Summit Financial Group Reports 3rd Quarter 2012 Results

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MOOREFIELD, W.Va., Oct. 31, 2012 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (Nasdaq:SMMF) today reported third quarter 2012 net income applicable to common shares of $803,000, or $0.10 per diluted share, compared with $1,862,000, or $0.24 per diluted share, for the third quarter of 2011. Third quarter 2012 results, as compared to the same period in 2011, were positively impacted by lower charges for other-than-temporary impairment ("OTTI") of securities and negatively impacted by higher charges to write-down foreclosed properties to estimated fair values and lower realized gains on the sales of securities.

Excluding from third quarter 2012 nonrecurring items (on a pre-tax basis) consisting of realized securities gains of $760,000, gains on sales of assets of $16,000, OTTI of securities of $39,000 and write-downs of foreclosed properties of $2.57 million, and from third quarter 2011 realized securities gains of $1,517,000, gains on sales of assets of $130,000, OTTI of securities of $484,000, and write-downs of foreclosed properties of $1.64 million, pro forma third quarter 2012 earnings applicable to common shares were approximately $1.96 million, or $0.22 per diluted share, compared to $2.16 million, or $0.28 per diluted share, for the year-ago period.

For the nine months ended September 30, 2012, Summit recorded net income applicable to common shares of $3.03 million, or $0.38 per diluted share, compared with $2.37 million, or $0.32 per diluted share, for the comparable 2011 nine-month period.

Excluding from the nine month period ended September 30, 2012 nonrecurring items (on a pre-tax basis) comprised of realized securities gains of $2.25 million, losses on sales of assets of $583,000, OTTI of $375,000 and write-downs of foreclosed properties of $6.11 million, and from the 2011 first nine-month period realized securities gains of $3.46 million, gain on sales of assets of $277,000, OTTI charges of $2.25 million and write-downs of foreclosed properties of $5.77 million, pro forma earnings for first nine months of 2012 were approximately $6.07 million, or $0.71 per diluted share, compared to $5.06 million, or $0.67 per diluted share, for the 2011 nine month period.

Highlights for Q3 2012 include:

  • Achieved sixth consecutive quarter of positive quarterly earnings.
  • Net interest margin improved 9 basis points compared to Q3 2011, but declined 3 basis points compared to Q2 2012.
  • Recorded charges of $2.57 million and $39,000, respectively, to write-down foreclosed properties and to recognize OTTI of securities, which were partially offset by $760,000 in realized securities gains.
  • Noninterest expenses remained well-controlled, declining 1.3 percent from the year-ago quarter.
  • Summit's leverage capital ratio is at its highest level in five years and its total risk-based capital ratio is at highest level in eleven years.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, "We are pleased by our continued progress having now achieved six consecutive quarters of profitability; unfortunately as anticipated, earnings are and will remain choppy in the near term as our foreclosed properties are re-appraised and written-down to estimated fair values on an ongoing basis. Year-to-date in 2012, I am particularly pleased that: despite a decline in average earning assets, our net interest income remains relatively stable; our net interest margin has improved; our core noninterest income has increased, while we have decreased noninterest expenses; and OTTI of securities charges are very modest compared to prior-year amounts, and are expected to remain at relatively low levels. Reducing our portfolio of problem assets remains our top priority, and we have reduced our nonperforming assets in each of the three most recent quarters. However, dispositions of foreclosed properties remain frustratingly slow -- particularly with respect to commercial and residential development properties."

Results from Operations

Total revenue for the third quarter 2012, consisting of net interest income and noninterest income, was $10.7 million compared to $12.1 million for the third quarter 2011. For the year-to-date period ended September 30, 2012, total revenue was $33.3 million compared to $33.7 million for the same period in 2011.

Total revenue excluding nonrecurring items (as enumerated above) was unchanged at $12.6 million for third quarter 2012 and the same prior-year quarter. For the first nine months of 2012, total revenue excluding nonrecurring items was $38.1 million compared to $38.0 for the first nine months of 2011.

For the third quarter of 2012, net interest income remained relatively unchanged at $9.94 million, compared to $9.92 million reported in the prior-year third quarter and $9.97 million reported in the linked quarter. The net interest margin for third quarter 2012 was 3.17 percent compared to 3.08 percent for the year-ago quarter, and 3.20 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 2012 was $806,000 compared to $2.19 million for the comparable period of 2011. Excluding nonrecurring items (as enumerated above), noninterest income was $2.64 million for third quarter 2012 compared to $2.66 million for third quarter 2011.

The provision for loan losses remained at $2.0 million for the third quarter of 2012, unchanged from both the linked and year-ago quarters.

Noninterest expenses continue to be well-controlled, as total noninterest expense decreased 1.3% for the quarter to $7.5 million from the $7.6 million reported in third quarter 2011. Noninterest expense for the first nine months of 2012 remained nearly unchanged compared to the first nine months 2011.

Balance Sheet

At September 30, 2012, total assets were $1.40 billion, a decrease of $46.0 million, or 3.2 percent, and a decrease of $60.5 million, or 4.1 percent, since December 31, 2011 and September 30, 2011, respectively. Total loans, net of unearned fees, were $958.8 million at September 30, 2012, down $24.5 million, or 2.5 percent, from the $983.2 million reported at year end 2011.

All loan categories have declined since year end 2011, except for commercial real estate ("CRE"), the largest component of Summit's loan portfolio, which increased $242,000. The second largest component of Summit's loan portfolio, residential real estate, declined $2.4 million, or 0.7 percent, while construction and development ("C&D") loans declined $11.0 million, or 11.5 percent and commercial ("C&I") loans declined $10.0 million, or 10.1 percent.

At September 30, 2012, retail deposits were $766.6 million, a decrease of $17.5 million, or 2.2 percent, since year end 2011. During the first nine months of 2012, retail checking deposits grew $26.9 million, or 10.9 percent, to $274.0 million, while retail savings and time deposits declined during the same period by $11.2 million and $33.1 million, respectively, or 5.4 percent and 10.1 percent, respectively. This reflects management's ongoing effort to enhance Summit's cost of funds by improving its deposit mix by attracting lower-cost checking deposits to replace higher-cost time deposits.

Long-term borrowings and subordinated debentures declined by 21.7 percent since year end 2011, as the Company paid down $66.5 million in maturing borrowings during this period.

Asset Quality

As of September 30, 2012, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $99.8 million, or 7.11 percent of assets. This compares to $106.1 million, or 7.49 percent of assets at the linked quarter, and $99.9 million, or 6.82 percent of assets at September 30, 2011.

Third quarter 2012 net loan charge-offs were $2.1 million, or 0.86 percent of average loans annualized, while adding $2.0 million to the allowance for loan losses. The allowance for loan losses stood at $17.8 million, or 1.86 percent of total loans at September 30, 2012, compared to 1.80 percent at December 31, 2011.

Capital Adequacy

Total shareholders' equity was $107.3 million as of September 30, 2012 compared to $102.6 million December 31, 2011.

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, 2012. The Bank's total risk-based capital ratio improved to 14.6 percent at September 30, 2012 compared to 13.6 percent at December 31, 2011, while its Tier 1 leverage capital ratio improved to 9.5 from the 8.9 percent reported at December 31, 2011. Total common shares outstanding as of September 30, 2012 were 7,425,472.

About the Company

Summit Financial Group, Inc. is a $1.40 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, gains/losses on sales of assets, 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 2012 vs Q3 2011
For the Quarter Ended Percent
Dollars in thousands 9/30/2012 9/30/2011 Change
Condensed Statements of Income
Interest income
Loans, including fees $ 13,648 $ 14,717 -7.3%
Securities 1,934 2,920 -33.8%
Other 7 15 -53.3%
Total interest income 15,589 17,652 -11.7%
Interest expense
Deposits 3,067 4,561 -32.8%
Borrowings 2,587 3,170 -18.4%
Total interest expense 5,654 7,731 -26.9%
Net interest income 9,935 9,921 0.1%
Provision for loan losses 2,000 2,001 0.0%
Net interest income after provision for loan losses 7,935 7,920 0.2%
Noninterest income
Insurance commissions 1,052 1,073 -2.0%
Service fees related to deposit accounts 1,074 1,078 -0.4%
Realized securities gains 760 1,517 -49.9%
Gain (loss) on sale of assets 16 130 -87.7%
Other-than-temporary impairment of securities (39) (484) -91.9%
Write-downs of foreclosed properties (2,571) (1,637) 57.1%
Other income 514 510 0.8%
Total noninterest income 806 2,187 -63.1%
Noninterest expense
Salaries and employee benefits 3,940 3,959 -0.5%
Net occupancy expense 476 473 0.6%
Equipment expense 576 589 -2.2%
Professional fees 250 265 -5.7%
FDIC premiums 510 580 -12.1%
Foreclosed properties expense 395 389 1.5%
Other expenses 1,325 1,318 0.5%
Total noninterest expense 7,472 7,573 -1.3%
Income before income taxes 1,269 2,534 -49.9%
Income taxes 272 598 -54.5%
Net income 997 1,936 -48.5%
Preferred stock dividends 194 74 162.2%
Net income applicable to common shares $ 803 $ 1,862 -56.9%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary --- Q3 2012 vs Q3 2011
For the Quarter Ended Percent
9/30/2012 9/30/2011 Change
Per Share Data
Earnings per common share
Basic $ 0.11 $ 0.25 -56.0%
Diluted $ 0.10 $ 0.24 -58.3%
Average shares outstanding
Basic 7,425,472 7,425,472 0.0%
Diluted 9,601,278 8,110,070 18.4%
Performance Ratios
Return on average equity (A) 3.71% 8.22% -54.9%
Return on average assets 0.28% 0.53% -47.2%
Net interest margin 3.17% 3.08% 2.9%
Efficiency ratio (B) 53.91% 52.36% 3.0%
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 --- 2012 vs 2011
For the Nine Months Ended Percent
Dollars in thousands 9/30/2012 9/30/2011 Change
Condensed Statements of Income
Interest income
Loans, including fees $ 42,054 $ 44,814 -6.2%
Securities 6,579 9,088 -27.6%
Other 31 59 -47.5%
Total interest income 48,664 53,961 -9.8%
Interest expense
Deposits 10,140 13,971 -27.4%
Borrowings 8,600 9,807 -12.3%
Total interest expense 18,740 23,778 -21.2%
Net interest income 29,924 30,183 -0.9%
Provision for loan losses 6,002 8,001 -25.0%
Net interest income after provision for loan losses 23,922 22,182 7.8%
Noninterest income
Insurance commissions 3,352 3,458 -3.1%
Service fees related to deposit accounts 3,163 3,024 4.6%
Realized securities gains 2,245 3,463 -35.2%
Gain (loss) on sale of assets (583) 277 -310.5%
Other-than-temporary impairment of securities (375) (2,245) -83.3%
Write-downs of foreclosed properties (6,114) (5,770) 6.0%
Other income 1,649 1,354 21.8%
Total noninterest income 3,337 3,561 -6.3%
Noninterest expense
Salaries and employee benefits 11,733 11,987 -2.1%
Net occupancy expense 1,445 1,463 -1.2%
Equipment expense 1,773 1,750 1.3%
Professional fees 781 654 19.4%
FDIC premiums 1,532 1,859 -17.6%
Foreclosed properties expense 1,017 1,235 -17.7%
Other expenses 4,025 3,503 14.9%
Total noninterest expense 22,306 22,451 -0.6%
Income before income taxes 4,953 3,292 50.5%
Income taxes 1,345 698 92.7%
Net income 3,608 2,594 39.1%
Preferred stock dividends 583 223 161.4%
Net income applicable to common shares $ 3,025 $ 2,371 27.6%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary --- 2012 vs 2011
For the Nine Months Ended Percent
9/30/2012 9/30/2011 Change
Per Share Data
Earnings per common share
Basic $ 0.41 $ 0.32 28.1%
Diluted $ 0.38 $ 0.32 18.8%
Average shares outstanding
Basic 7,425,472 7,425,472 0.0%
Diluted 9,601,098 7,428,860 29.2%
Performance Ratios
Return on average equity (A) 4.54% 3.76% 20.7%
Return on average assets 0.34% 0.23% 47.8%
Net interest margin 3.19% 3.10% 2.9%
Efficiency ratio (B) 53.04% 51.88% 2.2%
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 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Condensed Statements of Income
Interest income
Loans, including fees $ 13,648 $ 14,041 $ 14,365 $ 14,362 $ 14,717
Securities 1,934 2,225 2,421 2,711 2,920
Other 7 12 11 13 15
Total interest income 15,589 16,278 16,797 17,086 17,652
Interest expense
Deposits 3,067 3,360 3,713 4,302 4,561
Borrowings 2,587 2,947 3,066 3,123 3,170
Total interest expense 5,654 6,307 6,779 7,425 7,731
Net interest income 9,935 9,971 10,018 9,661 9,921
Provision for loan losses 2,000 2,001 2,001 1,999 2,001
Net interest income after provision for loan losses 7,935 7,970 8,017 7,662 7,920
Noninterest income
Insurance commissions 1,052 1,141 1,158 1,003 1,073
Service fees related to deposit accounts 1,074 1,075 1,014 1,102 1,078
Realized securities gains 760 320 1,165 542 1,517
Gain (loss) on sale of assets 16 (523) (77) 18 130
Other-than-temporary impairment of securities (39) (106) (229) (401) (484)
Write-downs of foreclosed properties (2,571) (1,631) (1,912) (882) (1,637)
Other income 514 552 584 607 510
Total noninterest income 806 828 1,703 1,989 2,187
Noninterest expense
Salaries and employee benefits 3,940 3,892 3,901 3,846 3,959
Net occupancy expense 476 490 479 472 473
Equipment expense 576 603 594 593 589
Professional fees 250 227 304 501 265
FDIC premiums 510 500 522 564 580
Foreclosed properties expense 395 248 374 441 389
Other expenses 1,325 1,335 1,365 1,417 1,318
Total noninterest expense 7,472 7,295 7,539 7,834 7,573
Income before income taxes 1,269 1,503 2,181 1,817 2,534
Income taxes 272 590 483 337 598
Net income 997 913 1,698 1,480 1,936
Preferred stock dividends 194 194 194 149 74
Net income applicable to common shares $ 803 $ 719 $ 1,504 $ 1,331 $ 1,862
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
For the Quarter Ended
9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Per Share Data
Earnings per common share
Basic $ 0.11 $ 0.10 $ 0.20 $ 0.18 $ 0.25
Diluted $ 0.10 $ 0.09 $ 0.18 $ 0.16 $ 0.24
Average shares outstanding
Basic 7,425,472 7,425,472 7,425,472 7,425,472 7,425,472
Diluted 9,601,278 8,927,802 9,600,017 9,044,976 8,110,070
Performance Ratios
Return on average equity (A) 3.71% 3.44% 6.49% 5.87% 8.22%
Return on average assets 0.28% 0.25% 0.47% 0.41% 0.53%
Net interest margin 3.17% 3.20% 3.20% 3.03% 3.08%
Efficiency ratio - (B) 53.91% 52.59% 52.70% 54.96% 52.36%
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 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Assets
Cash and due from banks $ 3,752 $ 4,266 $ 4,059 $ 4,398 $ 3,596
Interest bearing deposits other banks 13,441 14,288 26,855 28,294 39,103
Securities 291,992 289,151 292,002 286,599 292,442
Loans, net 940,933 948,294 957,797 965,516 964,349
Property held for sale 56,033 60,069 61,584 63,938 63,335
Premises and equipment, net 21,265 21,470 21,756 22,084 22,334
Intangible assets 8,387 8,475 8,563 8,651 8,739
Cash surrender value of life insurance policies 30,065 29,808 29,559 29,284 29,034
Other assets 38,218 40,620 42,190 41,357 41,652
Total assets $ 1,404,086 $ 1,416,441 $ 1,444,365 $ 1,450,121 $ 1,464,584
Liabilities and Shareholders' Equity
Retail deposits $ 766,555 $ 767,413 $ 785,283 $ 784,029 $ 816,904
Wholesale deposits 260,752 234,256 225,856 232,471 230,405
Short-term borrowings 20,957 10,957 15,956 15,956 955
Long-term borrowings and subordinated debentures 240,133 290,024 303,510 306,643 308,420
Other liabilities 8,361 8,084 9,361 8,456 8,976
Shareholders' equity 107,328 105,707 104,399 102,566 98,924
Total liabilities and shareholders' equity $ 1,404,086 $ 1,416,441 $ 1,444,365 $ 1,450,121 $ 1,464,584
Book value per common share (A) $ 11.20 $ 11.01 $ 10.87 $ 10.68 $ 10.96
Tangible book value per common share (A) $ 10.33 $ 10.13 $ 9.98 $ 9.78 $ 9.99
Tangible equity / Tangible assets 7.1% 6.9% 6.7% 6.5% 6.2%
NOTE (A) – Assumes conversion of all outstanding shares of convertible preferred stock.
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios
9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Summit Financial Group, Inc.
Total Risk Based Capital 13.8% 13.6% 13.3% 13.0% 12.3%
Tier 1 Risk Based Capital 11.3% 11.1% 10.8% 10.5% 9.7%
Tier 1 Leverage Ratio 8.0% 7.9% 7.8% 7.6% 6.9%
Summit Community Bank, Inc.
Total Risk Based Capital 14.6% 14.3% 14.0% 13.6% 13.4%
Tier 1 Risk Based Capital 13.3% 13.1% 12.7% 12.3% 12.1%
Tier 1 Leverage Ratio 9.5% 9.3% 9.1% 8.9% 8.7%
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
Dollars in thousands 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Commercial $ 88,997 $ 92,060 $ 99,386 $ 99,024 $ 94,801
Commercial real estate
Owner occupied 150,090 152,347 153,528 158,754 166,813
Non-owner occupied 279,132 280,891 275,727 270,226 253,538
Construction and development
Land and development 82,857 84,383 88,212 93,035 94,023
Construction 2,087 1,793 2,148 2,936 9,445
Residential real estate
Non-jumbo 215,584 217,321 219,485 221,733 224,499
Jumbo 62,748 61,962 62,836 61,535 62,255
Home equity 53,455 51,692 50,884 50,898 51,025
Consumer 21,290 21,212 21,573 22,325 22,988
Other 2,513 2,523 2,540 2,762 2,911
Total loans, net of unearned fees 958,753 966,184 976,319 983,228 982,298
Less allowance for loan losses 17,820 17,890 18,522 17,712 17,949
Loans, net $ 940,933 $ 948,294 $ 957,797 $ 965,516 $ 964,349
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Retail Deposit Composition
Dollars in thousands 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Non interest bearing checking $ 96,764 $ 96,172 $ 87,916 $ 88,655 $ 85,406
Interest bearing checking 177,236 164,867 172,506 158,483 163,840
Savings 197,610 204,509 212,402 208,809 208,030
Time deposits 294,945 301,865 312,459 328,082 359,628
Total retail deposits $ 766,555 $ 767,413 $ 785,283 $ 784,029 $ 816,904
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
For the Quarter Ended
Dollars in thousands 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Gross loan charge-offs $ 2,142 $ 2,790 $ 1,340 $ 2,368 $ 2,157
Gross loan recoveries (73) (156) (149) (133) (89)
Net loan charge-offs $ 2,069 $ 2,634 $ 1,191 $ 2,235 $ 2,068
Net loan charge-offs to average loans (annualized) 0.86% 1.08% 0.49% 0.91% 0.84%
Allowance for loan losses $ 17,820 $ 17,890 $ 18,523 $ 17,712 $ 17,949
Allowance for loan losses as a percentage of period end loans 1.86% 1.85% 1.89% 1.80% 1.82%
Nonperforming assets:
Nonperforming loans
Commercial $ 5,343 $ 6,476 $ 2,477 $ 3,259 $ 3,473
Commercial real estate 2,803 3,536 4,282 7,163 8,398
Commercial construction and development 428 662 799 1,052 --
Residential construction and development 16,333 16,735 21,375 22,634 17,506
Residential real estate 18,809 18,550 17,754 18,187 6,818
Consumer 88 78 81 145 87
Total nonperforming loans 43,804 46,037 46,768 52,440 36,282
Foreclosed properties
Commercial -- -- -- -- --
Commercial real estate 11,802 12,029 14,703 15,721 14,256
Commercial construction and development 17,683 18,632 17,377 17,101 16,960
Residential construction and development 23,769 26,014 25,724 27,877 27,804
Residential real estate 2,779 3,393 3,780 3,239 3,718
Total foreclosed properties 56,033 60,068 61,584 63,938 62,738
Other repossessed assets -- -- 266 263 859
Total nonperforming assets $ 99,837 $ 106,105 $ 108,618 $ 116,641 $ 99,879
Nonperforming loans to period end loans 4.57% 4.76% 4.79% 5.33% 3.69%
Nonperforming assets to period end assets 7.11% 7.49% 7.52% 8.04% 6.82%
Loans Past Due 30-89 Days
For the Quarter Ended
In thousands 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011
Commercial $ 874 $ 300 $ 689 $ 533 $ 255
Commercial real estate 1,264 1,787 2,776 5,746 2,797
Construction and development 56 293 518 1,756 1,251
Residential real estate 4,346 5,763 5,509 6,633 4,779
Consumer 313 408 242 466 308
Total $ 6,853 $ 8,551 $ 9,734 $ 15,134 $ 9,390
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2012 vs Q3 2011
Q3 2012 Q3 2011
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 $ 955,849 $ 13,572 5.65% $ 976,169 $ 14,656 5.96%
Tax-exempt 6,267 115 7.30% 4,575 92 7.98%
Securities
Taxable 238,458 1,341 2.24% 246,411 2,104 3.39%
Tax-exempt 69,636 890 5.08% 79,685 1,236 6.15%
Interest bearing deposits other banks and Federal funds sold 19,690 7 0.14% 28,911 15 0.21%
Total interest earning assets 1,289,900 15,925 4.91% 1,335,751 18,103 5.38%
Noninterest earning assets
Cash & due from banks 4,247 4,047
Premises & equipment 21,422 22,503
Other assets 117,354 126,113
Allowance for loan losses (17,825) (18,240)
Total assets $1,415,098 $1,470,174
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits $ 176,974 $ 83 0.19% $ 152,516 $ 96 0.25%
Savings deposits 200,865 321 0.64% 210,715 467 0.88%
Time deposits 548,983 2,663 1.93% 602,454 3,998 2.63%
Short-term borrowings 12,479 8 0.26% 1,226 1 0.32%
Long-term borrowings and subordinated debentures 264,315 2,579 3.88% 313,102 3,169 4.02%
Total interest bearing liabilities 1,203,616 5,654 1.87% 1,280,013 7,731 2.40%
Noninterest bearing liabilities
Demand deposits 96,048 86,966
Other liabilities 8,015 8,948
Total liabilities 1,307,679 1,375,927
Shareholders' equity - preferred 9,326 3,558
Shareholders' equity - common 98,093 90,689
Total liabilities and shareholders' equity $1,415,098 $1,470,174
NET INTEREST EARNINGS $ 10,271 $ 10,372
NET INTEREST MARGIN 3.17% 3.08%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2012 vs YTD 2011
YTD 2012 YTD 2011
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 $ 965,227 $ 41,811 5.79% $ 987,928 $ 44,622 6.04%
Tax-exempt 6,776 368 7.25% 4,765 289 8.11%
Securities
Taxable 235,885 4,592 2.60% 262,275 7,290 3.72%
Tax-exempt 70,753 3,009 5.68% 56,313 2,727 6.47%
Interest bearing deposits other banks and Federal funds sold 22,737 31 0.18% 36,307 59 0.22%
Total interest earning assets 1,301,378 49,811 5.11% 1,347,588 54,987 5.46%
Noninterest earning assets
Cash & due from banks 4,195 3,951
Premises & equipment 21,684 22,737
Other assets 120,041 118,393
Allowance for loan losses (18,191) (18,144)
Total assets $ 1,429,107 $ 1,474,525
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits $ 167,843 $ 247 0.20% $ 151,137 $ 296 0.26%
Savings deposits 206,953 1,054 0.68% 206,705 1,473 0.95%
Time deposits 545,121 8,839 2.17% 611,404 12,202 2.67%
Short-term borrowings 14,250 25 0.23% 1,663 3 0.24%
Long-term borrowings and subordinated debentures 288,305 8,575 3.97% 318,584 9,804 4.11%
1,222,472 18,740 2.05% 1,289,493 23,778 2.47%
Noninterest bearing liabilities
Demand deposits 92,362 83,768
Other liabilities 8,273 9,234
Total liabilities 1,323,107 1,382,495
Shareholders' equity - preferred 9,326 3,532
Shareholders' equity - common 96,674 88,498
Total liabilities and shareholders' equity $ 1,429,107 $ 1,474,525
NET INTEREST EARNINGS $ 31,071 $ 31,209
NET INTEREST MARGIN 3.19% 3.10%
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 9/30/2012 9/30/2011 9/30/2012 9/30/2011
Net income applicable to common shares - excluding realized securities gains, gains/(losses) on sales of assets, other-than-temporary impairment of securities and write-downs of foreclosed properties $ 1,959 $ 2,160 $ 6,066 $ 5,063
Realized securities gains 760 1,517 2,245 3,463
Applicable income tax effect (281) (561) (831) (1,281)
Gains (losses) on sales of assets 16 130 (583) 277
Applicable income tax effect (6) (48) 216 (102)
Other-than-temporary impairment of securities (39) (484) (375) (2,245)
Applicable income tax effect 14 179 139 831
Write-downs foreclosed properties (2,571) (1,637) (6,114) (5,770)
Applicable income tax effect 951 606 2,262 2,135
(1,156) (298) (3,041) (2,692)
GAAP net income applicable to common shares $ 803 $ 1,862 $ 3,025 $ 2,371
Diluted earnings per common share - excluding realized securities gains, gains/(losses) on sales of assets, other-than-temporary impairment of securities and write-downs of foreclosed properties $ 0.22 $ 0.28 $ 0.71 $ 0.67
Realized securities gains 0.08 0.19 0.23 0.47
Applicable income tax effect (0.03) (0.07) (0.09) (0.17)
Gains (losses) on sales of assets -- 0.02 (0.06) 0.04
Applicable income tax effect -- (0.01) 0.02 (0.01)
Other-than-temporary impairment of securities -- (0.06) (0.04) (0.30)
Applicable income tax effect -- 0.02 0.01 0.11
Write-downs of foreclosed properties (0.27) (0.20) (0.64) (0.78)
Applicable income tax effect 0.10 0.07 0.24 0.29
(0.12) (0.04) (0.33) (0.35)
GAAP diluted earnings per common share $ 0.10 $ 0.24 $ 0.38 $ 0.32
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 9/30/2012 9/30/2011 9/30/2012 9/30/2011
Total revenue - excluding realized securities gains, other-than-temporary impairment of securities and write-downs of foreclosed properties $ 12,575 $ 12,582 $ 38,088 $ 38,019
Realized securities gains 760 1,517 2,245 3,463
Gains (losses) on sales of assets 16 130 (583) 277
Other-than-temporary impairment of securities (39) (484) (375) (2,245)
Write-downs of foreclosed properties (2,571) (1,637) (6,114) (5,770)
(1,834) (474) (4,827) (4,275)
GAAP total revenue $ 10,741 $ 12,108 $ 33,261 $ 33,744
Total noninterest income - excluding realized securities gains, other-than-temporary impairment of securities and write-downs of foreclosed properties $ 2,640 $ 2,661 $ 8,164 $ 7,836
Realized securities gains 760 1,517 2,245 3,463
Gains (losses) on sales of assets 16 130 (583) 277
Other-than-temporary impairment of securities (39) (484) (375) (2,245)
Write-downs of foreclosed properties (2,571) (1,637) (6,114) (5,770)
(1,834) (474) (4,827) (4,275)
GAAP total noninterest income $ 806 $ 2,187 $ 3,337 $ 3,561
CONTACT: Robert S. Tissue, Sr. Vice President & CFO Telephone: (304) 530-0552 Email: rtissue@summitfgi.com

Source:Summit Financial Group, Inc.