) that corporation is the surviving corporation of the
merger, (ii) the articles of incorporation of the surviving corporation, with
certain exceptions, will not differ from its articles of incorporation before
the merger, (iii) each shareholder of the surviving corporation whose shares are
outstanding immediately before the merger will hold the same number of shares,
with identical designations, preferences, limitations, and relative rights,
immediately after the merger, and (iv) the number of shares of the corporation
to be issued in the merger, or to be issuable upon conversion of any convertible
instruments to be issued in the merger, does not exceed 20% of the voting stock
of that corporation outstanding immediately before the merger.
Under Delaware law, the vote of a simple majority of the outstanding shares
of CFB Common Stock entitled to vote thereon is required to approve a merger or
consolidation, or the sale, lease, or exchange of substantially all of CFB's
corporate assets. With respect to a merger, no vote of the stockholders of CFB
is required if CFB is the surviving corporation and (i) the related agreement of
merger does not amend the CFB Certificate, (ii) each share of stock of CFB
outstanding immediately before the merger is an identical outstanding or
treasury share of CFB after the merger, and (iii) the number of shares of CFB
stock to be issued in the merger (or to be issuable upon conversion of any
convertible instruments to be issued in the merger) does not exceed 20% of the
shares of CFB Common Stock outstanding immediately before the merger.
In addition to being subject to the laws of Colorado and Delaware,
respectively, both Summit and CFB, as bank holding companies, are subject to
various provisions of federal law with respect to mergers, consolidations and
certain other corporate transactions.
DISSENTERS' RIGHTS
Under the COBCA, any shareholder of a corporation is entitled to receive
payment of the fair value of such shareholder's shares of capital stock if such
shareholder properly dissents from (i) any merger, share exchange or
consummation of a sale or exchange of all or substantially all of the assets of
the corporation not made in the regular course of business for which a vote of
such shareholder is required, (ii) any corporate action that results in an
amendment of the articles of incorporation, which materially and adversely
affects rights with respect to a dissenter's shares because it alters or
abolishes a preferential right of the shares, creates, alters or abolishes a
right in respect of redemption, excludes or limits the right of the shares to be
voted on any matter or to cumulate votes, or reduces the number of shares owned
by the shareholder to a fraction of a share if the fractional share so created
is to be acquired for cash, (iii) any other corporate action taken pursuant to a
shareholder vote to the extent the bylaws or resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and to obtain payment
63
<PAGE>
for their shares. See the more detailed discussion of the procedures for
asserting dissenters rights under "The Merger - Dissenters' Rights."
Under Delaware law, a stockholder is generally entitled to receive payment
of the appraised value of such stockholder's shares if the stockholder dissents
from a merger or consolidation. However, appraisal rights are not available to
holders of (i) shares listed on a national securities exchange or held of record
by more than 2,000 persons or (ii) shares of the corporation surviving a merger,
if the merger did not require the approval of the stockholders of such
corporation, unless in either case, the holders of such stock are required by
the terms of the merger to accept anything other than (a) shares of stock of the
surviving corporation, (b) shares of stock of another corporation which are also
listed on the national securities exchange or held by more than 2,000 holders,
or (c) cash in lieu of fractional shares of such stock. Appraisal rights are
not available for a sale of assets or an amendment to the CFB Certificate of
Incorporation. Because shares of CFB Common Stock are traded in the Nasdaq
National Market System, its stockholders are not, subject to the aforementioned
exceptions, entitled to any rights of appraisal in connection with mergers or
consolidations involving CFB.
CONFLICTS OF INTEREST
Under Delaware law, a contract or transaction between a corporation and one
or more of its directors or officers, or between a corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall not be void or voidable solely for that reason, or solely
because the director or officer was present at or participated in the meeting of
the board or committee thereof which authorized the contract or transaction, or
solely because his or her vote was counted for such purpose, provided that the
contract or transaction is (i) authorized in good faith by the board of
directors, or (ii) ratified by the corporation's shareholders, or (iii) fair to
the corporation. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board which authorizes the contract
or transaction.
In general, Colorado's conflicts of interest statute is the same as
Delaware's statute, except that Colorado's conflict of interest statute does not
cover transactions between the corporation and its officers.
DIVIDENDS AND DISTRIBUTIONS
Distributions to shareholders of a Colorado corporation may not be made if
any such distribution would render the corporation unable to meet its
liabilities in the ordinary course of business or, if as a result of such
distribution, the excess of the corporation's assets over its liabilities would
be less than the liquidation preference of all shares having a preference on
liquidation over the class or series to which the distribution is made.
A Delaware corporation may make repurchases or redemptions that do not
impair capital and may pay dividends out of any surplus account (generally the
stockholders' equity of the corporation less the par value of the capital stock
outstanding) or, if there exists no surplus, out of net profits of the current
and preceding fiscal years (provided that certain provisions must be made for
preferences of outstanding stock having a liquidation preference). To determine
the surplus, assets and liabilities are valued at their current fair market
value. Assuming that such assets have a fair market value greater than their
book value and that liabilities have not increased in value to a greater extent,
such revaluation will increase the surplus of the corporation and thereby permit
the corporation to pay an increased dividend and/or to repurchase a greater
number of shares.
Summit and CFB are also subject to the policies of federal regulatory
authorities regarding payment of dividends, which generally limit dividends to
operating earnings. See "Business of Summit - Supervision and Regulation."
64
<PAGE>
ANTI-TAKEOVER PROVISIONS
Pursuant to Delaware's Business Combinations Statute, if a person acquires
15% or more of the voting stock of a Delaware corporation, that person is
designated an interested shareholder and the corporation may not engage in
certain business combinations with such person for a period of three years.
However, an otherwise prohibited business combination may be permitted if one of
these conditions is met: (1) if prior to the date the person became an
interested shareholder, the board of directors approved either the business
combination or the transaction which resulted in the shareholder becoming an
interested shareholder; (2) the tender offer or other transaction by which the
person acquires 15% stock ownership is attractive enough that he is able to
acquire ownership in the same transaction of at least 85% of the outstanding
voting stock; or (3) the business combination is approved by the board and
authorized at an annual or special meeting of shareholders by the affirmative
vote of two-thirds of the outstanding voting shares held by uninterested
shareholders. A business combination is defined to include any of the
following: any merger or consolidation with the interested shareholder; any
sale, transfer or other disposition of assets to the interested shareholder if
the assets have a market value equal to or greater than 10% of the aggregate
market value of all of the corporation's assets; any transfer of stock of the
corporation to the interested shareholder, except for transfers in a conversion
or exchange or a pro rata distribution; and any receipt by the interested
shareholder of any loans, advances, guarantees, pledges or other financial
benefits, except for a pro rata transfer.
Colorado does not have a comparable statute.
CFB is party to a shareholders' rights agreement which could in certain
circumstances serve as a deterrent against a possible change of control not
approved by CFB's Board of Directors. Under the agreement, upon the occurrence
of certain events which result in a change of control as defined by the
agreement, registered holders of shares of CFB Common Stock are entitled to
purchase one-hundredth of a share of junior participating preferred stock of CFB
at a stated price, or to purchase shares of common stock in the acquiring entity
with a market value equal to two times the exercise price. The rights may be
redeemed by CFB in certain circumstances and expire in 2005.
CHARTER AMENDMENTS
Delaware law does not provide for shareholders, independently from the
board, to propose amendments to the certificate of incorporation. Delaware law
generally requires that, absent a greater requirement in the certificate or
articles of incorporation, a majority of the outstanding stock entitled to vote
thereon, and a majority of the outstanding stock of each class entitled to vote
as a class, must vote in favor of the amendment.
Under Colorado law, the holders of shares representing at least 10% of the
votes entitled to be cast on the amendment may propose an amendment to the
articles of incorporation. Colorado law, generally requires that the amendment
be approved by a majority of the votes entitled to be cast on the amendment by
any voting group with respect to which the amendment would create dissenters'
rights.
AMENDMENT OF BYLAWS
Delaware law provides that the power to adopt, amend or repeal bylaws shall
be in the shareholders entitled to vote; provided, however, any corporation may,
in its certificate of incorporation, confer the power to adopt, amend, or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the shareholders, nor limit their power to adopt,
amend or repeal bylaws.
Generally, Colorado law provides that the board may amend or repeal the
bylaws unless the articles reserve the power exclusively to the shareholders or
the bylaw expressly provides that the board shall not amend or repeal that
bylaw. A corporation's shareholders may amend or repeal the corporation's
bylaws even though the bylaws may also be amended or repealed by its board of
directors.
65
<PAGE>
LEGAL MATTERS
The validity of the CFB Common Stock to be issued to the shareholders of
Summit in connection with the Merger will be passed upon for CFB by Lindquist &
Vennum P.L.L.P., Minneapolis, Minnesota. Patrick Delaney, a partner of
Lindquist & Vennum P.L.L.P., is a director of CFB and an owner of CFB Common
Stock and options to purchase CFB Common Stock. Certain federal income tax
consequences in connection with this Merger will be passed upon for CFB and
Summit by Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of CFB at December 31, 1996 and 1995,
and for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Proxy Statement-Prospectus which constitutes a
proxy statement of Summit and a prospectus and registration statement of CFB
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference which
(i) as to the years 1995 and 1994, are based in part on the reports of Arthur
Andersen LLP, formerly independent auditors for Mountain Parks Financial Corp.,
and (ii) as to the year 1994, are based in part on the reports of Hacker, Nelson
& Co., P.C. and Fortner, Bayens, Levkulich and Co., P.C., formerly independent
auditors for Minowa Bancshares, Inc., and First Community Bankshares, Inc.,
respectively. As of the date of their reports and during the periods covered by
the financial statements on which they reported, each of the foregoing
accounting firms were independent certified public accountants with respect to
CFB, Mountain Parks Financial Corp., Minowa Bancshares, Inc. and First Community
Bankshares, Inc., as the case may be, within the meaning of the Securities Act
and the applicable published rules and regulations thereunder. CFB has agreed
to indemnify Hacker, Nelson & Co., P.C., its officers, directors and employees
from any and all damages, fines, legal costs and expenses that may be incurred
by the parties being indemnified in successfully defending their audit to any
person, corporation or governmental entity relying upon the audit, provided that
such indemnification will not apply to any claim, legal expense, or costs
incurred if Hacker, Nelson & Co., P.C. has been found guilty of professional
malpractice with respect to such audit. The consolidated financial statements
referred to above are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
The financial statements of KeyBank Wyoming as of and for the year ended
December 31, 1996 appearing in CFB's Current Report on Form 8-K/A filed on
September 22, 1997 with the Securities and Exchange Commission have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance on such report given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Summit as of December 31, 1996 and
for the one-year period ended December 31, 1996 included herein have been
included herein in reliance upon the report of Fortner, Bayens, Levkulich & Co.,
P.C., Certified Public Accountants, independent auditors, appearing elsewhere
herein, and given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Summit as of December 31, 1995,
and for each of the years in the two-year period ended December 31, 1995
included herein have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Summit are included in this Proxy
Statement-Prospectus:
Page
----
YEAR ENDED DECEMBER 31, 1996:
Independent Auditors' Report on the Consolidated Financial
Statements for the year ended December 31, 1996. . . . . . . . . . . . . F-3
Consolidated Balance Sheets at of December 31, 1996 . . . . . . . . . . . F-4
Consolidated Statement of Income for the year ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statement of Shareholders' Equity for the year
ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Consolidated Statement of Cash Flows for the year ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . F-10
YEARS ENDED DECEMBER 31, 1995 and 1994:
Independent Auditors' Report on the Consolidated Financial
Statements as of December 31, 1995 and for the years ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . F-30
Consolidated Statements of Condition as of December 31, 1995 . . . . . . . F-31
Consolidated Statements of Income for the
years ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . F-33
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . F-34
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . F-35
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F-37
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED):
Condensed Consolidated Statements of Condition as of June 30,
1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-48
Condensed Consolidated Statements of Operations for the six months
ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . F-49
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . F-50
Notes to Condensed Financial Statements. . . . . . . . . . . . . . . . . . F-51
F-1
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
FIRST NATIONAL SUMMIT BANKSHARES, INC.
December 31, 1996
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
First National Summit Bankshares, Inc.
Gunnison, Colorado
We have audited the accompanying consolidated balance sheet of First
National Summit Bankshares, Inc. as of December 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
First National Summit Bankshares, Inc. and subsidiary at December 31, 1996 and
the results of their operations and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
FORTNER, BAYENS, LEVKULICH & CO. P.C.
Denver, Colorado
March 7, 1997
F-3
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996
ASSETS
Cash and due from banks $ 4,962,081
Federal funds sold 6,500,000
Investment securities available for sale 10,668,306
Investment securities held to maturity 4,755,575
Loans, net of unearned loan fees 64,255,485
Less allowance for loan losses (850,413)
-----------
63,405,072
Bank premises and equipment, net 3,420,511
Accrued interest receivable 745,687
Intangible assets, net of accumulated amortization
of $260,714 966,853
Cash surrender value of life insurance policies 1,020,445
Other assets 739,797
-----------
$97,184,327
-----------
-----------
F-4
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $24,853,916
NOW 14,569,638
Savings 11,940,047
Money market 14,150,243
Other time under $100,000 13,883,573
Other time over $100,000 6,277,650
-----------
Total deposits 85,675,067
Accrued interest payable 109,593
Federal Home Loan Bank borrowings 2,166,125
Notes payable 847,584
Other liabilities 602,435
-----------
Total liabilities 89,400,804
Commitments (notes G, K and L)
Stockholders' equity
Preferred stock, no par value, authorized 100,000 shares;
12,000 shares issued and outstanding, redemption price
of $100 per share 1,200,000
Common stock, $.0835 par value; 2,000,000 shares
authorized; 949,708 shares issued and outstanding 79,105
Additional paid-in capital 4,155,343
Retained earnings 2,354,919
Net unrealized loss on securities available for sale,
net of taxes (5,844)
-----------
Total stockholders' equity 7,783,523
-----------
$97,184,327
-----------
-----------
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31, 1996
INTEREST INCOME
Loans, including fees $6,642,726
Taxable investment securities 657,884
Nontaxable investment securities 155,383
Other interest 232,408
----------
Total interest income 7,688,401
INTEREST EXPENSE
Deposits 2,704,110
Other borrowings 21,158
----------
Total interest expense 2,725,268
----------
NET INTEREST INCOME 4,963,133
Provision for loan losses 579,025
----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,384,108
OTHER INCOME
Service charges on deposit accounts 685,623
Insurance income 474,727
Other income 748,594
----------
Total other income 1,908,944
OTHER EXPENSES
Salaries and employee benefits 2,197,726
Occupancy expenses of premises 311,175
Furniture and equipment expense 456,298
Other expenses 1,947,553
----------
Total other expenses 4,912,752
----------
Income before income taxes 1,380,300
INCOME TAX EXPENSE 517,022
----------
NET INCOME $ 863,278
----------
----------
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Year ended December 31, 1996
<TABLE>
<CAPTION>
Unrealized
loss on
securities
Preferred stock Common stock Additional available
------------------- ------------------- paid-in Retained for sale,
Shares Amount Shares Amount capital earnings net of taxes Total
------ ---------- ------ ------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 14,000 $1,400,000 980,172 $81,649 $4,510,751 $2,225,864 $(9,294) $8,208,970
Cash dividend paid on
preferred stock - - - - - (146,120) - (146,120)
Cash dividend paid on
common stock - - - - - (588,103) - (588,103)
Redemption of preferred
stock (2,000) (200,000) - - - - - (200,000)
Redemption of common stock - - (30,464) (2,544) (355,408) - (357,952)
Change in unrealized loss
on available for sale
securities - - - - - - 3,450 3,450
Net income - - - - - 863,278 - 863,278
------ ---------- ------- ------- ---------- ---------- ------- ----------
BALANCE AT DECEMBER 31,
1996 12,000 $1,200,000 949,708 $79,105 $4,155,343 $2,354,919 $(5,844) $7,783,523
------ ---------- ------- ------- ---------- ---------- ------- ----------
------ ---------- ------- ------- ---------- ---------- ------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 863,278
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 579,025
Depreciation and amortization 424,177
Amortization of intangibles 129,314
Amortization of investment premium, net of discount 45,653
Deferred income tax benefit (105,999)
Stock dividend from Federal Home Loan Bank (21,800)
Write down of investment securities 91,445
Increase in cash surrender value of insurance policies (121,905)
Changes in deferrals and accruals
Interest receivable 95,313
Interest payable (15,807)
Other, net (772,548)
-----------
Net cash provided by operating activities 1,190,146
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in federal funds sold (3,250,000)
Purchase of investment securities available for sale (3,540,769)
Purchase of investment securities held to maturity (1,434,431)
Proceeds from maturities of investment securities
available for sale 2,796,759
Proceeds from maturities of investment securities
held to maturity 565,000
Net change in loans 3,248,103
Expenditures for bank premises and equipment (1,012,888)
Additional investment in insurance policies (300,640)
-----------
Net cash used in investing activities (2,928,866)
F-8
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
Year ended December 31, 1996
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 367,367
Advances from Federal Home Loan Bank 2,000,000
Other borrowings 719,773
Payments on notes payable (62,564)
Dividends paid (734,223)
Redemption of stock (557,952)
-----------
Net cash provided by financing activities 1,732,401
-----------
NET DECREASE IN CASH AND DUE FROM BANKS (6,319)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 4,968,400
-----------
CASH AND DUE FROM BANKS AT END OF YEAR $ 4,962,081
-----------
-----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest expense $ 2,741,075
Income taxes 802,000
The accompanying notes are an integral part of this statement.
F-9
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - SUMMARY OF ACCOUNTING POLICIES
NATURE OF OPERATIONS
First National Summit Bankshares, Inc. (the Company) was incorporated for
the purposes of owning shares of and acting as parent holding company for
First National Summit Bank (the Bank). The Bank provides a full range of
banking and mortgage services to individual and corporate customers
principally in the Gunnison and Mesa County areas. A majority of the Bank's
loans are related to real estate and commercial activities. Borrowers'
abilities to honor their loans are dependent upon the continued economic
viability of the area. The Bank is subject to competition from other
financial institutions for loans and deposit accounts. The Bank is also
subject to regulation by certain governmental agencies and undergoes periodic
examinations by those regulatory agencies.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses.
In connection with the determination of the allowance for loan losses,
management obtains independent appraisals for significant properties and
assesses estimated future cash flows from borrowers' operations and the
liquidation of loan collateral.
F-10
<PAGE>
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
BASIS OF FINANCIAL STATEMENT PRESENTATION (CONTINUED)
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize loan losses, changes in
economic conditions may necessitate revisions in future years. In addition,
various regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan losses. Such
agencies may require the Bank to recognize additional losses based on their
judgments about information available to them at the time of their
examination.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First National
Summit Bank. All material intercompany transactions have been eliminated.
INVESTMENT SECURITIES
Management determines the classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the Company has the
positive intent and ability to hold the securities to maturity. Held-to-
maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value,
with the unrealized gains and losses, net of tax, reported as a component of
retained earnings in shareholders' equity.
F-11
<PAGE>
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INVESTMENT SECURITIES (CONTINUED)
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization and accretion is included
as an adjustment to interest income from investments. Realized gains and
losses and declines in value judged to be other-than-temporary are included
in net securities gains (losses). The cost of securities sold is based on
the specific identification method.
LOANS
Loans are reported at the principal amount outstanding, net of loan fees and
the allowance for credit losses. Interest on loans is calculated by using
the simple interest method on the daily balance of the principal amount
outstanding.
Loan fees which represent an adjustment to interest yield are deferred and
amortized over the estimated life of the loan. Most of the loans originated
by the Company are short-term.
Loans on which the accrual of interest has been discontinued are designated
as nonaccrual loans. Accrual of interest on loans is discontinued either
when reasonable doubt exists as to the full, timely collection of interest or
principal or when a loan becomes contractually past due by ninety days or
more with respect to interest or principal. When a loan is placed on
nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. Interest accruals are
resumed on such loans only when they are brought fully current with respect
to interest and principal and when, in the judgement of management, the loans
are estimated to be fully collectible as to both principal and interest.
F-12
<PAGE>
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
Renegotiated loans are those loans on which concessions in terms have been
granted because of a borrower's financial difficulty. Interest is generally
accrued on such loans in accordance with the new terms.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses charged to expenses. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely or, with respect to consumer installment loans, according to an
established delinquency schedule. The allowance is an amount that management
believes will be adequate to absorb losses inherent in existing loans, leases
and commitments to extend credit, based on evaluations of the collectibility
and prior loss experience of loans, leases and commitments to extend credit.
The evaluations take into consideration such factors as changes in the nature
and volume of the portfolio, overall portfolio quality, loan concentrations,
specific problem loans, leases and commitments, and current and anticipated
economic conditions that may affect the borrowers' ability to pay.
Impaired loans are measured based on the present value of expected future
cash flows discounted at the loan's original effective interest rate. As a
practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a
valuation allowance.
F-13
<PAGE>
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
BANK PREMISES, LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Bank premises, leasehold improvements and equipment are stated at cost.
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives,
principally on the straight-line method.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired of First National Bankshares of
Gunnison, Inc. and MJ Verzuh Insurance Agency is amortized on the straight-
line method over 15 years.
INCOME TAXES
Under the liability method of accounting for income taxes, current or
deferred income tax liability or asset is recognized, subject to certain
limitations, for the current or deferred tax consequences of all events that
have been recognized in the financial statements. The deferred income tax
asset or liability is measured by the provisions of enacted tax laws.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company has defined cash
equivalents as those amounts included in the balance sheet caption "Cash and
Due from Banks".
F-14
<PAGE>
NOTE B - INVESTMENT SECURITIES
At December 31, 1996 the Company had securities with the following amortized
cost and estimated fair market values:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities $ 2,563,350 $ 21,599 $ 3,449 $ 2,581,500
Obligations of state and political
subdivisions 7,532,833 19,200 46,627 7,505,406
Equity securities 581,400 - - 581,400
----------- -------- ------- -----------
$10,677,583 $ 40,799 $50,076 $10,668,306
----------- -------- ------- -----------
----------- -------- ------- -----------
SECURITIES HELD TO MATURITY
U.S. Treasury securities $ 1,994,823 $ 2,391 $ 914 $ 1,996,300
Obligations of state and political
subdivisions 2,760,752 116,371 6,722 2,870,401
----------- -------- ------- -----------
$ 4,755,575 $118,762 $ 7,636 $ 4,866,701
----------- -------- ------- -----------
----------- -------- ------- -----------
Included in the amortized cost of securities held to maturity is a valuation
reserve of approximately $116,000 related to two obligations of state and
political subdivisions currently in default. This valuation reserve brings the
amortized cost on these securities to the estimated market value.
F-15
<PAGE>
NOTE B - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated market value of debt securities at December 31,
1996 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations without call or prepayment penalties.
Held to Maturity Available for Sale
---------------------- -------------------------
Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ------------ -----------
Due in one year or less $1,358,891 $1,364,084 $ 2,824,926 $ 2,830,400
Due after one year through
five years 2,008,751 2,019,671 4,721,535 4,737,610
Due after five years through
ten years 886,778 945,886 500,000 489,650
Due after ten years 501,155 537,060 1,538,601 1,521,511
Collateralized mortgage
obligations - - 511,121 507,735
---------- ---------- ------------ -----------
$4,755,575 $4,866,701 $10,096,183 $10,086,906
---------- ---------- ------------ -----------
---------- ---------- ------------ -----------
Securities included in the accompanying balance sheet at December 31, 1996 with
an amortized cost of $11,326,634 are pledged as collateral for public deposits
and for other purposes as required or permitted by law.
There were no sales of investment securities in 1996.
F-16
<PAGE>
NOTE C - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans at December 31, 1996 consisted of the following:
Construction $ 3,525,588
Commercial 44,259,338
Installment 13,025,167
Other 3,469,425
Loans held for sale 79,950
-----------
64,359,468
Less unearned loan fees (103,983)
-----------
$64,255,485
-----------
-----------
Transactions in the allowance for possible loan losses at December 31, 1996 are
as follows:
Balance at beginning of year $590,883
Provision for loan losses 579,025
Recoveries 54,373
Loans charged off (373,868)
--------
Balance at end of year $850,413
--------
--------
The outstanding principal balance of loans having payments delinquent more than
sixty days at December 31, 1996 amounted to $3,356,714
F-17
<PAGE>
NOTE C - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES (CONTINUED)
Loans on which the accrual of interest has been discontinued or reduced
amounted to $1,927,717 at December 31, 1996.
The recorded investment in impaired loans was $1,805,204 at December 31, 1996.
Included in the impaired loan total was $741,249 of impaired loans for which
the specific allowance for possible loan losses was $225,000. The remaining
amounts of impaired loans did not require a specific allowance for possible
loan losses due to the net realizable value of loan collateral, guarantees and
other factors.
No loans were transferred to foreclosed real estate in 1996.
The Company is not committed to lend funds to debtors whose loans have been
modified.
NOTE D - BANK PREMISES, LEASEHOLD IMPROVEMENTS AND EQUIPMENT
At December 31, 1996 leasehold improvements and equipment, less accumulated
depreciation and amortization, consisted of the following:
Accumulated
depreciation
and Net
Cost amortization amount
---------- ------------ ----------
Bank premises $2,049,411 $ 244,383 $1,805,028
Leasehold improvements 76,713 61,297 15,416
Equipment 1,977,889 798,695 1,179,194
Land 264,952 - 264,952
Construction in progress 155,921 - 155,921
---------- ---------- ----------
$4,524,886 $1,104,375 $3,420,511
---------- ---------- ----------
---------- ---------- ----------
F-18
<PAGE>
NOTE E - FEDERAL HOME LOAN BANK BORROWINGS
As of December 31, 1996, the Company had $2,166,125 in Federal Home Loan Bank
borrowings. The advances outstanding at December 31, 1996 are as follows:
Interest
Amount Rate
---------- ---------
$2,000,000 5.55%
166,125 6.52
----------
$2,166,125
----------
----------
The Company has a blanket pledge agreement with the FHLB of Topeka
collateralizing the above advances.
Maturities of the aforementioned borrowings are as follows:
1997 $2,006,616
1998 7,237
1999 7,916
2000 8,658
2001 and thereafter 135,698
----------
$2,166,125
----------
----------
The $2,000,000 note was paid upon maturity on February 14, 1997. The Company
simultaneously borrowed $2,000,000 under a similar note, due March 14, 1997.
F-19
<PAGE>
NOTE F - NOTES PAYABLE
Notes payable at December 31, 1996 are as follows:
Note payable to a financial institution at the prime rate
(8.25% at December 31, 1996), due February 27, 1997;
collateralized by 214 shares of Company's subsidiary
bank (the note was renewed for an additional six months) $450,000
Note payable in connection with the acquisition of insurance
agency assets, payable in installments including interest at
8% through 2002, supported by a letter of credit which is
collateralized by shares of the subsidiary bank's common stock 397,584
-------
$847,584
-------
-------
Estimated annual principal reductions are as follows:
1997 $510,701
1998 65,739
1999 71,195
2000 77,104
2001 and thereafter 122,845
-------
$847,584
-------
-------
NOTE G - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and stand-by
letters of credit.
F-20
<PAGE>
NOTE G - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
(CONTINUED)
Those instruments involve, to a varying degree, elements of credit risk in
excess of the amount recognized in the statement of financial position. The
contract amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments.
The Company also has an open-ended note payable to the Federal Reserve Bank of
Kansas City, collateralized by pledged securities.
The Company's exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit and
stand-by letters of credit is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Financial instruments whose contract amounts
represent credit risk
Commitments to extend credit $10,951,000
Stand-by letters of credit 141,000
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments may expire
without being drawn upon or be participated to other financial institutions,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's credit-worthiness on a case-
by-case basis.
The amount of collateral obtained if deemed necessary by the Company upon
extension of credit is based on management's credit evaluation. Collateral
held varies, but may include accounts receivable, inventory, property, plant
and equipment and income-producing commercial properties.
F-21
<PAGE>
NOTE G - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
(CONTINUED)
Stand-by letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
NOTE H - COMMITMENTS
OPERATING LEASES
The Company leases its detached facilities and its branch facilities from
third parties. The leases expire at various dates through 2001.
Approximate future minimum rentals under these leases are as follows:
Year ended
December 31,
------------
1997 $ 49,000
1998 44,000
1999 44,000
2000 44,000
2001 11,000
--------
$192,000
-------
-------
Rental expense for the years ended December 31, 1996 was $19,318.
F-22
<PAGE>
NOTE I - INCOME TAXES
Following is an analysis of income taxes included in the statement of income:
Current tax expense $623,021
Deferred tax expense (benefit) (105,999)
-------
$517,022
-------
-------
Deferred tax assets and liabilities are recorded based on the differences
between financial statement and tax basis of assets and liabilities and the tax
rates in effect when these differences are expected to reverse. Temporary
differences result principally from differences in the allowance for loan
losses, loan fees, and depreciation.
Timing differences in the recognition of revenue and expense for tax and
financial reporting purposes resulted in deferred tax assets as follows:
Deferred tax assets
Provision for loan losses $232,201
Recognition of loan fees 50,695
Noncompete agreements 36,994
Accrued employee benefits 65,654
Valuation reserve for securities 34,109
--------
Total deferred tax assets 419,653
Deferred tax liabilities
Depreciation 205,150
Federal Home Loan Bank stock dividend 8,057
Cash to accrual conversion 40,150
Other 6,464
--------
Total deferred tax liabilities 259,821
--------
Net deferred tax asset $159,832
--------
--------
F-23
<PAGE>
NOTE I - INCOME TAXES (CONTINUED)
The effective income tax rate varies from the statutory federal rate because of
several factors, the most significant being nontaxable interest income earned
on obligations of state and municipalities. The following table reconciles the
Company's effective tax rate to the statutory federal rate.
Amount Percent
------ -------
Tax expense at statutory rate $469,302 34.0%
Increase (decrease) in taxes due to:
Tax exempt municipal interest (47,730) (3.5)
State tax 34,891 2.5
Amortization of intangibles 18,424 1.3
Other 42,135 3.2
------- ----
Total provision for income taxes $517,022 37.5%
------- ----
------- ----
NOTE J- RELATED PARTIES
In the ordinary course of business, the Company makes various direct and
indirect loans to officers, directors and employees of the Company and the
Bank. Such loans to officers and directors and their related interests totaled
$609,562 at December 31, 1996.
A company controlled by a major shareholder acted as agent for, and received
fees from, the insurance companies underwriting the life insurance policies
referred to in note K. In addition, the Bank's ESI, DDI and KSOP plans (note
K) are being administered by an affiliate of this company.
F-24
<PAGE>
NOTE K- EMPLOYEE BENEFITS
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan, with code section 401(k)
provisions (the KSOP), covering substantially all of its employees. The
Company contributes up to 2% of each employee's salary. Additional
contributions to the KSOP by the Company are discretionary and are determined
on an annual basis by the Company's Board of Directors. The KSOP has no debt
outstanding at December 31, 1996. Contributions to the KSOP amounted to
$30,050 for the year ended December 31, 1996.
DIRECTORS DEFERRED INCOME PLAN AND EXECUTIVE SUPPLEMENTAL INCOME PLAN
The Director's Deferred Income Plan (DDI) is a deferred compensation plan,
which permits eligible directors to defer a portion of their directors' fees.
The deferred compensation is distributable in cash after retirement. During
1996, directors compensation deferred under the DDI plan was $17,120. The
Executive Supplemental Income Plan (ESI) is a benefit plan which permits
eligible officers to obtain certain benefits, as defined in the Plan, upon
retirement from the Company or upon death. Benefits accrued under the ESI
plan vest at 10% per year for every year of service with the Company. During
1996, the accrual for benefits earned under the ESI plan was $5,185.
The total obligation for benefits earned under the DDI and ESI plans was
$89,587 at December 31, 1996, and is included in other liabilities in the
accompanying financial statements. During 1994, the Company insured the
lives of certain officers and directors, who participate in the DDI and ESI
plans, to assist in the funding of the obligations under the plans. The
Company is the owner and beneficiary of these insurance policies which have a
cash surrender value of $1,020,445 at December 31, 1996.
F-25
<PAGE>
NOTE L - STOCKHOLDERS' EQUITY
PREFERRED STOCK
The rights and privileges of the preferred stock, established by the Board of
Directors are as follows:
- DIVIDENDS - Preferred stock has an annual dividend rate of prime rate
(8.25% at December 31, 1996) plus 1.5%. This rate will be increased by 1%
in the event of a failure to pay the annual cumulative dividends.
Dividends are cumulative, accruing and payable annually on April 12.
Unpaid dividends shall accumulate and be paid at a rate per share of prime
plus 2.5%, not to exceed 12%. Dividends on commons stock may not be
declared or paid until preferred dividends have been paid or funds set
aside for their payment.
- VOTING - Shares of preferred stock are non-voting.
- LIQUIDATION RIGHTS - In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company, preferred stock is
to be redeemed at the original issuance price of $100.00 per share, plus
any accrued but unpaid dividends.
- REDEMPTION - The preferred stock is redeemable, at the option of the
Company, subject to regulatory approval, at a redemption price of $100 per
share plus accrued dividends. In addition, within 90 days after the death
of a holder of preferred stock, the Company will redeem the stock, subject
to certain limitations, at a redemption price of $100 per share.
- RESTRICTIVE COVENANTS - Certain regulatory restrictions have been placed
on the Company's preferred stock, primarily the redemption of shares and
payment of dividends. These events cannot occur, without prior regulatory
approval, unless certain operating and capital ratios are maintained.
F-26
<PAGE>
NOTE L - STOCKHOLDERS' EQUITY (CONTINUED)
REDEMPTION OF SHARES
In February 1996, the Company entered into agreements to purchase common
stock of two former board members. The Company obtained a loan from Bankers'
Bank of the West in the amount of $350,000 to fund the total redemption of
$357,952. The loan accrues interest at the prime rate which is payable
quarterly with the principal balance to be paid in full on February 27, 1997.
The loan is secured by Bank common stock.
In June 1996, the Company purchased 2,000 shares of preferred stock from an
individual.
STOCK OPTIONS
In April 1995, the Company's Board of Directors approved a stock option plan
for the Company that provides for options to issue up to 12,000 shares.
Options under the Plan will be granted at prices not less than the fair
market value of the Company's stock at the date of grant. As of December 31,
1996, no options had been granted under the Plan.
DIVIDENDS
The approval of the Office of the Comptroller of the Currency is required for
the Company's subsidiary Bank to pay dividends in any calendar year which
exceed the Bank's net profit for that year combined with its retained profits
for the preceding two years.
F-27
<PAGE>
NOTE M - REGULATORY MATTERS
The Company's subsidiary Bank is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the bank's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the
Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based,
and Tier 1 leverage ratios as set forth in the table.
F-28
<PAGE>
NOTE M - REGULATORY MATTERS (CONTINUED)
There are no conditions or events since that notification that management
believes have changed the institution's category.
<TABLE>
<CAPTION>
To be well
capitalized under
For capital prompt corrective
Actual adequacy purposes action provisions
-------------------- ------------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ------- --------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total capital
(to risk weighted assets) $7,920,654 11.8% $5,362,631 GREATER THAN 8.0% $6,703,290 GREATER THAN 10.0%
Tier 1 capital
(to risk weighted assets) 7,070,241 10.5 2,681,316 GREATER THAN 4.0 4,021,974 GREATER THAN 6.0
Tier 1 capital
(to average assets) 7,070,241 7.7 3,653,871 GREATER THAN 4.0 4,567,339 GREATER THAN 5.0
</TABLE>
On January 9, 1997, the Bank entered into a memorandum of understanding (MOU)
with the Office of the Comptroller of the Currency (OCC). The MOU requires,
among other things, that the Bank develop an effective written program to
improve its loan administration.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
First National Summit Bankshares, Inc.:
We have audited the accompanying consolidated statement of condition of First
National Summit Bankshares, Inc. and subsidiary as of December 31, 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for the years ended December 31, 1995 and 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of First National Summit Bankshares,
Inc. and subsidiary at December 31, 1995 and the results of their operations
and their cash flows for the years ended December 31, 1995 and 1994 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
April 20, 1996
F-30
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS 1995
CASH AND DUE FROM BANKS $ 4,968,400
FEDERAL FUNDS SOLD 3,250,000
INVESTMENT SECURITIES AVAILABLE FOR SALE
(Note 3) 9,927,100
INVESTMENT SECURITIES HELD TO MATURITY 3,991,700
LOANS (Note 4) 67,824,600
Less allowance for loan losses 592,400
-----------
Net loans 67,232,200
BANK PREMISES AND EQUIPMENT, net (Note 5) 2,831,800
ACCRUED INTEREST RECEIVABLE 841,000
INTANGIBLE ASSETS, net of accumulated
amortization of $131,400 978,900
CASH SURRENDER VALUE OF LIFE INSURANCE
POLICIES 597,900
OTHER ASSETS 289,300
-----------
TOTAL $94,908,300
-----------
-----------
See notes to consolidated financial statements.
F-31
<PAGE>
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995
DEPOSITS (Notes 3 and 6):
Demand $20,246,500
NOW 14,613,400
Savings 12,316,400
Money market 17,751,700
Time 20,379,700
-----------
Total deposits 85,307,700
-----------
ACCRUED INTEREST PAYABLE 125,400
BORROWED FUNDS (Note 8) 626,300
OTHER LIABILITIES 655,500
-----------
Total liabilities 86,714,900
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Notes 11 and 12):
Preferred stock, no par value, authorized
100,000 shares; 14,000 shares
issued and outstanding, redemption
price of $100 per share 1,400,000
Common stock, $.0835 par value; 2,000,000
shares authorized; 980,188
shares issued and outstanding 81,700
Additional paid-in capital 4,510,700
Retained earnings 2,210,300
Net unrealized depreciation on available
for sale securities, net of taxes of
$5,400 (9,300)
-----------
Total stockholders' equity 8,193,400
-----------
TOTAL $94,908,300
-----------
-----------
F-32
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1995 1994
INTEREST INCOME:
Interest and fees on loans $6,724,600 $5,463,300
Interest on investment securities:
U.S. Government agencies and corporations
and mortgage-backed securities 370,500 270,200
U.S. Treasury obligations 307,200 262,800
Obligations of state and political
subdivisions 141,700 145,200
Mortgage-backed securities 34,500 25,800
Interest on federal funds sold and other 143,900 107,900
---------- ----------
Total interest income 7,722,400 6,275,200
INTEREST EXPENSE:
Deposits:
NOW 442,600 356,600
Savings 541,000 417,600
Money Market 591,100 472,900
Time (Note 6) 907,600 544,000
Other 114,800 8,100
---------- ----------
Total interest expense 2,597,100 1,799,200
---------- ----------
NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES 5,125,300 4,476,000
PROVISION FOR LOAN LOSSES (Note 4) 147,000 30,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 4,978,300 4,446,000
OTHER INCOME:
Service charges 704,500 572,400
Insurance commissions 275,200
Other 381,600 310,800
---------- ----------
Total non-interest income 1,361,300 883,200
OTHER EXPENSE:
Salaries and employee benefits (Note 13) 1,975,600 1,537,200
Net occupancy, depreciation and maintenance 540,600 326,400
Other (Note 14) 1,565,600 1,886,900
---------- ----------
Total non-interest expense 4,081,800 3,750,500
---------- ----------
INCOME BEFORE INCOME TAXES 2,257,800 1,578,700
INCOME TAX EXPENSE (Note 9) 855,700 580,200
---------- ----------
NET INCOME $1,402,100 $ 998,500
---------- ----------
---------- ----------
See notes to consolidated financial statements.
F-33
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 600,000 $50,000
Net income
Issuance of common stock for cash (Note 1) 212,724 17,700
Issuance of stock in connection with acquisition (Note 1) 17,000 $1,700,000 237,276 19,800
Purchase of common stock (29,600) (2,500)
Dividends paid
Net change in unrealized depreciation on available-for-sale
securities, net of taxes of $14,400
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 17,000 1,700,000 1,020,400 85,000
Net income
Issuance of common stock 41,964 3,500
Purchase of common stock (82,176) (6,800)
Redemption of preferred stock (3,000) (300,000)
Dividends paid on preferred stock
Net change in unrealized appreciation on available-for-sale
securities, net of taxes
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 14,000 $1,400,000 980,188 $81,700
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
NET UNREALIZED
DEPRECIATION
ADDITIONAL ON AVAILABLE-
PAID-IN RETAINED FOR-SALE
CAPITAL EARNINGS SECURITIES TOTAL
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $1,994,200 $ 281,500 $2,325,700
Net income 998,500 998,500
Issuance of common stock for cash (Note 1) 1,467,300 1,485,000
Issuance of stock in connection with acquisition (Note 1) 1,720,200 3,440,000
Purchase of common stock (272,200) (274,700)
Dividends paid (312,500) (312,500)
Net change in unrealized depreciation on available-for-sale
securities, net of taxes of $14,400 $(24,500) (24,500)
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 4,909,500 967,500 (24,500) 7,637,500
Net income 1,402,100 1,402,100
Issuance of common stock 416,100 419,600
Purchase of common stock (814,900) (821,700)
Redemption of preferred stock (300,000)
Dividends paid on preferred stock (159,300) (159,300)
Net change in unrealized appreciation on available-for-sale
securities, net of taxes 15,200 15,200
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 $4,510,700 $2,210,300 $ (9,300) $8,193,400
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-34
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1995 1994
OPERATING ACTIVITIES:
Net income $1,402,100 $998,500
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization, net of accretion, on
investment securities 49,100 73,100
Provision for loan losses 147,000 30,000
Gain on sale of other real estate owned,
net of losses (52,800)
Gain on sale of assets (3,200)
Recovery on investment security (75,000)
Depreciation 316,600 171,300
Amortization of intangible assets 48,600 16,700
Proceeds from sales of loans 2,063,500 7,322,500
Origination of loans for sale (1,911,600) (6,962,700)
Loan origination fees received 168,600 255,100
Accretion of deferred loan fees (185,600) (59,600)
Changes, net of effect of acquisitions,
in: Accrued interest receivable (91,900) (8,600)
Other assets 112,000 43,300
Accrued interest payable 9,200 (291,100)
Other liabilities (145,300) 206,000
----------- -----------
Net cash provided by operating
activities 1,979,100 1,666,700
----------- -----------
INVESTING ACTIVITIES:
Net (increase) decrease in federal
funds sold (1,050,000) 8,790,000
Proceeds from maturities and
redemptions of investment securities
held-to-maturity 4,731,900 4,537,800
Proceeds from sales of investment
securities available-for-sale 495,000
Proceeds from redemptions of investment
securities available-for-sale 2,100,000 117,900
Purchase of investment securities
held-to-maturity (1,105,900) (3,547,200)
Purchase of investment securities
available-for-sale (2,459,800)
Net increase in loans (935,700) (13,762,900)
Purchase of bank premises and equipment (576,800) (739,500)
Proceeds from sale of other real estate
owned 699,000
Acquisitions, net cash received (paid) (150,000) 2,989,400
Premiums paid for life insurance policies (299,000) (298,900)
----------- -----------
Net cash provided by (used in)
investing activities 254,700 (719,400)
----------- -----------
(Continued)
F-35
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1995 1994
FINANCING ACTIVITIES:
Net decrease in deposits $ (574,100) $ (342,800)
Advances from Federal Home Loan Bank 175,000
Repayment of advances and note payable (33,800)
Issuance of common stock 419,600 1,485,000
Purchase of common stock (821,700) (274,700)
Redemption of preferred stock (300,000)
Dividends paid on preferred stock (159,300) (312,500)
------------ -----------
Net cash provided by (used in)
financing activities (1,294,300) 555,000
------------ -----------
NET INCREASE IN CASH AND DUE FROM BANKS 939,500 1,502,300
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 4,028,900 2,526,600
------------ -----------
CASH AND DUE FROM BANKS, END OF YEAR $ 4,968,400 $ 4,028,900
------------ -----------
------------ -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 2,587,900 $ 2,090,400
------------ -----------
------------ -----------
Income taxes $ 887,000 $ 836,600
------------ -----------
------------ -----------
See notes to consolidated financial statements. (Concluded)
F-36
<PAGE>
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACQUISITIONS
First National Summit Bankshares, Inc. (the Company) is a one-bank holding
company which was formed on July 8, 1993. Initially named the Crested
Butte State Holding Company, the name was changed to First National Summit
Bankshares, Inc. on August 1, 1994.
Through April 12, 1994, the Company's sole investment was in its
wholly-owned subsidiary, the Crested Butte State Bank (CBSB). On April 12,
1994, CBSB acquired all of the common stock of First National Bankshares of
Gunnison, Inc. (FNBHC), which owned 100% of the common stock of the First
National Bank of Gunnison (FNB), for a total purchase price, including
acquisition costs and a subsequent purchase price adjustment, of
$5,116,300.
In accordance with the purchase agreement, the Company issued 212,724
shares of common stock to its existing shareholders for $1,485,000. The
cash received from the stock issuance was paid to the FNBHC shareholders.
In addition, the Company issued 237,276 shares of its common stock valued
at $1,740,000 and 17,000 shares of preferred stock valued at $1,700,000.
Pursuant to the terms of the purchase agreement, the former shareholders of
FNBHC may earn additional purchase price consideration in cash should
certain events occur. Such additional consideration, if any, will be
accounted for as goodwill. This acquisition was accounted for under the
purchase method of accounting and, accordingly, the operating results of
FNBHC are included in the accompanying statement of income since the date
of acquisition. Subsequent to the purchase, FNBHC and FNB were merged into
CBSB. In conjunction with the Company's name change, CBSB changed its name
to First National Summit Bank (the Bank).
The assets acquired and liabilities assumed are as follows:
Estimated fair value of assets acquired:
Cash and due from banks $ 4,665,700
Federal funds sold 7,390,000
Loans, net 29,727,600
Investment securities 14,690,800
Accrued interest 497,500
Bank premises and equipment, net 998,000
Other assets 737,700
-------------
$58,707,300
Less estimated fair value of liabilities
assumed:
Deposits 53,136,000
Other liabilities 817,200
-------------
53,953,200
-------------
Net assets acquired at estimated fair
value 4,754,100
-------------
Cash paid (including acquisition costs) 1,676,300
Common and preferred stock issued 3,440,000
-------------
Total purchase price 5,116,300
-------------
Excess of cost over fair value of assets
acquired $ 362,200
-------------
-------------
F-37
<PAGE>
In May, 1995, the Bank acquired the assets of the MJ Verzuh Insurance
Agency located in Gunnison, Colorado. Total consideration for the assets
acquired was $635,000, including cash of $150,000 and a promissory note of
$485,000 (see Note 8). The acquisition was accounted for under the
purchase method of accounting and accordingly, the operating results
related to the assets acquired are included in the accompanying statement
of income since the date of acquisition.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting practices of the Company and the Bank conform
to generally accepted accounting principles and prevailing practices within
the banking industry. A summary of the more significant accounting and
reporting policies follows.
BASIS OF PRESENTATION - The preparation of financial statements requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The consolidated financial
statements include the accounts of the Company and its subsidiary. All
significant intercompany transactions and balances have been eliminated.
Certain reclassifications have been made in the 1994 financial statements
to conform with the 1995 presentation.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company has defined cash and cash equivalents as those amounts under
the statement of condition caption "Cash and due from banks."
INVESTMENT SECURITIES - The Company classifies its investment securities as
held-to-maturity, available-for-sale or trading according to management's
intent. As of December 31, 1995, the Company had no trading securities.
a. INVESTMENT SECURITIES HELD TO MATURITY - Bonds, notes and debentures
for which the Company has the positive intent and ability to hold to
maturity are reported at cost, adjusted for premiums and discounts.
These securities may be sold as a result of changes in the securities'
credit risk.
b. INVESTMENT SECURITIES AVAILABLE FOR SALE - Available-for-sale
securities consist of securities not classified as held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are reported as a net amount in a
separate component of stockholders' equity until realized.
Premiums and discounts on investment securities are recognized in interest
income using a method which approximates the interest method. Declines in
the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary result in
write-downs of the individual securities to their fair value. The related
write-downs are included in earnings as realized losses. Gains and losses
on the sale of securities are computed using the specific identification
method.
INTEREST ON LOANS - Interest is accrued daily on the principal balance
outstanding. The accrual of interest income is generally discontinued when
a loan becomes 90 days past due as to principal and interest. When a loan
is designated as non-accrual, the current period's accrued interest
receivable is charged against current earnings while any portion applicable
to prior periods are charged against the allowance for loan losses.
Interest payments received on non-accrual loans are generally applied to
the principal balance of the loan. Management may elect to continue the
accrual of interest when the loan is in the process of collection and the
realizable value of collateral is sufficient to cover the principal balance
and accrued interest.
F-38
<PAGE>
Loan fees received from originating loans are deferred and amortized over
the contractual life of the related loans.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established
through a provision for loan losses charged to operations. Management's
periodic evaluation of the adequacy of the allowance is based on the Bank's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions. Loans deemed uncollectible are charged to the allowance.
Provisions for loan losses and recoveries on loans previously charged-off
are added to the allowance.
In 1995 the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," and
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." In accordance with these standards, a loan
is considered to be impaired when it is probable that the Bank will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. As the Bank was already providing for impairment of loans
in a manner consistent with SFAS No. 114 and No. 118, the implementation of
these statements had no material effect on the Company's financial
statement.
BANK PREMISES AND EQUIPMENT - Bank premises and equipment are stated at
cost, or their estimated value at the date of acquisition, less accumulated
depreciation. Depreciation is calculated by the straight-line method over
the estimated useful lives of the respective assets.
INTANGIBLE ASSETS - The excess of the cost over the fair value of all
identifiable net assets acquired in the acquisition of First National
Bankshares of Gunnison, Inc. and MJ Verzuh Insurance Agency (see Note 1)
(commonly called goodwill) is being amortized on a straight-line basis over
a period of fifteen years. Intangible assets also include the value of a
non-compete agreement which is amortized over two years.
OTHER REAL ESTATE OWNED - Real estate acquired through foreclosure or
through deed in lieu of foreclosure is held for resale and is recorded at
the lower of cost or fair value, net of selling costs, when the Bank takes
title to the assets. Losses arising from the acquisition of property
through foreclosure are charged to the allowance for loan losses at the
time of foreclosure. Subsequent declines in value are charged against
operations and are based on independent appraisals and/or management's
evaluations of other real estate owned considering current economic
conditions. As of December 31, 1995, the Company had no other real estate
owned.
INCOME TAXES - A deferred income tax liability or asset is recognized for
temporary differences which exist in the recognition of certain income and
expense items for financial statement reporting purposes in periods
different than for tax reporting purposes. The provision for income taxes
is based on the amount of current and deferred income taxes payable or
refundable at the date of the financial statements as measured by the
provisions of current tax laws.
3. INVESTMENT SECURITIES
The Company adopted SFAS 115 "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
AND EQUITY SECURITIES," which addresses the accounting and reporting for
investment securities in the Company's investment portfolio during the
first quarter of 1994. Upon adoption, CBSB had no investment securities
available-for-sale; and accordingly, there was no impact from the adoption
of SFAS 115. In conjunction with the acquisition of FNB (see Note 1), the
Company acquired investment securities available-for-sale of $1,334,900.
F-39
<PAGE>
In December 1995, the Bank reassessed the classification of its investment
portfolio, in accordance with guidance issued by the Financial Accounting
Standards Board, and reclassified securities with a total carrying value of
$8,864,200 from held to maturity to available for sale as of December 31,
1995. In connection with this reclassification, an unrealized loss, net of
taxes, of $4,300 was included in a separate component of stockholders'
equity.
The carrying value of securities and their approximate fair values at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross Approximate
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
Available-for-sale securities
U.S. Treasury obligations $2,582,900 $ 52,400 $ 100 $2,635,200
U.S. Government agencies 6,281,300 11,200 75,300 6,217,200
Mortgage-backed securities 514,100 3,000 511,100
Other securities 563,600 563,600
---------- ---------- ---------- ----------
$9,941,900 $ 63,600 $ 78,400 $9,927,100
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Held-to-maturity securities
U.S. Treasury obligations $1,503,700 $ 17,300 $1,521,000
Obligations of states and
political subdivisions 2,488,000 146,900 2,400 2,632,500
---------- ---------- ---------- ----------
$3,991,700 $ 164,200 $ 2,400 $4,153,500
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-40
<PAGE>
The carrying value and approximate fair value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Due in one year or less $ 500,000 $ 504,100 $1,257,600 $1,253,200
Due after one year through five years 2,035,000 2,102,000 7,110,500 7,102,300
Due after five years through ten years 1,080,200 1,151,400 496,100 496,900
Due after ten years 376,500 396,000
Mortgage-backed securities 514,100 511,100
Other securities 563,600 563,600
---------- ---------- ---------- ----------
$3,991,700 $4,153,500 $9,941,900 $9,927,100
---------- ---------- ---------- ----------
</TABLE>
Investment securities having an approximate fair value of $10,337,000 were
pledged, as required by law, to secure public deposits of $7,648,000 at
December 31, 1995.
At December 31, 1995, obligations of states and political subdivisions do
not include a single issuer for which the total carrying amount exceeds 10%
of stockholders' equity. However, 100% of these securities are obligations
of the State of Colorado or its political subdivisions.
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
The majority of the Bank's lending activities are with customers located in
Gunnison County, Colorado, which includes the towns of Crested Butte and
Gunnison. At December 31, 1995, approximately 37% of the Bank's loans are
collateralized by residential real estate while 31% of the Bank's loans are
collateralized by nonresidential real estate. In addition, approximately
7% of the Bank's loan portfolio at December 31, 1995 consists of
construction and land development loans. The Bank's collateral
requirements are the same regardless of the region in which the loans are
originated. Loans which are secured by real estate are generally
originated for no more than 75% of the appraised value of the related
property.
At December 31, 1995, the recorded investment in loans that are considered
to be impaired under SFAS No. 114 was $467,800 ($370,100 of which was on a
non-accrual basis). The average recorded investment in impaired loans
during the year ended December 31, 1995 was approximately $465,800. For
the year ended December 31, 1995, the Bank recognized interest income on
those impaired loans of $29,300 using the cash basis method of income
recognition. The additional interest income that would have been recorded
if the loans had performed in accordance with their original terms was
$19,700 for the year ended December 31, 1995.
F-41
<PAGE>
Transactions in the allowance for loan losses for the years ended
December 31, 1995 and 1994 are summarized as follows:
1995 1994
Balance, beginning of year $ 666,600 $ 211,100
Provision charged to operating expenses 147,000 30,000
---------- ----------
813,600 241,100
Allowance added from acquisition (Note 1) 438,800
Charged-off loans (261,500) (46,300)
Recoveries of charged-off loans 40,300 33,000
---------- ----------
Net charge-offs 221,200 (13,300)
---------- ----------
Balance, end of year $ 592,400 $ 666,600
---------- ----------
---------- ----------
5. BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment at December 31, 1995
are summarized as follows:
1995
Land $ 265,000
Buildings and improvements 2,052,500
Furniture and equipment 1,236,300
----------
3,553,800
Less accumulated depreciation 722,000
----------
$2,831,800
----------
----------
6. TIME DEPOSITS
The composition of time deposits at December 31, are as follows:
1995
Less than $100,000 $14,995,900
$100,000 and more 5,383,800
-----------
$20,379,700
-----------
-----------
Related interest expense for the years ended December 31, 1995 and 1994 is
as follows:
1995 1994
Less than $100,000 $695,300 $427,600
$100,000 and more 212,300 116,400
-------- --------
$907,600 $544,000
-------- --------
-------- --------
F-42
<PAGE>
7. RELATED PARTY TRANSACTIONS
In 1995 and 1994, the Bank received consulting services from a company
controlled by a major stockholder of the Company. Total fees paid for
services rendered by this company were approximately $3,300 and $240,200
for the years ended December 31, 1995 and 1994, respectively. The services
provided advice to management on staffing levels, product and services
pricing and operational improvements for the purpose of enhancing the
Bank's earnings in those areas. Another company controlled by this major
stockholder acted as agent for, and received fees from, the insurance
companies underwriting the life insurance policies referred to in Note 13.
In addition, the Bank's ESI, DDI and KSOP plans (Note 13) are being
administered by an affiliate of this company.
In the ordinary course of business, the Bank makes various direct and
indirect loans to officers, directors and employees of the Company and the
Bank at competitive rates. Such loans to officers and directors and their
related interests totaled $377,200 and $950,900 at December 31, 1995 and
1994, respectively.
8. BORROWED FUNDS
Borrowed funds are as follows as of December 31, 1995:
Federal Home Loan Bank advance due in June 2005, interest
payable at 6.74%, collateralized by FHLB stock and by
certain real estate loans $172,200
Note payable in connection with acquisition of insurance
agency assets, payable in installments including interest
at 8% through 2002, supported by a letter of credit which
is collateralized by shares of Bank common stock 454,100
--------
$626,300
--------
--------
9. INCOME TAXES
The components of income tax expense for the years ended December 31, 1995
and 1994 are as follows:
1995 1994
Currently payable $1,046,200 $463,400
Deferred (190,500) 116,800
---------- --------
Total $ 855,700 $580,200
---------- --------
---------- --------
A deferred tax asset or liability is recognized for the tax consequences of
temporary differences in the recognition of revenue and expense for
financial and tax reporting purposes. The net change during the year in
the deferred tax asset or liability results in a deferred tax expense or
credit. Included in other assets at December 31, 1995 are net deferred tax
assets of $55,800. Included in other liabilities at December 31, 1994 are
net deferred tax liabilities of $120,300. The temporary differences, tax
effected,
F-43
<PAGE>
which give rise to the Company's net deferred tax assets (liabilities) as
of December 31, 1995 are summarized as follows:
1995
Deferred tax assets:
Allowance for loan losses $ 136,500
Deferred loan fees 101,100
Available for sale securities 5,400
Other 89,300
---------
Total deferred tax assets 332,300
Deferred tax liabilities:
Bank premises and equipment (196,200)
Cash to accrual basis adjustments (80,300)
---------
Total deferred tax liabilities (276,500)
---------
Net deferred tax assets (liabilities) $ 55,800
---------
---------
The following table reconciles the effective tax rate to the federal
statutory rate for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------ ----------------------
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Income before income taxes $2,257,800 100 % $1,578,700 100 %
---------- ----- ---------- -----
---------- ----- ---------- -----
Tax expense at statutory federal income $ 767,700 34.0 $ 536,800 34.0
tax rate:
Change in tax expense resulting from:
Tax-exempt interest (35,200) (1.6) (50,100) (3.2)
State taxes, net of federal benefit 35,000 1.6 10,800 0.7
Officers' life insurance 39,000 1.7 17,500 1.2
Amortization of intangibles 7,800 0.4 4,800 0.3
Other, net 41,400 1.8 60,400 3.8
---------- ----- ---------- -----
Income tax expense $ 855,700 37.9 % $ 580,200 36.8 %
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - in the normal course of
business, various commitments are outstanding, such as commitments to
extend credit and letters of credit, which are not reflected in the
accompanying consolidated financial statements.
F-44
<PAGE>
At December 31, 1995, the Bank has the following commitments:
Commitments to originate commercial and
real estate loans and unused lines of
credit extended to customers $ 3,434,000
--------------
--------------
Commitments to fund consumer loans $ 5,783,000
--------------
--------------
Standby letters of credit $ 143,000
--------------
--------------
The Bank makes contractual commitments to extend credit, which are legally
binding agreements to lend money to customers at predetermined interest
rates for a specified period of time. Credit risk, which is the risk of
non-performance by the counterparty to the commitment, is involved in
issuing these commitments, including standby letters of credit, and is
essentially the same as that involved in extending loan facilities.
Additionally, the amount and type of collateral obtained, if deemed
necessary, is essentially the same as that involved in extending loan
facilities. Therefore, the subsidiary bank applies the same credit
standards used in the lending process when extending these commitments,
including periodic reassessments of the customers' credit worthiness
through ongoing credit reviews. As such, the Bank's exposure to credit
loss in the event of non-performance by the counterparty to the financial
instrument for commitments to extend credit and standby letters of credit
is represented by the contractual amount of those instruments. Additional
risks associated with these commitments arise when they are drawn upon,
such as the demands on liquidity that the Bank would experience if a
significant portion were drawn down at once. However, this is considered
unlikely, as many commitments expire without having been drawn upon.
Pursuant to normal banking practices, the Bank is required to maintain
certain balances (reserves) with the Federal Reserve Bank. Included in
cash and due from banks in the accompanying statement of condition are
required reserve balances of approximately $957,000 at December 31, 1995.
11. STOCKHOLDERS' EQUITY
PREFERRED STOCK - The rights and privileges of the preferred stock,
established by the Board of Directors, are as follows:
- DIVIDENDS - Preferred stock has an annual dividend rate of prime rate
(8.75% at December 31, 1995) plus 1.5%. This rate will be increased
by 1% in the event of a failure to pay the annual cumulative
dividends. Dividends are cumulative, accruing and payable annually on
April 12. Unpaid dividends shall accumulate and be paid at a rate per
share of prime plus 2.5%, not to exceed 12%. Dividends on common
stock may not be declared or paid until preferred dividends have been
paid or funds set aside for their payment.
- VOTING - Shares of preferred stock are non-voting.
- LIQUIDATION RIGHTS - In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company, preferred stock
is to be redeemed at the original issuance price of $100.00 per share,
plus any accrued but unpaid dividends.
- REDEMPTION - The preferred stock is redeemable, at the option of the
Company, subject to regulatory approval, at a redemption price of $100
per share plus accrued dividends. In addition, within 90 days after
the death of a holder of preferred stock, the Company will redeem the
stock, subject to certain limitations, at a redemption price of $100
per share.
F-45
<PAGE>
- RESTRICTIVE COVENANTS - Certain regulatory restrictions have been
placed on the Company's preferred stock, primarily the redemption of
shares and payment of dividends. These events cannot occur, without
prior regulatory approval, unless certain operating and capital ratios
are maintained.
REDEMPTION OF SHARES - In February 1996, the Company entered into
agreements to purchase common stock of two former board members. The
Company obtained a loan from Bankers Bank of the West in the amount of
$350,000 to fund the total redemption of $311,000. The loan accrues
interest at the prime rate which is payable quarterly with the principal
balance to be paid in full on February 27, 1997. The loan is secured by
Bank common stock.
STOCK OPTIONS - In April, 1995 the Company's Board of Directors approved a
stock option plan for the Company that provides for options to issue up to
12,000 shares. Options under the Plan will be granted at prices not less
than the fair market value of the Company's stock at the date of grant. As
of December 31, 1995, no options had been granted under the Plan.
OTHER - On April 12, 1995, the Company's Board of Directors approved and
declared a 2 for 1 stock split of its common stock. Additionally, the
number of authorized common shares was increased to 2,000,000 shares.
Accordingly, all references to common stock in these financial statements
have been adjusted to give retroactive effect to the stock split.
At December 31, 1995, approximately $546,000 of undistributed earnings of
the Bank were available for distribution to the Company as dividends
without prior regulatory approval.
12. REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could
have a direct material effect on the Company's financial statements. The
regulations require the Company and the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of the Company and
the Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company and the
Bank's capital classification is also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum ratios of Tier I
capital (as defined in the regulations) to total assets (as defined), and
minimum ratios of Tier I and total capital (as defined) to risk-weighted
assets (as defined). To be considered adequately capitalized (as defined),
the Bank must maintain minimum capital ratios as set forth below. The
Bank's actual capital ratios as of December 31, 1995 are as follows:
REQUIRED ACTUAL
RATIO RATIO
Tier I Capital 4 % 7.89 %
Tier I Capital (to Risk Weighted Assets) 4 % 10.63 %
Total Capital (to Risk Weighted Assets) 8 % 11.42 %
Management believes, as of December 31, 1995, that the Company and the Bank
meet all capital requirements to which they are subject.
F-46
<PAGE>
13. BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN - The Bank has an employee stock ownership
plan, with code section 401(k) provisions, (the KSOP), covering
substantially all of its employees. Contributions to the KSOP by the Bank
are discretionary and are determined on an annual basis by the Bank's Board
of Directors. The KSOP has no debt outstanding at December 31, 1995.
Contributions to the KSOP amounted to $14,500 and $31,200 during the years
ended December 31, 1995 and 1994, respectively.
DIRECTORS DEFERRED INCOME PLAN AND EXECUTIVE SUPPLEMENTAL INCOME PLAN - The
Director's Deferred Income Plan (DDI) is a deferred compensation plan,
which permits eligible directors to defer a portion of their directors'
fees. The deferred compensation is distributable in cash after retirement.
During 1995 and 1994, directors compensation deferred under the DDI plan
was $30,900 and $22,600, respectively. The Executive Supplemental Income
Plan (ESI) is a benefit plan which permits eligible officers to obtain
certain benefits, as defined in the Plan, upon retirement from the Bank or
upon death. Benefits accrued under the ESI plan vest at 10% per year for
every year of service with the Bank. During 1995 and 1994, the accrual for
benefits earned under the ESI plan was $11,500 and $2,300, respectively.
The total obligation for benefits earned under the DDI and ESI plans was
$67,300 and $24,900 at December 31, 1995 and 1994, respectively, and is
included in other liabilities in the accompanying financial statements.
During 1994, the Bank insured the lives of certain officers and directors,
who participate in the DDI and ESI plans, to assist in the funding of the
obligations under the plans. The Bank is the owner and beneficiary of
these insurance policies which have a cash surrender value of $597,900
at December 31, 1995.
INCENTIVE BONUS PLAN - The Bank has an incentive bonus plan for certain
officers of the Bank. Payments under the plan are based on net income and
other performance factors. Total incentive bonuses were $35,700 and
$129,600 for the years ended December 31, 1995 and 1994, respectively.
14. OTHER EXPENSES
Other expenses for the years ended December 31, 1995 and 1994 include the
following:
1995 1994
Consulting and professional service fees $ 322,100 $ 363,300
Data processing - 167,000
Supervisory fees and assessments 164,100 143,400
Office and computer supplies 135,100 142,800
Loan collection and filing fees 55,000 102,700
Postage 96,700 79,100
Other real estate owned - 42,800
Advertising 92,600 72,900
Other 700,000 772,900
---------- ----------
$1,565,600 $1,886,900
---------- ----------
---------- ----------
F-47
<PAGE>
First National Summit Bankshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
June 30,
1997 1996
------------ ------------
ASSETS
Cash and due from banks $ 4,549,000 $ 3,670,000
Federal funds sold 695,000 3,800,000
Investment securities
Available for sale 13,027,000 8,804,000
Held to maturity 3,653,000 5,019,000
Loans, net of allowance of $1,061,000
and $582,000 for loan losses 57,122,000 64,732,000
Accrued interest receivable 751,000 872,000
Premises and equipment, net 3,585,000 3,223,000
Other assets 2,631,000 2,378,000
------------- ------------
$ 86,013,000 $ 92,498,000
------------- ------------
------------- ------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Demand 16,565,000 17,194,000
NOW, money market and savings 40,395,000 39,380,000
Time deposits 20,389,000 23,341,000
------------- ------------
77,349,000 79,915,000
Borrowed funds 631,000 3,919,000
Accrued interest payable 108,000 123,000
Other liabilities 765,000 1,016,000
------------- ------------
Total liabilities 78,853,000 84,973,000
Shareholders' equity
Preferred stock, no par value, authorized
100,000 shares; 10,750 and 12,000 shares
issued and outstanding, redemption price
of $100 per share 1,075,000 1,200,000
Common stock, $.0835 par value; 2,000,000
shares authorized; 953,708 and 949,708
shares issued and 79,000 79,000
outstanding
Additional paid-in-capital 4,195,000 4,155,000
Retained earnings 1,801,000 2,171,000
Net unrealized gain (loss) on securities
available for sale, net 10,000 (80,000)
------------- ------------
Total shareholders' equity 7,160,000 7,525,000
------------- ------------
$ 86,013,000 $ 92,498,000
------------- ------------
------------- ------------
See notes to condensed consolidated financial statements.
F-48
<PAGE>
First National Summit Bankshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended June 30,
1997 1996
------------- ------------
Interest income
Loans $ 3,221,000 $ 3,417,000
Investment securities 477,000 399,000
Federal funds sold and other 97,000 127,000
------------- ------------
Total interest income 3,795,000 3,943,000
Interest expense
Deposits 1,243,000 1,348,000
Other 60,000 51,000
------------- ------------
Total interest expense 1,303,000 1,399,000
------------- ------------
Net interest income before provision for
loan losses 2,492,000 2,544,000
Provision for loan losses 437,000 90,000
------------- ------------
Net interest income after provision for
loan losses 2,055,000 2,454,000
Noninterest income 859,000 782,000
Noninterest expenses
Salaries and employee benefits 1,384,000 998,000
Occupancy expense 463,000 324,000
Other 1,231,000 839,000
------------- ------------
Total noninterest expense 3,078,000 2,161,000
------------- ------------
Income (loss) before income taxes (164,000) 1,075,000
Provision for income taxes (9,000) 384,000
------------- ------------
Net income (loss) $ (155,000) $ 691,000
------------- ------------
------------- ------------
See notes to condensed consolidated financial statements.
F-49
<PAGE>
First National Summit Bankshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS CASH FLOWS
(Unaudited)
Six months ended June 30,
1997 1996
------------- ------------
Cash flows from operating activities
Net income (loss) $ (155,000) $ 691,000
Adjustments to reconcile net income (loss)
to net cash flows from operating activities
Depreciation and amortization 259,000 184,000
Deferred income taxes - (63,000)
Provision for credit losses 437,000 90,000
Net discount accretion/premium amortization
on investment securities 29,000 16,000
Stock dividend from federal Home Loan Bank (6,000) (5,000)
Amortization of goodwill (47,000) (11,000)
Increase in cash surrender value of
insurance policies (63,000) (181,000)
Changes in deferrals and accruals
Accrued interest receivable (5,000) (31,000)
Other assets 197,000 86,000
Accrued interest payable (2,000) (2,000)
Other liabilities 304,000 365,000
------------- ------------
Net cash provided by operating
activities 948,000 1,139,000
Cash flows from investing activities
Increase (decrease) in federal funds sold 5,805,000 (550,000)
Purchase of securities available for sale (2,425,000) (45,000)
Proceeds from maturities of securities
available for sale 1,064,000 3,000
Purchase of securities held to maturity - (2,000,000)
Proceeds from maturities of securities held
to maturity 106,000 14,000
Proceeds from sales of securities held to
maturity - 2,000,000
Net decrease in loans and leases 5,846,000 2,410,000
Purchases of property and equipment (664,000) (862,000)
Proceeds from sale of property and equipment 241,000 287,000
Additional investment in insurance policies - (301,000)
------------- ------------
Net cash provided by investing activities 9,973,000 956,000
Cash flows from financing activities
Net decrease in deposits (8,326,000) (5,393,000)
Net change in borrowed funds (2,383,000) 3,293,000
Cash dividends paid (540,000) (734,000)
Issuance of stock 40,000 -
Redemption of stock (125,000) (559,000)
------------- ------------
Net cash applied to financing activities (11,334,000) (3,393,000)
------------- ------------
Net increase (decrease) in cash and due from banks (413,000) (1,298,000)
Cash and due from banks at beginning of year 4,962,000 4,968,000
------------- ------------
Cash and due from banks at end of year $ 4,549,000 $ 3,670,000
------------- ------------
------------- ------------
See notes to condensed consolidated financial statements.
F-50
<PAGE>
First National Summit Bankshares, Inc. and Subsidiary
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997 and 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
First National Summit Bankshares, Inc. (the Company) is a unitary bank holding
company whose primary asset is 100% of the capital stock of First National
Summit Bank (the Bank) which is engaged in general commercial banking in
Gunnison and a portion of Mesa Counties of Colorado. The condensed consolidated
financial statements include the accounts of the Company and the Bank. All
significant intercompany transactions and accounts have been eliminated in the
consolidation.
Reference is made to the consolidated financial statements of the Company
included elsewhere in the Registration Statement for disclosure of the Company's
significant accounting policies used in the preparation of the financial
statements. Those consolidated financial statements, including notes thereto,
should be read in conjunction with the condensed financial statements.
The financial information as of June 30, 1997 and 1996 and for the six month
periods ended June 30, 1997 and 1996 is unaudited. In the opinion of the
Company, the condensed statements included all adjustments, consisting only of
normal recurring adjustments, which are necessary for a fair presentation of the
financial position, results of operations and cash flows for the years then
ended. Operating results for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
NOTE B - AGREEMENT AND PLAN OF MERGER
On July 11, 1997, the Company entered into an Agreement and Plan of Merger (the
Agreement) with Community First Bankshares, Inc. (CFB) whereby the shareholders
of the Company will receive shares of CFB in a non-taxable exchange. The
Agreement is conditioned upon the completion of certain requirements including,
but not limited to, approval by the shareholders of the Company.
F-51
<PAGE>
APPENDIX A
RESTATED AGREEMENT AND PLAN OF MERGER
dated as of August 22, 1997
between
COMMUNITY FIRST BANKSHARES, INC.,
and
FIRST NATIONAL SUMMIT BANKSHARES, INC.
<PAGE>
INDEX TO RESTATED AGREEMENT AND PLAN OF MERGER
Page
RESTATED AGREEMENT AND PLAN OF MERGER.........................................1
ARTICLE 1 THE MERGER.........................................................1
1.1 Effective Time of the Merger.........................................1
1.2 Closing..............................................................1
1.3 Effects of the Merger................................................2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES........................................3
2.1 Effect on Capital Stock..............................................3
(a) Conversion of Preferred Stock...................................3
(b) Conversion of Common Stock......................................3
(c) Exchange Rate...................................................4
(d) Adjustments to Exchange Rate Based on CFB Trading Value.........4
(e) Adjustment based on Summit Value................................5
(f) Shareholders' Right of Dissent..................................5
2.2 Exchange of Certificates.............................................5
(a) Exchange Agent..................................................5
(b) Exchange Procedures.............................................5
(c) Distributions with Respect to Unexchanged Shares; Voting........6
(d) Transfers.......................................................6
(e) Fractional Shares...............................................6
(f) Termination of Exchange Fund....................................7
(g) Lost or Destroyed Shares........................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.....................................7
3.1 Representations and Warranties of Summit.............................7
(a) Bank Subsidiary Organization....................................7
(b) Summit Organization.............................................8
(c) Enforceability..................................................8
(d) Limitation of Bank's Powers.....................................8
(e) Corporate Records...............................................8
(f) Insured Status of ..............................................8
(g) No Default; Creation of Liens...................................9
(h) Financial Statements............................................9
(i) Fidelity Insurance.............................................10
(j) Employment Contracts...........................................10
(k) Employee Benefits..............................................10
A-i
<PAGE>
(l) Litigation.....................................................10
(m) Taxes..........................................................10
(n) Title to Property..............................................11
(o) Insurance Policies.............................................11
(p) Bank Property..................................................11
(q) Conduct of Business............................................11
(r) Documentation..................................................12
(s) Leases and Contracts...........................................12
(t) Shareholder Lists..............................................12
(u) Bank Principals................................................12
(v) Information Supplied...........................................13
(w) Agreements with Bank Regulators................................13
3.2 Representations and Warranties of CFB...............................13
(a) CFB Organization...............................................13
(b) Reports........................................................14
(c) Enforceability.................................................14
(d) No Default; Creation of Liens..................................14
(e) Information Supplied...........................................14
(f) No Plan to Transfer Assets.....................................15
(g) Future Filing Requirements.....................................15
ARTICLE 4 COVENANTS OF SUMMIT AND CFB.......................................15
4.1 Covenants of Summit.................................................15
(a) Ordinary Course................................................15
(b) Shareholder Meeting............................................15
(c) Registration Statement.........................................16
(d) Confidential Information.......................................16
(e) Benefit Plans..................................................16
(f) No Solicitations...............................................17
(g) No Acquisitions................................................17
(h) Insurance......................................................18
(i) Pooling Restrictions...........................................18
(j) Financial Statements...........................................18
(k) Additional Covenants of Summit.................................18
4.2 Covenants of CFB....................................................21
(a) Ordinary Course................................................21
(b) Application....................................................21
(c) Cooperation....................................................21
(d) Registration Statement.........................................21
(e) Listing........................................................22
(f) Shares to be Issued............................................22
(g) Blue Sky.......................................................22
(h) Confidential Information.......................................22
A-ii
<PAGE>
(i) Registration Statement.........................................22
4.3 Covenants of Summit and CFB.........................................23
(a) Governing Documents............................................23
(b) Other Actions..................................................23
(c) Advice of Changes; Government Filings..........................23
(d) Title of Property..............................................23
(e) Environmental Assessment.......................................24
ARTICLE 5 ADDITIONAL AGREEMENTS.............................................24
5.1 Regulatory Matters..................................................24
5.2 Letters of Summit Officers..........................................25
5.3 Access to Information...............................................25
5.4 Affiliates..........................................................25
5.5 Employee Benefit Plans..............................................25
5.6 Expenses............................................................26
5.7 Escrow and Indemnity Agreement......................................26
5.8 Release.............................................................26
5.9 Additional Agreements; Best Efforts.................................26
ARTICLE 6 CONDITIONS PRECEDENT..............................................27
6.1 Conditions to Each Party's Obligation to Effect the Merger..........27
(a) Stockholder Approval...........................................27
(b) NASDAQ Listing.................................................27
(c) Other Approvals................................................27
(d) Registration Statement.........................................27
(e) No Injunctions or Restraints; Illegality.......................27
(f) No Unduly Burdensome Condition.................................27
6.2 Conditions to Obligations of CFB....................................28
(a) Representations and Warranties.................................28
(b) Performance of Obligations of Summit...........................28
(d) Legal Opinion..................................................28
6.3 Conditions to Obligations of Summit.................................28
(a) Representations and Warranties.................................28
(b) Performance of Obligations of CFB..............................28
(c) Consents Under Agreements......................................29
(d) Tax Opinion....................................................29
(e) Legal Opinion..................................................29
A-iii
<PAGE>
ARTICLE 7 TERMINATION AND AMENDMENT.........................................29
7.1 Termination.........................................................29
7.2 Effect of Termination...............................................30
7.3 Amendment...........................................................30
7.4 Extension; Waiver...................................................30
ARTICLE 8 GENERAL PROVISIONS................................................30
8.2 Notices.............................................................30
8.3 Interpretation......................................................31
8.4 Counterparts........................................................31
8.5 Entire Agreement: Third Party Beneficiaries; Rights of Ownership....31
8.6 Governing Law.......................................................32
8.7 Publicity...........................................................32
8.8 Assignment..........................................................32
8.9 Enforcement of Agreement............................................32
A-iv
<PAGE>
RESTATED AGREEMENT AND PLAN OF MERGER
RESTATED AGREEMENT AND PLAN OF MERGER, dated as of August 22, 1997 (the
"Agreement"), by and between Community First Bankshares, Inc., a Delaware
corporation ("CFB") and First National Summit Bankshares, Inc., a Colorado
corporation ("Summit").
WHEREAS, the Boards of Directors of CFB and Summit have approved, and deem
it advisable and in the best interests of their respective companies and their
stockholders to consummate the business combination transaction provided for
herein in which Summit will be merged with and into CFB (the "Merger");
WHEREAS, CFB and Summit desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, on the Closing Date (as defined in Section 1.2), articles of merger
(the "Articles of Merger") in substantially the form as attached hereto as
EXHIBIT A1 shall be duly prepared, executed and acknowledged by CFB and Summit
and thereafter delivered for filing to the Secretary of State of the State of
Colorado, as provided in the Colorado Business Corporation Act (the "Colorado
Act") and a certificate of merger (the "Certificate of Merger") in substantially
the form as attached hereto as Exhibit A2 shall be duly prepared, executed and
acknowledged by CFB and Summit and thereafter delivered for filing to the
Secretary of State of the State of Delaware, as provided in the Delaware General
Corporation Law (the "Delaware Law"). The Merger shall become effective upon
the filing of the Articles of Merger and the Certificate of Merger or at such
other time as CFB and Summit may agree in writing to provide in the Articles of
Merger and the Certificate of Merger (the "Effective Time"). Notwithstanding
the immediately preceding sentence, however, the parties intend that the
effective date and time of the Closing, as defined in Section 1.2 below, for
both Summit and tax reporting purposes, shall be as of the close of business on
the Closing Date.
1.2 CLOSING. Subject to the terms and conditions hereof, the closing of
the Merger (the "Closing") will take place after the satisfaction or waiver
(subject to applicable law) of the latest
<PAGE>
to occur of the conditions set forth in Article 6 hereof (the "Closing Date"),
at the offices of Lindquist & Vennum, in Minneapolis, Minnesota, unless another
time, date or place is agreed to in writing by the parties hereto. Each of the
parties agrees to use its best efforts to cause the Merger to be consummated
within thirty (30) business days after the satisfaction or waiver of the
conditions set forth in Article 6 of this Agreement.
1.3 EFFECTS OF THE MERGER.
(a) At the Effective Time: (i) the separate existence of Summit
shall cease and Summit shall be merged with and into CFB: (ii) the Certificate
of Incorporation of CFB, as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
duly amended in accordance with applicable law; (iii) the By-laws of CFB, as in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation until amended in accordance with applicable law; (iv)
holders certificate representing shares of capital stock of CFB shall continue
as shareholders of the Surviving Corporation; (v) the holders of certificates
representing shares of Summit Preferred Stock (as defined in Section 2.1(a)
below) shall cease to have any rights as shareholders of Summit, except such
rights, if any, as they may have pursuant to Article 113 of the Colorado Act,
and their sole right shall be the right to receive in cancellation thereof, the
sum of One Hundred and no/100 Dollars ($100.00) per share, plus accrued but
unpaid dividends thereon to the Effective Time; and (vi) the holders of
certificates representing shares of Summit Common Stock (as defined in Section
2.1(b) below) shall cease to have any rights as shareholders of Summit, except
such rights, if any, as they may have pursuant to Article 113 of the Colorado
Act, and their sole right shall be the right to receive (A) the number of whole
shares of CFB Common Stock (as defined in Section 2.1(b) below) into which their
shares of Summit Common Stock have been converted in the Merger as provided
herein (together with any dividend payments with respect thereto, to the extent
provided in Section 2.2(c) below), and (B) the cash value of any fraction of a
share of CFB Common Stock into which their shares of Summit Common Stock have
been converted as provided herein.
(b) As used in this Agreement, the term "Constituent Corporations"
shall mean Summit and CFB. The term "Surviving Corporation" shall mean CFB,
after giving effect to the Merger.
1.4 CALCULATION OF SUMMIT VALUE. Subject to the provisions of Section
4.1(k), as of the last day of the month immediately preceding the Effective Time
(the "Determination Date"), Summit shall prepare a consolidated balance sheet of
Summit in accordance with generally accepted accounting principles ("GAAP"), but
excluding the effects of any adjustments otherwise required by FASB 115 and
excluding any footnotes that might be required to be included with such
financial statements (the "Determination Date Balance Sheet"), together with a
consolidated statement of income (the "Interim Income") for the period from
March 31, 1997 to the Determination Date (the "Interim Income Statement"), such
consolidated statement of income shall be prepared in accordance with GAAP, but
excluding the effects of any adjustments otherwise required by FASB 115 and
excluding any footnotes that might be required to be included with such
statements (the "Determination Date Balance Sheet and Interim Income Statement
are herein referred to as the "Determination Date Financial Statements"). The
A-2
<PAGE>
Determination Date Financial Statements shall be delivered to CFB as soon as
they are prepared (and in no event less than five (5) business days before the
Closing) so that CFB and its accountants may review and confirm their accuracy.
For purposes of this Agreement, the "Summit Value" shall be equal to the total
consolidated assets of Summit minus the total consolidated liabilities of
Summit, all as reflected on the Determination Date Balance Sheet, prepared in
accordance with this Section 1.4. Total consolidated assets of Summit shall be
determined net of loan loss reserves. Total consolidated liabilities of Summit
shall include without limitation (i) provision for taxes and the expense of the
preparation of the final tax return for Summit; (ii) value of the remaining 1997
annual fees due National Commerce Bank Services, Inc. under the terms of the
Consulting and License Agreement dated September 8, 1995 by and between the Bank
and National Commerce Bank Services, Inc.; (iii) any remaining liabilities under
covenants not to compete entered into between the Bank and current or former
employees; (iv) liabilities to participants upon termination of the ESI and DDI
plans; and (v) any remaining liabilities under the Service Agreement between the
Bank and Dougherty & Associates dated January 7, 1997.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK.
(a) CONVERSION OF PREFERRED STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of shares of
preferred stock, $100.00 par value, of Summit ("Summit Preferred Stock"), each
issued and outstanding share of Summit Preferred Stock, other than shares of
Summit Preferred Stock held by persons who have taken all steps required to
perfect their right to be paid the fair value of such shares under Article 113
of the Colorado Act, shall be converted into the right to receive in
cancellation and exchange therefor the sum of One Hundred and no/100 ($100.00),
plus accrued but unpaid dividends thereon to the Effective Time. All such shares
of Summit Preferred Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist. Each Summit shareholder's
certificate or certificates previously representing shares of Summit Preferred
Stock (each a "Summit Preferred Certificate") shall be aggregated (if a single
stockholder holds more than one Summit Preferred Certificate) and exchanged for
the foregoing consideration upon the surrender of such Summit Preferred
Certificates in accordance with Section 2.2, without any interest thereon.
(b) CONVERSION OF COMMON STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of common
stock, $.09 par value, of Summit ("Summit Common Stock"), subject to Section
2.2(e), each issued and outstanding share of Summit Common Stock, other than
shares of Summit Common Stock held by persons who have taken all steps required
to perfect their right to be paid the fair value of such shares under Article
113 of the Colorado Act, shall be converted into shares of validly issued, fully
paid and
A-3
<PAGE>
nonassessable shares of common stock of CFB, $.01 par value ("CFB Common
Stock"). All such shares of Summit Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist. Each
Summit shareholder's certificate or certificates previously representing shares
of Summit Common Stock (each a "Summit Common Certificate") shall be aggregated
(if a single stockholder holds more than one Summit Common Certificate) and
exchanged for a certificate representing whole shares of CFB Common Stock and
cash in lieu of any fractional share issued in consideration therefor upon the
surrender of such Summit Common Certificates in accordance with Section 2.2,
without any interest thereon. In the event that, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of CFB Common
Stock shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar change in CFB's capitalization, then an appropriate and
proportionate adjustment shall be made to the "Exchange Rate," as hereinafter
defined, so that the number of shares of CFB Common Stock into which a share of
Summit Common Stock shall be converted will equal the number of shares of CFB
Common Stock that the holders of shares of Summit Common Stock would have
received pursuant to such reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar change had the
record date therefor been immediately following the Closing Date.
(c) EXCHANGE RATE. Subject to the adjustments provided in Section
2.1(b), 2.1(d) and 2.1(e) hereof, all of the issued and outstanding shares of
Summit Common Stock and any outstanding options, warrants or other rights to
Summit Common Stock shall be exchanged for Four Hundred Thousand (400,000)
shares of CFB Common Stock (the aforementioned exchange rate is hereinafter
referred to as the "Exchange Rate"). On or before the Effective Time, all stock
options and other rights with respect to Summit Common Stock shall be (i)
accelerated and exercised by the holder thereof, in accordance with the terms of
the stock option plan or agreement, or (ii) released and terminated by written
acknowledgment and agreement by the holder thereof, obtained by Summit less than
ten (10) business days prior to the Closing Date.
(d) ADJUSTMENTS TO EXCHANGE RATE BASED ON CFB TRADING VALUE.
Notwithstanding anything to the contrary in this Article 2, the Exchange Rate
shall be subject to modification as set forth below:
(i) If the CFB Trading Value is less than or equal to $39.50 per
share, then the Exchange Rate shall be as set forth in Section 2.1(c),
above;
(ii) If the CFB Trading Value is greater than $39.50 per share,
then the Exchange Rate shall be reduced so that the product of the CFB
Trading Value multiplied by the Exchange Rate shall be $15,800,000.
For purposes of this Agreement, the "CFB Trading Value" of the CFB Common
Stock shall be the average of the per share closing price for the CFB Common
Stock as reported by the NASDAQ National Market System for the 20 trading days
ending at the end of the fourth trading day immediately preceding the Closing
Date (as appropriately and proportionately adjusted in the
A-4
<PAGE>
event that, between the date hereof and the termination of such twenty trading
day period, shares of CFB Common Stock shall be changed into a different number
of shares or a different class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment or
stock dividend). Calculations will be rounded to three decimal places. Any
fractional share of CFB Common Stock will be paid in cash in accordance with
Section 2.2(e). Illustrations of the above Exchange Rate calculations are
attached as EXHIBIT 2.1(d) hereto and incorporated herein by reference.
(e) ADJUSTMENT BASED ON SUMMIT VALUE. In the event that the Summit
Value, calculated in accordance with Section 1.4, above, shall be less than
$7,000,000, then the Exchange Rate determined in accordance with Section
2.1(c)-(d) shall be subject to reduction. The amount of reduction shall be
determined by (i) multiplying the difference between the Summit Value and
$7,000,000 by 2.0857 (which is the ratio of the minimum transaction value
divided by the minimum equity requirement) and then (ii) dividing the foregoing
product by $36.50 (which is the minimum CFB Trading Value).
(f) SHAREHOLDERS' RIGHT OF DISSENT. Any holder of shares of Summit
Stock who does not vote in favor of the Merger at the meeting of shareholders of
Summit and has given notice in writing to the presiding officer prior to the
Merger vote that he or she intends to demand payment for his or her shares of
Summit Stock if the Merger is effectuated, shall be entitled to receive the
value of the Summit Stock so held by him or her in accordance with Article 113
of the Colorado Act and his or her shares of Summit Stock shall be deemed
subject to the provisions of Article 113 of the Colorado Act.
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At the Closing, CFB shall deposit with Norwest
Bank Minnesota, N.A. or such other bank or trust company acceptable to the
parties (the "Exchange Agent"), for the benefit of the holders of shares of
Summit Stock, (i) cash to be paid pursuant to Section 2.1(a) in exchange for the
outstanding shares of Summit Preferred Stock and (ii) certificates dated the
Closing Date representing the shares of CFB Common Stock and the cash to be paid
in lieu of fractional shares to be issued and paid pursuant to Section 2.1(b) in
exchange for the outstanding shares of Summit Common Stock. (Such cash and
certificates for shares of CFB Common Stock together with any dividends or
distributions with respect thereto, are hereinafter referred to as the "Exchange
Fund.")
(b) EXCHANGE PROCEDURES. Within five (5) business days after the
Closing Date, CFB shall cause the Exchange Agent to mail to each holder of
record of a Summit Certificate or Summit Certificates (i) a letter of
transmittal which shall specify that delivery shall be effective, and risk of
loss and title to the Summit Certificate(s) shall pass, only upon delivery of
the Summit Certificate(s) to the Exchange Agent and which shall be in such form
and have such other provisions as CFB and Summit may reasonably specify not
later than five business days before the Closing Date and (ii) instructions for
use in effecting the surrender of the Summit Common and Preferred Certificate(s)
in exchange for cash, in the case of Summit Preferred Certificates, or for a
certificate representing shares of CFB Common Stock and the cash to be paid in
lieu of any
A-5
<PAGE>
fractional share, in the case of Summit Common Certificates. Upon surrender of
a shareholder's Summit Preferred Certificate or Summit Preferred Certificates
for cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Summit Preferred Certificate(s) shall be
entitled to receive in exchange therefor a check representing the amount of the
cash to be paid for such Summit Preferred Stock and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect of
the Summit Preferred Certificate(s) surrendered, as provided in Section 2.2(c)
below, and the Summit Certificate(s) so surrendered shall forthwith be canceled.
Upon surrender of a shareholder's Summit Common Certificate or Summit Common
Certificates for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Summit Common Certificate(s)
shall be entitled to receive in exchange therefor (1) a certificate representing
the number of whole shares of CFB Common Stock and (2) a check representing the
amount of the cash to be paid in lieu of a fractional share, if any, and unpaid
dividends and distributions, if any, which such holder has the right to receive
in respect of the Summit Common Certificate(s) surrendered, as provided in
Section 2.2(c) below, and the Summit Common Certificate(s) so surrendered shall
forthwith be canceled. No interest will be paid on the cash in lieu of
fractional shares and unpaid dividends and distributions, if any, payable to
holders of Summit Common Certificates. In the event of a transfer of ownership
of Summit Common Stock which is not registered in the transfer records of
Summit, a CFB Certificate representing the proper number of shares of CFB Common
Stock, and/or a check for the cash to be paid, may be issued to such a
transferee if the Summit Common Certificate representing such Summit Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer. Any applicable stock transfer taxes shall be
paid by CFB.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES; VOTING. The
Exchange Agent shall receive and hold, for distribution without interest to the
first record holder of the certificate or certificates representing shares of
Summit Common Stock, all dividends and other distributions paid on shares of CFB
Common Stock held in the Exchange Agent's name as agent. Holders of
unsurrendered Summit Common Certificates shall not be entitled to vote after the
Closing Date at any meeting of CFB shareholders until they have exchanged their
Summit Common Certificates.
(d) TRANSFERS. After the Effective Time, there shall be no transfers
on the stock transfer books of Summit of the shares of Summit Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Summit Certificates are presented to the Surviving Corporation, they shall
be canceled and exchanged for the shares of CFB Common Stock and/or cash, in an
amount as determined in accordance with the provisions of Sections 2.1(a),
2.1(b) and this Section 2.2, deliverable in respect thereof pursuant to this
Agreement. Summit Certificates surrendered for exchange by any person
constituting an "affiliate" of Summit for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until CFB has received a written agreement from such person as
provided in Section 5.5.
(e) FRACTIONAL SHARES. No fractional shares of CFB Common Stock
shall be issued pursuant hereto. In lieu of the issuance of any fractional
share, cash adjustments will be paid to
A-6
<PAGE>
holders in respect of any fractional share of CFB Common Stock that would
otherwise be issuable, and the amount of such cash adjustment shall be equal to
such fractional proportion of the Trading Value of a share of CFB Common Stock.
For purposes of calculating fractional shares, a holder of Summit Common Stock
with more than one Summit Certificate shall receive cash only for the fractional
share remaining after aggregating all of its, his or her Summit Common Stock to
be exchanged.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any CFB Common Stock)
that remains unclaimed by the shareholders of Summit for twelve months after the
Closing Date shall be paid to CFB. The Exchange Agent shall give notice to
shareholders of Summit for whom Exchange Funds are held thirty (30) days prior
to the date upon which the Exchange Funds shall be paid to CFB. Any
shareholders of Summit who have not theretofore complied with this Article 2
shall thereafter look only to CFB for payment of their shares, and cash in an
amount as determined in accordance with the provisions of Section 2.1(a),
Section 2.1(b) and this Section 2.2, without any interest thereon.
Notwithstanding the foregoing, none of CFB, the Exchange Agent nor any other
person shall be liable to any former holder of shares of Summit Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) LOST OR DESTROYED SHARES. In the event any Summit Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Summit Certificate to be lost, stolen or
destroyed and, if required by the Exchange Agent, the posting by such person of
a bond in such amount as CFB may direct as indemnity against any claim that may
be made against it with respect to such Summit Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Summit Certificate the
shares of CFB Common Stock, and/or cash in an amount as determined in accordance
with the provisions of Sections 2.1(a), 2.1(b) and this Section 2.2, deliverable
in respect thereof pursuant to this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SUMMIT. In order to induce CFB to
enter into this Agreement, Summit represents and warrants to CFB, in all
material respects, as of the date of this Agreement (except as otherwise
expressly provided), as follows, except as disclosed on the attached EXHIBIT B
(the "Summit Disclosure Schedule") and the schedules thereunder which are
numbered to correspond to the representations set forth below:
(a) BANK SUBSIDIARY ORGANIZATION. First National Summit Bank (the
"Bank") is a national banking association duly organized and validly existing
and in good standing under the laws of the United States with an authorized
capital of $250,000, consisting of 2,500 shares of one class of common stock,
par value $100.00 per share. All of the shares of stock of the Bank which are
presently issued and outstanding, have been validly issued, fully paid and,
subject to 12 U.S.C. Section 55 (1982), non-assessable, and except for those
options described in Section 3.1(a) of the
A-7
<PAGE>
Summit Disclosure Schedule, there are no stock options or other commitments
outstanding pursuant to which the Bank is obligated to issue additional shares
of such stock or purchase or redeem any outstanding shares of such stock.
(b) SUMMIT ORGANIZATION. Summit is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
with authorized capital stock consisting of 100,000 shares of preferred stock,
$100.00 par value per share, of which 10,750 shares are issued and outstanding,
and 2,000,000 shares of common stock, $.09 par value per share, of which 953,708
shares are issued and outstanding. Summit has all requisite power, authority,
charters, licenses and franchises necessary or required by law to carry on the
business activity in which it is presently engaged, except where the failure to
have any such power, authority, charters, licenses or franchises would not
reasonably be expected to have a material adverse effect on Summit. Summit is
registered as a company under Section 1841 of Title 12, United States Code, as
amended (the "Bank Holding Company Act"). Summit has no direct or indirect
subsidiaries except the Bank and is not a partner to any partnership. Except as
set forth in Section 3.1(b) of the Summit Disclosure Schedule, Summit owns all
of the shares of Bank stock, free and clear of any liens or encumbrances.
(c) ENFORCEABILITY. Subject to the required approval of the Merger
by the shareholders of Summit, Summit has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Summit and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Summit. Subject to approval by the Summit
shareholders and of government agencies and other governing bodies having
regulatory authority over Summit or the Bank as may be required by statute or
regulation, this Agreement constitutes a valid and binding obligation of Summit,
enforceable against it in accordance with its terms.
(d) LIMITATION OF BANK'S POWERS. Except as set forth in Section
3.1(d) of the Summit Disclosure Schedule, there are no proceedings or actions
pending by any federal or state regulatory body having authority over the Bank
to limit or impair any of the Bank's powers, rights and privileges, to terminate
deposit insurance or to dissolve the Bank.
(e) CORPORATE RECORDS. Summit's Articles of Incorporation and
Bylaws, and the Bank's Articles of Association and Bylaws are each unchanged
from the form in which they were delivered to CFB on or before the date of this
Agreement. The minute books of Summit and the Bank contain reasonably complete
and accurate records of all meetings and corporate actions of each of their
respective shareholders and Boards of Directors.
(f) INSURED STATUS OF BANK. The Bank is an insured bank under the
provisions of Chapter 16 of Title 12, United States Code Annotated, known as the
"Federal Deposit Insurance Act," and no act or default on the part of any of the
Bank exists that could reasonably be expected to have a material adverse effect
on its status as an insured bank thereunder. All of the Bank's deposits are
insured by the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC as set forth in Section 3.1(f) of the Summit Disclosure Schedule. The
Bank possesses
A-8
<PAGE>
and is in full compliance with all licenses, franchises, permits and other
governmental authorizations that are legally required to hold its properties or
conduct its business, except where the failure to possess any such licenses,
franchises, permits or other governmental authorizations would not reasonably be
expected to have a material adverse effect on Summit.
(g) NO DEFAULT; CREATION OF LIENS. Neither the execution and
delivery of this Agreement, nor the consummation of the Merger will (i) conflict
with, result in the breach of, constitute a default under or accelerate the
performance provided by the terms of (A) any judgment, order or decree of any
court or other governmental agency to which Summit or the Bank may be subject,
(B) any of the "Material Contracts," as hereinafter defined, or (C) the Articles
of Incorporation/Association or Bylaws of Summit or the Bank, or (ii) constitute
an event that, with the lapse of time or action by a third party, would result
in a default under any of the foregoing or result in the creation of any lien,
charge or encumbrance upon the Summit Common Stock or any of the Bank's capital
stock.
(h) FINANCIAL STATEMENTS. The following financial statements of the
Bank and Summit (the "Financial Statements") have been delivered to CFB and are
incorporated by reference herein:
(i) The Consolidated Reports of Condition and Income of the Bank
as of December 31 for each of the years 1994, 1995 and 1996 and the period
ending March 31, 1997; and
(ii) The audited consolidated financial statements of
Summit, prepared in the ordinary course of business for each of the
years ended December 31, 1994, 1995 and 1996.
Each of the aforementioned Financial Statements is, and the Determination Date
Balance Sheet will be (when delivered pursuant to Section 1.4), true and correct
in all material respects, and together they fairly present, in accordance with
generally accepted accounting principles (applied on a consistent basis except
as disclosed in the footnotes thereto and except that the unaudited Financial
Statements are subject to any adjustments which might be required as a result of
an examination of independent accountants) the financial position and results of
operation of each of the respective Bank and Summit as of the dates and for the
periods therein set forth. To the knowledge of Summit, such Financial
Statements did not, as of the date of the preparation thereof, exclude any
material assets or omit to state any material liability, absolute or contingent,
the inclusion or omission of which renders such financial statements, in light
of the circumstances in which they were made, misleading in any material
respect. Since May 31, 1997, there has been no material adverse change in the
financial condition, results of operation or business of the Bank and Summit,
taken as a whole (other than changes in banking laws or regulations, changes in
generally accepted accounting principles or interpretations thereof that affect
the banking industry generally, or changes in general economic conditions that
affect the banking industry on a nationwide basis, including changes in the
general level of interest rates).
A-9
<PAGE>
(i) FIDELITY INSURANCE. The Bank is insured under a Banker's Blanket
Bond which is in full force and effect and the Bank has not received notice of
cancellation or non-renewal thereof, and except as set forth in Schedule 3.1(i)
of the Summit Disclosure Schedule, filed any claim thereunder during the past
five years. There are no unresolved claims.
(j) EMPLOYMENT CONTRACTS. Except as set forth in Section 3.1(j) of
the Summit Disclosure Schedule, neither Summit nor the Bank is a party to or
bound by any written or oral (i) employment or consulting contract that is not
terminable without penalty by Summit or the Bank on 30 days' or less notice or
(ii) any collective bargaining agreement covering employees.
(k) EMPLOYEE BENEFITS. Section 3.1(k) of the Summit Disclosure
Schedule lists every employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
the Bank or Summit maintain or to which the Bank or Summit contribute on behalf
of current or former employees of the Bank or Summit. All of the plans and
programs listed in Section 3.1(l) of the Summit Disclosure Schedule (hereinafter
referred to as the "Plans") are in compliance in all material respects with all
applicable requirements of ERISA and all other applicable federal and state
laws. None of the Plans is a defined benefit pension plan. None of the Plans
has engaged in a "prohibited transaction," within the meaning of Section 4975 of
the Code or Section 406 of ERISA, none of the Plans which is subject to Title IV
of ERISA or any trust created thereunder has been terminated, nor have there
been any "reportable events" as that term is defined in Section 4043 of ERISA
with respect to any Plan and none of the Plans has incurred an accumulated
funding deficiency within the meaning of Section 412(a) of the Code.
(l) LITIGATION. Except as described in Section 3.1(l) of the Summit
Disclosure Schedule, no claims have been asserted by written notice to Summit
and no relief has been sought against Summit, the Bank or any of the Plans in
any pending litigation or governmental proceedings or otherwise. Neither Summit
nor the Bank is a party to any unsatisfied order, judgment or decree which is
adverse to Summit or the Bank, and neither Summit nor the Bank (i) is the
subject of any cease and desist order, or other formal or informal enforcement
action by any regulatory authority; or (ii) has made any commitment to or
entered into any agreement with any regulatory authority that restricts or
adversely affects its operations or financial condition. To the knowledge of
Summit, there do not exist facts that would reasonably be expected to give rise
to a material claim against Summit or the Bank after the Closing Date.
(m) TAXES. Each of Summit and the Bank have filed all federal and
state income tax returns and all other returns with respect to any taxes, either
federal, state or local, which it is required to have filed; said returns have
been correctly and accurately prepared; all taxes reflected thereon have been
paid or adequately accrued for; no notice of any deficiency, assessments or
additions to tax have been received by Summit or the Bank; neither Summit nor
the Bank has waived any statute of limitations with respect to any taxes
reflected on said returns; and deferred taxes have been properly reflected on
the financial statements. Except as set forth in Section 3.1(m) of the Summit
Disclosure Schedule, there are no other taxes of any kind or character for which
either Summit or the Bank is or may be liable which are now past due, delinquent
and/or unpaid.
A-10
<PAGE>
(n) TITLE TO PROPERTY. The Bank has good and marketable title to all
material assets and properties, whether real or personal, that it purports to
own, including without limitation all real and personal assets and properties
reflected in its Consolidated Reports of Condition and Income as of December 31,
1996, or acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary course of
business since December 31, 1996) subject to no liens, mortgages, security
interests, encumbrances or charges of any kind, except (i) as noted in said
Consolidated Reports or the Schedules thereto; (ii) statutory liens for taxes
not yet delinquent; (iii) security interests granted to secure deposits of funds
by federal, state or other governmental agencies; (iv) minor defects and
irregularities in title and encumbrances that do not materially impair the use
thereof for the purposes for which they are held by the Bank as of the date
hereof; and (v) such liens, mortgages, security interests, encumbrances and
charges that are not in the aggregate material to the assets and properties of
such Bank.
(o) INSURANCE POLICIES. Summit has delivered to CFB true, accurate
and complete copies of all insurance policies of Summit and the Bank as of the
date of this Agreement. Each such policy is in full force and effect, with all
premiums due thereon on or prior to the date of this Agreement having been paid
as and when due.
(p) BANK PROPERTY. All buildings, structures, fixtures, and
appurtenances comprising the premises of the Bank are in good condition subject
to ordinary wear and tear. Except for the facts set forth in the Assessment (as
hereinafter defined), Summit and the Bank are, and have been at all times, in
substantial compliance with all applicable Environmental Laws (as defined
below), and have not engaged in any activity resulting in a material violation
of any applicable Environmental Law. To the best knowledge of Summit, there is
no legal, administrative, or other proceeding, claim, investigation (with
respect to which Summit is aware), inquiry, order, hearing or action of any
nature seeking to impose, or that would reasonably be expected to result in the
imposition, on Summit or the Bank, of any liability arising from any violation
of or obligation under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("Environmental Laws"), pending or, to the knowledge of Summit, threatened
against Summit or the Bank; to the knowledge of Summit and except for the facts
set forth in the Assessment, there is no reasonable basis for any such
proceeding, claim, investigation, inquiry, order, hearing or action; and neither
Summit nor the Bank is subject to any agreement, order, judgment, or decree by
or with court, governmental authority or third party imposing any such
environmental liability. No claims have been made by any governmental authority
or third party against Summit since it was incorporated, or the Bank during the
past ten (10) years relating to damage, contribution, cost recovery,
compensation, loss or inquiry resulting from any violation of or obligation
under any Environmental Laws.
(q) CONDUCT OF BUSINESS. Except for the facts set forth in the
Assessment, the Bank and Summit are in compliance in all material respects with
all laws, regulations and orders (including zoning ordinances) applicable to
them and to the conduct of their business, including without limitation, all
statutes, rules and regulations pertaining to the conduct of the Bank's banking
A-11
<PAGE>
activities (including the exercise of fiduciary and trust powers), except where
the failure to comply would not reasonably be expected to have a material
adverse effect on Summit.
(r) DOCUMENTATION. The documentation relating to loans made by the
Bank and relating to all security interests, mortgages and other liens with
respect to all collateral for such loans, taken as a whole, is adequate for the
enforcement of the material terms of such loans and of the related security
interests, mortgages and other liens. The terms of such loans and of the
related security interests, mortgages and other liens comply in all material
respects with all applicable laws, rules and regulations (including laws, rules
and regulations relating to the extension of credit). There are no loans,
leases, other extensions of credit or commitments to extend credit of the Bank
that have been or should in accordance with generally acceptable accounting
principles, have been classified by the Bank as nonaccrual, as restructured, as
90 days past due, as still accruing and doubtful of collection or any comparable
classification. Summit has provided to CFB such written information concerning
the loan portfolios of the Bank as CFB has requested, which information is true,
correct and complete in all material respects.
(s) LEASES AND CONTRACTS. Except as set forth in Section 3.1(s) of
the Summit Disclosure Schedule neither the Bank nor Summit is a party to or
bound by any written or oral (i) lease or license with respect to any property,
real or personal, with a value in excess of $20,000, whether as a lessor,
lessee, licensor or licensee; (ii) contract or commitment for capital
expenditures in excess of $20,000 for any one project or $50,000 in the
aggregate; (iii) contract or commitment for total expenses in excess of $20,000
made in the ordinary course of business for the purchase of materials, supplies,
or for the performance of services for a period of more than 180 days from the
date of this Agreement; or (iv) contract or option for the purchase or sale of
any real or personal property other than in the ordinary course of business (all
such agreements, contracts, and commitments collectively are herein referred to
as the "Material Contracts"). The Bank and Summit have performed in all
material respects all obligations required to be performed by them to date, and
are not in material default under, and no event has occurred which, with the
lapse of time or action by a third party, could result in a material default
under any of the Material Contracts to which the Bank or Summit is a party or by
which the Bank or Summit is bound. Each of the Material Contracts is a valid
and legally binding obligation of the Bank and the other party or parties
thereto, subject to (i) all applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
(ii) the application of equitable principles if equitable remedies are sought.
(t) SHAREHOLDER LISTS. Summit has furnished to CFB a current
shareholder list as of the date set forth therein that (i) sets forth the record
name and number of shares held by each holder of preferred stock and common
stock of Summit and (ii) identifies each shareholder who is an officer or
director of the Bank or Summit.
(u) BANK PRINCIPALS. Except as set forth in Section 3.1(u) of the
Summit Disclosure Schedule, no director or executive officer of Summit or the
Bank, nor any holder of ten percent or more of the outstanding capital stock of
Summit, nor any affiliate of such person as that term is defined under 12 USC
371(c) ("Bank Principal") (i) is or has during the period subsequent to December
31, 1995, been a party (other than as a depositor) to any transaction with the
Bank,
A-12
<PAGE>
whether as a borrower or otherwise, which (a) was made other than in the
ordinary course of business; (b) was made on other than substantially the same
terms, including interest rate and collateral, as those prevailing at the time
for comparable transactions for other persons; or (c) involves more than the
normal risk of collectibility or presents other unfavorable features; or (ii) is
a party to any loan or loan commitment, whether written or oral, from the Bank
involving an amount in excess of $10,000. Except as set forth in Section 3.1(u)
of the Summit Disclosure Schedule, no Bank Principal holds any position with any
depository organization other than the Bank or Summit. For the purposes of this
provision, the term "depository organization" means a commercial bank (including
a private bank), a savings bank, a trust company, a savings and loan
association, a homestead association, a cooperative bank, an industrial bank, a
credit union, or a depository organization holding company.
(v) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Summit or the Bank for inclusion or incorporation by reference in
(i) the "Registration Statement" (as hereinafter defined) will, at the time the
Registration Statement becomes effective under the Securities Act of 1993, as
amended (the "Securities Act"), contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading and (ii) the "Prospectus-Proxy Statement" (as hereinafter
defined) and any amendment or supplement thereto will, at the date of mailing to
the Summit stockholders and at the times of the meeting of stockholders of
Summit to be held in connection with the Merger, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. Summit
will use its best efforts to cause those portions of the Registration Statement
supplied by Summit to comply in all material respects with applicable law.
(w) AGREEMENTS WITH BANK REGULATORS. Except as set forth in Section
3.1(w) of the Summit Disclosure Schedule, neither Summit nor the Bank: (i) is a
party to any written agreement or memorandum of understanding with; (ii) is
subject to any order or directive by; (iii) is subject to any extraordinary
supervisory letter from; or (iv) has adopted any board resolutions at the
request of, federal or state governmental entities charged with the supervision
or regulation of Bank or Summit or engaged in the insurance of bank deposits
("Bank Regulators"), nor has Summit been advised by any Bank Regulators that it
is contemplating issuing or requesting any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
3.2 REPRESENTATIONS AND WARRANTIES OF CFB. CFB represents and warrants to
Summit, in all material respects, as of the date of this Agreement (except as
otherwise expressly provided) as follows, except as disclosed on the attached
EXHIBIT C (the "CFB Disclosure Schedule") and the schedules thereunder which are
numbered to correspond to the representations set forth below:
(a) CFB ORGANIZATION. CFB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
authorized capital stock consisting of
A-13
<PAGE>
30,000,000 shares of common stock, par value of $.01 per share, of which
18,658,951 shares were issued and outstanding as of March 31, 1997 and 2,000,000
shares of preferred stock, of which no shares of preferred stock were issued and
outstanding as of March 31, 1997. CFB has all requisite power, authority,
charters, licenses and franchises necessary or required by law to carry on the
business activity in which it is presently engaged. CFB is registered as a
corporation under Section 1841 of Title 12, United States Code, as amended (the
"Bank Holding Company Act").
(b) REPORTS. CFB and the CFB Subsidiaries have filed all reports,
registrations and statements, together with any required amendments thereto,
that they were required to file with (i) the Securities and Exchange Commission
("SEC"), including, but not limited to, Forms 10-K, Forms 10-Q and proxy
statements, (ii) the Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller
and (v) any applicable state securities or banking authorities. All such
reports and statements filed with any such regulatory body or authority are
collectively referred to herein as the "CFB Reports." As of their respective
dates, the CFB Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. CFB has timely filed with the SEC all reports, statements and
forms required to be filed pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(c) ENFORCEABILITY. The execution, delivery and performance of this
Agreement by CFB and the consummation of the transactions contemplated hereby
have been duly authorized by the Board of Directors of CFB. Subject to approval
by the government agencies and other governing bodies having regulatory
authority over CFB as may be required by statute or regulation, this Agreement
constitutes a valid and binding obligation of CFB, enforceable against it in
accordance with its terms. This Agreement does not require the approval of CFB
shareholders. CFB has no knowledge of any facts or circumstances which would
lead a reasonably prudent person to conclude that regulatory approval of this
transaction might be denied.
(d) NO DEFAULT; CREATION OF LIENS. Neither the execution and
delivery of this Agreement nor the consummation of the transaction contemplated
hereby will conflict with, result in the breach of, constitute a default under
or accelerate the performance provided by the terms of any judgment, order or
decree of any court or other governmental agency to which CFB may be subject, or
any contract, agreement or instrument to which CFB is a party or by which CFB is
bound or committed, or the Articles of Incorporation or Bylaws of CFB, or
constitute an event that, with the lapse of time or action by a third party,
could result in a default under any of the foregoing or result in the creation
of any lien, charge or encumbrance upon the CFB Common Stock.
(e) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by CFB for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time
A-14
<PAGE>
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not misleading
and (ii) the Prospectus-Proxy Statement and any amendment or supplement thereto
will, at the date of mailing to Summit stockholders and at the times of the
meeting of stockholders of Summit to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The Registration Statement will comply as to form in
all material respects with applicable law.
(f) NO PLAN TO TRANSFER ASSETS. CFB has no plan or intention to sell
or otherwise dispose of any of the assets of Summit to be acquired in the
Merger, except for dispositions in the ordinary course of business or transfers
to controlled subsidiaries as described in Section 368(a)(2)(C) of the Code.
(g) FUTURE FILING REQUIREMENTS. CFB will make any and all filings
which are required to satisfy the requirements of Rule 145(d)(1) and Rule 144(c)
(or any amendments, supplements, or successors to such rules) on or before the
dates on which such filings are required to be made to comply with applicable
requirements of law, and will include in its reports, both quarterly and annual,
the statement that CFB has filed all reports required to be filed by Section 13
or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12
months.
ARTICLE 4
COVENANTS OF SUMMIT AND CFB
4.1 COVENANTS OF SUMMIT. During the period from the date of this
Agreement and continuing until the Effective Time, Summit agrees as follows:
(a) ORDINARY COURSE. Except as otherwise required under this
Agreement or by CFB, Summit and the Bank shall carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and use all reasonable efforts to preserve intact
their present business organizations, maintain their rights and franchises and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect. Summit shall not, nor
shall it permit the Bank to (i) enter into any new material line of business,
(ii) increase or decrease the current number of the directors of Summit and the
Bank, (iii) change its or the Bank's lending, investment, liability management
or other material banking policies in any respect that is material to such
party; or (iv) incur or commit to any capital expenditures (or any obligations
or liabilities in connection therewith) other than capital expenditures (and
obligations or liabilities in connection therewith) incurred or committed to in
the ordinary course of business consistent with past practices.
(b) SHAREHOLDER MEETING. Summit will cause to be duly called, and
will cause to be held as soon as it is practicable to do so, but in no event
later than forty-five (45) days following
A-15
<PAGE>
the effective date of the Registration Statement, a meeting of its shareholders
and will direct that this Agreement be submitted to a vote at such meeting.
Summit will (i) cause proper notice of such meeting to be given to its
shareholders in compliance with the Colorado Act and other applicable laws and
regulations; (ii) recommend by the affirmative vote of a majority of the Board
of Directors a vote in favor of approval of this Agreement; and (iii) use its
best efforts to solicit from its shareholders proxies in favor thereof.
(c) REGISTRATION STATEMENT. Summit will promptly furnish or cause to
be furnished to CFB all of the information concerning Summit and the Bank
required for inclusion in, and will cooperate with CFB in the preparation of,
the Registration Statement and Prospectus-Proxy Statement (including audited
financial statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement and
Prospectus-Proxy Statement), or any statement or application made by CFB to any
governmental body in connection with the Merger. Summit agrees promptly to
advise CFB if at any time prior to the Effective Date of the Merger, any
information provided by or on behalf of Summit becomes incorrect or incomplete
in any material respect and to provide the information needed to correct such
inaccuracy or omission.
(d) CONFIDENTIAL INFORMATION. Summit will hold in confidence all
documents and nonpublic information concerning CFB and its subsidiaries
furnished to Summit and its representatives in connection with the Merger and
will not release or disclose such information to any other person, except as
required by law and except to Summit's outside professional advisers in
connection with this Agreement, with the same undertaking from such professional
advisers. If the Merger contemplated by this Agreement shall not be
consummated, such confidence shall be maintained and such information shall not
be used in competition with CFB (except to the extent that such information can
be shown to be previously known to Summit, in the public domain, or later
acquired by Summit from other legitimate sources) and, upon request, all such
documents, any copies thereof and extracts therefrom shall immediately
thereafter be returned to CFB.
(e) BENEFIT PLANS. Summit and the Bank will, to the extent legally
permissible, take all action necessary or required (i) to terminate or amend, if
requested by CFB and at CFB's cost, all qualified pension and welfare benefit
plans and all non-qualified benefit plans and compensation arrangements as of
the Effective Time; (ii) to amend the Plans to comply with the provisions of the
Tax Reform Act of 1986, as amended, and regulations thereunder and other
applicable law as of the Effective Time; and (iii) to submit application to the
Internal Revenue Service for a favorable determination letter for each of the
Plans which is subject to the qualification requirements of Section 401(a) of
the Code prior to the Effective Time. Notwithstanding the foregoing, Summit and
the Bank will terminate the Executive Supplemental Income and Director Deferred
Income plans, at the expense of Summit and the Bank, and fully provide for any
and all resulting liabilities as of the Determination Date Financial Statement.
Except as set forth in Section 3.1(k) of the Summit Disclosure Schedule,
and except as otherwise required pursuant to this Section 4.1(e), Summit agrees
as to itself and the Bank that it will not, without the prior written consent of
CFB, (i) enter into, adopt, amend (except as may be required by law) or
terminate any Plan, as the case may be, or any other employee benefit plan or
A-16
<PAGE>
any agreement, arrangement, plan or policy between Summit or any of the Bank and
one or more of its directors or officers; provided, however, that Summit or the
Bank may amend any of the Plans to reduce or eliminate a requirement of
mandatory periodic contributions provided that if any of the Plans do not have
assets with an aggregate value that exceeds the present value of its liability
for accrued benefits, all as determined on a termination basis, then Summit
shall accrue on its Determination Date Financial Statements the amount by which
any of the Plans are underfunded; (ii) except for normal increases in the
ordinary course of business consistent with past practice that in the aggregate
do not result in aggregate annual base compensation expense to Summit in excess
of 105% of that in effect as of December 31, 1996, increase in any manner the
compensation of any director, officer, or employee, or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or (iii) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of Summit or the Bank of compensation or benefits
contingent, or the terms of which are materially altered, upon the occurrence of
the Merger.
(f) NO SOLICITATIONS. Summit shall not permit the Bank to, nor shall
it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it or the Bank to solicit, or take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any takeover proposal (as
defined below), or agree or endorse any takeover proposal, or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal. Summit shall promptly
advise CFB orally and in writing of any such inquiries or proposals, including
all of the material terms thereof. As used in this Agreement, "takeover
proposal" shall mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Summit or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of Summit other than the transactions
contemplated or permitted by this Agreement.
(g) NO ACQUISITIONS. Other than (i) acquisitions described in
Section 4.1(g) of the Summit Disclosure Schedule, or (ii) acquisitions which may
be mutually agreed to by the parties, Summit shall not, nor shall permit the
Bank to, acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or division thereof or otherwise acquire or agree to acquire any
substantial amount of assets in each case; PROVIDED, however, that the foregoing
shall not prohibit (i) internal reorganizations, consolidations or dissolutions
involving only the Bank as permitted or directed by this Agreement, (ii)
foreclosures and other acquisitions related to previously contracted debt, in
each case in the ordinary course of business, or (iii) acquisitions of Summit
assets in each case in the ordinary course of business.
A-17
<PAGE>
(h) INSURANCE. Summit and the Bank shall maintain the insurance
coverage (or coverage of a like kind and amount) referenced in Section 3.1(o)
through the Effective Time.
(i) POOLING RESTRICTIONS. From and after the date of this Agreement,
neither Summit nor the Bank shall take any action which, with respect to Summit,
would disqualify the Merger as a "pooling of interests" for accounting purposes.
(j) FINANCIAL STATEMENTS. Summit shall have prepared, filed and
submitted to CFB all quarterly and management prepared financial statements for
any periods ending at least 30 days before the Closing Date.
(k) ADDITIONAL COVENANTS OF SUMMIT. From the date of this Agreement
to the Closing Date or the earlier termination of this Agreement, Summit, EXCEPT
WITH THE PRIOR WRITTEN CONSENT OF CFB (except as otherwise specifically provided
in clauses (xiv) and (xv) of this Section 4.1(k)), or as specifically required
under the Agreement, shall not, nor shall it allow the Bank to:
(i) Except as set forth in Section 4.1(g) of the Summit
Disclosure Schedule, issue, sell or commit to issue or sell any shares
of capital stock of Summit or the Bank, securities convertible into or
exchangeable for capital stock of Summit or the Bank, warrants,
options or other rights to acquire such stock, or enter into any
agreement with respect to the foregoing other than issuance by the
Bank of capital stock to Summit;
(ii) Redeem, purchase or otherwise acquire (except for trust
account shares) directly or indirectly, any shares of capital stock of
Summit or the Bank or any securities convertible or exercisable for
any shares of capital stock of Summit or the Bank;
(iii) Split, combine or reclassify any of capital stock of
Summit or the Bank or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of, or in substitution for
shares of capital stock of Summit or the Bank;
(iv) Borrow, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation or other entity, any material amount;
(v) Other than in the ordinary course of business, discharge
or satisfy any material lien or encumbrance on the properties or
assets of the Bank or pay any material liability;
(vi) Mortgage, pledge or subject to any lien or other
encumbrance any of its assets, except (A) in the ordinary course of
business, (B) liens and encumbrances for current property taxes not
yet due and payable, and (C) liens and encumbrances which do not
materially affect the value or interfere with the current use or
ability to convey the property subject thereto or affected thereby;
A-18
<PAGE>
(vii) Sell, assign or transfer any tangible or intangible assets
with a book value greater than $10,000, except in the ordinary course
of business;
(viii) Enter into any individual employment, agency or other
contract or arrangement for the performance of personal services for
an amount in excess of $10,000 (except for service agreements in the
ordinary course of business);
(ix) Amend the Bank' or Summit's Articles of Association,
Articles of Incorporation, Bylaws or other governing documents;
(x) Cancel any material debt or claim or waive any right of
material value, except in the ordinary course of business;
(xi) Repurchase or enter into any agreement to repurchase all
or any portion of any loan previously participated to any other
financial institution other than loans repurchased in compliance with
all applicable laws and regulations;
(xii) Originate any loan which is thereafter participated to
another financial institution providing for payment upon default on
any basis other than pro rata;
(xiii) Make or commit to make any further advances on any loan
which is either in default or classified, whether such classification
is a result of a federal or state bank regulatory examination or
internal classification of substandard or lower by Bank's officers or
directors, unless the Bank is under a legal obligation to do so;
(xiv) (A) make, or agree to make, any fully secured loan or
increase any existing fully secured loan for an amount in excess of
$150,000, to any one borrower, unless said loan is made pursuant to a
properly documented and legally enforceable commitment of the Bank to
the borrower made prior to the date of this Agreement; (B) make, or
agree to make, any unsecured loan or increase any unsecured loan by
$25,000 or more, unless said loan is made pursuant to a properly
documented and legally enforceable commitment of the Bank to the
borrower made prior to the date of this Agreement; (C) make, or agree
to make any new loan or advance on any existing loan, except in
conformity with the Bank's current loan policies; (D) make, or agree
to make, any additional advance in an amount in excess of $25,000 with
respect to any loan classified "substandard" or less by any bank
regulatory agency or pursuant to the Bank's risk rating system; or (E)
make any change with respect to the terms of any existing loan, except
in the ordinary course of business (the provisions of parts A and B of
this section shall not apply to renewals of existing loans, advances
under existing loans or increases to existing loans for an amount
below the applicable limit set forth in parts A and B). Section
4.1(xiv), CFB shall provide advice of its consent within three
business days after CFB has received the Request for Consent and
accompanying information necessary for CFB to consider the request;
A-19
<PAGE>
(xv) Make or agree to make any loan to any Bank Principal or
any person, corporation or entity in violation of any state or federal
law or regulation;
(xvi) Incur any obligation or liability with respect to capital
expenditures which exceeds $10,000 for any single matter or $50,000 in
the aggregate, except for capital expenditures described in Section
3.1(s) of the Summit Disclosure Schedule;
(xvii) Fail to timely pay and discharge all federal and state
taxes and other accounts payable for which it is liable, provided,
that the Bank may deposit an amount equal to any such taxes, in lieu
of the payment thereof, into a reserve account, determined
consistently with prior practices, from which such taxes will be paid
when and to the extent they are found to be properly due and payable;
(xviii) Pay or commit to pay any additional salary or other
compensation to any of the Bank's officers, directors or employees;
(xix) Except as otherwise required pursuant to Section 4.1(e),
enter into, adopt, amend (except as may be required by law), terminate
or make or grant any increase above current funding levels in any of
the Plans (other than normal premium increases on current health care
insurance) or arrangement;
(xx) Purchase or sell any bonds or other investment securities
without prior written consent of CFB or make or agree to make any
investment in violation of any federal law or regulation except that
the Bank may purchase U.S. Treasury or Agencies securities with
maturity dates of twenty-four (24) months or less;
(xxi) Fail to charge and pay interest rates on loans and
deposits, respectively, not materially consistent with practices in
the Bank's marketplace;
(xxii) Fail to use its reasonable best efforts to comply with any
law, rule, regulation or order applicable to the Bank and/or Summit if
such failure would have a material adverse effect upon Summit;
(xxiii) Fail to make all appropriate and required transfers to
the Bank's loan loss reserves based upon existing policies of the Bank
or at the request of any regulatory agency or, in any event, fail to
maintain a loan loss reserve of at least equal to $2,000,000;
(xxiv) Change any accounting methods, practices or procedures
with respect to the accumulation and presentation of financial
information, except as directed by applicable law or regulation or to
conform with accounting standards;
(xxv) Declare or pay any dividends or distributions with respect
to its stock after the Determination Date; or
A-20
<PAGE>
(xxvi) Fail to use its reasonable best efforts to obtain the
consent or approval of each person (other than the government
authorities referred to in Section 6.1(c)) whose consent or approval
is required in order to permit a succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or
interest of Summit or the Bank under any loan or credit agreement,
note, mortgage, indenture, lease, license or other agreement or
instrument.
4.2 COVENANTS OF CFB. During the period from the date of this Agreement
and continuing until the Effective Time, CFB agrees as follows:
(a) ORDINARY COURSE. Except as set forth in Section 4.2(a) of the
CFB Disclosure Schedule, CFB shall carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted.
(b) APPLICATION. Subject to the required cooperation of Summit and
its affiliates, CFB shall use its reasonable best efforts to prepare and submit
within thirty (30) days of the date hereof an application to the Federal Reserve
Bank of Minneapolis for prior approval pursuant to Section 3(a)(5) of the Bank
Holding Company Act of 1956, as amended, of the proposed transaction, and to
prosecute all required federal and state applications.
(c) COOPERATION. CFB will furnish to Summit all the information
concerning CFB required for inclusion in, and will cooperate in the preparation
of, the Prospectus-Proxy Statement to be sent to the shareholders of Summit.
CFB agrees promptly to advise Summit if at any time prior to the Effective Date
of the Merger, any information provided by CFB in the Prospectus-Proxy Statement
becomes incorrect or incomplete in any material respect and to provide the
information needed to correct such inaccuracy or omission.
(d) REGISTRATION STATEMENT. As promptly as practicable after the
execution of this Agreement, CFB will file with the SEC a registration statement
on Form S-4 under the Securities Act (the "Registration Statement") and any
other applicable documents, which will include a prospectus and joint proxy
statement (the "Prospectus-Proxy Statement"), and will use its best efforts to
cause the Registration Statement to become effective under the Securities Act
and applicable state securities laws as soon as practicable. CFB shall advise
Summit promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and CFB shall furnish Summit with copies of
all such documents. At the time the Registration Statement becomes effective,
the Registration Statement and the Prospectus-Proxy Statement will comply in all
material respects with the provisions of the Securities Act and the published
rules and regulations thereunder, and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading. At the time of mailing
thereof to the Summit shareholders, at the time of the Summit shareholders'
meeting referred to in Section 4.1(b) hereof and at the Effective Time of the
Merger, the Prospectus-Proxy Statement included as part of the Registration
Statement or any amendment thereof or supplement thereto, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein, in light of the circumstances under
which they
A-21
<PAGE>
are made, not misleading or omit to state a material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
any proxy for the Summit shareholders' meeting; PROVIDED, HOWEVER, that none of
the provisions of this subparagraph shall apply to statements in or omissions
from the Registration Statement or the Prospectus-Proxy Statement made in
reliance upon and in conformity with information furnished by Summit or the Bank
for use in the Registration Statement or the Prospectus-Proxy Statement. CFB
shall bear the costs of all SEC filing fees with respect to the Registration
Statement, the costs of printing the Prospectus-Proxy Statement, and the costs
of qualifying the shares of CFB Common Stock under state blue sky laws as
necessary.
(e) LISTING. CFB will file all documents required to be filed to
obtain approval for listing the CFB Common Stock to be issued pursuant to the
Merger on the NASDAQ National Market System and use its best efforts to effect
said listing.
(f) SHARES TO BE ISSUED. The shares of CFB Common Stock to be issued
by CFB to the shareholders of Summit pursuant to this Agreement will, upon such
issuance and delivery to said shareholders pursuant to the Agreement, be duly
authorized, validly issued, fully paid and nonassessable. The shares of CFB
Common Stock to be delivered to the shareholders of Summit pursuant to this
Agreement are and will be free of any preemptive rights of the stockholders of
CFB.
(g) BLUE SKY. CFB will file all documents required to obtain prior
to the Effective Time of the Merger all necessary Blue Sky permits and
approvals, if any, required to carry out the transactions contemplated by this
Agreement, will pay all expenses incident thereto and will use its best efforts
to obtain such permits and approvals.
(h) CONFIDENTIAL INFORMATION. CFB will hold in confidence all
documents and information concerning Summit and the Bank furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to its outside professional advisers in
connection with this Agreement, with the same undertaking from such professional
advisers. If the transactions contemplated by this Agreement shall not be
consummated, such confidence shall be maintained and such information shall not
be used in competition with Summit (except to the extent that such information
can be shown to be previously known to CFB, in the public domain, or later
acquired by CFB from other legitimate sources) and, upon request, all such
documents, copies thereof or extracts therefrom shall immediately thereafter be
returned to Summit.
(i) REGISTRATION STATEMENT. CFB will furnish or cause to be
furnished all of the information concerning CFB and the CFB Subsidiaries
required for inclusion in, and will cooperate with Summit in the preparation of
the Registration Statement, or any statement or application made by Summit to
any governmental body in connection with the transactions contemplated by this
Agreement. CFB agrees to advise Summit if at any time prior to the
A-22
<PAGE>
Effective Time, any information provided by or on behalf of CFB becomes
incorrect or incomplete in any material respect and to provide the information
needed to correct such inaccuracy or omission.
4.3 COVENANTS OF SUMMIT AND CFB. During the period from the date of this
Agreement and continuing until the Effective Time, Summit and CFB agree as to
themselves and their subsidiaries that, except as expressly contemplated or
permitted by this Agreement, or to the extent that the parties shall otherwise
consent in writing:
(a) GOVERNING DOCUMENTS. No party shall amend its Certificate or
Articles of Incorporation or Bylaws.
(b) OTHER ACTIONS. Unless such action is required by law or sound
banking practice, no party knowingly and intentionally shall, or shall permit
any of its Subsidiaries to, take any action that (i) is intended to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger set forth in Article VI not being satisfied or in a violation of any
provision of this Agreement, or (ii) would adversely affect the ability of any
of them to obtain any of the Requisite Regulatory Approvals (as defined in
Section 6.1(c)) without imposition of a condition or restriction of the type
referred to in Section 6.1(f) hereof except, in every case, as may be required
by applicable law or this Agreement.
(c) ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall promptly
advise the other orally and in writing of any change or event constituting a
material breach of any of the representations, warranties or covenants of such
party contained herein. CFB shall file all reports required to be filed by it
with the SEC between the date of this Agreement and the Effective Time and shall
deliver to Summit copies of all such reports promptly after the same are filed.
CFB, Summit and each subsidiary of CFB or Summit that is a bank shall file all
Call Reports with the appropriate Bank Regulators and all other reports,
applications and other documents required to be filed with the appropriate Bank
Regulators between the date hereof and the Closing Date and shall make available
to the other party copies of all such reports promptly after the same are filed.
(d) TITLE OF PROPERTY. Summit agrees to deliver to CFB (at Summit's
expense) within thirty (30) days of the date hereof, a title insurance
commitment for all real property owned by Summit or the Bank in the State of
Colorado (including property held as OREO) (the "Title Commitment"). CFB shall
have thirty (30) days after receipt by CFB's counsel of said Title Commitment
within which to notify Summit, in writing, of CFB's objection to any exceptions
(other than any exception of the type described in Section 3.1(n)(i) through
(iv)) to the title shown in said Title Commitment. In the event of any such
objection, then Summit shall have thirty (30) days from the date of such
objection within which to attempt to eliminate such objected to exceptions to
title from the Title Commitment. In the event such objected to exceptions are
not eliminated or satisfied to the reasonable satisfaction of CFB, CFB may
terminate this Agreement pursuant to Section 7.1 hereof and such termination
shall be the sole and exclusive remedy for the failure to eliminate or satisfy
such exceptions.
A-23
<PAGE>
(e) ENVIRONMENTAL ASSESSMENT. Summit shall engage at its expense an
independent, qualified environmental engineering firm, acceptable to CFB for the
purpose of conducting a Phase I Hazardous Waste Assessment (the "Assessment") of
all real properties owned or controlled by the Bank. The Assessment shall
satisfy ASTM's E-1527 Standard Practice and shall include a record review of
publicly available federal, state and local sources of environmental records.
The Assessment shall be completed within thirty (30) days after the date hereof.
CFB shall have a period of thirty (30) days from the date of receipt of such
Assessment to review such Assessment and give written notice to Summit stating
either that (i) such Assessment is approved by CFB or (ii) such Assessment is
not approved by CFB and the reasons therefor.
If CFB gives a notice pursuant to (ii) above which sets forth specific
objections to the Assessment, then CFB may, at its option, terminate this
Agreement as of the date which is sixty (60) days after the date of such notice
unless during such sixty (60) day period Summit corrects or satisfies such
objections, or indemnifies CFB against loss, liability or expense, to the
reasonable satisfaction of CFB.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 REGULATORY MATTERS.
(a) CFB shall use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and, following the record date for the
stockholder meeting of Summit, thereafter mail the Prospectus-Proxy Statement to
the stockholders of Summit.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to obtain as promptly as practicable all necessary
permits, consents, and authorizations of all governmental entities necessary to
consummate the Merger ("Requisite Regulatory Approvals"). Summit and CFB shall
have the right to review in advance, and to the extent practicable each will
consult the other on, subject to applicable laws relating to the exchange of
information, all the information relating to Summit or CFB, as the case may be,
and any of their respective subsidiaries, which appear in any filing made with,
or written materials submitted to any governmental entity in connection with the
Merger. In exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable.
(c) Summit and CFB shall promptly furnish each other with copies of
written communications received by Summit or CFB, as the case may be, or any of
their respective Subsidiaries, Affiliates or Associates (as such items are
defined in Rule 12b-2 under the Exchange Act as in effect on the date hereof)
from, or delivered by any of the foregoing to, any governmental entity in
respect of the Merger.
A-24
<PAGE>
5.2 LETTERS OF SUMMIT OFFICERS. Summit shall cause to be delivered to CFB
a letter of Summit's chief financial officer in substantially the form shown on
EXHIBIT 5.2A dated (i) the date on which the Registration Statement shall become
effective and (ii) the business day prior to the Closing Date, and addressed to
CFB.
CFB shall cause to be delivered to Summit a letter of CFB's chief financial
officer in substantially the form shown on EXHIBIT 5.2B dated (i) the date on
which the Registration Statement shall become effective and (ii) the business
day prior to the Closing Date, and addressed to Summit.
5.3 ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable laws relating to the exchange of information, Summit and CFB shall
each (and cause each of its subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of CFB, access during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records for the purpose of
updating any review of such items performed prior to the date of this Agreement
and, during such period, Summit and CFB shall (and shall cause each of its
subsidiaries to) make available to the other: (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal or state securities
laws or federal or state banking laws (other than reports or documents which
either party is not permitted to disclose under applicable law); and (b) all
other information concerning its business, properties and personnel as either
party may reasonably request. It is the intention of the parties that CFB shall
conduct an examination of Summit and the Bank (i) promptly following execution
of the Agreement and, again (ii) prior to the Closing Date in order to confirm
compliance with the representations, warranties and covenants set forth in this
Agreement. Any required adjustments to the Financial Statements shall be made
by Summit within ten (10) business days following identification by CFB. In the
event of a dispute between Summit and CFB over whether adjustments are in
conformity with generally accepted accounting principles, the parties agree to
share the cost of referring the matter to Grant Thornton L.L.P. and to abide by
its final determination. No investigation by either party shall affect the
representations and warranties set forth herein.
5.4 AFFILIATES. Each of Summit and CFB shall use its reasonable best
efforts to cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act) of Summit or CFB
to deliver to the other party hereto, as soon as practicable after the date
hereof, and at least 32 days prior to the Closing Date, a written agreement
substantially in the form of EXHIBIT 5.4.
5.5 EMPLOYEE BENEFIT PLANS. Each person who is an employee of the Bank as
of the Effective Time ("Bank Employees") shall be participants in the employee
welfare plans, and shall be eligible for participation in the pension plans of
CFB, as in effect from time to time, subject to any eligibility requirements
(with full credit for years of past service to any of the Bank, or to any
predecessor-in-interest of the Bank to the extent such service is presently
given credit under the Plans of the Bank described in Section 3.1(k) hereof, for
the purpose of satisfying any eligibility and vesting periods) applicable to
such plans (but not subject to any pre-existing condition
A-25
<PAGE>
exclusions) and shall enter each welfare plan immediately after the Effective
Time and shall enter each pension plan not later than the first day of the
calendar year which begins at least 32 days after the Effective Time. For the
purpose of determining each Bank Employee's benefit for the year in which the
Merger occurs under the CFB vacation program, vacation taken by a Bank Employee
in the year in which the Merger occurs will be deducted from the total CFB
benefit. Each Bank Employee shall be eligible for participation, as a new
employee with the credit for past service described above, in the CFB Plans
under the terms thereof.
5.6 EXPENSES. Except as otherwise stated herein, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement, and the transactions contemplated hereby shall be paid by the party
incurring such expense, except as may be permitted by Section 7.2. All of the
expenses (including but not limited to professional fees) incurred or to be
incurred by Summit in connection with the Merger shall be accrued as expenses on
the Determination Date Balance Sheet.
5.7 ESCROW AND INDEMNITY AGREEMENT. Concurrently with the execution and
delivery of this Amendment, CFB and Summit shall execute and deliver an
Agreement (the "Escrow Agreement") requiring indemnification of CFB by
shareholders of Summit against certain losses or expenses as described therein,
and providing for an escrow as of the Effective Time in the aggregate value of
Three Hundred Fifty Thousand Dollars ($350,000), to be administered as provided
therein. The obligations of CFB under the Merger Agreement are expressly
contingent upon the execution, delivery and performance of the Escrow Agreement
by Summit.
5.8 RELEASE. Concurrently with the execution and delivery of this
Amendment, CFB and Dr. Bob L. Sellers ("Sellers") shall execute and deliver a
Release providing for the release by Sellers of any and all claims he may have
against Summit and the Bank, as provided therein. The obligations of CFB under
the Merger Agreement are expressly contingent upon the execution, delivery and
performance of the Release by Sellers.
5.9 ADDITIONAL AGREEMENTS; BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its
reasonable best efforts to take all action and to do all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, cooperating fully with the other party hereto, providing the other
party hereto with any appropriate information and making all necessary filings
in connection with the Requisite Regulatory Approvals. Without limiting the
foregoing, Summit agrees to (i) cooperate with CFB and use its best efforts in
support of a request by CFB to the appropriate regulatory agencies to provide
interim management assistance to the Bank pending consummation of the Agreement,
and (ii) cooperate with CFB in converting the Bank to CFB's data processing
system. In the event the Bank's data processing system is converted prior to
consummation, CFB shall not charge the Bank at a rate in excess of the rate the
Bank currently pays for comparable services.
A-26
<PAGE>
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been approved
and adopted by the affirmative vote of the holders of two-thirds of the
outstanding shares of Summit Common Stock.
(b) NASDAQ LISTING. The shares of CFB Common Stock issuable to the
Summit stockholders pursuant to this Agreement shall have been approved for
listing on the NASDAQ National Market System, upon notice of issuance.
(c) OTHER APPROVALS. Other than the filing provided for by Section
1.1, all consents, orders or approvals of, or declarations or filings with, and
all expirations of waiting periods imposed by, any governmental entity
(collectively, the "Consents") which are prescribed by law as necessary for the
consummation of the Merger and the other transactions contemplated hereby (other
than immaterial Consents) shall have been filed, occurred or been obtained and
all such Requisite Regulatory Approvals shall be in full force and effect.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction
or decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger or any of the transactions contemplated hereby shall be in effect, nor
shall any proceeding by any governmental entity seeking any such Injunction be
pending. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, or enforced by any governmental entity which prohibits,
restricts or makes illegal consummation of the Merger.
(f) NO UNDULY BURDENSOME CONDITION. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger or any of the transactions contemplated hereby,
by any federal or state governmental entity which, in connection with the grant
of a Requisite Regulatory Approval, imposes any condition or restriction upon
CFB, Summit, or any of their Subsidiaries which would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement as to render inadvisable, in the reasonable business judgment of
the Board of Directors of either CFB or Summit, the consummation of the Merger.
A-27
<PAGE>
6.2 CONDITIONS TO OBLIGATIONS OF CFB. The obligation of CFB to effect the
Merger are also subject to the satisfaction or waiver by CFB prior to the
Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Summit set forth in this Agreement shall be true and correct in
all material respects as of the date of the Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on the Closing Date, except where the failure to be
true and accurate in all material respects would not have or would not be
reasonably expected to have a material adverse effect on Summit, and CFB shall
have received a certificate signed on behalf of Summit by the Chairman of the
Board of Summit to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF SUMMIT. Summit shall have
performed in all materials respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and CFB shall have
received a certificate signed on behalf of Summit by the Chairman of the Board
of Summit to such effect.
(c) POOLING LETTER. CFB shall have received a letter from Ernst &
Young, in form and substance reasonably satisfactory to CFB, approving the
accounting treatment of the Merger as a "pooling of interests" in accordance
with generally accepted accounting principles, as of a date no more than five
business days prior to the Closing Date; in support of the Ernst & Young pooling
letter, Ernst & Young and CFB shall have received a letter from Summit's
accountants, in form and substance reasonably satisfying to Ernst & Young,
confirming certain facts on behalf of Summit.
(d) LEGAL OPINION. CFB shall have received the opinion of McKenna &
Cuneo, L.L.P., counsel to Summit, dated the Closing Date, in substantially the
form shown on EXHIBIT 6.2, and such opinion shall not have been withdrawn prior
to the Effective Time.
6.3 CONDITIONS TO OBLIGATIONS OF SUMMIT. The obligation of Summit to
effect the Merger is also subject to the satisfaction or waiver by Summit prior
to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CFB set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on the Closing Date, except as otherwise
contemplated by this Agreement, and Summit shall have received a certificate
signed on behalf of CFB by the Chairman and Chief Executive Officer and by the
Chief Financial Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF CFB. CFB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Summit shall have received a
certificate signed on behalf of CFB by the Chairman and Chief Executive Officer
and by the Chief Financial Officer to such effect.
A-28
<PAGE>
(c) CONSENTS UNDER AGREEMENTS. CFB shall have obtained the consent
or approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
CFB or any of its subsidiaries is a party or is otherwise bound, except those
for which failure to obtain such consents and approvals would not, in the
reasonable opinion of Summit, individually or in the aggregate, have a material
adverse effect on CFB or upon the consummation of the transactions contemplated
hereby.
(d) TAX OPINION. CFB and Summit shall have received the opinion of
Lindquist & Vennum P.L.L.P., dated the Closing Date, to the effect that (i) the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, (ii) CFB and Summit will each
be a party to that reorganization within the meaning of Section 368(b) of the
Code, (iii) shareholders of Summit who exchange their shares of Summit Common
Stock for shares of CFB Common Stock will not recognize gain or loss, for
purposes of federal income tax, except to the extent of the cash received in
lieu of fractional shares, and (iv) Summit will not recognize gain or loss, for
purposes of federal income tax, as a result of consummation of the Merger.
(e) LEGAL OPINION. Summit shall have received the opinion of
Lindquist and Vennum, P.L.L.P., counsel to CFB, dated the Closing Date, in
substantially the form shown on Exhibit 6.3, and such opinion shall not have
been withdrawn prior to the Effective Time.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated in writing at any time
prior to the Effective Time, whether before or after approval of the Merger by
the stockholders of Summit or CFB, only in the following circumstances:
(a) by mutual consent of CFB and Summit in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either CFB or Summit if (i) any Requisite Regulatory Approval
shall have been denied; or (ii) any governmental entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement;
(c) by either CFB or Summit if the Merger shall not have been
consummated on or before December 31, 1997, unless the failure of consummation
shall be due to the failure of the party seeking to terminate to perform or
observe in all material respects the covenants and agreements hereunder to be
performed or observed by such party;
A-29
<PAGE>
(d) by either CFB or Summit if there shall have been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of the other party, which breach shall not have been cured before closing
or within twenty (20) business days following receipt by the breaching party of
written notice of such breach from the other party, whichever occurs first; or
(e) by CFB pursuant to the terms of Section 4.3(d) or 4.3(e), as
applicable.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either CFB or Summit as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect except that the obligations under
Sections 4.1(d), 4.2(h), 5.6, and 7.2 shall survive termination of this
Agreement; provided, however, that no party shall be relieved or released from
any liabilities or damages arising out of the willful breach by such party of
any provision of this Agreement.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Summit and CFB, provided, however, that after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders, without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any of the Schedules; and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty contained in this Agreement shall survive the Merger or the termination
of this Agreement, except that Section 3.2, 4.2(c) - (f), 4.2(h) - (i), 5.6, 8.6
and 8.10 shall survive the Merger, and Sections 4.1(d), 4.2(h), 5.6 and 7.2
shall survive the termination of the Agreement.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when received by the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
A-30
<PAGE>
(a) if to CFB: Community First Bankshares, Inc.
Attn: Donald R. Mengedoth, President
520 Main Avenue
Fargo, ND 58124
with copies to: Steven J. Johnson, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South 8th Street
Minneapolis, MN 55402-2205
and
(b) if to Summit, to: First National Summit Bankshares, Inc.
Attn: James C. Noone, D.V.M.
201 Main Street
Gunnison, CO 86723
with copies to: Patrick B. Augustine, Esq.
McKenna & Cuneo, L.L.P.
370 17th Street #4850
Denver, CO 80202
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
8.4 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
8.5 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP. This
Agreement (including the documents and the instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder, except that
Sections 3.2 and 4.2(i) are intended for the benefit of the Summit shareholders;
and Section 5.5 is intended for the benefit of employees of the Bank. CFB shall
be liable to such third-party beneficiaries for damages caused by the breach of
such Sections. No party shall have the right to acquire or shall be deemed to
have acquired shares of common stock of the other party pursuant to the Merger
until consummation thereof.
A-31
<PAGE>
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Colorado.
8.7 PUBLICITY. Except as otherwise required by law or the rules of the
NASDAQ or the National Association of Securities Dealers, so long as this
Agreement is in effect, neither CFB nor Summit shall, nor shall either of them
permit any of its subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.9 ENFORCEMENT OF AGREEMENT. Each of the parties hereto agrees that it
will not object if the other party seeks to obtain an injunction to prevent
breaches of this Agreement or to enforce specifically the terms and provision
hereof in any court in the United States or any state have jurisdiction. The
enforcing party shall be entitled to recover its attorneys fees incurred in the
successful enforcement of the terms and provisions of this Agreement.
8.10 INDEMNIFICATION. CFB will indemnify the officers and directors of
Summit and Bank for all actions they take in the performance of their duties as
required by this Agreement to the same extent CFB indemnifies its officers and
directors for all actions they take in the performance of their duties as
required by this Agreement.
A-32
<PAGE>
IN WITNESS WHEREOF, CFB and Summit have caused this Agreement to be signed
by their respective officers thereunto duly authorized as of the date first
above written.
COMMUNITY FIRST BANKSHARES, INC.
By: /s/ Donald R. Mengedoth
--------------------------------------
Name: Donald R. Mengedoth
Attest: Title: Chairman and President
/s/ Mark A. Anderson
- -------------------------------
Name: Mark A. Anderson
Title: Executive Vice President
FIRST NATIONAL SUMMIT BANKSHARES INC.
By: /s/ James C. Noone, D.V.M.
--------------------------------------
Attest: Name: James C. Noone, D.V.M.
Title: Chairman
/s/ Alanson Hegeman
- -------------------------------
Name: Alanson Hegeman
Title: Secretary
A-33
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A -- Articles of Merger
EXHIBIT B -- Summit Disclosure Schedule
EXHIBIT C -- CFB Disclosure Schedule
EXHIBIT 2.1(c) -- Illustrations of Exchange Rate Calculations
EXHIBIT 5.4 -- Affiliate Agreement
EXHIBIT 6.2 -- McKenna & Cuneo LLP Opinion
EXHIBIT 6.3 -- Lindquist & Vennum P.L.L.P. Opinion
A-34
<PAGE>
APPENDIX B
AGREEMENT
THIS AGREEMENT is made as of the 22nd day of August, 1997 by and between
COMMUNITY FIRST BANKSHARES, INC., a Delaware corporation ("CFB") and FIRST
NATIONAL SUMMIT BANKSHARES, INC., a Colorado corporation ("Summit"), as agent
for the shareholders of Summit ("Shareholders").
RECITALS
WHEREAS, CFB and Summit are parties to an Agreement and Plan of Merger
dated August 22, 1997 (the "Merger Agreement"), and generally providing for the
acquisition of Summit and its subsidiary, First National Summit Bank ("Bank"),
by CFB; and
WHEREAS, it is a condition to consummation of the Merger Agreement that the
Shareholders indemnify CFB against certain future liabilities and expenses and
provide an escrow account to fund such indemnification obligation.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. INDEMNIFICATION. Shareholders shall indemnify and hold the CFB,
Summit and the Bank, and their respective successors and assigns (collectively,
the "Indemnified Parties") harmless from and against any and all losses, costs,
damages, expenses, liabilities, taxes, interest, penalties, judgments, amounts
paid in settlement, claims, demands, deficiencies, causes of action, suits or
other damage, including without limitation, attorney's fees and expenses (a)
resulting from, arising out of or incurred with respect to (or alleged to result
from, arise out of or to have been incurred with respect to) any actions or
omissions (or alleged actions or omissions) by officers or directors of Summit
or the Bank prior to the Effective Time which constitute (or are alleged to
constitute) (i) a violation of law or regulation, (ii) a breach of fiduciary
duty, or (iii) an unsafe or unsound practice which caused or is likely to cause
more than a minimum financial loss to the Bank (all of the foregoing items being
hereinafter referred to as a "Director/Officer Claims"), or (b) resulting from,
arising out of or incurred with respect to (or alleged to result from, arise out
of or to have been incurred with respect to) any discharge, release or actual or
constructive termination by Summit or the Bank of any officer or employee from
employment prior to the Effective Time who has informed the Bank of alleged
disability (all of the foregoing items being hereinafter referred to as an
"Employee Claim", and, collectively with Director/Officer Claims, as "Claims").
Without limiting the foregoing, a "Director/Officer Claim" shall include the
reasonable expenses or costs incurred by an Indemnified Party, including
reasonable attorney's fees, in connection with any investigation or civil,
criminal or administrative proceeding with respect to any matter which gives
rise to a claim for which an Indemnified Party is entitled to indemnification
pursuant to the foregoing provisions. Notwithstanding anything to the contrary
<PAGE>
herein, however, such indemnification obligations shall be limited to the
Escrow, as hereinafter set forth.
2. ESTABLISHMENT OF ESCROW. At the Effective Time of the Merger
Agreement, CFB shall establish an escrow account (hereinabove and hereinafter,
the "Escrow") at Colorado Community First National Bank (the "Escrow Agent").
The initial amount of the Escrow shall be Three Hundred Fifty Thousand Dollars
($350,000), of which Three Hundred Twenty-Five Thousand Dollars ($325,000) shall
be allocated to the Director/Officer Claims and Twenty-Five Thousand Dollars
($25,000) shall be allocated to the Employee Claims, to be funded either (i) by
wire transfer in that amount on the Closing Date from the Bank to the Escrow
Agent, or (ii) by transfer of that amount of CFB Common Stock by CFB to the
Escrow Agent from the proceeds of the Merger otherwise due the Shareholders
under the terms of the Merger Agreement. If CFB Common Stock is utilized, the
value of the CFB Common Stock shall be calculated based upon the per-share
closing price as reported by the NASDAQ National Market System for the trading
day immediately preceding the Effective Time.
3. EFFECT OF ESCROW ON MERGER CONSIDERATION. If CFB Common Stock is used
to initially fund the Escrow, the number of shares of CFB Common Stock
transferred to the Escrow shall correspondingly reduce the Exchange Rate
otherwise due holders of Summit Common Stock under the terms of the Merger
Agreement. If a wire transfer is used to initially fund the Escrow, the amount
of the Escrow shall nevertheless be included in the determination of Summit
Value in accordance with Section 1.4 of the Merger Agreement and for purposes of
the Adjustment based on Summit Value, calculated in accordance with Section
2.1(e) of the Merger Agreement; provided, however, that the Exchange Rate
resulting from the foregoing calculations shall then be reduced by the number of
shares determined by (i) dividing $350,000 by the per-share closing price of the
CFB Common Stock as reported by the NASDAQ National Market System for the
trading day immediately preceding the Effective Time.
4. INVESTMENT IN CFB COMMON STOCK. It is the acknowledged preference
of the parties that the Escrow be funded with CFB Common Stock, if such funding
would not result in a failure of the pooling accounting condition in Section 6.2
of the Merger Agreement or otherwise jeopardize consummation of the transaction.
Accordingly, in the event the Escrow is initially funded by a wire transfer,
unless such investment shall jeopardize satisfaction of the pooling accounting
condition set forth in Section 6.2(c) of the Merger Agreement, the Escrow Agent
is instructed to invest the proceeds of the wire transfer in CFB Common Stock as
promptly as reasonably practicable following the Effective Time. Subject only
to the liquidity needs of the Escrow in meeting current obligations, the Escrow
Agent is expressly relieved of any express or implied responsibility to consider
the prudence of maintaining all or substantially all of the Escrow as an
investment in CFB Common Stock.
5. ADMINISTRATION OF THE ESCROW. The Escrow Agent shall pay out from
the Escrow amounts necessary to satisfy any Claims presented to the Escrow
Agent by an Indemnified Party; provided, however, that payments from the
Escrow to satisfy a Director/Officer Claim shall not exceed its allocable
share of the Escrow, based upon the foregoing funding formula of Three
Hundred Twenty-Five Thousand Dollars ($325,000) initial funding and
investment, and payments from the Escrow to satisfy an Employee Claim shall
not exceed the balance of the Escrow, based
B-2
<PAGE>
upon the foregoing funding formula of Twenty-Five Thousand Dollars ($25,000).
At any time during the term of the Escrow, an Indemnified Party may present a
Claim to the Escrow Agent. Claims shall be accompanied by documentation
setting forth in reasonable detail the amount of the Claim, and the
Indemnified Party shall provide a copy of the Claim and supporting
documentation to the representative of the Shareholders at the time of
submission to the Escrow Agent. Subject to the foregoing limitations, the
Escrow Agent shall pay Claims from proceeds of the Escrow within ten (10)
business days of receipt, unless satisfaction of the Claim requires proceeds
from the sale of CFB Common Stock, in which case payment shall occur by the
later to occur of (i) 10 business days of receipt of Claim or (ii) five (5)
business days of receipt of proceeds of sale. Sales of CFB Common Stock
shall occur no more frequently than monthly, on the fifth trading day of each
month, at the market price. Sales of CFB Common Stock shall be made in round
lots, at the next round lot after estimated proceeds sufficient to satisfy
all outstanding Claims.
6. TERM OF INDEMNITY AND ESCROW. The indemnity granted herein shall
expire with respect to any Claims not asserted by an Indemnified Party on or
before the fifth anniversary of this Agreement, in accordance with the
procedures set forth below. Subject to the foregoing, the indemnity granted
herein shall survive the investigations by CFB prior to the Effective Time, and
the investigations by CFB after the closing of the transactions contemplated by
the Merger Agreement. The Escrow shall be established as of the date hereof and
shall continue until the earlier of (i) payment from the Escrow of all proceeds
of the Escrow or (ii) the fifth anniversary of the date of the Agreement. On
the fifth anniversary of the date of this Agreement, provided there are no
outstanding Claims, any proceeds remaining in the Escrow shall be disbursed by
the Escrow Agent to the Shareholders in proportion to their Summit ownership
interest as of the Effective Time. The parties agree to reevaluate the need for
the Escrow and reasonable requirements thereof, as of the third anniversary of
the date of this Agreement. Notwithstanding the foregoing, the portion of the
Escrow allocated to Officer/Director Claims shall be terminated and the
remaining portion thereof shall be disbursed within sixty (60) days of the
termination of all investigations and proceedings described in Section 1 hereof,
as demonstrated to CFB's reasonable satisfaction. Further, notwithstanding the
foregoing, the portion of the Escrow allocated to Employee Claims shall be
terminated and the remaining portion thereof shall be disbursed with sixty days
of the satisfaction and release of all pending or threatened employee claims, as
demonstrated to CFB's reasonable satisfaction.
7. DUTIES AND LIABILITY OF ESCROW AGENT. The Escrow Agent hereby accepts
its obligations under this Agreement, and represents that it has the corporate
power and legal authority to enter into this Agreement and perform its
obligations hereunder. The Escrow Agent agrees to provide to the parties a
monthly written statement, setting forth in reasonable detail the activity in
the Escrow for the period since the preceding statement. The Escrow Agent shall
be entitled to deduct from the Escrow reimbursement for any actual out-of-pocket
expenses incurred by it hereunder. The Escrow Agent shall not be liable for any
action or failure to act under or in connection with this Agreement, except for
its own gross negligence or willful misconduct.
8. COOPERATION. In connection with the defense or compromise of any
Claim, the parties, and their respective affiliates and successors, shall
cooperate in making available to each other all relevant information, documents,
books, records and files, as well as access to personnel
B-3
<PAGE>
having knowledge thereof, except where such information is subject to privilege
or where release of such information is prohibited or restricted by law or
regulation.
9. ARBITRATION. Any disputes arising under this Agreement which cannot
be resolved by good faith negotiation between the parties shall be subject to
binding arbitration in accordance with the rules and procedures of the American
Arbitration Association as then in effect, except as otherwise provided in this
Agreement. Either party may demand arbitration by providing thirty (30) days'
prior written notice to the other party. Unless otherwise agreed by the
parties, arbitration shall take place in Denver, Colorado. Each party shall
appoint an arbitrator and the two selected arbitrators shall appoint a third
arbitrator. If the two arbitrators selected by the parties are unable to agree
upon a third arbitrator, the third arbitrator shall be selected by and in
accordance with the procedures of the American Arbitration Association. The
costs and expenses of the arbitration, including the costs and expenses of the
arbitrators, shall be shared equally by the parties unless the arbitrators
determine that one party should bear a greater portion or all of the expenses.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, superseding all
prior oral or written agreements or understandings. There have been and are no
promises, restrictions, agreements or understandings between the parties with
respect to the subject matter hereof except as set forth herein.
11. HEADINGS; DEFINITIONS. The headings in this Agreement are for
convenience only and shall not be considered a part of or affect the meaning,
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in the several counterparts each of which shall be
deemed an original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument. Capitalized terms used herein and
not otherwise defined shall have the meanings assigned to them in the Merger
Agreement.
12. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed, construed and interpreted exclusively in accordance with the laws of
the State of Colorado.
13. NOTICES. All notices given hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid, addressed as follows:
(a) If to CFB, to: Donald R. Mengedoth, President
Community First Bankshares, Inc.
520 Main Avenue
Fargo, ND 58124
With a copy to: Steven J. Johnson, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
B-4
<PAGE>
(b) If to Shareholders, after the Closing, to:
James C. Noone, D.V.M.
First National Summit Bankshares, Inc.
201 Main Street
Gunnison, CO 86723
With a copy to: William Ernest Norcross, Esq.
890 Willow Tree Cir #8
Cordova, TN 38018-8847
And a copy to: Patrick B. Augustine, Esq.
McKenna & Cuneo, L.L.P.
370 Seventeenth Street
Suite 4800
Denver, CO 80202
or to such other address as a party may have furnished to the others in writing
in accordance herewith, except that notices of a change of address shall be
effective only upon receipt.
14. SEVERABILITY. If any provision of this Agreement shall be deemed
invalid or inoperative, or in the event a court of competent jurisdiction
determines that any of the provisions of this Agreement contravene public policy
in any way, this Agreement shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any such
provisions which are invalid or inoperative or which contravene public policy
shall be deemed, without further action or deed on the part of any person, to be
modified, amended and/or limited, but only to the limited extent necessary to
render the same valid and enforceable.
15. AMENDMENT AND MODIFICATION. This Agreement may only be amended,
modified or supplemented by a written agreement executed by each of the parties
hereto.
16. EFFECTIVE DATE. This Agreement shall be effective upon the Effective
Date of the Merger Agreement.
17. COSTS AND EXPENSES. In the event of any dispute hereunder, the
prevailing party in such dispute shall be entitled to recover from the other
party its reasonable costs and expenses incurred in connection with such
dispute, including, without limitation, reasonable attorneys' fees.
B-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
COMMUNITY FIRST BANKSHARES, INC.
By /s/ Donald R. Mengedoth
--------------------------------------------
Its President and Chief Executive Officer
-----------------------------------------
FIRST NATIONAL SUMMIT BANKSHARES, INC.
By /s/ James C. Noone, D.V.M.
--------------------------------------------
Its Chairman
-----------------------------------------
Accepted this 22nd day of August, 1997.
COLORADO COMMUNITY FIRST NATIONAL BANK
By James R. Krumm
------------------------------------------------
Its Chief Executive Officer
-------------------------------------
B-6
<PAGE>
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT is dated as of the 22nd day of August,
1997 and made and entered into by and between COMMUNITY FIRST BANKSHARES, INC.,
a Delaware corporation ("CFB"), and FIRST NATIONAL SUMMIT BANKSHARES, INC., a
Colorado corporation ("Summit"), as agent for the shareholders of Summit
("Shareholders").
WHEREAS, the parties hereto are parties to an Agreement providing for
certain indemnification and escrow matters dated August 22, 1997 (the "Escrow
Agreement"); and
WHEREAS, the parties desire to make certain changes to the Escrow
Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 2 OF THE ESCROW AGREEMENT. Section 2 of the
Escrow Agreement is amended and restated in its entirety as follows:
2. ESTABLISHMENT OF ESCROW. At the Effective Time of the
Merger Agreement, CFB shall establish an escrow account (hereinabove
and hereinafter, the "Escrow") at Colorado Community First National
Bank (the "Escrow Agent"). The initial amount of the Escrow shall be
that minimum number of whole shares of CFB Common Stock whose total
value shall not be less than Three Hundred Fifty Thousand Dollars
($350,000), of which Three Hundred Twenty-Five Thousand Dollars
($325,000) shall be allocated to the Director/Officer Claims and
Twenty-Five Thousand Dollars ($25,000) shall be allocated to the
Employee Claims, to be funded by transfer of that amount of CFB Common
Stock by CFB to the Escrow Agent from the proceeds of the Merger
otherwise due the Shareholders under the terms of the Merger
Agreement. The value of the CFB Common Stock shall be calculated
based upon the per-share closing price as reported by the NASDAQ
National Market System for the trading day immediately preceding the
Effective Time (the "Effective Time Value").
2. AMENDMENT OF SECTION 3 OF THE ESCROW AGREEMENT. Section 3 of the
Escrow Agreement is amended and restated in its entirety as follows:
3. EFFECT OF ESCROW ON MERGER CONSIDERATION. The number of
shares of CFB Common Stock transferred to the Escrow shall
correspondingly reduce the Exchange Rate otherwise due holders of
Summit Common Stock on the Closing Date, under the terms of the Merger
Agreement.
3. AMENDMENT OF SECTION 4 OF THE ESCROW AGREEMENT. Section 4 of the
Escrow Agreement is amended and restated in its entirety as follows:
B-7
<PAGE>
4. INVESTMENT IN CFB COMMON STOCK. Subject to each
Shareholder's right to direct a sale of shares of CFB Common Stock
from their respective Escrow Account, discussed below, the Escrow
shall be maintained invested in CFB Common Stock until termination.
The Escrow Agent is expressly relieved of any express or implied
responsibility to consider the prudence of maintaining all or
substantially all of the Escrow as an investment in CFB Common Stock.
4. AMENDMENT TO SECTION 5 OF THE ESCROW AGREEMENT. Section 5 of the
Escrow Agreement is amended and restated in its entirety as follows:
5. ADMINISTRATION OF THE ESCROW. As used herein, an "Escrow
Account" refers to that portion of the Escrow which corresponds to
such Shareholder's proportionate share of the Summit Common Stock. At
the establishment of the Escrow, all of the Escrow Accounts shall
consist of CFB Common Stock, including fractional shares thereof, and
are referred to herein as "Stock Escrow Accounts". Notwithstanding
the Escrow, Shareholders shall be entitled to vote shares of CFB
Common Stock held in their respective Stock Escrow Account, provided
such shares have not been reserved for return, as hereinafter set
forth. Dividends received with respect to shares of CFB Common Stock
retained in the Escrow shall be retained by the Escrow Agent. Subject
to the limitations upon sales by affiliates under Section 5.4 of the
Merger Agreement, at any time during the term of the Escrow, a
Shareholder may request that the unreserved portion of his Escrow
Account be liquidated and sold and the cash proceeds substituted for
the CFB Common Stock. Any and all expenses of sale must be paid by
the Shareholder and deposited with the Escrow Agent prior to the
Escrow Agent's liquidation of the Stock Escrow Account. Liquidated
Stock Escrow Accounts are referred to herein as "Cash Escrow
Accounts". A Shareholder may not divide his unreserved Stock Escrow
Account and liquidate only a portion thereof, and once a Stock Escrow
Account has been liquidated, a Shareholder may not direct that his
Cash Escrow Account be reinvested in CFB Common Stock. Any and all
Cash Escrow Accounts shall be invested in interest-bearing
obligations, in the reasonable discretion of the Escrow Agent,
considering the liquidity needs of the Cash Escrow Accounts.
At any time during the term of the Escrow, an Indemnified Party
may present a Claim to the Escrow Agent. Claims shall be accompanied
by documentation setting forth in reasonable detail the amount of the
Claim, and the Indemnified Party shall provide a copy of the Claim and
supporting documentation to the representative of the Shareholders at
the time of submission to the Escrow Agent.
Within ten (10) business days of receipt of a Claim, the Escrow
Agent shall reserve from each Stock Escrow Account and deduct from
each Cash Escrow Account the respective Shareholder's portion of the
indemnification liability. For these purposes, CFB Common Stock held
in Stock Escrow Accounts shall continue to be valued at the Effective
Time Value, and charges against a Cash Escrow Account shall be based
upon the original percentage indemnification liability of the
Shareholder of such Cash Escrow Account, rather than the nominal value
of the liability. (For
B-8
<PAGE>
example, a holder of 10% of Summit Common Stock who receives CFB Common
Stock with an Effective Time Value of $35 per share and liquidates such
shares at a sale price of $45 per share would be charged 60% of the value
of his Cash Escrow Account ($27,000) as his share of a Claim against the
Escrow of $210,000.) Unless sooner requested by CFB, the Escrow Agent
shall return shares (and accumulated dividends thereon) to CFB from the
Escrow upon termination of the Escrow, and pending such return, shall
reserve shares from Stock Escrow Accounts until a final accounting.
Subtractions from the Escrow in response to a Director/Officer Claim shall
not exceed its allocable share of the Escrow, based upon the foregoing
funding formula of Three Hundred Twenty-Five Thousand Dollars ($325,000)
initial funding and subtractions from the Escrow in response to an Employee
Claim shall not exceed the balance of the Escrow, based upon the foregoing
funding formula of Twenty-Five Thousand Dollars ($25,000).
The Escrow Agent shall prepare a final accounting and return or
distribution of the Escrow with ten (10) business days of termination.
5. Except as hereinabove set forth, there are no other changes to the
Escrow Agreement, and the same is expressly ratified and confirmed.
IN WITNESS WHEREOF, CFB and Summit have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
COMMUNITY FIRST BANKSHARES, INC.
By: /s/ Gary A. Knutson
-------------------------------------
Name: Gary A. Knutson
Title: Senior Vice President
FIRST NATIONAL SUMMIT BANKSHARES INC.
By: /s/ James C. Noone, D.V.M.
-------------------------------------
Name: James C. Noone, D.V.M.
Title: Chairman
Accepted this 22nd day of August, 1997.
COLORADO COMMUNITY FIRST
NATIONAL BANK
By: /s/ James R. Krumm
-------------------------------------
Its: Chief Executive Officer
----------------------------
B-9
<PAGE>
APPENDIX C
ARTICLE 113
DISSENTERS' RIGHTS
PART I
RIGHT OF DISSENT--PAYMENT FOR SHARES
7-113-101 DEFINITIONS.--For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT.-- (1) A shareholder, whether or not entitled to
vote, is entitled to dissent and obtain payment of the fair value of the
shareholder's shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if:
(I) Approval by the shareholders of that corporation is required for the
merger by section 7-111-103 or 7-111-104 or by the articles of incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
C-1
<PAGE>
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to section
7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended, or
on the national market system of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporation action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by more
than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares.
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record
C-2
<PAGE>
shareholder's name only if the record shareholder dissents with respect to all
shares beneficially owned by any one person and causes the corporation to
receive written notice which states such dissent and the name, address, and
federal taxpayer identification number, if any, of each person on whose behalf
the record shareholder asserts dissenters' rights. The rights of a record
shareholder under this subsection (1) are determined as if the shares as to
which the record shareholder dissents and the other shares of the record
shareholder were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed corporate action
creating dissenters' rights under section 7-113-102 is submitted to a vote at a
shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by this subsection (1)1 shall not affect any action
taken at the shareholders' meeting for which the notice was to have been given,
but any shareholder who was entitled to dissent but who was not given such
notice shall not be precluded from demanding payment for the shareholder's
shares under this article by reason of the shareholder's failure to comply with
the provisions of section 7-113-202(1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection
(2) shall not affect
C-3
<PAGE>
any action taken pursuant to section 7-107-104 for which the notice was to have
been given, but any shareholder who was entitled to dissent but who was not
given such notice shall not be precluded from demanding payment for the
shareholder's shares under this article by reason of the shareholder's failure
to comply with the provisions of section 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--(1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting and if notice of dissenters' rights has been
given to such shareholder in connection with the action pursuant to section
7-113-201(1), a shareholder who wishes to assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the shareholder's
shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2) a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE.--(1) If a proposed corporate action creating
dissenters' rights under section 7-113-102 is authorized, the corporation shall
give a written dissenters' notice to all shareholders who are entitled to demand
payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the
corporation action creating dissenters' rights under section 7-113-102 and
shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
C-4
<PAGE>
7-113-204 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who is given a
dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly completed, or
may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand for payment
under section 7-113-204 from a shareholder holding uncertificated shares, and in
lieu of the deposit of certificates representing the shares, the corporation may
restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.--(1) Except as provided in section 7-113-208, upon the
effective date of the corporate action creating dissenters' rights under section
7-113-102 or upon receipt of a payment demand pursuant to section 7-113-204,
whichever is later, the corporation shall pay each dissenter who complied with
section 7-113-204, at the address stated in the payment demand, or if no such
address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
value of the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet as of
the end of a fiscal year ending not more than sixteen months before the date of
payment, an income statement for that year, and, if the corporation customarily
provides such statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7-113-209; and
(e) A copy of this article.
C-5
<PAGE>
7-113-207 FAILURE TO TAKE ACTION.--(1) If the effective date of the corporate
action creating dissenters' rights under section 7-113-102 does not occur within
sixty days after the date set by the corporation by which the corporation must
receive the payment demand as provided in section 7-113-203, the corporation
shall return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT OF
PROPOSED CORPORATE ACTION.--(1) The corporation may, in or with the dissenters'
notice given pursuant to section 7-113-203, states the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action creating dissenters' rights under section 7-113-102 and state
that the dissenter shall certify in writing, in or with the dissenter's payment
demand under section 7-113-204, whether or not the dissenter (or the person on
whose behalf dissenters' rights are asserted) acquired beneficial ownership of
the shares before that date. With respect to any dissenter who does not so
certify in writing, in or with the payment demand, that the dissenter or the
person on whose behalf the dissenter asserts dissenters' rights acquired
beneficial ownership of the shares before such date, the corporation may, in
lieu of making the payment provided in section 7-113-206, offer to make such
payment if the dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.--(1)
A dissenter may give notice to the corporation in writing of the dissenter's
estimate of the fair value of the dissenter's shares and of the amount of
interest due and may demand payment of such estimate, less any payment made
under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the shares or
that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206 within
sixty days after the date set by the corporation by which the corporation must
receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
C-6
<PAGE>
APPENDIX D
EXAMPLES OF CALCULATIONS OF THE EXCHANGE RATE
The following examples are presented for informational purposes only to
illustrate the procedure for determining the Exchange Rate in the Merger given a
variety of assumptions. The information presented below is not intended as an
estimate or projection of any of the data that will be used to determine the
Exchange Rate or of the amount that a holder of Summit Common Stock may
ultimately receive in the Merger. Further, the examples are not intended to
provide a range of such amounts; the actual Exchange Rate may be higher than the
highest amount presented or lower than the lowest amount presented.
The examples illustrate the effects of various assumed levels of the
Trading Value of CFB Common Stock and the Summit Value as of the Determination
Date (as adjusted pursuant to the Merger Agreement) on the Exchange Rate and the
resulting aggregate consideration to be received by holders of Summit Common
Stock in the Merger. The actual Trading Value of CFB Common Stock in connection
with the Merger will be equal to the average of the per share closing price for
the CFB Common Stock for the 20 trading days ending at the end of the fourth
trading day immediately preceding the Closing Date. The Summit Value shall be
equal to the total consolidated assets of Summit minus the sum of the total
consolidated liabilities of Summit, as reflected on the Determination Date
Balance Sheet. Total consolidated liabilities of Summit shall include, without
limitation, provisions for taxes and the expenses of the preparation of the
final tax return for Summit. See "The Merger--Conversion of Summit Common
Stock." Certain non-recurring expenses to consummate the Merger, currently
estimated to be $75,000, will be the responsibility of Summit and will have
the effect of reducing the Summit Value.
Example I below is based on the actual Summit Value on June 30, 1997 of
$6,622,807. Examples II and III are based on an assumed Summit Value of
$6,600,000 as of the Determination Date. If the actual Summit Value is
$5,940,000 or less (i.e., 90% or less of the assumed Summit Value used in
Examples II and III), then the holders of Summit Common Stock will be provided
with updated information and resolicited with respect to the approval of the
Merger Agreement. A Summit Value of $5,940,000 would reduce the Exchange Rate
in Examples II and III by .0391 shares of CFB Common Stock for every share of
Summit Common Stock, which would result in an Exchange Rate of .3008:1 in
Example II and .2519:1 in Example III. Any variation in the Exchange Rate
caused by a change in the assumed Trading Value of CFB Common Stock will not
result in a new opportunity to consider approval of the Merger Agreement.
D-1
<PAGE>
EXAMPLE I*
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$34.706 (based on the average closing price of CFB Common Stock for the
twenty trading days ended on the fourth trading day preceding June 30,
1997).
Outstanding shares of Summit Common Stock:
965,708 shares (based on number outstanding on June 30, 1997, as adjusted
to reflect the issuance of 12,000 shares pursuant to outstanding stock
options).
Summit Value on Determination Date:
$6,622,807 (assumed to be equal to total consolidated assets less total
liabilities of Summit on June 30, 1997, reduced by $563,123 to reflect the
after-tax effects of a shortfall in loan loss reserves as of such date from
the agreed-upon level of $2,000,000).
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 400,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $39.50 PER SHARE:
[No adjustment, given assumed Trading Value of $34.706 per share] --
c. ADJUSTMENT FOR SUMMIT VALUE
Minimum Summit Value per Merger Agreement $7,000,000
Less Summit Value at June 30, 1997 $6,622,807
Shortfall in Summit Value: $377,193
Adjustment:
(i) Multiply $377,193 shortfall x 2.0857 (minimum ratio of
transaction value to equity): $786,711
(ii) Divide result of $786,711 by $36.50 (minimum Trading Value
of CFB Common Stock): 21,554
(iii) Subtract 21,554 share adjustment from 400,000 shares to
determine adjusted shares of CFB Common Stock issued: 378,446
Aggregate number of shares of CFB Common Stock to be issued in
the Merger: 378,446
Resulting calculation of Exchange Rate:
378,446 shares of CFB Common Stock divided by 965,708 shares of
Summit Common Stock outstanding: .3919:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued multiplied by
Trading Value) $13,134,346
Dollar value of the Merger consideration per share of Summit Common
Stock $13.60
* Represents calculations used to arrive at hypothetical Exchange Rate of
.3919:1 used to calculate pro forma financial information included in this
Proxy Statement-Prospectus under the caption "Summary - Historical and Pro
Forma Comparative Unaudited Per Share Data."
D-2
<PAGE>
EXAMPLE II
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$45.00
Outstanding shares of Summit Common Stock:
965,708 shares
Summit Value on Determination Date:
$6,600,000
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 400,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $39.50 PER SHARE:
Aggregate number of shares of CFB Common Stock issued (before
adjustment for Summit Value) is adjusted to equal the number
determined by dividing $15,800,000 by the Trading Value: 351,111
c. ADJUSTMENT FOR SUMMIT VALUE
Minimum Summit Value per Merger Agreement $7,000,000
Less Assumed Summit Value 6,600,000
Shortfall in Summit Value: 400,000
Adjustment:
(i) Multiply $400,000 shortfall x 2.0857 (minimum ratio of
transaction value to equity): $834,280
(ii) Divide result of $834,280 by $36.50 (minimum Trading Value
of CFB Common Stock): 22,857
(iii) Subtract 22,857 share adjustment from 351,111 shares
(result of adjustment in b. above) to determine adjusted
shares of CFB Common Stock issued: 328,254
Resulting calculation of Exchange Rate:
328,254 shares of CFB Common Stock divided by 965,708 shares of
Summit Common Stock outstanding: .3399:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued multiplied by Trading
Value) $14,771,430
Dollar value of the Merger consideration per share of Summit Common
Stock $15.30
D-3
<PAGE>
EXAMPLE III
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$52.00
Outstanding shares of Summit Common Stock:
965,708 shares
Summit Value on Determination Date:
$6,600,000
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 400,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $39.50 PER SHARE:
Aggregate number of shares of CFB Common Stock issued (before
adjustment for Summit Value) is adjusted to equal the number
determined by dividing $15,800,000 by the Trading Value: 303,846
c. ADJUSTMENT FOR SUMMIT VALUE
Minimum Summit Value per Merger Agreement $7,000,000
Less Assumed Summit Value 6,600,000
Shortfall in Summit Value: 400,000
Adjustment:
(i) Multiply $400,000 shortfall x 2.0857 (minimum ratio of
transaction value to equity): $834,280
(ii) Divide result of $834,280 by $36.50 (minimum Trading Value
of CFB Common Stock): 22,857
(iii) Subtract 22,857 share adjustment from 303,846 shares
(result of adjustment in b. above) to determine adjusted
shares of CFB Common Stock issued: 280,989
Resulting calculation of Exchange Rate:
280,989 shares of CFB Common Stock divided by 965,708 shares of
Summit Common Stock outstanding: .2910:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued multiplied by Trading
Value) $14,611,428
Dollar value of the Merger consideration per share of Summit Common
Stock $15.13
D-4
<PAGE>
EXAMPLE IV
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$45.00
Outstanding shares of Summit Common Stock:
965,708 shares
Summit Value on Determination Date:
$7,200,000
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 400,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $39.50 PER SHARE:
Aggregate number of shares of CFB Common Stock issued is adjusted
to equal the number determined by dividing $15,800,000 by the
Trading Value: 351,111
c. ADJUSTMENT FOR SUMMIT VALUE
[No adjustment, since Summit Value is greater than or equal to
$7,000,000] --
Resulting calculation of Exchange Rate:
351,111 shares of CFB Common Stock divided by 965,708 shares of
Summit Common Stock outstanding: .3636:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued multiplied by Trading
Value) $15,800,000
Dollar value of the Merger consideration per share of Summit Common
Stock $16.36
D-5
