<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



    Mark One

    [X]     Quarterly report pursuant to section 13 or 15(d) of the Securities
            Exchange Act of 1934

            For the quarterly period ended June 30, 2001; or

    [ ]     Transition report pursuant to section 13 or 15(d) of the Securities
            Exchange Act of 1934

            For the Transition period from               to               .
                                           -------------    --------------


                         Commission File Number 0-11986


                             SUMMIT BANCSHARES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


               Texas                                    75-1694807
      ------------------------             ------------------------------------
      (State of Incorporation)             (I.R.S. Employer Identification No.)


                   1300 Summit Avenue, Fort Worth, Texas 76102
                   -------------------------------------------
                    (Address of principal executive offices)


                                 (817) 336-6817
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


                                    No Change
         --------------------------------------------------------------
         (Former name, former address and former fiscal year if changed
                               since last report)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares of common stock, $1.25 par value, outstanding at June 30,
2001 was 6,360,673 shares.
<PAGE>

                             SUMMIT BANCSHARES, INC.



                                      INDEX


PART I - FINANCIAL INFORMATION                                          Page No.


Item 1.  Financial Statements

         Consolidated Balance Sheets at June 30,
         2001 and 2000 and at December 31, 2000                             4

         Consolidated Statements of Income for the
         Six Months Ended June 30, 2001 and 2000
         and for the Year Ended December 31, 2000                           5

         Consolidated Statements of Changes in
         Shareholders' Equity for the Six Months
         Ended June 30, 2001 and 2000 and for the
         Year Ended December 31, 2000                                       6

         Consolidated Statements of Cash Flows for
         the Six Months Ended June 30, 2001 and
         2000 and for the Year Ended December 31,
         2000                                                               7

         Notes to Consolidated Financial
         Statements for the Six Months Ended June
         30, 2001 and 2000 and for the Year Ended
         December 31, 2000                                               8-20

The June 30, 2001 and 2000 and the December 31, 2000 financial statements
included herein are unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management of the registrant, necessary to a fair statement of
the results for the interim periods.

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations for the Six Months
         Ended June 30, 2001 and 2000                                   21-28

                                       2
<PAGE>

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                               29

Item 2.   Change in Securities                                            29

Item 3.   Defaults Upon Senior Securities                                 29

Item 4.   Submission of Matters to a Vote of Security Holders             29

Item 5.   Other Information                                               29

Item 6.   Exhibits and Reports on Form 8-K                                29

SIGNATURES                                                                30

EXHIBIT INDEX                                                             31

EXHIBIT 11  Computation of Earnings Per Common Share                      32

                                       3
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
-----------------------------
<TABLE>
<CAPTION>

                                  SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS

                                                                            (Unaudited)
                                                                              June 30,           (Unaudited)
                                                                     -------------------------   December 31,
                                                                         2001          2000          2000
                                                                     -----------   -----------   -----------
ASSETS                                                                                  (In Thousands)
<S>                                                                  <C>           <C>           <C>
CASH AND DUE FROM BANKS - NOTE 1                                     $    29,057   $    27,577   $    27,595
FEDERAL FUNDS SOLD & DUE FROM TIME                                        49,259        19,245        46,461
INVESTMENT SECURITIES - NOTE 2
 Securities Available-for-Sale, at fair value                            125,781       121,769       127,626
 Securities Held-to-Maturity, at cost (fair value of $23,396,000
   and $21,949,000 June 30, 2000
   and December 31, 2000, respectively)                                       --        24,029        22,021
LOANS - NOTES 3, 11 AND 17
  Loans, Net of Unearned Discount                                        402,432       377,641       380,016
      Allowance for Loan Losses
                                                                          (5,745)       (6,899)       (5,399)
                                                                     -----------   -----------   -----------
                LOANS, NET                                               396,687       370,742       374,617

PREMISES AND EQUIPMENT - NOTE 4                                            8,048         8,404         8,124
ACCRUED INCOME RECEIVABLE                                                  4,310         5,021         5,133
OTHER REAL ESTATE - NOTE 5                                                   -0-         1,343           286
OTHER ASSETS                                                               6,707         7,241         7,258
                                                                     -----------   -----------   -----------
                TOTAL ASSETS                                         $   619,849   $   585,371   $   619,121
                                                                     ===========   ===========   ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS - NOTE 6
  Noninterest-Bearing Demand                                         $   140,601   $   140,466   $   146,083
  Interest-Bearing                                                       401,965       362,755       393,583
                                                                     -----------   -----------   -----------

                TOTAL DEPOSITS                                           542,566       503,221       539,666

SHORT TERM BORROWINGS - NOTE 7                                            14,945        29,052        19,910
ACCRUED INTEREST PAYABLE                                                     904           752         1,091
OTHER LIABILITIES                                                          2,818         2,313         2,883
                                                                     -----------   -----------   -----------

                TOTAL LIABILITIES                                        561,233       535,338       563,550
                                                                     -----------   -----------   -----------

COMMITMENTS AND CONTINGENCIES - NOTE 12, 14, 16 AND 18

SHAREHOLDERS' EQUITY - NOTES 13, 15 AND 19
  Common Stock - $1.25 Par Value; 20,000,000 shares authorized;
    6,360,673, 6,380,841and 6,362,278 shares issued
    and outstanding at June 30, 2001 and 2000 and at
    December 31, 2000, respectively                                        7,951         7,976         7,953
  Capital Surplus                                                          6,831         6,643         6,678
  Retained Earnings                                                       43,204        37,179        40,655
  Accumulated Other Comprehensive Income - Unrealized Gain
    (Loss) on Available-for-Sale Investment Securities, Net of Tax         1,411        (1,298)          285
  Treasury Stock at Cost (40,000 and 28,563 shares at
    June 30, 2001 and 2000, respectively)                                   (781)         (467)          -0-
                                                                     -----------   -----------   -----------
                TOTAL SHAREHOLDERS' EQUITY                                58,616        50,033        55,571
                                                                     -----------   -----------   -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $   619,849   $   585,371   $   619,121
                                                                     ===========   ===========   ===========
</TABLE>

The accompanying Notes should be read with these financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>

                               SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF INCOME

                                                                      (Unaudited)
                                                               For the Six Months Ended    (Unaudited)
                                                                       June 30,             Year Ended
                                                               -------------------------   December 31,
                                                                   2001          2000          2000
                                                               -----------   -----------   -----------
                                                                (In Thousands, Except Per Share Data)
<S>                                                            <C>           <C>           <C>
INTEREST INCOME
  Interest and Fees on Loans                                   $    18,051   $    17,718   $    36,768
  Interest and Dividends on Investment Securities:
    Taxable                                                          4,125         4,570         9,253
    Exempt from Federal Income Taxes                                     6            10            17
  Interest on Federal Funds Sold and Due From Time                   1,458           403         1,571
                                                               -----------   -----------   -----------

               TOTAL INTEREST INCOME                                23,640        22,701        47,609
                                                               -----------   -----------   -----------

INTEREST EXPENSE
  Interest on Deposits                                               8,794         7,813        17,470
  Interest on Short Term Borrowings                                    378           721         1,400
                                                               -----------   -----------   -----------

               TOTAL INTEREST EXPENSE                                9,172         8,534        18,870
                                                               -----------   -----------   -----------

               NET INTEREST INCOME                                  14,468        14,167        28,739

LESS: PROVISION FOR LOAN LOSSES - NOTE 3                               490         1,728         2,606
                                                               -----------   -----------   -----------

               NET INTEREST INCOME AFTER
               PROVISION FOR LOAN LOSSES                            13,978        12,439        26,133
                                                               -----------   -----------   -----------

NON-INTEREST INCOME
  Service Charges and Fees on Deposits                               1,146           970         1,998
  Loss on Sale of Investment Securities                                -0-           -0-            (2)
  Other Income                                                       1,003           856         1,782
                                                               -----------   -----------   -----------

               TOTAL NON-INTEREST INCOME                             2,149         1,826         3,778
                                                               -----------   -----------   -----------

NON-INTEREST EXPENSE
  Salaries and Employee Benefits - NOTE 14                           5,132         4,689         9,480
  Occupancy Expense - Net                                              624           505           993
  Furniture and Equipment Expense                                      727           692         1,391
  Other Real Estate Owned and Foreclosed Asset Expense - Net           127           356           324
  Merger Related Expense - NOTE 9                                      598           -0-           -0-
  Other Expense - NOTE 9                                             2,067         2,200         3,982
                                                               -----------   -----------   -----------

               TOTAL NON-INTEREST EXPENSE                            9,275         8,442        16,170
                                                               -----------   -----------   -----------

               INCOME BEFORE INCOME TAXES                            6,852         5,823        13,741

APPLICABLE INCOME TAXES - NOTE 10                                    2,365         2,026         4,765
                                                               -----------   -----------   -----------

               NET INCOME                                      $     4,487   $     3,797   $     8,976
                                                               ===========   ===========   ===========

               NET INCOME PER SHARE - NOTE 15
                       Basic                                   $      0.71   $      0.60   $      1.41
                       Diluted                                        0.69          0.58          1.38
</TABLE>

The accompanying Notes should be read with these financial statements.

                                       5
<PAGE>

                    SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                       (Unaudited)
                                                               For the Three Months Ended
                                                                        June 30,
                                                               -------------------------
                                                                   2001          2000
                                                               -----------   -----------
                                                         (In Thousands, Except Per Share Data)
<S>                                                            <C>           <C>
INTEREST INCOME
  Interest and Fees on Loans                                   $     8,967   $     9,037
  Interest and Dividends on Investment Securities:
     Taxable                                                         1,980         2,291
     Exempt from Federal Income Taxes                                    3             4
  Interest on Federal Funds Sold and Due From Time                     604           219
                                                               -----------   -----------

               TOTAL INTEREST INCOME                                11,554        11,551
                                                               -----------   -----------

INTEREST EXPENSE
  Interest on Deposits                                               4,105         4,073
  Interest on Short Term Borrowings                                    167           370
                                                               -----------   -----------

               TOTAL INTEREST EXPENSE                                4,272         4,443
                                                               -----------   -----------

               NET INTEREST INCOME                                   7,282         7,108

LESS: PROVISION FOR LOAN LOSSES - NOTE 3                               310         1,496
                                                               -----------   -----------

               NET INTEREST INCOME AFTER
               PROVISION FOR LOAN LOSSES                             6,972         5,612
                                                               -----------   -----------

NON-INTEREST INCOME
  Service Charges and Fees on Deposits                                 592           488
  Other Income                                                         519           430
                                                               -----------   -----------
               TOTAL NON-INTEREST INCOME                             1,111           918
                                                               -----------   -----------

NON-INTEREST EXPENSE
  Salaries and Employee Benefits - NOTE 14                           2,593         2,332
  Occupancy Expense - Net                                              315           247
  Furniture and Equipment Expense                                      366           354
  Other Real Estate Owned and Foreclosed Asset Expense - Net            46           368
  Other Expense                                                      1,132         1,148
                                                               -----------   -----------

               TOTAL NON-INTEREST EXPENSE                            4,452         4,449
                                                               -----------   -----------

               INCOME BEFORE INCOME TAXES                            3,631         2,081

APPLICABLE INCOME TAXES - NOTE 10                                    1,255           734
                                                               -----------   -----------

               NET INCOME                                      $     2,376   $     1,347
                                                               ===========   ===========

               NET INCOME PER SHARE  - NOTE 15
                       Basic                                   $      0.38   $      0.22
                       Diluted                                        0.37          0.21
</TABLE>

The accompanying Notes should be read with these financial statements.

                                       6
<PAGE>

<TABLE>
<CAPTION>

                                          SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                      FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                          AND FOR THE YEAR ENDED DECEMBER 31, 2000
                                                        (Unaudited)

                                                                                    Accumulated
                                                                                      Other
                                                                                   Comprehensive
                                                                                   Income - Net
                                                                                  Unrealized Gain                   Total
                                  Common Stock                                       (Loss) on                      Share-
                            ------------------------     Capital       Retained      Investment      Treasury      Holder's
                               Shares        Amount      Surplus       Earnings      Securities       Stock         Equity
---------------------------------------------------------------------------------------------------------------------------
                                                     (Dollars in Thousands, Except Per Share Data)
<S>                          <C>          <C>           <C>          <C>            <C>            <C>           <C>
BALANCE AT
January 1, 2000              6,361,247    $    7,952    $    6,469   $   35,474     $   (1,186)    $      -0-    $   48,709

Stock Options Exercised         71,238            89           174                                                      263
Purchases of Stock Held
  in Treasury                                                                                          (1,348)       (1,348)
Retirement of Stock Held
  in Treasury                  (51,644)          (65)                      (816)                          881           -0-
Cash Dividend
  $.20 Per Share                                                         (1,276)                                     (1,276)
Net Income for the
  Six Months Ended
  June 30, 2000                                                           3,797                                       3,797
Securities Available-
  for-Sale Adjustment                                                                     (112)                        (112)
                                                                                                                 ----------
    Total Comprehensive
    Income NOTE 22                                                                                                    3,685
                            ----------   ----------    ----------    ----------     ----------     ----------    ----------

BALANCE AT
June 30, 2000                6,380,841         7,976         6,643       37,179         (1,298)          (467)       50,033

Stock Options Exercised         10,000            12            35                                                       47
Retirement of Stock Held
  in Treasury                  (28,563)          (35)                      (432)                          467           -0-
Cash Dividend -
  $.20 Per Share                                                         (1,271)                                     (1,271)
Net Income for the Months
  Six Months Ended
   December 31, 2000                                                      5,179                                       5,179
Securities Available-
  for-Sale Adjustment                                                                    1,583                        1,583
                                                                                                                 ----------
    Total Comprehensive
    Income NOTE 22                                                                                                    6,762
                            ----------    ----------   ----------    ----------     ----------     ----------    ----------
BALANCE AT
December 31, 2000            6,362,278         7,953         6,678       40,655            285            -0-        55,571

Stock Options Exercised         28,400            35           153                                                      188
Purchases of Stock Held
  in Treasury                                                                                          (1,358)       (1,358)
Retirement of Stock Held
  in Treasury                  (30,005)          (37)                      (540)                          577           -0-
Cash Dividend -
  $.22 Per Share                                                         (1,398)                                     (1,398)
Net Income for the
  Six Months Ended
  June 30, 2001                                                           4,487                                       4,487
Securities Available-
  for-Sale Adjustment                                                                    1,126                        1,126
                                                                                                                 ----------
    Total Comprehensive
     Income NOTE 22                                                                                                   5,613
                            ----------    ----------   ----------    ----------     ----------     ----------    ----------

BALANCE AT
June 30, 2001                6,360,673    $    7,951    $    6,831   $   43,204     $    1,411     $     (781)   $   58,616
                            ==========    ==========   ==========    ==========     ==========     ==========    ==========
</TABLE>

The accompanying Notes should be read with these financial statements.

                                       7
<PAGE>

<TABLE>
<CAPTION>

                                SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                AND FOR THE YEAR ENDED DECEMBER 31, 2000

                                                                        (Unaudited)
                                                                    For Six Months Ended     (Unaudited)
                                                                          June 30,           Year Ended
                                                                 -------------------------   December 31,
                                                                     2001          2000          2000
                                                                 -----------   -----------   -----------
                                                                              (In Thousands)
<S>                                                              <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                                     $     4,487   $     3,797   $     8,976
  Adjustments to Reconcile Net Income to Net
   Cash Provided by Operating Activities:
    Depreciation and Amortization                                        532           526         1,054
    Net Premium Accretion
      of Investment Securities                                           (36)          (41)         (142)
    Provision for Loan Losses                                            490         1,728         2,606
    Deferred Income Taxes Benefit                                       (253)         (713)         (194)
    Net Loss  on Sale of Investment Securities                           -0-           -0-             2
    Writedown of Other Real Estate                                        11           420           426
    Writedown of Foreclosed Assets                                       301           -0-           -0-
    Net Gain From Sale of Other Real Estate                             (308)          (77)         (151)
    Net Decrease (Increase) in Accrued Income and Other Assets        (1,385)         (920)       (1,280)
    Net Decrease (Increase) in Accrued Expenses and
      and Other Liabilities                                             (252)         (375)          232
                                                                 -----------   -----------   -----------
      Total Adjustments                                                 (900)          548         2,553
                                                                 -----------   -----------   -----------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                        3,587         4,345        11,529
                                                                 -----------   -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in Federal Funds Sold & Due From Time                      (2,798)       (1,233)      (28,449)
  Proceeds from Matured and Prepaid Investment Securities
    o  Held-to-Maturity                                               15,000           285         1,285
    o  Available-for-Sale                                             60,186         1,272        82,218
  Proceeds from Sales of Investment Securities                         9,987        45,929        59,922
  Purchase of Investment Securities
    o  Available-for-Sale                                            (59,565)      (36,978)     (134,263)
  Loans Originated and Principal Repayments, Net                     (20,868)      (22,673)      (27,367)
  Recoveries of Loans Previously Charged-Off                              81           128           224
  Proceeds from Sale of Premises and Equipment                           126           -0-            23
  Proceeds from Sale of Other Real Estate/Foreclosed Assets              941           503           666
  Purchases of Premises and Equipment                                   (582)         (368)         (639)
                                                                 -----------   -----------   -----------
      NET CASH USED BY INVESTING ACTIVITIES                            2,508       (13,135)      (46,380)
                                                                 -----------   -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net Increase in Demand Deposits, Savings
   Accounts and Interest Bearing Transaction Accounts                  6,890         2,519        14,728
  Net Increase (Decrease) in Certificates of Deposit                  (3,991)       20,156        44,392
  Net Increase (Decrease) in Repurchase Agreements                    (4,964)       (3,039)      (12,181)
  Payments of Cash Dividends                                          (1,398)       (1,276)       (2,547)
  Proceeds from Stock Options Exercised                                  188           263           310
  Purchase of Treasury Stock                                          (1,358)       (1,348)       (1,348)
                                                                 -----------   -----------   -----------
       NET CASH PROVIDED BY FINANCING ACTIVITIES                      (4,633)       17,275        43,354
                                                                 -----------   -----------   -----------

NET INCREASE IN CASH AND DUE FROM BANKS                                1,462         8,485         8,503

CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD                        27,595        19,092        19,092
                                                                 -----------   -----------   -----------
CASH AND DUE FROM BANKS AT END OF PERIOD                         $    29,057   $    27,577   $    27,595
                                                                 ===========   ===========   ===========

SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES

  Interest Paid                                                  $     9,359   $     8,358   $    18,355
  Income Taxes Paid                                                    2,607         2,762         5,097
  Other Real Estate Acquired in Settlement of Loans                      -0-           242         1,538
  Bank Financed Sales of Other Real Estate                               -0-           -0-         1,250
</TABLE>

The accompanying Notes should be read with these financial statements.

                                       8
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
           FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)
              AND FOR THE YEAR ENDED DECEMBER 31, 2000 (UNAUDITED)

NOTE 1 - Summary of Significant Accounting Policies
------

         The accounting and reporting policies of Summit Bancshares, Inc. (the
"Corporation") and Subsidiaries are in accordance with accounting principles
generally accepted in the United States of America and the prevailing practices
within the banking industry. A summary of the more significant policies follows:

Basis of Presentation and Principles of Consolidation
-----------------------------------------------------

         The consolidated financial statements of the Corporation include its
accounts and those of its wholly-owned subsidiaries, Summit National Bank and
Summit Community Bank, National Association (the "Subsidiary Banks") and Summit
Bancservices, Inc., a wholly-owned operations subsidiary. Effective May 14,
2001, Summit Community Bank, N.A. merged with and into Summit National Bank and
Summit National Bank changed its name to Summit Bank, National Association. Also
Summit Bancservices, Inc. was liquidated effective May 14, 2001 and its assets
were contributed by the Corporation to Summit Bank, N.A. All operations of
Summit Bancservices will be continued in the Bank. All significant intercompany
balances and transactions have been eliminated in consolidation.

Use of Estimates
----------------

         The preparation of financial statements in conformity with generally
accepted accounting principles 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 periods. Actual results could differ from those estimates.

Cash and Due From Banks
-----------------------

         The Subsidiary Bank is required to maintain certain balances at the
Federal Reserve Bank based on their levels of deposits. During the first six
months of 2001 the average cash balance maintained at the Federal Reserve Bank
was $815,000. Compensating balances held at correspondent banks, to minimize
service charges, averaged approximately $18,698,000 during the same period.

Investment Securities
---------------------

         The Corporation has adopted Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS
115"). At the date of purchase, the Corporation is required to classify debt and
equity securities into one of three categories: held-to-maturity, trading or
available-for-sale. At each reporting date, the appropriateness of the
classification is reassessed. Investments in debt securities are classified as
held-to-maturity and measured at amortized cost in the financial statements only
if management has the positive intent and ability to hold those securities to
maturity. Securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading and measured at fair
value in the financial statements with unrealized gains and losses included in
earnings. Investments not classified as either held-to-maturity or trading are
classified as available-for-sale and measured at fair value in the financial
statements with unrealized gains and losses reported, net of tax, in a separate
component of shareholders' equity until realized.

         The Corporation has the ability and intent to hold to maturity its
investment securities classified as held-to-maturity; accordingly, no adjustment
has been made for the excess, if any, of amortized cost over market. In
determining the investment category classifications at the time of purchase of
securities, management considers its asset/liability strategy, changes in
interest rates and prepayment risk, the need to increase capital and other
factors. Under certain circumstances (including the deterioration of the
issuer's creditworthiness, a change in tax law, or statutory or regulatory
requirements), the Corporation may change the investment security
classification. In the periods reported for 2001 and 2000 the Corporation held
no securities that would have been classified as trading securities.

         All investment securities are adjusted for amortization of premiums and
accretion of discounts. Amortization of premiums and accretion of discounts are
recorded to income over the contractual maturity or estimated life of the
individual investment on the level yield method. Gain or loss on sale of
investments is based upon the specific identification method and the gain or
loss is recorded in non-interest income. Income earned on the Corporation's
investments in state and political subdivisions is not taxable.

Loans and Allowance for Loan Losses
-----------------------------------

         Loans are stated at the principal amount outstanding less unearned
discount and the allowance for loan losses. Unearned discount on installment
loans is recognized as income over the terms of the loans by a method
approximating the interest method. Interest income on all other loans is
recognized based upon the principal amounts outstanding, the simple interest
method. Direct costs related to loan originations are not separately allocated
to loans but are charged to non-interest expense in the period incurred. The net
effect of not recognizing such fees and related costs over the life of the
related loan is not considered to be material to the financial statements. The
accrual of interest on a loan is discontinued when, in the opinion of
management, there is doubt about the ability of the borrower to pay interest or
principal. Interest previously earned, but uncollected on such loans, is written
off. After loans are placed on

                                       9
<PAGE>

NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
------

non-accrual all payments received are applied to principal and no interest
income is recorded until the loan is returned to accrual status or the principal
has been reduced to zero.

         The Corporation has adopted Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by
Statement of Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosure." Under this
standard, the allowance for loan losses related to loans that are identified for
evaluation in accordance with Statement No. 114 (impaired loans) is based on
discounted cash flows using the loan's initial effective rate or the fair value
of the collateral for certain collateral dependent loans.

         The allowance for loan losses is comprised of amounts charged against
income in the form of a provision for loan losses as determined by management.
Management's evaluation is based on a number of factors, including the
Subsidiary Banks' loss experience in relation to outstanding loans and the
existing level of the allowance, prevailing and prospective economic conditions,
and management's continuing review of the discounted cash flow values of
impaired loans and its evaluation of the quality of the loan portfolio. Loans
are charged against the allowance for loan losses when management believes that
the collectibility of the principal is unlikely.

         The evaluation of the adequacy of loan collateral is often based upon
estimates and appraisals. Because of changing economic conditions, the
valuations determined from such estimates and appraisals may also change.
Accordingly, the Corporation may ultimately incur losses which vary from
management's current estimates. Adjustments to the allowance for loan losses
will be reported in the period such adjustments become known or are reasonably
estimable.

Premises and Equipment
----------------------

         Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation expense is computed on the straight-line method
based upon the estimated useful lives of the assets ranging from three to forty
years. Maintenance and repairs are charged to non-interest expense. Renewals and
betterments are added to the asset accounts and depreciated over the periods
benefited. Depreciable assets sold or retired are removed from the asset and
related accumulated depreciation accounts and any gain or loss is reflected in
the income and expense accounts.

Other Real Estate
-----------------

         Other real estate is foreclosed property held pending disposition and
is valued at the lower of its fair value or the recorded investment in the
related loan. At foreclosure, if the fair value, less estimated costs to sell,
of the real estate acquired is less than the Corporation's recorded investment
in the related loan, a writedown is recognized through a charge to the allowance
for loan losses. Any subsequent reduction in value is recognized by a charge to
income. Operating expenses of such properties, net of related income, and gains
and losses on their disposition are included in non-interest expense.

Federal Income Taxes
--------------------

         The Corporation joins with its Subsidiary in filing a consolidated
federal income tax return. The Subsidiary pays to the parent a charge equivalent
to its current federal income tax based on the separate taxable income of the
Subsidiary.

         The Corporation and the Subsidiary maintain their records for financial
reporting and income tax reporting purposes on the accrual basis of accounting.
Deferred income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Deferred income
taxes are provided for accumulated temporary differences due to basic
differences for assets and liabilities for financial reporting and income tax
purposes.

         Realization of net deferred tax assets is dependent on generating
sufficient future taxable income. Although realization is not assured,
management believes it is more likely than not that all of the net deferred tax
assets will be realized. The amount of the net deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced.

Cash and Cash Equivalents
-------------------------

         For the purpose of presentation in the Statements of Cash Flows, cash
and cash equivalents are defined as those amounts included in the balance sheet
caption "Cash and Due from Banks."

Reclassification
----------------

         Certain reclassifications have been made to the 2000 financial
statements to conform to the 2001 presentation.

                                       10
<PAGE>

NOTE 1 - Summary of Significant Accounting Policies (cont'd.)
------

Earnings Per Common and Common Equivalent Share
-----------------------------------------------

         Earnings per common and common equivalent share is calculated by
dividing net income by the weighted average number of common shares and common
share equivalents. Stock options are regarded as common share equivalents and
are therefore considered in earnings per share calculations, if dilutive. The
number of common share equivalents is determined using the treasury stock
method.

Audited Financial Statements
----------------------------

         The consolidated balance sheet as of December 31, 2000, and the
consolidated statements of income, changes in shareholders' equity and cash
flows for the year ended December 31, 2000 are headed "unaudited" in these
financial statements. These statements were reported in the Securities Exchange
Commission Form 10-K as of December 31, 2000 as "audited" but are required to be
reflected in these statements as unaudited because of the absence of an
independent auditor's report.


NOTE 2 - Investment Securities
------

         A summary of amortized cost and estimated fair values of investment
securities is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                     Gross       Gross
                                                     Amortized    Unrealized   Unrealized     Fair
                                                        Cost         Gains       Losses       Value
                                                     ----------   ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>          <C>
Investment Securities - Available-for-Sale
  U.S.  Treasury Securities                          $   13,057   $      234   $      -0-   $   13,291
  U.S. Government Agencies
    and Corporations                                     83,596        1,814          -0-       85,410
  U.S. Government Agency Mortgage
    Backed Securities                                    25,420          102          (14)      25,508
  Obligations of States and Political Subdivisions          240            2          -0-          242
  Federal Reserve and Federal Home Loan Bank Stock        1,330          -0-          -0-        1,330
                                                     ----------   ----------   ----------   ----------

     Total Available-for-Sale Securities                123,643        2,152          (14)     125,781
                                                     ----------   ----------   ----------   ----------

        Total Investment Securities                  $  123,643   $    2,152   $      (14)  $  125,781
                                                     ==========   ==========   ==========   ==========
</TABLE>

         During the second quarter of 2001, $7 million of securities previously
classified as Held-to-Maturity Securities were reclassified to
Available-for-Sale Securities. All Investment Securities are now carried on the
consolidated balance sheet as of June 30, 2001 at fair value. A net unrealized
gain of $2,138,000 is included in the Available-for-Sale Investment Securities
balance. The unrealized gain, net of tax, is included in Shareholders' Equity.

                                       11
<PAGE>

NOTE 2 - Investment Securities (cont'd)
------

         A summary of amortized cost and estimated fair values of investment
securities is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                       June 30, 2000
                                                     ------------------------------------------------
                                                                    Gross        Gross
                                                     Amortized    Unrealized   Unrealized     Fair
                                                        Cost        Gains        Losses       Value
                                                     ----------   ----------   ----------   ---------
<S>                                                  <C>          <C>          <C>          <C>
Investment Securities - Held-to-Maturity
  U.S. Treasury Securities                           $    5,999   $       10   $      -0-   $   6,009
  U.S. Government Agencies                               18,030          -0-         (643)     17,387
                                                     ----------   ----------   ----------   ---------

    Total Held-to-Maturity Securities                    24,029           10         (643)     23,396
                                                     ----------   ----------   ----------   ---------

Investment Securities - Available-for-Sale
  U.S.  Treasury Securities                              17,974           24          (50)     17,948
  U.S. Government Agencies
    and Corporations                                     92,238           11       (1,707)     90,542
  U.S. Government Agency Mortgage
    Backed Securities                                    11,934           10         (257)     11,687
  Obligations of States and Political Subdivisions          350          -0-           (2)        348
  Federal Reserve and Federal Home Loan Bank Stock        1,244          -0-          -0-       1,244
                                                     ----------   ----------   ----------   ---------

     Total Available-for-Sale Securities                123,740           45       (2,016)    121,769
                                                     ----------   ----------   ----------   ---------

        Total Investment Securities                  $  147,769   $       55   $   (2,659)  $ 145,165
                                                     ==========   ==========   ==========   =========
</TABLE>


         In the above schedule the amortized cost of Total Held-to-Maturity
Securities of $24,029,000 and the fair value of Total Available-for-Sale
Securities of $121,769,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 2000 for a total of $145,798,000. A
net unrealized loss of $1,971,000 is included in the Available-for-Sale
Investment Securities balance. The unrealized loss, net of tax benefit, is
included in Shareholders' Equity.

NOTE 3 - Loans and Allowance for Loan Losses
------

         The book values of loans by major type follow (in thousands):

                                           June 30,
                                  -------------------------   December 31,
                                      2001          2000          2000
                                  -----------   -----------   -----------

Commercial                        $   177,360   $   166,919   $   167,818
Real Estate Mortgage                  134,835       127,421       132,062
Real Estate Construction               55,993        49,339        47,183
Loans to Individuals                   34,264        34,049        32,996
Less:  Unearned Discount                  (20)          (87)          (43)
                                  -----------   -----------   -----------
                                      402,432       377,641       380,016
Allowance for Loan Losses              (5,745)       (6,899)       (5,399)
                                  -----------   -----------   -----------

     Loans - Net                  $   396,687   $   370,742   $   374,617
                                  ===========   ===========   ===========

                                       12
<PAGE>

NOTE 3 - Loans and Allowance for Loan Losses (cont'd.)
------

         Transactions in the allowance for loan losses are summarized as follows
(in thousands):
<TABLE>
<CAPTION>

                                                   Six Months Ended
                                                       June 30,            Year Ended
                                              -------------------------   December 31,
                                                  2001          2000          2000
                                              -----------   -----------   -----------
<S>                                           <C>           <C>           <C>
Balance, Beginning of Period                  $     5,399   $     5,169   $     5,169
Provisions, Charged to Income                         490         1,728         2,606

Loans Charged-Off                                    (225)         (126)       (2,600)
Recoveries of Loans Previously
 Charged-Off                                           81           128           224
                                              -----------   -----------   -----------

          Net Loans (Charged-Off) Recovered          (144)            2        (2,376)
                                              -----------   -----------   -----------

Balance, End of Period                        $     5,745   $     6,899   $     5,399
                                              ===========   ===========   ===========
</TABLE>

         The provisions for loan losses charged to operating expenses during the
six months ended June 30, 2001 and June 30, 2000 of $490,000 and $1,728,000,
respectively, were considered adequate to maintain the allowance in accordance
with the policy discussed in Note 1. For the year ended December 31, 2000, a
provision of $2,606,000 was recorded.

         At June 30, 2001, the recorded investment in loans that are considered
to be impaired under Statement of Financial Accounting Standards No. 114 was
$2,380,000 (of which $2,380,000 were on non-accrual status). The related
allowance for loan losses for these loans was $873,000. The average recorded
investment in impaired loans during the six months ended June 30, 2001 was
approximately $2,482,000. For this period the Corporation recognized no interest
income on these impaired loans.


NOTE 4 - Premises and Equipment
------

         The investment in premises and equipment stated at cost and net of
accumulated amortization and depreciation is as follows (in thousands):
<TABLE>
<CAPTION>

                                                            June 30,
                                                   -------------------------   December 31,
                                                       2001          2000          2000
                                                   -----------   -----------   -----------
<S>                                                <C>           <C>           <C>
Land                                               $     2,317   $     2,320   $     2,320
Buildings and Improvements                               8,075         7,784         7,845
Furniture & Equipment                                    7,769         8,034         8,134
                                                   -----------   -----------   -----------
Total Cost                                              18,161        18,138        18,299

Less:  Accumulated Amortization and Depreciation       (10,113)       (9,734)      (10,175)
                                                   -----------   -----------   -----------

       Net Book Value                              $     8,048   $     8,404   $     8,124
                                                   ===========   ===========   ===========
</TABLE>


NOTE 5 - Other Real Estate
------

         The carrying value of other real estate is as follows (in thousands):
<TABLE>
<CAPTION>

                                                            June 30,
                                                   -------------------------   December 31,
                                                       2001          2000          2000
                                                   -----------   -----------   -----------
<S>                                                <C>           <C>           <C>
Other Real Estate                                  $       -0-   $     1,343   $       286
                                                   ===========   ===========   ===========
</TABLE>

         There were direct writedowns of other real estate charged to income for
the six months ended June 30, 2001 of $11,000. There were direct writedowns of
other real estate charged to income for the six months ended June 30, 2000 of
$420,000. For the year ended December 31, 2000, $426,000 was charged to income.

                                       13
<PAGE>

NOTE 6 - Deposits
------

         The book values of deposits by major type follow (in thousands):
<TABLE>
<CAPTION>

                                                       June 30,
                                              -------------------------   December 31,
                                                  2001          2000          2000
                                              -----------   -----------   -----------
<S>                                           <C>           <C>           <C>
Noninterest-Bearing Demand Deposits           $   140,601   $   140,466   $   146,083
Interest-Bearing Deposits:
  Interest-Bearing Transaction
    Accounts and Money Market Funds               163,738       160,085       156,348
  Savings                                          98,997        83,684        94,014
  Savings Certificates - Time                      82,239        64,656        82,248
  Certificates of Deposits $100,000 or more        56,213        53,552        60,195
  Other                                               778           778           778
                                              -----------   -----------   -----------
       Total                                      401,965       362,755       393,583
                                              -----------   -----------   -----------
           Total Deposits                     $   542,566   $   503,221   $   539,666
                                              ===========   ===========   ===========
</TABLE>


NOTE 7 - Short Term Borrowings
------

         Securities sold under repurchase agreements generally represent
borrowings with maturities ranging from one to thirty days. Information relating
to these borrowings is summarized as follows (in thousands):
<TABLE>
<CAPTION>

                                                          Six Months Ended
                                                               June 30,            Year Ended
                                                      -------------------------   December 31,
                                                          2001          2000          2000
                                                      -----------   -----------   -----------
<S>                                                   <C>           <C>           <C>
Securities Sold Under Repurchase Agreements:
     Average for Period                               $    18,473   $    22,437   $    20,797
     Period-End                                            14,945        19,052        19,910
     Maximum Month-End Balance During Period               20,374        25,019        25,019
Interest Rate:
     Average for Period                                      4.13%         4.98%         5.19%
     Period-End                                              2.65%         6.06%         5.44%
</TABLE>

         The Corporation, through its subsidiary, has available a line of credit
with the Federal Home Loan Bank of Dallas which allows the subsidiary to borrow
on a collateralized basis at a fixed term. At June 30, 2001, the subsidiary had
no borrowings outstanding. For the six months ended June 30, 2001, the
subsidiary had no borrowings. At June 30, 2000, the subsidiary had borrowings
outstanding of $10,000,000. For the year ended December 31, 2000, the subsidiary
had borrowed an average balance of $4,929,000 under the line of credit, bearing
an average interest rate of 6.49%.


NOTE 8 - Notes Payable
------

         On July 15, 2000, the Corporation obtained lines of credit from a bank
under which the Corporation may borrow $9,000,000 at prime rate. The lines of
credit are secured by stock of the Subsidiary Bank and mature in July 2001,
whereupon, if balances are outstanding, the lines convert to term notes having
five year terms. The Corporation will not pay a fee for any unused portion of
the lines. As of June 30, 2001, no funds had been borrowed under these lines nor
were any borrowings outstanding.

                                       14
<PAGE>

NOTE 9 - Other Non-Interest Expense
------

         The significant components of other non-interest expense are as follows
(in thousands):

                                           Six Months Ended
                                                June 30,            Year Ended
                                       -------------------------   December 31,
                                           2001          2000          2000
                                       -----------   -----------   -----------

Business Development                   $       312   $       360   $       601
Legal and Professional Fees                    314           390           866
Printing and Supplies                          185           190           369
Regulatory Fees and Assessments                124           116           237
Other                                        1,132         1,144         1,909
                                       -----------   -----------   -----------

       Total                           $     2,067   $     2,200   $     3,982
                                       ===========   ===========   ===========


         The Merger-Related Expenses reported in the first quarter of 2001
include expenses, accrued and incurred, related to the merger of the
Corporation's subsidiaries as reported in Note 1 Basis of Presentation and
Principles of Consolidation. The expenses include the cost of severance payments
to a former chief executive officer of one of the units and legal and
professional fees and other expenses related to the merger and to the name
change of Summit Bank, N.A.


NOTE 10 - Income Taxes
-------

         Federal income taxes included in the consolidated balance sheets were
as follows (in thousands):

                                                 June 30,
                                        -------------------------   December 31,
                                            2001          2000          2000
                                        -----------   -----------   -----------

Current Tax Asset (Liability)           $        57   $       (46)  $        68
Deferred Tax Asset                            1,366         3,030         1,693
                                        -----------   -----------   -----------

       Total Included in Other Assets   $     1,423   $     2,984   $     1,761
                                        ===========   ===========   ===========


         The deferred tax asset at June 30, 2001 of $1,366,000 included
$(727,000) related to unrealized gains on Available-for-Sale Securities.

         The components of income tax expense were as follows (in thousands):
<TABLE>
<CAPTION>

                                                    Six Months Ended
                                                        June 30,            Year Ended
                                               -------------------------   December 31,
                                                   2001          2000          2000
                                               -----------   -----------   -----------
<S>                                            <C>           <C>           <C>
Federal Income Tax Expense:
Current                                        $     2,618   $     2,739   $     4,959
Deferred (benefit)                                    (253)         (713)         (194)
                                               -----------   -----------   -----------

       Total Federal Income Tax Expense        $     2,365   $     2,026   $     4,765
                                               ===========   ===========   ===========

            Effective Tax Rates                       34.5%        34.80%        34.70%
</TABLE>

                                       15
<PAGE>

NOTE 10 - Income Taxes (con't)
-------

         The reasons for the difference between income tax expense and the
amount computed by applying the statutory federal income tax rate to operating
earnings are as follows (in thousands):
<TABLE>
<CAPTION>

                                                    Six Months Ended
                                                        June 30,            Year Ended
                                               -------------------------   December 31,
                                                   2001          2000          2000
                                               -----------   -----------   -----------
<S>                                            <C>           <C>           <C>
Federal Income Taxes at Statutory
  Rate of 34.3%                                $     2,352   $     2,000   $     4,716
Effect of Tax Exempt Interest Income                    (2)           (4)           (6)
Non-deductible Expenses                                 32            32            66
Other                                                  (17)           (2)          (11)
                                               -----------   -----------   -----------

     Income Taxes Per Income Statement         $     2,365   $     2,026   $     4,765
                                               ===========   ===========   ===========
</TABLE>


Deferred income tax expense (benefit) results from differences between amounts
of assets and liabilities as measured for income tax return and financial
reporting purposes. The significant components of federal deferred tax assets
and liabilities are in the following table (in thousands):
<TABLE>
<CAPTION>

                                                               Six Months Ended
                                                                   June 30,           Year Ended
                                                          -------------------------   December 31,
                                                              2001          2000          2000
                                                          -----------   -----------   -----------
<S>                                                       <C>           <C>           <C>
Federal Deferred Tax Assets:
  Allowance for Loan Losses                               $     1,689   $     1,927   $     1,494
  Valuation Reserves - Other Real Estate                            2           144             5
  Interest on Non-accrual Loans                                   284           214           238
  Deferred Compensation                                           514           463           505
  Unrealized Losses on Available-for-Sale Securities              -0-           672           -0-
  Other                                                            24             7            20
                                                          -----------   -----------   -----------

  Gross Federal Deferred Tax Assets                             2,513         3,427         2,262
                                                          -----------   -----------   -----------

Federal Deferred Tax Liabilities:
  Depreciation and Amortization                                   294           312           318
  Accretion                                                       110            85           104
  Unrealized Gains on Available-for-Sale Securities               727           -0-           147
  Other                                                            16           -0-           -0-
                                                          -----------   -----------   -----------

  Gross Federal Deferred Tax Liabilities                        1,147           397           569
                                                          -----------   -----------   -----------

           Net Deferred Tax Asset                         $     1,366   $     3,030   $     1,693
                                                          ===========   ===========   ===========
</TABLE>

NOTE 11 - Related Party Transactions
-------

         The Subsidiary Bank have transactions made in the ordinary course of
business with certain of its officers, directors and their affiliates. All loans
included in such transactions are made on substantially the same terms,
including interest rate and collateral, as those prevailing at the time for
comparable transactions with other persons. Total loans outstanding to such
parties amounted to approximately $3,241,000 at December 31, 2000.


NOTE 12 - Commitments and Contingent Liabilities
-------

         In the normal course of business, there are various outstanding
commitments and contingent liabilities, such as guarantees and commitments to
extend credit, which are not reflected in the financial statements. No losses
are anticipated as a result of these transactions. Commitments are most
frequently extended for real estate, commercial and industrial loans.

         At June 30, 2001, outstanding documentary and standby letters of credit
totaled $5,333,000 and commitments to extend credit totaled $125,400,000.

                                       16
<PAGE>

NOTE 13 - Stock Option Plans
-------

         The Corporation has two Incentive Stock Option Plans, the 1993 Plan and
the 1997 Plan, ("the Plans"). Each Plan has reserved 600,000 shares (adjusted
for two-for-one stock splits in 1995 and 1997) of common stock for grants
thereunder. The Plans provide for the granting to executive management and other
key employees of Summit Bancshares, Inc. and subsidiaries incentive stock
options, as defined under the current tax law. The options under the Plans will
be exercisable for ten years from the date of grant and generally vest ratably
over a five year period. Options will be and have been granted at prices which
will not be less than 100-110% of the fair market value of the underlying common
stock at the date of grant.

         The Corporation applies APB Opinion No. 25 and related Interpretations
in accounting for its plans. Since the option prices are considered to
approximate fair market value at date of grant, no compensation expense has been
reported. Had compensation cost for these plans been determined consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" the Corporation's net income and earnings per share would have
been reduced by insignificant amounts on a proforma basis for the year ended
December 31, 2000, and the six months ended June 30, 2001.

         The following is a summary of transactions during the periods
presented:

                                                Shares Under Option
                                         ----------------------------------
                                         Six Months Ended      Year Ended
                                          June 30, 2001     December 31, 2000
                                         --------------      --------------

Outstanding, Beginning of Period                359,559             445,497
Additional Options Granted During
  the Period                                      4,000              15,000
Forfeited During the Period                         -0-             (19,700)
Exercised During the Period                     (28,400)            (81,238)
                                         --------------      --------------

     Outstanding, End of Period                 335,159             359,559
                                         ==============      ==============


         Options outstanding at June 30, 2001 ranged in price from $3.00 to
$19.375 per share with a weighted average exercise price of $10.36 and 309,859
shares exercisable. At June 30, 2001, there remained 483,300 shares reserved for
future grants of options under the 1997 Plan.


NOTE 14 - Employee Benefit Plans
-------

401(k) Plan
-----------

         The Corporation implemented a 401(k) plan in December 1997 covering
substantially all employees. The Corporation made no contribution to this plan
in 1999 or 1998. In 2000, the Corporation made matching contributions to the
participant's deferrals of compensation up to 100% of the employee contributions
not to exceed 6% of the employee's annual compensation.

         For the first six months of 2001, the Corporation expensed $172,000 in
support of the plan.

Management Security Plan
------------------------

         In 1992, the Corporation established a Management Security Plan to
provide key employees with retirement, death or disability benefits in addition
to those provided by the Pension Plan. The expense charged to operations for
such future obligations was $85,000 and $94,000 during the first six months of
2001 and 2000, respectively, and $203,000 for the year 2000.

Other Post Retirement Benefits
------------------------------

         The Corporation provides certain health care benefits for certain
retired employees who bear all costs of these benefits. These benefits are
covered under the "Consolidated Omnibus Budget Reconciliation Act" (COBRA).

                                       17
<PAGE>

NOTE 15 - Earnings per Share
-------

         The following data shows the amounts used in computing earnings per
share and the weighted average number of shares of dilutive potential common
stock (dollars in thousands).


                                             Six Months Ended
                                                 June 30,           Year Ended
                                        -------------------------   December 31,
                                            2001          2000          2000
                                        -----------   -----------   -----------

Net income                              $     4,487   $     3,797   $     8,976
                                        ===========   ===========   ===========
Weighted average number of common
        shares used in Basic EPS          6,348,564     6,373,667     6,364,492
Effect of dilutive stock options            157,563       156,947       159,467
                                        -----------   -----------   -----------
Weighted number of common shares
        and dilutive potential common
        stock used in Diluted EPS         6,506,127     6,530,614     6,523,959
                                        ===========   ===========   ===========


NOTE 16 - Financial Instruments with Off-Balance Sheet Risk
-------

         The Corporation 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 loan commitments, standby letters
of credit and documentary letters of credit. The instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the financial statements.

         The Corporation's exposure to credit loss in the event of
non-performance by the other party of these loan commitments and standby letters
of credit is represented by the contractual amount of those instruments. The
Corporation uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.

         The total contractual amounts of financial instruments with off-balance
sheet risk are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                    June 30,
                                                                           -------------------------
                                                                               2001          2000
                                                                           -----------   -----------
<S>                                                                        <C>           <C>
Financial Instruments Whose Contract Amounts Represent Credit Risk:
            Loan Commitments Including Unfunded Lines of Credit            $   125,400   $   137,012
            Standby Letters of Credit                                            5,333         3,697
</TABLE>


         Since many of the loan commitments may expire without being drawn upon,
the total commitment amount does not necessarily represent future cash
requirements. The Corporation evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Corporation upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, owner occupied real estate
and income-producing commercial properties.

         The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.


NOTE 17 - Concentrations of Credit Risk
-------

         The Subsidiary Bank grants commercial, consumer and real estate loans
in their direct market which is defined as Fort Worth and its surrounding area.
The Board of Directors of the Subsidiary Bank monitors concentrations of credit
by purpose, collateral and industry at least quarterly. Certain limitations for
concentration are set by the Board. Additional loans in excess of these limits
must have prior approval of the directors' loan committee. Although its
Subsidiary Bank has a diversified loan portfolio, a substantial portion of its
debtors' abilities to honor their contracts is dependent upon the strength of
the local and state economy.


NOTE 18 - Litigation
-------

         The Subsidiary Bank is involved in legal actions arising in the
ordinary course of business. It is the opinion of management, after reviewing
such actions with outside legal counsel, that the settlement of these matters
will not materially affect the Corporation's financial position.

                                       18
<PAGE>

NOTE 19 - Stock Repurchase Plan
-------

         On April 17, 2001, the Board of Directors approved a stock repurchase
plan. The plan authorized management to purchase up to 318,973 shares of the
Corporation's common stock over the next twelve months through the open market
or in privately negotiated transactions in accordance with all applicable state
and federal laws and regulations.

         In the first six months of 2001, 70,005 shares were purchased through
the open market by the Corporation through this plan or a similar repurchase
plan approved in the prior year.


NOTE 20 - Subsequent Event
-------

         On July 17, 2001, the Board of Directors of the Corporation approved a
quarterly dividend of $.11 per share to be paid on August 15, 2001 to
shareholders of record on August 1, 2001.


NOTE 21 - Fair Values of Financial Instruments
-------

         The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:

         Cash and cash equivalents: The carrying amounts reported in the balance
         sheet for cash and due from banks and federal funds sold approximate
         those assets' fair values.
         Investment securities (including mortgage-backed securities): Fair
         values for investment securities are based on quoted market prices,
         where available. If quoted market prices are not available, fair values
         are based on quoted market prices of comparable instruments.
         Loans: For variable-rate loans, fair values are based on carrying
         values. The fair values for fixed rate loans such as mortgage loans
         (e.g., one-to-four family residential) and installment loans are
         estimated using discounted cash flow analysis. The carrying amount of
         accrued interest receivable approximates its fair value.
         Deposit liabilities: The fair value disclosed for interest bearing and
         noninterest-bearing demand deposits, passbook savings, and certain
         types of money market accounts are, by definition, equal to the amount
         payable on demand at the reporting date or their carrying amounts. Fair
         values for fixed-rate certificates of deposit are estimated using a
         discounted cash flow calculation that applies interest rates currently
         being offered on certificates to a schedule of aggregated expected
         monthly maturities on time deposits.
         Short-term borrowings: The carrying amounts of borrowings under
         repurchase agreements approximate their fair values.

         The estimated fair values of the Corporation's financial instruments
are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                  June 30,
                                           -----------------------------------------------------
                                                      2001                        2000
                                           -------------------------   -------------------------
                                            Carrying        Fair        Carrying        Fair
                                             Amount         Value        Amount         Value
                                           -----------   -----------   -----------   -----------
<S>                                        <C>           <C>           <C>           <C>
Financial Assets
    Cash and due from banks                $    29,057   $    29,057   $    27,577   $    27,577
    Federal funds sold and Due From Time        49,259        49,273        19,245        19,245
    Securities                                 125,781       125,781       145,798       145,165
    Loans                                      402,432       410,440       377,641       373,696
    Allowance for loan losses                   (5,745)       (5,745)       (6,899)       (6,899)

Financial Liabilities
    Deposits                                   542,566       546,191       503,221       502,835
    Short Term Borrowings                       14,945        14,988        29,052        29,052

Off-balance Sheet Financial Instruments
    Loan commitments                                         125,400                     137,012
    Letters of credit                                          5,333                       3,697
</TABLE>

                                       19
<PAGE>

NOTE 22 - Comprehensive Income
-------

         The Corporation has adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income". This standard requires an entity to report and display
comprehensive income and its components. Comprehensive income is as follows (in
thousands):
<TABLE>
<CAPTION>

                                                Six Months Ended
                                                     June 30,           Year Ended
                                            -------------------------   December 31,
                                                2001          2000          2000
                                            -----------   -----------   -----------
<S>                                         <C>           <C>           <C>
Net Income                                  $     4,487   $     3,797   $     8,976
Other Comprehensive Income:
  Unrealized gain (loss) on securities
  available-for-sale, net of tax                  1,126          (112)        1,471
                                            -----------   -----------   -----------

    Comprehensive Income                    $     5,613   $     3,685   $    10,447
                                            ===========   ===========   ===========
</TABLE>

                                       20
<PAGE>

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations
--------------------------------------------------------------------------------

Summary
-------

         Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Corporation analyzes the major elements of the
Corporation's consolidated balance sheets and statements of income. This
discussion should be read in conjunction with the consolidated financial
statements and accompanying notes.

         Net income for the second quarter of 2001 was $2,376,000, or $.37
diluted earnings per share, compared with $1,347,000, or $.21 diluted earnings
per share, for the second quarter of 2000. Net income for the first six months
of 2001 was $4,487,000, or $.69 diluted earnings per share, compared with
$3,797,000 or $.58 diluted earnings per share for the first six months of the
prior year. On a per share basis, diluted earnings per share increased 76.2%
over the second quarter of the prior year. Per share amounts are based on
average diluted shares outstanding of 6,506,127 for the first six months of 2001
and 6,530,614 for the comparable period of 2000 adjusted to reflect stock
options granted.

         Outstanding loans at June 30, 2001 of $402.4 million represented an
increase of $24.8 million, or 6.6%, over June 30, 2000 and an increase of $22.4
million, or 5.9%, from December 31, 2000.

         Total deposits at June 30, 2001 of $542.6 million represented an
increase of $39.3 million, or 7.8%, over June 30, 2000 and an increase of $2.9
million, or .5%, from December 31, 2000.

         The following table summarizes the Corporation's performance for the
six months ended June 30, 2001 and 2000 (tax equivalent basis and dollars in
thousands).

<TABLE>
<CAPTION>
                                          Three Months Ended         Six Months Ended
                                               June 30,                  June 30,
                                        -----------------------   -----------------------
                                           2001         2000         2001         2000
                                        ----------   ----------   ----------   ----------
<S>                                     <C>          <C>          <C>          <C>
Interest Income                         $   11,556   $   11,554   $   23,643   $   22,707
Interest Expense                             4,272        4,443        9,172        8,534
                                        ----------   ----------   ----------   ----------

        Net Interest Income                  7,284        7,111       14,471       14,173
Provision for Loan Loss                        310        1,496          490        1,728
                                        ----------   ----------   ----------   ----------

        Net Interest Income After
              Provision for Loan Loss        6,974        5,615       13,981       12,445
Non-Interest Income                          1,111          918        2,149        1,826
Non-Interest Expense                         4,452        4,449        9,275        8,442
                                        ----------   ----------   ----------   ----------

        Income Before Income Tax             3,633        2,084        6,855        5,829
Income Tax Expense                           1,257          737        2,368        2,032
                                        ----------   ----------   ----------   ----------

               Net Income               $    2,376   $    1,347   $    4,487   $    3,797
                                        ==========   ==========   ==========   ==========

Net Income per Share-
    Basic                               $     0.38   $     0.22   $     0.71   $     0.60
    Diluted                                   0.37         0.21         0.69         0.58

Return on Average Assets                      1.53%        0.95%        1.45%        1.34%

Return on Average Stockholders' Equity       16.45%       10.81%       15.78%       15.40%
</TABLE>

                                       21
<PAGE>

Summary of Earning Assets and Interest-Bearing Liabilities
----------------------------------------------------------

         The following schedule presents average balance sheets that highlight
earning assets and interest-bearing liabilities and their related rates earned
and paid for the second quarter of 2001 and 2000 (rates on tax equivalent
basis).
<TABLE>
<CAPTION>

                                                                   Three Months Ended June 30,
                                         -----------------------------------------------------------------------------
                                                         2001                                     2000
                                         ------------------------------------     ------------------------------------
                                          Average                   Average        Average                   Average
                                          Balances     Interest    Yield/Rate      Balances     Interest    Yield/Rate
                                         ----------   ----------   ----------     ----------   ----------   ----------
                                                                     (Dollars in Thousands)
<S>                                      <C>          <C>                <C>      <C>          <C>                <C>
Earning Assets:
  Federal Funds Sold & Due From Time     $   55,316   $      605         4.38%    $   13,986   $      219         6.30%
  Investment Securities (Taxable)           133,817        1,979         5.93%       147,212        2,291         6.26%
  Investment Securities (Tax-exempt)            240            5         7.68%           350            7         7.62%
  Loans, Net of Unearned Discount(1)        396,672        8,967         9.07%       373,251        9,037         9.74%
                                         ----------   ----------   ----------     ----------   ----------   ----------
    Total Earning Assets                    586,045       11,556         7.91%       534,799       11,554         8.69%
                                                      ----------                               ----------

Non-interest Earning Assets:
  Cash and Due From Banks                    23,980                                   24,250
  Other Assets                               19,249                                   19,488
  Allowance for Loan Losses                  (5,630)                                  (5,524)
                                         ----------                               ----------
    Total Assets                         $  623,644                               $  573,013
                                         ==========                               ==========

Interest-Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Money Market Funds      $  159,463        1,095         2.75%    $  160,178        1,538         3.86%
  Savings                                   102,511          939         3.67%        89,170        1,029         4.64%
  Savings Certificates                       83,133        1,197         5.78%        61,397          825         5.40%
  Certificates of Deposit
    $100,000 or more                         59,587          862         5.80%        47,636          670         5.66%
  Other Time                                    778           12         6.08%           778           11         5.56%
  Other Borrowings                           18,224          167         3.67%        26,182          370         5.69%
                                         ----------   ----------   ----------     ----------   ----------   ----------
    Total Interest-Bearing Liabilities      423,696        4,272         4.04%       385,341        4,443         4.64%
                                                      ----------                               ----------

Non-interest Bearing Liabilities:
  Demand Deposits                           137,257                                  136,250
  Other Liabilities                           4,764                                    1,347
  Shareholders' Equity                       57,927                                   50,075
                                         ----------                               ----------
    Total Liabilities and
      Shareholders' Equity               $  623,644                               $  573,013
                                         ==========                               ==========
Net Interest Income and Margin
 (Tax-equivalent Basis)(2)                            $    7,284         4.98%                 $    7,111         5.35%
                                                      ==========                               ==========
</TABLE>

(1)      Loan interest income includes various loan fees and loan volumes
         include loans on non-accrual.
(2)      Presented on tax equivalent basis ("T/E") using a federal income tax
         rate of 34% both years.

                                       22
<PAGE>

Summary of Earning Assets and Interest-Bearing Liabilities (con'td.)
--------------------------------------------------------------------

           The following schedule presents average balance sheets that highlight
earning assets and interest-bearing liabilities and their related rates earned
and paid for the first six months of 2001 and 2000 (rates on tax equivalent
basis).

<TABLE>
<CAPTION>
                                                                  Six Months Ended June 30,
                                         ----------------------------------------------------------------------------
                                                         2001                                    2000
                                         ------------------------------------    ------------------------------------
                                          Average                   Average       Average                   Average
                                          Balances     Interest    Yield/Rate     Balances     Interest    Yield/Rate
                                         ----------   ----------   ----------    ----------   ----------   ----------
                                                                   (Dollars in Thousands)
<S>                                      <C>          <C>                <C>     <C>          <C>                <C>
Earning Assets:
  Federal Funds Sold & Due From Time     $   59,727   $    1,459         4.92%   $   13,527   $      403         6.00%
  Investment Securities (Taxable)           135,658        4,125         6.13%      147,807        4,570         6.22%
  Investment Securities (Tax-exempt)            240            9         7.72%          421           16         7.45%
  Loans, Net of Unearned Discount(1)        389,299       18,050         9.35%      369,001       17,718         9.66%
                                         ----------   ----------   ----------    ----------   ----------   ----------
    Total Earning Assets                    584,924       23,643         8.15%      530,756       22,707         8.60%
                                                      ----------                              ----------

Non-interest Earning Assets:
  Cash and Due From Banks                    23,650                                  24,182
  Other Assets                               19,500                                  19,391
  Allowance for Loan Losses                  (5,547)                                 (5,416)
                                         ----------                              ----------
    Total Assets                         $  622,527                              $  568,913
                                         ==========                              ==========

Interest-Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Money Market Funds      $  163,483        2,489         3.07%   $  160,012        2,970         3.73%
  Savings                                   100,522        2,024         4.06%       92,614        2,088         4.53%
  Savings Certificates                       83,249        2,445         5.92%       60,003        1,552         5.20%
  Certificates of Deposit
    $100,000 or more                         60,708        1,812         6.02%       43,456        1,182         5.47%
  Other Time                                    778           24         6.18%          778           21         5.47%
  Other Borrowings                           18,473          378         4.13%       27,832          721         5.21%
                                         ----------   ----------   ----------    ----------   ----------   ----------
    Total Interest-Bearing Liabilities      427,213        9,172         4.33%      384,695        8,534         4.46%
                                                      ----------                              ----------

Non-interest Bearing Liabilities:
  Demand Deposits                           133,632                                 133,224
  Other Liabilities                           4,324                                   1,403
  Shareholders' Equity                       57,358                                  49,591
                                         ----------                              ----------
    Total Liabilities and
      Shareholders' Equity               $  622,527                              $  568,913
                                         ==========                              ==========
Net Interest Income and Margin
 (Tax-equivalent Basis)(2)                            $   14,471         4.99%                $   14,173         5.37%
                                                      ==========                              ==========
</TABLE>

(1)      Loan interest income includes various loan fees and loan volumes
         include loans on non-accrual.
(2)      Presented on tax equivalent basis ("T/E") using a federal income tax
         rate of 34% both years.

                                       23
<PAGE>

Net Interest Income
-------------------

         Net interest income (tax equivalent) for the second quarter of 2001 was
$7,284,000 which represented an increase of $173,000 or 2.4%, over the second
quarter of 2000. In this same period, total interest income increased $2,000
while total interest expense decreased $171,000 or 3.8% and reflects a 275 basis
point decrease in the national prime rate for loans from the first of January
2001 to mid-June 2001.

         The following table summarizes the effects of changes in interest
rates, average volumes of earning assets and interest bearing liabilities on net
interest income (tax equivalent) for the periods ended June 30, 2001 and 2000.
<TABLE>
<CAPTION>

                                                          ANALYSIS OF CHANGES IN NET INTEREST INCOME
                                                                    (Dollars in Thousands)

                                            2nd Qtr. 2001 vs. 2nd Qtr. 2000      Six Months 2001 vs. Six Months 2000
                                                  Increase (Decrease)                    Increase (Decrease)
                                                  Due to Changes in:                     Due to Changes in:
                                          ------------------------------------   ------------------------------------
                                            Volume        Rate        Total        Volume        Rate         Total
                                          ----------   ----------   ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>          <C>          <C>
Interest Earning Assets:
     Federal Funds Sold                   $      649   $     (263)  $      386   $    1,311   $     (238)  $    1,073
     Investment Securities (Taxable)            (209)        (103)        (312)        (378)         (84)        (462)
     Investment Securities (Tax-exempt)           (2)         -0-           (2)          (6)          (3)          (9)
     Loans, Net of Unearned Discount             569         (639)         (70)         972         (639)         333
                                          ----------   ----------   ----------   ----------   ----------   ----------

     Total Interest Income                     1,007       (1,005)           2        1,899         (964)         935
                                          ----------   ----------   ----------   ----------   ----------   ----------

Interest-Bearing Liabilities:
     Deposits                                    619         (586)          33        1,311         (331)         980
     Other Borrowings                           (113)         (91)        (204)        (242)        (101)        (343)
                                          ----------   ----------   ----------   ----------   ----------   ----------


     Total Interest Expense                      506         (677)        (171)       1,069         (432)         637
                                          ----------   ----------   ----------   ----------   ----------   ----------

Net Interest Income                       $      501   $     (328)  $      173   $      830   $     (532)  $      298
                                          ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>


Allowance for Loan Losses and Non-Performing Assets
---------------------------------------------------

         The Corporation's allowance for loan losses was $5,745,000, or 1.43% of
total loans, as of June 30, 2001 compared to $6,899,000, or 1.83% of total
loans, as of June 30, 2000.

         Transactions in the provision for loan losses are summarized as follows
(in thousands):

<TABLE>
<CAPTION>
                                       Three Months Ended         Six Months Ended
                                            June 30,                  June 30,
                                    -----------------------   -----------------------
                                       2001         2000         2001          2000
                                    ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>
Balance, Beginning of Period        $    5,537   $    5,440   $    5,399   $    5,169
Provisions, Charged to Income              310        1,496          490        1,728

Loans Charged-Off                         (135)         (95)        (225)        (126)
Recoveries of Loans Previously
  Charged-Off                               33           58           81          128
                                    ----------   ----------   ----------   ----------

      Net Loans (Charged-Off)
       Recovered                          (102)         (37)        (144)           2
                                    ----------   ----------   ----------   ----------

Balance, End of Period              $    5,745   $    6,899   $    5,745   $    6,899
                                    ==========   ==========   ==========   ==========
</TABLE>


         For the six months ended June 30, 2001 and 2000, net charge-offs
(recoveries) were .04% and .00% of loans, respectively, not annualized.

                                       24
<PAGE>

         The following table summarizes the non-performing assets as of the end
of the last five quarters (in thousands).

<TABLE>
<CAPTION>

                                            June 30,     March 31,  December 31, September 30,  June 30,
                                              2001         2001         2000         2000         2000
                                           ----------   ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>          <C>
Non-Accrual Loans                          $    2,611   $    2,904   $    2,182   $    5,273   $    5,440

Renegotiated Loans                                -0-          -0-          -0-          -0-            1
Other Real Estate Owned and
  Other Foreclosed Assets                         643        1,348        1,595        1,329        1,343
                                           ----------   ----------   ----------   ----------   ----------

    Total Non-Performing Assets            $    3,254   $    4,252   $    3,777   $    6,602   $    6,784
                                           ==========   ==========   ==========   ==========   ==========

As a Percent of:
    Total Assets                                 0.52%        0.62%        0.61%        1.11%        1.16%
    Total Loans and Other Real Estate/
        Foreclosed Assets                        0.81%        1.10%        0.99%        1.73%        1.79%

Loans Past Due 90 days or
    More and Still Accruing                $      315   $       32   $       10   $      -0-   $      -0-
</TABLE>

         Non-accrual loans to total loans were .65% at June 30, 2001 and
non-performing assets were .81% of loans and other real estate owned/foreclosed
assets at the same date.

         As of June 30, 2001, the Corporation had four credits that represented
over 91% of the total non-accrual loans. The largest of these loans with a
current balance of $1.2 million has been on non-accrual status since the second
quarter of 1998. The balance of this loan has been reduced from approximately
$2.2 million as the borrower has continued to make monthly payments. These
payments, principal and interest, have reduced the balance. The total balance of
non-accrual loans of $2.6 million is reported before reducing the amount for SBA
guarantees or cash collateral in the amount of $588,000 on certain of the loans.

         As of June 30, 2001 the Corporation has $643,000 in Other Foreclosed
Assets, reported in Other Assets on the Balance Sheet, which represents an
inventory of textbooks. These assets are in process of liquidation, however the
process is expected to take several months. The cost of liquidation is recorded
as a current period expense and all proceeds from sale of inventory reduces the
carrying-value of the inventory.

         The following table summarizes the relationship between non-performing
loans, criticized loans and the allowance for loan losses (dollars in
thousands).
<TABLE>
<CAPTION>

                                              June 30,     March 31,    December 31, September 30,    June 30,
                                                2001         2001          2000          2000           2000
                                             -----------  -----------   -----------   -----------   -----------
<S>                                          <C>          <C>           <C>           <C>           <C>
Non-Performing Loans                         $     2,611  $     2,904   $     2,182   $     5,273   $     5,441
Criticized Loans                                  11,677       11,586        11,536        16,562        13,064
Allowance for Loan Losses                          5,745        5,537         5,399         6,918         6,899
Allowance for Loan Losses as a Percent of:
          Non-Performing Loans                       220%         191%          247%          131%          127%
          Criticized Loans                            49%          48%           47%           42%           53%
</TABLE>

                                       25
<PAGE>

Non-Interest Income
-------------------

         The major component of non-interest income is service charges on
deposits. Other service fees are the majority of other non-interest income.

         The following table reflects the changes in non-interest income during
the periods presented (dollars in thousands).

<TABLE>
<CAPTION>

                                            Three Months Ended               Six Months Ended
                                                  June 30,                         June 30,
                                      ------------------------------   ------------------------------
                                        2001       2000     % Change     2001       2000     % Change
                                      --------   --------   --------   --------   --------   --------
<S>                                   <C>        <C>            <C>    <C>        <C>            <C>
Service Charges on Deposit Accounts   $    592   $    488       21.3%  $  1,146   $    970       18.1%
Non-recurring Income                       -0-          4         --        -0-         65         --
Other Non-interest Income                  519        426       21.8      1,003        791       26.8
                                      --------   --------   --------   --------   --------   --------

  Total Non-interest Income           $  1,111   $    918       21.0   $  2,149   $  1,826       17.7
                                      ========   ========   ========   ========   ========   ========
</TABLE>


         The increase in other non-interest income in the second quarter of 2001
as compared to the same quarter last year is primarily due to increases in
mortgage brokerage/origination fees, letters of credit fees, collection fees and
fees earned on investment services to customers.

Non-interest Expense
--------------------

         Non-interest expenses include all expenses other than interest expense,
provision for loan losses and income tax expense.

         The following table summarizes the changes in non-interest expense
during the periods presented (dollars in thousands).

<TABLE>
<CAPTION>

                                            Three Months Ended               Six Months Ended
                                                 June 30,                        June 30,
                                     ------------------------------   ------------------------------
                                       2001       2000     % Change     2001       2000     % Change
                                     --------   --------   --------   --------   --------   --------
<S>                                  <C>        <C>            <C>    <C>        <C>             <C>
Salaries & Employee Benefits         $  2,593   $  2,332       11.2%  $  5,132   $  4,689        9.4%
Occupancy Expense - Net                   315        247       27.5        624        505       23.4
Furniture and Equipment Expense           366        354        3.4        727        692        5.1
Other Real Estate Expense - Net            46        368      (87.5)       127        356      (64.3)
Merger Related Expense                    -0-        -0-         --        598        -0-         --
Other Expenses:
     Business Development                 175        184       (4.9)       312        360      (13.3)
     Insurance - Other                     30         25       20.0         63         52       21.2
     Legal & Professional Fees            156        202      (22.8)       314        390      (19.5)
     Taxes - Other                         36         44      (18.2)        72        100      (28.0)
     Postage & Courier                     77         82       (6.1)       162        165       (1.8)
     Printing & Supplies                  107         90       18.9        185        190       (2.6)
     Regulatory Fees & Assessments         62         56       10.7        124        116        6.9
     Other Operating Expenses             489        465        5.2        835        827        1.0
                                     --------   --------   --------   --------   --------

        Total Other Expenses            1,132      1,148       (1.4)     2,067      2,200       (6.0)
                                     --------   --------   --------   --------   --------

        Total Non-interest Expense   $  4,452   $  4,449        0.1   $  9,275   $  8,442        9.9
                                     ========   ========   ========   ========   ========
</TABLE>


         Total non-interest expense increased 0.1% in the second quarter of 2001
over 2000, reflecting increases in salaries and benefits, occupancy expense, and
other operating expenses partially offset by decreases in business development
expense, legal and professional expense, state franchise taxes and other real
estate expense. As a percent of average assets, non-interest expenses were 2.86%
in the second quarter of 2001 (annualized) and 3.18% in the same period of 2000.
The "efficiency ratio" (non-interest expenses divided by total non-interest
income plus net interest income) was 53.0% for the second quarter of 2001.

         The increase in occupancy expense is primarily due to a decline in rent
income because of a vacancy earlier in the year at one bank-owned facility that
has third party rental space. The property has subsequently been rented.

         The Merger Related Expenses recorded in the first quarter of 2001
include expenses, accrued and incurred, related to the merger of the Company's
two banking subsidiaries and its non-banking subsidiary to form one unit. The
expenses include the cost of severance payment to a former chief executive
officer of one of the units, legal and professional fees and expenses related to
the merger and to the name change of Summit Bank, N.A.

         Other Operating Expense in the second quarter of 2001 includes $72,000
of expense related to Other Foreclosed Assets. These expenses are the costs to
liquidate the inventory of textbooks.

                                       26
<PAGE>

Interest Rate Sensitivity
-------------------------

         Interest rate sensitivity is the relationship between changes in market
interest rates and net interest income due to the repricing characteristics of
assets and liabilities.

         The following table, commonly referred to as a "static gap report",
indicates the interest rate sensitivity position at June 30, 2001 and may not be
reflective of positions in subsequent periods (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                 Total      Repriced
                                           Matures or Reprices within:           Rate        After
                                      ------------------------------------     Sensitive    1 Year or
                                       30 Days      31-180        181 to        One Year   Non-interest
                                       or Less       Days        One Year       or Less     Sensitive     Total
                                      ---------    ---------     ---------     ---------    ---------   ---------
<S>                                   <C>          <C>           <C>           <C>          <C>         <C>
Earning Assets:
  Loans                               $ 243,508    $  23,539     $  14,626     $ 281,673    $ 120,759   $ 402,432
  Investment Securities                   9,422       21,637        32,749        63,808       61,973     125,781
  Federal Funds Sold and
    Due From Time                        49,259          -0-           -0-        49,259          -0-      49,259
                                      ---------    ---------     ---------     ---------    ---------   ---------

   Total Earning Assets                 302,189       45,176        47,375       394,740      182,732     577,472
                                      ---------    ---------     ---------     ---------    ---------   ---------

Interest Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Savings                262,736          -0-           -0-       262,736          -0-     262,736
  Certificate of Deposits >$100,000       9,084       33,452        10,560        53,096        3,117      56,213
  Other Time Deposits                     7,240       47,799        19,012        74,051        8,966      83,017
  Short Term Borrowings                  14,945          -0-           -0-        14,945          -0-      14,945
                                      ---------    ---------     ---------     ---------    ---------   ---------

   Total Interest Bearing
    Liabilities                         294,005       81,251        29,572       404,828       12,083     416,911
                                      ---------    ---------     ---------     ---------    ---------   ---------

Interest Sensitivity
 Gap                                  $   8,184    $ (36,075)    $  17,803     $ (10,088)   $ 170,649   $ 160,561
                                      =========    =========     =========     =========    =========   =========
Cumulative Gap                        $   8,184    $ (27,891)    $ (10,088)
                                      =========    =========     =========

Cumulative Gap to
 Total Earning Assets                      1.42%       (4.83%)       (1.75%)

Cumulative Gap to
 Total Assets                              1.32%       (4.50%)       (1.63%)
</TABLE>


         The preceding static gap report reflects a cumulative liability
sensitive position during the one year horizon. An inherent weakness of this
report is that it ignores the relative volatility any one category may have in
relation to other categories or market rates in general. For instance, the rate
paid on NOW accounts typically moves slower than the three month T-Bill.
Management attempts to capture this relative volatility by utilizing a
simulation model with a "beta factor" adjustment which estimates the volatility
of rate sensitive assets and/or liabilities in relation to other market rates.

         Beta factors are an estimation of the long term, multiple interest rate
environment relation between an individual account and market rates in general.
For instance, NOW, savings and money market accounts, which are repriceable
within 30 days will have considerably lower beta factors than variable rate
loans and most investment categories. Taking this into consideration, it is
quite possible for a bank with a negative cumulative gap to total asset ratio to
have a positive "beta adjusted" gap risk position.

         As a result of applying the beta factors established by management to
the earning assets and interest bearing liabilities in the static gap report via
a simulation model, the negative cumulative gap to total assets ratio at one
year of (1.63%) was reversed to a positive 11.59% "beta adjusted" gap position.

         Management feels that the "beta adjusted" gap risk technique more
accurately reflects the Corporation's gap position.

                                       27
<PAGE>

Capital
-------

         The Federal Reserve Board has guidelines for capital to total assets
(leverage) and capital standards for bank holding companies. The Comptroller of
the Currency also has similar guidelines for national banks. These guidelines
require a minimum level of Tier I capital to total assets of 3 percent. A
banking organization operating at or near these levels is expected to have
well-diversified risk, excellent asset quality, high liquidity, good earnings
and in general be considered a strong banking organization. Organizations not
meeting these characteristics are expected to operate well above these minimum
capital standards. Thus, for all but the most highly rated organizations, the
minimum Tier I leverage ratio is to be 3 percent plus minimum additional
cushions of at least 100 to 200 basis points. At the discretion of the
regulatory authorities, additional capital may be required.

         The Federal Reserve Board and Comptroller of the Currency also have
risk-adjusted capital adequacy guidelines. Capital under these new guidelines is
defined as Tier I and Tier II. At Summit Bancshares, Inc. the only components of
Tier I and Tier II capital are shareholders' equity and a portion of the
allowance for loan losses, respectively. The guidelines also stipulate that four
categories of risk weights (0, 20, 50 and 100 percent), primarily based on the
relative credit risk of the counterparty, be applied to the different types of
balance sheet assets. Risk weights for all off-balance sheet exposures are
determined by a two-step process whereby the face value of the off-balance sheet
item is converted to a "credit equivalent amount" and that amount is assigned to
the appropriate risk category.

         The regulatory minimum ratio for total qualifying capital is 8.00% of
which 4.00% must be Tier I capital. At June 30, 2001, the Corporation's Tier I
capital represented 13.8% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented 15.0% of risk weighted assets. Both ratios are
well above current regulatory guidelines.

         Also, as of June 30, 2001, the Corporation and its Subsidiary Bank met
the criteria for classification as a "well-capitalized" institution under the
rules of the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA").

         The Corporation and Subsidiary Bank's regulatory capital positions as
of June 30, 2001, were as follows (dollars in thousands):
<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>
CONSOLIDATED:
As of June 30, 2001
Total Capital (to Risk Weighted Assets)    $  62,480       14.82%  $  33,717        8.00%
Tier I Capital (to Risk Weighted Assets)      57,205       13.57%     16,856        4.00%
Tier I Capital (to Average Assets)            57,205        9.17%     18,705        3.00%

SUMMIT BANK, N.A.:
As of June 30, 2001
Total Capital (to Risk Weighted Assets)    $  61,349       14.56%  $  33,708        8.00%  $  42,135       10.00%
Tier I Capital (to Risk Weighted Assets)      56,075       13.30%     16,865        4.00%     25,298        6.00%
Tier I Capital (to Average Assets)            56,075        9.01%     18,671        3.00%     31,118        5.00%
</TABLE>


Forward-Looking Statements
--------------------------

         The Corporation may from time to time make forward-looking statements
(within the meaning of the Private Securities Litigation Reform Act of 1995)
with respect to earnings per share, credit quality, expected Year 2001
compliance program, corporate objectives and other financial and business
matters. The Corporation cautions the reader that these forward-looking
statements are subject to numerous assumptions, risks and uncertainties,
including economic conditions; actions taken by the Federal Reserve Board;
legislative and regulatory actions and reforms; competition; as well as other
reasons, all of which change over time. Actual results may differ materially
from forward-looking statements.

                                       28
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

               Not applicable

Item 2.  Change in Securities

               Not applicable

Item 3.  Defaults Upon Senior Securities

               Not applicable

Item 4.  Submission of Matters to a Vote of Security Holders

         At the Corporation's annual shareholders' meeting, held on April 17,
2001, the shareholders of the Corporation:

         o        ratified the appointment by the Board of Directors of Stovall,
                  Grandey & Whatley as independent auditors of the Corporation
                  for its fiscal year ending December 31, 2001. The shareholder
                  vote in this matter was 5,544,474 for, 18,392 against, and
                  3,104 abstaining.

         o        elected the Board of Directors, consisting of eleven (11)
                  persons. The following directors, constituting the entire
                  Board of Directors, were elected:

                                                   For        Against    Abstain
                                                ---------     -------    -------
                       D. Jerrell Farr          5,531,735      32,800     1,435
                       Elliott S. Garsek        5,436,235     128,300     1,435
                       Ronald J. Goldman        5,435,035     129,500     1,435
                       F.S. Gunn                5,508,635      55,900     1,435
                       Robert L. Herchert       5,416,335     148,200     1,435
                       Jay J. Lesok             5,531,435      33,100     1,435
                       William W. Meadows       5,416,635     147,900     1,435
                       James L. Murray          5,393,535     171,000     1,435
                       Philip E. Norwood        5,315,683     248,852     1,435
                       Byron B. Searcy          5,392,935     171,600     1,435
                       Roderick D. Stepp        5,531,435      33,100     1,435

Item 5.  Other Information

               Not applicable


Item 6.  Exhibits and Reports on Form 8-K

               (a)   Exhibits

                     11      Computation of Earnings Per Common Share

               (b)   No Reports on Form 8-K were filed during the period ending

                                       29
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        SUMMIT BANCSHARES, INC.
                                               Registrant




Date:   08-10-01                        By: /s/ PHILIP E. NORWOOD
     ----------------                       ------------------------------------
                                        Philip E. Norwood, Chairman & President


Date:   08-10-01                        By: /s/ BOB G. SCOTT
     ----------------                       ------------------------------------
                                        Bob G. Scott, Executive Vice President
                                            and Chief Operating Officer
                                             (Chief Accounting Officer)

                                       30
<PAGE>

                                  EXHIBIT INDEX

Exhibit                                                                 Page No.
-------                                                                 --------


  11          Computation of Earnings Per Common Share                     32

                                       31