MOOREFIELD, W.Va., Nov. 4, 2008 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (Nasdaq:SMMF) today reported a net loss for the third quarter of $7.7 million, or $1.03 per diluted share, compared with third quarter 2007 earnings from continuing operations of $3.8 million, or $0.50 per diluted share. Third quarter 2008 results include a $12.0 million provision for loan losses that reflects the higher levels of nonperforming loans in the current quarter, as well as a non-cash other-than-temporary impairment charge of $4.5 million pre-tax ($2.8 million after-tax) relating to the further write-down to fair value of Summit's investments in Fannie Mae and Freddie Mac preferred stock.
Excluding from third quarter operating earnings the 2008 impact of this impairment charge and a 2007 pre-tax gain of $752,000 ($474,000 after-tax) from the change in the fair value of interest rate swaps, pro forma third quarter results were a loss of $4.8 million for 2008, or $0.65 per diluted share, compared with pro forma 2007 income from continuing operations of $3.3 million, or $0.44 per diluted share.
H. Charles Maddy III, president and chief executive officer of Summit Financial Group, stated, "Obviously we are disappointed with our operating results for this quarter, but we are encouraged that our core earnings capacity remains solid going forward and we are confident that we have provided appropriately for our known problem assets. Accordingly, we anticipate our fourth quarter 2008 earnings will range between $0.45 and $0.48 per diluted share."
Highlights for the 2008 third quarter include:
* A $12.0 million provision for possible loan losses recorded this
quarter, raising the allowance for loan losses to 1.83 percent of
loans in response to recently identified nonperforming loans of
$49.9 million.
* Recorded an other-than-temporary impairment charge of $4.5 million
to reflect Fannie Mae and Freddie Mac preferred stock investments
at their fair values as of September 30, 2008 as a result of the
third quarter announcement by the U.S. Treasury and the Federal
Housing Finance Agency ("FHFA") that both Fannie Mae and Freddie
Mac were being placed under conservatorship and that management
of the entities would be under the control of the FHFA. The plan
announced by the U.S. Treasury and FHFA included the elimination
of dividends on all Fannie Mae and Freddie Mac preferred stock
issuances.
* Operating revenues, excluding nonrecurring items, increased 4.6
percent over the prior-year third quarter but declined 9.5 percent
from the linked quarter.
* A decline of 39 basis points in the net interest margin was
primarily due to $1.6 million of interest income reversed when
loans were placed on nonaccrual status in the current quarter.
* Loan growth of $172.3 million, or 17.3 percent year-over-year, was
derived principally from commercial real estate and residential
mortgages.
* Plans to complete the acquisition of Greater Atlantic Bank are
proceeding according to the revised agreement entered into on
June 10, 2008; it is anticipated that the merger will be completed
in the fourth quarter of 2008 subject to regulatory approval.
For the nine months ended September 30, 2008, the Company recorded a net loss of $1.3 million, or $0.17 per diluted share, compared with net income from continuing operations of $9.7 million, or $1.33 per diluted share, for the prior-year nine month period. Excluding other-than-temporary impairment charges relating to Fannie Mae and Freddie Mac aggregating $6.0 million for 2008 ($3.80 million after-tax) and pre-tax changes in the fair value of interest rate swaps of $705,000 and $694,000 in 2008 and 2007, respectively, pro forma earnings for the nine months ended September 30, 2008 were $2.1 million, or $0.28 per diluted share, compared with pro forma net income from continuing operations of $9.2 million, or $1.27 per diluted share, for the first nine months of 2007.
"In the space of one short quarter, Summit caught up with the rest of the world," commented Mr. Maddy. "Despite the quality of our borrowers and our markets, the real estate crisis and its ensuing impact on financial markets have finally reached our shores. Summit serves an affluent clientele, possessing resources that have sustained loan performance far into this real estate cycle. Unfortunately, and for different reasons, several of our larger real estate developers ran out of cash at the same time.
"We are responding aggressively to the situation. Each of these projects is basically sound, and we have several workout strategies available to us. We are in the process of developing a plan for each project that will reduce our exposures expeditiously while we strive to minimize potential losses," Mr. Maddy continued. "We doubled our loan loss reserve this quarter, which now stands at a very strong 1.83 percent of loans, and believe we are adequately reserved to cover losses associated with these recently identified problem assets."
Total revenue, composed of net interest income and noninterest income, was $8.2 million for the third quarter of 2008, down 36.4 percent from year-ago revenue of $12.9 million. Excluding the 2008 impairment charge on securities and the 2007 changes in fair value of interest rate swaps, operating revenue for third quarter 2008 was $12.7 million, up 4.6 percent from the $12.2 million reported in the third quarter of 2007. Net interest income was $10.4 million for the current period, 3.9 percent higher than the $10.0 million reported for the year-ago quarter. Growth resulted from an 18.0 percent increase in average earning assets year-over-year partially offset by a 39 basis point decline in the net interest margin to 2.89 percent.
Mr. Maddy remarked, "Our goal has been to maintain a neutral balance sheet and a stable net interest margin, and we have been consistently successful quarter after quarter; over the previous four quarters, for example, the margin has varied within a narrow band from 3.24 percent to 3.33 percent. During the current quarter, however, we reversed $1.6 million from interest income when we transferred $49.9 million of loans to nonaccrual status; had this not been the case, our margin would have been in excess of 3.30 percent for the current quarter . On a going forward basis, lost interest income from nonaccrual loans should approximate $770,000 each quarter given the present level of nonperforming loans. Consistent with past experience, we do not anticipate any material impact from the recent 50 basis point cut in the fed funds rate."
Noninterest income, reported on a GAAP basis, was a loss of $2.2 million for the 2008 third quarter compared with income of $2.9 million for the year-ago quarter. Excluding the securities impairment charge of $4.5 million in the current quarter and the $752,000 change in fair value of interest rate swaps in the 2007 quarter, noninterest income from operations totaled $2.3 million for the 2008 third quarter and $2.2 million for the 2007 third quarter. Insurance commissions of approximately $1.3 million each quarter, primarily from the Kelly Agencies, should contribute an after-tax profit of approximately $400,000 for the full year.
The $12.0 million provision for loan losses recorded this quarter was the primary factor contributing to the decline in operating earnings, up from $525,000 in the year-ago period and $1.8 million in the second quarter of 2008. Although only $917,000 was charged off this quarter, management estimates that the loss potential associated with the $50 million of loans transferred to nonaccrual status should be less than $10 million. After a thorough review of its loan portfolio metrics and problem loans, management anticipates that the provision for loan losses should return to its normal level of approximately $750,000 in the fourth quarter (barring unforeseen circumstances which are not apparent at this time). Year-to-date, Summit had net charge-offs of $2.5 million, or 0.30 percent of average loans (annualized); this compares with net charge-offs of $0.8 million, or 0.11 percent of average loans for the 2007 nine-month period.
Noninterest expense was generally well controlled, up 6.8 percent or $465,000 from the year-ago third quarter, to $7.3 million. Salaries and employee benefits, which accounted for 56.5 percent of noninterest expense in the current quarter, were $4.1 million, up 1.5 percent over prior year, when they were 59.4 percent of noninterest expense. The other expense category accounted for the majority of the year-over-year increase, up $344,000, or 21.1 percent, to $2.0 million; FDIC premium was up $135,000; telephone expense was up $60,000 and foreclosure and repossession expenses increased $54,000. Summit's efficiency ratio, based on continuing operations and excluding one-time nonrecurring items, was 54.52 percent for the current quarter, 61 basis points higher than the year-ago ratio of 53.91 percent primarily from the reversal of interest income from loans placed on nonaccrual status this quarter.
Assets at September 30, 2008 were $1.6 billion, up $226.6 million, or 16.9 percent, since the 2007 third quarter-end. Total loans were $1.2 billion at period end, up $172.3 million or 17.3 percent during the same twelve month period. Year over year loan growth was mainly derived from commercial real estate and 1-4 family residential mortgages, which increased $71.6 million, or 20.3 percent, and $62.0 million, or 20.3 percent, respectively. Construction and development (C&D) loans outstanding were $225.6 million at third quarter 2008, up $13.0 million or 6.1 percent from a year-ago.
For the most recent quarter, loan growth slowed to 2.3 percent (9.2 percent annualized), increasing by $26.2 million. The majority of loan growth ($16.8 million, or 64 percent of the total) was in the commercial real estate and C&D loan categories, which grew 33.63 percent and 30.43 percent, respectively.
Commercial real estate and 1-4 family residential mortgages represent 36.3 percent and 31.4 percent of total loans, respectively, at September 30, 2008. Non-real estate related commercial loans accounted for 9.8 percent of the loan portfolio, while C&D loans of $225.6 million represented 19.3 percent of total loans, down from 21.3 percent at September 30, 2007; C&D loans were the only category to reduce significantly over the course of the past year.
Nonperforming loans were $59.8 million, or 5.13 percent of total loans, at September 30, 2008, compared with $15.6 million, or 1.37 percent of loans, for the linked quarter, and $6.9 million, or 0.69 percent, for the year-ago quarter. During the current quarter, $49.9 million of loans were placed on nonaccrual, offset by a net reduction of $9.7 million of nonperforming loans through reclassification to performing status ($3.4 million), payoffs ($826,000), charge-offs ($656,000) and transfer to OREO ($625,000). The loans reclassified to nonperforming status this quarter principally consist of four projects:
* A completed hotel and adjacent golf course in northern Virginia, having a total loan balance of $23.7 million, which opened late this summer and has yet to stabilize its operations to the point to generate sufficient cash flow to service its debt. * 3 projects in VA and WV consisting of developed and partially developed residential lots, representing total loan balances of $21.5 million. Prices are depressed and sales have been slower than anticipated.
Mr. Maddy commented that these projects had been performing until recently He added, "These are all viable projects, but the absorption rates are too slow in this weak market to repay our loans. We have credit staff in-house with extensive experience to manage the workout process to a favorable conclusion; we anticipate that the level of nonperforming loans should reduce to approximately 2.5 percent of loans within a six month period through aggressive collection efforts and discounted sales of our collateral."
At September 30, 2008, foreclosed real estate was $2.3 million compared with $2.5 million for the linked quarter and $815,000 for the year-ago quarter.
Loans in the 30-89 day delinquent category totaled $13.8 million at September 30, 2008, down from $39.6 million for the preceding quarter and $7.5 million at September 30, 2007. Residential mortgages accounted for $8.5 million of third quarter 2008 delinquencies, with three larger loans in Virginia representing $2.7 million.
For the current quarter, net charge-offs were $917,000, or an annualized 0.32 percent of average loans, compared with $999,000, or an annualized 0.36 percent for the linked quarter, and $566,000, or 0.23 percent annualized for the year earlier period. The $12.0 million loan loss provision recorded this quarter raised the loan loss reserve to 1.83 percent of loans at September 30, 2008 compared with 0.91 percent for the linked quarter and 0.88 percent at September 30, 2007.
Total deposits at September 30, 2008 were $945.2 million compared with $857.7 million at June 30, 2008 and $828.6 million for the year-ago quarter, an increase of $87.5 million or 10.2 percent, and $116.6, or 14.1 percent, respectively. Core deposits were approximately 70 percent of total deposits in the current quarter compared with 74 percent in the linked quarter and 77 percent in the year-ago quarter. Despite a greater reliance on time deposits to meet funding needs, Summit has maintained a consistent margin through diversification of funding sources, in particular, the Federal Home Loan Bank.
Shareholders' equity at September 30, 2008 was $80.5 million, a decrease of 13.9 percent over the last twelve months. Capital ratios for Summit and its banking subsidiary, Summit Community Bank, remain in excess of regulatory requirements for "well-capitalized," the highest regulatory capital requirement under Federal regulation. As of third quarter-end, common shares outstanding totaled 7,410,791 compared with 7,402,666 for the 2007 third quarter.
ABOUT THE COMPANY
Summit Financial Group, Inc., a financial holding company with total assets of $1.6 billion, operates fifteen banking locations through its wholly-owned community bank, Summit Community Bank, headquartered in Moorefield, West Virginia. Summit also operates Summit Insurance Services, LLC headquartered in Moorefield, West Virginia.
The Summit Financial Group, Inc. logo is available at http://www.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 several GAAP performance measures to exclude the effects of the non-cash, other-than-temporary impairment charges on securities recorded in the 2nd and 3rd quarters of 2008 and to exclude the effects of the non-cash changes in fair value of interest rate swaps included in its Statements of Income. Management deems these items to be unusual in nature and believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of Summit's core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Quarterly Performance Summary -- Q3 2008 vs Q3 2007
For the Quarter Ended
--------------------- Percent
Dollars in thousands 9/30/2008 9/30/2007 Change
---------------------------------------------------------------------
Condensed Statements of Income
Interest income
Loans, including fees $ 18,527 $ 19,921 -7.0%
Securities 4,108 3,446 19.2%
Other 2 9 -77.8%
-------- --------
Total interest income 22,637 23,376 -3.2%
Interest expense
Deposits 6,704 8,627 -22.3%
Borrowings 5,549 4,753 16.7%
Total interest expense 12,253 13,380 -8.4%
-------- --------
Net interest income 10,384 9,996 3.9%
Provision for loan losses 12,000 525 2185.7%
-------- --------
Net interest income after
provision for loan losses (1,616) 9,471 -117.1%
-------- --------
Noninterest income
Insurance commissions 1,337 1,303 2.6%
Service fee income 828 788 5.1%
Other-than-temporary
impairment of securities (4,495) -- n/a
Net cash settlement on
interest rate swaps -- (181) -100.0%
Change in fair value of
interest rate swaps -- 752 -100.0%
Other income 155 244 -36.5%
-------- --------
Total noninterest income (2,175) 2,906 -174.8%
-------- --------
Noninterest expense
Salaries and employee benefits 4,113 4,054 1.5%
Net occupancy expense 489 466 4.9%
Equipment expense 538 496 8.5%
Professional fees 173 176 -1.7%
Other expenses 1,972 1,628 21.1%
-------- --------
Total noninterest expense 7,285 6,820 6.8%
-------- --------
Income from continuing
operations before income taxes (11,076) 5,557 -299.3%
Income taxes (3,402) 1,802 -288.8%
Income from continuing
operations (7,674) 3,755 -304.4%
Discontinued operations
Exit costs and impairment of
long-lived assets -- -- n/m
Operating income (loss) -- (200) n/m
-------- --------
Income (loss) from discontinued
operations before income taxes -- (200) n/m
Income taxes -- (69) n/m
Income (loss) from
discontinued operations -- (131) n/m
Net Income $ (7,674) $ 3,624 -311.8%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Quarterly Performance Summary -- Q3 2008 vs Q3 2007
For the Quarter Ended
------------------------ Percent
9/30/2008 9/30/2007 Change
---------------------------------------------------------------------
Per Share Data
Earnings per share from
continuing operations
Basic $ (1.04) $ 0.51 -303.9%
Diluted $ (1.03) $ 0.50 -306.0%
Earnings per share from
discontinued operations
Basic $ -- $ (0.02) -100.0%
Diluted $ -- $ (0.02) -100.0%
Earnings per share
Basic $ (1.04) $ 0.49 -312.2%
Diluted $ (1.03) $ 0.48 -314.6%
Average shares outstanding
Basic 7,410,791 7,399,213 0.2%
Diluted 7,445,242 7,458,515 -0.2%
Performance Ratios
Return on average equity -34.71% 16.13% -315.2%
Return on average equity -
continuing operations -34.71% 16.71% -307.7%
Return on average assets -1.99% 1.11% -279.3%
Return on average assets -
continuing operations -1.99% 1.15% -273.0%
Net interest margin 2.89% 3.28% -11.9%
Efficiency ratio (A) 54.52% 55.49% -1.7%
Efficiency ratio -
continuing operations (A) 54.52% 53.91% 1.1%
NOTE: (A) - Computed on a tax equivalent basis excluding
nonrecurring income and expense items and amortization of
intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Nine Month Performance Summary -- 2008 vs 2007
For the Nine Months Ended
------------------------- Percent
Dollars in thousands 9/30/2008 9/30/2007 Change
---------------------------------------------------------------------
Condensed Statements of Income
Interest income
Loans, including fees $ 58,173 $ 57,712 0.8%
Securities 11,655 9,832 18.5%
Other 8 43 -81.4%
-------- --------
Total interest income 69,836 67,587 3.3%
Interest expense
Deposits 20,263 26,537 -23.6%
Borrowings 16,876 12,324 36.9%
Total interest expense 37,139 38,861 -4.4%
-------- --------
Net interest income 32,697 28,726 13.8%
Provision for loan losses 14,750 1,305 1030.3%
-------- --------
Net interest income after
provision for loan losses 17,947 27,421 -34.6%
-------- --------
Noninterest income
Insurance commissions 3,939 1,719 129.1%
Service fee income 2,395 2,141 11.9%
Other-than-temporary
impairment of securities (6,036) -- --
Net cash settlement on
interest rate swaps (170) (544) -68.8%
Change in fair value of
interest rate swaps 705 694 1.6%
Other income 968 649 49.2%
-------- --------
Total noninterest income 1,801 4,659 -61.3%
-------- --------
Noninterest expense
Salaries and employee benefits 12,695 10,518 20.7%
Net occupancy expense 1,407 1,292 8.9%
Equipment expense 1,606 1,436 11.8%
Professional fees 473 543 -12.9%
Other expenses 5,341 4,399 21.4%
-------- --------
Total noninterest expense 21,522 18,188 18.3%
-------- --------
Income from continuing
operations before income taxes (1,774) 13,892 -112.8%
Income taxes (518) 4,223 -112.3%
Income from continuing
operations (1,256) 9,669 -113.0%
Discontinued operations
Exit costs and impairment of
long-lived assets -- 123 n/a
Operating income (loss) -- (798) -100.0%
-------- --------
Income (loss) from discontinued
operations before income taxes -- (675) -100.0%
Income taxes -- (231) -100.0%
Income (loss) from
discontinued operations -- (444) -100.0%
Net Income $ (1,256) $ 9,225 -113.6%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Nine Month Performance Summary -- 2008 vs 2007
For the Nine Months Ended
------------------------- Percent
9/30/2008 9/30/2007 Change
---------------------------------------------------------------------
Per Share Data
Earnings per share from
continuing operations
Basic (0.17) 1.34 -112.7%
Diluted (0.17) 1.33 -112.8%
Earnings per share from
discontinued operations
Basic -- (0.06) -100.0%
Diluted -- (0.06) -100.0%
Earnings per share
Basic $ (0.17) $ 1.28 -113.3%
Diluted $ (0.17) $ 1.27 -113.4%
Average shares outstanding
Basic 7,409,986 7,190,875 3.0%
Diluted 7,447,313 7,252,778 2.7%
Performance Ratios
Return on average equity -1.82% 14.41% -112.6%
Return on average equity -
continuing operations -1.82% 15.11% -112.0%
Return on average assets -0.11% 0.97% -111.3%
Return on average assets -
continuing operations -0.11% 1.01% -110.9%
Net interest margin 3.16% 3.27% -3.4%
Efficiency ratio (A) 52.11% 55.65% -6.4%
Efficiency ratio -
continuing operations (A) 52.11% 52.99% -1.7%
NOTE: (A) - Computed on a tax equivalent basis excluding
nonrecurring income and expense items and amortization of
intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Five Quarter Performance Summary
For the Quarter Ended
-------------------------------------------
9/30/ 6/30/ 3/31/ 12/31/ 9/30/
Dollars in thousands 2008 2008 2008 2007 2007
--------------------------------------------------------------------
Condensed Statements
of Income
Interest income
Loans, including
fees $18,527 $19,576 $20,069 $20,199 $19,921
Securities 4,108 3,761 3,786 3,590 3,446
Other 2 3 4 8 9
------- ------- ------- ------- -------
Total interest
income 22,637 23,340 23,859 23,797 23,376
------- ------- ------- ------- -------
Interest expense
Deposits 6,704 6,435 7,124 7,759 8,627
Borrowings 5,549 5,530 5,796 5,697 4,753
Total interest
expense 12,253 11,965 12,920 13,456 13,380
Net interest income 10,384 11,375 10,939 10,341 9,996
Provision for loan
losses 12,000 1,750 1,000 750 525
------- ------- ------- ------- -------
Net interest income
after provision for
loan losses (1,616) 9,625 9,939 9,591 9,471
------- ------- ------- ------- -------
Noninterest income
Insurance commissions 1,337 1,275 1,327 1,157 1,303
Service fee income 828 824 743 863 788
Other-than-temporary
impairment of
securities (4,495) (1,541) -- -- --
Net cash settlement
on interest rate
swaps -- -- (170) (183) (181)
Change in fair value
of interest rate
swaps -- -- 705 783 752
Other income 155 570 243 78 244
Total noninterest
income (2,175) 1,128 2,848 2,698 2,906
------- ------- ------- ------- -------
Noninterest expense
Salaries and
employee benefits 4,113 4,187 4,395 4,090 4,054
Net occupancy expense 489 443 476 466 466
Equipment expense 538 533 534 568 496
Professional fees 173 182 118 152 176
Other expenses 1,972 1,804 1,566 1,634 1,628
------- ------- ------- ------- -------
Total noninterest
expense 7,285 7,149 7,089 6,910 6,820
------- ------- ------- ------- -------
Income before income
taxes (11,076) 3,604 5,698 5,379 5,557
Income taxes (3,402) 1,010 1,874 1,511 1,802
------- ------- ------- ------- -------
Income from
continuing
operations (7,674) 2,594 3,824 3,868 3,755
Discontinued
operations
Exit costs and
impairment of
long-lived assets -- -- -- (435) --
Operating income
(loss) -- -- -- (9,549) (200)
Income (loss) from
discontinued
operations before
income taxes -- -- -- (9,984) (200)
Income taxes -- -- -- (3,347) (69)
------- ------- ------- ------- -------
Income (loss) from
discontinued
operations -- -- -- (6,637) (131)
------- ------- ------- ------- -------
Net Income $(7,674) $ 2,594 $ 3,824 $(2,769) $ 3,624
------- ------- ------- ------- -------
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Five Quarter Performance Summary
For the Quarter Ended
-----------------------------------------------------
9/30/2008 6/30/2008 3/31/2008 12/31/2007 9/30/2007
--------------------------------------------------------------------
Per Share Data
Earnings per
share from
continuing
operations
Basic $ (1.04) $ 0.35 $ 0.52 $ 0.52 $ 0.51
Diluted $ (1.03) $ 0.35 $ 0.51 $ 0.52 $ 0.50
Earnings per
share from
discontinued
operations
Basic $ -- $ -- $ -- $ (0.89) $ (0.02)
Diluted $ -- $ -- $ -- $ (0.89) $ (0.02)
Earnings
per share
Basic $ (1.04) $ 0.35 $ 0.52 $ (0.37) $ 0.49
Diluted $ (1.03) $ 0.35 $ 0.51 $ (0.37) $ 0.48
Average
shares
outstanding
Basic 7,410,791 7,410,217 7,408,941 7,401,684 7,399,213
Diluted 7,445,242 7,448,170 7,449,105 7,450,049 7,458,515
Performance
Ratios
Return on
average
equity -34.71% 11.16% 16.55% -11.62% 16.13%
Return on
average
equity -
continuing
operations -34.71% 11.16% 16.55% 16.23% 16.71%
Return on
average
assets -1.99% 0.70% 1.06% -0.81% 1.11%
Return on
average
assets -
continuing
operations -1.99% 0.70% 1.06% 1.13% 1.15%
Net interest
margin 2.89% 3.33% 3.28% 3.24% 3.28%
Efficiency
ratio -
continuing
operations (A) 54.52% 49.87% 52.11% 53.03% 53.91%
NOTE: (A) - Computed on a tax equivalent basis excluding
nonrecurring income and expense items and amortization of
intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Selected Balance Sheet Data
Dollars in thousands, except per share amounts
For the Quarter Ended
----------------------------------------------------------
9/30/2008 6/30/2008 3/31/2008 12/31/2007 9/30/2007
--------------------------------------------------------------------
Assets $1,567,325 $1,525,978 $1,465,110 $1,435,536 $1,340,679
Securities 327,648 307,232 302,029 300,066 279,289
Loans, net 1,145,606 1,130,483 1,079,223 1,052,489 986,437
Intangible
assets 9,792 9,880 9,968 10,055 10,143
Retail
deposits 663,569 634,007 652,148 652,296 638,633
Brokered
time
deposits 281,655 223,742 184,796 176,391 189,966
Short-term
borrowings 98,316 147,900 93,950 172,055 124,699
Long-term
borrowings
and sub-
ordinated
debentures 434,016 419,775 431,918 335,327 283,268
Shareholders'
equity 80,510 91,466 91,955 89,420 93,475
Book
value per
share $ 10.86 $ 12.34 $ 12.41 $ 12.06 $ 12.63
Tangible
book
value per
share $ 9.54 $ 11.01 $ 11.07 $ 10.70 $ 11.26
Tangible
equity /
Tangible
assets 4.5% 5.4% 5.6% 5.6% 6.3%
Tier 1
leverage
ratio 6.2% 7.0% 7.8% 7.3% 8.1%
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Loan Composition
Dollars in thousands
9/30/2008 6/30/2008 3/31/2008 12/31/2007 9/30/2007
--------------------------------------------------------------------
Commercial $ 115,106 $ 112,793 $ 111,442 $ 92,599 $ 87,018
Commercial
real estate 423,982 415,187 394,619 384,478 352,396
Construc-
tion and
development 225,582 217,623 211,052 225,270 212,570
Residential
real estate 366,989 361,009 336,985 322,640 305,016
Consumer 31,433 30,361 30,206 31,956 33,254
Other 6,240 6,206 6,395 6,641 6,794
---------- ---------- ---------- ---------- ----------
Total
loans 1,169,332 1,143,179 1,090,699 1,063,584 997,048
Less
unearned
fees and
interest 2,293 2,347 1,878 1,903 1,884
---------- ---------- ---------- ---------- ----------
Total
loans
net of
unearned
fees and
interest 1,167,039 1,140,832 1,088,821 1,061,681 995,164
Less
allowance
for loan
losses 21,433 10,349 9,598 9,192 8,727
---------- ---------- ---------- ---------- ----------
Loans,
net $1,145,606 $1,130,483 $1,079,223 $1,052,489 $ 986,437
========== ========== ========== ========== ==========
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Retail Deposit Composition
Dollars in thousands
9/30/2008 6/30/2008 3/31/2008 12/31/2007 9/30/2007
---------------------------------------------------------------------
Non interest
bearing checking $ 70,353 $ 68,912 $ 64,111 $ 65,727 $ 65,230
Interest bearing
checking 182,383 194,255 201,820 222,825 230,491
Savings 58,678 60,245 53,427 40,845 39,596
Time deposits 352,155 310,595 332,790 322,899 303,316
-------- -------- -------- -------- --------
Total retail
deposits $663,569 $634,007 $652,148 $652,296 $638,633
======== ======== ======== ======== ========
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Asset Quality Information
For the Quarter Ended
-------------------------------------------
9/30/ 6/30/ 3/31/ 12/31/ 9/30/
Dollars in thousands 2008 2008 2008 2007 2007
--------------------------------------------------------------------
Gross loan charge-offs $ 969 $ 1,079 $ 646 $ 332 $ 599
Gross loan recoveries (52) (80) (52) (47) (33)
------- ------- ------- ------- -------
Net loan charge-offs $ 917 $ 999 $ 594 $ 285 $ 566
======= ======= ======= ======= =======
Net loan charge-offs
to average loans
(annualized) 0.32% 0.36% 0.22% 0.11% 0.23%
Allowance for loan
losses $21,433 $10,349 $ 9,598 $ 9,192 $ 8,727
Allowance for loan
losses as a percentage
of period end loans 1.87% 0.91% 0.88% 0.86% 0.88%
Nonperforming assets:
Nonperforming loans $59,845 $15,614 $13,957 $10,333 $ 6,916
Foreclosed properties
and other repossessed
assets 2,284 2,546 2,205 2,058 815
------- ------- ------- ------- -------
Total $62,129 $18,160 $16,162 $12,391 $ 7,731
======= ======= ======= ======= =======
Nonperforming loans to
period end loans 5.13% 1.37% 1.28% 0.97% 0.69%
======= ======= ======= ======= =======
Nonperforming assets to
period end assets 3.96% 1.19% 1.11% 0.86% 0.58%
======= ======= ======= ======= =======
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Nonperforming Loans
For the Quarter Ended
-------------------------------------------
9/30/ 6/30/ 3/31/ 12/31/ 9/30/
Dollars in thousands 2008 2008 2008 2007 2007
--------------------------------------------------------------------
Commercial $ 140 $ 81 $ 695 $ 716 $ 712
Commercial real estate 27,347 3,184 5,095 4,346 582
Construction and
development 29,127 6,460 3,694 2,016 2,557
Residential real estate 2,799 5,521 4,247 3,012 2,871
Consumer 432 368 226 243 194
------- ------- ------- ------- -------
Total nonperforming
loans $59,845 $15,614 $13,957 $10,333 $ 6,916
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Loans Past Due 30-89 Days
For the Quarter Ended
-------------------------------------------
9/30/ 6/30/ 3/31/ 12/31/ 9/30/
Dollars in thousands 2008 2008 2008 2007 2007
--------------------------------------------------------------------
Commercial $ 706 $ 1,089 $ 321 $ 264 $ 87
Commercial real estate 1,407 24,606 1,249 1,604 2,278
Construction and
development 1,996 9,919 1,059 997 817
Residential real estate 8,537 2,962 3,792 4,485 3,303
Consumer 1,140 979 946 1,335 984
------- ------- ------- ------- -------
Total nonperforming
loans $13,786 $39,555 $ 7,367 $ 8,685 $ 7,469
------- ------- ------- ------- -------
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Average Balance Sheet, Interest Earnings & Expenses and
Average Rates
Q3 2008 vs Q3 2007
Dollars in thousands
Q3 2008 Q3 2007
-------------------------- --------------------------
Average Earnings/ Yield/ Average Earnings/ Yield/
Balances Expense Rate Balances Expense Rate
----------------------------------------- --------------------------
ASSETS
Interest
earning
assets
Loans, net
of unearned
interest
Taxable $1,144,923 $18,413 6.40% $ 967,106 $19,790 8.12%
Tax-exempt 8,365 173 8.23% 9,523 192 8.00%
Securities
Taxable 269,735 3,563 5.25% 223,731 2,900 5.14%
Tax-exempt 50,484 820 6.46% 47,910 822 6.81%
Interest
bearing
deposits
other banks
and Federal
funds sold 295 2 2.70% 662 11 6.59%
---------- ------- ---- ---------- ------- ----
Total interest
earning assets 1,473,802 22,971 6.20% 1,248,932 23,715 7.53%
Noninterest
earning assets
Cash & due
from banks 20,936 14,356
Premises &
equipment 22,047 22,103
Other assets 38,782 32,935
Allowance for
loan losses (11,053) (8,939)
---------- ----------
Total
assets $1,544,514 $1,309,387
========== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Liabilities
Interest
bearing
liabilities
Interest
bearing
demand
deposits $ 187,442 $ 586 1.24% $ 230,918 $ 1,969 3.38%
Savings
deposits 60,584 261 1.71% 40,752 163 1.59%
Time deposits 585,197 5,857 3.98% 517,405 6,495 4.98%
Short-term
borrowings 119,769 671 2.23% 89,941 1,180 5.21%
Long-term
borrowings
and subor-
dinated
debentures 418,093 4,878 4.64% 263,968 3,573 5.37%
---------- ------- ---- ---------- ------- ----
1,371,085 12,253 3.56% 1,142,984 13,380 4.64%
Noninterest
bearing
liabilities
Demand
deposits 78,012 66,079
Other
liabilities 6,991 10,435
---------- ----------
Total
liabil-
ities 1,456,088 1,219,498
Shareholders'
equity 88,426 89,889
---------- ----------
Total
liabilities
and share-
holders'
equity $1,544,514 $1,309,387
========== ==========
NET INTEREST
EARNINGS $10,718 $10,335
======= =======
NET INTEREST
YIELD ON
EARNING ASSETS 2.89% 3.28%
==== ====
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Average Balance Sheet, Interest Earnings & Expenses and
Average Rates
YTD 2008 vs YTD 2007
Dollars in thousands
For the Nine Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2008 2007
-------------------------- --------------------------
Average Earnings/ Yield/ Average Earnings/ Yield/
Balances Expense Rate Balances Expense Rate
----------------------------------------- --------------------------
ASSETS
Interest
earning
assets
Loans, net
of unearned
interest
Taxable $1,107,474 $57,824 6.97% $ 945,496 $57,435 8.12%
Tax-exempt 8,647 529 8.17% 9,274 550 7.93%
Securities
Taxable 256,914 9,921 5.16% 214,602 8,216 5.12%
Tax-exempt 50,923 2,594 6.80% 46,931 2,419 6.89%
Interest
bearing
deposits
other banks
and Federal
funds sold 391 7 2.39% 1,190 43 4.83%
Total interest
earning assets 1,424,349 70,875 6.65% 1,217,493 68,663 7.54%
Noninterest
earning assets
Cash & due
from banks 18,118 14,003
Premises &
equipment 22,058 22,207
Other assets 37,579 29,132
Allowance for
loan losses (10,176) (8,564)
---------- ----------
Total
assets $1,491,928 $1,274,271
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Liabilities
Interest
bearing
liabilities
Interest
bearing
demand
deposits $ 198,246 $ 2,134 1.44% $ 227,461 $ 6,120 3.60%
Savings
deposits 54,583 668 1.63% 43,449 561 1.73%
Time deposits 536,493 17,461 4.35% 536,784 19,856 4.95%
Short-term
borrowings 110,228 2,161 2.62% 78,002 3,098 5.31%
Long-term
borrowings
and subor-
dinated
debentures 418,265 14,715 4.70% 227,914 9,226 5.41%
---------- ------- ---- ---------- ------- ----
1,317,815 37,139 3.76% 1,113,610 38,861 4.67%
Noninterest
bearing
liabilities
Demand
deposits 74,153 64,028
Other
liabilities 8,085 11,297
---------- ----------
Total
liabil-
ities 1,400,053 1,188,935
Shareholders'
equity 91,875 85,336
Total
liabilities
and share-
holders'
equity $1,491,928 $1,274,271
========== ==========
NET INTEREST
EARNINGS $33,736 $29,802
======= =======
NET INTEREST
YIELD ON
EARNING ASSETS 3.16% 3.27%
==== ====
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
For the For the
Quarter Ended Nine Months Ended
------------------ ------------------
Dollars in thousands 9/30/ 9/30/ 9/30/ 9/30/
(except per share amounts) 2008 2007 2008 2007
--------------------------------------------------------------------
Income from continuing
operations - excluding
other-than-temporary
charge on securities and
change in fair value of
interest rate swaps $(4,842) $ 3,281 $ 2,103 $ 9,232
Other-than-temporary
impairment charge on
securities (4,495) -- (6,036) --
Applicable income tax
effect 1,663 -- 2,233 --
Change in fair value of
interest rate swaps -- 752 705 694
Applicable income tax
effect -- (278) (261) (257)
------- ------- ------- -------
(2,832) 474 (3,359) 437
------- ------- ------- -------
GAAP income from
continuing operations $(7,674) $ 3,755 $(1,256) $ 9,669
======= ======= ======= =======
Diluted earnings per share
from continuing operations -
excluding other-than-
temporary impairment charge
on securities $ (0.65) $ 0.44 $ 0.28 $ 1.27
Other-than-temporary
impairment charge on
securities (0.60) -- (0.81) --
Applicable income tax
effect 0.22 -- 0.30 --
Change in fair value of
interest rate swaps -- 0.10 0.09 0.10
Applicable income tax
effect -- (0.04) (0.03) (0.04)
------- ------- ------- -------
(0.38) 0.06 (0.45) 0.06
------- ------- ------- -------
GAAP diluted earnings
per share $ (1.03) $ 0.50 $ (0.17) $ 1.33
======= ======= ======= =======
Total revenue - excluding
other-than-temporary
impairment charge on
securities and change in
fair value of interest
rate swaps $12,704 $12,150 $39,829 $32,691
Other-than-temporary
impairment charge on
securities (4,495) -- (6,036) --
Change in fair value of
interest rate swaps -- 752 705 694
------- ------- ------- -------
(4,495) 752 (5,331) 694
------- ------- ------- -------
GAAP total revenue $ 8,209 $12,902 $34,498 $33,385
======= ======= ======= =======
Non-interest income -
excluding other-than-
temporary impairment charge
on securities and change
in fair value of interest
rate swaps $ 2,320 $ 2,154 $ 7,132 $ 3,965
Other-than-temporary
impairment charge on
securities (4,495) -- (6,036) --
Change in fair value of
interest rate swaps -- 752 705 694
------- ------- ------- -------
(4,495) 752 (5,331) 694
------- ------- ------- -------
GAAP non-interest income $(2,175) $ 2,906 $ 1,801 $ 4,659
======= ======= ======= =======