updated 1/31/2011 5:47:11 PM ET 2011-01-31T22:47:11

MOOREFIELD, W.V., Jan. 31, 2011 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (Nasdaq:SMMF) today reported net income applicable to common shareholders for the 2010 fourth quarter of $836,000, or $0.11 per diluted share, compared to a 2009 fourth quarter net loss of $508,000 applicable to common shareholders, or ($0.07) per diluted share, and a net loss of $202,000 to common shareholders, or ($0.03) per diluted share, for the third quarter of 2010. The Company reported a full-year 2010 net loss applicable to common shareholders of $2.3 million, or ($0.31) per diluted share, compared to a net loss of $790,000 applicable to common shareholders, or ($0.11) per diluted share, for the 2009 full-year.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, "Our primary focus remains to reduce our portfolio of nonperforming assets, which has been the principal factor contributing to lower earnings performance. We made good progress this year, highlighted by the 14.2% reduction in our nonperforming assets. However, disposition of foreclosed real estate remains difficult to achieve as the return of our real estate markets to normal activity levels has been slower than we anticipated."

"We will continue to manage our problem assets through a combination of asset sales, loan workouts and charge-offs. We believe we are moving in the right direction; although the costs of credit administration have escalated, we have maintained operating expenses at a stable level through staff reductions, salary freezes and the rescission of bonuses until our profitability normalizes. On the revenue side, nonaccruals have negatively affected interest income, but we have been fairly successful managing our funding costs to partially offset the impact. We saw significant net interest margin improvement during the most recent quarter, increasing 37 basis points compared to Q3 2010, following recent maturities and repricings of over $100 million of higher-cost wholesale funding. Given the improving operational trends we've established, we are hopeful that the profit we reported this quarter will serve as a baseline for profitability as we move into 2011."

Results from Operations

For the fourth quarter of 2010, net interest income was $10.4 million, an increase of 2.3 percent from the $10.2 million reported in the prior-year fourth quarter. However, the underlying dynamics have shifted significantly. The net interest margin for fourth quarter was 3.19 percent compared to 2.83 percent for the year-ago quarter, and 2.82 percent for the linked quarter. Borrowing costs in the fourth quarter were lower by $1.0 million compared to the linked quarter, and net interest income improved 9.3 percent above the linked quarter. Compared to the year-ago fourth quarter, however, average earning assets declined by 8.7 percent, partially offsetting the positive impact of this margin improvement.

Total revenue for the 2010 full-year, consisting of net interest income and noninterest income, was $47.4 million compared to $49.3 million for the 2009 full year. Noninterest income for the 2010 full-year was $7.2 million compared to $5.8 million for 2009. Nonrecurring charges were $2.2 million for 2010, including a $2.1 million gain on the sale of securities, a $142,000 gain on sale of assets, OTTI charges of $1.0 million on securities, and $3.4 million in writedowns of foreclosed properties; for 2009, nonrecurring items totaled $4.0 million, including OTTI charges of $5.4 million on securities, a $112,000 loss on the sale of assets and a $1.5 million gain on the sale of securities. Excluding these one-time charges, noninterest income from operations was $9.4 million in 2010, down $364,000 or 3.7 percent from the $9.8 million reported for 2009.

Excluding nonrecurring items, noninterest income from operations was reasonably stable over the past five quarters, averaging $2.4 million per quarter. Noninterest income consists primarily of insurance commissions from Summit's insurance agency subsidiary and service fee income from banking activities. Summit reported fourth quarter 2010 noninterest income of $737,000 compared to $2.9 million for the year-ago quarter. Net nonrecurring charges were $1.6 million in the 2010 quarter, including a $463,000 gain on the sale of securities, OTTI charges of $0.9 million on securities, a $31,000 gain on the sale of assets, and writedowns of $1.2 million on foreclosed properties. For the 2009 quarter, net nonrecurring income totaled $393,000, including $773,000 in realized securities gains and OTTI charges of $383,000 on securities. Excluding one-time items from their respective fourth quarters, noninterest income from operations was $2.3 million in 2010 and $2.5 million for the year-ago quarter.

The provision for loan losses was $3.0 million for the fourth quarter of 2010 compared to $4.5 million and $6.8 million for the linked and year-ago quarters, respectively. For 2010, Summit provided $21.4 million for loan losses, a $1.0 million or 5.0 percent increase from the $20.3 million provided during 2009. At year-end 2010, the allowance for loan losses was 1.70 percent of total loans compared to 1.47 percent at year-end 2009.

Mr. Maddy noted that operating expenses continue to be exceedingly well-controlled, despite the increased costs of OREO administration, which increased 229.9 percent, to $1.6 million for 2010, compared to $478,000 in 2009. In fact, operating expenses actually decreased for the year to $31.0 million, down $0.9 million, or 3.0 percent, from the $31.9 million reported for 2009. Cost-saving initiatives remain in place and their impact continues to grow. Fourth quarter 2010 operating expenses of $7.6 million were unchanged compared to the year-ago fourth quarter.

Balance Sheet

At December 31, 2010, total assets were $1.48 billion, a decline of $106.8 million, or 6.7 percent since year-end 2009. Total loans, net of unearned fees and interest, were $1.01 billion at December 31, 2010, down $142 million, or 12.3 percent, over the same twelve-month period. Compared to the linked quarter, assets declined by $18.6 million, or 1.2 percent; loans declined by $24.5 million, or 2.4 percent, while investment securities and cash equivalents increased $7.9 million, or 2.5 percent.

All loan categories have declined since year-end 2009, most notably construction and development ("C&D") loans, down $49.2 million or 30.4 percent. The two largest components of Summit's loan portfolio, commercial real estate ("CRE") and residential real estate declined $42.0 million (down 9.0 percent) and $20.5 million (down 5.5 percent), respectively, while commercial ("C&I") loans declined $25.2 million, or 20.6 percent. At 2010 year-end, CRE loans were $423.0 million, or approximately 41.7 percent of total loans, followed by residential real estate loans at $352.3 million, or approximately 34.7 percent of total loans. C&D loans were $112.8 million, accounting for 11.1 percent of total loans, while C&I loans and consumer and other loans represented the remainder of the portfolio at 9.6 and 2.8 percent of total loans, respectively.

During 2010, retail deposits grew $31.2 million, or 4.0 percent, to $806.7 million, with the majority of growth occurring in the 2010 fourth quarter when retail time deposits jumped $29 million; retail deposit growth was partially offset by an $11 million decrease in savings accounts over the past year. The $107 million decline in total assets since December 31, 2009 provided Summit with an opportunity to reduce broker deposits, and relatively higher-cost short- and long-term borrowings by $11.5 million, $48.2 million and $77.4 million, respectively, during 2010.

Asset Quality

As of December 31, 2010, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $92.2 million, or 6.24 percent of assets. This compares to $107.5 million, or 6.78 percent of assets, at year-end 2009, and $98.0 million, or 6.55 percent of assets, at September 30, 2010. The $15.3 million year-over-year decline in NPAs masks the significant progress Summit has made in reducing its nonperforming loan portfolio, which declined by $45.2 million during 2010. Nonperforming loans now account for 2.14 percent of total loans, down from 5.79 percent at year-end 2009.

During 2010, foreclosed real estate increased by $29.9 million, to $70.2 million, or 4.75 percent of assets. Approximately three-fourths of the total, or $51 million, consists of land, development and construction projects.

Loans 30-89 day delinquent increased $16 million this past quarter, after having shown consistent improvement each previous quarter of 2010. In this regard, Mr. Maddy added, "We had a $13 million loan relationship past due at year end which is principally secured by a large residence and farm located in one of the most desirable counties in Virginia." 

Capital Adequacy

Common shareholders' equity was $86.0 million as of December 31, 2010 compared to $87.2 million December 31, 2009. Summit's depository institution, Summit Community Bank, continues to be well in excess of regulatory requirements for a "well capitalized" institution at December 31, 2010. The Bank's total risk-based capital ratio was 12.6 percent, while its Tier 1 leverage capital ratio was 8.5 percent compared to 11.4 percent and 7.6 percent, respectively, at December 31, 2009. Total common shares outstanding as of December 31, 2010 were 7,425,472.

In conclusion, Mr. Maddy commented, "We end the year on a more hopeful note than we have at any time during this economic downturn. However, community banks, like Summit, will still experience uncertainty until economic activity returns to a level where people feel confident that they will find jobs, and real estate sales rebound. We have been fortunate in the past that our markets have been attractive enough to sustain population and job growth. We are hopeful that these dynamics will return in the not-too-distant future. We all are hoping for a better year in 2011."

About the Company

Summit Financial Group, Inc., a financial holding company with total assets of $1.48 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 GAAP performance measures to exclude the effects of realized and unrealized securities gains and losses, unrealized OREO writedowns, gains/losses on sales of assets, and FDIC special assessment 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 --- Q4 2010 vs Q4 2009
     
   For the Quarter Ended   Percent 
 Dollars in thousands  12/31/2010 12/31/2009  Change 
 Condensed Statements of Income       
Interest income       
Loans, including fees   $ 16,064  $ 17,480 -8.1%
Securities   3,191  3,882 -17.8%
Other   11  6 NM
Total interest income   19,266  21,368 -9.8%
Interest expense       
Deposits   5,000  5,878 -14.9%
Borrowings   3,829  5,286 -27.6%
Total interest expense   8,829  11,164 -20.9%
Net interest income   10,437  10,204 2.3%
Provision for loan losses   3,000  6,825 -56.0%
Net interest income after provision for loan losses   7,437  3,379 120.1%
Noninterest income       
Insurance commissions   1,086  1,164 -6.7%
Service fee income   741  878 -15.6%
Realized securities gains (losses)   463  773 -40.1%
Other-than-temporary impairment of securities   (850)  (383) -121.9%
OREO writedowns   (1,206)  -- NM
Other income   503  437 15.1%
Total noninterest income  737  2,869 -74.3%
Noninterest expense       
Salaries and employee benefits  3,705  3,459 7.1%
Net occupancy expense  480  484 -0.8%
Equipment expense  574  529 8.5%
Professional fees  256  342 -25.1%
FDIC premiums  705  935 -24.6%
OREO expense  430  183 135.0%
Other expenses  1,478  1,639 -9.8%
Total noninterest expense  7,628  7,571 0.8%
Income (loss) before income taxes   546  (1,323) NM
Income taxes   (364)  (889) 59.1%
Net income (loss)   910  (434) NM
Preferred stock dividends   74  74 0.0%
       
Net income (loss) applicable to common shares  $ 836  $ (508) NM
 
 
Quarterly Performance Summary --- Q4 2010 vs Q4 2009
     
   For the Quarter Ended   Percent 
  12/31/2010 12/31/2009  Change 
 Per Share Data       
Earnings per share from continuing operations       
Basic   $ 0.11  $ (0.07) NM
Diluted   $ 0.11  $ (0.07) NM
       
Average shares outstanding       
Basic   7,425,472  7,425,472 0.0%
Diluted   7,425,822  7,425,472 0.0%
       
 Performance Ratios       
Return on average equity (A)  3.83% -2.21% 273.3%
Return on average assets  0.23% -0.13% 276.9%
Net interest margin  3.19% 2.83% 12.7%
Efficiency ratio (B)  58.18% 57.33% 1.5%
       
NOTE (A) – Net income divided by total shareholders equity less preferred equity.
       
NOTE (B) – Computed on a tax equivalent basis excluding nonrecurring income and expense items and

amortization of intangibles.
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary --- 2010 vs 2009
       
   For the Year Ended   Percent 
 Dollars in thousands  12/31/2010 12/31/2009  Change 
 Condensed Statements of Income       
Interest income       
Loans, including fees   $ 65,957  $ 71,843 -8.2%
Securities   13,684  17,680 -22.6%
Other   31  13 138.5%
Total interest income   79,672  89,536 -11.0%
Interest expense       
Deposits   21,036  24,951 -15.7%
Borrowings   18,484  21,043 -12.2%
Total interest expense   39,520  45,994 -14.1%
Net interest income   40,152  43,542 -7.8%
Provision for loan losses   21,350  20,325 5.0%
Net interest income after provision for loan losses   18,802  23,217 -19.0%
Noninterest income       
Insurance commissions   4,744  5,045 -6.0%
Service fee income   3,039  3,330 -8.7%
Realized securities gains (losses)   2,051  1,497 37.0%
Other-than-temporary impairment of securities   (988)  (5,366) -81.6%
OREO writedowns   (3,401)  -- NA
Other income   1,776  1,294 37.2%
Total noninterest income  7,221  5,800 24.5%
Noninterest expense       
Salaries and employee benefits  15,133  15,908 -4.9%
Net occupancy expense  2,009  2,032 -1.1%
Equipment expense  2,457  2,151 14.2%
Professional fees  1,015  1,408 -27.9%
FDIC premiums  2,870  3,223 -11.0%
OREO expense  1,577  478 229.9%
Other expenses  5,892  6,698 -12.0%
Total noninterest expense  30,953  31,898 -3.0%
Income (loss) before income taxes   (4,930)  (2,881) 71.1%
Income taxes   (2,955)  (2,165) 36.5%
Net income (loss)   (1,975)  (716) 175.8%
Preferred stock dividends   297  74 301.4%
       
Net income (loss) applicable to common shares  $ (2,272)  $ (790) 187.6%
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary --- 2010 vs 2009
     
   For the Year Ended   Percent 
  12/31/2010 12/31/2009  Change 
 Per Share Data       
 Earnings per share       
 Basic   (0.31)  (0.11) -181.8%
 Diluted   (0.31)  (0.11) -181.8%
       
 Average shares outstanding       
 Basic   7,425,472  7,421,596 0.1%
 Diluted   7,425,472  7,431,672 -0.1%
       
 Performance Ratios       
 Return on average equity (A)  -2.60% -0.90% -188.9%
 Return on average assets  -0.15% -0.05% -200.0%
 Net interest margin  2.96% 2.96% 0.0%
 Efficiency ratio (B)  60.03% 56.16% 6.9%
       
NOTE (A) – Net income divided by total shareholders equity less preferred equity.
       
NOTE (B) – Computed on a tax equivalent basis excluding nonrecurring income and expense items and

amortization of intangibles.
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
         
   For the Quarter Ended 
 Dollars in thousands  12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
 Condensed Statements of Income           
Interest income           
Loans, including fees   $ 16,064  $ 16,239  $ 16,614  $ 17,040  $ 17,480
Securities   3,191  3,308  3,592  3,594  3,882
Other   11  7  2  11  6
Total interest income   19,266  19,554  20,208  20,645  21,368
Interest expense           
Deposits   5,000  5,160  5,378  5,498  5,878
Borrowings   3,829  4,846  4,894  4,915  5,286
Total interest expense   8,829  10,006  10,272  10,413  11,164
Net interest income   10,437  9,548  9,936  10,232  10,204
Provision for loan losses   3,000  4,500  8,500  5,350  6,825
Net interest income after provision for loan losses   7,437  5,048  1,436  4,882  3,379
Noninterest income           
Insurance commissions   1,086  1,227  1,223  1,209  1,164
Service fee income   741  763  828  707  878
Realized securities gains (losses)   463  67  1,256  264  773
Other-than-temporary impairment of securities   (850)  (109)  --  (29)  (383)
OREO writedowns   (1,206)  --  (2,194)  --  --
Other income   503  338  568  365  437
Total noninterest income  737  2,286  1,681  2,516  2,869
Noninterest expense           
Salaries and employee benefits  3,705  3,866  3,839  3,723  3,459
Net occupancy expense  480  498  509  521  484
Equipment expense  574  620  634  629  529
Professional fees  256  223  262  274  342
FDIC premiums  705  715  625  825  935
OREO expense  430  671  244  232  183
Other expenses  1,478  1,467  1,543  1,406  1,639
Total noninterest expense  7,628  8,060  7,656  7,610  7,571
Income (loss) before income taxes   546  (726)  (4,539)  (212)  (1,323)
Income taxes   (364)  (598)  (1,661)  (332)  (889)
Net income (loss)   910  (128)  (2,878)  120  (434)
Preferred stock dividends   74  74  74  74  74
Net income (loss) applicable to common shares  $ 836  $ (202)  $ (2,952)  $ 46  $ (508)
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
         
   For the Quarter Ended 
  12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
 Per Share Data           
 Earnings per share           
 Basic   $ 0.11  $ (0.03)  $ (0.40)  $ 0.01  $ (0.07)
 Diluted   $ 0.11  $ (0.03)  $ (0.40)  $ 0.01  $ (0.07)
           
 Average shares outstanding           
 Basic   7,425,472  7,425,472  7,425,472  7,425,472  7,425,472
 Diluted   7,425,822  7,427,955  7,425,472  7,425,472  7,425,472
           
 Performance Ratios           
 Return on average equity (A)  3.83% -0.59% -13.16% 0.20% -2.21%
 Return on average assets  0.23% -0.03% -0.75% 0.01% -0.13%
 Net interest margin  3.19% 2.82% 2.92% 3.00% 2.83%
 Efficiency ratio - (B)  58.18% 65.35% 59.14% 57.78% 57.33%
           
NOTE (A) – Net income divided by total shareholders equity less preferred equity.
           
NOTE (B) – Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data
   For the Quarter Ended 
 Dollars in thousands, except per share amounts  12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
 Assets           
Cash and due from banks  $ 4,652  $ 4,598  $ 4,190  $ 5,163  $ 6,813
Interest bearing deposits other banks  45,696  40,691  24,810  9,032  34,247
Securities  270,658  267,856  258,971  262,566  271,654
Loans, net  995,319  1,018,169  1,065,118  1,112,526  1,137,336
Property held for sale  70,235  68,353  69,478  50,562  40,293
Intangible assets  9,002  9,090  9,178  9,265  9,353
Other assets  82,243  87,655  87,861  87,382  84,929
Total assets  $ 1,477,805  $ 1,496,412  $ 1,519,606  $ 1,536,496  $ 1,584,625
           
 Liabilities and Shareholders' Equity           
Retail deposits  $ 806,652  $ 786,992  $ 780,809  $ 776,251  $ 775,524
Brokered time deposits  230,287  243,040  240,329  234,785  241,814
Short-term borrowings  1,582  1,610  2,739  27,456  49,739
Long-term borrowings and subordinated debentures  340,498  366,037  397,564  397,724  417,881
Other liabilities  9,630  8,499  9,311  9,746  9,007
Shareholders' equity  89,156  90,234  88,854  90,534  90,660
 Total liabilities and shareholders' equity  $ 1,477,805  $ 1,496,412  $ 1,519,606  $ 1,536,496  $ 1,584,625
           
Book value per common share (A)  $ 11.01  $ 11.14  $ 10.97  $ 11.18  $ 11.19
Tangible book value per common share (A)  $ 9.90  $ 10.02  $ 9.84  $ 10.03  $ 10.04
Tangible equity / Tangible assets 5.5% 5.5% 5.3% 5.3% 5.2%
           
NOTE: (A) – Assumes conversion of convertible preferred stock
 
 
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios
           
  12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
Summit Financial Group, Inc.          
Total Risk Based Capital 11.8% 11.6% 11.5% 11.4% 11.3%
Tier 1 Risk Based Capital 9.1% 8.8% 8.7% 8.7% 8.6%
Tier 1 Leverage Ratio 6.9% 6.7% 6.5% 6.6% 6.5%
           
Summit Community Bank, Inc.          
Total Risk Based Capital 12.6% 12.2% 12.0% 11.9% 11.4%
Tier 1 Risk Based Capital 11.4% 10.9% 10.8% 10.6% 10.1%
Tier 1 Leverage Ratio 8.5% 8.3% 8.1% 8.1% 7.6%
 
 
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
           
Dollars in thousands 12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
Commercial  $ 97,261  $ 95,939  $ 117,334  $ 121,514  $ 122,508
Commercial real estate  423,011  430,003  432,321  456,120  465,037
Construction and development  112,840  122,455  143,907  151,281  162,080
Residential real estate  352,328  360,142  362,649  370,713  372,867
Consumer  23,886  25,006  25,968  26,974  28,203
Other  4,840  5,227  5,540  5,685  5,652
Total loans  1,014,166  1,038,772  1,087,719  1,132,287  1,156,347
Less unearned fees and interest  1,623  1,734  1,833  1,918  2,011
Total loans net of unearned fees and interest  1,012,543  1,037,038  1,085,886  1,130,369  1,154,336
Less allowance for loan losses  17,224  18,869  20,768  17,843  17,000
Loans, net  $ 995,319  $ 1,018,169  $ 1,065,118  $ 1,112,526  $ 1,137,336
           
           
           
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Retail Deposit Composition
           
Dollars in thousands 12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
Non interest bearing checking  $ 74,604  $ 76,362  $ 73,519  $ 71,100  $ 74,119
Interest bearing checking  150,291  152,393  142,771  148,657  148,587
Savings  177,053  182,284  196,224  198,303  188,419
Time deposits  404,704  375,953  368,295  358,191  364,399
Total retail deposits  $ 806,652  $ 786,992  $ 780,809  $ 776,251  $ 775,524
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
   For the Quarter Ended 
 Dollars in thousands  12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
           
Gross loan charge-offs  $ 5,135  $ 6,477  $ 5,907  $ 4,606  $ 3,864
Gross loan recoveries  (490)  (78)  (332)  (99)  (192)
Net loan charge-offs  $ 4,645  $ 6,399  $ 5,575  $ 4,507  $ 3,672
           
Net loan charge-offs to average loans (annualized) 1.76% 2.42% 1.94% 1.57% 1.25%
Allowance for loan losses  $ 17,224  $ 18,869  $ 20,768  $ 17,843  $ 17,000
Allowance for loan losses as a percentage of period end loans 1.70% 1.82% 1.91% 1.58% 1.47%
Nonperforming assets:          
Nonperforming loans          
Commercial  $ 1,318  $ 891  $ 1,347  $ 511  $ 431
Commercial real estate  2,686  5,386  15,387  33,907  35,217
Commercial construction and development  --  --  812  9,668  11,553
Residential construction and development  10,048  14,419  18,307  7,018  14,775
Residential real estate  7,517  8,542  6,125  4,220  4,563
Consumer  142  75  23  209  403
Total nonperforming loans  21,711  29,313  42,001  55,533  66,942
 Foreclosed properties          
Commercial  $ 597  $ --  $ --  $ --  $ --
Commercial real estate  14,745  13,091  15,011  5,086  4,788
Commercial construction and development  17,021  16,691  16,213  4,814  2,028
Residential construction and development  34,377  35,197  34,506  36,447  30,230
Residential real estate  3,495  3,374  3,748  4,215  3,247
Total foreclosed properties  70,235  68,353  69,478  50,562  40,293
Other repossessed assets  289  314  333  291  269
Total nonperforming assets  $ 92,235  $ 97,980  $ 111,812  $ 106,386  $ 107,504
           
Nonperforming loans to period end loans 2.14% 2.82% 3.86% 4.90% 5.79%
Nonperforming assets to period end assets 6.24% 6.55% 7.36% 6.92% 6.78%
 
 
Loans Past Due 30-89 Days
   For the Quarter Ended 
 In thousands  12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
           
Commercial  $ 664  $ 817  $ 516  $ 1,209  $ 1,585
Commercial real estate  4,523  1,933  9,246  9,497  3,861
Construction and development  3,156  1,711  819  11,654  1,161
Residential real estate  19,164  7,050  10,846  8,638  8,250
Consumer  551  691  536  419  835
Total  $ 28,058  $ 12,202  $ 21,963  $ 31,417  $ 15,692
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2010 vs Q4 2009            
  Q4 2010 Q4 2009
  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  $ 1,017,035  $ 16,124 6.29%  $ 1,163,441  $ 17,372 5.92%
Tax-exempt  5,336  109 8.10%  7,845  164 8.29%
Securities            
Taxable  262,488  2,768 4.18%  254,792  3,372 5.25%
Tax-exempt  37,880  639 6.69%  46,003  768 6.62%
Interest bearing deposits other banks and Federal funds sold  23,355  11 0.19%  2,264  6 1.05%
Total interest earning assets  1,346,094  19,651 5.79%  1,474,345  21,682 5.83%
             
Noninterest earning assets            
Cash & due from banks  4,227      30,665    
Premises & equipment  23,288      24,241    
Other assets  115,930      76,279    
Allowance for loan losses  (19,176)      (15,076)    
Total assets  $ 1,470,363      $ 1,590,454    
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
Liabilities            
Interest bearing liabilities            
Interest bearing demand deposits  $ 151,552  $ 119 0.31%  $ 152,119  $ 198 0.52%
Savings deposits  171,806  440 1.02%  162,270  601 1.47%
Time deposits  619,572  4,441 2.84%  622,363  5,093 3.25%
Short-term borrowings  1,847  1 0.21%  56,768  86 0.60%
Long-term borrowings and subordinated debentures  345,245  3,828 4.40%  425,129  5,186 4.84%
   1,290,022  8,829 2.72%  1,418,649  11,164 3.12%
Noninterest bearing liabilities            
Demand deposits  78,844      71,050    
Other liabilities  10,768      8,889    
Total liabilities  1,379,634      1,498,588    
             
Shareholders' equity - preferred  3,519      --    
Shareholders' equity - common  87,210      91,866    
Total liabilities and shareholders' equity  $ 1,470,363      $ 1,590,454    
             
NET INTEREST EARNINGS    $ 10,822      $ 10,518  
             
NET INTEREST YIELD ON EARNING ASSETS     3.19%     2.83%
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2010 vs YTD 2009
     
  YTD 2010 YTD 2009
  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  $ 1,082,537  $ 65,481 6.05%  $ 1,184,571  $ 71,405 6.03%
Tax-exempt  5,965  476 7.98%  8,045  665 8.27%
Securities            
Taxable  253,529  12,265 4.84%  271,820  15,602 5.74%
Tax-exempt  40,048  2,670 6.67%  46,740  3,150 6.74%
Interest bearing deposits other banks and Federal funds sold  16,373  31 0.19%  1,335  13 0.97%
Total interest earning assets  1,398,452  80,923 5.79%  1,512,511  90,835 6.01%
             
Noninterest earning assets            
Cash & due from banks  4,267      18,282    
Premises & equipment  23,742      23,646    
Other assets  104,907      60,656    
Allowance for loan losses  (19,226)      (18,293)    
Total assets  $ 1,512,142      $ 1,596,802    
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
Liabilities            
Interest bearing liabilities            
Interest bearing demand deposits  $ 147,513  $ 583 0.40%  $ 154,233  $ 784 0.51%
Savings deposits  188,233  2,323 1.23%  112,712  1,774 1.57%
Time deposits  605,663  18,131 2.99%  632,988  22,407 3.54%
Short-term borrowings  16,172  80 0.49%  99,497  573 0.58%
Long-term borrowings and subordinated debentures  380,235  18,403 4.84%  429,481  20,457 4.76%
   1,337,816  39,520 2.95%  1,428,911  45,995 3.22%
Noninterest bearing liabilities            
Demand deposits  73,971      71,281    
Other liabilities  9,597      8,666    
Total liabilities  1,421,384      1,508,858    
             
Shareholders' equity - preferred  3,519      --    
Shareholders' equity - common  87,239      87,944    
Total liabilities and shareholders' equity  $ 1,512,142      $ 1,596,802    
             
NET INTEREST EARNINGS    $ 41,403      $ 44,840  
             
NET INTEREST YIELD ON EARNING ASSETS     2.96%     2.96%
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
         
   For the Quarter Ended   For the Year Ended 
 Dollars in thousands  12/31/2010 12/31/2009 12/31/2010 12/31/2009
         
Net income - excluding realized securities gains, other-than-

temporary impairment of securities, gains/losses on sales 

of assets, unrealized OREO writedown, and FDIC

special assessment 
 $ 1,893  $ (682)  $ (591)  $ 2,256
         
Realized securities gains   463  773  2,051  1,497
Applicable income tax effect   (171)  (286)  (759)  (554)
Other-than-temporary impairment of securities   (850)  (383)  (988)  (5,366)
Applicable income tax effect   315  142  366  1,985
Gains/(losses) on sales of assets   31  3  142  (112)
Applicable income tax effect   (11)  (1)  (53)  41
Unrealized OREO writedown   (1,206)  --  (3,401)  --
Applicable income tax effect   446  --  1,258  --
FDIC special assessment   --  --  --  (735)
Applicable income tax effect   --  --  --  272
   (983)  248  (1,384)  (2,972)
GAAP net income   $ 910  $ (434)  $ (1,975)  $ (716)
         
Diluted earnings per share - excluding realized securities gains, 

other-than-temporary impairment of securities, gains/losses 

on sales of assets, unrealized OREO writedown, and 

FDIC special assessment 
 $ 0.02  $ (0.10)  $ (0.03)  $ 0.29
         
Realized securities gains   0.06  0.10  0.28  0.20
Applicable income tax effect   (0.02)  (0.04)  (0.10)  (0.07)
Other-than-temporary impairment of securities   (0.11)  (0.05)  (0.13)  (0.71)
Applicable income tax effect   0.04  0.02  0.05  0.26
Gains/(losses) on sales of assets   --   --   0.02  (0.02)
Applicable income tax effect   --   --   (0.01)  0.01
Unrealized OREO writedown   (0.16)  --   (0.46)  -- 
Applicable income tax effect   0.06  --   0.17  -- 
FDIC special assessment   --   --   --   (0.10)
Applicable income tax effect   --   --   --   0.04
   (0.13)  0.03  (0.18)  (0.39)
GAAP diluted earnings per share   $ (0.11)  $ (0.07)  $ (0.21)  $ (0.10)
 
 
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
         
   For the Quarter Ended   For the Year Ended 
 Dollars in thousands  12/31/2010 12/31/2009 12/31/2010 12/31/2009
         
         
Total revenue - excluding realized securities gains, 

other-than-temporary impairment of securities, 

gains/losses on sales of assets, and unrealized 

OREO writedown 
 $ 12,736  $ 12,680  $ 49,569  $ 53,323
         
Realized securities gains  463  773  2,051  1,497
Other-than-temporary impairment of securities   (850)  (383)  (988)  (5,366)
Gains/(losses) on sales of assets   31  3  142  (112)
Unrealized OREO writedown   (1,206)  --  (3,401)  --
   (1,562)  393  (2,196)  (3,981)
GAAP total revenue   $ 11,174  $ 13,073  $ 47,373  $ 49,342
         
Total noninterest income - excluding realized securities 

gains, other-than-temporary impairment of securities, 

gains/losses on sales of assets, and unrealized 

OREO writedown 
 $ 2,299  $ 2,476  $ 9,417  $ 9,781
         
Realized securities gains  463  773  2,051  1,497
Other-than-temporary impairment of securities   (850)  (383)  (988)  (5,366)
Gains/(losses) on sales of assets   31  3  142  (112)
Unrealized OREO writedown   (1,206)  --  (3,401)  --
   (1,562)  393  (2,196)  (3,981)
GAAP total noninterest income   $ 737  $ 2,869  $ 7,221  $ 5,800
CONTACT: Robert S. Tissue, Sr. Vice President & CFO
         (304) 530-0552
         rtissue@SummitFGI.com

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