MOOREFIELD, W.V., Jan. 31, 2008 (PRIME NEWSWIRE) -- Summit Financial Group, Inc. (Nasdaq:SMMF) today reported fiscal year and fourth quarter 2007 financial results from 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 2007 was $13.5 million or $1.85 per diluted share, an increase of 22.4 percent and 20.1 percent, respectively, compared with $11.1 million or $1.54 per diluted share reported for the prior-year. Excluding mark-to-market changes in fair value of interest rate swaps, income from continuing operations was $12.6 million for 2007 compared to $11.1 million for 2006. 2007 results from continuing operations reflect strong loan growth, well-controlled operating expenses and a stable net interest margin year-over-year.
For the fourth quarter of 2007, Summit's income from continuing operations was $3.9 million or $0.52 per diluted share compared with the $2.7 million or $0.39 per diluted share reported for the prior-year quarter, an increase of 40.7 percent and 33.3 percent, respectively. Excluding mark-to-market changes in fair value of interest rate swaps, fourth quarter 2007 income from continuing operations was $3.4 million compared to $2.7 million for the same period in 2006.
H. Charles Maddy, III, president and chief executive officer of Summit, commented, "This has not been an easy year for the banking industry, and we include Summit in that statement. We continue to perform well by virtue of our strong markets, our conservative loan and administration policies, and the dedication of our staff. We are expanding successfully in a weak banking environment, keeping our expenses in check and our revenues growing proportionately to our asset size. We are seeing some signs of weakness in our loan portfolio, but so far, these have been at a manageable level."
Highlights of the year include:
* Settlement of the Corinthian Mortgage litigation in Q4
* Completion of the acquisition of the Kelly Agencies in Q3
* Agreement to acquire Greater Atlantic Financial Corp. in Q2; plan to close in Q1 '08
* Consolidation of our two subsidiary banks under the "Summit Community Bank" name in Q2
Mr. Maddy continued, "The big news for us in 2007 is that we have completely exited from our mortgage banking business following settlement of litigation that carried a high price. However, we are relieved to be rid of the uncertainties that have compromised our ability to focus on our core banking business. We are ready to move ahead to close and consolidate our acquisition of Greater Atlantic in the first quarter of 2008. We are confident of our ability to run an outstanding community bank, and Greater Atlantic represents an extension of our core expertise.
"Our accomplishments this past year position us well for continued growth. We consolidated our two banks into one, unifying our brand and improving our operating efficiency. We completed the acquisition of the Kelly Agencies, two Leesburg, Virginia-based insurance agencies primarily specializing in group health, life and disability benefit plans. This acquisition is already performing well for us, generating approximately $1 million of commission revenue per quarter. Next on our agenda is the completion of the Greater Atlantic acquisition, consisting of five branches in some of the highest growth and wealthiest markets in the country. We anticipate closing on the Greater Atlantic acquisition during the first quarter of 2008."
Consolidated net income for 2007 was $6.5 million or $0.88 per diluted share, compared with $8.3 million or $1.15 per diluted share reported for 2006, a decline of 21.8 percent and 23.5 percent, respectively. 2007 consolidated results include a loss from discontinued operations related to Summit Mortgage of $7.1 million, or $0.97 per diluted share, which includes a $5.8 million after-tax charge to settle the Corinthian litigation. 2006 results include a loss from discontinued operations of $2.8 million, or $0.39 per diluted share.
On a consolidated basis, Summit reported a fourth quarter 2007 net loss of $2.8 million, or $0.37 per diluted share, compared with net income of $207,000, or $0.03 per diluted share for the prior-year fourth quarter. Consolidated results for the fourth quarter also reflect the above-mentioned 2007 litigation settlement and a charge to terminate the mortgage company in 2006.
For 2007, the returns on average shareholders' equity and average assets from continuing operations calculated in accordance with GAAP were 15.39 percent and 1.04 percent, respectively, compared with prior-year ratios of 13.99 percent and 0.94 percent. Fourth quarter 2007 returns on average shareholders' equity and average assets from continuing operations were 16.23 percent and 1.13 percent, respectively, compared with prior-year ratios of 13.37 percent and 0.89 percent.
Total revenues for 2007 were $46.4 million, consisting of $39.0 million of net interest income plus $7.4 million of noninterest income, an increase of 17.4 percent compared to total revenues of $39.5 million in 2006. Net interest income for the year increased 8.8 percent above 2006, reflecting 10.7 percent growth in average earning assets, partially offset by a 12 basis point decline in the net interest margin, to 3.26 percent.
Total revenue for the fourth quarter of 2007 was $13.0 million, up 26.3 percent from fourth quarter 2006 revenue of $10.3 million. Net interest income was $10.3 million, up 10.3 percent from the year-ago quarter, from the combined impact of an 11.6 percent increase in average earning assets and an eight basis point decline in the net interest margin, to 3.24 percent. Mr. Maddy commented, "Unlike many community banks, Summit's balance sheet is liability-sensitive, and in this sharply declining interest-rate environment, our net interest margin should strengthen. Competitive pressures from loan and deposit pricing still remain formidable, but with respect to loan pricing, some of our competitors are just not quite as competitive as they were in the past."
Mr. Maddy added, "Our fee-based revenue has been growing solidly. Service fee income is growing incrementally each quarter, and the contribution of insurance commissions surged to approximately 50 percent of noninterest income this quarter (excluding the impact of interest rate swaps from noninterest income). We completed our acquisition of the Kelly Insurance Agencies on July 2, 2007, and for each of the two most recent 2007 quarters, insurance commissions increased by $1 million per quarter."
For 2007, noninterest income was $7.4 million, up $3.7 million or 102.5 percent from the $3.6 million reported for fiscal 2006. Excluding changes in fair value of interest rate swaps and the net cash settlement of interest on these swaps from fiscal 2007 and 2006, and further excluding the $2.1 million of insurance revenues from the Kelly Agencies acquisition, noninterest income from organic sources was $4.5 million, up $249,000 or 5.8 percent above fiscal 2006. Service fee income increased $246,000, or 8.9 percent, to $3.0 million, compared to $2.8 million for the prior-year. For the fourth quarter of 2007, noninterest income was $2.7 million, up $1.8 million from the $946,000 recorded for the year-ago quarter. Service fee income increased $161,000, or 22.9 percent, to $863,000 for fourth quarter of 2007.
2007 noninterest expense was $25.1 million, a 16.1 percent, or $3.5 million increase over the $21.6 million record for the previous fiscal year. Salaries and benefits accounted for 79.9 percent of the increase, increasing $2.8 million, or 23.6 percent, to $14.6 million for the year; 2007 results include the addition of 34 employees associated with the acquisition of the Kelly Agencies. The efficiency ratio for continuing operations was 53.00 percent for 2007, compared with 52.15 percent for 2006. For the fourth quarter of 2007, noninterest expense was $6.9 million, up 30.4 percent or $1.6 million from the fourth quarter of 2006, and 1.3 percent or $90,000 from the linked quarter. The efficiency ratio (for continuing operations) was 53.03 percent for the fourth quarter of 2007, compared with 49.61 percent for the prior-year fourth quarter, and 53.91 percent for the linked quarter.
Assets at December 31, 2007 were $1.44 billion, an increase of $200.0 million, or 16.2 percent, over the prior-year period. Loans, net of unearned income, were $1.06 billion at period end, up $138.1 million, or 15.0 percent, year over year. Loan growth was distributed across virtually every loan category (except consumer loans); however, commercial real estate (CRE) loans, the largest loan category at 36.1 percent of the portfolio, was also the driver of 2007 loan growth, up $70.3 million year-over-year; CRE contributed approximately 50 percent of total loan growth for the year. Residential real estate, the second largest loan category at 30.3 percent, contributed approximately $40 million of loan growth, mostly in the second half of the year. Growth of construction and development loans slowed substantially this year with only a $9.5 million increase, its portfolio share reduced to 21.2 percent from 23.3 percent at year-end 2006.
At December 31, 2007, nonperforming assets were $12.4 million, or 0.86 percent of total assets, compared with $7.7 million, or 0.58 percent for the linked quarter and $5.4 million, or 0.43 percent for the year-ago quarter. Residential real estate loans account for approximately $4.9 million of nonperforming assets, and construction and development loans - largely residential - accounted for an additional $2.0 million. Commercial real estate loans totaled approximately $2.5 million of nonperforming assets. Mr. Maddy noted, "Although our level of nonperforming assets has doubled as a percent of total assets over the course of the past year, we believe our loans are solidly underwritten and supported by real property that should retain its value better than in many markets. Anticipated population growth should serve to absorb the additional housing inventory within a reasonable timeframe. A bright spot has been the CRE portfolio, which has performed well and has yet to demonstrate substantial signs of weakness."
For the current quarter, the Company had net charge-offs of $285,000, or an annualized 0.11 percent of average loans, compared with $566,000, or an annualized 0.23 percent for the linked quarter, and $263,000, or 0.11 percent annualized for the year earlier period. Mr. Maddy commented, "We experienced very low charge-offs on loans that are part of our continuing operations. Approximately $464,000 of charge-offs during the year were loans made by Summit Mortgage; when we discontinued its 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 December 31, 2007, loan loss reserves were 0.86 percent of loans outstanding.
Total deposits at December 31, 2007 were $828.7 million compared with $888.7 million at the prior year-end, a decrease of $60 million or 6.8 percent. Brokered deposits declined by $103.2 million or 36.9 percent over the past year, to $176.4 million at December 31, 2007, while Summit's retail deposit portfolio increased by $43.2 million, or 7.1 percent, to $652.3 million at year-end 2007. Retail deposits now account for 78.7 percent of total deposits, compared with 68.5 percent at year end 2006.
Shareholders' equity at December 31, 2007 was $89.4 million, an increase of 13.5 percent over the last twelve months. Common shares outstanding totaled 7,408,941 at year-end, compared with 7,089,680 for the prior-year end. The increase includes the issuance of approximately 318,000 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 $1.44 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 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 -- Q4 2007 vs Q4 2006 For the Quarter Ended ---------------------- Percent Dollars in thousands 12/31/2007 12/31/2006 Change ----------------------------------------------------------------- Condensed Statements of Income Interest income Loans, including fees $ 20,199 $ 18,746 7.8% Securities 3,590 3,131 14.7% Other 8 7 14.3% -------- -------- Total interest income 23,797 21,884 8.7% -------- -------- Interest expense Deposits 7,759 8,990 -13.7% Borrowings 5,697 3,518 61.9% -------- -------- Total interest expense 13,456 12,508 7.6% -------- -------- Net interest income 10,341 9,376 10.3% Provision for loan losses 750 930 -19.4% -------- -------- Net interest income after provision for loan losses 9,591 8,446 13.6% -------- -------- Noninterest income Insurance commissions 1,157 228 407.5% Service fee income 863 702 22.9% Securities gains (losses) -- -- n/a Net cash settlement on interest rate swaps (183) (197) -7.1% Change in fair value of interest rate swaps 783 50 1466.0% Other income 78 163 -52.1% -------- -------- Total noninterest income 2,698 946 185.2% -------- -------- Noninterest expense Salaries and employee benefits 4,090 2,899 41.1% Net occupancy expense 466 378 23.3% Equipment expense 568 480 18.3% Professional fees 152 252 -39.7% Other expenses 1,634 1,291 26.6% -------- -------- Total noninterest expense 6,910 5,300 30.4% -------- -------- Income from continuing operations before income taxes 5,379 4,092 31.5% Income taxes 1,511 1,343 12.5% -------- -------- Income from continuing operations 3,868 2,749 40.7% -------- -------- Discontinued operations Exit costs and impairment of long-lived assets (435) (2,480) -82.5% Operating income (loss) (9,549) (1,373) 595.5% -------- -------- Income (loss) from discontinued operations before income taxes (9,984) (3,853) 159.1% Income taxes (3,347) (1,311) 155.3% -------- -------- Income (loss) from dis- continued operations (6,637) (2,542) 161.1% -------- -------- Net Income $ (2,769) $ 207 -1437.7% ======== ======== Per Share Data Earnings per share from continuing operations Basic $ 0.52 $ 0.39 33.3% Diluted $ 0.52 $ 0.39 33.3% Earnings per share from dis- continued operations Basic $ (0.89) $ (0.36) 147.2% Diluted $ (0.89) $ (0.36) 147.2% Earnings per share Basic $ (0.37) $ 0.03 -1333.3% Diluted $ (0.37) $ 0.03 -1333.3% Average shares outstanding Basic 7,401,684 7,091,560 4.4% Diluted 7,450,049 7,150,407 4.2% Performance Ratios Return on average equity -11.62% 1.01% -1250.5% Return on average equity - continuing operations 16.23% 13.37% 21.4% Return on average assets -0.81% 0.07% -1257.1% Return on average assets - continuing operations 1.13% 0.89% 27.0% Net interest margin 3.24% 3.32% -2.4% Efficiency ratio - continuing operations (A) 53.03% 49.61% 6.9% 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) Annual Performance Summary -- 2007 vs 2006 For the Years Ended ------------------------ Percent Dollars in thousands 12/31/2007 12/31/2006 Change --------------------------------------------------------------------- Condensed Statements of Income Interest income Loans, including fees $ 77,911 $ 68,656 13.5% Securities 13,422 11,562 16.1% Other 51 60 -15.0% --------- --------- Total interest income 91,384 80,278 13.8% --------- --------- Interest expense Deposits 34,296 28,312 21.1% Borrowings 18,021 16,067 12.2% --------- --------- Total interest expense 52,317 44,379 17.9% --------- --------- Net interest income 39,067 35,899 8.8% Provision for loan losses 2,055 1,845 11.4% --------- --------- Net interest income after provision for loan losses 37,012 34,054 8.7% --------- --------- Noninterest income Insurance commissions 2,876 924 211.3% Service fee income 3,004 2,758 8.9% Securities gains (losses) -- -- -- Net cash settlement on interest rate swaps (727) (533) 36.4% Change in fair value of interest rate swaps 1,478 (91) -1724.2% Other income 726 575 26.3% --------- --------- Total noninterest income 7,357 3,633 102.5% --------- --------- Noninterest expense Salaries and employee benefits 14,608 11,821 23.6% Net occupancy expense 1,758 1,557 12.9% Equipment expense 2,004 1,901 5.4% Professional fees 695 892 -22.1% Other expenses 6,033 5,438 10.9% --------- --------- Total noninterest expense 25,098 21,609 16.1% --------- --------- Income from continuing operations before income taxes 19,271 16,078 19.9% Income taxes 5,734 5,018 14.3% --------- --------- Income from continuing operations 13,537 11,060 22.4% --------- --------- Discontinued operations Exit costs and impairment of long-lived assets (312) (2,480) -87.4% Operating income (loss) (10,347) (1,750) 491.3% --------- --------- Income (loss) from discontinued operations before income taxes (10,659) (4,230) 152.0% Income taxes (3,578) (1,427) 150.7% --------- --------- Income (loss) from dis- continued operations (7,081) (2,803) 152.6% --------- --------- Net Income $ 6,456 $ 8,257 -21.8% ========= ========= Per Share Data Earnings per share from continuing operations Basic 1.87 $ 1.55 20.6% Diluted 1.85 $ 1.54 20.1% Earnings per share from dis- continued operations Basic (0.98) $ (0.39) 151.3% Diluted (0.97) $ (0.39) 148.7% Earnings per share Basic $ 0.89 $ 1.16 -23.3% Diluted $ 0.88 $ 1.15 -23.5% Average shares outstanding Basic 7,244,011 7,120,518 1.7% Diluted 7,303,391 7,183,281 1.7% Performance Ratios Return on average equity 7.34% 10.44% -29.7% Return on average equity - continuing operations 15.39% 13.99% 10.0% Return on average assets 0.50% 0.70% -28.6% Return on average assets - continuing operations 1.04% 0.94% 10.6% Net interest margin 3.26% 3.38% -3.6% Efficiency ratio - continuing operations (A) 53.00% 52.15% 1.6% 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 Dollars in thousands For the Quarter Ended ----------------------------------------------------- 12/31/07 9/30/07 6/30/07 3/31/07 12/31/06 --------------------------------------------------------------------- Condensed Statements of Income Interest income Loans, including fees $ 20,199 $ 19,921 $ 19,079 $ 18,712 $ 18,746 Securities 3,590 3,446 3,263 3,124 3,131 Other 8 9 27 6 7 --------- --------- --------- --------- --------- Total interest income 23,797 23,376 22,369 21,842 21,884 --------- --------- --------- --------- --------- Interest expense Deposits 7,759 8,627 8,882 9,028 8,990 Borrowings 5,697 4,753 3,960 3,611 3,518 --------- --------- --------- --------- --------- Total interest expense 13,456 13,380 12,842 12,639 12,508 --------- --------- --------- --------- --------- Net interest income 10,341 9,996 9,527 9,203 9,376 Provision for loan losses 750 525 390 390 930 --------- --------- --------- --------- --------- Net interest income after provision for loan losses 9,591 9,471 9,137 8,813 8,446 --------- --------- --------- --------- --------- Noninterest income Insurance commissions 1,157 1,303 209 206 228 Service fee income 863 788 736 617 702 Securities gains (losses) -- -- -- -- -- Net cash settle- ment on interest rate swaps (183) (181) (179) (184) (197) Change in fair value of interest rate swaps 783 752 (273) 227 50 Other income 78 244 203 191 163 --------- --------- --------- --------- --------- Total non- interest income 2,698 2,906 696 1,057 946 --------- --------- --------- --------- --------- Noninterest expense Salaries and employee benefits 4,090 4,054 3,238 3,226 2,899 Net occupancy expense 466 466 408 418 378 Equipment expense 568 496 493 446 480 Professional fees 152 176 193 174 252 Other expenses 1,634 1,628 1,386 1,385 1,291 --------- --------- --------- --------- --------- Total non- interest expense 6,910 6,820 5,718 5,649 5,300 --------- --------- --------- --------- --------- Income before income taxes 5,379 5,557 4,115 4,221 4,092 Income taxes 1,511 1,802 1,135 1,286 1,343 --------- --------- --------- --------- --------- Income from continuing operations 3,868 3,755 2,980 2,935 2,749 --------- --------- --------- --------- --------- Discontinued operations Exit costs and impairment of long-lived assets (435) -- 43 80 (2,480) Operating income (loss) (9,549) (200) (227) (372) (1,373) --------- --------- --------- --------- --------- Income (loss) from discontinued operations before income taxes (9,984) (200) (184) (292) (3,853) Income taxes (3,347) (69) (66) (97) (1,311) --------- --------- --------- --------- --------- Income (loss) from discon- tinued opera- tions (6,637) (131) (118) (195) (2,542) --------- --------- --------- --------- --------- Net Income $ (2,769) $ 3,624 $ 2,862 $ 2,740 $ 207 ========= ========= ========= ========= ========= Per Share Data Earnings per share from con- tinuing opera- tions Basic $ 0.52 $ 0.51 $ 0.42 $ 0.41 $ 0.39 Diluted $ 0.52 $ 0.50 $ 0.42 $ 0.41 $ 0.39 Earnings per share from discontinued operations Basic $ (0.89) $ (0.02) $ (0.02) $ (0.03) $ (0.36) Diluted $ (0.89) $ (0.02) $ (0.02) $ (0.03) $ (0.36) Earnings per share Basic $ (0.37) $ 0.49 $ 0.40 $ 0.38 $ 0.03 Diluted $ (0.37) $ 0.48 $ 0.40 $ 0.38 $ 0.03 Average shares outstanding Basic 7,401,684 7,399,213 7,084,980 7,084,980 7,091,560 Diluted 7,450,049 7,458,515 7,148,241 7,147,170 7,150,407 Performance Ratios Return on average equity -11.62% 16.13% 13.59% 13.40% 1.01% Return on average equity - con- tinuing opera- tions 16.23% 16.71% 14.15% 14.35% 13.37% Return on average assets -0.81% 1.11% 0.91% 0.88% 0.07% Return on average assets - con- tinuing opera- tions 1.13% 1.15% 0.94% 0.94% 0.89% Net interest margin 3.24% 3.28% 3.28% 3.26% 3.32% Efficiency ratio - continuing operations (A) 53.03% 53.91% 51.46% 53.50% 49.61% 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 share amounts For the Quarter Ended ---------------------------------------------------------- 12/31/2007 9/30/2007 6/30/2007 3/31/2007 12/31/2006 --------------------------------------------------------------------- Assets $1,435,536 $1,340,679 $1,280,428 $1,254,528 $1,235,519 Securities 300,066 279,289 259,526 258,173 247,874 Loans, net 1,052,489 986,437 949,175 930,769 916,045 Intangible assets 10,055 10,143 3,121 3,159 3,197 Retail deposits 652,296 638,633 626,617 623,431 609,064 Brokered time deposits 176,391 189,966 223,771 253,794 279,623 Short-term borrowings 172,055 124,699 100,901 79,886 60,428 Long-term borrowings and sub- ordinated debentures 335,327 283,268 236,347 203,408 195,698 Shareholders' equity 89,420 93,475 81,910 81,950 78,752 Book value per share $ 12.06 $ 12.63 $ 11.56 $ 11.57 $ 11.12 Tangible book value per share $ 10.70 $ 11.26 $ 11.12 $ 11.12 $ 10.66 Tangible equity / Tangible assets 5.6% 6.3% 6.2% 6.3% 6.1% Tier 1 leverage ratio 7.3% 8.1% 7.9% 7.9% 7.8% SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Loan Composition Dollars in thousands For the Quarter Ended ------------------------------------------------------- 12/31/2007 9/30/2007 6/30/2007 3/31/2007 12/31/2006 --------------------------------------------------------------------- Commercial $ 92,599 $ 87,018 $ 81,292 $ 69,700 $ 69,470 Commercial real estate 384,478 352,396 354,833 329,561 314,199 Construction and develop- ment 225,270 212,570 198,721 220,430 215,820 Residential real estate 322,640 305,016 283,821 279,564 282,512 Consumer 31,956 33,255 33,937 33,845 36,455 Other 6,641 6,793 7,111 7,209 6,968 ---------- --------- --------- --------- --------- Total loans 1,063,584 997,048 959,715 940,309 925,424 Less unearned fees and interest 1,903 1,884 1,772 1,757 1,868 ---------- --------- --------- --------- --------- Total loans net of unearned fees and interest 1,061,681 995,164 957,943 938,552 923,556 Less allowance for loan losses 9,192 8,727 8,768 7,783 7,511 ---------- --------- --------- --------- --------- Loans, net $1,052,489 $ 986,437 $ 949,175 $ 930,769 $ 916,045 ========== ========= ========= ========= ========= SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Retail Deposit Composition Dollars in thousands 12/31/2007 9/30/2007 6/30/2007 3/31/2007 12/31/2006 --------------------------------------------------------------------- Non interest bearing checking $ 65,727 $ 65,230 $ 64,373 $ 60,645 $ 62,591 Interest bearing checking 222,825 230,491 230,509 230,634 220,167 Savings 40,845 39,596 41,910 44,713 47,984 Time deposits 322,899 303,316 289,825 287,439 278,322 -------- -------- -------- -------- -------- Total retail deposits $652,296 $638,633 $626,617 $623,431 $609,064 ======== ======== ======== ======== ======== SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Asset Quality Information Dollars in thousands For the Quarter Ended --------------------------------------------- 12/31/07 9/30/07 6/30/07 3/31/07 12/31/06 --------------------------------------------------------------------- Gross loan charge-offs $ 332 $ 599 $ 141 $ 206 $ 313 Gross loan recoveries (47) (33) (45) (87) (50) ------- ------ ------ ------ ------ Net loan charge-offs $ 285 $ 566 $ 96 $ 119 $ 263 ======= ====== ====== ====== ====== Net loan charge-offs to average loans (annualized) 0.11% 0.23% 0.04% 0.05% 0.11% Allowance for loan losses $ 9,192 $8,727 $8,768 $7,783 $7,511 Allowance for loan losses as a percentage of period end loans 0.86% 0.88% 0.91% 0.83% 0.81% Nonperforming assets: Nonperforming loans $10,333 $6,916 $7,307 $4,474 $5,276 Foreclosed properties and other repossessed assets 2,058 815 851 43 77 ------- ------ ------ ------ ------ Total $12,391 $7,731 $8,158 $4,517 $5,353 ======= ====== ====== ====== ====== Nonperforming loans to period end loans 0.97% 0.69% 0.76% 0.48% 0.57% ======= ====== ====== ====== ====== Nonperforming assets to period end assets 0.86% 0.58% 0.64% 0.36% 0.43% ======= ====== ====== ====== ====== SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Average Balance Sheet, Interest Earnings & Expenses and Average Rates Q4 2007 vs Q4 2006 Dollars in thousands Q4 2007 Q4 2006 --------------------------- --------------------------- Average Earnings/ Yield/ Average Earnings/ Yield/ Balances Expense Rate Balances Expense Rate ----------------------------------------- --------------------------- ASSETS Interest earning assets Loans, net of unearned interest Taxable $1,015,397 $ 20,075 7.84% $ 914,050 $18,735 8.13% Tax-exempt 9,259 188 8.06% 8,591 166 7.67% Securities Taxable 234,444 3,008 5.09% 202,758 2,566 5.02% Tax-exempt 49,760 870 6.94% 47,666 842 7.01% Interest bearing de- posits other banks and Federal funds sold 479 9 7.45% 517 11 8.44% ---------- -------- ---- ---------- ------- ---- Total interest earning assets 1,309,339 24,150 7.32% 1,173,582 22,320 7.55% Noninterest earning assets Cash & due from banks 14,391 12,393 Premises & equipment 22,092 23,309 Other assets 35,362 26,786 Allowance for loan losses (9,033) (7,339) ---------- ---------- Total assets $1,372,151 $1,228,731 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bear- ing demand deposits $ 225,686 $ 1,575 2.77% $ 221,943 $ 2,066 3.69% Savings deposits 38,706 145 1.49% 46,804 243 2.06% Time deposits 487,609 6,039 4.91% 549,785 6,679 4.82% Short-term borrowings 147,144 1,724 4.65% 77,044 1,040 5.36% Long-term borrowings and sub- ordinated debentures 299,420 3,973 5.26% 176,932 2,478 5.56% ---------- -------- ---- ---------- ------- ---- 1,198,565 13,456 4.45% 1,072,508 12,506 4.63% Noninterest bearing liabilities Demand deposits 68,123 63,671 Other liabilities 10,131 10,307 ---------- ---------- Total lia- bilities 1,276,819 1,146,486 Shareholders' equity 95,332 82,245 ---------- ---------- Total liabili- ties and shareholders' equity $1,372,151 $1,228,731 ========== ========== NET INTEREST EARNINGS $ 10,694 $ 9,814 ======== ======= NET INTEREST YIELD ON EARNING ASSETS 3.24% 3.32% ==== ==== SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Average Balance Sheet, Interest Earnings & Expenses and Average Rates YTD 2007 vs YTD 2006 Dollars in thousands For the Years Ended December 31, --------------------------------------------------------------------- 2007 2006 --------------------------- -------------------------- Average Earnings/ Yield/ Average Earnings/ Yield/ Balances Expense Rate Balances Expense Rate ----------------------------------------- -------------------------- ASSETS Interest earning assets Loans, net of unearned interest Taxable $ 963,116 $ 77,510 8.05% $ 872,017 $68,915 7.90% Tax-exempt 9,270 738 7.96% 8,428 642 7.62% Securities Taxable 219,605 11,224 5.11% 193,046 9,403 4.87% Tax-exempt 47,645 3,289 6.90% 46,382 3,227 6.96% Interest bearing de- posits other banks and Federal funds sold 1,011 51 5.04% 1,216 62 5.10% ---------- -------- ---- ---------- ------- ---- Total interest earning assets 1,240,647 92,812 7.48% 1,121,089 82,249 7.34% Noninterest earning assets Cash & due from banks 14,104 13,417 Premises & equipment 22,179 23,496 Other assets 30,795 26,422 Allowance for loan losses (8,683) (6,849) ---------- ---------- Total assets $1,299,042 $1,177,575 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits $ 227,014 $ 7,695 3.39% $ 215,642 $ 7,476 3.47% Savings deposits 42,254 706 1.67% 42,332 554 1.31% Time deposits 524,389 25,895 4.94% 458,864 20,282 4.42% Short-term borrowings 95,437 4,822 5.05% 130,771 6,612 5.06% Long-term borrowings and sub- ordinated debentures 245,937 13,199 5.37% 176,422 9,455 5.36% ---------- -------- ---- ---------- ------- ---- 1,135,031 52,317 4.61% 1,024,031 44,379 4.33% Noninterest bearing liabilities Demand deposits 65,060 64,380 Other liabilities 11,000 10,106 ---------- ---------- Total lia- bilities 1,211,091 1,098,517 Shareholders' equity 87,951 79,058 ---------- ---------- Total liabili- ties and shareholders' equity $1,299,042 $1,177,575 ========== ========== NET INTEREST EARNINGS $ 40,495 $37,870 ======== ======= NET INTEREST YIELD ON EARNING ASSETS 3.26% 3.38% ==== ==== SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures Dollars in thousands For the Quarter Ended For the Year Ended -------------------- -------------------- 12/31/07 12/31/06 12/31/07 12/31/06 --------------------------------------------- -------------------- Income from continuing operations - excluding changes in fair value of interest rate swaps $ 3,375 $ 2,718 $ 12,606 $ 11,117 Changes in fair value of interest rate swaps 783 49 1,478 (91) Applicable income tax effect (290) (18) (547) 34 -------- -------- -------- -------- 493 31 931 (57) -------- -------- -------- -------- GAAP income from continuing operations $ 3,868 $ 2,749 $ 13,537 $ 11,060 ======== ======== ======== ========