MOOREFIELD, W.Va., July 25, 2008 (PRIME NEWSWIRE) -- Summit Financial Group, Inc. (the "Company" or "Summit") (Nasdaq:SMMF) today reported second quarter 2008 net income of $2.6 million, or $0.35 per diluted share. This compares with second quarter 2007 earnings from continuing operations of $3.0 million, or $0.42 per diluted share. On a diluted per share basis, earnings for second quarter 2008 decreased 16.7 percent from 2007 second quarter earnings from continuing operations. For the second quarter of 2008, the returns on average shareholders' equity and average assets were 11.16 percent and 0.70 percent, respectively, compared with prior-year second quarter ratios of 14.15 percent and 0.94 percent, excluding discontinued operations.
Included in earnings for the current period was an other-than-temporary non-cash impairment charge of $1.5 million pre-tax, equivalent to $971,000 after-tax, or $0.13 per diluted share. This impairment charge relates to certain preferred stock issuances of the Fannie Mae and Freddie Mac which Summit continues to own. Excluding the impact of this impairment charge from current earnings and $273,000 of pre-tax losses ($172,000 after-tax) from mark-to-market changes in fair value of interest rate swaps occurring in second quarter 2007, pro forma second quarter net income was $3.6 million for 2008, or $0.48 per diluted share, compared with pro forma income from continuing operations for 2007 of $3.2 million, or $0.45 per diluted share, an improvement of 13.1 percent and 6.7 percent, respectively.
Highlights for the second quarter of 2008 include:
* Strong loan growth on both a year-over-year and a linked-quarter basis. * A stable net interest margin. * Entry into a new definitive agreement on June 10 to acquire Reston, VA.-based Greater Atlantic Financial Corp. (assets of $230 million) following Summit's earlier decision to terminate its agreement.
For the six months ended June 30, 2008, net income was $6.4 million, or $0.86 per diluted share, up 8.5 percent and 3.6 percent, respectively, compared with $5.9 million, or $0.83 per diluted share, earnings from continuing operations reported for the prior-year period. For the first six months of 2008, the returns on average shareholders' equity and average assets calculated on a GAAP basis were 13.80 percent and 0.88 percent, respectively, compared with prior-year ratios of 14.20 percent and 0.94 percent, excluding discontinued operations.
Excluding the impact of the other-than-temporary impairment charge related to Fannie Mae and Freddie Mac preferred stock in 2008 and mark-to-market changes in fair value of interest rate swaps in 2007 and 2008, pro forma net income for the six months ended June 30, 2008 was $6.9 million, or $0.93 per diluted shared compared with pro forma income from continuing operations of $5.9 million, or $0.84 per diluted share for the first half of 2007.
H. Charles Maddy, III, president and chief executive officer of Summit, remarked, "Given that nothing comes easy in banking these days, we've had a number of successes this quarter that make us quite pleased. Our community banking fundamentals are very sound: net interest income continues to grow as a result of strong loan growth; we are maintaining stability in our net interest margin; and we are diversifying our revenue stream. We are finally moving ahead with our acquisition of Greater Atlantic at much more favorable terms than before. This represents an opportunity to gain a foothold in some of the best markets for banking in the country, and in these trying times, a growing, healthy market is more valuable than ever.
"We are focusing on returning our credit quality to previous levels. The economy is clearly weakening overall, but our markets are affluent and among the fastest growing, and that gives us confidence as we go through these turbulent times."
Total revenue, consisting of net interest income and noninterest income from operations, was $12.5 million for the second quarter of 2008, up 22.3 percent from second quarter 2007 revenue of $10.2 million; excluding the impairment charge on securities and changes in fair value of interest rate swaps, total revenue for second quarter 2008 increased 33.8% to $14.0 million compared to second quarter 2007. Net interest income was $11.4 million for the current quarter, 19.4 percent higher than the $9.5 million reported for the year-ago quarter; the improvement resulted from the combined impact of a 16.9 percent increase in average earning assets and a 5 basis point increase in the net interest margin to 3.33 percent. Mr. Maddy remarked, "Compared to the margin contractions experienced by many banks following the Federal Reserve's interest rate cuts beginning in the third quarter of last year, our net interest margin continues to be remarkably stable quarter over quarter within a range of nine basis points. We have maintained a slight bias toward liability sensitivity, and our strategy has been to remain neutral rather than exploit interest rate swings to generate revenue. We prefer to base our net interest income growth on expansion within our high-growth markets, which continue to generate quality loans and sufficient core deposits."
Another of Summit's goals is to strengthen fee-based revenues and diversify sources of income. Progress has been made toward meeting that goal with the acquisition of Kelly Agencies in third quarter 2007. Noninterest income, reported on a GAAP basis, was $1.1 million for the current second quarter compared with $696,000 for the year-ago quarter, an increase of 62.1 percent. Excluding the securities impairment charge of $1.5 million in the second quarter of 2008 and further excluding the change in fair value of interest rate swaps of $273,000 in the 2007 quarter, noninterest income totaled $2.7 million in the current year second quarter versus $969,000 a year ago.
Mr. Maddy noted, "The addition of the Kelly Agencies represents a big step in our long-term fee-based strategy. We believe we have tremendous upside to be achieved through additional revenue enhancements and cost efficiencies as we build on this attractive base of business."
The provision for loan losses was $1.8 million this quarter, an increase of $750,000 or 75.0 percent above 2007 fourth quarter and $1.4 million above the second quarter of last year. The larger provision reflects the impact of the struggling economy and weakened credit markets on Summit's asset quality. Nonperforming assets increased by $2.0 million in the current quarter, and second quarter 2008 net charge-offs totaled $999,000, or 0.36 percent of average loans (annualized).
Noninterest expense was $7.1 million in the second quarter of 2008, up 25.0 percent or $1.4 million from the year-ago quarter. Since current expense levels include the Kelly Agencies, which was acquired in third quarter 2007, a linked-quarter rather than year-ago comparison is more meaningful. Noninterest expense grew less than 1.0 percent or $60,000 from the linked quarter. Salaries and employee benefits -- the largest component of noninterest expense -- declined $208,000, or 4.7 percent, to $4.2 million from the first quarter of 2008, primarily as a result of reductions in employee incentive compensation.
Summit's efficiency ratio benefited from the double leveraged impact of disciplined cost controls and strong revenue growth, improving 384 basis points, from 53.71 percent for the year-ago quarter to 49.87 percent the current quarter.
Assets at June 30, 2008 were $1.5 billion, up $245.6 million, or 19.2 percent, over the prior-year second quarter. Loans, net of unearned income, were $1.1 billion at period end, up $182.9 million, or 19.1 percent, year over year. Residential real estate and commercial real estate were the major growth contributors, up $77.2 million and $67.6 million, respectively, from year-ago levels; they now constitute 31.6 percent and 36.9 percent, respectively, of total loans. Meanwhile, construction and development loans are growing at a much slower rate -- $11.7 million, or 5.9 percent year-over-year -- becoming a smaller percentage of the loan portfolio (18.4 percent at June 30, 2008). Following modest growth in the first quarter of 2008, loans increased by $52.0 million or 19.1 percent (annualized) above the linked quarter.
Although nonperforming assets increased significantly over the last twelve months, recent growth has slowed and the level of troubled credits remains within reasonable limits in the context of the current economic climate. Nonperforming assets were $18.2 million, or 1.19 percent of total assets, at June 30, 2008, compared with $16.2 million, or 1.11 percent, for the linked quarter, and $8.2 million, or 0.64 percent, for the year-ago quarter. At June 30, 2008, foreclosed real estate represented $2.5 million of nonperforming assets, $341,000 higher than first quarter 2008 and $1.7 million above the year-ago second quarter.
Three major categories accounted for the bulk of the $15.6 million in nonperforming loans at second quarter end: commercial real estate ($3.2 million of nonperforming loans, or 0.8 percent of the total CRE); construction and development ($6.5 million of nonperforming loans, or 3.1 percent of total C&D); and residential real estate ($5.5 million of nonperforming loans, or 1.5 percent of the residential real estate loans).
For the current quarter, the Company had net charge-offs of $999,000, or an annualized 0.36 percent of average loans, compared with $594,000, or an annualized 0.22 percent for the linked quarter, and $96,000, or 0.04 percent annualized for the year earlier period. At June 30, 2008, loan loss reserves were 0.91 percent of loans outstanding.
Mr. Maddy added, "Real estate serves as collateral for the majority of our loans, and we continue to monitor developments to ensure valuations are current and liquidity of borrowers remains strong."
Deposits at June 30, 2008 totaled $857.7 million compared with $850.4 million at the end of second quarter 2007, an increase of $7.4 million or 0.9 percent. Core deposits remained level as a percentage of total deposits at approximately 74 percent of total deposits in both the current and year-ago quarters.
Shareholders' equity at June 30, 2008 was $91.5 million, an increase of 11.7 percent over the last twelve months. Common shares outstanding totaled 7,410,791 at quarter-end, compared with 7,084,980 at the end of the second quarter 2007.
ABOUT THE COMPANY
Summit Financial Group, Inc., a financial holding company with total assets of $1.5 billion, operates fifteen banking locations through its wholly-owned community bank, Summit Community Bank, headquartered in Moorefield, West Virginia. Summit also operates Summit Insurance Services, LLC headquartered in Moorefield, West Virginia.
The Summit Financial Group, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=2990
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.
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, other-than-temporary impairment charge on securities recorded in the 2nd quarter of 2008 and to exclude the effects of the non-cash changes in fair value of interest rate swaps included in its Statements of Income. Management deems these items to be unusual in nature and believes presentations of financial measures excluding the impact of these items 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.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Quarterly Performance Summary -- Q2 2008 vs Q2 2007
For the Quarter Ended
------------------------ Percent
Dollars in thousands 6/30/2008 6/30/2007 Change
---------------------------------------------------------------------
Condensed Statements of Income
Interest income
Loans, including fees $ 19,576 $ 19,079 2.6%
Securities 3,761 3,263 15.3%
Other 3 27 -88.9%
---------- ----------
Total interest income 23,340 22,369 4.3%
---------- ----------
Interest expense
Deposits 6,435 8,882 -27.6%
Borrowings 5,530 3,960 39.6%
---------- ----------
Total interest expense 11,965 12,842 -6.8%
---------- ----------
Net interest income 11,375 9,527 19.4%
Provision for loan losses 1,750 390 348.7%
---------- ----------
Net interest income after
provision for loan losses 9,625 9,137 5.3%
---------- ----------
Noninterest income
Insurance commissions 1,275 209 510.0%
Service fee income 824 736 12.0%
Securities gains (losses) (1,541) -- n/a
Net cash settlement on
interest rate swaps -- (179) -100.0%
Change in fair value of
interest rate swaps -- (273) -100.0%
Other income 570 203 180.8%
---------- ----------
Total noninterest income 1,128 696 62.1%
---------- ----------
Noninterest expense
Salaries and employee benefits 4,187 3,238 29.3%
Net occupancy expense 443 408 8.6%
Equipment expense 533 493 8.1%
Professional fees 182 193 -5.7%
Other expenses 1,804 1,386 30.2%
---------- ----------
Total noninterest expense 7,149 5,718 25.0%
---------- ----------
Income from continuing
operations before income taxes 3,604 4,115 -12.4%
Income taxes 1,010 1,135 -11.0%
---------- ----------
Income from continuing
operations 2,594 2,980 -13.0%
---------- ----------
Discontinued operations
Exit costs and impairment of
long-lived assets -- 43 n/m
Operating income (loss) -- (227) n/m
---------- ----------
Income (loss) from discontinued
operations before income taxes -- (184) n/m
Income taxes -- (66) n/m
---------- ----------
Income (loss) from
discontinued operations -- (118) n/m
---------- ----------
Net Income $ 2,594 $ 2,862 -9.4%
---------- ----------
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Quarterly Performance Summary -- Q2 2008 vs Q2 2007
For the Quarter Ended
------------------------ Percent
6/30/2008 6/30/2007 Change
---------------------------------------------------------------------
Per Share Data
Earnings per share from
continuing operations
Basic $ 0.35 $ 0.42 -16.7%
Diluted $ 0.35 $ 0.42 -16.7%
Earnings per share from
discontinued operations
Basic $ -- $ (0.02) -100.0%
Diluted $ -- $ (0.02) -100.0%
Earnings per share
Basic $ 0.35 $ 0.40 -12.5%
Diluted $ 0.35 $ 0.40 -12.5%
Average shares outstanding
Basic 7,410,217 7,084,980 4.6%
Diluted 7,448,170 7,148,241 4.2%
Performance Ratios
Return on average equity 11.16% 13.59% -17.9%
Return on average equity -
continuing operations 11.16% 14.15% -21.1%
Return on average assets 0.70% 0.91% -23.1%
Return on average assets -
continuing operations 0.70% 0.94% -25.5%
Net interest margin 3.33% 3.28% 1.5%
Efficiency ratio (A) 49.87% 53.71% -7.1%
Efficiency ratio - continuing
operations (A) 49.87% 51.46% -3.1%
NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring
income and expense items and amortization of intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Six Month Performance Summary -- 2008 vs 2007
For the Six Months Ended
------------------------ Percent
Dollars in thousands 6/30/2008 6/30/2007 Change
---------------------------------------------------------------------
Condensed Statements of Income
Interest income
Loans, including fees $ 39,645 $ 37,792 4.9%
Securities 7,548 6,386 18.2%
Other 6 33 -81.8%
---------- ----------
Total interest income 47,199 44,211 6.8%
---------- ----------
Interest expense
Deposits 13,559 17,910 -24.3%
Borrowings 11,327 7,571 49.6%
---------- ----------
Total interest expense 24,886 25,481 -2.3%
---------- ----------
Net interest income 22,313 18,730 19.1%
Provision for loan losses 2,750 780 252.6%
---------- ----------
Net interest income after
provision for loan losses 19,563 17,950 9.0%
---------- ----------
Noninterest income
Insurance commissions 2,602 415 527.0%
Service fee income 1,567 1,353 15.8%
Net cash settlement on
interest rate swaps (170) (363)
Change in fair value of
interest rate swaps 705 (47)
Unrealized securities gains
(losses) (1,541) -- --
Other income 813 394 106.3%
---------- ----------
Total noninterest income 3,976 1,752 126.9%
---------- ----------
Noninterest expense
Salaries and employee benefits 8,581 6,463 32.8%
Net occupancy expense 919 826 11.3%
Equipment expense 1,068 940 13.6%
Professional fees 300 367 -18.3%
Other expenses 3,369 2,772 21.5%
---------- ----------
Total noninterest expense 14,237 11,368 25.2%
---------- ----------
Income from continuing
operations before income taxes 9,302 8,334 11.6%
Income taxes 2,884 2,421 19.1%
---------- ----------
Income from continuing
operations 6,418 5,913 8.5%
---------- ----------
Discontinued operations
Exit costs and impairment of
long-lived assets -- 123 n/a
Operating income (loss) -- (598) -100.0%
---------- ----------
Income (loss) from discontinued
operations before income taxes -- (475) -100.0%
Income taxes -- (163) -100.0%
---------- ----------
Income (loss) from
discontinued operations -- (312) -100.0%
---------- ----------
Net Income $ 6,418 $ 5,601 14.6%
---------- ----------
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Six Month Performance Summary -- 2008 vs 2007
For the Six Months Ended
------------------------ Percent
6/30/2008 6/30/2007 Change
---------------------------------------------------------------------
Per Share Data
Earnings per share from
continuing operations
Basic 0.87 0.83 4.8%
Diluted 0.86 0.83 3.6%
Earnings per share from
discontinued operations
Basic -- (0.04) -100.0%
Diluted -- (0.04) -100.0%
Earnings per share
Basic $ 0.87 $ 0.79 10.1%
Diluted $ 0.86 $ 0.79 8.9%
Average shares outstanding
Basic 7,409,579 7,084,980 4.6%
Diluted 7,448,974 7,147,784 4.2%
Performance Ratios
Return on average equity 13.80% 13.45% 2.6%
Return on average equity -
continuing operations 13.80% 14.20% -2.8%
Return on average assets 0.88% 0.89% -1.1%
Return on average assets -
continuing operations 0.88% 0.94% -6.4%
Net interest margin 3.31% 3.27% 1.2%
Efficiency ratio (A) 50.96% 55.74% -8.6%
Efficiency ratio - continuing
operations (A) 50.96% 52.46% -2.9%
NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring
income and expense items and amortization of intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Five Quarter Performance Summary
For the Quarter Ended
-------------------------------------------
6/30/ 3/31/ 12/31/ 9/30/ 6/30/
Dollars in thousands 2008 2008 2007 2007 2007
---------------------------------------------------------------------
Condensed Statements
of Income
Interest income
Loans, including
fees $19,576 $20,069 $20,199 $19,921 $19,079
Securities 3,761 3,786 3,590 3,446 3,263
Other 3 4 8 9 27
------- ------- ------- ------- -------
Total interest
income 23,340 23,859 23,797 23,376 22,369
------- ------- ------- ------- -------
Interest expense
Deposits 6,435 7,124 7,759 8,627 8,882
Borrowings 5,530 5,796 5,697 4,753 3,960
------- ------- ------- ------- -------
Total interest
expense 11,965 12,920 13,456 13,380 12,842
------- ------- ------- ------- -------
Net interest income 11,375 10,939 10,341 9,996 9,527
Provision for loan
losses 1,750 1,000 750 525 390
------- ------- ------- ------- -------
Net interest income
after provision for
loan losses 9,625 9,939 9,591 9,471 9,137
------- ------- ------- ------- -------
Noninterest income
Insurance commissions 1,275 1,327 1,157 1,303 209
Service fee income 824 743 863 788 736
Unrealized securities
gains (losses) (1,541) -- -- -- --
Net cash settlement
on interest rate
swaps -- (170) (183) (181) (179)
Change in fair value
of interest rate
swaps -- 705 783 752 (273)
Other income 570 243 78 244 203
------- ------- ------- ------- -------
Total noninterest
income 1,128 2,848 2,698 2,906 696
------- ------- ------- ------- -------
Noninterest expense
Salaries and employee
benefits 4,187 4,395 4,090 4,054 3,238
Net occupancy expense 443 476 466 466 408
Equipment expense 533 534 568 496 493
Professional fees 182 118 152 176 193
Other expenses 1,804 1,566 1,634 1,628 1,386
------- ------- ------- ------- -------
Total noninterest
expense 7,149 7,089 6,910 6,820 5,718
------- ------- ------- ------- -------
Income before income
taxes 3,604 5,698 5,379 5,557 4,115
Income taxes 1,010 1,874 1,511 1,802 1,135
------- ------- ------- ------- -------
Income from continuing
operations 2,594 3,824 3,868 3,755 2,980
------- ------- ------- ------- -------
Discontinued operations
Exit costs and
impairment of
long-lived assets -- -- (435) -- 43
Operating income (loss) -- -- (9,549) (200) (227)
------- ------- ------- ------- -------
Income (loss) from
discontinued operations
before income taxes -- -- (9,984) (200) (184)
Income taxes -- -- (3,347) (69) (66)
------- ------- ------- ------- -------
Income (loss) from
discontinued
operations -- -- (6,637) (131) (118)
------- ------- ------- ------- -------
Net Income $ 2,594 $ 3,824 $(2,769) $ 3,624 $ 2,862
------- ------- ------- ------- -------
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Five Quarter Performance Summary
For the Quarter Ended
-----------------------------------------------------
6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
---------------------------------------------------------------------
Per Share Data
Earnings per
share from
continuing
operations
Basic $ 0.35 $ 0.52 $ 0.52 $ 0.51 $ 0.42
Diluted $ 0.35 $ 0.51 $ 0.52 $ 0.50 $ 0.42
Earnings per
share from
discontinued
operations
Basic $ -- $ -- $ (0.89) $ (0.02) $ (0.02)
Diluted $ -- $ -- $ (0.89) $ (0.02) $ (0.02)
Earnings per
share
Basic $ 0.35 $ 0.52 $ (0.37) $ 0.49 $ 0.40
Diluted $ 0.35 $ 0.51 $ (0.37) $ 0.48 $ 0.40
Average shares
outstanding
Basic 7,410,217 7,408,941 7,401,684 7,399,213 7,084,980
Diluted 7,448,170 7,449,105 7,450,049 7,458,515 7,148,241
Performance
Ratios
Return on
average
equity 11.16% 16.55% -11.62% 16.13% 13.59%
Return on
average
equity -
continuing
operations 11.16% 16.55% 16.23% 16.71% 14.15%
Return on
average
assets 0.70% 1.06% -0.81% 1.11% 0.91%
Return on
average
assets -
continuing
operations 0.70% 1.06% 1.13% 1.15% 0.94%
Net interest
margin 3.33% 3.28% 3.24% 3.28% 3.28%
Efficiency
ratio -
continuing
operations (A) 49.87% 52.11% 53.03% 53.91% 51.46%
NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring
income and expense items and amortization of intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Selected Balance Sheet Data
Dollars in
thousands, For the Quarter Ended
except per ------------------------------------------------------
share amounts 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
---------------------------------------------------------------------
Assets $1,525,978 $1,465,110 $1,435,536 $1,340,679 $1,280,428
Securities 307,232 302,029 300,066 279,289 259,526
Loans, net 1,130,483 1,079,223 1,052,489 986,437 949,175
Intangible
assets 9,880 9,968 10,055 10,143 3,121
Retail deposits 634,007 652,148 652,296 638,633 626,617
Brokered time
deposits 223,742 184,796 176,391 189,966 223,771
Short-term
borrowings 147,900 93,950 172,055 124,699 100,901
Long-term
borrowings and
subordinated
debentures 419,775 431,918 335,327 283,268 236,347
Shareholders'
equity 91,466 91,955 89,420 93,475 81,910
Book value per
share $ 12.34 $ 12.41 $ 12.06 $ 12.63 $ 11.56
Tangible book
value per
share $ 11.01 $ 11.07 $ 10.70 $ 11.26 $ 11.12
Tangible
equity /
Tangible
assets 5.4% 5.6% 5.6% 6.3% 6.2%
Tier 1 leverage
ratio 7.0% 7.8% 7.3% 8.1% 7.9%
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Loan Composition
Dollars in
thousands 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
---------------------------------------------------------------------
Commercial $ 112,793 $ 111,442 $ 92,599 $ 87,018 $ 81,292
Commercial
real estate 422,393 396,414 384,478 352,396 354,833
Construction
and development 210,417 209,257 225,270 212,570 198,721
Residential
real estate 361,009 336,985 322,640 305,016 283,821
Consumer 30,361 30,206 31,956 33,254 33,937
Other 6,206 6,395 6,641 6,794 7,111
---------- ---------- ---------- ---------- ----------
Total loans 1,143,179 1,090,699 1,063,584 997,048 959,715
Less unearned
fees and
interest 2,347 1,878 1,903 1,884 1,772
---------- ---------- ---------- ---------- ----------
Total loans
net of
unearned
fees and
interest 1,140,832 1,088,821 1,061,681 995,164 957,943
Less allowance
for loan
losses 10,349 9,598 9,192 8,727 8,768
---------- ---------- ---------- ---------- ----------
Loans, net $1,130,483 $1,079,223 $1,052,489 $ 986,437 $ 949,175
========== ========== ========== ========== ==========
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Retail Deposit Composition
Dollars in
thousands 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
---------------------------------------------------------------------
Non interest
bearing
checking $ 68,912 $ 64,111 $ 65,727 $ 65,230 $ 64,373
Interest
bearing
checking 194,255 201,820 222,825 230,491 230,509
Savings 60,245 53,427 40,845 39,596 41,910
Time deposits 310,595 332,790 322,899 303,316 289,825
---------- ---------- ---------- ---------- ----------
Total retail
deposits $ 634,007 $ 652,148 $ 652,296 $ 638,633 $ 626,617
========== ========== ========== ========== ==========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Asset Quality Information
For the Quarter Ended
-------------------------------------------
6/30/ 3/31/ 12/31/ 9/30/ 6/30/
Dollars in thousands 2008 2008 2007 2007 2007
---------------------------------------------------------------------
Gross loan charge-offs $ 1,079 $ 646 $ 332 $ 599 $ 141
Gross loan recoveries (80) (52) (47) (33) (45)
------- ------- ------- ------- -------
Net loan charge-offs $ 999 $ 594 $ 285 $ 566 $ 96
======= ======= ======= ======= =======
Net loan charge-offs to
average loans
(annualized) 0.36% 0.22% 0.11% 0.23% 0.04%
Allowance for loan losses $10,349 $ 9,598 $ 9,192 $ 8,727 $ 8,768
Allowance for loan losses
as a percentage of
period end loans 0.91% 0.88% 0.86% 0.88% 0.91%
Nonperforming assets:
Nonperforming loans $15,614 $13,957 $10,333 $ 6,916 $ 7,307
Foreclosed properties
and other repossessed
assets 2,546 2,205 2,058 815 851
------- ------- ------- ------- -------
Total $18,160 $16,162 $12,391 $ 7,731 $ 8,158
======= ======= ======= ======= =======
Nonperforming loans to
period end loans 1.37% 1.28% 0.97% 0.69% 0.76%
======= ======= ======= ======= =======
Nonperforming assets to
period end assets 1.19% 1.11% 0.86% 0.58% 0.64%
======= ======= ======= ======= =======
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Nonperforming Loans by Type
For the Quarter Ended
-------------------------------------------
6/30/ 3/31/ 12/31/ 9/30/ 6/30/
Dollars in thousands 2008 2008 2007 2007 2007
---------------------------------------------------------------------
Commercial $ 81 $ 695 $ 716 $ 712 $ 124
Commercial real estate 3,184 5,095 4,346 582 84
Construction and
development 6,460 3,694 2,016 2,557 4,177
Residential real estate 5,521 4,247 3,012 2,871 2,683
Consumer 368 226 243 194 239
------- ------- ------- ------- -------
Total nonperforming
loans $15,614 $13,957 $10,333 $ 6,916 $ 7,307
======= ======= ======= ======= =======
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2008 vs Q2 2007
Q2 2008 Q2 2007
-------------------------- --------------------------
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 $1,103,871 $19,462 7.07% $ 939,998 $18,980 8.10%
Tax-exempt 8,630 173 8.04% 9,374 184 7.87%
Securities
Taxable 249,082 3,161 5.09% 211,592 2,739 5.19%
Tax-exempt 51,881 895 6.92% 45,587 783 6.89%
Interest
bearing
deposits
other banks
and Federal
funds sold 419 2 1.91% 2,459 29 4.73%
---------- ------- ---- ---------- ------- ----
Total interest
earning assets 1,413,883 23,693 6.72% 1,209,010 22,715 7.54%
Noninterest
earning assets
Cash & due
from banks 20,670 14,525
Premises &
equipment 22,016 22,190
Other assets 36,650 27,390
Allowance
for loan
losses (10,043) (8,611)
---------- ----------
Total
assets $1,483,176 $1,264,504
========== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Liabilities
Interest
bearing
liabilities
Interest
bearing
demand
deposits $ 199,754 $ 618 1.24% $ 229,444 $ 2,084 3.64%
Savings
deposits 56,548 212 1.50% 43,252 181 1.68%
Time deposits 517,711 5,605 4.34% 536,852 6,617 4.94%
Short-term
borrowings 101,913 571 2.25% 71,451 960 5.39%
Long-term
borrowings
and subord-
inated
debentures 426,656 4,959 4.66% 223,021 3,000 5.40%
---------- ------- ---- ---------- ------- ----
1,302,582 11,965 3.68% 1,104,020 12,842 4.67%
Noninterest
bearing
liabilities
Demand
deposits 79,933 64,665
Other
liabilities 7,650 11,551
---------- ----------
Total
liabil-
ities 1,390,165 1,180,236
Shareholders'
equity 93,011 84,268
---------- ----------
Total
liabilities
and share-
holders'
equity $1,483,176 $1,264,504
========== ==========
NET INTEREST
EARNINGS $11,728 $ 9,873
======= =======
NET INTEREST
YIELD ON
EARNING ASSETS 3.33% 3.28%
==== ====
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2008 vs YTD 2007
For the Six Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
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 $1,088,544 $39,410 7.28% $ 934,513 $37,645 8.12%
Tax-exempt 8,790 356 8.14% 9,147 358 7.89%
Securities
Taxable 250,414 6,358 5.11% 209,965 5,316 5.11%
Tax-exempt 51,153 1,774 6.97% 46,433 1,597 6.94%
Interest
bearing
deposits
other banks
and Federal
funds sold 441 6 2.74% 1,458 33 4.56%
---------- ------- ---- ---------- ------- ----
Total interest
earning assets 1,399,342 47,904 6.88% 1,201,516 44,949 7.54%
Noninterest
earning assets
Cash & due
from banks 16,691 13,821
Premises &
equipment 22,062 22,260
Other assets 36,426 27,452
Allowance
for loan
losses (9,785) (8,376)
---------- ----------
Total
assets $1,464,736 $1,256,673
========== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Liabilities
Interest
bearing
liabilities
Interest
bearing
demand
deposits $ 203,707 $ 1,548 1.53% $ 225,705 $ 4,150 3.71%
Savings
deposits 51,549 407 1.59% 44,820 398 1.79%
Time deposits 511,873 11,604 4.56% 546,634 13,362 4.93%
Short-term
borrowings 105,405 1,490 2.84% 71,930 1,918 5.38%
Long-term
borrowings
and subord-
inated
debentures 418,353 9,837 4.73% 209,588 5,653 5.44%
---------- ------- ---- ---------- ------- ----
1,290,887 24,886 3.88% 1,098,677 25,481 4.68%
Noninterest
bearing
liabilities
Demand
deposits 72,203 62,986
Other
liabilities 8,629 11,722
---------- ----------
Total
liabil-
ities 1,371,719 1,173,385
Shareholders'
equity 93,017 83,288
---------- ----------
Total
liabilities
and share-
holders'
equity $1,464,736 $1,256,673
========== ==========
NET INTEREST
EARNINGS $23,018 $19,468
======= =======
NET INTEREST
YIELD ON
EARNING ASSETS 3.31% 3.27%
==== ====
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
For the For the
Quarter Ended Six Months Ended
Dollars in thousands ------------------ -------------------
(except per share amounts) 6/30/2008 6/30/2007 6/30/2008 6/30/2007
---------------------------------------------------------------------
Income from continuing
operations - excluding
other-than-temporary charge
on securities and change in
fair value of interest rate
swaps $ 3,565 $ 3,152 $ 6,945 $ 5,943
Other-than-temporary
impairment charge on
securities (1,541) -- (1,541) --
Applicable income tax
effect 570 -- 570 --
Change in fair value of
interest rate swaps -- (273) 705 (47)
Applicable income tax
effect -- 101 (261) 17
------- ------- ------- -------
(971) (172) (527) (30)
------- ------- ------- -------
GAAP income from continuing
operations $ 2,594 $ 2,980 $ 6,418 $ 5,913
======= ======= ======= =======
Diluted earnings per share
from continuing operations -
excluding other-than-
temporary impairment charge
on securities $ 0.48 $ 0.45 $ 0.93 $ 0.84
Other-than-temporary
impairment charge on
securities (0.21) -- (0.21) --
Applicable income tax
effect 0.08 -- 0.08 --
Change in fair value of
interest rate swaps -- (0.04) 0.10 (0.01)
Applicable income tax
effect -- 0.01 (0.04) --
------- ------- ------- -------
(0.13) (0.03) (0.07) (0.01)
------- ------- ------- -------
GAAP diluted earnings per
share $ 0.35 $ 0.42 $ 0.86 $ 0.83
======= ======= ======= =======
Total revenue - excluding
other-than-temporary
impairment charge on
securities and change in
fair value of interest rate
swaps $14,044 $10,496 $27,125 $20,529
Other-than-temporary
impairment charge on
securities (1,541) -- (1,541) --
Change in fair value of
interest rate swaps -- (273) 705 (47)
------- ------- ------- -------
(1,541) (273) (836) (47)
------- ------- ------- -------
GAAP total revenue $12,503 $10,223 $26,289 $20,482
======= ======= ======= =======
Non-interest income -
excluding other-than-
temporary impairment charge
on securities and change in
fair value of interest rate
swaps $ 2,669 $ 969 $ 4,812 $ 1,799
Other-than-temporary
impairment charge on
securities (1,541) -- (1,541) --
Change in fair value of
interest rate swaps -- (273) 705 (47)
------- ------- ------- -------
(1,541) (273) (836) (47)
------- ------- ------- -------
GAAP non-interest income $ 1,128 $ 696 $ 3,976 $ 1,752
======= ======= ======= =======