<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, 2000; 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,
2000 was 6,380,841 shares.
<PAGE>

                            SUMMIT BANCSHARES, INC.


                                     INDEX


PART I - FINANCIAL INFORMATION                                       Page No.


Item 1.   Financial Statements

          Consolidated Balance Sheets at June 30, 2000 and 1999
          and at December 31, 1999                                       4

          Consolidated Statements of Income for the Three Months
          and Six Months Ended June 30, 2000 and 1999
          and for the Year Ended December 31, 1999                       5-6

          Consolidated Statements of Changes in Shareholders'
          Equity for the Six Months Ended June 30, 2000
          and 1999 and for the Year Ended December 31, 1999              7

          Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 2000 and 1999 and for
          the Year Ended December 31, 1999                               8

          Notes to Consolidated Financial Statements for the Six
          Months Ended June 30, 2000 and 1999 and for the
          Year Ended December 31, 1999                                   9-20

The June 30, 2000 and 1999 and the December 31, 1999 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, 2000 and 1999                                  21-28

2
<PAGE>

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

Item 2.   Change in Securities

Item 3.   Defaults Upon Senior Securities

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

Item 5.   Other Information

Item 6.   Exhibits and Reports on Form 8-K

                                                                               3
<PAGE>

PART I - FINANCIAL INFORMATION


Item 1 - Financial Statements
-----------------------------

                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    (Unaudited)
                                                                                      June 30,             (Unaudited)
                                                                                --------------------       December 31,
                                                                                  2000        1999             1999
                                                                                --------    --------         --------
<S>                                                                             <C>         <C>            <C>
ASSETS                                                                              (In Thousands)

CASH AND DUE FROM BANKS - NOTE 1                                                $ 27,577    $ 23,117         $ 19,092
FEDERAL FUNDS SOLD & DUE FROM TIME                                                19,245       8,980           18,012
INVESTMENT SECURITIES - NOTE 2
 Securities Available-for-Sale, at fair value                                    121,769     108,358          129,116
 Securities Held-to-Maturity, at cost (fair value of                              24,029      29,336           27,324
   $23,396,000, $29,175,000, and $26,739,000
   June 30, 2000 and 1999 and December 31, 1999,
   respectively)
LOANS - NOTE 3 AND 11
  Loans, Net of Unearned Discount                                                377,641     339,212          355,414
     Allowance for Loan Losses                                                    (6,899)     (4,895)          (5,169)
                                                                                --------    --------         --------
      LOANS, NET                                                                 370,742     334,317          350,245

PREMISES AND EQUIPMENT - NOTE 4                                                    8,404       8,964            8,562
ACCRUED INCOME RECEIVABLE                                                          5,021       4,313            4,503
OTHER REAL ESTATE - NOTE 5                                                         1,343       1,467            1,947
OTHER ASSETS                                                                       7,241       5,479            5,985
                                                                                --------    --------         --------

      TOTAL ASSETS                                                              $585,371    $524,331         $564,786
                                                                                ========    ========         ========

LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS - NOTE 6
  Noninterest-Bearing Demand                                                    $140,466    $128,753         $128,685
  Interest-Bearing                                                               362,755     325,145          351,861
                                                                                --------    --------         --------

      TOTAL DEPOSITS                                                             503,221     453,898          480,546

SHORT TERM BORROWINGS - NOTE 7                                                    29,052      20,340           32,091
NOTE PAYABLE - NOTE 8                                                                -0-         250              -0-
ACCRUED INTEREST PAYABLE                                                             752         546              576
OTHER LIABILITIES                                                                  2,313       2,367            2,864
                                                                                --------    --------         --------

      TOTAL LIABILITIES                                                          535,338     477,401          516,077
                                                                                --------    --------         --------

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; 6,380,841, 6,453,497 and 6,361,247 shares
   issued and outstanding at June 30, 2000 and 1999 and
   at December 31, 1999, respectively                                              7,976       8,067            7,952
  Capital Surplus                                                                  6,643       6,428            6,469
  Retained Earnings                                                               37,179      33,529           35,474
  Accumulated Other Comprehensive Income - Unrealized Loss
    on Available for Sale Investment Securities, Net of Tax                       (1,298)       (273)          (1,186)
  Treasury Stock at Cost (28,563 and 43,500 shares at
    June 30, 2000 and 1999, respectively)                                           (467)       (821)             -0-
                                                                                --------    --------         --------

      TOTAL SHAREHOLDERS' EQUITY                                                  50,033      46,930           48,709
                                                                                --------    --------         --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $585,371    $524,331         $564,786
                                                                                ========    ========         ========
</TABLE>

The accompanying Notes should be read with these financial statements.

4
<PAGE>

                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                 (Unaudited)
                                                                      For the Six Months Ended June 30,          (Unaudited)
                                                                      ---------------------------------    Year Ended December 31,
                                                                         2000                1999                   1999
                                                                       --------            --------                -------
                                                                                 (In Thousands, Except Per Share Data)
<S>                                                                   <C>                 <C>              <C>
INTEREST INCOME
  Interest and Fees on Loans                                            $ 17,718           $ 14,546                $ 30,620
  Interest and Dividends on Investment Securities:
    Taxable                                                                4,570              4,091                   8,495
    Exempt from Federal Income Taxes                                          10                 19                      35
  Interest on Federal Funds Sold & Due From Time                             403                459                   1,082
                                                                        --------           --------                --------

      TOTAL INTEREST INCOME                                               22,701             19,115                  40,232
                                                                        --------           --------                --------

INTEREST EXPENSE
  Interest on Deposits                                                     7,813              6,094                  12,837
  Interest on Short Term Borrowings                                          721                314                     926
  Interest on Note Payable                                                   -0-                  3                       9
                                                                        --------           --------                --------

      TOTAL INTEREST EXPENSE                                               8,534              6,411                  13,772
                                                                        --------           --------                --------

      NET INTEREST INCOME                                                 14,167             12,704                  26,460

LESS: PROVISION FOR LOAN LOSSES - NOTE 3                                   1,728                638                  1, 001
                                                                        --------           --------                --------

      NET INTEREST INCOME AFTER
       PROVISION FOR LOAN LOSSES                                          12,439             12,066                  25,459
                                                                        --------           --------                --------

NON-INTEREST INCOME
  Service Charges and Fees on Deposits                                       970                967                   2,002
  Loss on Sale of Investment Securities                                      -0-                -0-                      (3)
  Other Income                                                               856                966                   1,881
                                                                        --------           --------                --------

      TOTAL NON-INTEREST INCOME                                            1,826              1,933                   3,880
                                                                        --------           --------                --------

NON-INTEREST EXPENSE
  Salaries and Employee Benefits - NOTE 14                                 4,689              4,491                   9,226
  Occupancy Expense - Net                                                    505                550                   1,031
  Furniture and Equipment Expense                                            692                590                   1,202
  Other Real Estate Owned Expense - Net                                      356                 25                     107
  Other Expense - NOTE 9                                                   2,200              1,760                   3,658
                                                                        --------           --------                --------

      TOTAL NON-INTEREST EXPENSE                                           8,442              7,416                  15,224
                                                                        --------           --------                --------

      INCOME BEFORE INCOME TAXES                                           5,823              6,583                  14,115

APPLICABLE INCOME TAXES - NOTE 10                                          2,026              2,276                   4,893
                                                                        --------           --------                --------

      NET INCOME                                                        $  3,797           $  4,307                $  9,222
                                                                        ========           ========                ========

      NET INCOME PER SHARE - NOTE 15
        Basic                                                           $    .60           $    .67                $   1.44
        Diluted                                                              .58                .64                    1.39
</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,
                                                                     ---------------------------
                                                                       2000               1999
                                                                     --------           --------
                                                                 (In Thousands, Except Per Share Data)
<S>                                                              <C>                    <C>
INTEREST INCOME
 Interest and Fees on Loans                                          $ 9,037            $ 7,537
 Interest and Dividends on Investment Securities:
  Taxable                                                              2,291              2,019
  Exempt from Federal Income Taxes                                         4                  9
 Interest on Federal Funds Sold & Due From Time                          219                156
                                                                     -------            -------

   TOTAL INTEREST INCOME                                              11,551              9,721
                                                                     -------            -------

INTEREST EXPENSE
 Interest on Deposits                                                  4,073              3,000
 Interest on Short Term Borrowings                                       370                154
 Interest on Note Payable                                                -0-                  3
                                                                     -------            -------

   TOTAL INTEREST EXPENSE                                              4,443              3,157
                                                                     -------            -------

   NET INTEREST INCOME                                                 7,108              6,564

LESS: PROVISION FOR LOAN LOSSES - NOTE 3                               1,496                418
                                                                     -------            -------

   NET INTEREST INCOME AFTER
    PROVISION FOR LOAN LOSSES                                          5,612              6,146
                                                                     -------            -------

NON-INTEREST INCOME
 Service Charges and Fees on Deposits                                    488                489
 Other Income                                                            430                413
                                                                     -------            -------

   TOTAL NON-INTEREST INCOME                                             918                902
                                                                     -------            -------

NON-INTEREST EXPENSE
 Salaries and Employee Benefits                                        2,332              2,350
 Occupancy Expense - Net                                                 247                305
 Furniture and Equipment Expense                                         354                307
 Other Real Estate Owned (Income) Expense - Net                          368                 (2)
 Other Expense                                                         1,148                718
                                                                     -------            -------

   TOTAL NON-INTEREST EXPENSE                                          4,449              3,678
                                                                     -------            -------

   INCOME BEFORE INCOME TAXES                                          2,081              3,370

APPLICABLE INCOME TAXES - NOTE 10                                        734              1,159
                                                                     -------            -------

   NET INCOME                                                        $ 1,347            $ 2,211
                                                                     =======            =======

   NET INCOME PER SHARE
     Basic                                                           $   .22            $   .34
     Diluted                                                             .21                .33
</TABLE>

The accompanying Notes should be read with these financial statements.

6
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
                   AND FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                            (Unaudited)        (Unaudited)
                                                                             June 30,           December 31,
                                                                     ------------------------  -------------
                                                                       2000            1999          1999
                                                                     --------        --------      ---------
CASH FLOW FROM OPERATING ACTIVITIES:                                              (In Thousands)
<S>                                                                  <C>             <C>           <C>
 Net Income                                                          $  3,797        $  4,307      $   9,222
                                                                     --------        --------      ---------
 Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
   Depreciation and Amortization                                          526             537          1,081
   Net Discount Accretion of Investment Securities                        (41)            (17)           (39)
   Provision for Loan Losses                                            1,728             638          1,001
   Deferred Income Taxes (Benefit)                                       (713)           (115)          (385)
   Loss on Sale of Investment Securities                                  -0-             -0-              3
   Writedown of Other Real Estate                                         420             -0-            -0-
   Writedown of Other Assets                                              -0-               1            -0-
   Net Gain From Sale of Other Real Estate                                (77)             (9)           (36)
   Net Gain on Sale of Premises and Equipment                             -0-             -0-           (105)
   Increase in Accrued Income and Other Assets                           (920)           (205)           (33)
   Increase (Decrease) in Accrued Expenses and Other Liabilities         (375)           (277)           250
                                                                     --------        --------      ---------

    Total Adjustments                                                     548             553          1,737
                                                                     --------        --------      ---------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                           4,345           4,860         10,959
                                                                     --------        --------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
 (Increase) Decrease in Federal Funds Sold                             (1,233)         29,726         20,694
 Proceeds from Matured and Prepaid Investment Securities
   . Held-to-Maturity                                                     285           3,280          4,280
   . Available-for-Sale                                                 1,272          55,184         63,531
 Proceeds from Sales of Investment Securities                          45,929           3,997         71,214
 Purchase of Investment Securities
   . Held-to-Maturity                                                     -0-          (6,037)        (6,037)
   . Available-for-Sale                                               (36,978)        (47,352)      (144,026)
 Loans Originated and Principal Repayments, Net                       (22,673)        (35,368)       (52,828)
 Recoveries of Loans Previously Charged-Off                               128              92            171
 Proceeds from Sale of Premises and Equipment                             -0-             -0-            567
 Proceeds from Sale of Other Real Estate                                  503              49            559
 Purchases of Premises and Equipment                                     (368)           (419)        (1,023)
                                                                     --------        --------      ---------

    NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                  (13,135)          3,152        (42,898)
                                                                     --------        --------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net Increase (Decrease) in Demand Deposits, Savings
   Accounts and Interest Bearing Transaction Accounts                   2,519          (8,642)         7,488
 Net Increase (Decrease) in Certificates of Deposit                    20,156          (2,960)         7,558
 Net Increase (Decrease) in Repurchase Agreements                      (3,039)          2,501         14,252
 Proceeds from Note Payable                                               -0-             250            -0-
 Payments of Cash Dividends                                            (1,276)         (1,031)        (2,052)
 Proceeds from Stock Options Exercised                                    263             154            219
 Purchase of Treasury Stock                                            (1,348)         (1,902)        (3,169)
                                                                     --------        --------      ---------

     NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                  17,275         (11,630)        24,296
                                                                     --------        --------      ---------

NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS                      8,485          (3,618)        (7,643)

CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD                         19,092          26,735         26,735
                                                                     --------        --------      ---------

CASH AND DUE FROM BANKS AT END OF PERIOD                             $ 27,577        $ 23,117      $  19,092
                                                                     ========        ========      =========

SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES

 Interest Paid                                                       $  8,358        $  6,902      $  14,232
 Income Taxes Paid                                                      2,762           2,419          5,198
 Other Real Estate Acquired in Settlement of Loans                        242           1,226          2,188
</TABLE>

The accompanying Notes should be read with these financial statements.

7
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
          FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
             AND FOR THE YEAR ENDED DECEMBER 31, 1999 (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 the generally
          accepted accounting principles 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. 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 Banks are required to maintain certain balances at the
          Federal Reserve Bank based on their levels of deposits. During the
          first six months of 2000 the average cash balance maintained at the
          Federal Reserve Bank was $1,007,000. Compensating balances held at
          correspondent banks, to minimize service charges, averaged
          approximately $18,373,000 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 2000 and 1999 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.

                                                                               8
<PAGE>

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

          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. Generally, loan origination
          and commitment fees are recognized at the time of funding and are
          considered adjustments to interest income. Related direct costs 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 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 expenses. 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 Subsidiaries in filing a consolidated
          federal income tax return. The Subsidiaries pay to the parent a charge
          equivalent to their current federal income tax based on the separate
          taxable income of the Subsidiaries.

          The Corporation and the Subsidiaries 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."

9
<PAGE>

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

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

          Certain reclassifications have been made to the 1999 financial
          statements to conform to the 2000 presentation.

          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, 1999, and the
          consolidated statements of income, changes in shareholders' equity and
          cash flows for the year ended December 31, 1999 are headed "unaudited"
          in these financial statements. These statements were reported in the
          Securities Exchange Commission Form 10-K as of December 31, 1999 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>

                                                                      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
   and Corporations                                      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.

                                                                              10
<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, 1999
                                                      ---------------------------------------------
                                                                   Gross        Gross
                                                      Amortized  Unrealized  Unrealized     Fair
                                                        Cost       Gains       Losses       Value
                                                      ---------  ----------  -----------  ---------
<S>                                                   <C>        <C>         <C>          <C>
Investment Securities - Held-to-Maturity
  U.S. Treasury Securities                            $   8,992       $ 100      $  -0-   $   9,092
  U.S. Government Agencies
   and Corporations                                      20,055         -0-        (263)     19,792
  Obligations of States and Political Subdivisions          289           2         -0-         291
                                                      ---------       -----      ------   ---------

    Total Held-to-Maturity Securities                    29,336         102        (263)     29,175
                                                      ---------       -----      ------   ---------

Investment Securities - Available-for-Sale
  U.S. Treasury Securities                               26,020         186         (22)     26,184
  U.S. Government Agencies
    and Corporations                                     65,598          34        (572)     65,060
  U.S. Government Agency Mortgage
    Backed Securities                                    15,509          52         (95)     15,466
  Obligations of States and Political Subdivisions          455           3         -0-         458
  Federal Reserve and Federal Home Loan Bank Stock        1,190         -0-         -0-       1,190
                                                      ---------       -----      ------   ---------

     Total Available-for-Sale Securities                108,772         275        (689)    108,358
                                                      ---------       -----      ------   ---------

       Total Investment Securities                    $ 138,108       $ 377      $ (952)  $ 137,533
                                                      =========       =====      ======   =========
</TABLE>

        In the above schedule the amortized cost of Total Held-to-Maturity
Securities of $29,336,000 and the fair value of Total Available-for-Sale
Securities of $108,358,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 1999 for a total of $137,694,000.  A
net unrealized loss of $414,000 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):

<TABLE>
<CAPTION>
                                                       June 30,
                                              ---------------------------    December 31,
                                                 2000             1999           1999
                                                 ----             ----       ------------
<S>                                           <C>               <C>          <C>
Commercial                                    $166,919          $157,320       $156,847
Real Estate Mortgage                           127,421           111,323        120,596
Real Estate Construction                        49,339            37,968         43,875
Loans to Individuals                            34,049            32,894         34,261
Less:  Unearned Discount                           (87)             (293)          (165)
                                              --------          --------       --------
                                               377,641           339,212        355,414
Allowance for Loan Losses                       (6,899)           (4,895)        (5,169)
                                              --------          --------       --------

 Loans - Net                                  $370,742          $334,317       $350,245
                                              ========          ========       ========
</TABLE>

11
<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,
                                                      2000               1999            1999
                                                     ------             ------       ------------
<S>                                                  <C>                <C>          <C>
Balance, Beginning of Period                         $ 5,169            $ 4,724        $ 4,724
Provisions, Charged to Income                          1,728                638          1,001

Loans Charged-Off                                       (126)              (559)          (727)
Recoveries of Loans Previously
 Charged-Off                                             128                 92            171
                                                     -------            -------        -------

      Net Loans (Charged-Off) Recovered                    2               (467)          (556)
                                                     -------            -------        -------

Balance, End of Period                               $ 6,899            $ 4,895        $ 5,169
                                                     =======            =======        =======
</TABLE>

        The provisions for loan losses charged to operating expenses during the
six months ended June 30, 2000 and June 30, 1999 of $1,728,000 and $638,000,
respectively, were considered adequate to maintain the allowance in accordance
with the policy discussed in Note 1. For the year ended December 31, 1999, a
provision of $1,001,000 was recorded.

        At June 30, 2000, the recorded investment in loans that are considered
to be impaired under Statement of Financial Accounting Standards No. 114 was
$5,392,000 (of which $5,392,000 were on non-accrual status). The related
allowance for loan losses for these loans was $2,184,000. The average recorded
investment in impaired loans during the six months ended June 30, 2000 was
approximately $3,990,000. 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,
                                                       2000               1999           1999
                                                     -------            --------     -----------
<S>                                                  <C>                <C>          <C>
Land                                                 $ 2,320            $ 2,783        $ 2,320
Buildings and Improvements                             7,784              7,560          7,715
Furniture & Equipment                                  8,034              7,600          8,003
                                                     -------            -------        -------
        Total Cost                                    18,138             17,943         18,038

Less:  Accumulated Amortization and Depreciation      (9,734)            (8,979)        (9,476)
                                                     -------            -------        -------

        Net Book Value                               $ 8,404            $ 8,964        $ 8,562
                                                     =======            =======        =======
</TABLE>

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

        The carrying value of other real estate is as follows (in thousands):

<TABLE>
<CAPTION>
                                                              June 30,
                                                     ---------------------------      December 31,
                                                       2000               1999           1999
                                                     -------            --------     -----------
<S>                                                  <C>                <C>          <C>
Other Real Estate                                    $ 1,343            $ 1,467        $ 1,947
                                                     =======            =======        =======
</TABLE>

        There were direct writedowns of other real estate charged to income for
the six months ended June 30, 2000 of $420,000. There were no direct writedowns
of other real estate for the six months ended June 30, 1999 or for the year
ended December 31, 1999.

                                                                              12
<PAGE>

NOTE 6 - Deposits
------

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

<TABLE>
<CAPTION>
                                                        June 30,
                                                ----------------------    December 31,
                                                  2000          1999         1999
                                               ---------     ---------  -------------
<S>                                             <C>          <C>        <C>
Noninterest-Bearing Demand Deposits            $ 140,466     $ 128,753    $ 128,685
                                               ---------     ---------    ---------
Interest-Bearing Deposits:
  Interest-Bearing Transaction
     Accounts and Money Market Funds             160,085       156,658      154,304
  Savings                                         83,684        80,177       98,728
  Savings Certificates - Time                     64,656        53,242       58,973
  Certificates of Deposits $100,000 or more       53,552        34,290       39,078
  Other                                              778           778          778
                                               ---------     ---------    ---------
   Total                                         362,755       325,145      351,861
                                               ---------     ---------    ---------
       Total Deposits                          $ 503,221     $ 453,898    $ 480,546
                                               =========     =========    =========
</TABLE>

NOTE 7 - Securities Sold Under Repurchase Agreements
------

    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,
                                                   2000          1999         1999
                                               ---------      ----------  ------------
<S>                                            <C>            <C>         <C>
Securities Sold Under Repurchase Agreements:
    Average                                     $ 22,437      $ 16,806     $ 20,488
    Period-End                                    19,052        20,340       28,091
    Maximum Month-End Balance During Period       25,019        20,340       30,309
Interest Rate
    Average                                         4.98%         3.77%        4.04%
    Period-End                                      6.06          3.83         3.38
</TABLE>

    The Corporation, through one of its subsidiaries, 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, 2000, the
subsidiary had borrowed $10,000,000 bearing an interest rate of 6.77% and having
a maturity of September 22, 2000.  Also, at December 31, 1999, the subsidiary
had borrowed $4,000,000 under the line of credit, bearing an interest rate of
5.43% and having a maturity of April 2000.

NOTE 8 - Notes Payable
------

On July 15, 1999, 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 one of the Subsidiary Banks and mature in July 2000,
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, 2000, no funds had been borrowed under these lines
nor were outstanding.

13
<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,
                                       2000               1999         1999
                                     -------            -------    -----------

Business Development                 $   360            $   269      $   602
Legal and Professional Fees              390                288          619
Printing and Supplies                    190                196          379
Regulatory Fees and Assessments          116                 91          183
Other                                  1,144                916        1,875
                                     -------            -------      -------

  Total                              $ 2,200            $ 1,760      $ 3,658
                                     =======            =======      =======

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

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

                                               June 30,
                                     --------------------------    December 31,
                                       2000               1999         1999
                                     -------            -------    ------------

Current Tax Asset (Liability)        $   (46)           $    38      $   (70)
Deferred Tax Asset                     3,030              1,517        2,257
                                     -------            -------      -------

  Total Included in Other Assets     $ 2,984            $ 1,555      $ 2,187
                                     =======            =======      =======

   The deferred tax asset at June 30, 2000 of $3,030,000 included $672,000
related to unrealized losses on Available-for-Sale Securities.

   The components of income tax expense were as follows (in thousands):


                                      Six Months Ended June 30,     Year Ended
                                     --------------------------    December 31,
                                       2000               1999         1999
                                     -------            -------    ------------

Federal Income Tax Expense
  Current                            $ 2,739            $ 2,391      $ 5,278
  Deferred (benefit)                    (713)              (115)        (385)
                                     -------            -------      -------

    Total Federal Income Tax Expense $ 2,026            $ 2,276      $ 4,893
                                     =======            =======      =======

    Effective Tax Rates                 34.8%              34.6%        34.7%
                                     =======            =======      =======

   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):


                                      Six Months Ended June 30,     Year Ended
                                     --------------------------    December 31,
                                       2000               1999         1999
                                     -------            -------    ------------

Federal Income Taxes at Statutory
 Rate of 34.3%                       $ 2,000            $ 2,258      $ 4,847
Effect of Tax Exempt Interest Income      (4)                (6)         (12)
Non-deductible Expenses                   32                 25           64
Other                                     (2)                (1)          (6)
                                     -------            -------      -------

 Income Taxes Per Income Statement   $ 2,026            $ 2,276      $ 4,893
                                     =======            =======      =======

                                                                              14
<PAGE>

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

<TABLE>
<CAPTION>

                                                       Six Months Ended June 30,        Year Ended
                                                       -------------------------       December 31,
                                                         2000              1999            1999
                                                       -------           -------       ------------
<S>                                                    <C>               <C>           <C>
Federal Deferred Tax Assets:
 Allowance for Loan Losses                             $ 1,927           $ 1,221         $ 1,357
 Valuation Reserves - Other Real Estate                    144                 1             -0-
 Interest on Non-accrual Loans                             214               173             189
 Deferred Compensation                                     463               417             458
 Unrealized Losses on Available-for-Sale Securities        672               141             611
 Other                                                       7                16              19
                                                       -------           -------         -------

 Gross Federal Deferred Tax Assets                       3,427             1,969           2,634
                                                       -------           -------         -------

Federal Deferred Tax Liabilities:
 Depreciation and Amortization                             312               297             321
 Accretion                                                  85                45              56
 Other                                                     -0-               110             -0-
                                                       -------           -------         -------

 Gross Federal Deferred Tax Liabilities                    397               452             377
                                                       -------           -------         -------

 Net Deferred Tax Asset                                $ 3,030           $ 1,517         $ 2,257
                                                       =======           =======         =======
</TABLE>

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

     The Subsidiary Banks 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 $3,488,000 at December 31, 1999.

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, 2000, outstanding documentary and standby letters of credit
totaled $3,697,000 and commitments to extend credit totaled $137,012,000.

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, 1999, and the six months ended June 30, 2000.

15
<PAGE>

NOTE 13 - Stock Option Plans (con't)
-------

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

                                             Shares Under Option
                                     -----------------------------------
                                       Six Months
                                         Ended            Year Ended
                                     June 30, 2000    December 31, 1999
                                     ---------------  ------------------
Outstanding, Beginning of Period         445,497           461,717
Additional Options Granted During
  the Period                              10,000            49,500
Forfeited During the Period              (17,500)           (2,400)
Exercised During the Period              (71,238)          (63,320)
                                         -------           -------

  Outstanding, End of Period             366,759           445,497
                                         =======           =======

     Options outstanding at June 30, 2000 ranged in price from $3.00 to $19.25
per share with a weighted average exercise price of $9.70 and 284,927 shares
exercisable.  At June 30, 1999, there remained 490,300 shares reserved for
future grants of options under the 1997 Plan.  There are no shares available for
grant under the 1993 Plan.

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

Pension Plan
------------

     The Corporation had a defined benefit pension plan covering substantially
all of its employees.  The benefits were based on years of service and the
employee's compensation history.  The employee's compensation used in the
benefit calculation were the highest average for any five consecutive years of
employment within the employee's last ten years of employment.

     Effective August 31, 1998, the accrual of benefits under this plan were
suspended.  In February 1999, the Board of Directors chose to terminate the plan
effective April 15, 1999.  The assets held in trust were distributed to the plan
participants in mid-1999 under terms of the plan.

     During 1999 the Corporation expensed $321,000 in support of the plan.

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 will make 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 2000, the Corporation expensed $186,000 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 $94,000 and $103,000 during the first six months of 2000 and
1999, respectively, and $223,000 for the year 1999.

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).

                                                                              16
<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.
The number of shares used in the calculations reflect a two-for-one stock split
in December 1997 (dollars in thousands)

                                               June 30,
                                       ----------------------   December 31,
                                          2000        1999          1999
                                          ----        ----      ------------

Net income                             $    3,797  $    4,307    $    9,222
                                       ==========  ==========    ==========
Weighted average number of common
 shares used in Basic EPS               6,373,667   6,439,205     6,410,762
Effect of dilutive stock options          156,947     249,749       244,787
                                       ----------  ----------    ----------
Weighted number of common shares
 and dilutive potential common
 stock used in Diluted EPS              6,530,614   6,688,954     6,655,549
                                       ==========  ==========    ==========

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):

                                               June 30,
                                         --------------------
                                           2000         1999
                                         --------    --------

Financial Instruments Whose
  Contract Amounts Represent
     Credit Risk:
     Commitments to Extend Credit        $137,012    $118,199

     Documentary and Standby
     Letters of Credit                      3,697       4,032

     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 Banks grant 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 each Subsidiary Bank monitors concentrations of credit by
purpose, collateral and industry at least quarterly. Certain limitations for
concentration are set by the Boards. Additional loans in excess of these limits
must have prior approval of the bank's directors' loan committee. Although its
Subsidiary Banks have diversified loan portfolios, a substantial portion of its
debtors' abilities to honor their contracts is dependent upon the strength of
the local and state economy.

17
<PAGE>

NOTE 18 - Litigation
-------

     Certain of the Subsidiary Banks are 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.

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

     On April 18, 2000, the Board of Directors approved a stock repurchase plan.
The plan authorized management to purchase up to 322,232 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 six months of 2000, 80,207 shares were purchased by the Corporation
through a similar repurchase plan through the open market.

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

     On July 18, 2000, the Board of Directors of the Corporation approved a
quarterly dividend of $.10 per share to be paid on August 15, 2000 to
shareholders of record on August 1, 2000.

                                                                              18
<PAGE>

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,
                                           ------------------------------------------
                                                   2000                  1999
                                           ------------------    --------------------
                                           Carrying      Fair    Carrying      Fair
                                            Amount      Value     Amount      Value
                                            ------      -----     ------      -----
<S>                                        <C>        <C>        <C>        <C>
Financial Assets
     Cash and due from banks               $ 27,577   $ 27,577   $ 23,117   $ 23,117
     Federal funds sold                      19,245     19,245      8,980      8,980
     Securities                             145,798    145,165    137,694    137,533
     Loans                                  377,641    373,696    339,212    340,327
     Reserve for loan losses                 (6,899)    (6,899)    (4,895)    (4,895)

Financial Liabilities
     Deposits                               503,221    502,835    453,898    454,166
     Securities sold under repurchase
      agreements                             29,052     29,052     20,340     20,340
     Note Payable                               -0-        -0-        250        250

Off-balance Sheet Financial Instruments
     Loan commitments                                  137,012               118,199
     Letters of credit                                   3,697                 4,032
</TABLE>

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

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

<TABLE>
<CAPTION>
                                           For the Six Months Ended June 30,
                                           ---------------------------------        Year Ended
                                                 2000            1999            December 31, 1999
                                                 ----            ----            -----------------
     <S>                                   <C>                  <C>              <C>
     Net Income                                $ 3,797          $ 4,307               $ 9,222
     Other Comprehensive Income:
       Unrealized loss on securities
       available-for-sale, net of tax             (112)            (833)               (1,746)
                                               -------          -------               -------

         Comprehensive Income                  $ 3,685          $ 3,474               $ 7,476
                                               =======          =======               =======
</TABLE>

19
<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 2000 was $1,347,000, or $.21 diluted
earnings per share, compared with $2,211,000, or $.33 diluted earnings per
share, for the second quarter of 1999. Net income for the first six months of
2000 was $3,797,000, or $.58 diluted earnings per share, compared with
$4,307,000, or $.64 diluted earnings per share, for the first six months of the
prior year. On a per share basis, diluted earnings per shares decreased 36.4%
over the second quarter of the prior year. Per share amounts are based on
average shares outstanding of 6,530,614 for the first six months of 2000 and
6,688,954 for the comparable period of 1999 adjusted to reflect stock options
granted.

     Outstanding loans at June 30, 2000 of $ 377.6 million represented an
increase of $38.4 million, or 11.3%, over June 30,1999 and an increase of $22.2
million, or 6.3%, from December 31, 1999.

     Total deposits at June 30, 2000 of $503.2 million represented an increase
of $49.3 million, or 10.9%, over June 30,1999 and an increase of $22.7 million,
or 4.7%, from December 31, 1999.

     In the second quarter, net interest income increased 8.3% over the previous
year. The Provision for Loan Losses increased $1,078,000 in the quarter over the
same period of the prior year. Non-interest expense increased $771,000 or 21.0%
in the second quarter over that of the same period in the prior year and
included an increase in Other Real Estate Owned expense of $370,000.

     The following table summarizes the Corporation's performance for the three
months and six months ended June 30, 2000 and 1999 (tax equivalent basis and
dollars in thousands).

<TABLE>
<CAPTION>
                                           Three Months Ended     Six Months Ended
                                                June 30,               June 30,
                                           ------------------     ----------------
                                             2000       1999       2000       1999
                                             ----       ----       ----       ----
<S>                                        <C>         <C>       <C>        <C>
Interest Income                            $11,554     $9,725    $22,707    $19,124
Interest Expense                             4,443      3,157      8,534      6,411
                                           -------     ------    -------    -------

 Net Interest Income                         7,111      6,568     14,173     12,713
Provision for Loan Loss                      1,496        418      1,728        638
                                           -------     ------    -------    -------

 Net Interest Income After
   Provision for Loan Loss                   5,615      6,150     12,445     12,075
Non-Interest Income                            918        902      1,826      1,933
Non-Interest Expense                         4,449      3,678      8,442      7,416
                                           -------     ------    -------    -------

 Income Before Income Tax                    2,084      3,374      5,829      6,592
Income Tax Expense                             737      1,163      2,032      2,285
                                           -------     ------    -------    -------

   Net Income                              $ 1,347     $2,211    $ 3,797    $ 4,307
                                           =======     ======    =======    =======

Net Income per Share-
 Basic                                     $   .22     $  .34    $   .60    $   .67
 Diluted                                       .21        .33        .58        .64

Return on Average Assets                       .95%      1.71%      1.34%      1.67%

Return on Average Stockholders' Equity       10.81%     18.89%     15.40%     18.59%
</TABLE>

                                                                              20
<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 2000 and 1999 (rates on tax equivalent basis).

<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,
                                         --------------------------------------------------------------------
                                                       2000                               1999
                                         --------------------------------   ---------------------------------
                                          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      $ 13,986    $   219        6.30%   $ 12,930     $  156        4.84%
  Investment Securities (Taxable)          147,212      2,291        6.26     138,384      2,019        5.85
  Investment Securities (Tax-exempt)           350          7        7.62         745         13        7.11
  Loans, Net of Unearned Discount/(1)/     373,251      9,037        9.74     330,685      7,537        9.14
                                          --------    -------                --------     ------
   Total Earning Assets                    534,799     11,554        8.69     482,744      9,725        8.08
                                                      -------                             ------

Non-interest Earning Assets:
  Cash and Due From Banks                   24,250                             23,095
  Other Assets                              19,488                             18,850
  Allowance for Loan Losses                 (5,524)                            (4,720)
                                          --------                           --------
   Total Assets                           $573,013                           $519,969
                                          ========                           ========

Interest-Bearing Liabilities:
  Interest-Bearing Transaction
   Accounts and Money Market Funds        $160,178      1,538        3.86    $153,200      1,188        3.11
  Savings                                   89,170      1,029        4.64      82,527        792        3.85
  Savings Certificates                      61,397        825        5.40      52,674        597        4.54
  Certificates of Deposit
   $100,000 or more                         47,636        670        5.66      34,722        413        4.77
  Other Time                                   778         11        5.56         778         10        5.05
  Other Borrowings                          26,182        370        5.69      16,569        157        3.80
                                          --------    -------                --------     ------
   Total Interest-Bearing Liabilities      385,341      4,443        4.64     340,470      3,157        3.72
                                                      -------                             ------

Non-interest Bearing Liabilities:
  Demand Deposits                          136,250                            130,200
  Other Liabilities                          1,347                              2,735
  Shareholders' Equity                      50,075                             46,564
                                          --------                           --------
   Total Liabilities and
    Shareholders' Equity                  $573,013                           $519,969
                                          ========                           ========
Net Interest Income and Margin
 (Tax-equivalent Basis)/(2)/                          $ 7,111        5.35                 $6,568        5.46
                                                      =======                             ======
</TABLE>

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

21
<PAGE>

     The following schedule presents average balance sheets that highlight
earning assets and interest-bearing liabilities and their related rates earned
and paid for the six months ended June 30, 2000 and 1999 (rates on tax
equivalent basis).

<TABLE>
<CAPTION>
                                                             Six Months Ended June 30,
                                         --------------------------------------------------------------------
                                                       2000                               1999
                                         --------------------------------   ---------------------------------
                                          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      $ 13,527    $   403        6.00%   $ 19,135    $   459        4.82%
  Investment Securities (Taxable)          147,807      4,570        6.22     141,868      4,091        5.82
  Investment Securities (Tax-exempt)           421         16        7.45         817         28        7.08
  Loans, Net of Unearned Discount/(1)/     369,001     17,718        9.66     321,058     14,546        9.14
                                          --------    -------                --------    -------
   Total Earning Assets                    530,756     22,707        8.60     482,878     19,124        7.99
                                                      -------                            -------

Non-interest Earning Assets:
  Cash and Due From Banks                   24,182                             23,186
  Other Assets                              19,391                             18,870
  Allowance for Loan Losses                 (5,416)                            (4,754)
                                          --------                           --------
   Total Assets                           $568,913                           $520,180
                                          ========                           ========

Interest-Bearing Liabilities:
  Interest-Bearing Transaction
   Accounts & Money Market Funds          $160,012      2,970        3.73    $153,973      2,400        3.14
  Savings                                   92,614      2,088        4.53      82,723      1,607        3.92
  Savings Certificates                      60,003      1,552        5.20      52,949      1,211        4.61
  Certificates of Deposit
   $100,000 or more                         43,456      1,182        5.47      35,407        856        4.88
  Other Time                                   778         21        5.47         778         20        5.13
  Other Borrowings                          27,832        721        5.21      16,900        317        3.78
                                          --------    -------                --------    -------
   Total Interest-Bearing Liabilities      384,695      8,534        4.46     342,730      6,411        3.77
                                                      -------                            -------

Non-interest Bearing Liabilities:
  Demand Deposits                          133,224                            128,363
  Other Liabilities                          1,403                              2,548
  Shareholders' Equity                      49,591                             46,539
                                          --------                           --------
   Total Liabilities and
    Shareholders' Equity                  $568,913                           $520,180
                                          ========                           ========

Net Interest Income and Margin
 (Tax-equivalent Basis)/(2)/                          $14,173        5.37                $12,713        5.31
                                                      =======                            =======
</TABLE>

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

                                                                              22
<PAGE>

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

   Net interest income (tax equivalent) for the second quarter of 2000 was $
7,111,000 which represented an increase of $543,000, or 8.3%, over the second
quarter of 1999. This increase was heavily contributed to by a 12.9% increase in
average loans for the second quarter of 2000 versus the same quarter last year.

   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, 2000 and 1999.

<TABLE>
<CAPTION>
                                                    ANALYSIS OF CHANGES IN NET INTEREST INCOME
                                                             (Dollars in Thousands)

                                       2nd Qtr. 2000 vs. 2nd Qtr. 1999    Six Months 2000 vs. Six Months 1999
                                              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                        $   13      $   50   $    63       $  (277)      $  221      $  (56)
 Investment Securities (Taxable)              130         142       272           181          298         479
 Investment Securities (Tax-exempt)           (12)          6        (6)          (16)           4         (12)
 Loans, Net of Unearned Discount              993         507     1,500         2,297          875       3,172
                                           ------      ------   -------       -------      -------     -------

 Total Interest Income                      1,124         705     1,829         2,185        1,398       3,583
                                           ------      ------   -------       -------      -------     -------

Interest-Bearing Liabilities:
 Deposits                                     361         712     1,073           623        1,096       1,719
 Other Borrowings                             115          98       213           255          149         404
                                           ------      ------   -------       -------      -------     -------

 Total Interest Expense                       476         810     1,286           878        1,245       2,123
                                           ------      ------   -------       -------      -------     -------

Net Interest Income                        $  648      $ (105)  $   543       $ 1,307      $   153     $ 1,460
                                           ======      ======   =======       =======      =======     =======
</TABLE>

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

   The Corporation's allowance for loan losses was $6,899,000 or 1.83% of total
loans, as of June 30, 2000 compared to $4,895,000, or 1.44% of total loans, as
of June 30,1999.

   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,
                                        --------------------    --------------------------
                                           2000         1999       2000               1999
                                        -------      -------    -------            -------
<S>                                     <C>          <C>        <C>                <C>
Balance, Beginning of Period            $ 5,440      $ 4,749    $ 5,169            $ 4,724
Provisions, Charged to Income             1,496          418      1,728                638

Loans Charged-Off                           (95)        (325)      (126)              (559)
Recoveries of Loans Previously
      Charged-Off                            58           53        128                 92
                                        -------      -------    -------            -------

           Net Loans (Charged-Off)
                 Recovered                  (37)        (272)         2               (467)
                                        -------      -------    -------            -------

Balance, End of Period                  $ 6,899      $ 4,895    $ 6,899            $ 4,895
                                        =======      =======    =======            =======
</TABLE>

     For the six months ended June 30, 2000 and 1999, net charge-offs
(recoveries) were (.00)% and .14% of loans, respectively, not annualized.

23
<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,
                                         2000        2000           1999          1999          1999
                                       --------    ---------    ------------  -------------   --------
<S>                                    <C>         <C>          <C>           <C>             <C>
Non-Accrual Loans                       $5,440       $2,518        $2,450         $2,899       $2,952
Renegotiated Loans                           1            2             3            -0-          -0-
Other Real Estate Owned                  1,343        1,945         1,947          1,494        1,467
                                        ------       ------        ------         ------       ------

  Total Non-Performing Assets           $6,784       $4,465        $4,400         $4,393       $4,419
                                        ======       ======        ======         ======       ======

<CAPTION>
                                       June 30,    March 31,    December 31,  September 30,   June 30,
                                         2000        2000           1999          1999          1999
                                       --------    ---------    ------------  -------------   --------
<S>                                    <C>         <C>          <C>           <C>             <C>
As a Percent of:
 Total Assets                             1.16%         .77%          .78%           .80%         .84%
 Total Loans and Other Real Estate        1.79         1.20          1.23           1.26         1.30

Loans Past Due 90 days or
 More and Still Accruing                $  -0-       $  105        $  -0-         $  -0-       $   17
</TABLE>

     Non-accrual loans to total loans were 1.44% at June 30, 2000 and non-
performing assets were 1.79% of loans and other real estate owned at the same
date.

     As of June 30, 2000, the Company had two large credits that were on non-
accrual loan status and represented 90% of the Company's non-performing loans.
The first with a balance of approximately $1.5 million has been on non-accrual
status since the second quarter of 1998.  The balance of this loan has been
reduced from approximately $2.1 million as the borrower has continued to make
monthly payments.  These payments, principal and interest, have reduced the
balance.  The second large credit was placed on non-accrual status in the second
quarter.  This loan has a balance of approximately $3.4 million and some amount
of charge-off is expected on this credit before year-end.

     The balance of Other Real Estate Owned as of June 30, 2000, was $1,343,000.
In the second quarter the Company wrote-down (expensed) $412,000 of one
property, added a second property with a value of $230,000 and sold a property
that had a value of $425,000.  The write-down of the first property resulted in
a carrying value of approximately $1.0 million for that property.  This
property, which was foreclosed in early 1999 after being constructed, had an
original value of $1.6 million and is being aggressively marketed.

     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,
                                         2000        2000           1999          1999          1999
                                       --------    ---------    ------------  -------------   --------
<S>                                    <C>         <C>          <C>           <C>             <C>

Non-Performing Loans                    $ 5,441     $ 2,520        $ 2,453         $2,899      $2,952
Criticized Loans                         13,064      12,367         11,804          9,196       9,755
Allowance for Loan Losses                 6,899       5,440          5,169          5,044       4,895
Allowance for Loan Losses
  as a Percent of:
    Non-Performing Loans                    127%        216%           211%           174%        166%
    Criticized Loans                         53          44             44             55          50
</TABLE>

24
<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,
                                          --------------------------    --------------------------
                                           2000      1999  % Change      2000     1999   % Change
                                          -----     -----  ---------    ------   ------ ----------
<S>                                       <C>       <C>    <C>          <C>      <C>    <C>
Service Charges on Deposit Accounts       $ 488     $ 489       (.2)%   $  970   $  967        .3%
Non-recurring Income                          4        46     (91.3)        65      244     (73.4)
Other Non-interest Income                   426       367      16.1        791      722       9.6
                                          -----     -----     -----     ------   ------     -----

  Total Non-interest Income               $ 918     $ 902       1.8     $1,826   $1,933      (5.5)
                                          =====     =====               ======   ======
</TABLE>

     Non-recurring income is primarily interest recovered on loans charged-off
in prior years and gains on sales of assets taken in satisfaction of debt in
prior years.  The increase in other non-interest income in the second quarter of
2000 is primarily due to increases in mortgage brokerage/origination 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 June 30,         Six Months Ended June 30,
                                     ----------------------------       ---------------------------
                                      2000     1999     % Change         2000     1999    % Change
                                     ------   ------   ----------       ------   ------  ----------
<S>                                  <C>      <C>      <C>              <C>      <C>     <C>
Salaries & Employee Benefits         $2,332   $2,350        (.8)%       $4,689   $4,491        4.4%
Occupancy Expense - Net                 247      305      (19.0)           505      550       (8.2)
Furniture and Equipment Expense         354      307       15.3            692      590       17.3
Other Real Estate Expense - Net         368       (2)        --            356       25         --
Other Expenses:
 Business Development                   184      145       26.9            360      269       33.8
 Insurance - Other                       25       36      (30.6)            52       71      (26.8)
 Legal & Professional Fees              202      121       66.9            390      288       35.4
 Taxes - Other                           44       47       (6.4)           100      112      (10.7)
 Postage & Courier                       82       80        2.5            165      158        4.4
 Printing & Supplies                     90       91       (1.1)           190      196       (3.1)
 Regulatory Fees & Assessments           56       45       24.4            116       91       27.5
 Other Operating Expenses               465      153      203.9            827      575       43.8
                                     ------   ------                    ------   ------

   Total Other Expenses               1,148      718       59.9          2,200    1,760       25.0
                                     ------   ------                    ------   ------

   Total Non-interest Expense        $4,449   $3,678       21.0         $8,442   $7,416       13.8
                                     ======   ======                    ======   ======
</TABLE>

     Total non-interest expense increased  21.0% in the second quarter of 2000
over 1999, reflecting increases primarily in furniture and equipment expense,
other real estate expense, business development expense, and legal and
professional expense.  As a percent of average assets, non-interest expenses
were 3.18% in the second quarter of 2000 and 2.84% in the same period of 1999.
The "efficiency ratio" (non-interest expenses divided by total non-interest
income plus net interest income) was 55.88% for the second quarter of 2000.

     The increase in the second quarter in Other Real Estate Expense reflects
the write-down of the carrying value of foreclosed real  property and is net of
a gain on sale of another property of approximately $77,000.

     The increase in furniture and fixtures primarily is a result of an increase
in equipment maintenance expense.

     An increase in advertising expense and customer relations expense is
reflected in the increase in business development expenses.

     Legal and Profession Fees increased in the second quarter 2000 over the
prior year because of increases in attorney fees related to credit issues and
consultant fees related to new product development.

     Other Operating Expenses in the second quarter of 1999 were somewhat lower
than normal due to decreases in various miscellaneous operating expenses.

                                                                              25
<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, 2000 and may not be
reflective of positions in subsequent periods (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                   Total       Repriced
                                                                                   Rate         After
                                          Matures or Reprices within:            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                                $207,490        $ 21,351     $ 19,367      $248,208       $129,433   $377,641
  Investment Securities                   2,887          11,949       12,355        27,191        118,607    145,798
  Federal Funds Sold                     19,245             -0-          -0-        19,245            -0-     19,245
                                       --------        --------     --------      --------       --------   --------

   Total Earning Assets                 229,622          33,300       31,722       294,644        248,040    542,684
                                       --------        --------     --------      --------       --------   --------

Interest Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Savings                243,769             -0-          -0-       243,769            -0-    243,769
  Certificate of Deposits
    >$100,000                             7,221          24,760       14,345        46,326          7,226     53,552
  Other Time Deposits                     5,928          23,712       18,897        48,537         16,897     65,434
  Short Term Borrowings                  29,052             -0-          -0-        29,052            -0-     29,052
                                       --------        --------     --------      --------       --------   --------

   Total Interest Bearing
    Liabilities                         285,970          48,472       33,242       367,684         24,123    391,807
                                       --------        --------     --------      --------       --------   --------

Interest Sensitivity
 Gap                                   $(56,348)       $(15,172)    $ (1,520)     $(73,040)      $223,917   $150,877
                                       ========        ========     ========      ========       ========   ========
Cumulative Gap                         $(56,348)       $(71,520)    $(73,040)
                                       ========        ========     ========

Cumulative Gap to
 Total Earning Assets                     (10.4%)         (13.2%)      (13.5%)

Cumulative Gap to
 Total Assets                              (9.6%)         (12.2%)      (12.5%)
</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 (12.5%) was reversed to a positive 7.3%   "beta adjusted" gap position.

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

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.

26
<PAGE>

Capital (con't)
-------

    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, 2000, the Corporation's Tier I
capital represented 13.19% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented 14.44 % of risk weighted assets.  Both ratios
are well above current regulatory guidelines.

    Also, as of June 30, 2000, the Corporation and its Subsidiary Banks 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 Banks' regulatory capital positions as of June
30, 2000, were as follows:

<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, 2000
Total Capital (to Risk Weighted Assets)      $56,194  14.44%  $31,132     8.0%
Tier I Capital (to Risk Weighted Assets)      51,331  13.19    15,566     4.0
Tier I Capital (to Average Assets)            51,331   8.96    17,187     3.0

SUMMIT NATIONAL BANK:
As of June 30, 2000
Total Capital (to Risk Weighted Assets)      $22,527  14.75%  $12,218     8.0%        $15,273        10.0%
Tier I Capital (to Risk Weighted Assets)      20,658  13.50     6,109     4.0           9,164         6.0
Tier I Capital (to Average Assets)            20,658   8.84     6,997     3.0          11,662         5.0

SUMMIT COMMUNITY BANK, N.A.:
As of June 30, 2000
Total Capital (to Risk Weighted Assets)      $29,710  12.78%  $18,598     8.0%        $23,247        10.0%
Tier I Capital (to Risk Weighted Assets)      26,804  11.53     9,299     4.0          13,948         6.0
Tier I Capital (to Average Assets)            26,804   7.97    10,089     3.0          16,816         5.0
</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 2000 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.

                                                                              27
<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 18,
          2000, the shareholders of the Corporation:

          .    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, 2000. The shareholder vote in
               this matter was 5,585,123 for, 8,600 against, and 2 abstaining.

          .    elected the Board of Directors, consisting of ten (10) persons.
               The following directors, constituting the entire Board of
               Directors, were elected:

                                          For       Against         Abstain
                                       ---------    -------         -------
               D. Jerrell Farr         5,561,625       200           31,900
               Elliott S. Garsek       5,561,825                     31,900
               Ronald J. Goldman       5,560,425     1,400           31,900
               F.S. Gunn               5,561,825                     31,900
               Jeffrey M. Harp         5,479,393    82,432           31,900
               Robert L. Herchert      5,561,625       200           31,900
               William W. Meadows      5,561,825                     31,900
               James L. Murray         5,561,825                     31,900
               Philip E. Norwood       5,479,393    82,432           31,900
               Byron B. Searcy         5,561,825                     31,900

Item 5.   Other Information

          Not applicable
<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

          11   Computation of Earnings Per Common Share

          27   Financial Data Schedule

          (b)  No Reports on Form 8-K were filed during the period ending June
               30, 2000
<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:   July 27, 2000               By: /s/  Philip E. Norwood
        -------------                  ------------------------------------

                                    Philip E. Norwood, Chairman



Date:   July 27, 2000               By: /s/  Bob G. Scott
       --------------                  ------------------------------------

                                    Bob G. Scott, Executive Vice President
                                        and Chief Operating Officer
                                         (Chief Accounting Officer)
<PAGE>

                                 EXHIBIT INDEX

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

11        Computation of Earnings Per Common Share

27        Financial Data Schedule