<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, 1999; 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,
1999 was 6,453,497 shares.
<PAGE>

                            SUMMIT BANCSHARES, INC.


                                     INDEX


PART I - FINANCIAL INFORMATION                                          Page No.


Item 1.   Financial Statements

          Consolidated Balance Sheets at June 30, 1999
          and 1998 and at December 31, 1998                                4

          Consolidated Statements of Income for the Three Months
          and Six Months Ended June 30, 1999 and 1998
          and for the Year Ended December 31, 1998                         5-6

          Consolidated Statements of Changes in Shareholders'
          Equity for the Six Months Ended June 30, 1999
          and 1998 and for the Year Ended December 31, 1998                7

          Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 1999 and 1998 and for
          the Year Ended December 31, 1998                                 8-9

          Notes to Consolidated Financial Statements for the Six
          Months Ended June 30, 1999 and 1998 and for the
          Year Ended December 31, 1998                                     10-21

The June 30, 1999 and 1998 and the December 31, 1998 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, 1999 and 1998                                     22-29

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,
                                                                                           1999        1998         1998
                                                                                         --------    --------    -----------
ASSETS                                                                                            (In Thousands)
<S>                                                                                      <C>         <C>         <C>
CASH AND DUE FROM BANKS - NOTE 1                                                         $ 23,117    $ 25,602      $ 26,735
FEDERAL FUNDS SOLD                                                                          8,980      27,675        38,706
INVESTMENT SECURITIES - NOTE 2
 Securities Available-for-Sale, at fair value                                             108,358      60,223       121,417
 Securities Held-to-Maturity, at cost (fair value of                                       29,336      47,749        26,595
   $29,175,000, $48,011,000, and $26,959,000
   June 30, 1999 and 1998 and December 31, 1998,
   respectively)
LOANS - NOTE 3
  Loans, Net of Unearned Discount                                                         339,212     292,846       305,833
     Allowance for Loan Losses                                                             (4,895)     (4,413)       (4,724)
                                                                                         --------    --------      --------
      LOANS, NET                                                                          334,317     288,433       301,109

PREMISES AND EQUIPMENT - NOTE 4                                                             8,964       7,781         9,082
ACCRUED INCOME RECEIVABLE                                                                   4,313       3,575         3,823
OTHER REAL ESTATE - NOTE 5                                                                  1,467          71           281
OTHER ASSETS                                                                                5,479       4,506         5,016
                                                                                         --------    --------      --------

      TOTAL ASSETS                                                                       $524,331    $465,615      $532,764
                                                                                         ========    ========      ========

LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS - NOTE 6
  Noninterest-Bearing Demand                                                             $128,753    $116,822      $141,170
  Interest-Bearing                                                                        325,145     289,150       324,330
                                                                                         --------    --------      --------

      TOTAL DEPOSITS                                                                      453,898     405,972       465,500

SECURITIES SOLD UNDER
  AGREEMENTS TO REPURCHASE - NOTE 7                                                        20,340      13,728        17,839
NOTE PAYABLE - NOTE 8                                                                         250         -0-           -0-
ACCRUED INTEREST PAYABLE                                                                      546         657         1,037
OTHER LIABILITIES                                                                           2,367       1,911         2,153
                                                                                         --------    --------      --------

      TOTAL LIABILITIES                                                                   477,401     422,268       486,529
                                                                                         --------    --------      --------

COMMITMENTS AND CONTINGENCIES - NOTE 12, 14, 18

SHAREHOLDERS' EQUITY - NOTES 13, 15 AND 19
  Common Stock - $1.25 Par Value; 20,000,000 shares
   authorized; 6,453,497, 6,514,794 and 6,471,827 shares
   issued and outstanding at June 30, 1999 and 1998 and
   at December 31, 1998, respectively                                                       8,067       8,143         8,090
  Capital Surplus                                                                           6,428       6,218         6,329
  Retained Earnings                                                                        33,529      29,114        31,271
  Accumulated Other Comprehensive Income - Unrealized Gain
    (Loss) on Available for Sale Investment Securities, Net of Tax                           (273)        286           560
  Treasury Stock at Cost (43,500 shares at June 30, 1999)                                    (821)       (414)          (15)
                                                                                         --------    --------      --------

      TOTAL SHAREHOLDERS' EQUITY                                                           46,930      43,347        46,235
                                                                                         --------    --------      --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                               $524,331    $465,615      $532,764
                                                                                         ========    ========      ========
</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,
                                                                        1999                1998                    1998
                                                                   -------------       -------------              --------
                                                                                  (In Thousands, Except Per Share Data)
<S>                                                                <C>                 <C>                 <C>
INTEREST INCOME
  Interest and Fees on Loans                                          $ 14,546            $ 13,653                $ 28,000
  Interest and Dividends on Investment Securities:
    Taxable                                                              4,091               3,272                   6,963
    Exempt from Federal Income Taxes                                        19                  26                      50
  Interest on Federal Funds Sold                                           459                 989                   2,052
                                                                      --------            --------                --------

      TOTAL INTEREST INCOME                                             19,115              17,940                  37,065
                                                                      --------            --------                --------

INTEREST EXPENSE
  Interest on Deposits                                                   6,094               6,230                  12,786
  Interest on Securities Sold Under
   Agreements to Repurchase                                                314                 307                     692
  Interest on Note Payable                                                   3                 -0-                     -0-
                                                                      --------            --------                --------

      TOTAL INTEREST EXPENSE                                             6,411               6,537                  13,478
                                                                      --------            --------                --------

      NET INTEREST INCOME                                               12,704              11,403                  23,587

LESS: PROVISION FOR LOAN LOSSES - NOTE 3                                   638                 408                     785
                                                                      --------            --------                --------

      NET INTEREST INCOME AFTER
       PROVISION FOR LOAN LOSSES                                        12,066              10,995                  22,802
                                                                      --------            --------                --------

NON-INTEREST INCOME
  Service Charges and Fees on Deposits                                     967               1,004                   2,018
  Loss on Sale of Investment Securities                                    -0-                 -0-                      35
  Other Income                                                             966                 822                   1,797
                                                                      --------            --------                --------

      TOTAL NON-INTEREST INCOME                                          1,933               1,826                   3,850
                                                                      --------            --------                --------

NON-INTEREST EXPENSE
  Salaries and Employee Benefits                                         4,491               4,102                   8,576
  Occupancy Expense - Net                                                  550                 471                     928
  Furniture and Equipment Expense                                          590                 584                   1,150
  Other Real Estate Owned (Income) Expense - Net                            25                 -0-                      (1)
  Other Expense - Note 9                                                 1,760               1,784                   3,520
                                                                      --------            --------                --------

      TOTAL NON-INTEREST EXPENSE                                         7,416               6,941                  14,173
                                                                      --------            --------                --------

      INCOME BEFORE INCOME TAXES                                         6,583               5,880                  12,479

APPLICABLE INCOME TAXES - NOTE 10                                        2,276               2,013                   4,333
                                                                      --------            --------                --------

      NET INCOME                                                      $  4,307            $  3,867                $  8,146
                                                                      ========            ========                ========

      NET INCOME PER SHARE - NOTE 15
        Basic                                                         $   .67             $    .59                $   1.25
        Diluted                                                           .64                  .56                    1.20

</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,
                                                                    ---------------------------
                                                                        1999           1998
                                                                    ------------    -----------
                                                               (In Thousands, Except Per Share Data)
<S>                                                            <C>                  <C>
INTEREST INCOME
  Interest and Fees on Loans                                           $7,537          $6,975
  Interest and Dividends on Investment Securities:
     Taxable                                                            2,019           1,648
     Exempt from Federal Income Taxes                                       9              13
  Interest on Federal Funds Sold                                          156             431
                                                                       ------          ------

            TOTAL INTEREST INCOME                                       9,721           9,067
                                                                       ------          ------

INTEREST EXPENSE
  Interest on Deposits                                                  3,000           3,144
  Interest on Securities Sold Under Agreements
    to Repurchase                                                         154             144
  Interest on Note Payable                                                  3             -0-
                                                                       ------          ------

            TOTAL INTEREST EXPENSE                                      3,157           3,288
                                                                       ------          ------

            NET INTEREST INCOME                                         6,564           5,779

LESS: PROVISION FOR LOAN LOSSES - NOTE 3                                  418             250
                                                                       ------          ------

            NET INTEREST INCOME AFTER
              PROVISION FOR LOAN LOSSES                                 6,146           5,529
                                                                       ------          ------

NON-INTEREST INCOME
  Service Charges and Fees on Deposits                                    489             518
  Other Income                                                            413             438
                                                                       ------          ------

            TOTAL NON-INTEREST INCOME                                     902             956
                                                                       ------          ------

NON-INTEREST EXPENSE
  Salaries and Employee Benefits                                        2,350           2,061
  Occupancy Expense - Net                                                 305             232
  Furniture and Equipment Expense                                         307             289
  Other Real Estate Owned (Income) Expense - Net                           (2)              3
  Other Expense                                                           718             850
                                                                       ------          ------

            TOTAL NON-INTEREST EXPENSE                                  3,678           3,435
                                                                       ------          ------

            INCOME BEFORE INCOME TAXES                                  3,370           3,050

APPLICABLE INCOME TAXES - NOTE 10                                       1,159           1,047
                                                                       ------          ------

            NET INCOME                                                 $2,211          $2,003
                                                                       ======          ======

            NET INCOME PER SHARE
                   Basic                                               $  .34          $  .30
                   Diluted                                                .33             .29

</TABLE>


The accompanying Notes should be read with these financial statements.


6
<PAGE>

                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                         CONSOLIDATED AND COMPANY ONLY
                FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                   AND FOR THE YEAR ENDED DECEMBER 31, 1998
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                          Accumulated
                                                                                             Other
                                                                                         Comprehensive
                                                                                           Income  -
                                                                                         Net Unrealized
                                                                                         Gain (Loss) on                    Total
                                               Common Stock       Capital    Retained     Investment       Treasury   Shareholders'
                                            Shares      Amount    Surplus    Earnings     Securities        Stock        Equity
------------------------------------------------------------------------------------------------------------------------------------
                                                                 (Dollars in Thousands, Except Per Share Data)
<S>                                      <C>           <C>       <C>        <C>          <C>             <C>          <C>
BALANCE AT
JANUARY 1, 1998                            6,501,332    $8,127   $  6,251   $  26,491     $     243      $     -0-      $ 41,112

Purchases of Stock Held
 in Treasury                                                                                                  (908)         (908)
Retirement of Stock
 Held in Treasury                            (25,000)      (31)                  (463)                         494           -0-
Stock Options Exercised                       38,462        47        (33)                                                    14
Cash Dividend -
 $.12 Per Share                                                                  (781)                                      (781)
Net Income for the
 Six Months Ended
 June 30,1998                                                                   3,867                                      3,867
Securities Available-
 for-Sale Adjustment                                                                             43                           43
                                                                                                                        --------
Total Comprehensive
 Income                                                                                                                    3,910
                                         -----------   -------   --------   ---------     ---------      ---------      --------

BALANCE AT
 JUNE 30, 1998                             6,514,794     8,143      6,218      29,114           286           (414)       43,347

Purchases of Stock Held
 in Treasury                                                                                                (1,040)       (1,040)
Retirement of Stock
 Held in Treasury                            (76,700)      (96)                (1,343)                       1,439           -0-
Stock Options Exercised                       33,733        43        111                                                    154
Cash Dividend -
 $.12 Per Share                                                                  (779)                                      (779)
Net Income for the
 Six Months Ended
 December 31, 1998                                                              4,279                                      4,279
Securities Available-
 for-Sale Adjustment                                                                            274                          274
                                                                                                                        --------
Total Comprehensive
 Income                                                                                                                    4,553
                                         -----------   -------   --------   ---------     ---------      ---------      --------

BALANCE AT
 DECEMBER 31, 1998                         6,471,827     8,090      6,329      31,271           560            (15)       46,235

Purchases of Stock Held
 in Treasury                                                                                                (1,902)       (1,902)
Retirement of Stock
 Held in Treasury                            (62,500)      (78)                (1,018)                       1,096           -0-
Stock Options Exercised                       44,170        55         99                                                    154
Cash Dividend -
 $.08 Per Share                                                                (1,031)                                    (1,031)
Net Income for the
 Six Months Ended
 June 30, 1999                                                                  4,307                                      4,307
Securities Available-
 for-Sale Adjustment                                                                           (833)                        (833)
                                                                                                                        --------
Total Comprehensive
 Income                                                                                                                    3,474
                                         -----------   -------   --------   ---------     ---------      ---------      --------

BALANCE AT
 JUNE 30, 1999                             6,453,497   $ 8,067   $  6,428   $  33,529     $    (273)     $    (821)     $ 46,930
                                         ===========   =======   ========   =========     =========      =========      ========
</TABLE>


The accompanying Notes should be read with these financial statements.

                                                                               7
<PAGE>

                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                   AND FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>

                                                                            (Unaudited)
                                                                             June 30,          (Unaudited)
                                                                     -----------------------   December 31,
                                                                        1999         1998          1998
                                                                     ----------  -----------  -------------
                                                                                (In Thousands)
<S>                                                                  <C>         <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net Income                                                          $  4,307     $  3,867      $   8,146
                                                                      --------     --------      ---------
  Adjustments to Reconcile Net Income to Net
   Cash Provided by Operating Activities:
    Depreciation and Amortization                                          537          516          1,037
    Net Premium Amortization (Discount Accretion)
      of Investment Securities                                             (17)          84            (31)
    Provision for Loan Losses                                              638          408            785
    Deferred Income Taxes (Benefit)                                       (115)        (167)          (465)
    Loss on Sale of Investment Securities                                  -0-          -0-            (35)
    Writedown of Other Assets                                                1          -0-            -0-
    Net Gain From Sale of Other Real Estate                                 (9)          (2)            (2)
    Net (Gain) Loss on Sale of Premises and Equipment                      -0-            1             (3)
    Increase in Accrued Income and Other Assets                           (205)          10           (523)
    Increase (Decrease) in Accrued Expenses and Other Liabilities         (277)         299            921
                                                                      --------     --------      ---------

      Total Adjustments                                                    553        1,149          1,684
                                                                      --------     --------      ---------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                          4,860        5,016          9,830
                                                                      --------     --------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  (Increase) Decrease in Federal Funds Sold                             29,726        8,085         (2,946)
  Proceeds from Matured and Prepaid Investment Securities
    . Held-to-Maturity                                                   3,280       13,457         21,627
    . Available-for-Sale                                                55,184       14,614         63,334
  Proceeds from Sales of Investment Securities                           3,997          -0-         11,992
  Purchase of Investment Securities
    . Held-to-Maturity                                                  (6,037)     (15,118)       (20,644)
    . Available-for-Sale                                               (47,352)     (15,317)      (118,148)
  Loans Originated and Principal Repayments, Net                       (35,368)     (16,990)       (30,482)
  Recoveries of Loans Previously Charged-Off                                92           55            217
  Proceeds from Sale of Premises and Equipment                             -0-            2              6
  Proceeds from Sale of Other Real Estate                                   49           82             82
  Purchases of Premises and Equipment                                     (419)        (383)        (2,206)
                                                                      --------     --------      ---------

      NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                   3,152      (11,513)       (77,168)
                                                                      --------     --------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net Increase (Decrease) in Demand Deposits, Savings
    Accounts and Interest Bearing Transaction Accounts                  (8,642)       2,778         60,585
  Net Increase (Decrease) in Certificates of Deposit                    (2,960)       1 470          3,191
  Net Increase (Decrease) in Repurchase Agreements                       2,501         (961)         3,150
  Proceeds from Note Payable                                               250          -0-            -0-
  Payments of Cash Dividends                                            (1,031)        (781)        (1,560)
  Proceeds from Stock Options Exercised                                    154           14            168
  Purchase of Treasury Stock                                            (1,902)        (908)        (1,948)
                                                                      --------     --------      ---------

       NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                (11,630)       1,612         63,586
                                                                      --------     --------      ---------

NET DECREASE IN CASH AND DUE FROM BANKS                                 (3,618)      (4,885)        (3,752)

CASH AND DUE FROM BANKS AT BEGINNING
  OF PERIOD                                                             26,735       30,487         30,487
                                                                      --------     --------      ---------

CASH AND DUE FROM BANKS AT END OF PERIOD                              $ 23,117     $ 25,602      $  26,735
                                                                      ========     ========      =========

</TABLE>


7
<PAGE>

                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONT'D
                FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                   AND FOR THE YEAR ENDED DECEMBER 31, 1998
                                  (Unaudited)



SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES:

<TABLE>
<CAPTION>

                                                                 (Unaudited)
                                                                   June 30,          (Unaudited)
                                                          -------------------------  December 31,
                                                              1999          1998         1998
                                                          ----------    -----------  -----------
                                                                 (In Thousands)
<S>                                                       <C>          <C>           <C>
(1)  Interest Paid                                            $6,902         $6,558     $13,120
(2)  Income Taxes Paid (Refund Received)                       2,419          2,215       4,815
(3)  Other Real Estate Acquired in Settlement of Loans         1,226            -0-         210

</TABLE>


                                                                               9
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SUMMIT BANCSHARES, INC. AND SUBSIDIARIES
          FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
             AND FOR THE YEAR ENDED DECEMBER 31, 1998 (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 1999 the average cash balance maintained at the Federal
     Reserve Bank was $950,000. Compensating balances held at correspondent
     banks, to minimize service charges, averaged approximately $17,554,000
     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 1999 and
     1998 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.


10
<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."


                                                                              11
<PAGE>

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

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

     Certain reclassifications have been made to the 1998 financial statements
     to conform to the 1999 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, 1998, and the
     consolidated statements of income, changes in shareholders' equity and cash
     flows for the year ended December 31, 1998 are headed "unaudited" in these
     financial statements.  These statements were reported in the Securities
     Exchange Commission Form 10-K as of December 31, 1998 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, 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.


12
<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, 1998
                                                       ---------------------------------------------
                                                                    Gross        Gross
                                                       Amortized  Unrealized  Unrealized     Fair
                                                         Cost       Gains       Losses       Value
                                                       ---------  ----------  -----------  ---------
<S>                                                    <C>        <C>         <C>          <C>
Investment Securities - Held-to-Maturity
  U.S. Treasury Securities                              $ 14,993        $175        $ (2)   $ 15,166
  U.S. Government Agencies
   and Corporations                                       25,405          63         (27)     25,441
  U.S. Government Agency Mortgage Backed Securities        6,216          53          (6)      6,263
  Obligations of States and Political Subdivisions         1,135           6         -0-       1,141
                                                        --------        ----        ----    --------

    Total Held-to-Maturity Securities                     47,749         297         (35)     48,011
                                                        --------        ----        ----    --------

Investment Securities - Available-for-Sale
  U.S.  Treasury Securities                               39,533         366         (20)     39,879
  U.S. Government Agencies
    and Corporations                                      11,104          49         -0-      11,153
  U.S. Government Agency Mortgage Backed Securities        8,104          39         -0-       8,143
  Federal Reserve and Federal Home Loan Bank Stock         1,048         -0-         -0-       1,048
                                                        --------        ----        ----    --------

     Total Available-for-Sale Securities                  59,789         454         (20)     60,223
                                                        --------        ----        ----    --------

        Total Investment Securities                     $107,538        $751        $(55)   $108,234
                                                        ========        ====        ====    ========
</TABLE>

     In the above schedule the amortized cost of Total Held-to-Maturity
Securities of $47,749,000 and the fair value  of Total Available-for-Sale
Securities of $60,223,000 are reflected in Investment Securities on the
consolidated balance sheet as of June 30, 1998 for a total of  $107,972,000.  A
net unrealized gain of $434,000 is included in the Available-for-Sale Investment
Securities balance.  The unrealized gain, net of tax, is included in
Shareholders' Equity.

     Effective October 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards Board No. 133 "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133") which establishes accounting and reporting
standards for derivative instruments and requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. At the effective date, the Corporation
transferred approximately $17,448,000 of securities from Held-to-Maturity to
Available-for-Sale classification.  At the time of transfer the securities had
an approximate unrealized gain of $349,000.

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,
                                1999           1998         1998
                             ----------    -----------  -----------
<S>                          <C>           <C>          <C>

Commercial                    $157,320       $129,424     $133,066
Real Estate Mortgage           111,323         96,994      100,421
Real Estate Construction        37,968         35,338       40,456
Loans to Individuals            32,894         31,654       32,388
Less:  Unearned Discount          (293)          (564)        (498)
                              --------       --------     --------
  339,212                      292,846        305,833
Allowance for Loan Losses       (4,895)        (4,413)      (4,724)
                              --------       --------     --------

 Loans - Net                  $334,317       $288,433     $301,109
                              ========       ========     ========

</TABLE>


                                                                              13
<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,
                                                                 1999           1998          1998
                                                            -------------  -------------  -----------
<S>                                                         <C>            <C>            <C>

Balance, Beginning of Period                                      $4,724         $4,065       $4,065
Provisions, Charged to Income                                        638            408          785

Loans Charged-Off                                                   (559)          (115)        (343)
Recoveries of Loans Previously
 Charged-Off                                                          92             55          217
                                                                  ------         ------       ------

          Net Loans (Charged-Off) Recovered                         (467)           (60)        (126)
                                                                  ------         ------       ------

Balance, End of Period                                            $4,895         $4,413       $4,724
                                                                  ======         ======       ======
</TABLE>

    The provisions for loan losses charged to operating expenses during the six
months ended June 30,1999 and June 30,1998 of $638,000 and $408,000,
respectively, were considered adequate to maintain the allowance in accordance
with the policy discussed in Note 1.  For the year ended December 31, 1998, a
provision of $785,000 was recorded.

    At June 30,1999, the recorded investment in loans that are considered to be
impaired under Statement of Financial Accounting Standards No. 114 was
$2,861,000 (of which $2,861,000 were on non-accrual status).  The related
allowance for loan losses for these loans was $893,000.  The average recorded
investment in impaired loans during the six months ended June 30, 1999 was
approximately $3,410,000.  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,
                                                       1999       1998        1998
                                                    ---------  ---------  ------------
<S>                                                 <C>        <C>        <C>

Land                                                 $ 2,783    $ 1,446        $ 2,783
Buildings and Improvements                             7,560      7,573          7,537
Furniture & Equipment                                  7,600      6,816          7,234
                                                     -------    -------        -------
    Total Cost                                        17,943     15,835         17,554

Less:  Accumulated Amortization and Depreciation      (8,979)    (8,054)        (8,472)
                                                     -------    -------        -------

    Net Book Value                                   $ 8,964    $ 7,781        $ 9,082
                                                     =======    =======        =======
</TABLE>

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

    The carrying value of other real estate is as follows (in thousands):
<TABLE>
<CAPTION>
                                                               June 30,
                                                     --------------------------  December 31,
                                                         1999           1998         1998
                                                     -----------    -----------  -----------
<S>                                                  <C>            <C>          <C>
Other Real Estate                                        $1,467          $  71        $ 281
Valuation Reserve                                           -0-            -0-          -0-
                                                         ------          -----        -----

    Net Other Real Estate                                $1,467          $  71        $ 281
                                                         ======          =====        =====
</TABLE>


14
<PAGE>

NOTE 5 - Other Real Estate (cont'd.)
------

    Transactions in the valuation reserve are summarized as follows (in
     thousands):
<TABLE>
<CAPTION>
                                                                              Six Months Ended June 30,       Year Ended
                                                                              -------------------------       December 31,
                                                                               1999               1998           1998
                                                                              ------             ------         ------
<S>                                                                           <C>                <C>          <C>
Balance, Beginning of Period                                                  $  -0-              $  34         $  34
Provisions Charged to Income                                                     -0-                -0-           -0-
Reductions from Sales                                                            -0-                (34)          (34)
                                                                              ------              -----         -----

Balance, End of Period                                                        $  -0-              $ -0-         $ -0-
                                                                              ======              =====         =====

</TABLE>

    There were no direct writedowns of other real estate charged to income for
the six months ended June 30, 1999 or June 30, 1998, respectively, or for the
year ended December 31, 1998.


NOTE 6 - Deposits
------

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

                                                        June 30,
                                               -----------------------   December 31,
                                                  1999          1998        1998
                                               ---------     ---------   -----------
<S>                                            <C>           <C>         <C>
Noninterest-Bearing Demand Deposits             $128,753      $116,822      $141,170
                                                --------      --------    ----------
Interest-Bearing Deposits:
  Interest-Bearing Transaction
     Accounts and Money Market Funds             156,658       137,165    151,557
  Savings                                         80,177        62,435     81,503
  Savings Certificates - Time                     53,242        52,162     53,394
  Certificates of Deposits $100,000 or more       34,290        36,610     37,099
  Other                                              778           778        777
                                                --------      --------   --------
   Total                                         325,145       289,150    324,330
                                                --------      --------   --------
       Total Deposits                           $453,898      $405,972   $465,500
                                                ========      ========   ========
</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,
                                                                  1999           1998          1998
                                                             -------------  -------------  -----------
<S>                                                          <C>            <C>            <C>

Securities Sold Under Repurchase Agreements:
    Average                                                       $16,806        $13,461      $15,742
    Period-End                                                     20,340         13,728       17,839
    Maximum Month-End Balance During Period                        20,340         15,249       19,354
Interest Rate
    Average                                                          3.77%          4.60%        4.40%
    Period-End                                                       3.83           4.55         3.83
</TABLE>

NOTE 8 - Notes Payable
------

On July 15, 1998, 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 1999,
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, 1999, $250,000 had been borrowed under these lines
and was outstanding on that date.  It is anticipated this advance under the line
of credit will be paid before converting to a term note.


                                                                              15
<PAGE>

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

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


                                    Six Months Ended June 30,   Year Ended
                                    -------------------------  December 31,
                                       1999          1998          1998
                                    -----------  ------------  ------------
<S>                                 <C>           <C>           <C>
Business Development                     $  269        $  303        $  611
Legal and Professional Fees                 288           252           511
Printing and Supplies                       196           202           387
Regulatory Fees and Assessments              91            84           169
Other                                       916           943         1,842
                                         ------        ------        ------

  Total                                  $1,760        $1,784        $3,520
                                         ======        ======        ======
</TABLE>

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

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

                                           June 30,
                                    ----------------------   December 31,
                                      1999          1998         1998
                                    --------      --------   ------------
<S>                                 <C>           <C>        <C>
Current Tax Asset                     $   38         $  28          $  10
Deferred Tax Asset                     1,517           816            973
                                      ------         -----          -----

  Total Included in Other Assets      $1,555         $ 844          $ 983
                                      ======         =====          =====
</TABLE>

  The deferred tax asset at June 30, 1999 of $1,517,000 included $141,000
related to unrealized losses on Available-for-Sale Securities.

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


                                        Six Months Ended June 30,    Year Ended
                                       ---------------------------  December 31,
                                            1999          1998          1998
                                       -------------  ------------  -------------
<S>                                    <C>            <C>           <C>
Federal Income Tax Expense
 Current                                     $2,391        $2,180         $4,798
 Deferred (benefit)                            (115)         (167)          (465)
                                             ------        ------         ------

   Total Federal Income Tax Expense          $2,276        $2,013         $4,333
                                             ======        ======         ======

   Effective Tax Rates                         34.6%         34.2%          34.7%
                                             ======        ======         ======
</TABLE>

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


                                         Six Months Ended June 30,    Year Ended
                                        ---------------------------  December 31,
                                             1999          1998          1998
                                        -------------  ------------  -------------
<S>                                     <C>            <C>           <C>
Federal Income Taxes at Statutory
 Rate of 34.3%                                $2,258        $1,999         $4,278
Effect of Tax Exempt Interest Income              (6)          (10)           (19)
Non-deductible Expenses                           25            25             58
Other                                             (1)           (1)            16
                                              ------        ------         ------

 Income Taxes Per Income Statement            $2,276        $2,013         $4,333
                                              ======        ======         ======
</TABLE>


16
<PAGE>

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

  Deferred income tax expense (benefit) results from differences between amounts
of assets and liabilities as measured for income tax return and financial
reporting purposes.  The significant components of federal deferred tax assets
and liabilities are in the following table (in thousands):
<TABLE>
<CAPTION>
                                                           Six Months Ended   Year Ended
                                                               June 30,      December 31,
                                                                 1999            1998
                                                           ----------------  ------------
<S>                                                        <C>               <C>
Federal Deferred Tax Assets:
  Allowance for Loan Losses                                          $1,221        $1,107
  Valuation Reserves - Other Real Estate                                  1             1
  Interest on Non-accrual Loans                                         173           199
  Deferred Compensation                                                 417           414
  Unrealized Losses on Available for Sale Securities                    141           -0-
  Other                                                                  16            18
                                                                     ------        ------


  Gross Federal Deferred Tax Assets                                   1,969         1,739
                                                                     ------        ------

Federal Deferred Tax Liabilities:
  Depreciation and Amortization                                         297           301
  Accretion                                                              45            78
  Unrealized Gains on Available-for-Sale Securities                     -0-           289
  Other                                                                 110            98
                                                                     ------        ------

  Gross Federal Deferred Tax Liabilities                                452           766
                                                                     ------        ------

  Net Deferred Tax Asset                                             $1,517        $  973
                                                                     ======        ======
</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 $2,848,000 at December 31, 1998.


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, 1999, outstanding documentary and standby letters of credit
totaled $4,032,000 and commitments to extend credit totaled $118,199,000.


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, 1998, and the six months ended June 30, 1999.


                                                                              17
<PAGE>

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

     The following is a summary of transactions during the periods presented:
<TABLE>
<CAPTION>

                                             Shares Under Option
                                     -----------------------------------
                                       Six Months
                                          Ended           Year Ended
                                      June 30, 1999   December 31, 1998
                                     ---------------  ------------------
<S>                                  <C>              <C>

Outstanding, Beginning of Period            461,717             543,112
Additional Options Granted During
  the Period                                 39,500               3,000
Forfeited During the Period                  (2,400)             (5,400)
Exercised During the Period                 (44,170)            (78,995)
                                            -------             -------

  Outstanding, End of Period                454,647             461,717
                                            =======             =======
</TABLE>

     Options outstanding at June 30, 1999 ranged in price from $3.00 to $19.25
per share with a weighted average exercise price of $8.02 and 345,785 shares
exercisable.  At June 30, 1999, there remained 494,800 shares reserved for
future grants of options under the 1997 Plan.


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

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

     The Corporation has a defined benefit pension plan covering substantially
all of its employees.  The benefits are based on years of service and the
employee's compensation history.  The employee's compensation used in the
benefit calculation is 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 will be distributed to the
plan participants under terms of the plan as soon as administratively possible.

     Funding for the plan is provided by employer contributions to trust funds
in amounts determined by actuarial assumptions and valuation of the plan.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.

     The table below sets forth the plan's funded status and amounts recognized
in the Corporation's consolidated balance sheets at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                                           1998      1997
                                                                         -------   -------
<S>                                                                      <C>       <C>
Actuarial present value of benefit obligations:
 Accumulated benefit obligation, including vested
  benefits of $1,719,000 in 1998 and $2,240,000 in 1997                   $1,852    $2,420
                                                                          ======    ======

Projected benefit obligation for service rendered
 to date                                                                  $2,958    $3,035
Plan assets at fair value, primarily listed stocks
 and U.S. bonds                                                            2,176     2,883
                                                                          ------    ------

Projected benefit obligation in excess of (less than) plan assets            782       152
Unrecognized net loss from past experience
 different from that assumed and effect of
 changes in assumptions                                                     (930)     (396)
Prior service cost not yet recognized in net
 periodic pension cost                                                       (10)       12
                                                                          ------    ------

Prepaid pension cost included in other assets                             $ (158)   $ (232)
                                                                          ======    ======
</TABLE>

18
<PAGE>

NOTE 14 - Employee Benefit Plans (con't)
-------

Net pension expense included the following components (in thousands):
<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                                                          -----------------------
                                                                           1998             1997
                                                                          ------           ------
<S>                                                                       <C>              <C>
Service Cost - benefits earned during the period                          $  355           $  227
Interest cost on projected benefit obligation                                170              157
Less: Actual return on plan assets                                          (126)            (196)
Net amortization and deferral                                                 39                5
                                                                          ------           ------

   Net periodic pension cost                                              $  438           $  193
                                                                          ======           ======
</TABLE>

     The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligation
were 7 percent and 6 percent, respectively.  The expected long-term rate of
return on plan assets was 7 percent.

     The market value of plan assets at June 30, 1999 was $2,132,000.  There has
not been a contribution to the plan during 1999.  Prepaid pension cost at June
30, 1999 was $77,000.

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

     The Corporation implemented a 401(k) plan in December 1997 covering
substantially all employees.  The Corporation has not matched the employee's
contributions to date nor made any other contribution to 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 $103,000 and $110,000 during the six months of 1999 and 1998,
respectively, and $237,000 for the year 1998.

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).


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)
<TABLE>
<CAPTION>

                                              June 30,
                                     ------------------------  December 31,
                                        1999         1998          1998
                                     ----------    ----------  ------------
<S>                                  <C>           <C>         <C>
Net income                           $    4,307    $    3,867    $    8,146
                                     ==========    ==========    ==========
Weighted average number of common
 shares used in Basic EPS             6,439,205     6,508,425     6,496,595
Effect of dilutive stock options        249,749       343,130       316,702
                                     ----------    ----------    ----------
Weighted number of common shares
 and dilutive potential common
 stock used in Diluted EPS            6,688,954     6,851,555     6,813,297
                                     ==========    ==========    ==========

</TABLE>

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.


                                                                              19
<PAGE>

NOTE 16 - Financial Instruments with Off-Balance Sheet Risk (con't)
--------

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

                                                    June 30,
                                               ------------------
                                                 1999      1998
                                               --------  --------
<S>                                            <C>       <C>

Financial Instruments Whose
  Contract Amounts Represent
     Credit Risk:
     Commitments to Extend Credit              $118,199  $109,019

     Documentary and Standby
     Letters of Credit                            4,032     3,502
</TABLE>

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

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


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

     The Subsidiary 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.

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 20, 1999, 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 1999, 105,200 shares were purchased by the Corporation
through a similar repurchase plan through the open market.


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

     On July 20, 1999, the Board of Directors of the Corporation approved a
quarterly dividend of $.08 per share to be paid on August 16, 1999 to
shareholders of record on August 2, 1999.


20
<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,
                                              ------------------------------------------
                                                       1999                 1998
                                              --------------------  --------------------
                                              Carrying     Fair     Carrying     Fair
                                               Amount      Value     Amount      Value
                                              ---------  ---------  ---------  ---------
<S>                                           <C>        <C>        <C>        <C>
   Financial Assets
     Cash and due from banks                  $ 23,117   $ 23,117   $ 25,602   $ 25,602
     Federal funds sold                          8,980      8,980     27,675     27,675
     Securities                                137,694    137,533    107,972    108,677
     Loans                                     339,212    340,327    292,846    292,170
     Reserve for loan losses                    (4,895)    (4,895)    (4,413)    (4,413)

   Financial Liabilities
     Deposits                                  453,898    454,166    405,972    406,241
     Securities sold under repurchase
      agreements                                20,340     20,340     13,728     13,731
     Note Payable                                  250        250        -0-        -0-

   Off-balance Sheet Financial Instruments
     Loan commitments                                                118,199    109,019
     Letters of credit                                                 4,032      3,502
</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
                                                    1999              1998        December 31, 1998
                                              ----------------  ----------------  -----------------
<S>                                           <C>               <C>               <C>

     Net Income                                        $4,307             $3,867             $8,146
     Other Comprehensive Income:
       Unrealized gain (loss) on securities
       available-for-sale, net of tax                    (833)                43                317
                                                       ------             ------             ------

         Comprehensive Income                          $3,474             $3,910             $8,463
                                                       ======             ======             ======
</TABLE>


                                                                              21
<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 1999 was $2,211,000, or $.33 diluted
earnings per share, compared with $2,003,000, or $.29

diluted earnings per share, for the second quarter of 1998.  Net income for the
first six months of 1999 was $4,307,000, or $.64 diluted earnings per share,
compared with $3,867,000, or $.56 diluted earnings per share, for the first six
months of the prior year. On a per share basis, diluted earnings per share
increased 13.8% over the second quarter of the prior year. Per share amounts are
based on average shares outstanding of  6,688,954 for the first six months of
1999 and 6,851,555 for the comparable period of 1998 adjusted to reflect stock
options granted.

     Outstanding loans at June 30, 1999 of $339.2 million represented an
increase of $46.4 million, or 15.8%, over June 30,1998 and an increase of $33.4
million, or 10.9%, from December 31, 1998.

     Total deposits at June 30, 1999 of $453.9 million represented an increase
of $47.9 million, or 11.8%, over June 30,1998 and a decrease of $11.6 million,
or 2.5%, from December 31, 1998.

     In the second quarter, net interest income increased 13.6% over the
previous year.  Non-interest expense increased 7.1% in the second quarter over
that of the same period in the prior year.

     The following table summarizes the Corporation's performance for the three
months and six months ended June 30, 1999 and 1998 (tax equivalent basis and
dollars in thousands).

<TABLE>
<CAPTION>
                                           Three Months Ended   Six Months Ended
                                                 June 30,           June 30,
                                           ------------------  -------------------
                                            1999       1998       1999       1998
                                           ------     ------    -------    -------
<S>                                        <C>        <C>       <C>        <C>
Interest Income                            $9,725     $9,075    $19,124    $17,956
Interest Expense                            3,157      3,288      6,411      6,537
                                           ------     ------    -------    -------

 Net Interest Income                        6,568      5,787     12,713     11,419
Provision for Loan Loss                       418        250        638        408
                                           ------     ------    -------    -------

 Net Interest Income After
   Provision for Loan Loss                  6,150      5,537     12,075     11,011
Non-Interest Income                           902        956      1,933      1,826
Non-Interest Expense                        3,678      3,435      7,416      6,941
                                           ------     ------    -------    -------

 Income Before Income Tax                   3,374      3,058      6,592      5,896
Income Tax Expense                          1,163      1,055      2,285      2,029
                                           ------     ------    -------    -------

   Net Income                              $2,211     $2,003    $ 4,307    $ 3,867
                                           ======     ======    =======    =======

Net Income per Share-
 Basic                                     $  .34     $  .30    $   .67    $   .59
 Diluted                                      .33        .29        .64        .56

Return on Average Assets                     1.71%      1.73%      1.67%      1.69%

Return on Average Stockholders' Equity      18.89%     18.65%     18.59%     18.42%

</TABLE>

22
<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 1999 and 1998 (rates on tax equivalent basis).
<TABLE>
<CAPTION>


                                                              Three Months ended June 30,
                                          --------------------------------------------------------------------
                                                        1999                               1998
                                          ---------------------------------  ---------------------------------
                                           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            $ 12,930     $  156        4.84%   $ 31,338     $  431        5.53%
  Investment Securities (Taxable)           138,384      2,019        5.85     107,658      1,648        6.14
  Investment Securities (Tax-exempt)            745         13        7.11       1,137         20        6.88
  Loans, Net of Unearned Discount(1)        330,685      7,537        9.14     290,811      6,976        9.62
                                           --------     ------                --------     ------
    Total Earning Assets                    482,744      9,725        8.08     430,944      9,075        8.45
                                                        ------                             ------

Non-interest Earning Assets:
  Cash and Due From Banks                    23,095                             22,130
  Other Assets                               18,850                             15,506
  Allowance for Loan Losses                  (4,720)                           (4 ,306)
                                           --------                           --------
    Total Assets                           $519,969                           $464,274
                                           ========                           ========

Interest-Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Money Market Funds        $153,200      1,188        3.11    $139,867      1,283        3.68
  Savings                                    82,527        792        3.85      64,202        710        4.43
  Savings Certificates                       52,674        597        4.54      51,866        660        5.10
  Certificates of Deposit
    $100,000 or more                         34,722        413        4.77      35,931        478        5.34
  Other Time                                    778         10        5.05         956         13        5.56
  Other Borrowings                           16,569        157        3.80      12,730        144        4.53
                                           --------     ------                --------     ------
    Total Interest-Bearing Liabilities      340,470      3,157        3.72     305,552      3,288        4.32
                                                        ------                             ------

Non-interest Bearing Liabilities:
  Demand Deposits                           130,200                            113,223
  Other Liabilities                           2,735                              2,419
  Shareholders' Equity                       46,564                             43,080
                                           --------                           --------
    Total Liabilities and
      Shareholders' Equity                 $519,969                           $464,274
                                           ========                           ========
Net Interest Income and Margin
 (Tax-equivalent Basis)(2)                              $6,568        5.46                 $5,787        5.39
                                                        ======                             ======

</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.


                                                                              23
<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, 1999 and 1998 (rates on tax
equivalent basis).
<TABLE>
<CAPTION>

                                                               Six Months Ended June 30,
                                          --------------------------------------------------------------------
                                                        1999                               1998
                                          ---------------------------------   --------------------------------
                                           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            $ 19,135    $   459        4.82%   $ 36,104    $   991        5.53%
  Investment Securities (Taxable)           141,868      4,091        5.82     107,026      3,271        6.16
  Investment Securities (Tax-exempt)            817         28        7.08       1,139         39        6.98
  Loans, Net of Unearned Discount(1)        321,058     14,546        9.14     283,944     13,655        9.70
                                           --------    -------                --------    -------
    Total Earning Assets                    482,878     19,124        7.99     428,213     17,956        8.46
                                                       -------                            -------

Non-interest Earning Assets:
  Cash and Due From Banks                    23,186                             22,169
  Other Assets                               18,870                             15,490
  Allowance for Loan Losses                  (4,754)                            (4,224)
                                           --------                           --------
    Total Assets                           $520,180                           $461,648
                                           ========                           ========

Interest-Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts & Money Market Funds          $153,973      2,400        3.14    $138,328      2,498        3.64
  Savings                                    82,723      1,607        3.92      65,137      1,438        4.45
  Savings Certificates                       52,949      1,211        4.61      51,767      1,308        5.09
  Certificates of Deposit
    $100,000 or more                         35,407        856        4.88      36,346        960        5.33
  Other Time                                    778         20        5.13         931         26        5.63
  Other Borrowings                           16,900        317        3.78      13,461        307        4.60
                                           --------    -------                --------    -------
    Total Interest-Bearing Liabilities      342,730      6,411        3.77     305,970      6,537        4.31
                                                       -------                            -------

Non-interest Bearing Liabilities:
  Demand Deposits                           128,363                            111,004
  Other Liabilities                           2,548                              2,337
  Shareholders' Equity                       46,539                             42,337
                                           --------                           --------
    Total Liabilities and
      Shareholders' Equity                 $520,180                           $461,648
                                           ========                           ========

Net Interest Income and Margin
 (Tax-equivalent Basis)(2)                             $12,713        5.31                $11,419        5.38
                                                       =======                            =======

</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.

24
<PAGE>

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

  Net interest income (tax equivalent) for the second quarter of 1999 was
$6,568,000 which represented an increase of $781,000, or 13.5%, over the second
quarter of 1998.  This increase was heavily contributed to by a 13.7% increase
in average loans for the second quarter of 1999 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, 1999 and 1998.
<TABLE>
<CAPTION>

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

                                        2nd Qtr. 1999 vs. 2nd Qtr. 1998     Six Months 1999 vs. Six Months 1998
                                              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                       $ (227)    $   (48)      $(275)       $ (418)     $  (114)      $ (532)
 Investment Securities (Taxable)             851        (480)        371         1,334         (514)         820
 Investment Securities (Tax-exempt)          (11)          4          (7)          (13)           2          (11)
 Loans, Net of Unearned Discount           2,458      (1,897)        561         2,827       (1,936)         891
                                          ------     -------       -----        ------      -------       ------

 Total Interest Income                     3,071      (2,421)        650         3,730       (2,562)       1,168
                                          ------     -------       -----        ------      -------       ------

Interest-Bearing Liabilities:
 Deposits                                  1,447      (1,591)       (144)        1,413       (1,549)        (136)
 Other Borrowings                            130        (117)         13           136         (126)          10
                                          ------     -------       -----        ------      -------       ------

 Total Interest Expense                    1,577      (1,708)       (131)        1,549       (1,675)        (126)
                                          ------     -------       -----        ------      -------       ------
Net Interest Income                       $1,494     $  (713)      $ 781        $2,181      $  (887)      $1,294
                                          ======     =======       =====        ======      =======       ======
</TABLE>

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

  The Corporation's allowance for loan losses was $4,895,000, or 1.44% of total
loans, as of June 30, 1999 compared to $4,413,000, or 1.51% of total loans, as
of June 30,1998.

  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,
                                          ------------------   ------------------
                                            1999       1998      1999      1998
                                          -------    -------   -------   --------
<S>                                       <C>        <C>       <C>       <C>
Balance, Beginning of Period               $4,749     $4,192    $4,724     $4,065
Provisions, Charged to Income                 418        250       638        408

Loans Charged-Off                            (325)       (68)     (559)      (115)
Recoveries of Loans Previously
      Charged-Off                              53         39        92         55
                                           ------     ------    ------     ------

         Net Loans (Charged-Off)
               Recovered                     (272)       (29)     (467)       (60)
                                           ------     ------    ------     ------

Balance, End of Period                     $4,895     $4,413    $4,895     $4,413
                                           ======     ======    ======     ======
</TABLE>
     For the six months ended June 30, 1999 and 1998, net charge-offs were .14%
and .02% of loans, respectively, not annualized.


                                                                              25
<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,
                                    1999        1999        1998            1998         1998
                                 ---------  ----------  -------------  --------------  ---------
<S>                              <C>        <C>         <C>            <C>             <C>
Non-Accrual Loans                  $2,952      $4,207       $5,049          $6,213       $6,830
Other Real Estate Owned             1,467       1,711          281              71           71
                                   ------      ------       ------          ------       ------

  Total Non-Performing Assets      $4,419      $5,918       $5,330          $6,284       $6,901
                                   ======      ======       ======          ======       ======
<CAPTION>
                                  June 30,   March 31,   December 31,   September 30,   June 30,
                                    1999        1999        1998            1998         1998
                                 ---------  ----------  -------------  --------------  ---------
<S>                              <C>        <C>         <C>            <C>             <C>
As a Percent of:
 Total Assets                         .84%       1.14%        1.00%           1.28%        1.48%
 Total Loans and Other Assets        1.30        1.85         1.74            2.08         2.36

Loans Past Due 90 days or
 More and Still Accruing          $    17      $    7       $    3          $  269        $   6
</TABLE>

     Non-accrual loans to total loans were .87% at June 30, 1999 and non-
performing assets were 1.30% of loans and other real estate owned at the same
date.

     As of June 30, 1999, loans to five borrowers represent approximately 93% of
the loans on non-accrual and three of these borrowers are current as to payment
of principal and interest on their loans.  The Corporation does not see the
increase in non-accrual loans in mid 1998 as a signal of a weakened local
economy or a change in the Corporation's lending standards, rather this is the
enforcement of the Corporation's strict policy of identifying problem loans as
soon as any difficulty a borrower may be experiencing is noted.

     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,
                               1999        1999         1998            1998         1998
                             ---------  ----------  -------------  --------------  ---------
<S>                          <C>        <C>         <C>            <C>             <C>
Non-Performing Loans           $2,952      $4,207      $ 5,055         $ 6,482      $ 6,830
Criticized Loans                9,755       9,597       10,468          11,524       11,737
Allowance for Loan Losses       4,895       4,749        4,724           4,663        4,413
Allowance for Loan Losses
  as a Percent of:
    Non-Performing Loans          166%        129%          94%             72%          65%
    Criticized Loans               50          50           45              40           38

</TABLE>
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,
                                       -----------------------------  -----------------------------
                                         1999      1998    % Change     1999      1998    % Change
                                       --------  --------  ---------  -------  ---------  ---------
<S>                                    <C>       <C>       <C>        <C>      <C>        <C>

Service Charges on Deposit Accounts       $ 489     $ 518     (5.6)%   $  967    $1,004     (3.7)%
Non-recurring Income                         46        88        --       244       154        --
Other Non-interest Income                   367       350       4.9       722       668       8.1
                                          -----     -----     -----    ------    ------

  Total Non-interest Income               $ 902     $ 956      (5.7)   $1,933    $1,826       5.9
                                          =====     =====              ======    ======

</TABLE>

     Non-recurring income is primarily franchise tax refunds, 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 1999 is primarily due to increases in mortgage
brokerage/origination fees and fees earned on investment services to customers.

26
<PAGE>

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,
                                   -----------------------------  ---------------------------------
                                     1999      1998    % Change      1999        1998     % Change
                                   ---------  -------  ---------  ----------  ----------  ---------
<S>                                <C>        <C>      <C>        <C>         <C>         <C>

Salaries & Employee Benefits         $2,350    $2,061      14.0%      $4,491      $4,102       9.5%
Occupancy Expense - Net                 305       232      31.5          550         471      16.8
Furniture and Equipment Expense         307       289       6.2          590         584      1.03
Other Real Estate Expense - Net          (2)        3        --           25         -0-        --
Other Expenses:
 Business Development                   145       159      (8.8)         269         303     (11.2)
 Insurance - Other                       36        21      71.4           71          46      54.3
 Legal & Professional Fees              121       121        --          288         252      14.3
 Taxes - Other                           47        82     (42.7)         112         167     (32.9)
 Postage & Courier                       80        69      15.9          158         141      12.1
 Printing & Supplies                     91       107     (15.0)         196         202      (3.0)
 Regulatory Fees & Assessments           45        44       2.3           91          84       8.3
 Other Operating Expenses               153       247     (38.1)         575         589      (2.4)
                                     ------    ------                 ------      ------

   Total Other Expenses                 718       850     (15.5)       1,760       1,784      (1.3)
                                     ------    ------                 ------      ------

   Total Non-interest Expense        $3,678    $3,435       7.1       $7,416      $6,941       6.8
                                     ======    ======                 ======      ======
</TABLE>

     Total non-interest expense increased  7.1% in the second quarter of 1999
over 1998, reflecting increases primarily in salaries and benefits and occupancy
expense.  As a percent of average assets, non-interest expenses were 2.84% in
the second quarter of 1999 and 2.97% in the same period of 1998.  The
"efficiency ratio" (non-interest expenses divided by total non-interest income
plus net interest income) was 49.2% for the second quarter of 1999.  These
measures of operating efficiency compare very favorably to other financial
institutions in the Corporation's peer group.

    The increase in salaries and employee benefits for the second quarter of
1999 is due to salary merit increases and additions to staff. The average number
of full-time equivalent employees increased by 3.5 to an average full-time
equivalent of 170.5 from the twelve months prior.  This increase in number of
employees was required because of the increase in assets over the past year.

     The increase in occupancy expense is primarily due to increased repairs,
increased property taxes and increased rent as a result of one branch office
relocating from temporary quarters to a permanent facility.

     Other operating expenses decreased in the second quarter of 1999 due to
decreases in various miscellaneous operating costs.


                                                                              27
<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, 1999 and may not be
reflective of positions in subsequent periods (dollars in thousands):
<TABLE>
<CAPTION>


                                                                                   Total       Repriced
                                         Matures or Reprices within:               Rate          After
                                  ------------------------------------------     Sensitive     1 Year or
                                     30 Days          31-180        181 to       One Year    Non-interest
                                     or Less           Days        One Year       or Less      Sensitive     Total
                                  -------------    ------------    ---------    ----------   ------------  ---------
<S>                               <C>              <C>             <C>          <C>          <C>           <C>
Earning Assets:
  Loans                                $220,958        $ 12,278     $  9,492      $242,728       $ 96,484   $339,212
  Investment Securities                   4,479          17,398       19,450        41,327         96,367    137,694
  Federal Funds Sold                      8,980             -0-          -0-         8,980            -0-      8,980
                                       --------        --------     --------      --------       --------   --------

   Total Earning Assets                 234,417          29,676       28,942       293,035        192,851    485,886
                                       --------        --------     --------      --------       --------   --------

Interest Bearing Liabilities:
  Interest-Bearing Transaction
    Accounts and Savings                236,835             -0-          -0-       236,835            -0-    236,835
  Certificate of Deposits
    >$100,000                            12,750           9,723       10,588        33,061          1,229     34,290
  Other Time Deposits                    17,055          16,641       16,704        50,400          3,620     54,020
  Repurchase Agreements                  20,340             -0-          -0-        20,340            -0-     20,340
  Note Payable                              250             -0-          -0-           250            -0-        250
                                       --------        --------     --------      --------       --------   --------

   Total Interest Bearing
    Liabilities                         287,230          26,364       27,292       340,886          4,849    345,735
                                       --------        --------     --------      --------       --------   --------

Interest Sensitivity
 Gap                                   $(52,813)       $  3,312     $  1,650      $(47,851)      $188,002   $140,151
                                       ========        ========     ========      ========       ========   ========
Cumulative Gap                         $(52,813)       $(49,501)    $(47,851)
                                       ========        ========     ========

Cumulative Gap to
 Total Earning Assets                    (10.87%)        (10.19%)     ( 9.85%)

Cumulative Gap to
 Total Assets                            (10.07%)        ( 9.44%)      (9.13%)
</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 (9.13%) was reversed to a positive 12.99% "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.

28
<PAGE>

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

    At June 30, 1999, total capital to total assets was 8.95%.

    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, 1999, the Corporation's Tier I
capital represented 13.36% of risk weighted assets and total qualifying capital
(Tier I and Tier II) represented  14.61% of risk weighted assets.  Both ratios
are well above current regulatory guidelines.

    Also, as of June 30, 1999, 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").

Impact of the Year 2000 Issue
-----------------------------

  The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year.  Any of the Corporation's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activities.

     Based on assessments, the Corporation determined that it would be required
to modify or replace portions of its software so that its computer systems will
properly utilize dates beyond December 31, 1999.  The Corporation presently
believes that with modifications made to existing software, the Year 2000 Issue
will be mitigated.

  The Corporation has utilized both internal and external resources to correct
and test the software for Year 2000 modifications.  The Corporation has
substantially completed the Year 2000 project.  The remaining work on the
project includes finalization of the Corporation's contingency plans should any
area not function as tested or any external event impact the operation of the
Corporation.  The total cost of the Year 2000 project has not been material to
the financial condition of the Corporation.

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.

                                                                              29
<PAGE>

                                  SIGNATURES



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

                                    SUMMIT BANCSHARES, INC.
                                           Registrant



Date: July 30, 1999              By: /s/  Philip E. Norwood
      -------------                 --------------------------------------------
                                    Philip E. Norwood, Chairman

Date: July 30, 1999              By: /s/  Bob G. Scott
      -------------                 --------------------------------------------
                                    Bob G. Scott, Executive Vice President
                                       and Chief Operating Officer
                                         (Chief Accounting Officer)



30
<PAGE>

                         PART II - OTHER INFORMATIONM

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 20,
          1999, 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, 1999. The shareholder vote in
               this matter was 5,636,661 for, 16,740 against, and 10,484
               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        5,606,359        7,900         49,626
               Elliott S. Garsek      5,601,659       12,600         49,626
               Ronald J. Goldman      5,605,259        9,000         49,626
               F.S. Gunn              5,606,659        7,600         49,626
               Jeffrey M. Harp        5,606,659        7,600         49,626
               Robert L. Herchert     5,606,459        7,800         49,626
               William W. Meadows     5,606,659        7,600         49,626
               James L. Murray        5,606,659        7,600         49,626
               Philip E. Norwood      5,606,659        7,600         49,626
               Byron B. Searcy        5,606,659        7,600         49,626

Item 5.   Other Information

          Not applicable

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, 1999
<PAGE>

                                 EXHIBIT INDEX

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

11      Computation of Earnings Per Common Share

27      Financial Data Schedule