FOR RELEASE 6:00 AM EDT, THURSDAY, OCTOBER 18, 2007
| Contact: | Robert S. Tissue, Sr. Vice President & CFO |
| Telephone: | (304) 530-0552 |
| Email: | rtissue@SummitFGI.com |
SUMMIT FINANCIAL GROUP REPORTS THIRD QUARTER 2007 EARNINGS
MOOREFIELD, WV -- October 18, 2007--Summit Financial Group, Inc. (NASDAQ: SMMF) today reported third quarter 2007 net income of its consolidated operations and its continuing operations which excludes from income substantially all business activities of Summit Mortgage, its residential mortgage loan origination unit, which ceased operations in January 2007.
Income from continuing operations for third quarter 2007 was $3.8 million, or $0.50 per diluted share, up 5.7 percent and 2.0 percent, respectively, compared with $3.6 million, or $0.49 per diluted share, reported for the prior-year period. Consolidated net income was $3.6 million, or $0.48 per diluted share, compared with $2.9 million, or $0.39 per diluted share reported for the third quarter of 2006, up 26.3 percent and 23.1 percent, respectively. Third quarter 2007 results reflect solid asset growth, well-controlled operating expenses, and a remarkably stable net interest margin. For the third quarter of 2007, in accordance with GAAP accounting, the returns on average shareholders' equity and average assets from continuing operations were 16.71 percent and 1.15 percent, respectively, compared with prior-year ratios of 17.85 percent and 1.19 percent.
For the nine months ended September 30, 2007, income from continuing operations was $9.7 million, or $1.33 per diluted share, up 16.3 percent and 14.7 percent, respectively, compared with $8.3 million, or $1.16 per diluted share, reported for the prior-year period. Consolidated net income for the first nine months of 2007 was $9.2 million, or $1.27 per diluted share, compared with $8.1 million, or $1.12 per diluted share reported for the 2006 nine-month period, up 14.6 percent and 13.4 percent respectively. For the first nine months of 2007, the returns on average shareholders' equity and average assets from continuing operations calculated on a GAAP basis were 15.11 percent and 1.01 percent, respectively, compared with prior-year ratios of 14.24 percent and 0.96 percent.
On August 22, 2007, Summit Financial Group, Inc. filed a Form 8-K stating that as a result of a review by the Securities and Exchange Commission (“SEC”) of Summit’s Form 10-K for the year ended December 31, 2006, the Company’s interpretation of the short-cut method of hedge accounting under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS 133”) as it was applied to certain of its interest rate swaps should be restated. Accordingly, in September 2007, the Company restated its financial statements for December 31, 2006, and the first two quarters of 2007 to eliminate the application of hedge accounting with respect to four interest rate swaps which previously had been designated as fair value hedges of certain convertible rate advances from the Federal Home Loan Bank (“FHLB”). The impact of the restatement is that fair value changes for these interest rate swaps are now recognized as noninterest income rather than as an adjustment to the carrying value of advances. Further, net cash settlement payments received/paid during each period are reclassified from interest expense on long-term borrowings to noninterest income. The four interest rate swaps, which were entered into in August 2003 to convert the fixed rate FHLB advances to a variable rate, had a notional value totaling $36 million. Restatements for prior years were incorporated into the December 31, 2006 restatement.
“This issue has affected many financial institutions who, like us, believed their initial accounting treatment for the transactions was appropriate,” explained Robert S. Tissue, Summit’s Chief Financial Officer. “The interpretation of SFAS 133 is complex and continues to evolve. Our swap transactions created effective economic hedges and performed as anticipated. In light of the recent review by the SEC, we have restated our historical financial statements for the periods since 2003 when we entered into the swaps. Should we elect to hold these swaps through their termination date of October 18, 2010, these market value adjustments will reverse themselves over the life of the swap and will result in no economic impact to the Company.”
For the third quarter, the change in the fair value of interest rate swaps was a gain of $752,000 in 2007 and a gain of $579,000 in 2006. These gains from the non-cash change in fair value have been reported as a component of noninterest income in accordance with GAAP. Excluding the gains in fair value, third quarter pre-tax earnings from continuing operations were $4.8 million in 2007 compared with $4.6 million in 2006, a year-over-year increase of 3.7 percent. For the first nine months, the change in the fair value of interest rate swaps was a gain of $705,000 in 2007 and a loss of $140,000 in 2006. Excluding the gains/losses in fair value, pre-tax earnings from continuing operations were $13.2 million for the first nine months in 2007 compared with $12.1 million during the first nine months in 2006, a year-over-year increase of 8.8 percent.
H. Charles Maddy, III, President and Chief Executive Officer, commented, " This has been an excellent quarter for us in several respects: We continue to see strong loan growth in our markets, with loan quality and pricing holding up well. The blip in our charge-offs this quarter reflects the fast-approaching end of our obligation to repurchase any substandard loans originated by Summit Mortgage; the reserves we previously recorded have been adequate to address the losses experienced since we discontinued this business segment.
“Second, we consolidated our two previously chartered West Virginia and Virginia community banks this past quarter – into one bank, Summit Community Bank. This consolidation will provide greater brand recognition throughout our two-state footprint, as well as operational expense savings. Summit Financial Group, our holding company, will continue to be headquartered in Moorefield, West Virginia. The Summit franchise will expand even further, into northern Virginia and Montgomery County, Maryland, when we expect to close on our acquisition of Greater Atlantic Financial late in the fourth quarter of this year.
“Third, we closed on the acquisition of the Leesburg, Virginia-based Kelly Insurance Agency Inc. and Kelly Property and Casualty Inc. (“Kelly Agencies”) on July 2, and we now have one full quarter of first-hand operating experience with their team. Their employee benefits products and insurance lines are a natural fit to cross-sell to our customers, and we look forward to developing the synergies between our two organizations.”
Total revenue for the third quarter of 2007, consisting of net interest income plus noninterest income, was $12.9 million, an increase of 20.0 percent compared to the $10.8 million reported for the third quarter of 2006. Net interest income for the quarter increased 7.9 percent above the prior-year third quarter, to $10.0 million, reflecting 9.8 percent growth in average earning assets, partially offset by a 12 basis point decline in the net interest margin, to 3.28 percent. Mr. Maddy added, “Our margin continues to vary within a tight band over the past year and did not change in the past quarter. Going forward, we anticipate the 50-basis point cut in the target federal funds rate will have a positive impact on our liability-sensitive balance sheet, and the possibility of additional cuts down the road should further enhance this impact.”
Noninterest income for the 2007 third quarter was $2.9 million, nearly doubling from the $1.5 million recorded for the prior-year period. Excluding from the current and year-ago third quarters, the gain on the fair value of the interest rate swaps and the net cash settlement of interest, which was previously reflected in net interest income, and further excluding the $1.1 million of insurance revenues from the acquisition of the Kelly Agencies in the third quarter of 2007, noninterest income from organic sources was $1.25 million, up $193,000, or 18.2 percent above the year-earlier quarter, and up $106,000, or 9.2 percent, compared with the linked quarter. Service fee income, the second major component of noninterest income, increased $88,000, or 12.6 percent, to $788,000.
Third quarter 2007 noninterest expense was $6.8 million, a 29.2 percent increase over the $5.3 million recorded for the prior-year third quarter; compared with the second quarter of 2007, noninterest expense increased $1.1 million, or 19.3 percent. The increase in operating expenses was largely attributable to the addition of the Kelly Agencies; excluding the $982,600 of Kelly-related expenses, noninterest expense was $5.8 million, reflecting more modest year-over-year growth of $560,000, or 10.6 percent; compared with the second quarter of 2007, growth was $119,000, or 2.1 percent. The majority of the impact was attributable to salaries and employee benefits, which rose $1.2 million over the year-ago quarter; $800,000 of the increase was derived from the addition of 34 FTE employees from the Kelly Agencies during the third quarter. The efficiency ratio (for continuing operations) was 53.91 percent for the third quarter of 2007, compared with 49.88 percent for the prior-year third quarter, and 51.46 percent for the linked quarter.
At September 30, 2007, nonperforming assets were $7.7 million, or 0.58 percent of total assets, compared with $8.2 million, or 0.64 percent for the linked quarter and $1.5 million, or 0.12 percent for the year-ago quarter. Mr. Maddy commented, “The decline in the real estate market has had a significant impact on our asset quality; residential real estate loans account for approximately $2.8 million of nonperforming assets, and construction loans – largely residential – accounted for an additional $2.6 million. Commercial real estate loans totaled approximately $600,000 of nonperforming assets. In general, the CRE portfolio has performed well and has not demonstrated any substantial signs of weakness.”
For the current quarter, the Company had net charge-offs of $566,000, or an annualized 0.23 percent of average loans, compared with $96,000, or an annualized 0.04 percent for the linked quarter, and $45,000, or 0.02 percent annualized for the year earlier period. Mr. Maddy commented, “Approximately $464,000 of charge-offs during the quarter were loans made by Summit Mortgage; when we discontinued operations earlier this year, we were obligated to provide recourse for up to one year with respect to nonperforming previously sold loans. We reserved accordingly, and the obligation period will end in first quarter 2008.” At September 30, 2007, loan loss reserves were 0.88 percent of loans outstanding.
Assets at September 30, 2007 were $1.34 billion, an increase of $129.5 million, or 10.7 percent, over the prior-year period. Loans, net of unearned income, were $988.0 million at period end, up $93.2 million, or 10.4 percent, year over year. Commercial real estate contributed $51.7 million to loan growth, a 17.2 percent increase over the past twelve months. Residential mortgages were the second largest contributors to the year-over-year increase in loans, with all of the growth occurring during the third quarter; they grew by $21.2 million, up 7.5 percent from the linked quarter. Commercial real estate remains the largest component of Summit's loan portfolio at 35.3 percent of total loans; residential mortgages account for an additional 30.6 percent. Construction and development loans follow with a 21.3 percent share.
Deposits at September 30, 2007 were $828.6 million, a decrease of $36.5 million, or 4.2 percent from prior-year third quarter levels. Retail deposits increased by $40.3 million, or 6.7 percent, to $638.6 million; retail deposits now account for 77.1 percent of total deposits, compared with 69.2 percent for the third quarter of 2006. Contributing to the shift in the deposit mix was a year-over-year decrease of $76.8 million, or 28.8 percent, in brokered time deposits, which totaled $190.0 million at period end.
Shareholders' equity at September 30, 2007 was $93.5 million, an increase of 17.6 percent over the last twelve months. Common shares outstanding totaled 7,402,666 at quarter-end, compared with 7,102,720 for the prior-year quarter. The increase includes the issuance of 317,686 shares during the third quarter of 2007 for the acquisition of the Kelly Agencies.
ABOUT THE COMPANY
Summit Financial Group, Inc., a financial holding company with total assets of $1.34 billion, operates fifteen banking locations through its wholly-owned community bank, Summit Community Bank. Summit also operates Summit Insurance Services, LLC.
NON-GAAP FINANCIAL MEASURES
This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Specifically, Summit adjusted several GAAP performance measures to exclude the effects of the non-cash changes in fair value of interest rate swaps included in its Statements of Income . Management believes presentations of financial measures excluding the impact of this item 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.
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 economy. We undertake no obligation to revise these statements following the date of this press release.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | |
Quarterly Performance Summary -- Q3 2007 vs Q3 2006 | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | |
| | | For the Quarter Ended | | | Percent | |
Dollars in thousands | | 9/30/07 | | | 9/30/06 | | | Change | |
Condensed Statements of Income | | | | | | | | | |
| Interest income | | | | | | | | | |
| Loans, including fees | | $ | 19,921 | | | $ | 18,060 | | | | 10.3 | % |
| Securities | | | 3,446 | | | | 2,998 | | | | 14.9 | % |
| Other | | | 9 | | | | 16 | | | | -43.8 | % |
| Total interest income | | | 23,376 | | | | 21,074 | | | | 10.9 | % |
| Interest expense | | | | | | | | | | | | |
| Deposits | | | 8,627 | | | | 7,761 | | | | 11.2 | % |
| Borrowings | | | 4,753 | | | | 4,049 | | | | 17.4 | % |
| Total interest expense | | | 13,380 | | | | 11,810 | | | | 13.3 | % |
| Net interest income | | | 9,996 | | | | 9,264 | | | | 7.9 | % |
| Provision for loan losses | | | 525 | | | | 260 | | | | 101.9 | % |
| Net interest income after provision | | | | | | | | | | | | |
| for loan losses | | | 9,471 | | | | 9,004 | | | | 5.2 | % |
| Noninterest income | | | | | | | | | | | | |
| Insurance commissions | | | 1,303 | | | | 219 | | | | 495.0 | % |
| Service fee income | | | 788 | | | | 700 | | | | 12.6 | % |
| Securities gains (losses) | | | - | | | | - | | | | - | |
| Net cash settlement on interest rate swaps | | | (181 | ) | | | (154 | ) | | | 17.5 | % |
| Change in fair value of interest rate swaps | | | 752 | | | | 579 | | | | 29.9 | % |
| Other income | | | 244 | | | | 142 | | | | 71.8 | % |
| Total noninterest income | | | 2,906 | | | | 1,486 | | | | 95.6 | % |
| Noninterest expense | | | | | | | | | | | | |
| Salaries and employee benefits | | | 4,054 | | | | 2,817 | | | | 43.9 | % |
| Net occupancy expense | | | 466 | | | | 387 | | | | 20.4 | % |
| Equipment expense | | | 496 | | | | 476 | | | | 4.2 | % |
| Professional fees | | | 176 | | | | 188 | | | | -6.4 | % |
| Other expenses | | | 1,628 | | | | 1,409 | | | | 15.5 | % |
| Total noninterest expense | | | 6,820 | | | | 5,277 | | | | 29.2 | % |
| Income from continuing operations before income taxes | | | 5,557 | | | | 5,213 | | | | 6.6 | % |
| Income taxes | | | 1,802 | | | | 1,659 | | | | 8.6 | % |
| Income from continuing operations | | | 3,755 | | | | 3,554 | | | | 5.7 | % |
| Discontinued operations | | | | | | | | | | | | |
| Exit costs and impairment of long-lived assets | | | - | | | | - | | | | n/a | |
| Operating income (loss) | | | (200 | ) | | | (1,059 | ) | | | -81.1 | % |
| Income (loss) from discontinued operations | | | | | | | | | | | | |
| before income taxes | | | (200 | ) | | | (1,059 | ) | | | -81.1 | % |
| Income taxes | | | (69 | ) | | | (374 | ) | | | -81.6 | % |
| Income (loss) from discontinued operations | | | (131 | ) | | | (685 | ) | | | -80.9 | % |
| | | | | | | | | | | | | |
| Net Income | | $ | 3,624 | | | $ | 2,869 | | | | 26.3 | % |
| | | | | | | | | | | | | |
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | |
Quarterly Performance Summary -- Q3 2007 vs Q3 2006 | | | | | | | |
| | | | | | | |
| | | For the Quarter Ended | | | Percent | |
| | | 9/30/2007 | | | 9/30/2006 | | | Change | |
Per Share Data | | | | | | | | | |
| Earnings per share from continuing operations | | | | | | | | | |
| Basic | | $ | 0.51 | | | $ | 0.50 | | | | 2.0 | % |
| Diluted | | $ | 0.50 | | | $ | 0.49 | | | | 2.0 | % |
| Earnings per share from discontinued operations | | | | | | | | | | | | |
| Basic | | $ | (0.02 | ) | | $ | (0.10 | ) | | | -80.0 | % |
| Diluted | | $ | (0.02 | ) | | $ | (0.10 | ) | | | -80.0 | % |
| Earnings per share | | | | | | | | | | | | |
| Basic | | $ | 0.49 | | | $ | 0.40 | | | | 22.5 | % |
| Diluted | | $ | 0.48 | | | $ | 0.39 | | | | 23.1 | % |
| | | | | | | | | | | | | |
| Average shares outstanding | | | | | | | | | | | | |
| Basic | | | 7,399,213 | | | | 7,127,650 | | | | 3.8 | % |
| Diluted | | | 7,458,515 | | | | 7,187,274 | | | | 3.8 | % |
| | | | | | | | | | | | | |
Performance Ratios | | | | | | | | | | | | |
| Return on average equity | | | 16.13 | % | | | 14.41 | % | | | 11.9 | % |
| Return on average equity - continuing operations | | | 16.71 | % | | | 17.85 | % | | | -6.4 | % |
| Return on average assets | | | 1.11 | % | | | 0.96 | % | | | 15.6 | % |
| Return on average assets - continuing operations | | | 1.15 | % | | | 1.19 | % | | | -3.4 | % |
| Net interest margin | | | 3.28 | % | | | 3.40 | % | | | -3.5 | % |
| Efficiency ratio (A) | | | 55.49 | % | | | 70.86 | % | | | -21.7 | % |
| Efficiency ratio - continuing operations (A) | | | 53.91 | % | | | 49.88 | % | | | 8.1 | % |
NOTE: (A) – Computed on a tax equivalent basis excluding nonrecurring income and expense items, amortization of intangibles, and changes in fair value of derivatives.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | |
Nine Month Performance Summary -- 2007 vs 2006 | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | |
| | | For the Nine Months Ended | | | Percent | |
Dollars in thousands | | 9/30/2007 | | | 9/30/2006 | | | Change | |
Condensed Statements of Income | | | | | | | | | |
| Interest income | | | | | | | | | |
| Loans, including fees | | $ | 57,712 | | | $ | 49,910 | | | | 15.6 | % |
| Securities | | | 9,832 | | | | 8,431 | | | | 16.6 | % |
| Other | | | 43 | | | | 53 | | | | -18.9 | % |
| Total interest income | | | 67,587 | | | | 58,394 | | | | 15.7 | % |
| Interest expense | | | | | | | | | | | | |
| Deposits | | | 26,537 | | | | 19,322 | | | | 37.3 | % |
| Borrowings | | | 12,324 | | | | 12,549 | | | | -1.8 | % |
| Total interest expense | | | 38,861 | | | | 31,871 | | | | 21.9 | % |
| Net interest income | | | 28,726 | | | | 26,523 | | | | 8.3 | % |
| Provision for loan losses | | | 1,305 | | | | 915 | | | | 42.6 | % |
| Net interest income after provision | | | | | | | | | | | | |
| for loan losses | | | 27,421 | | | | 25,608 | | | | 7.1 | % |
| Noninterest income | | | | | | | | | | | | |
| Insurance commissions | | | 1,719 | | | | 696 | | | | 147.0 | % |
| Service fee income | | | 2,141 | | | | 2,056 | | | | 4.1 | % |
| Securities gains (losses) | | | - | | | | - | | | | - | |
| Net cash settlement on interest rate swaps | | | (544 | ) | | | (337 | ) | | | 61.4 | % |
| Change in fair value of interest rate swaps | | | 705 | | | | (140 | ) | | | -603.6 | % |
| Other income | | | 638 | | | | 412 | | | | 54.9 | % |
| Total noninterest income | | | 4,659 | | | | 2,687 | | | | 73.4 | % |
| Noninterest expense | | | | | | | | | | | | |
| Salaries and employee benefits | | | 10,518 | | | | 8,921 | | | | 17.9 | % |
| Net occupancy expense | | | 1,292 | | | | 1,179 | | | | 9.6 | % |
| Equipment expense | | | 1,436 | | | | 1,421 | | | | 1.1 | % |
| Professional fees | | | 543 | | | | 640 | | | | -15.2 | % |
| Other expenses | | | 4,399 | | | | 4,149 | | | | 6.0 | % |
| Total noninterest expense | | | 18,188 | | | | 16,310 | | | | 11.5 | % |
| Income from continuing operations before income taxes | | | 13,892 | | | | 11,985 | | | | 15.9 | % |
| Income taxes | | | 4,223 | | | | 3,674 | | | | 14.9 | % |
| Income from continuing operations | | | 9,669 | | | | 8,311 | | | | 16.3 | % |
| Discontinued operations | | | | | | | | | | | | |
| Exit costs and impairment of long-lived assets | | | 123 | | | | - | | | | n/a | |
| Operating income (loss) | | | (798 | ) | | | (377 | ) | | | 111.7 | % |
| Income (loss) from discontinued operations | | | | | | | | | | | | |
| before income taxes | | | (675 | ) | | | (377 | ) | | | 79.0 | % |
| Income taxes | | | (231 | ) | | | (116 | ) | | | 99.1 | % |
| Income (loss) from discontinued operations | | | (444 | ) | | | (261 | ) | | | 70.1 | % |
| | | | | | | | | | | | | |
| Net Income | | $ | 9,225 | | | $ | 8,050 | | | | 14.6 | % |
| | | | | | | | | | | | | |
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | |
Nine Month Performance Summary -- 2007 vs 2006 | | | | | | | |
| | | | | | | |
| | | For the Nine Months Ended | | | Percent | |
| | | 9/30/2007 | | | 9/30/2006 | | | Change | |
Per Share Data | | | | | | | | | |
| Earnings per share from continuing operations | | | | | | | | | |
| Basic | | | 1.34 | | | $ | 1.17 | | | | 14.5 | % |
| Diluted | | | 1.33 | | | $ | 1.16 | | | | 14.7 | % |
| Earnings per share from discontinued operations | | | | | | | | | | | | |
| Basic | | | (0.06 | ) | | $ | (0.04 | ) | | | 50.0 | % |
| Diluted | | | (0.06 | ) | | $ | (0.04 | ) | | | 50.0 | % |
| Earnings per share | | | | | | | | | | | | |
| Basic | | $ | 1.28 | | | $ | 1.13 | | | | 13.3 | % |
| Diluted | | $ | 1.27 | | | $ | 1.12 | | | | 13.4 | % |
| | | | | | | | | | | | | |
| Average shares outstanding | | | | | | | | | | | | |
| Basic | | | 7,190,875 | | | | 7,130,276 | | | | 0.8 | % |
| Diluted | | | 7,252,778 | | | | 7,194,351 | | | | 0.8 | % |
| | | | | | | | | | | | | |
Performance Ratios | | | | | | | | | | | | |
| Return on average equity | | | 14.41 | % | | | 13.79 | % | | | 4.5 | % |
| Return on average equity - continuing operations | | | 15.11 | % | | | 14.24 | % | | | 6.1 | % |
| Return on average assets | | | 0.97 | % | | | 0.93 | % | | | 4.3 | % |
| Return on average assets - continuing operations | | | 1.01 | % | | | 0.96 | % | | | 5.2 | % |
| Net interest margin | | | 3.27 | % | | | 3.40 | % | | | -3.8 | % |
| Efficiency ratio (A) | | | 55.65 | % | | | 70.47 | % | | | -21.0 | % |
| Efficiency ratio - continuing operations (A) | | | 52.99 | % | | | 53.04 | % | | | -0.1 | % |
NOTE: (A) – Computed on a tax equivalent basis excluding nonrecurring income and expense items, amortization of intangibles, and changes in fair value of derivatives.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | | | | | |
Five Quarter Performance Summary | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | For the Quarter Ended | |
Dollars in thousands | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
Condensed Statements of Income | | | | | | | | | | | | | | | |
| Interest income | | | | | | | | | | | | | | | |
| Loans, including fees | | $ | 19,921 | | | $ | 19,079 | | | $ | 18,712 | | | $ | 18,746 | | | $ | 18,060 | |
| Securities | | | 3,446 | | | | 3,263 | | | | 3,124 | | | | 3,131 | | | | 2,998 | |
| Other | | | 9 | | | | 27 | | | | 6 | | | | 7 | | | | 16 | |
| Total interest income | | | 23,376 | | | | 22,369 | | | | 21,842 | | | | 21,884 | | | | 21,074 | |
| Interest expense | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 8,627 | | | | 8,882 | | | | 9,028 | | | | 8,990 | | | | 7,761 | |
| Borrowings | | | 4,753 | | | | 3,960 | | | | 3,611 | | | | 3,518 | | | | 4,049 | |
| Total interest expense | | | 13,380 | | | | 12,842 | | | | 12,639 | | | | 12,508 | | | | 11,810 | |
| Net interest income | | | 9,996 | | | | 9,527 | | | | 9,203 | | | | 9,376 | | | | 9,264 | |
| Provision for loan losses | | | 525 | | | | 390 | | | | 390 | | | | 930 | | | | 260 | |
| Net interest income after provision | | | | | | | | | | | | | | | | | | | | |
| for loan losses | | | 9,471 | | | | 9,137 | | | | 8,813 | | | | 8,446 | | | | 9,004 | |
| Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Insurance commissions | | | 1,303 | | | | 209 | | | | 206 | | | | 228 | | | | 219 | |
| Service fee income | | | 788 | | | | 736 | | | | 617 | | | | 702 | | | | 700 | |
| Securities gains (losses) | | | - | | | | - | | | | - | | | | - | | | | - | |
| Net cash settlement on interest rate swaps | | | (181 | ) | | | (179 | ) | | | (184 | ) | | | (197 | ) | | | (154 | ) |
| Change in fair value of interest rate swaps | | | 752 | | | | (273 | ) | | | 227 | | | | 50 | | | | 579 | |
| Other income | | | 244 | | | | 203 | | | | 191 | | | | 163 | | | | 142 | |
| Total noninterest income | | | 2,906 | | | | 696 | | | | 1,057 | | | | 946 | | | | 1,486 | |
| Noninterest expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 4,054 | | | | 3,238 | | | | 3,226 | | | | 2,899 | | | | 2,817 | |
| Net occupancy expense | | | 466 | | | | 408 | | | | 418 | | | | 378 | | | | 387 | |
| Equipment expense | | | 496 | | | | 493 | | | | 446 | | | | 480 | | | | 476 | |
| Professional fees | | | 176 | | | | 193 | | | | 174 | | | | 252 | | | | 188 | |
| Other expenses | | | 1,628 | | | | 1,386 | | | | 1,385 | | | | 1,291 | | | | 1,409 | |
| Total noninterest expense | | | 6,820 | | | | 5,718 | | | | 5,649 | | | | 5,300 | | | | 5,277 | |
| Income before income taxes | | | 5,557 | | | | 4,115 | | | | 4,221 | | | | 4,092 | | | | 5,213 | |
| Income taxes | | | 1,802 | | | | 1,135 | | | | 1,286 | | | | 1,343 | | | | 1,659 | |
| Income from continuing operations | | | 3,755 | | | | 2,980 | | | | 2,935 | | | | 2,749 | | | | 3,554 | |
| Discontinued operations | | | | | | | | | | | | | | | | | | | | |
| Exit costs and impairment of long-lived assets | | | - | | | | 43 | | | | 80 | | | | (2,480 | ) | | | - | |
| Operating income (loss) | | | (200 | ) | | | (227 | ) | | | (372 | ) | | | (1,373 | ) | | | (1,059 | ) |
| Income (loss) from discontinued operations | | | | | | | | | | | | | | | | | | | | |
| before income taxes | | | (200 | ) | | | (184 | ) | | | (292 | ) | | | (3,853 | ) | | | (1,059 | ) |
| Income taxes | | | (69 | ) | | | (66 | ) | | | (97 | ) | | | (1,311 | ) | | | (374 | ) |
| Income (loss) from discontinued operations | | | (131 | ) | | | (118 | ) | | | (195 | ) | | | (2,542 | ) | | | (685 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Income | | $ | 3,624 | | | $ | 2,862 | | | $ | 2,740 | | | $ | 207 | | | $ | 2,869 | |
| | | | | | | | | | | | | | | | | | | | | |
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | | | | | | | |
Five Quarter Performance Summary | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | For the Quarter Ended | |
| | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
Per Share Data | | | | | | | | | | | | | | | |
| Earnings per share from continuing operations | | | | | | | | | | | | | | | |
| Basic | | $ | 0.51 | | | $ | 0.42 | | | $ | 0.41 | | | $ | 0.39 | | | $ | 0.50 | |
| Diluted | | $ | 0.50 | | | $ | 0.42 | | | $ | 0.41 | | | $ | 0.38 | | | $ | 0.49 | |
| Earnings per share from discontinued operations | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.02 | ) | | $ | (0.02 | ) | | $ | (0.03 | ) | | $ | (0.36 | ) | | $ | (0.10 | ) |
| Diluted | | $ | (0.02 | ) | | $ | (0.02 | ) | | $ | (0.03 | ) | | $ | (0.36 | ) | | $ | (0.10 | ) |
| Earnings per share | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.49 | | | $ | 0.40 | | | $ | 0.38 | | | $ | 0.03 | | | $ | 0.40 | |
| Diluted | | $ | 0.48 | | | $ | 0.40 | | | $ | 0.38 | | | $ | 0.02 | | | $ | 0.39 | |
| | | | | | | | | | | | | | | | | | | | | |
| Average shares outstanding | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 7,399,213 | | | | 7,084,980 | | | | 7,084,980 | | | | 7,091,560 | | | | 7,127,650 | |
| Diluted | | | 7,458,515 | | | | 7,148,241 | | | | 7,147,170 | | | | 7,150,407 | | | | 7,187,274 | |
| | | | | | | | | | | | | | | | | | | | | |
Performance Ratios | | | | | | | | | | | | | | | | | | | | |
| Return on average equity | | | 16.13 | % | | | 13.59 | % | | | 13.40 | % | | | 1.01 | % | | | 14.41 | % |
| Return on average equity - continuing operations | | | 16.71 | % | | | 14.15 | % | | | 14.35 | % | | | 13.37 | % | | | 17.85 | % |
| Return on average assets | | | 1.11 | % | | | 0.91 | % | | | 0.88 | % | | | 0.07 | % | | | 0.96 | % |
| Return on average assets - continuing operations | | | 1.15 | % | | | 0.94 | % | | | 0.94 | % | | | 0.89 | % | | | 1.19 | % |
| Net interest margin | | | 3.28 | % | | | 3.28 | % | | | 3.26 | % | | | 3.32 | % | | | 3.40 | % |
| Efficiency ratio (A) | | | 55.49 | % | | | 53.69 | % | | | 57.71 | % | | | 69.79 | % | | | 70.86 | % |
| Efficiency ratio - continuing operations (A) | | | 53.91 | % | | | 51.46 | % | | | 53.50 | % | | | 49.61 | % | | | 49.88 | % |
NOTE: (A) – Computed on a tax equivalent basis excluding nonrecurring income and expense items, amortization of intangibles, and changes in fair value of derivatives.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | | | | | |
Selected Balance Sheet Data | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | For the Quarter Ended | |
Dollars in thousands, except per share amounts | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
| | | | | | | | | | | | | | | | |
| Assets | | $ | 1,340,679 | | | $ | 1,280,428 | | | $ | 1,254,528 | | | $ | 1,235,519 | | | $ | 1,211,195 | |
| Securities | | | 279,289 | | | | 259,526 | | | | 258,173 | | | | 247,874 | | | | 246,332 | |
| Loans, net | | | 988,033 | | | | 949,175 | | | | 930,769 | | | | 916,045 | | | | 894,836 | |
| Intangible assets | | | 10,143 | | | | 3,121 | | | | 3,159 | | | | 3,197 | | | | 3,234 | |
| Retail deposits | | | 638,633 | | | | 626,617 | | | | 623,431 | | | | 609,064 | | | | 598,293 | |
| Brokered time deposits | | | 189,966 | | | | 223,771 | | | | 253,794 | | | | 279,623 | | | | 266,769 | |
| Short-term borrowings | | | 124,699 | | | | 100,901 | | | | 79,886 | | | | 60,428 | | | | 90,422 | |
| Long-term borrowings and | | | | | | | | | | | | | | | | | | | | |
| subordinated debentures | | | 283,268 | | | | 236,347 | | | | 203,408 | | | | 195,698 | | | | 165,716 | |
| Shareholders' equity | | | 93,475 | | | | 81,910 | | | | 81,950 | | | | 78,752 | | | | 79,481 | |
| | | | | | | | | | | | | | | | | | | | | |
| Book value per share | | $ | 12.63 | | | $ | 11.56 | | | $ | 11.57 | | | $ | 11.12 | | | $ | 11.19 | |
| Tangible book value per share | | $ | 11.26 | | | $ | 11.12 | | | $ | 11.12 | | | $ | 10.66 | | | $ | 10.73 | |
| Tangible equity / Tangible assets | | | 6.3 | % | | | 6.2 | % | | | 6.3 | % | | | 6.1 | % | | | 6.3 | % |
| Tier 1 leverage ratio | | | 8.1 | % | | | 7.9 | % | | | 7.9 | % | | | 7.8 | % | | | 8.1 | % |
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) | | | | | | | | | | | | | |
Loan Composition | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Dollars in thousands | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
| | | | | | | | | | | | | | | | |
| Commercial | | $ | 87,018 | | | $ | 81,292 | | | $ | 69,700 | | | $ | 69,470 | | | $ | 67,352 | |
| Commercial real estate | | | 352,396 | | | | 354,833 | | | | 329,561 | | | | 314,199 | | | | 300,676 | |
| Construction and development | | | 212,570 | | | | 198,721 | | | | 220,430 | | | | 215,820 | | | | 207,545 | |
| Residential real estate | | | 305,016 | | | | 283,821 | | | | 279,564 | | | | 282,512 | | | | 283,943 | |
| Consumer | | | 33,255 | | | | 33,937 | | | | 33,845 | | | | 36,455 | | | | 36,885 | |
| Other | | | 6,793 | | | | 7,111 | | | | 7,209 | | | | 6,968 | | | | 7,086 | |
| Total loans | | | 997,048 | | | | 959,715 | | | | 940,309 | | | | 925,424 | | | | 903,487 | |
| Less unearned fees and interest | | | 1,884 | | | | 1,772 | | | | 1,757 | | | | 1,868 | | | | 1,806 | |
| Total loans net of unearned fees and interest | | | 995,164 | | | | 957,943 | | | | 938,552 | | | | 923,556 | | | | 901,681 | |
| Less allowance for loan losses | | | 8,727 | | | | 8,768 | | | | 7,783 | | | | 7,511 | | | | 6,845 | |
| Loans, net | | $ | 986,437 | | | $ | 949,175 | | | $ | 930,769 | | | $ | 916,045 | | | $ | 894,836 | |
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) | | | | | | | | | | |
Retail Deposit Composition | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Dollars in thousands | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
| | | | | | | | | | | | | | | | |
| Non interest bearing checking | | $ | 65,230 | | | $ | 64,373 | | | $ | 60,645 | | | $ | 62,591 | | | $ | 64,751 | |
| Interest bearing checking | | | 230,491 | | | | 230,509 | | | | 230,634 | | | | 220,167 | | | | 223,992 | |
| Savings | | | 39,596 | | | | 41,910 | | | | 44,713 | | | | 47,984 | | | | 44,980 | |
| Time deposits | | | 303,316 | | | | 289,825 | | | | 287,439 | | | | 278,322 | | | | 264,570 | |
| Total retail deposits | | $ | 638,633 | | | $ | 626,617 | | | $ | 623,431 | | | $ | 609,064 | | | $ | 598,293 | |
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | | | | | |
Asset Quality Information | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | For the Quarter Ended | |
Dollars in thousands | | 9/30/2007 | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | |
| | | | | | | | | | | | | | | | |
| Gross loan charge-offs | | $ | 599 | | | $ | 141 | | | $ | 206 | | | $ | 313 | | | $ | 95 | |
| Gross loan recoveries | | | (33 | ) | | | (45 | ) | | | (87 | ) | | | (50 | ) | | | (50 | ) |
| Net loan charge-offs | | $ | 566 | | | $ | 96 | | | $ | 119 | | | $ | 263 | | | $ | 45 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loan charge-offs to average loans (annualized) | | | 0.23 | % | | | 0.04 | % | | | 0.05 | % | | | 0.11 | % | | | 0.02 | % |
| Allowance for loan losses | | $ | 8,727 | | | $ | 8,768 | | | $ | 7,783 | | | $ | 7,511 | | | $ | 6,845 | |
| Allowance for loan losses as a percentage | | | | | | | | | | | | | | | | | | | | |
| of period end loans | | | 0.88 | % | | | 0.91 | % | | | 0.83 | % | | | 0.81 | % | | | 0.76 | % |
| Nonperforming assets: | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans | | $ | 6,916 | | | $ | 7,307 | | | $ | 4,474 | | | $ | 5,276 | | | $ | 1,273 | |
| Foreclosed properties and | | | | | | | | | | | | | | | | | | | | |
| other repossessed assets | | | 815 | | | | 851 | | | | 43 | | | | 77 | | | | 180 | |
| Total | | $ | 7,731 | | | $ | 8,158 | | | $ | 4,517 | | | $ | 5,353 | | | $ | 1,453 | |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans to period end loans | | | 0.69 | % | | | 0.76 | % | | | 0.48 | % | | | 0.57 | % | | | 0.14 | % |
| Nonperforming assets to period end assets | | | 0.58 | % | | | 0.64 | % | | | 0.36 | % | | | 0.43 | % | | | 0.12 | % |
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | | | | | | | | |
Average Balance Sheet, Interest Earnings & Expenses and Average Rates | | | | | | | | | | |
Q3 2007 vs Q3 2006 | | | | | | | | | | | | | | | | | | |
| | | Q3 2007 | | | Q3 2006 | |
| | | 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 | | $ | 967,106 | | | $ | 19,790 | | | | 8.12 | % | | $ | 884,917 | | | $ | 18,103 | | | | 8.12 | % |
| Tax-exempt | | | 9,523 | | | | 192 | | | | 8.00 | % | | | 8,631 | | | | 171 | | | | 7.86 | % |
| Securities | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 223,731 | | | | 2,900 | | | | 5.14 | % | | | 192,475 | | | | 2,452 | | | | 5.05 | % |
| Tax-exempt | | | 47,910 | | | | 822 | | | | 6.81 | % | | | 47,842 | | | | 817 | | | | 6.78 | % |
| Interest bearing deposits other banks | | | | | | | | | | | | | | | | | | | | | | | | |
| and Federal funds sold | | | 662 | | | | 11 | | | | 6.59 | % | | | 3,559 | | | | 16 | | | | 1.78 | % |
| Total interest earning assets | | | 1,248,932 | | | | 23,715 | | | | 7.53 | % | | | 1,137,424 | | | | 21,559 | | | | 7.52 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest earning assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash & due from banks | | | 14,356 | | | | | | | | | | | | 12,791 | | | | | | | | | |
| Premises & equipment | | | 22,103 | | | | | | | | | | | | 23,703 | | | | | | | | | |
| Other assets | | | 32,935 | | | | | | | | | | | | 27,224 | | | | | | | | | |
| Allowance for loan losses | | | (8,939 | ) | | | | | | | | | | | (6,994 | ) | | | | | | | | |
| Total assets | | $ | 1,309,387 | | | | | | | | | | | $ | 1,194,148 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing | | | | | | | | | | | | | | | | | | | | | | | | |
| demand deposits | | $ | 230,918 | | | $ | 1,969 | | | | 3.38 | % | | $ | 221,297 | | | $ | 2,044 | | | | 3.66 | % |
| Savings deposits | | | 40,752 | | | | 163 | | | | 1.59 | % | | | 42,038 | | | | 164 | | | | 1.55 | % |
| Time deposits | | | 517,405 | | | | 6,495 | | | | 4.98 | % | | | 478,992 | | | | 5,553 | | | | 4.60 | % |
| Short-term borrowings | | | 89,941 | | | | 1,180 | | | | 5.21 | % | | | 132,680 | | | | 1,777 | | | | 5.31 | % |
| Long-term borrowings and | | | | | | | | | | | | | | | | | | | | | | | | |
| subordinated debentures | | | 263,968 | | | | 3,573 | | | | 5.37 | % | | | 164,996 | | | | 2,272 | | | | 5.46 | % |
| | | | 1,142,984 | | | | 13,380 | | | | 4.64 | % | | | 1,040,003 | | | | 11,810 | | | | 4.51 | % |
| Noninterest bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | | 66,079 | | | | | | | | | | | | 64,043 | | | | | | | | | |
| Other liabilities | | | 10,435 | | | | | | | | | | | | 10,470 | | | | | | | | | |
| Total liabilities | | | 1,219,498 | | | | | | | | | | | | 1,114,516 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders' equity | | | 89,889 | | | | | | | | | | | | 79,632 | | | | | | | | | |
| Total liabilities and | | | | | | | | | | | | | | | | | | | | | | | | |
| shareholders' equity | | $ | 1,309,387 | | | | | | | | | | | $ | 1,194,148 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
NET INTEREST EARNINGS | | | | | | $ | 10,335 | | | | | | | | | | | $ | 9,749 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
NET INTEREST YIELD ON EARNING ASSETS | | | | | | | | 3.28 | % | | | | | | | | | | | 3.40 | % |
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) | | | | | | | | | | | | | | | | |
Average Balance Sheet, Interest Earnings & Expenses and Average Rates | | | | | | | | | | |
YTD 2007 vs YTD 2006 | | | | | | | | | | | | | | | | | | |
| | | For the Nine Months Ended September 30, | | | For the Nine Months Ended September 30, | |
| | | 2007 | | | 2006 | |
| | | 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 | | $ | 945,496 | | | $ | 57,435 | | | | 8.12 | % | | $ | 857,851 | | | $ | 50,180 | | | | 7.82 | % |
| Tax-exempt | | | 9,274 | | | | 550 | | | | 7.93 | % | | | 8,373 | | | | 476 | | | | 7.60 | % |
| Securities | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 214,602 | | | | 8,216 | | | | 5.12 | % | | | 189,768 | | | | 6,837 | | | | 4.82 | % |
| Tax-exempt | | | 46,931 | | | | 2,419 | | | | 6.89 | % | | | 45,950 | | | | 2,385 | | | | 6.94 | % |
| Interest bearing deposits other banks | | | | | | | | | | | | | | | | | | | | | | | | |
| and Federal funds sold | | | 1,190 | | | | 43 | | | | 4.83 | % | | | 1,453 | | | | 52 | | | | 4.78 | % |
| Total interest earning assets | | | 1,217,493 | | | | 68,663 | | | | 7.54 | % | | | 1,103,395 | | | | 59,930 | | | | 7.26 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest earning assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash & due from banks | | | 14,003 | | | | | | | | | | | | 13,760 | | | | | | | | | |
| Premises & equipment | | | 22,207 | | | | | | | | | | | | 23,552 | | | | | | | | | |
| Other assets | | | 29,132 | | | | | | | | | | | | 26,160 | | | | | | | | | |
| Allowance for loan losses | | | (8,564 | ) | | | | | | | | | | | (6,683 | ) | | | | | | | | |
| Total assets | | $ | 1,274,271 | | | | | | | | | | | $ | 1,160,184 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing | | | | | | | | | | | | | | | | | | | | | | | | |
| demand deposits | | $ | 227,461 | | | $ | 6,120 | | | | 3.60 | % | | $ | 213,518 | | | $ | 5,410 | | | | 3.39 | % |
| Savings deposits | | | 43,449 | | | | 561 | | | | 1.73 | % | | | 40,826 | | | | 311 | | | | 1.02 | % |
| Time deposits | | | 536,784 | | | | 19,856 | | | | 4.95 | % | | | 428,224 | | | | 13,601 | | | | 4.25 | % |
| Short-term borrowings | | | 78,002 | | | | 3,098 | | | | 5.31 | % | | | 148,876 | | | | 5,572 | | | | 5.00 | % |
| Long-term borrowings and | | | | | | | | | | | | | | | | | | | | | | | | |
| subordinated debentures | | | 227,914 | | | | 9,226 | | | | 5.41 | % | | | 176,250 | | | | 6,977 | | | | 5.29 | % |
| | | | 1,113,610 | | | | 38,861 | | | | 4.67 | % | | | 1,007,694 | | | | 31,871 | | | | 4.23 | % |
| Noninterest bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | | 64,028 | | | | | | | | | | | | 64,618 | | | | | | | | | |
| Other liabilities | | | 11,297 | | | | | | | | | | | | 10,059 | | | | | | | | | |
| Total liabilities | | | 1,188,935 | | | | | | | | | | | | 1,082,371 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders' equity | | | 85,336 | | | | | | | | | | | | 77,813 | | | | | | | | | |
| Total liabilities and | | | | | | | | | | | | | | | | | | | | | | | | |
| shareholders' equity | | $ | 1,274,271 | | | | | | | | | | | $ | 1,160,184 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
NET INTEREST EARNINGS | | | | | | $ | 29,802 | | | | | | | | | | | $ | 28,059 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
NET INTEREST YIELD ON EARNING ASSETS | | | | | | | | 3.27 | % | | | | | | | | | | | 3.40 | % |
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 | | 9/30/2007 | | | 9/30/2006 | | | 9/30/2007 | | | 9/30/2006 | |
| | | | | | | | | | | | | |
| Income from continuing operations | | | | | | | | | | | | |
| before income taxes, excluding changes | | | | | | | | | | |
| in fair value of interest rate swaps | | $ | 4,805 | | | $ | 4,634 | | | $ | 13,187 | | | $ | 12,125 | |
| | | | | | | | | | | | | | | | | |
| Changes in fair value of | | | | | | | | | | | | | | | | |
| interest rate swaps | | | 752 | | | | 579 | | | | 705 | | | | (140 | ) |
| GAAP income from continuing | | | | | | | | | | | | | | | | |
| operations, before income taxes | | $ | 5,557 | | | $ | 5,213 | | | $ | 13,892 | | | $ | 11,985 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income from continuing operations - | | | | | | | | | | | | | | | | |
| excluding changes in fair | | | | | | | | | | | | | | | | |
| value of interest rate swaps | | $ | 3,281 | | | $ | 3,189 | | | $ | 9,225 | | | $ | 8,399 | |
| | | | | | | | | | | | | | | | | |
| Changes in fair value of | | | | | | | | | | | | | | | | |
| interest rate swaps | | | 752 | | | | 579 | | | | 705 | | | | (140 | ) |
| Applicable income tax effect | | | (278 | ) | | | (214 | ) | | | (261 | ) | | | 52 | |
| | | | 474 | | | | 365 | | | | 444 | | | | (88 | ) |
| GAAP income from continuing | | | | | | | | | | | | | | | | |
| operations | | $ | 3,755 | | | $ | 3,554 | | | $ | 9,669 | | | $ | 8,311 | |
