Summit Financial Group Reports Second Quarter 2011 Results

Q2 2011 EPS $0.11 Compared to ($0.04) in Q1 2011 and ($0.40) in Q2 2010

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| Source: Summit Financial Group, Inc.

MOOREFIELD, W.Va., Aug. 1, 2011 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (Nasdaq:SMMF) today reported second quarter 2011 net income applicable to common shares of $831,000, or $0.11 per diluted share, compared with a net loss applicable to common shares of $2.95 million, or ($0.40) per diluted share, for the second quarter of 2010. Second quarter 2011 results, as compared to the same period in 2010, were positively impacted by a lower provision for loan losses and by reduced charges to write-down foreclosed properties to estimated fair value.

Excluding from second quarter 2011 nonrecurring items (on a pre-tax basis) consisting of realized securities gains of $318,000, charges for other-than-temporary impairment ("OTTI") of securities of $533,000 and write-downs of foreclosed properties of $689,000, and from second quarter 2010 realized securities gains of $1.26 million and write-downs of foreclosed properties of $2.19 million, pro forma second quarter 2011 earnings were approximately $1.40 million, or $0.18 per diluted share, compared to a pro forma net loss of $2.36 million, or ($0.32) per diluted share, for the year-ago period.

For the six months ended June 30, 2011, Summit recorded net income applicable to common shares of $509,000, or $0.07 per diluted share, compared with a net loss applicable to common shares of $2.91 million, or ($0.39) per diluted share, for the comparable 2010 six-month period.

Excluding from the six month period ended June 30, 2011 nonrecurring items (on a pre-tax basis) comprised of realized securities gains of $1.95 million, OTTI charges of $1.76 million and write-downs of foreclosed properties of $4.13 million, and from the 2010 first six-month period realized securities gains of $1.52 million and write-downs of foreclosed properties of $2.19 million, pro forma earnings for first six months of 2011 were approximately $3.00 million, or $0.41 per diluted share, compared to a pro forma net loss of $2.46 million, or ($0.33) per diluted share, for the 2010 six month period.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, "While we are pleased to have returned to profitability this quarter, our job one remains to reduce our portfolio of nonperforming assets, which remain a significant drag on our earnings performance. We continue to make progress in this regard, as loan delinquencies have declined since year-end 2010, quarter-over-quarter net loan charge-offs have declined for three consecutive quarters, and we are seeing few new additions to our problem loan portfolio. We continue to manage our problem assets through a combination of asset sales, loan workouts and charge-offs. However, progress with respect to the disposition of foreclosed properties has been difficult to achieve as the return of our real estate markets to more normal activity levels is progressing slowly."

"We continue to lower our loan portfolio's risk, particularly in regard to construction and development lending which now represents just 11 percent of the portfolio compared to 16 percent two years ago. We have increased our reliance on retail deposits; during the first half of 2011, retail deposits increased by more than 5 percent, contributing to our ability to pay down $56 million in higher-priced wholesale funding; more over, during the past two years our retail deposits have increased 20 percent, while our use of wholesale funds has decreased 34 percent. Further, our hard work to reduce controllable expenses, which partially offsets the higher costs associated with increased levels of problem assets, continues to produce good results as our total noninterest expense for the first half of 2011 was more than 4% less than in the first half of 2010 due to staff reductions, salary freezes and other cost reduction measures."

Results from Operations

Total revenue for the 2011 second quarter, consisting of net interest income and noninterest income, was $12.1 million compared to $11.7 million for the 2010 second quarter. For the year-to-date period ended June 30, 2011, total revenue was $21.6 million compared to $24.6 million for the same period in 2010.

Perhaps more meaningful, total revenue excluding nonrecurring items (as enumerated above) was $13.0 million for second quarter 2011 compared to $12.6 million in the prior-year quarter, an increase of 3.9 percent. For the first six months of 2011, total revenue excluding nonrecurring items was $25.6 million versus $25.1 million for the same period in 2010, an increase of 2.1 percent.

For the second quarter of 2011, net interest income was $10.2 million, an increase of 2.3 percent from the $9.9 million reported in the prior-year second quarter and an increase of 0.6 percent from the $10.1 million reported in the linked quarter. The net interest margin for second quarter 2011 was 3.09 percent compared to 2.90 percent for the year-ago quarter, and 3.11 percent for the linked quarter.

Noninterest income, consisting primarily of insurance commissions from Summit's insurance agency subsidiary and service fee income from community banking activities, for second quarter 2011 was $1.99 million compared to $1.81 million for the comparable period of 2010. Excluding nonrecurring items (as enumerated above), noninterest income was $2.89 million for second quarter 2011, up $144,000 or 5.2 percent from the $2.75 million reported for first quarter 2010.

The provision for loan losses was $3.0 million for the second quarter of 2011 compared to $3.0 million and $8.5 million for the linked and year-ago quarters, respectively.

Noninterest expense continues to be well-controlled, despite the increased costs of the administration of foreclosed properties, which increased 68.9 percent, to $412,000 for second quarter 2011, compared to $244,000 for the comparable period of 2010. Total noninterest expense increased just 1.6% for the quarter to $7.9 million from the $7.8 million reported in second quarter 2010. Moreover, noninterest expense for the first half of 2011 was $637,000, or 4.1 percent, less than during the first half of 2010. Cost-saving initiatives continue in place and their impact remain beneficial.

Balance Sheet

At June 30, 2011, total assets were $1.47 billion, a decrease of $9.8 million, or 0.7 percent, and a decrease of $51.6 million, or 3.4 percent, since December 31, 2010 and June 30, 2010, respectively. Total loans, net of unearned fees, were $989.1 million at June 30, 2011, down $23.4 million, or 2.3 percent, from the $1.013 billion reported at year-end 2010, and down $96.7 million or 8.9 percent from the year-ago quarter-end.

All loan categories have declined since year-end 2010, except for commercial real estate ("CRE"), the largest component of Summit's loan portfolio, which increased a modest $0.9 million. The second largest component of Summit's loan portfolio, residential real estate, declined $11.7 million, or 3.3 percent, while construction and development ("C&D") loans declined $6.1 million, or 5.4 percent and commercial ("C&I") loans declined $4.8 million, or 4.9 percent.

During the first half of 2011, retail deposits grew $43.7 million, or 5.4 percent, to $850.3 million, with the majority of growth occurring in savings and non interest bearing checking accounts. The increase in retail deposits provided Summit with an opportunity to further reduce brokered deposits and relatively higher-cost long-term borrowings by $34.5 million and $21.5 million, respectively, or 15.0 percent and 6.3 percent, respectively, since year-end 2010.

Asset Quality

As of June 30, 2011, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $105.3 million, or 7.18 percent of assets. This compares to $89.8 million, 6.06 percent of assets at first quarter-end 2011, and $92.2 million, or 6.24 percent of assets, at year-end 2010. The increase in second quarter 2011 NPAs is principally the result of classifying a single residential construction and development loan relationship as nonperforming during the quarter. Partially as result of the increase in nonperforming loans, the allowance for loan losses increased 18.9 percent during second quarter 2011 to 1.82 percent of period end total loans, compared to 1.70 percent of total loans at March 31, 2011 and at year-end 2010.

During first half of 2011, foreclosed real estate decreased by $4.0 million, to $66.2 million, or 4.51 percent of assets. Approximately three-fourths of total foreclosed properties, or $47.4 million, consists of land, development and construction projects.

Loans 30-89 day delinquent continued to show improvement, decreasing to 1.16 percent of total loans at June 30, 2011, compared to 1.25 percent and 2.77 percent of total loans at March 31, 2011 and December 31, 2010, respectively.

Capital Adequacy

Common shareholders' equity was $91.9 million as of June 30, 2011 compared to $89.2 million December 31, 2010. Summit's depository institution, Summit Community Bank, Inc. ("Bank"), remains well in excess of regulatory requirements for a "well capitalized" institution at June 30, 2011. The Bank's total risk-based capital ratio improved to 12.8 percent at June 30, 2011 compared 12.6 percent at March 31, 2011, while its Tier 1 leverage capital ratio remained unchanged at 8.3 at both period ends. Total common shares outstanding as of June 30, 2011 were 7,425,472.

About the Company

Summit Financial Group, Inc. is a $1.47 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and South Central regions of West Virginia and the Northern and Shenandoah Valley regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates fifteen banking locations. Summit also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia.

The Summit Financial Group, Inc. logo is available at http://www.globenewswire.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 economies. 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 GAAP performance measures to exclude the effects of realized and unrealized securities gains and losses, and write-downs of foreclosed properties to estimated fair value 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 2011 vs Q2 2010    
       
     
   For the Quarter Ended   Percent 
Dollars in thousands  6/30/2011 6/30/2010  Change 
Condensed Statements of Income       
Interest income       
Loans, including fees   $ 14,956  $ 16,614 -10.0%
Securities   3,125  3,592 -13.0%
Other   28  2 NM
Total interest income   18,109  20,208 -10.4%
Interest expense       
Deposits   4,667  5,378 -13.2%
Borrowings   3,282  4,894 -32.9%
Total interest expense   7,949  10,272 -22.6%
Net interest income   10,160  9,936 2.3%
Provision for loan losses   3,000  8,500 -64.7%
 Net interest income after provision for loan losses   7,160  1,436 NM
       
Noninterest income       
Insurance commissions   1,142  1,223 -6.6%
Service fee income   758  828 -8.5%
Realized securities gains   318  1,256 -74.7%
Other-than-temporary impairment of securities   (533)  -- NM
Write-downs of foreclosed properties   (689)  (2,194) 68.6%
Other income   990  694 42.7%
Total noninterest income  1,986  1,807 9.9%
Noninterest expense       
Salaries and employee benefits  4,186  3,965 5.6%
Net occupancy expense  481  509 -5.5%
Equipment expense  581  634 -8.4%
Professional fees  193  262 -26.3%
FDIC premiums  586  625 -6.2%
Foreclosed properties expense  412  244 68.9%
Other expenses  1,464  1,543 -5.1%
Total noninterest expense  7,903  7,782 1.6%
Income (loss) before income taxes   1,243  (4,539) NM
Income taxes   338  (1,661) NM
Net income (loss)   905  (2,878) NM
Preferred stock dividends   74  74 0.0%
       
Net income (loss) applicable to common shares  $ 831  $ (2,952) NM
     
     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Quarterly Performance Summary --- Q2 2011 vs Q2 2010    
     
   For the Quarter Ended   Percent 
  6/30/2011 6/30/2010  Change 
Per Share Data       
Earnings per common share       
Basic   $ 0.11  $ (0.40) NM
Diluted   $ 0.11  $ (0.40) NM
       
Average shares outstanding       
Basic   7,425,472  7,425,472 0.0%
Diluted   7,425,472  7,425,472 0.0%
       
Performance Ratios       
Return on average equity (A)  4.12% -13.16% 131.3%
Return on average assets  0.24% -0.75% 132.0%
Net interest margin  3.09% 2.90% 6.6%
Efficiency ratio (B)  58.66% 59.14% -0.8%
       
NOTE (A) – Net income divided by total shareholders' equity less preferred equity.
       
NOTE (B) – 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 --- 2011 vs 2010    
       
       
   For the Six Months Ended   Percent 
Dollars in thousands  6/30/2011 6/30/2010  Change 
Condensed Statements of Income       
Interest income       
Loans, including fees   $ 30,096  $ 33,654 -10.6%
Securities   6,168  7,185 -14.2%
Other   45  13 NM
Total interest income   36,309  40,852 -11.1%
Interest expense       
Deposits   9,410  10,876 -13.5%
Borrowings   6,637  9,809 -32.3%
Total interest expense   16,047  20,685 -22.4%
Net interest income   20,262  20,167 0.5%
Provision for loan losses   6,000  13,850 -56.7%
Net interest income after provision for loan losses   14,262  6,317 125.8%
       
Noninterest income       
Insurance commissions   2,384  2,432 -2.0%
Service fee income   1,379  1,535 -10.2%
Realized securities gains   1,946  1,520 28.0%
Other-than-temporary impairment of securities   (1,761)  (29) NM
Write-downs of foreclosed properties   (4,132)  (2,194) -88.3%
Other income   1,558  1,184 31.6%
Total noninterest income  1,374  4,448 -69.1%
Noninterest expense       
Salaries and employee benefits  8,028  7,813 2.8%
Net occupancy expense  990  1,031 -4.0%
Equipment expense  1,161  1,263 -8.1%
Professional fees  389  536 -27.4%
FDIC premiums  1,279  1,450 -11.8%
Foreclosed properties expense  846  476 77.7%
Other expenses  2,186  2,947 -25.8%
Total noninterest expense  14,879  15,516 -4.1%
Income (loss) before income taxes   757  (4,751) NM
Income taxes   100  (1,993) NM
Net income (loss)   657  (2,758) NM
Preferred stock dividends   148  148 0.0%
       
Net income (loss) applicable to common shares  $ 509  $ (2,906) NM
     
     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Six Month Performance Summary --- 2011 vs 2010    
     
   For the Six Months Ended   Percent 
  6/30/2011 6/30/2010  Change 
Per Share Data       
Earnings per common share       
Basic   $ 0.07  $ (0.39) NM
Diluted   $ 0.07  $ (0.39) NM
       
Average shares outstanding       
Basic   7,425,472  7,425,472 0.0%
Diluted   7,425,472  7,425,472 0.0%
       
Performance Ratios       
Return on average equity (A)  1.50% -6.29% NM
Return on average assets  0.09% -0.36% NM
Net interest margin  3.10% 2.92% 6.2%
Efficiency ratio (B)  58.52% 58.45% 0.1%
       
NOTE (A) – Net income divided by total shareholders' equity less preferred equity.      
       
NOTE (B) – 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 
Dollars in thousands  6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
Condensed Statements of Income           
Interest income           
Loans, including fees   $ 14,956  $ 15,140  $ 16,064  $ 16,239  $ 16,614
Securities   3,125  3,043  3,191  3,308  3,592
Other   28  17  11  7  2
Total interest income   18,109  18,200  19,266  19,554  20,208
Interest expense           
Deposits   4,667  4,743  5,000  5,160  5,378
Borrowings   3,282  3,355  3,829  4,846  4,894
Total interest expense   7,949  8,098  8,829  10,006  10,272
Net interest income   10,160  10,102  10,437  9,548  9,936
Provision for loan losses   3,000  3,000  3,000  4,500  8,500
Net interest income after provision for loan losses   7,160  7,102  7,437  5,048  1,436
           
Noninterest income           
Insurance commissions   1,142  1,242  1,086  1,227  1,223
Service fee income   758  621  741  763  828
Realized securities gains   318  1,628  463  67  1,256
Other-than-temporary impairment of securities   (533)  (1,228)  (850)  (109)  --
Write-downs of foreclosed properties   (689)  (3,443)  (1,206)  --  (2,194)
Other income   990  699  637  472  694
Total noninterest income  1,986  (481)  871  2,420  1,807
Noninterest expense           
Salaries and employee benefits  4,186  3,973  3,839  4,000  3,965
Net occupancy expense  481  509  480  498  509
Equipment expense  581  580  574  620  634
Professional fees  193  196  256  223  262
FDIC premiums  586  693  705  715  625
Foreclosed properties expense  412  434  430  671  244
Other expenses  1,464  722  1,478  1,467  1,543
Total noninterest expense  7,903  7,107  7,762  8,194  7,782
Income (loss) before income taxes   1,243  (486)  546  (726)  (4,539)
Income taxes   338  (238)  (364)  (598)  (1,661)
Net income (loss)   905  (248)  910  (128)  (2,878)
Preferred stock dividends   74  74  74  74  74
Net income (loss) applicable to common shares  $ 831  $ (322)  $ 836  $ (202)  $ (2,952)
         
         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)        
Five Quarter Performance Summary          
         
   For the Quarter Ended 
  6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
Per Share Data           
Earnings per common share           
Basic   $ 0.11  $ (0.04)  $ 0.11  $ (0.03)  $ (0.40)
Diluted   $ 0.11  $ (0.04)  $ 0.11  $ (0.03)  $ (0.40)
           
Average shares outstanding           
Basic   7,425,472  7,425,472  7,425,472  7,425,472  7,425,472
Diluted   7,425,472  7,425,472  7,425,822  7,427,955  7,425,472
           
Performance Ratios           
Return on average equity (A)  4.12% -1.14% 4.17% -0.59% -13.16%
Return on average assets  0.24% -0.07% 0.25% -0.03% -0.75%
Net interest margin  3.09% 3.11% 3.15% 2.84% 2.90%
Efficiency ratio - (B)  58.66% 58.38% 58.05% 65.00% 59.54%
           
NOTE (A) – Net income divided by total shareholders' equity less preferred equity.
           
NOTE (B) – 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          
   For the Quarter Ended 
 Dollars in thousands, except per share amounts 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
           
Assets          
Cash and due from banks  $ 4,515  $ 4,263  $ 4,652  $ 4,598  $ 4,190
Interest bearing deposits other banks  24,658  46,448  45,696  40,691  24,810
Securities  295,806  293,240  270,658  267,856  258,971
Loans, net  971,127  979,387  995,319  1,018,169  1,065,118
Property held for sale  66,188  66,961  70,235  68,353  69,478
Intangible assets  8,826  8,914  9,002  9,090  9,178
Other assets  96,866  82,982  82,243  87,655  87,861
Total assets  $ 1,467,986  $ 1,482,195  $ 1,477,805  $ 1,496,412  $ 1,519,606
           
Liabilities and Shareholders' Equity          
Retail deposits  $ 850,312  $ 844,914  $ 806,652  $ 786,992  $ 780,809
Brokered time deposits  195,782  217,205  230,287  243,040  240,329
Short-term borrowings  2,047  1,879  1,582  1,610  2,739
Long-term borrowings and subordinated debentures  319,020  319,905  340,498  366,037  397,564
Other liabilities  8,966  8,964  9,630  8,499  9,311
Shareholders' equity  91,859  89,328  89,156  90,234  88,854
Total liabilities and shareholders' equity  $ 1,467,986  $ 1,482,195  $ 1,477,805  $ 1,496,412  $ 1,519,606
           
Book value per common share (A)  $ 11.34  $ 11.03  $ 11.01  $ 11.14  $ 10.97
Tangible book value per common share (A)  $ 10.25  $ 9.93  $ 9.90  $ 10.02  $ 9.84
Tangible equity / Tangible assets 5.7% 5.5% 5.5% 5.5% 5.3%
           
NOTE (A) - Assumes conversion of convertible preferred stock          
       
       
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)      
Regulatory Capital Ratios          
           
  6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
Summit Financial Group, Inc.          
Total Risk Based Capital 11.9% 11.7% 11.8% 11.6% 11.5%
Tier 1 Risk Based Capital 9.3% 9.1% 9.1% 8.8% 8.7%
Tier 1 Leverage Ratio 6.7% 6.6% 6.9% 6.7% 6.5%
           
Summit Community Bank, Inc.          
Total Risk Based Capital 12.8% 12.6% 12.6% 12.2% 12.0%
Tier 1 Risk Based Capital 11.5% 11.3% 11.4% 10.9% 10.8%
Tier 1 Leverage Ratio 8.3% 8.3% 8.5% 8.3% 8.1%
         
         
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)        
Loan Composition          
           
Dollars in thousands 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
Commercial    $ 92,287  $ 92,227  $ 97,060  $ 95,713  $ 117,072
Commercial real estate  423,374  423,560  422,435  429,369  428,093
Construction and development  106,687  107,554  112,777  122,385  141,869
Residential real estate  339,906  345,685  351,614  359,404  367,410
Consumer    23,773  22,968  24,146  24,945  25,908
Other    3,116  4,326  4,511  5,222  5,534
Total loans, net of unearned fees  989,143  996,320  1,012,543  1,037,038  1,085,886
Less allowance for loan losses  18,016  16,933  17,224  18,869  20,768
Loans, net  $ 971,127  $ 979,387  $ 995,319  $ 1,018,169  $ 1,065,118
         
         
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)        
Retail Deposit Composition          
           
Dollars in thousands 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
Non interest bearing checking  $ 85,964  $ 86,735  $ 74,604  $ 76,362  $ 73,519
Interest bearing checking  150,004  153,283  150,291  152,393  142,771
Savings    212,745  212,502  177,053  182,284  196,224
Time deposits    401,599  392,394  404,704  375,953  368,295
Total retail deposits  $ 850,312  $ 844,914  $ 806,652  $ 786,992  $ 780,809
         
         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)        
Asset Quality Information          
   For the Quarter Ended 
Dollars in thousands 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
           
Gross loan charge-offs  $ 2,022  $ 3,396  $ 5,135  $ 6,477  $ 5,907
Gross loan recoveries  (104)  (105)  (490)  (78)  (332)
Net loan charge-offs  $ 1,918  $ 3,291  $ 4,645  $ 6,399  $ 5,575
           
Net loan charge-offs to average loans (annualized) 0.76% 1.31% 1.76% 2.42% 1.94%
           
Allowance for loan losses  $ 18,016  $ 16,933  $ 17,224  $ 18,869  $ 20,768
Allowance for loan losses as a percentage of period end loans 1.82% 1.70% 1.70% 1.82% 1.91%
           
Nonperforming assets:          
Nonperforming loans          
Commercial  $ 2,212  $ 2,186  $ 1,318  $ 891  $ 1,347
Commercial real estate  8,093  5,284  2,686  5,386  15,387
Commercial construction and development  --  131  --  --  812
Residential construction and development  19,222  8,428  10,048  14,419  18,307
Residential real estate  9,237  6,343  7,517  8,542  6,125
Consumer  130  206  142  75  23
Total nonperforming loans  38,894  22,578  21,711  29,313  42,001
           
Foreclosed properties          
Commercial  $ 597  $ 597  $ 597  $ --  $ --
Commercial real estate  14,179  13,738  14,745  13,091  15,011
Commercial construction and development  16,886  16,919  17,021  16,691  16,213
Residential construction and development  30,512  32,002  34,377  35,197  34,506
Residential real estate  4,014  3,706  3,495  3,374  3,748
Total foreclosed properties  66,188  66,962  70,235  68,353  69,478
Other repossessed assets  264  262  289  314  333
Total nonperforming assets  $ 105,346  $ 89,802  $ 92,235  $ 97,980  $ 111,812
           
Nonperforming loans to period end loans 3.93% 2.26% 2.14% 2.82% 3.86%
Nonperforming assets to period end assets 7.18% 6.06% 6.24% 6.55% 7.36%
           
           
Loans Past Due 30-89 Days          
   For the Quarter Ended 
In thousands 6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
Commercial  $ 1,572  $ 910  $ 664  $ 817  $ 516
Commercial real estate  2,756  2,515  4,523  1,933  9,246
Construction and development  163  1,947  3,156  1,711  819
Residential real estate  6,603  6,561  19,164  7,050  10,846
Consumer  415  494  551  691  536
 Total  $ 11,509  $ 12,427  $ 28,058  $ 12,202  $ 21,963
       
       
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)      
Average Balance Sheet, Interest Earnings & Expenses and Average Rates      
Q2 2011 vs Q2 2010            
  Q2 2011 Q2 2010
  Average Earnings / Yield / Average Earnings / Yield /
Dollars in thousands Balances Expense Rate Balances Expense Rate
             
ASSETS            
Interest earning assets            
Loans, net of unearned interest            
Taxable  $ 986,545  $ 14,884 6.05%  $ 1,116,980  $ 16,533 5.94%
Tax-exempt  4,783  97 8.13%  6,070  123 8.13%
Securities            
Taxable  270,812  2,574 3.81%  247,404  3,140 5.09%
Tax-exempt  50,968  835 6.57%  41,156  685 6.68%
Interest bearing deposits other banks and Federal funds sold  43,741  27 0.25%  1,075  2 0.75%
Total interest earning assets  1,356,849  18,417 5.44%  1,412,685  20,483 5.82%
             
Noninterest earning assets            
Cash & due from banks  3,756      13,454    
Premises & equipment  22,737      23,926    
Other assets  115,920      99,812    
Allowance for loan losses  (18,075)      (19,003)    
Total assets  $ 1,481,187      $ 1,530,874    
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
             
Liabilities            
Interest bearing liabilities            
Interest bearing demand deposits  $ 152,587  $ 101 0.27%  $ 145,966  $ 157 0.43%
Savings deposits  211,618  504 0.96%  196,653  637 1.30%
Time deposits  608,669  4,061 2.68%  601,629  4,585 3.06%
Short-term borrowings  2,035  1 0.20%  16,231  20 0.49%
Long-term borrowings and subordinated debentures  319,533  3,282 4.12%  397,640  4,874 4.92%
Total interest bearing liabilities  1,294,442  7,949 2.46%  1,358,119  10,273 3.03%
             
Noninterest bearing liabilities            
Demand deposits  86,216      71,934    
Other liabilities  9,127      9,855    
Total liabilities  1,389,785      1,439,908    
             
Shareholders' equity - preferred  3,519      3,519    
Shareholders' equity - common  87,883      87,447    
Total liabilities and shareholders' equity  $ 1,481,187      $ 1,530,874    
             
NET INTEREST EARNINGS    $ 10,468      $ 10,210  
             
NET INTEREST MARGIN     3.09%     2.90%
           
           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates      
YTD 2011 vs YTD 2010            
  YTD 2011 YTD 2010
  Average Earnings / Yield / Average Earnings / Yield /
Dollars in thousands Balances Expense Rate Balances Expense Rate
             
ASSETS            
Interest earning assets            
Loans, net of unearned interest            
Taxable  $ 993,905  $ 29,967 6.08%  $ 1,131,013  $ 33,491 5.97%
Tax-exempt  4,861  195 8.09%  6,376  247 7.81%
Securities            
Taxable  270,338  5,183 3.87%  249,937  6,278 5.07%
Tax-exempt  44,434  1,492 6.77%  41,475  1,374 6.68%
Interest bearing deposits other banks and Federal funds sold  40,075  45 0.23%  708  13 3.70%
Total interest earning assets  1,353,613  36,882 5.49%  1,429,509  41,403 5.84%
             
Noninterest earning assets            
Cash & due from banks  3,894      14,543    
Premises & equipment  22,857      24,034    
Other assets  114,467      92,337    
Allowance for loan losses  (18,095)      (18,641)    
Total assets  $ 1,476,736      $ 1,541,782    
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
             
Liabilities            
Interest bearing liabilities            
Interest bearing demand deposits  $ 150,437  $ 201 0.27%  $ 146,331  $ 330 0.45%
Savings deposits  204,666  1,005 0.99%  195,746  1,328 1.37%
Time deposits  615,953  8,204 2.69%  598,749  9,218 3.10%
Short-term borrowings  1,886  2 0.21%  30,519  78 0.52%
Long-term borrowings and subordinated debentures  321,370  6,635 4.16%  399,155  9,732 4.92%
   1,294,312  16,047 2.50%  1,370,500  20,686 3.04%
Noninterest bearing liabilities            
Demand deposits  82,142      71,255    
Other liabilities  9,378      8,865    
Total liabilities  1,385,832      1,450,620    
             
Shareholders' equity - preferred  3,519      3,519    
Shareholders' equity - common  87,385      87,643    
             
Total liabilities and shareholders' equity  $ 1,476,736      $ 1,541,782    
             
NET INTEREST EARNINGS    $ 20,835      $ 20,717  
             
NET INTEREST MARGIN     3.10%     2.92%
     
     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures    
   For the Quarter
Ended 
 For the Six Months Ended 
 Dollars in thousands  6/30/2011 6/30/2010 6/30/2011 6/30/2010
         
Net income applicable to common shares - excluding realized securities gains, other-than-temporary impairment of securities and write-downs of foreclosed properties   $ 1,400  $ (2,361)  $ 2,995  $ (2,464)
         
Realized securities gains   318  1,256  1,946  1,520
Applicable income tax effect   (118)  (465)  (720)  (562)
Other-than-temporary impairment of securities   (532)  --  (1,761)  (29)
Applicable income tax effect   197  --  652  11
Write-downs foreclosed properties   (689)  (2,194)  (4,132)  (2,194)
Applicable income tax effect   255  812  1,529  812
   (569)  (591)  (2,486)  (442)
GAAP net income applicable to common shares   $ 831  $ (2,952)  $ 509  $ (2,906)
 
Diluted earnings per common share - excluding realized securities gains, other-than-temporary impairment of securities, and write-downs of foreclosed 
   $ 0.18  $ (0.32)  $ 0.41  $ (0.33)
Realized securities gains   0.04  0.17  0.26  0.20
Applicable income tax effect   (0.01)  (0.06)  (0.10)  (0.07)
Other-than-temporary impairment of securities   (0.07)  --   (0.24)  -- 
Applicable income tax effect   0.03  --   0.09  -- 
Write-downs of foreclosed properties   (0.09)  (0.30)  (0.56)  (0.30)
Applicable income tax effect   0.03  0.11  0.21  0.11
   (0.07)  (0.08)  (0.34)  (0.06)
GAAP diluted earnings per common share   $ 0.11  $ (0.40)  $ 0.07  $ (0.39)
         
Total revenue - excluding realized securities gains, other-than-temporary impairment of securities and write-downs of foreclosed properties   $ 13,048  $ 12,555  $ 25,583  $ 25,068
         
Realized securities gains  318  1,256  1,946  1,520
Other-than-temporary impairment of securities   (532)  --  (1,761)  (29)
Write-downs of foreclosed properties   (689)  (2,194)  (4,132)  (2,194)
   (903)  (938)  (3,947)  (703)
GAAP total revenue   $ 12,145  $ 11,617  $ 21,636  $ 24,365
         
Total noninterest income - excluding realized securities gains, other-than-temporary impairment of securities and write-downs of foreclosed properties   $ 2,889  $ 2,745  $ 5,321  $ 5,151
         
Realized securities gains  318  1,256  1,946  1,520
Other-than-temporary impairment of securities   (532)  --  (1,761)  (29)
Write-downs of foreclosed properties   (689)  (2,194)  (4,132)  (2,194)
   (903)  (938)  (3,947)  (703)
GAAP total noninterest income   $ 1,986  $ 1,807  $ 1,374  $ 4,448
Robert S. Tissue, Sr. Vice President & CFO
(304) 530-0552