MOOREFIELD, W.V., Oct. 18, 2007 (PRIME NEWSWIRE) -- Summit Financial Group, Inc. (Nasdaq:SMMF) today reported third quarter 2007 net income of its consolidated operations and its continuing operations which excludes from income substantially all business activities of Summit Mortgage, its residential mortgage loan origination unit, which ceased operations in January 2007.
Income from continuing operations for third quarter 2007 was $3.8 million, or $0.50 per diluted share, up 5.7 percent and 2.0 percent, respectively, compared with $3.6 million, or $0.49 per diluted share, reported for the prior-year period. Consolidated net income was $3.6 million, or $0.48 per diluted share, compared with $2.9 million, or $0.39 per diluted share reported for the third quarter of 2006, up 26.3 percent and 23.1 percent, respectively. Third quarter 2007 results reflect solid asset growth, well-controlled operating expenses, and a remarkably stable net interest margin. For the third quarter of 2007, in accordance with GAAP accounting, the returns on average shareholders' equity and average assets from continuing operations were 16.71 percent and 1.15 percent, respectively, compared with prior-year ratios of 17.85 percent and 1.19 percent.
For the nine months ended September 30, 2007, income from continuing operations was $9.7 million, or $1.33 per diluted share, up 16.3 percent and 14.7 percent, respectively, compared with $8.3 million, or $1.16 per diluted share, reported for the prior-year period. Consolidated net income for the first nine months of 2007 was $9.2 million, or $1.27 per diluted share, compared with $8.1 million, or $1.12 per diluted share reported for the 2006 nine-month period, up 14.6 percent and 13.4 percent respectively. For the first nine months of 2007, the returns on average shareholders' equity and average assets from continuing operations calculated on a GAAP basis were 15.11 percent and 1.01 percent, respectively, compared with prior-year ratios of 14.24 percent and 0.96 percent.
On August 22, 2007, Summit Financial Group, Inc. filed a Form 8-K stating that as a result of a review by the Securities and Exchange Commission ("SEC") of Summit's Form 10-K for the year ended December 31, 2006, the Company's interpretation of the short-cut method of hedge accounting under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended ("SFAS 133") as it was applied to certain of its interest rate swaps should be restated. Accordingly, in September 2007, the Company restated its financial statements for December 31, 2006, and the first two quarters of 2007 to eliminate the application of hedge accounting with respect to four interest rate swaps which previously had been designated as fair value hedges of certain convertible rate advances from the Federal Home Loan Bank ("FHLB"). The impact of the restatement is that fair value changes for these interest rate swaps are now recognized as noninterest income rather than as an adjustment to the carrying value of advances. Further, net cash settlement payments received/paid during each period are reclassified from interest expense on long-term borrowings to noninterest income. The four interest rate swaps, which were entered into in August 2003 to convert the fixed rate FHLB advances to a variable rate, had a notional value totaling $36 million. Restatements for prior years were incorporated into the December 31, 2006 restatement.
"This issue has affected many financial institutions who, like us, believed their initial accounting treatment for the transactions was appropriate," explained Robert S. Tissue, Summit's Chief Financial Officer. "The interpretation of SFAS 133 is complex and continues to evolve. Our swap transactions created effective economic hedges and performed as anticipated. In light of the recent review by the SEC, we have restated our historical financial statements for the periods since 2003 when we entered into the swaps. Should we elect to hold these swaps through their termination date of October 18, 2010, these market value adjustments will reverse themselves over the life of the swap and will result in no economic impact to the Company."
For the third quarter, the change in the fair value of interest rate swaps was a gain of $752,000 in 2007 and a gain of $579,000 in 2006. These gains from the non-cash change in fair value have been reported as a component of noninterest income in accordance with GAAP. Excluding the gains in fair value, third quarter pre-tax earnings from continuing operations were $4.8 million in 2007 compared with $4.6 million in 2006, a year-over-year increase of 3.7 percent. For the first nine months, the change in the fair value of interest rate swaps was a gain of $705,000 in 2007 and a loss of $140,000 in 2006. Excluding the gains/losses in fair value, pre-tax earnings from continuing operations were $13.2 million for the first nine months in 2007 compared with $12.1 million during the first nine months in 2006, a year-over-year increase of 8.8 percent.
H. Charles Maddy, III, President and Chief Executive Officer, commented, "This has been an excellent quarter for us in several respects: We continue to see strong loan growth in our markets, with loan quality and pricing holding up well. The blip in our charge-offs this quarter reflects the fast-approaching end of our obligation to repurchase any substandard loans originated by Summit Mortgage; the reserves we previously recorded have been adequate to address the losses experienced since we discontinued this business segment.
"Second, we consolidated our two previously chartered West Virginia and Virginia community banks this past quarter -- into one bank, Summit Community Bank. This consolidation will provide greater brand recognition throughout our two-state footprint, as well as operational expense savings. Summit Financial Group, our holding company, will continue to be headquartered in Moorefield, West Virginia. The Summit franchise will expand even further, into northern Virginia and Montgomery County, Maryland, when we expect to close on our acquisition of Greater Atlantic Financial late in the fourth quarter of this year.
"Third, we closed on the acquisition of the Leesburg, Virginia-based Kelly Insurance Agency Inc. and Kelly Property and Casualty Inc. ("Kelly Agencies") on July 2, and we now have one full quarter of first-hand operating experience with their team. Their employee benefits products and insurance lines are a natural fit to cross-sell to our customers, and we look forward to developing the synergies between our two organizations."
Total revenue for the third quarter of 2007, consisting of net interest income plus noninterest income, was $12.9 million, an increase of 20.0 percent compared to the $10.8 million reported for the third quarter of 2006. Net interest income for the quarter increased 7.9 percent above the prior-year third quarter, to $10.0 million, reflecting 9.8 percent growth in average earning assets, partially offset by a 12 basis point decline in the net interest margin, to 3.28 percent. Mr. Maddy added, "Our margin continues to vary within a tight band over the past year and did not change in the past quarter. Going forward, we anticipate the 50-basis point cut in the target federal funds rate will have a positive impact on our liability-sensitive balance sheet, and the possibility of additional cuts down the road should further enhance this impact."
Noninterest income for the 2007 third quarter was $2.9 million, nearly doubling from the $1.5 million recorded for the prior-year period. Excluding from the current and year-ago third quarters, the gain on the fair value of the interest rate swaps and the net cash settlement of interest, which was previously reflected in net interest income, and further excluding the $1.1 million of insurance revenues from the acquisition of the Kelly Agencies in the third quarter of 2007, noninterest income from organic sources was $1.25 million, up $193,000, or 18.2 percent above the year-earlier quarter, and up $106,000, or 9.2 percent, compared with the linked quarter. Service fee income, the second major component of noninterest income, increased $88,000, or 12.6 percent, to $788,000.
Third quarter 2007 noninterest expense was $6.8 million, a 29.2 percent increase over the $5.3 million recorded for the prior-year third quarter; compared with the second quarter of 2007, noninterest expense increased $1.1 million, or 19.3 percent. The increase in operating expenses was largely attributable to the addition of the Kelly Agencies; excluding the $982,600 of Kelly-related expenses, noninterest expense was $5.8 million, reflecting more modest year-over-year growth of $560,000, or 10.6 percent; compared with the second quarter of 2007, growth was $119,000, or 2.1 percent. The majority of the impact was attributable to salaries and employee benefits, which rose $1.2 million over the year-ago quarter; $800,000 of the increase was derived from the addition of 34 FTE employees from the Kelly Agencies during the third quarter. The efficiency ratio (for continuing operations) was 53.91 percent for the third quarter of 2007, compared with 49.88 percent for the prior-year third quarter, and 51.46 percent for the linked quarter.
At September 30, 2007, nonperforming assets were $7.7 million, or 0.58 percent of total assets, compared with $8.2 million, or 0.64 percent for the linked quarter and $1.5 million, or 0.12 percent for the year-ago quarter. Mr. Maddy commented, "The decline in the real estate market has had a significant impact on our asset quality; residential real estate loans account for approximately $2.8 million of nonperforming assets, and construction loans -- largely residential -- accounted for an additional $2.6 million. Commercial real estate loans totaled approximately $600,000 of nonperforming assets. In general, the CRE portfolio has performed well and has not demonstrated any substantial signs of weakness."
For the current quarter, the Company had net charge-offs of $566,000, or an annualized 0.23 percent of average loans, compared with $96,000, or an annualized 0.04 percent for the linked quarter, and $45,000, or 0.02 percent annualized for the year earlier period. Mr. Maddy commented, "Approximately $464,000 of charge-offs during the quarter were loans made by Summit Mortgage; when we discontinued operations earlier this year, we were obligated to provide recourse for up to one year with respect to nonperforming previously sold loans. We reserved accordingly, and the obligation period will end in first quarter 2008." At September 30, 2007, loan loss reserves were 0.88 percent of loans outstanding.
Assets at September 30, 2007 were $1.34 billion, an increase of $129.5 million, or 10.7 percent, over the prior-year period. Loans, net of unearned income, were $988.0 million at period end, up $93.2 million, or 10.4 percent, year over year. Commercial real estate contributed $51.7 million to loan growth, a 17.2 percent increase over the past twelve months. Residential mortgages were the second largest contributors to the year-over-year increase in loans, with all of the growth occurring during the third quarter; they grew by $21.2 million, up 7.5 percent from the linked quarter. Commercial real estate remains the largest component of Summit's loan portfolio at 35.3 percent of total loans; residential mortgages account for an additional 30.6 percent. Construction and development loans follow with a 21.3 percent share.
Deposits at September 30, 2007 were $828.6 million, a decrease of $36.5 million, or 4.2 percent from prior-year third quarter levels. Retail deposits increased by $40.3 million, or 6.7 percent, to $638.6 million; retail deposits now account for 77.1 percent of total deposits, compared with 69.2 percent for the third quarter of 2006. Contributing to the shift in the deposit mix was a year-over-year decrease of $76.8 million, or 28.8 percent, in brokered time deposits, which totaled $190.0 million at period end.
Shareholders' equity at September 30, 2007 was $93.5 million, an increase of 17.6 percent over the last twelve months. Common shares outstanding totaled 7,402,666 at quarter-end, compared with 7,102,720 for the prior-year quarter. The increase includes the issuance of 317,686 shares during the third quarter of 2007 for the acquisition of the Kelly Agencies.
ABOUT THE COMPANY
Summit Financial Group, Inc., a financial holding company with total assets of $1.34 billion, operates fifteen banking locations through its wholly-owned community bank, Summit Community Bank. Summit also operates Summit Insurance Services, LLC.
The Summit Financial Group, Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2990
NON-GAAP FINANCIAL MEASURES
This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Specifically, Summit adjusted several GAAP performance measures to exclude the effects of the non-cash changes in fair value of interest rate swaps included in its Statements of Income. Management believes presentations of financial measures excluding the impact of this item provide useful supplemental information that is important for a proper understanding of the operating results of Summit's core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
FORWARD-LOOKING STATEMENTS
This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as "expects", "anticipates", "believes", "estimates" and other similar expressions or future or conditional verbs such as "will", "should", "would" and "could" are intended to identify such forward-looking statements.
Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economy. We undertake no obligation to revise these statements following the date of this press release.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q3 2007 vs Q3 2006
For the Quarter Ended
--------------------- Percent
Dollars in thousands 9/30/07 9/30/06 Change
---------------------------------------------------------------------
Condensed Statements of Income
Interest income
Loans, including fees $ 19,921 $ 18,060 10.3%
Securities 3,446 2,998 14.9%
Other 9 16 -43.8%
-------- --------
Total interest income 23,376 21,074 10.9%
-------- --------
Interest expense
Deposits 8,627 7,761 11.2%
Borrowings 4,753 4,049 17.4%
-------- --------
Total interest expense 13,380 11,810 13.3%
-------- --------
Net interest income 9,996 9,264 7.9%
Provision for loan losses 525 260 101.9%
-------- --------
Net interest income after
provision for loan losses 9,471 9,004 5.2%
-------- --------
Noninterest income
Insurance commissions 1,303 219 495.0%
Service fee income 788 700 12.6%
Securities gains (losses) -- -- --
Net cash settlement on
interest rate swaps (181) (154) 17.5%
Change in fair value of
interest rate swaps 752 579 29.9%
Other income 244 142 71.8%
-------- --------
Total noninterest income 2,906 1,486 95.6%
-------- --------
Noninterest expense
Salaries and employee
benefits 4,054 2,817 43.9%
Net occupancy expense 466 387 20.4%
Equipment expense 496 476 4.2%
Professional fees 176 188 -6.4%
Other expenses 1,628 1,409 15.5%
-------- --------
Total noninterest expense 6,820 5,277 29.2%
-------- --------
Income from continuing
operations before income
taxes 5,557 5,213 6.6%
Income taxes 1,802 1,659 8.6%
-------- --------
Income from continuing
operations 3,755 3,554 5.7%
-------- --------
Discontinued operations
Exit costs and impairment
of long-lived assets -- -- n/a
Operating income (loss) (200) (1,059) -81.1%
-------- --------
Income (loss) from
discontinued operations
before income taxes (200) (1,059) -81.1%
Income taxes (69) (374) -81.6%
-------- --------
Income (loss) from
discontinued operations (131) (685) -80.9%
-------- --------
Net Income $ 3,624 $ 2,869 26.3%
======== ========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q3 2007 vs Q3 2006
For the Quarter Ended
--------------------- Percent
9/30/2007 9/30/2006 Change
---------------------------------------------------------------------
Per Share Data
Earnings per share from
continuing operations
Basic $ 0.51 $ 0.50 2.0%
Diluted $ 0.50 $ 0.49 2.0%
Earnings per share from
discontinued operations
Basic $ (0.02) $ (0.10) -80.0%
Diluted $ (0.02) $ (0.10) -80.0%
Earnings per share
Basic $ 0.49 $ 0.40 22.5%
Diluted $ 0.48 $ 0.39 23.1%
Average shares outstanding
Basic 7,399,213 7,127,650 3.8%
Diluted 7,458,515 7,187,274 3.8%
Performance Ratios
Return on average equity 16.13% 14.41% 11.9%
Return on average equity -
continuing operations 16.71% 17.85% -6.4%
Return on average assets 1.11% 0.96% 15.6%
Return on average assets -
continuing operations 1.15% 1.19% -3.4%
Net interest margin 3.28% 3.40% -3.5%
Efficiency ratio (A) 55.49% 70.86% -21.7%
Efficiency ratio -
continuing operations (A) 53.91% 49.88% 8.1%
NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring
income and expense items, amortization of intangibles, and changes in
fair value of derivatives.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary -- 2007 vs 2006
For the Nine Months Ended
------------------------- Percent
Dollars in thousands 9/30/2007 9/30/2006 Change
---------------------------------------------------------------------
Condensed Statements of Income
Interest income
Loans, including fees $ 57,712 $ 49,910 15.6%
Securities 9,832 8,431 16.6%
Other 43 53 -18.9%
-------- --------
Total interest income 67,587 58,394 15.7%
-------- --------
Interest expense
Deposits 26,537 19,322 37.3%
Borrowings 12,324 12,549 -1.8%
-------- --------
Total interest expense 38,861 31,871 21.9%
-------- --------
Net interest income 28,726 26,523 8.3%
Provision for loan losses 1,305 915 42.6%
-------- --------
Net interest income after
provision for loan losses 27,421 25,608 7.1%
-------- --------
Noninterest income
Insurance commissions 1,719 696 147.0%
Service fee income 2,141 2,056 4.1%
Securities gains (losses) -- -- --
Net cash settlement on
interest rate swaps (544) (337) 61.4%
Change in fair value of
interest rate swaps 705 (140) -603.6%
Other income 638 412 54.9%
-------- --------
Total noninterest income 4,659 2,687 73.4%
-------- --------
Noninterest expense
Salaries and employee
benefits 10,518 8,921 17.9%
Net occupancy expense 1,292 1,179 9.6%
Equipment expense 1,436 1,421 1.1%
Professional fees 543 640 -15.2%
Other expenses 4,399 4,149 6.0%
-------- --------
Total noninterest
expense 18,188 16,310 11.5%
-------- --------
Income from continuing
operations before income
taxes 13,892 11,985 15.9%
Income taxes 4,223 3,674 14.9%
-------- --------
Income from continuing
operations 9,669 8,311 16.3%
-------- --------
Discontinued operations
Exit costs and impairment
of long-lived assets 123 -- n/a
Operating income (loss) (798) (377) 111.7%
-------- --------
Income (loss) from
discontinued operations
before income taxes (675) (377) 79.0%
Income taxes (231) (116) 99.1%
-------- --------
Income (loss) from
discontinued operations (444) (261) 70.1%
-------- --------
Net Income $ 9,225 $ 8,050 14.6%
======== ========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary -- 2007 vs 2006
For the
Nine Months Ended
------------------------ Percent
9/30/2007 9/30/2006 Change
---------------------------------------------------------------------
Per Share Data
Earnings per share from continuing
operations
Basic 1.34 $ 1.17 14.5%
Diluted 1.33 $ 1.16 14.7%
Earnings per share from
discontinued operations
Basic (0.06) $ (0.04) 50.0%
Diluted (0.06) $ (0.04) 50.0%
Earnings per share
Basic $ 1.28 $ 1.13 13.3%
Diluted $ 1.27 $ 1.12 13.4%
Average shares outstanding
Basic 7,190,875 7,130,276 0.8%
Diluted 7,252,778 7,194,351 0.8%
Performance Ratios
Return on average equity 14.41% 13.79% 4.5%
Return on average equity -
continuing operations 15.11% 14.24% 6.1%
Return on average assets 0.97% 0.93% 4.3%
Return on average assets -
continuing operations 1.01% 0.96% 5.2%
Net interest margin 3.27% 3.40% -3.8%
Efficiency ratio (A) 55.65% 70.47% -21.0%
Efficiency ratio - continuing
operations (A) 52.99% 53.04% -0.1%
NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring
income and expense items, amortization of intangibles, and changes in
fair value of derivatives.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
For the Quarter Ended
Dollars in --------------------------------------------------
thousands 9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
---------------------------------------------------------------------
Condensed
Statements of
Income
Interest income
Loans, including
fees $ 19,921 $ 19,079 $ 18,712 $ 18,746 $ 18,060
Securities 3,446 3,263 3,124 3,131 2,998
Other 9 27 6 7 16
-------- -------- -------- -------- --------
Total interest
income 23,376 22,369 21,842 21,884 21,074
-------- -------- -------- -------- --------
Interest expense
Deposits 8,627 8,882 9,028 8,990 7,761
Borrowings 4,753 3,960 3,611 3,518 4,049
-------- -------- -------- -------- --------
Total interest
expense 13,380 12,842 12,639 12,508 11,810
-------- -------- -------- -------- --------
Net interest
income 9,996 9,527 9,203 9,376 9,264
Provision for
loan losses 525 390 390 930 260
-------- -------- -------- -------- --------
Net interest
income after
provision for
loan losses 9,471 9,137 8,813 8,446 9,004
-------- -------- -------- -------- --------
Noninterest income
Insurance
commissions 1,303 209 206 228 219
Service fee
income 788 736 617 702 700
Securities gains
(losses) -- -- -- -- --
Net cash
settlement on
interest rate
swaps (181) (179) (184) (197) (154)
Change in fair
value of
interest rate
swaps 752 (273) 227 50 579
Other income 244 203 191 163 142
-------- -------- -------- -------- --------
Total
noninterest
income 2,906 696 1,057 946 1,486
-------- -------- -------- -------- --------
Noninterest
expense
Salaries and
employee
benefits 4,054 3,238 3,226 2,899 2,817
Net occupancy
expense 466 408 418 378 387
Equipment expense 496 493 446 480 476
Professional fees 176 193 174 252 188
Other expenses 1,628 1,386 1,385 1,291 1,409
-------- -------- -------- -------- --------
Total
noninterest
expense 6,820 5,718 5,649 5,300 5,277
-------- -------- -------- -------- --------
Income before
income taxes 5,557 4,115 4,221 4,092 5,213
Income taxes 1,802 1,135 1,286 1,343 1,659
-------- -------- -------- -------- --------
Income from
continuing
operations 3,755 2,980 2,935 2,749 3,554
-------- -------- -------- -------- --------
Discontinued
operations
Exit costs and
impairment of
long-lived
assets -- 43 80 (2,480) --
Operating income
(loss) (200) (227) (372) (1,373) (1,059)
-------- -------- -------- -------- --------
Income (loss) from
discontinued
operations before
income taxes (200) (184) (292) (3,853) (1,059)
Income taxes (69) (66) (97) (1,311) (374)
-------- -------- -------- -------- --------
Income (loss)
from
discontinued
operations (131) (118) (195) (2,542) (685)
-------- -------- -------- -------- --------
Net Income $ 3,624 $ 2,862 $ 2,740 $ 207 $ 2,869
======== ======== ======== ======== ========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
For the Quarter Ended
---------------------------------------------------------
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
---------------------------------------------------------------------
Per Share
Data
Earnings per
share from
continuing
opera-
tions
Basic $ 0.51 $ 0.42 $ 0.41 $ 0.39 $ 0.50
Diluted $ 0.50 $ 0.42 $ 0.41 $ 0.38 $ 0.49
Earnings
per share
from
disconti-
nued
opera-
tions
Basic $ (0.02) $ (0.02) $ (0.03) $ (0.36) $ (0.10)
Diluted $ (0.02) $ (0.02) $ (0.03) $ (0.36) $ (0.10)
Earnings
per share
Basic $ 0.49 $ 0.40 $ 0.38 $ 0.03 $ 0.40
Diluted $ 0.48 $ 0.40 $ 0.38 $ 0.02 $ 0.39
Average
shares
outstand-
ing
Basic 7,399,213 7,084,980 7,084,980 7,091,560 7,127,650
Diluted 7,458,515 7,148,241 7,147,170 7,150,407 7,187,274
Performance
Ratios
Return on
average
equity 16.13% 13.59% 13.40% 1.01% 14.41%
Return on
average
equity -
continuing
operations 16.71% 14.15% 14.35% 13.37% 17.85%
Return on
average
assets 1.11% 0.91% 0.88% 0.07% 0.96%
Return on
average
assets -
continuing
operations 1.15% 0.94% 0.94% 0.89% 1.19%
Net interest
margin 3.28% 3.28% 3.26% 3.32% 3.40%
Efficiency
ratio (A) 55.49% 53.69% 57.71% 69.79% 70.86%
Efficiency
ratio -
continuing
operations
(A) 53.91% 51.46% 53.50% 49.61% 49.88%
NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring
income and expense items, amortization of intangibles, and changes in
fair value of derivatives.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data
Dollars in
thousands,
except per For the Quarter Ended
share -------------------------------------------------------
amounts 9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
---------------------------------------------------------------------
Assets $1,340,679 $1,280,428 $1,254,528 $1,235,519 $1,211,195
Securities 279,289 259,526 258,173 247,874 246,332
Loans, net 988,033 949,175 930,769 916,045 894,836
Intangible
assets 10,143 3,121 3,159 3,197 3,234
Retail
deposits 638,633 626,617 623,431 609,064 598,293
Brokered
time
deposits 189,966 223,771 253,794 279,623 266,769
Short-term
borrowings 124,699 100,901 79,886 60,428 90,422
Long-term
borrowings
and
subordinated
debentures 283,268 236,347 203,408 195,698 165,716
Shareholders'
equity 93,475 81,910 81,950 78,752 79,481
Book value
per share $ 12.63 $ 11.56 $ 11.57 $ 11.12 $ 11.19
Tangible
book value
per share $ 11.26 $ 11.12 $ 11.12 $ 10.66 $ 10.73
Tangible
equity /
Tangible
assets 6.3% 6.2% 6.3% 6.1% 6.3%
Tier 1
leverage
ratio 8.1% 7.9% 7.9% 7.8% 8.1%
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
Dollars in
thousands 9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
---------------------------------------------------------------------
Commercial $ 87,018 $ 81,292 $ 69,700 $ 69,470 $ 67,352
Commercial real
estate 352,396 354,833 329,561 314,199 300,676
Construction
and
development 212,570 198,721 220,430 215,820 207,545
Residential
real estate 305,016 283,821 279,564 282,512 283,943
Consumer 33,255 33,937 33,845 36,455 36,885
Other 6,793 7,111 7,209 6,968 7,086
-------- -------- -------- -------- --------
Total loans 997,048 959,715 940,309 925,424 903,487
Less unearned
fees and
interest 1,884 1,772 1,757 1,868 1,806
-------- -------- -------- -------- --------
Total loans
net of
unearned fees
and interest 995,164 957,943 938,552 923,556 901,681
Less allowance
for loan
losses 8,727 8,768 7,783 7,511 6,845
-------- -------- -------- -------- --------
Loans, net $986,437 $949,175 $930,769 $916,045 $894,836
======== ======== ======== ======== ========
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Retail Deposit Composition
Dollars in
thousands 9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
--------------------------------------------------------------------
Non interest
bearing
checking $ 65,230 $ 64,373 $ 60,645 $ 62,591 $ 64,751
Interest
bearing
checking 230,491 230,509 230,634 220,167 223,992
Savings 39,596 41,910 44,713 47,984 44,980
Time deposits 303,316 289,825 287,439 278,322 264,570
-------- -------- -------- -------- --------
Total retail
deposits $638,633 $626,617 $623,431 $609,064 $598,293
======== ======== ======== ======== ========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Asset Quality Information
For the Quarter Ended
Dollars in -----------------------------------------------------
thousands 9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
--------------------------------------------------------------------
Gross loan
charge-offs $ 599 $ 141 $ 206 $ 313 $ 95
Gross loan
recoveries (33) (45) (87) (50) (50)
--------- --------- --------- --------- ---------
Net loan
charge-offs $ 566 $ 96 $ 119 $ 263 $ 45
--------- --------- --------- --------- ---------
Net loan
charge-offs to
average loans
(annualized) 0.23% 0.04% 0.05% 0.11% 0.02%
Allowance for
loan losses $ 8,727 $ 8,768 $ 7,783 $ 7,511 $ 6,845
Allowance for
loan losses as
a percentage
of period end
loans 0.88% 0.91% 0.83% 0.81% 0.76%
Nonperforming
assets:
Nonperforming
loans $ 6,916 $ 7,307 $ 4,474 $ 5,276 $ 1,273
Foreclosed
properties
and other
repossessed
assets 815 851 43 77 180
--------- --------- --------- --------- ---------
Total $ 7,731 $ 8,158 $ 4,517 $ 5,353 $ 1,453
========= ========= ========= ========= =========
Nonperforming
loans to
period end
loans 0.69% 0.76% 0.48% 0.57% 0.14%
========= ========= ========= ========= =========
Nonperforming
assets to
period end
assets 0.58% 0.64% 0.36% 0.43% 0.12%
========= ========= ========= ========= =========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2007 vs Q3 2006
Q3 2007 Q3 2006
-------------------------- ---------------------------
Dollars in Average Earnings/ Yield/ Average Earnings/ Yield/
thousands Balances Expense Rate Balances Expense Rate
--------------------------------------- ---------------------------
ASSETS
Interest
earning
assets
Loans, net
of unearned
interest
Taxable $ 967,106 $19,790 8.12% $ 884,917 $18,103 8.12%
Tax-exempt 9,523 192 8.00% 8,631 171 7.86%
Securities
Taxable 223,731 2,900 5.14% 192,475 2,452 5.05%
Tax-exempt 47,910 822 6.81% 47,842 817 6.78%
Interest
bearing
deposits
other
banks and
Federal
funds
sold 662 11 6.59% 3,559 16 1.78%
---------- ------- ---- ---------- ------- ----
Total
interest
earning
assets 1,248,932 23,715 7.53% 1,137,424 21,559 7.52%
Noninterest
earning
assets
Cash & due
from banks 14,356 12,791
Premises &
equipment 22,103 23,703
Other
assets 32,935 27,224
Allowance
for loan
losses (8,939) (6,994)
---------- ----------
Total
assets $1,309,387 $1,194,148
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest
bearing
liabilities
Interest
bearing
demand
deposits $ 230,918 $ 1,969 3.38% $ 221,297 $ 2,044 3.66%
Savings
deposits 40,752 163 1.59% 42,038 164 1.55%
Time
deposits 517,405 6,495 4.98% 478,992 5,553 4.60%
Short-term
borrowings 89,941 1,180 5.21% 132,680 1,777 5.31%
Long-term
borrowings
and
subordinated
debentures 263,968 3,573 5.37% 164,996 2,272 5.46%
---------- ------- ---- ---------- ------- ----
1,142,984 13,380 4.64% 1,040,003 11,810 4.51%
Noninterest
bearing
liabilities
Demand
deposits 66,079 64,043
Other
liabilities 10,435 10,470
---------- ----------
Total
lia-
bilities 1,219,498 1,114,516
Shareholders'
equity 89,889 79,632
---------- ----------
Total
liabilities
and
shareholders'
equity $1,309,387 $1,194,148
========== ==========
NET INTEREST
EARNINGS $10,335 $ 9,749
======= =======
NET INTEREST
YIELD ON
EARNING
ASSETS 3.28% 3.40%
==== ====
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2007 vs YTD 2006
For the Nine Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------------------------------------
2007 2006
--------------------------- ----------------------------
Dollars in Average Earnings/ Yield/ Average Earnings/ Yield/
thousands Balances Expense Rate Balances Expense Rate
--------------------------------------- ----------------------------
ASSETS
Interest
earning
assets
Loans, net
of unearned
interest
Taxable $ 945,496 $57,435 8.12% $ 857,851 $50,180 7.82%
Tax-exempt 9,274 550 7.93% 8,373 476 7.60%
Securities
Taxable 214,602 8,216 5.12% 189,768 6,837 4.82%
Tax-exempt 46,931 2,419 6.89% 45,950 2,385 6.94%
Interest
bearing
deposits
other
banks and
Federal
funds
sold 1,190 43 4.83% 1,453 52 4.78%
---------- ------- ---- ---------- ------- ----
Total
interest
earning
assets 1,217,493 68,663 7.54% 1,103,395 59,930 7.26%
Noninterest
earning
assets
Cash & due
from banks 14,003 13,760
Premises &
equipment 22,207 23,552
Other
assets 29,132 26,160
Allowance
for loan
losses (8,564) (6,683)
---------- ----------
Total
assets $1,274,271 $1,160,184
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest
bearing
liabilities
Interest
bearing
demand
deposits $ 227,461 $ 6,120 3.60% $ 213,518 $ 5,410 3.39%
Savings
deposits 43,449 561 1.73% 40,826 311 1.02%
Time
deposits 536,784 19,856 4.95% 428,224 13,601 4.25%
Short-term
borrowings 78,002 3,098 5.31% 148,876 5,572 5.00%
Long-term
borrowings
and
subordinated
debentures 227,914 9,226 5.41% 176,250 6,977 5.29%
---------- ------- ---- ---------- ------- ----
1,113,610 38,861 4.67% 1,007,694 31,871 4.23%
Noninterest
bearing
liabilities
Demand
deposits 64,028 64,618
Other
liabilities 11,297 10,059
---------- ----------
Total
lia-
bilities 1,188,935 1,082,371
Shareholders'
equity 85,336 77,813
---------- ----------
Total
liabilities
and
shareholders'
equity $1,274,271 $1,160,184
========== ==========
NET INTEREST
EARNINGS $29,802 $28,059
======= =======
NET INTEREST
YIELD ON
EARNING
ASSETS 3.27% 3.40%
==== ====
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP
Financial Measures
For the
For the Quarter Ended Nine Months Ended
--------------------- --------------------
Dollars in thousands 9/30/2007 9/30/2006 9/30/2007 9/30/2006
-------------------------------------------------------------------
Income from continuing
operations before
income taxes, excluding
changes in fair value
of interest rate swaps $ 4,805 $ 4,634 $ 13,187 $ 12,125
Changes in fair value
of interest rate swaps 752 579 705 (140)
-------- -------- -------- --------
GAAP income from
continuing operations,
before income taxes $ 5,557 $ 5,213 $ 13,892 $ 11,985
======== ======== ======== ========
Income from continuing
operations -
excluding changes in
fair value of interest
rate swaps $ 3,281 $ 3,189 $ 9,225 $ 8,399
Changes in fair value of
interest rate swaps 752 579 705 (140)
Applicable income tax
effect (278) (214) (261) 52
-------- -------- -------- --------
474 365 444 (88)
-------- -------- -------- --------
GAAP income from
continuing operations $ 3,755 $ 3,554 $ 9,669 $ 8,311
======== ======== ======== ========