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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

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