Summit Financial Group Reports Third Quarter 2011 Results

Q3 2011 Diluted EPS $0.24 Compared to $0.11 in Q2 2011 and ($0.03) in Q3 2010

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| Source: Summit Financial Group, Inc.

MOOREFIELD, W.Va., Oct. 27, 2011 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (Nasdaq:SMMF) today reported third quarter 2011 net income applicable to common shares of $1,862,000, or $0.24 per diluted share, compared with a net loss applicable to common shares of $201,000, or ($0.03) per diluted share, for the third quarter of 2010.

Excluding from third quarter 2011 nonrecurring items (on a pre-tax basis) consisting of realized securities gains of $1,517,000, charges for other-than-temporary impairment ("OTTI") of securities of $484,000 and write-downs of foreclosed properties of $1,637,000, pro forma third quarter 2011 earnings were approximately $2.24 million, or $0.29 per diluted share. Excluding from third quarter 2010 nonrecurring realized securities gains of $67,000 and OTTI of securities of $109,000, a pro forma net loss of $175,000 would have resulted, or ($0.03) per diluted share.

For the nine months ended September 30, 2011, Summit recorded net income applicable to common shares of $2.37 million, or $0.32 per diluted share, compared with a net loss applicable to common shares of $3.11 million, or ($0.42) per diluted share, for the comparable 2010 nine-month period.

Excluding from the nine month period ended September 30, 2011 nonrecurring items (on a pre-tax basis) comprised of realized securities gains of $3.46 million, OTTI charges of $2.25 million and write-downs of foreclosed properties of $5.77 million, and from the 2010 first nine-month period realized securities gains of $1.59 million, OTTI charges of $138,000, and write-downs of foreclosed properties of $2.19 million, pro forma earnings for first nine months of 2011 were approximately $5.24 million, or $0.70 per diluted share, compared to a pro forma net loss of $2.64 million, or ($0.35) per diluted share, for the 2010 nine month period.

Highlights for Q3 2011 include:

  • Achieved best quarterly earnings since Q4 2008.
     
  • Provision for loans losses declined by a third compared to that recorded in the prior quarter.
     
  • Nonperforming assets decreased 5% in the quarter.
     
  • Past due loans continue to trend downward.
     
  • Recorded a $1.6 million charge to write-down foreclosed properties which was offset by $1.5 million in realized securities gains.
     
  • Net interest margin remained stable, although loan levels continued to decline as originating quality new loans remains challenging.
     
  • Noninterest expenses remained well-controlled.
     
  • Through September 30, 2011, Summit had received subscriptions totaling $3.6 million in conjunction with its ongoing offerings of Series 2011 8% Noncumulative Convertible Preferred Stock.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, "We are very pleased to continue to achieve improved earnings performance. We remain very focused on reducing our portfolio of nonperforming assets, and we continue to make progress in this regard, although not at the pace we would desire. Loan delinquencies have declined, net loan charge-offs remain stabilized at levels well below that experienced in 2010, and we continue to see significantly fewer new problem loans. However, progress in regard to dispositions of foreclosed properties remains difficult to achieve as the return of our real estate markets to more normal levels is progressing slowly".

Results from Operations

Total revenue for the 2011 third quarter, consisting of net interest income and noninterest income, was $12.1 million compared to $12.0 million for the 2010 third quarter. For the year-to-date period ended September 30, 2011, total revenue was $33.7 million compared to $36.6 million for the same period in 2010.

Perhaps more meaningful, total revenue excluding nonrecurring items (as enumerated above) was $12.7 million for third quarter 2011 compared to $12.0 million in the prior-year quarter, an increase of 5.8 percent. For the first nine months of 2011, total revenue excluding nonrecurring items was $38.3 million versus $37.3 million for the same period in 2010, an increase of 2.6 percent.

For the third quarter of 2011, net interest income was $9.9 million, an increase of 3.9 percent from the $9.5 million reported in the prior-year third quarter and a decrease of 2.4 percent from the $10.2 million reported in the linked quarter. The net interest margin for third quarter 2011 was 3.08 percent compared to 2.84 percent for the year-ago quarter, and 3.09 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 third quarter 2011 was $2.19 million compared to $2.42 million for the comparable period of 2010. Excluding nonrecurring items (as enumerated above), noninterest income was $2.79 million for third quarter 2011, up $329,000 or 13.4 percent from the $2.46 million reported for third quarter 2010.

The provision for loan losses was $2.0 million for the third quarter of 2011 compared to $3.0 million and $4.5 million for the linked and year-ago quarters, respectively.

Noninterest expense continues to be well-controlled. Total noninterest expense decreased 2.6% to $7.6 million for the quarter from $7.8 million in the linked quarter, and decreased 7.6% from the $8.2 million reported in third quarter 2010. Moreover, noninterest expense for the first nine months of 2011 was $1.26 million or 5.3 percent, less than during the first nine months of 2010. Cost-saving initiatives continue in place and their impact remains beneficial.

Balance Sheet

At September 30, 2011, total assets were $1.46 billion, a decrease of $13.9 million, or 0.9 percent, and a decrease of $31.8 million, or 2.1 percent, since December 31, 2010 and September 30, 2010, respectively. Total loans, net of unearned fees, were $982.3 million at September 30, 2011, down $30.2 million, or 3.0 percent, from the $1.01 billion reported at year-end 2010, and down $54.7 million or 5.3 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 $2.3 million, or 0.5 percent. The second largest component of Summit's loan portfolio, residential real estate, declined $13.8 million, or 3.9 percent, while construction and development ("C&D") loans declined $9.3 million, or 8.3 percent and commercial ("C&I") loans declined $6.6 million, or 6.8 percent. 

During the first nine months of 2011, retail checking and savings deposits grew $55.3 million, or 13.8 percent, to $457.3 million. The increase in these deposits provided Summit with an opportunity to further reduce brokered deposits and relatively higher-cost long-term borrowings by $44.6 million and $32.1 million, respectively, or 19.4 percent and 9.4 percent, respectively, since year-end 2010.

Asset Quality

As of September 30, 2011, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $99.9 million, or 6.82 percent of assets. This compares to $105.3 million, or 7.18 percent of assets at the linked quarter, and $92.2 million, or 6.24 percent of assets, at year-end 2010. The 5.2 percent decline in third quarter 2011 NPAs compared to the linked quarter was the result of a $2.6 million reduction in nonperforming loans, and a $2.9 million decrease in foreclosed properties due to increased sales activity and write-downs to fair value.

Third quarter 2011 net loan charge-offs were $2.1 million, or 0.84 percent of average loans annualized; year-to-date 2011, Summit's net loan charge-offs were $7.2 million, while adding $8.0 million to the allowance for loan losses. The allowance for loan losses stood at $17.9 million, or 1.82 percent of total loans at September 30, 2011, compared to 1.70 percent at year-end 2010. 

Loans 30-89 day delinquent continued to show improvement, decreasing to 0.96 percent of total loans at September 30, 2011, compared to 1.16 percent and 2.77 percent of total loans at June 30, 2011 and December 31, 2010, respectively.

Capital Adequacy

Shareholders' equity, which includes net subscription proceeds totaling $3.5 million relating to Summit's ongoing offerings of Series 2011 8% Noncumulative Convertible Preferred Stock, was $98.9 million as of September 30, 2011 compared to $89.8 million December 31, 2010.

Summit's depository institution, Summit Community Bank, Inc. (the "Bank"), remains well in excess of regulatory requirements for a "well capitalized" institution at September 30, 2011. The Bank's total risk-based capital ratio improved to 13.4 percent at September 30, 2011 compared 12.8 percent at June 30, 2011, while its Tier 1 leverage capital ratio improved to 8.7 from the 8.3 percent reported at June 30, 2011. Total common shares outstanding as of September 30, 2011 were 7,425,472.

About the Company

Summit Financial Group, Inc. is a $1.46 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 --- Q3 2011 vs Q3 2010
       
     
   For the Quarter Ended   Percent 
 Dollars in thousands  9/30/2011 9/30/2010  Change 
 Condensed Statements of Income     
 Interest income       
 Loans, including fees   $ 14,717  $ 16,239 -9.4%
 Securities   2,920  3,308 -11.7%
 Other   15  7 NM
 Total interest income   17,652  19,554 -9.7%
 Interest expense       
 Deposits   4,561  5,160 -11.6%
 Borrowings   3,170  4,846 -34.6%
 Total interest expense   7,731  10,006 -22.7%
 Net interest income   9,921  9,548 3.9%
 Provision for loan losses   2,001  4,500 -55.5%
 Net interest income after provision     
 for loan losses   7,920  5,048 56.9%
       
 Noninterest income       
 Insurance commissions   1,073  1,227 -12.6%
 Service fee income   776  763 1.7%
 Realized securities gains   1,517  67 NM
 Other-than-temporary impairment of securities   (484)  (109) 344.0%
 Write-downs of foreclosed properties   (1,637)  -- NA
 Other income   942  472 99.6%
Total noninterest income  2,187  2,420 -9.6%
 Noninterest expense       
 Salaries and employee benefits  3,959  3,999 -1.0%
 Net occupancy expense  473  498 -5.0%
 Equipment expense  589  620 -5.0%
 Professional fees  265  223 18.8%
 FDIC premiums  580  715 -18.9%
 Foreclosed properties expense  389  671 -42.0%
 Other expenses  1,318  1,467 -10.2%
Total noninterest expense  7,573  8,193 -7.6%
 Income (loss) before income taxes   2,534  (725) NM
 Income taxes   598  (598) NM
 Net income (loss)   1,936  (127) NM
 Preferred stock dividends   74  74 0.0%
       
Net income (loss) applicable to common shares  $ 1,862  $ (201) NM
       
       
       
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)      
Quarterly Performance Summary --- Q3 2011 vs Q3 2010      
     
   For the Quarter Ended   Percent 
  9/30/2011 9/30/2010  Change 
 Per Share Data       
 Earnings per common share       
 Basic   $ 0.25  $ (0.03) NM
 Diluted   $ 0.24  $ (0.03) NM
       
 Average shares outstanding       
 Basic   7,425,472  7,425,472 0.0%
 Diluted   8,110,070  7,427,955 9.2%
       
 Performance Ratios       
 Return on average equity (A)  8.54% -0.59% NM
 Return on average assets  0.53% -0.03% NM
 Net interest margin  3.08% 2.84% 8.5%
 Efficiency ratio (B)  57.29% 65.38% -12.4%
       
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)      
Nine Month Performance Summary --- 2011 vs 2010      
       
       
   For the Nine Months Ended   Percent 
 Dollars in thousands  9/30/2011 9/30/2010  Change 
 Condensed Statements of Income      
 Interest income       
 Loans, including fees   $ 44,814  $ 49,893 -10.2%
 Securities   9,088  10,493 -13.4%
 Other   59  21 181.0%
 Total interest income   53,961  60,407 -10.7%
 Interest expense       
 Deposits   13,971  16,037 -12.9%
 Borrowings   9,807  14,655 -33.1%
 Total interest expense   23,778  30,692 -22.5%
 Net interest income   30,183  29,715 1.6%
 Provision for loan losses   8,001  18,350 -56.4%
 Net interest income after provision       
 for loan losses   22,182  11,365 95.2%
       
 Noninterest income       
 Insurance commissions   3,458  3,659 -5.5%
 Service fee income   2,155  2,298 -6.2%
 Realized securities gains   3,463  1,587 118.2%
 Other-than-temporary impairment of securities   (2,245)  (138) NM
 Write-downs of foreclosed properties   (5,770)  (2,194) -163.0%
 Other income   2,500  1,656 51.0%
Total noninterest income  3,561  6,868 -48.2%
 Noninterest expense       
 Salaries and employee benefits  11,987  11,812 1.5%
 Net occupancy expense  1,463  1,529 -4.3%
 Equipment expense  1,750  1,883 -7.1%
 Professional fees  654  759 -13.8%
 FDIC premiums  1,859  2,165 -14.1%
 Foreclosed properties expense  1,235  1,147 7.7%
 Other expenses  3,503  4,414 -20.6%
Total noninterest expense  22,451  23,709 -5.3%
 Income (loss) before income taxes   3,292  (5,476) NM
 Income taxes   698  (2,591) NM
 Net income (loss)   2,594  (2,885) NM
 Preferred stock dividends   223  223 0.0%
       
Net income (loss) applicable to common shares  $ 2,371  $ (3,108) NM
       
       
       
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)      
Nine Month Performance Summary --- 2011 vs 2010      
     
   For the Nine Months Ended   Percent 
  9/30/2011 9/30/2010  Change 
 Per Share Data       
 Earnings per common share       
 Basic   $ 0.32  $ (0.42) NM
 Diluted   $ 0.32  $ (0.42) NM
       
 Average shares outstanding       
 Basic   7,425,472  7,425,472 0.0%
 Diluted   7,428,860  7,426,422 0.0%
       
 Performance Ratios       
 Return on average equity (A)  3.91% -4.41% NM
 Return on average assets  0.23% -0.25% NM
 Net interest margin  3.10% 2.88% 7.6%
 Efficiency ratio (B)  58.03% 61.40% -5.5%
       
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  9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
 Condensed Statements of Income          
 Interest income           
 Loans, including fees   $ 14,717  $ 14,956  $ 15,140  $ 16,064  $ 16,239
 Securities   2,920  3,125  3,043  3,191  3,308
 Other   15  28  17  11  7
 Total interest income   17,652  18,109  18,200  19,266  19,554
 Interest expense           
 Deposits   4,561  4,667  4,743  5,000  5,160
 Borrowings   3,170  3,282  3,355  3,829  4,846
 Total interest expense   7,731  7,949  8,098  8,829  10,006
 Net interest income   9,921  10,160  10,102  10,437  9,548
 Provision for loan losses   2,001  3,000  3,000  3,000  4,500
 Net interest income after provision           
 for loan losses   7,920  7,160  7,102  7,437  5,048
           
 Noninterest income           
 Insurance commissions   1,073  1,142  1,242  1,086  1,227
 Service fee income   776  758  621  741  763
 Realized securities gains   1,517  318  1,628  463  67
 Other-than-temporary impairment of securities   (484)  (533)  (1,228)  (850)  (109)
 Write-downs of foreclosed properties   (1,637)  (689)  (3,443)  (1,206)  --
 Other income   942  859  699  637  472
Total noninterest income  2,187  1,855  (481)  871  2,420
 Noninterest expense           
 Salaries and employee benefits  3,959  4,055  3,973  3,839  3,999
 Net occupancy expense  473  481  509  480  498
 Equipment expense  589  581  580  574  620
 Professional fees  265  193  196  256  223
 FDIC premiums  580  586  693  705  715
 Foreclosed properties expense  389  412  434  430  671
 Other expenses  1,318  1,464  722  1,478  1,467
Total noninterest expense  7,573  7,772  7,107  7,762  8,193
 Income (loss) before income taxes   2,534  1,243  (486)  546  (725)
 Income taxes   598  338  (238)  (364)  (598)
 Net income (loss)   1,936  905  (248)  910  (127)
 Preferred stock dividends   74  74  74  74  74
Net income (loss) applicable to common shares  $ 1,862  $ 831  $ (322)  $ 836  $ (201)
           
           
           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)          
Five Quarter Performance Summary          
         
   For the Quarter Ended 
  9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
 Per Share Data           
 Earnings per common share           
 Basic   $ 0.25  $ 0.11  $ (0.04)  $ 0.11  $ (0.03)
 Diluted   $ 0.24  $ 0.11  $ (0.04)  $ 0.11  $ (0.03)
           
 Average shares outstanding           
 Basic   7,425,472  7,425,472  7,425,472  7,425,472  7,425,472
 Diluted   8,110,070  7,425,472  7,425,472  7,425,822  7,427,955
           
 Performance Ratios           
 Return on average equity (A)  8.54% 4.12% -1.14% 4.17% -0.59%
 Return on average assets  0.53% 0.24% -0.07% 0.25% -0.03%
 Net interest margin  3.08% 3.09% 3.11% 3.15% 2.84%
 Efficiency ratio - (B)  57.29% 58.42% 58.38% 58.05% 65.00%
           
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  9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
           
 Assets           
Cash and due from banks  $ 3,596  $ 4,515  $ 4,263  $ 4,652  $ 4,598
Interest bearing deposits other banks  39,103  24,658  46,448  45,696  40,691
Securities  292,442  295,806  293,240  271,730  267,856
Loans, net  964,349  971,127  979,387  995,319  1,018,169
Property held for sale  63,335  66,188  66,961  70,235  68,353
Premises and equipment, net  22,334  22,587  22,784  23,092  23,402
Intangible assets  8,739  8,826  8,914  9,002  9,090
Cash surrender value of life insurance policies  29,034  28,762  13,589  13,458  13,301
Other assets  41,652  45,517  46,609  45,286  50,952
 Total assets  $ 1,464,584  $ 1,467,986  $ 1,482,195  $ 1,478,470  $ 1,496,412
           
 Liabilities and Shareholders' Equity           
Retail deposits  $ 861,639  $ 850,312  $ 844,914  $ 806,652  $ 786,992
Brokered time deposits  185,670  195,782  217,205  230,287  243,040
Short-term borrowings  955  2,047  1,879  1,582  1,610
Long-term borrowings and          
 subordinated debentures  308,420  319,020  319,905  340,498  366,037
Other liabilities  8,976  8,966  8,964  9,630  8,499
Shareholders' equity  98,924  91,859  89,328  89,821  90,234
 Total liabilities and shareholders' equity  $ 1,464,584  $ 1,467,986  $ 1,482,195  $ 1,478,470  $ 1,496,412
           
Book value per common share (A)  $ 12.21  $ 11.34  $ 11.03  $ 11.01  $ 11.14
Tangible book value per common share (A)  $ 11.13  $ 10.25  $ 9.93  $ 9.90  $ 10.02
Tangible equity / Tangible assets 6.2% 5.7% 5.5% 5.5% 5.5%
           
NOTE (A) – Assumes conversion of convertible preferred stock
           
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)          
Regulatory Capital Ratios          
           
  9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
Summit Financial Group, Inc.          
Total Risk Based Capital 12.3% 11.9% 11.7% 11.8% 11.6%
Tier 1 Risk Based Capital 9.7% 9.3% 9.1% 9.1% 8.8%
Tier 1 Leverage Ratio 6.9% 6.7% 6.6% 6.9% 6.7%
           
Summit Community Bank, Inc.          
Total Risk Based Capital 13.4% 12.8% 12.6% 12.6% 12.2%
Tier 1 Risk Based Capital 12.1% 11.5% 11.3% 11.4% 10.9%
Tier 1 Leverage Ratio 8.7% 8.3% 8.3% 8.5% 8.3%
           
           
           
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)          
Loan Composition          
           
Dollars in thousands 9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
           
Commercial  $ 90,422  $ 92,287  $ 92,227  $ 97,060  $ 95,713
Commercial real estate          
 Owner occupied  171,192  180,943  182,956  187,098  193,109
 Non-owner occupied  253,538  242,431  240,604  235,337  236,260
Construction and development          
 Land and development  94,023  94,464  93,675  99,085  112,185
 Construction  9,445  12,223  13,879  13,691  10,201
Residential real estate          
 Non-jumbo  224,499  228,205  233,308  239,290  243,987
 Jumbo  62,255  60,817  61,878  61,339  64,264
 Home equity  51,025  50,884  50,499  50,987  51,152
Consumer  22,988  23,773  22,968  24,145  24,945
Other  2,911  3,116  4,326  4,511  5,222
Total loans, net of unearned fees  982,298  989,143  996,320  1,012,543  1,037,038
Less allowance for loan losses  17,949  18,016  16,933  17,224  18,869
Loans, net  $ 964,349  $ 971,127  $ 979,387  $ 995,319  $ 1,018,169
           
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)          
Retail Deposit Composition          
           
Dollars in thousands 9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
Non interest bearing checking  $ 85,406  $ 85,964  $ 86,735  $ 74,604  $ 76,362
Interest bearing checking  163,840  150,004  153,283  150,291  152,393
Savings  208,030  212,745  212,502  177,053  182,284
Time deposits  404,363  401,599  392,394  404,704  375,953
Total retail deposits  $ 861,639  $ 850,312  $ 844,914  $ 806,652  $ 786,992
           
           
           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)          
Asset Quality Information          
   For the Quarter Ended 
 Dollars in thousands  9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
Gross loan charge-offs  $ 2,157  $ 2,022  $ 3,396  $ 5,135  $ 6,477
Gross loan recoveries  (89)  (104)  (105)  (490)  (78)
 Net loan charge-offs  $ 2,068  $ 1,918  $ 3,291  $ 4,645  $ 6,399
           
Net loan charge-offs to average loans (annualized) 0.84% 0.76% 1.31% 1.76% 2.42%
Allowance for loan losses  $ 17,949  $ 18,016  $ 16,933  $ 17,224  $ 18,869
Allowance for loan losses as a percentage          
 of period end loans 1.82% 1.82% 1.70% 1.70% 1.82%
Nonperforming assets:          
 Nonperforming loans          
 Commercial  $ 3,473  $ 2,212  $ 2,186  $ 1,318  $ 891
 Commercial real estate  8,398  8,093  5,284  2,686  5,386
 Commercial construction and development  --  --  131  --  --
 Residential construction and development  17,506  19,222  8,428  10,048  14,419
 Residential real estate  6,818  9,237  6,343  7,517  8,542
 Consumer  87  130  206  142  75
Total nonperforming loans  36,282  38,894  22,578  21,711  29,313
 Foreclosed properties          
 Commercial  $ 597  $ 597  $ 597  $ 597  $ --
 Commercial real estate  14,256  14,179  13,738  14,745  13,091
 Commercial construction and development  16,960  16,886  16,918  17,021  16,691
 Residential construction and development  27,804  30,512  32,002  34,377  35,197
 Residential real estate  3,718  4,014  3,706  3,495  3,374
Total foreclosed properties  63,335  66,188  66,961  70,235  68,353
Other repossessed assets  262  264  262  289  314
Total nonperforming assets  $ 99,879  $ 105,346  $ 89,801  $ 92,235  $ 97,980
           
Nonperforming loans to period end loans 3.69% 3.93% 2.26% 2.14% 2.82%
Nonperforming assets to period end assets 6.82% 7.18% 6.06% 6.24% 6.55%
           
Loans Past Due 30-89 Days          
   For the Quarter Ended 
 In thousands  9/30/2011 6/30/2011 3/31/2011 12/31/2010 9/30/2010
           
Commercial  $ 255  $ 1,572  $ 910  $ 664  $ 817
Commercial real estate  2,797  2,756  2,515  4,523  1,933
Construction and development  1,251  163  1,947  3,156  1,711
Residential real estate  4,779  6,603  6,561  19,164  7,050
Consumer  308  415  494  551  691
 Total  $ 9,390  $ 11,509  $ 12,427  $ 28,058  $ 12,202
         
         
         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)        
Average Balance Sheet, Interest Earnings & Expenses and Average Rates      
Q3 2011 vs Q3 2010            
  Q3 2011 Q3 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  $ 976,169  $ 14,656 5.96%  $ 1,052,668  $ 16,161 6.09%
 Tax-exempt  4,575  92 7.98%  5,786  118 8.09%
 Securities            
 Taxable  246,411  2,104 3.39%  251,640  2,874 4.53%
 Tax-exempt  79,685  1,236 6.15%  39,408  656 6.60%
 Interest bearing deposits other banks            
 and Federal funds sold  28,911  15 0.21%  20,069  7 0.14%
Total interest earning assets  1,335,751  18,103 5.38%  1,369,571  19,816 5.74%
             
Noninterest earning assets            
 Cash & due from banks  4,047      4,233    
 Premises & equipment  22,503      23,619    
 Other assets  126,113      117,326    
 Allowance for loan losses  (18,240)      (20,427)    
 Total assets  $ 1,470,174      $ 1,494,322    
             
 LIABILITIES AND SHAREHOLDERS' EQUITY          
             
Liabilities            
Interest bearing liabilities            
 Interest bearing             
 demand deposits  $ 152,516  $ 96 0.25%  $ 145,800  $ 133 0.36%
 Savings deposits  210,715  467 0.88%  189,879  555 1.16%
 Time deposits  602,454  3,998 2.63%  605,357  4,472 2.93%
 Short-term borrowings  1,226  1 0.32%  2,268  2 0.35%
 Long-term borrowings and            
 subordinated debentures  313,102  3,169 4.02%  378,004  4,844 5.08%
Total interest bearing liabilities  1,280,013  7,731 2.40%  1,321,308  10,006 3.00%
             
Noninterest bearing liabilities            
 Demand deposits  86,966      74,444    
 Other liabilities  8,948      8,577    
 Total liabilities  1,375,927      1,404,329    
             
Shareholders' equity - preferred  3,558      3,519    
Shareholders' equity - common  90,689      86,474    
 Total liabilities and            
 shareholders' equity  $ 1,470,174      $ 1,494,322    
             
NET INTEREST EARNINGS    $ 10,372      $ 9,810  
             
NET INTEREST MARGIN     3.08%     2.84%
         
         
         
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  $ 987,928  $ 44,622 6.04%  $ 1,104,611  $ 49,651 6.01%
 Tax-exempt  4,765  289 8.11%  6,177  367 7.94%
 Securities            
 Taxable  262,275  7,290 3.72%  250,511  9,151 4.88%
 Tax-exempt  56,313  2,727 6.47%  40,778  2,032 6.66%
 Interest bearing deposits other banks            
 and Federal funds sold  36,307  59 0.22%  14,021  21 0.20%
Total interest earning assets  1,347,588  54,987 5.46%  1,416,098  61,222 5.78%
             
Noninterest earning assets            
 Cash & due from banks  3,951      4,280    
 Premises & equipment  22,737      23,896    
 Other assets  118,393      100,597    
 Allowance for loan losses  (18,144)      (19,243)    
 Total assets  $ 1,474,525      $ 1,525,628    
             
 LIABILITIES AND SHAREHOLDERS' EQUITY          
             
Liabilities            
Interest bearing liabilities            
 Interest bearing             
 demand deposits  $ 151,137  $ 296 0.26%  $ 146,152  $ 463 0.42%
 Savings deposits  206,705  1,473 0.95%  193,769  1,883 1.30%
 Time deposits  611,404  12,202 2.67%  600,976  13,691 3.05%
 Short-term borrowings  1,663  3 0.24%  20,998  79 0.50%
 Long-term borrowings and            
 subordinated debentures  318,584  9,804 4.11%  392,027  14,575 4.97%
   1,289,493  23,778 2.47%  1,353,922  30,691 3.03%
Noninterest bearing liabilities            
 Demand deposits  83,768      72,329    
 Other liabilities  9,234      8,609    
 Total liabilities  1,382,495      1,434,860    
             
Shareholders' equity - preferred  3,532      3,519    
Shareholders' equity - common  88,498      87,249    
 Total liabilities and            
 shareholders' equity  $ 1,474,525      $ 1,525,628    
             
NET INTEREST EARNINGS    $ 31,209      $ 30,531  
             
NET INTEREST MARGIN     3.10%     2.88%
         
         
         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)        
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures    
           
   For the Quarter Ended     For the Nine Months Ended 
 Dollars in thousands  9/30/2011 9/30/2010   9/30/2011 9/30/2010
           
 Net income applicable to common shares - excluding           
 realized securities gains, other-than-temporary           
 impairment of securities and write-downs of           
 foreclosed properties   $ 2,243  $ (175)    $ 5,238  $ (2,639)
           
 Realized securities gains   1,517  67    3,463  1,587
 Applicable income tax effect   (561)  (25)    (1,281)  (587)
 Other-than-temporary impairment of securities   (484)  (109)    (2,245)  (138)
 Applicable income tax effect   179  40    831  51
 Write-downs foreclosed properties   (1,637)  --    (5,770)  (2,194)
 Applicable income tax effect   606  --    2,135  812
   (381)  (26)    (2,867)  (469)
 GAAP net income applicable to common shares   $ 1,862  $ (201)    $ 2,371  $ (3,108)
           
 Diluted earnings per common share - excluding realized         
 securities gains, other-than-temporary impairment           
 of securities, and write-downs of foreclosed           
   $ 0.29  $ (0.03)    $ 0.70  $ (0.35)
           
 Realized securities gains   0.19  0.01    0.47  0.21
 Applicable income tax effect   (0.07)  --     (0.17)  (0.08)
 Other-than-temporary impairment of securities   (0.06)  (0.01)    (0.30)  (0.02)
 Applicable income tax effect   0.02  --     0.11  0.01
 Write-downs of foreclosed properties   (0.20)  --     (0.78)  (0.30)
 Applicable income tax effect   0.07  --     0.29  0.11
   (0.05)  --     (0.38)  (0.07)
 GAAP diluted earnings per common share   $ 0.24  $ (0.03)    $ 0.32  $ (0.42)
           
 Total revenue - excluding realized securities gains,           
 other-than-temporary impairment of securities and           
 write-downs of foreclosed properties   $ 12,712  $ 12,010    $ 38,296  $ 37,328
           
 Realized securities gains  1,517  67    3,463  1,587
 Other-than-temporary impairment of securities   (484)  (109)    (2,245)  (138)
 Write-downs of foreclosed properties   (1,637)  --    (5,770)  (2,194)
   (604)  (42)    (4,552)  (745)
 GAAP total revenue   $ 12,108  $ 11,968    $ 33,744  $ 36,583
           
 Total noninterest income - excluding realized securities           
 gains, other-than-temporary impairment of securities           
 and write-downs of foreclosed properties   $ 2,791  $ 2,462    $ 8,113  $ 7,613
           
 Realized securities gains  1,517  67    3,463  1,587
 Other-than-temporary impairment of securities   (484)  (109)    (2,245)  (138)
 Write-downs of foreclosed properties   (1,637)  --    (5,770)  (2,194)
   (604)  (42)    (4,552)  (745)
 GAAP total noninterest income   $ 2,187  $ 2,420    $ 3,561  $ 6,868
Robert S. Tissue, Sr. Vice President & CFO
(304) 530-0552