Summit Financial Group Reports Third Quarter 2013 Results

Q3 2013 Diluted EPS $0.24 Compared to $0.10 in Q3 2012 and $0.13 in Q2 2013; YTD 2013 Diluted EPS $0.55 Compared to $0.38 in 2012


MOOREFIELD, W.Va., Oct. 30, 2013 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (Nasdaq:SMMF) today reported third quarter 2013 net income applicable to common shares of $2.08 million, or $0.24 per diluted share, compared with $803,000, or $0.10 per diluted share, for the third quarter of 2012. Third quarter 2013 results, as compared to the same period in 2012, were positively impacted primarily by a lower provision for loan losses and lower write-downs of foreclosed properties.

Excluding from third quarter 2013 (on a pre-tax basis) realized securities gains of $132,000, gains on sales of foreclosed properties of $17,000, charges for other-than-temporary impairment ("OTTI") of securities of $38,000 and write-downs of foreclosed properties of $654,000, and from third quarter 2012 realized securities gains of $760,000, gains on sales of foreclosed properties of $16,000, charges for other-than-temporary impairment ("OTTI") of securities of $39,000 and write-downs of foreclosed properties of $2.57 million, third quarter 2013 earnings would have approximated $2.42 million, or $0.27 per diluted share, compared to $1.96 million, or $0.22 per diluted share, for the year-ago period.

For the nine months ended September 30, 2013, Summit recorded net income applicable to common shares of $4.70 million, or $0.55 per diluted share, compared with $3.03 million, or $0.38 per diluted share, for the comparable 2012 nine-month period.

Excluding from the nine month period ended September 30, 2013 (on a pre-tax basis) realized securities gains of $116,000, losses on sales of foreclosed properties of $546,000, OTTI charges of $118,000 and write-downs of foreclosed properties of $3.08 million, and from the 2012 first nine-month period realized securities gains of $2.25 million, losses on sale of foreclosed properties of $583,000, OTTI charges of $375,000 and write-downs of foreclosed properties of $6.11 million, earnings for the first nine months of 2013 would have approximated $6.98 million, or $0.79 per diluted share, compared to $6.07 million, or $0.71 per diluted share, for the 2012 nine month period.

Highlights for Q3 2013 include:

  • Best quarter's earnings per diluted share since Q4 2008.
  • Tenth consecutive quarter of positive quarterly earnings.
  • Nonperforming assets declined for the seventh consecutive quarter, reaching its lowest level since Q4 2008; OREO is at its lowest level since Q4 2009.
  • The provision for loan losses remained unchanged compared to the $1.00 million recorded in Q2 2013, and was half the amount recorded in Q3 2012.
  • Recorded charges to write-down foreclosed properties of $654,000, compared to $1.49 million in Q2 2013 and $2.57 million in Q3 2012.
  • Net interest margin increased 3 basis points compared to Q2 2013, but decreased 2 basis points compared to Q3 2012.
  • Loans grew a modest 1.3 percent.
  • Summit's regulatory capital ratios are at the highest levels in thirteen years.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, "We are pleased to report this past quarter's continued progress toward: improving our earnings performance, reducing our portfolio of problem assets, and strengthening our capital levels. Our problem assets remain top priority, and we are encouraged by the 23 percent reduction in our nonperforming assets over the past 12 months. However, dispositions of foreclosed properties remain challenging -- particularly with respect to commercial and residential development properties. Further, we anticipate our near term quarterly earnings may continue to fluctuate as foreclosed properties are re-appraised and adjusted to estimated fair values on an ongoing basis."

Results from Operations

Total revenue for the third quarter 2013, consisting of net interest income and noninterest income, was $12.4 million compared to $13.3 million for the third quarter 2012. For the year-to-date period ended September 30, 2013, total revenue was $37.1 million compared to $40.0 million for the same period in 2012.

Total revenue excluding realized securities gains of $132,000 and OTTI of securities of $38,000 was $12.3 million for third quarter 2013 compared to $12.6 million for the same prior-year quarter, a decrease of 2.1 percent. For the first nine months of 2013, total revenue excluding these same items was $37.1 million compared to $38.1 million for the first nine months of 2012.

For the third quarter of 2013, net interest income decreased to $9.5 million, compared to $9.9 million reported in the prior-year third quarter and was relatively unchanged compared to the linked quarter. The net interest margin for third quarter 2013 was 3.15 percent compared to 3.12 percent for the linked quarter, and 3.17 percent for the year-ago 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 2013 was $2.9 million compared to $3.4 million for the comparable period of 2012. Excluding realized securities gains and OTTI of securities, noninterest income was $2.77 million for third quarter 2013, compared to the $2.64 million reported for third quarter 2012.

The provision for loan losses was $1.0 million for the third quarter and linked quarter of 2013 compared to $2.0 million for the year-ago quarter.

Noninterest expenses continue to be well-controlled. Total noninterest expense decreased 17.9% for the quarter to $8.2 million from the $10.0 million reported in third quarter 2012. Excluding from third quarter 2013 noninterest expense (on a pre-tax basis) gains on sales of foreclosed properties of $17,000 and write-downs of foreclosed properties of $654,000 and from third quarter 2012 gains on sales of foreclosed properties of $16,000 and write-downs of foreclosed properties of $2.6 million, noninterest expense would have approximated $7.6 million for third quarter 2013 compared to $7.5 million for third quarter 2012.

Noninterest expense for the first nine months of 2013 decreased 9.2% compared to the first nine months of 2012. Excluding from the nine month period ended September 30, 2013 noninterest expense (on a pre-tax basis) losses on sales of foreclosed properties of $546,000 and write-downs of foreclosed properties of $3.1 million and from 2012 first nine-month period losses on sales of foreclosed properties of $583,000 and write-downs of foreclosed properties of $6.1 million, noninterest expense would have approximated $22.7 million for nine months ended September 30, 2013, compared to $22.3 million for the comparable period of 2012.

Balance Sheet                                                           

At September 30, 2013, total assets were $1.39 billion, an increase of $683,000, or 0.1 percent, and a decrease of $16.3 million, or 1.2 percent, since December 31, 2012 and September 30, 2012, respectively. Total loans, net of unearned fees and allowance for loan losses, were $939.2 million at September 30, 2013, up $2.0 million, or 0.2 percent, from the $937.2 million reported at year end 2012.

At September 30, 2013, deposits were $1.02 billion, a decrease of $10.4 million, or 1.0 percent, since year end 2012. During the first nine months of 2013, interest bearing checking deposits grew $11.0 million, or 6.3 percent, to $186.7 million, while time deposits decreased by $20.1 million, or 3.6 percent. Long-term borrowings and subordinated debentures declined by 16.6 percent since year end 2012, as the Company paid down $39.7 million in maturing borrowings during this period.

Asset Quality

As of September 30, 2013, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $77.1 million, or 5.55 percent of assets. This compares to $78.2 million, or 5.70 percent of assets at the linked quarter, and $99.8 million, or 7.11 percent of assets at September 30, 2012.

Third quarter 2013 net loan charge-offs were $2.1 million, or 0.89 percent of average loans annualized, while adding $1.0 million to the allowance for loan losses. The allowance for loan losses stood at $13.0 million, or 1.37 percent of total loans at September 30, 2013, compared to 1.88 percent at December 31, 2012.

Capital Adequacy

Shareholders' equity was $108.8 million as of September 30, 2013 compared to $108.6 million at December 31, 2012.

Summit's regulatory total risk-based capital ratio increased modestly to 14.5 percent at September 30, 2013, compared to 14.4 percent at June 30, 2013 and 14.0 percent at December 31, 2012. The Company's September 30, 2013 Tier 1 leverage capital ratio of 8.9 percent is up from 8.6 percent at June 30, 2013 and 8.3 percent at December 30, 2012.

Summit's depository institution, Summit Community Bank, Inc. (the "Bank"), is well in excess of regulatory requirements for a "well capitalized" institution at September 30, 2013. The Bank's total risk-based capital ratio was 15.5 percent at September 30, 2013 compared to 15.6 percent at June 30, 2013 and 15.0 percent at December 31, 2012, while its Tier 1 leverage capital ratio improved to 10.4 percent from the 10.2 percent and 9.8 percent reported at June 30, 2013 and December 31, 2012, respectively. The Bank received regulatory approval for and paid an upstream dividend of $1.00 million to Summit during third quarter 2013, representing the first such dividend since second quarter 2008.  

Total common shares outstanding as of September 30, 2013 were 7,448,422 compared to 7,425,472 shares as of December 31, 2012.

About the Company

Summit Financial Group, Inc. is a $1.39 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.

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, gains/losses on sales of foreclosed properties, and write-downs of foreclosed properties to estimated fair values included in its Consolidated Statements of Income. Management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of Summit's results of operations for the following reasons: (1) the trading of securities is not deemed a core business activity of Summit; and (2) prior to the financial crisis in 2008, the recognition of material unrealized securities losses, gains/losses on sales of foreclosed properties, and write-downs of foreclosed properties were infrequent, and results excluding their impact will be beneficial to readers, if our levels of nonperforming assets return to historical levels. 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 2013 vs Q3 2012
       
       
   For the Quarter Ended   Percent 
 Dollars in thousands  9/30/2013 9/30/2012  Change 
 Condensed Statements of Income       
 Interest income       
 Loans, including fees   $ 12,532  $ 13,648 -8.2%
 Securities   1,512  1,934 -21.8%
 Other   1  7 -85.7%
 Total interest income   14,045  15,589 -9.9%
 Interest expense       
 Deposits   2,487  3,067 -18.9%
 Borrowings   2,020  2,587 -21.9%
 Total interest expense   4,507  5,654 -20.3%
 Net interest income   9,538  9,935 -4.0%
 Provision for loan losses   1,000  2,000 -50.0%
 Net interest income after provision  for loan losses   8,538  7,935 7.6%
       
 Noninterest income       
 Insurance commissions   1,057  1,052 0.5%
 Service fees related to deposit accounts   1,106  1,074 3.0%
 Realized securities gains   132  760 -82.6%
 Other-than-temporary impairment of securities   (38)  (39) -2.6%
 Other income   606  514 17.9%
Total noninterest income  2,863  3,361 -14.8%
 Noninterest expense       
 Salaries and employee benefits  4,050  3,940 2.8%
 Net occupancy expense  454  476 -4.6%
 Equipment expense  578  573 0.9%
 Professional fees  263  292 -9.9%
 FDIC premiums  503  510 -1.4%
 Foreclosed properties expense  262  356 -26.4%
 (Gain) on sale of foreclosed properties   (17)  (16) 6.3%
 Write-downs of foreclosed properties   654  2,571 -74.6%
 Other expenses  1,484  1,325 12.0%
Total noninterest expense  8,231  10,027 -17.9%
 Income before income taxes   3,170  1,269 149.8%
 Income taxes   898  272 230.1%
 Net income   2,272  997 127.9%
 Preferred stock dividends   194  194 0.0%
       
Net income applicable to common shares  $ 2,078  $ 803 158.8%
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q3 2013 vs Q3 2012
       
   For the Quarter Ended   Percent 
  9/30/2013 9/30/2012  Change 
 Per Share Data       
 Earnings per common share       
 Basic   $ 0.28  $ 0.11 154.5%
 Diluted   $ 0.24  $ 0.10 140.0%
       
 Average shares outstanding       
 Basic   7,443,865  7,425,472 0.2%
 Diluted   9,621,957  9,601,278 0.2%
       
 Performance Ratios       
 Return on average equity (A)  8.49% 3.71% 128.8%
 Return on average assets  0.67% 0.28% 139.3%
 Net interest margin  3.15% 3.17% -0.6%
 Efficiency ratio (B)  56.22% 54.38% 3.4%
       
NOTE (A) – Net income divided by total average shareholders' 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 -- 2013 vs 2012
       
       
   For the Nine Months Ended   Percent 
 Dollars in thousands  9/30/2013 9/30/2012  Change 
 Condensed Statements of Income       
 Interest income       
 Loans, including fees   $ 38,234  $ 42,055 -9.1%
 Securities   4,684  6,579 -28.8%
 Other   4  30 -86.7%
 Total interest income   42,922  48,664 -11.8%
 Interest expense       
 Deposits   8,074  10,140 -20.4%
 Borrowings   6,047  8,600 -29.7%
 Total interest expense   14,121  18,740 -24.6%
 Net interest income   28,801  29,924 -3.8%
 Provision for loan losses   3,500  6,002 -41.7%
 Net interest income after provision for loan losses   25,301  23,922 5.8%
       
 Noninterest income       
 Insurance commissions   3,373  3,352 0.6%
 Service fees related to deposit accounts   3,202  3,163 1.2%
 Realized securities gains   116  2,245 -94.8%
 Other-than-temporary impairment of securities   (118)  (375) -68.5%
 Other income   1,741  1,649 5.6%
Total noninterest income  8,314  10,034 -17.1%
 Noninterest expense       
 Salaries and employee benefits  12,155  11,733 3.6%
 Net occupancy expense  1,387  1,445 -4.0%
 Equipment expense  1,724  1,777 -3.0%
 Professional fees  885  872 1.5%
 FDIC premiums  1,557  1,532 1.6%
 Foreclosed properties expense  836  935 -10.6%
 Loss on sale of foreclosed properties   546  583 -6.3%
 Write-downs of foreclosed properties   3,078  6,114 -49.7%
 Other expenses  4,164  4,012 3.8%
Total noninterest expense  26,332  29,003 -9.2%
 Income before income taxes   7,283  4,953 47.0%
 Income taxes   2,001  1,345 48.8%
 Net income   5,282  3,608 46.4%
 Preferred stock dividends   582  583 -0.2%
       
Net income applicable to common shares  $ 4,700  $ 3,025 55.4%
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary -- 2013 vs 2012
       
   For the Nine Months Ended   Percent 
  9/30/2013 9/30/2012  Change 
 Per Share Data       
 Earnings per common share       
 Basic   $ 0.63  $ 0.41 53.7%
 Diluted   $ 0.55  $ 0.38 44.7%
       
 Average shares outstanding       
 Basic   7,438,216  7,425,472 0.2%
 Diluted   9,618,328  9,601,098 0.2%
       
 Performance Ratios       
 Return on average equity (A)  6.46% 4.54% 42.3%
 Return on average assets  0.51% 0.34% 50.0%
 Net interest margin  3.17% 3.19% -0.6%
 Efficiency ratio (B)  56.24% 53.75% 4.6%
       
NOTE (A) – Net income divided by total average shareholders' 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  9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
 Condensed Statements of Income           
 Interest income           
 Loans, including fees   $ 12,532  $ 12,799  $ 12,904  $ 13,512  $ 13,648
 Securities   1,512  1,507  1,664  1,703  1,934
 Other   1  2  1  5  7
 Total interest income   14,045  14,308  14,569  15,220  15,589
 Interest expense           
 Deposits   2,487  2,820  2,768  3,017  3,067
 Borrowings   2,020  1,984  2,043  2,307  2,587
 Total interest expense   4,507  4,804  4,811  5,324  5,654
 Net interest income   9,538  9,504  9,758  9,896  9,935
 Provision for loan losses   1,000  1,000  1,500  2,498  2,000
 Net interest income after provision for loan losses   8,538  8,504  8,258  7,398  7,935
           
 Noninterest income           
 Insurance commissions   1,057  1,132  1,184  1,082  1,052
 Service fees related to deposit accounts   1,106  1,085  1,012  1,092  1,074
 Realized securities gains   132  (57)  42  103  760
 Other-than-temporary impairment of securities   (38)  (27)  (54)  (76)  (39)
 Other income   606  570  564  644  514
Total noninterest income  2,863  2,703  2,748  2,845  3,361
 Noninterest expense           
 Salaries and employee benefits  4,050  3,987  4,117  3,799  3,940
 Net occupancy expense  454  476  457  495  476
 Equipment expense  578  559  598  577  573
 Professional fees  263  360  251  314  292
 FDIC premiums  503  515  540  535  510
 Foreclosed properties expense  262  295  279  269  356
 (Gain) loss on sale of foreclosed properties   (17)  523  40  94  (16)
 Write-downs of foreclosed properties   654  1,494  929  748  2,571
 Other expenses  1,484  1,329  1,351  1,433  1,325
Total noninterest expense  8,231  9,538  8,562  8,264  10,027
 Income before income taxes   3,170  1,669  2,444  1,979  1,269
 Income taxes   898  452  651  (126)  272
 Net income   2,272  1,217  1,793  2,105  997
 Preferred stock dividends   194  194  194  194  194
Net income applicable to common shares  $ 2,078  $ 1,023  $ 1,599  $ 1,911  $ 803
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
           
   For the Quarter Ended 
  9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
 Per Share Data           
 Earnings per common share           
 Basic   $ 0.28  $ 0.14  $ 0.22  $ 0.26  $ 0.11
 Diluted   $ 0.24  $ 0.13  $ 0.19  $ 0.22  $ 0.10
           
 Average shares outstanding           
 Basic   7,443,865  7,438,401  7,432,254  7,425,472  7,425,472
 Diluted   9,621,957  9,619,585  9,613,886  9,601,435  9,601,278
           
 Performance Ratios           
 Return on average equity (A)  8.49% 4.40% 6.55% 7.76% 3.71%
 Return on average assets  0.67% 0.35% 0.52% 0.60% 0.28%
 Net interest margin  3.15% 3.12% 3.23% 3.19% 3.17%
 Efficiency ratio - (B)  56.22% 56.52% 56.00% 53.88% 54.38%
           
NOTE (A) – Net income divided by total average shareholders' 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  9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
           
 Assets           
Cash and due from banks  $ 4,571  $ 4,336  $ 3,906  $ 3,833  $ 3,752
Interest bearing deposits other banks  11,532  7,971  7,915  10,969  13,441
Securities  291,258  291,180  283,054  281,539  291,992
Loans, net  939,169  925,979  945,741  937,168  940,933
Property held for sale  45,303  47,258  54,625  56,172  56,033
Premises and equipment, net  20,780  20,936  21,023  21,129  21,265
Intangible assets  8,036  8,124  8,212  8,300  8,387
Cash surrender value of life insurance policies  35,257  30,027  29,791  29,553  30,065
Other assets  31,881  34,159  35,931  38,441  38,218
 Total assets  $ 1,387,787  $ 1,369,970  $ 1,390,198  $ 1,387,104  $ 1,404,086
           
 Liabilities and Shareholders' Equity           
Deposits  $ 1,016,735  $ 1,038,163  $ 1,066,318  $ 1,027,125  $ 1,027,307
Short-term borrowings  54,163  16,762  5,960  3,958  20,957
Long-term borrowings and subordinated debentures  199,929  199,954  199,977  239,657  240,133
Other liabilities  8,155  7,880  7,928  7,809  8,361
Shareholders' equity  108,805  107,211  110,015  108,555  107,328
 Total liabilities and shareholders' equity  $ 1,387,787  $ 1,369,970  $ 1,390,198  $ 1,387,104  $ 1,404,086
           
Book value per common share (A)  $ 11.32  $ 11.15  $ 11.45  $ 11.31  $ 11.20
Tangible book value per common share (A)  $ 10.48  $ 10.31  $ 10.60  $ 10.44  $ 10.33
Tangible equity / Tangible assets 7.3% 7.3% 7.4% 7.3% 7.1%
           
NOTE (A) – Assumes the conversion to common stock of all outstanding shares of convertible preferred stock.
 
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios
           
  9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
Summit Financial Group, Inc.          
Total Risk Based Capital 14.5% 14.4% 14.1% 14.0% 13.8%
Tier 1 Risk-based Capital 12.1% 12.1% 11.8% 11.6% 11.3%
Tier 1 Leverage Ratio 8.9% 8.6% 8.4% 8.3% 8.0%
           
Summit Community Bank, Inc.          
Total Risk Based Capital 15.5% 15.6% 15.2% 15.0% 14.6%
Tier 1 Risk-based Capital 14.3% 14.3% 13.9% 13.7% 13.3%
Tier 1 Leverage Ratio 10.4% 10.2% 10.0% 9.8% 9.5%
 
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
           
Dollars in thousands 9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
           
Commercial  $ 83,844  $ 78,964  $ 86,877  $ 85,829  $ 88,997
Commercial real estate        
 Owner occupied  151,261  149,660  151,942  154,252  150,090
 Non-owner occupied  279,412  277,773  288,475  276,082  279,132
Construction and development        
 Land and development  73,089  73,426  76,277  79,335  82,857
 Construction  12,323  7,634  5,782  3,772  2,087
Residential real estate        
 Non-jumbo  215,058  216,759  213,965  216,714  215,584
 Jumbo  59,701  58,567  62,849  61,567  62,748
 Home equity  53,674  53,774  53,765  53,263  53,455
Consumer  20,472  20,147  19,638  20,586  21,290
Other  3,374  3,397  3,191  3,701  2,513
Total loans, net of unearned fees  952,208  940,101  962,761  955,101  958,753
Less allowance for loan losses  13,039  14,122  17,020  17,933  17,820
Loans, net  $ 939,169  $ 925,979  $ 945,741  $ 937,168  $ 940,933
 
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition
           
Dollars in thousands 9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
Non interest bearing checking  $ 99,109  $ 92,147  $ 93,125  $ 100,592  $ 96,764
Interest bearing checking  186,702  187,244  181,327  175,706  177,236
Savings  193,285  196,069  197,587  193,039  197,610
Time deposits  537,639  562,703  594,279  557,788  555,697
Total deposits  $ 1,016,735  $ 1,038,163  $ 1,066,318  $ 1,027,125  $ 1,027,307
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
           
   For the Quarter Ended 
 Dollars in thousands  9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
Gross loan charge-offs  $ 2,825  $ 3,968  $ 2,497  $ 2,545  $ 2,142
Gross loan recoveries  (742)  (70)  (84)  (160)  (73)
 Net loan charge-offs  $ 2,083  $ 3,898  $ 2,413  $ 2,385  $ 2,069
           
Net loan charge-offs to average loans (annualized) 0.89% 1.63% 1.00% 0.99% 0.86%
Allowance for loan losses  $ 13,039  $ 14,122  $ 17,020  $ 17,933  $ 17,820
Allowance for loan losses as a percentage of period end loans 1.37% 1.50% 1.77% 1.88% 1.86%
Nonperforming assets:          
 Nonperforming loans          
 Commercial  $ 2,557  $ 3,996  $ 4,763  $ 5,002  $ 5,343
 Commercial real estate  3,795  1,695  1,525  2,556  2,803
 Commercial construction and development  3,761  --  --  --  428
 Residential construction and development  9,128  11,505  13,076  13,641  16,333
 Residential real estate  12,385  13,605  16,869  16,522  18,809
 Consumer  145  91  72  55  88
Total nonperforming loans  31,771  30,892  36,305  37,776  43,804
 Foreclosed properties          
 Commercial  --  --  --  --  --
 Commercial real estate  9,961  10,310  11,779  11,835  11,802
 Commercial construction and development  11,161  11,492  16,670  17,597  17,683
 Residential construction and development  20,585  21,591  21,929  23,074  23,769
 Residential real estate  3,596  3,865  4,247  3,666  2,779
Total foreclosed properties  45,303  47,258  54,625  56,172  56,033
Other repossessed assets  --  2  19  6  --
Total nonperforming assets  $ 77,074  $ 78,152  $ 90,949  $ 93,954  $ 99,837
           
Nonperforming loans to period end loans 3.34% 3.29% 3.77% 3.96% 4.57%
Nonperforming assets to period end assets 5.55% 5.70% 6.54% 6.77% 7.11%
 
Loans Past Due 30-89 Days
   For the Quarter Ended 
 In thousands  9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
           
Commercial  $ 30  $ 199  $ 27  $ 180  $ 874
Commercial real estate  1,757  626  2,161  437  1,264
Construction and development  154  698  64  --  56
Residential real estate  4,697  4,479  4,522  6,170  4,346
Consumer  229  286  277  326  313
Other  50  53  --  --  --
 Total  $ 6,917  $ 6,341  $ 7,051  $ 7,113  $ 6,853
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2013 vs Q3 2012
  Q3 2013 Q3 2012
  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  $ 935,975  $ 12,468 5.28%  $ 955,849  $ 13,572 5.65%
Tax-exempt  5,258  95 7.17%  6,267  115 7.30%
Securities            
Taxable  218,054  895 1.63%  238,458  1,341 2.24%
Tax-exempt  77,445  935 4.79%  69,636  890 5.08%
Interest bearing deposits other banks and Federal funds sold  7,081  1 0.06%  19,690  7 0.14%
Total interest earning assets  1,243,813  14,394 4.59%  1,289,900  15,925 4.91%
             
Noninterest earning assets            
 Cash & due from banks  4,524      4,247    
 Premises & equipment  20,900      21,422    
 Other assets  109,219      117,354    
 Allowance for loan losses  (13,945)      (17,825)    
 Total assets  $ 1,364,511      $ 1,415,098    
             
 LIABILITIES AND SHAREHOLDERS' EQUITY
             
Liabilities            
Interest bearing liabilities            
Interest bearing demand deposits  $ 183,042  $ 61 0.13%  $ 176,974  $ 83 0.19%
Savings deposits  194,810  278 0.57%  200,865  321 0.64%
Time deposits  543,552  2,147 1.57%  548,983  2,663 1.93%
Short-term borrowings  34,839  24 0.27%  12,479  8 0.26%
Long-term borrowings and subordinated debentures  199,940  1,996 3.96%  264,315  2,579 3.88%
Total interest bearing liabilities  1,156,183  4,506 1.55%  1,203,616  5,654 1.87%
             
Noninterest bearing liabilities            
Demand deposits  93,424      96,048    
Other liabilities  7,831      8,015    
Total liabilities  1,257,438      1,307,679    
             
Shareholders' equity - preferred  9,309      9,326    
Shareholders' equity - common  97,764      98,093    
Total liabilities and shareholders' equity  $ 1,364,511      $ 1,415,098    
             
NET INTEREST EARNINGS    $ 9,888      $ 10,271  
             
NET INTEREST MARGIN     3.15%     3.17%
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2013 vs YTD 2012
             
  YTD 2013 YTD 2012
  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  $ 948,870  $ 38,038 5.36%  $ 965,227  $ 41,811 5.79%
 Tax-exempt  5,560  298 7.17%  6,776  368 7.25%
 Securities            
 Taxable  220,669  2,851 1.73%  235,885  4,592 2.60%
 Tax-exempt  76,021  2,776 4.88%  70,753  3,009 5.68%
Interest bearing deposits other banks and Federal funds sold  7,706  4 0.07%  22,737  31 0.18%
Total interest earning assets  1,258,826  43,967 4.67%  1,301,378  49,811 5.11%
             
Noninterest earning assets            
 Cash & due from banks  4,430      4,195    
 Premises & equipment  21,006      21,684    
 Other assets  111,948      120,041    
 Allowance for loan losses  (15,726)      (18,191)    
 Total assets  $ 1,380,484      $ 1,429,107    
             
 LIABILITIES AND SHAREHOLDERS' EQUITY          
             
Liabilities            
Interest bearing liabilities            
Interest bearing demand deposits  $ 178,911  $ 193 0.14%  $ 167,843  $ 247 0.20%
Savings deposits  195,907  875 0.60%  206,953  1,054 0.68%
Time deposits  566,172  7,007 1.65%  545,121  8,839 2.17%
Short-term borrowings  25,579  50 0.26%  14,250  25 0.23%
Long-term borrowings and subordinated debentures  203,019  5,997 3.95%  288,305  8,575 3.97%
   1,169,588  14,122 1.61%  1,222,472  18,740 2.05%
Noninterest bearing liabilities            
 Demand deposits  94,139      92,362    
 Other liabilities  7,698      8,273    
 Total liabilities  1,271,425      1,323,107    
             
Shareholders' equity - preferred  9,319      9,326    
Shareholders' equity - common  99,740      96,674    
Total liabilities and shareholders' equity  $ 1,380,484      $ 1,429,107    
             
NET INTEREST EARNINGS    $ 29,845      $ 31,071  
             
NET INTEREST MARGIN     3.17%     3.19%
 
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  9/30/2013 9/30/2012 9/30/2013 9/30/2012
         
         
Net income applicable to common shares - excluding realized securities gains, gains/(losses) on sales of foreclosed properties, other-than-temporary impairment of securities and write-downs of foreclosed properties   $ 2,420  $ 1,959  $ 6,984  $ 6,066
         
Realized securities gains/(losses)   132  760  116  2,245
Applicable income tax effect   (49)  (281)  (43)  (831)
Gains/(losses) on sales of foreclosed properties   17  16  (546)  (583)
Applicable income tax effect   (6)  (6)  202  216
Other-than-temporary impairment of securities   (38)  (39)  (118)  (375)
Applicable income tax effect   14  14  44  139
Write-downs foreclosed properties   (654)  (2,571)  (3,078)  (6,114)
Applicable income tax effect   242  951  1,139  2,262
   (342)  (1,156)  (2,284)  (3,041)
GAAP net income applicable to common shares   $ 2,078  $ 803  $ 4,700  $ 3,025
         
         
Diluted earnings per common share - excluding realized securities gains, gains/(losses) on sales of foreclosed properties, other-than-temporary impairment of securities and write-downs of foreclosed properties   $ 0.27  $ 0.22  $ 0.79  $ 0.71
         
Realized securities gains/(losses)   0.01  0.08  0.01  0.23
Applicable income tax effect   --   (0.03)  --   (0.09)
Gains/(losses) on sales of foreclosed properties   --   --   (0.06)  (0.06)
Applicable income tax effect   --   --   0.02  0.02
Other-than-temporary impairment of securities   --   --   (0.01)  (0.04)
 Applicable income tax effect   --   --   --   0.01
Write-downs of foreclosed properties   (0.07)  (0.27)  (0.32)  (0.64)
Applicable income tax effect   0.03  0.10  0.12  0.24
   (0.03)  (0.12)  (0.24)  (0.33)
GAAP diluted earnings per common share   $ 0.24  $ 0.10  $ 0.55  $ 0.38
 
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  9/30/2013 9/30/2012 9/30/2013 9/30/2012
         
         
 Total revenue - excluding realized securities gains and other-than-temporary impairment of securities   $ 12,307  $ 12,575  $ 37,117  $ 38,088
         
 Realized securities gains/(losses)  132  760  116  2,245
 Other-than-temporary impairment of securities   (38)  (39)  (118)  (375)
   94  721  (2)  1,870
 GAAP total revenue   $ 12,401  $ 13,296  $ 37,115  $ 39,958
         
         
 Total noninterest income - excluding realized securities gains and other-than-temporary impairment of securities   $ 2,769  $ 2,640  $ 8,316  $ 8,164
         
 Realized securities gains/(losses)  132  760  116  2,245
 Other-than-temporary impairment of securities   (38)  (39)  (118)  (375)
   94  721  (2)  1,870
 GAAP total noninterest income   $ 2,863  $ 3,361  $ 8,314  $ 10,034
         
 Total noninterest expense - excluding gains/losses on sales of foreclosed properties and write-downs of foreclosed properties  $7,594 $7,472 $22,708 $22,306
         
(Gains)/losses on sales of foreclosed properties (17) (16) 546 583
Write-downs of foreclosed properties 654 2,571 3,078 6,114
  637 2,555 3,624 6,697
GAAP total noninterest expense $8,231 $10,027 $26,332 $29,003


            

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