Summit Financial 8-K Summit Financial Corporation Reports

EXHIBIT 99.1

NEWS RELEASE

DATE:	October 19, 2004
RELEASE DATE:	Immediate

SUMMIT FINANCIAL CORPORATION REPORTS

18% INCREASE IN THIRD QUARTER EARNINGS

GREENVILLE, SC -Summit Financial Corporation (NASDAQ/Small Cap: SUMM) today reported net income of $1,148,000 for the quarter ended September 30, 2004, up from $970,000 for the same period of 2003. Net income per diluted share was $0.23 for the third quarter of 2004, a 15% increase from $0.20 for the third quarter of 2003. These results represent a significant improvement in profitability measurements for the quarterly period. Return on assets for the third quarter of 2004 increased to 1.44% from 1.19%, and return on equity was 13.18% compared to 12.40% for the same period of the prior year.

For the first nine months of 2004 net income increased to $3,255,000 or $0.66 per diluted share, up 11% from $2,938,000 or $0.61 per diluted share for the comparable period of 2003. For the nine months ended September 30, 2004, ROA increased to 1.32% and ROE was 12.83% for the same period.

The following were primary factors in the increased earnings for both the third quarter and the first nine months of 2004:

·   Higher net interest income related to the reduced cost of funds;

·   Lower provision for loan losses resulting from the lower net loan growth for the first nine months of 2004 as compared to 2003, and the overall improvement in credit quality of the loan portfolio;

·   A nonrecurring charge of $166,000 for a prepayment penalty on FHLB advances included in 2003 “Other Operating Expenses” line; and

·   Overall control of overhead expenses.

These improvements are offset somewhat by the reduction in noninterest income resulting primarily from less mortgage loan referral fees as the refinancing boom has slowed, and lower gains on sales of securities for the nine month period due to a smaller volume of transactions in 2004.

At September 30, 2004, assets totaled $323.0 million, down slightly from $325.1 million at September 30, 2003. Gross loans totaled $228.8 million at the end of the third quarter of 2004, while investments, the second largest component of earning assets, decreased 29% from year end to total $64.8 million at September 30, 2004. The realignment of the balance sheet, resulting in the reduction of investment securities and higher priced deposits and FHLB advances, has decreased the Company’s exposure to interest rate risk and contributed to an increase in net interest income for the first nine months of 2004.

Loans past due in excess of 90 days were $341,000 or 0.15% of loans at September 30, 2004, compared to $170,000 and $169,000 at December 31, 2003 and September 30, 2003, respectively. Nonaccrual loans and OREO at September 30, 2004, December 31, 2003 and September 30, 2003 totaled $638,000, $712,000, and $527,000, respectively. Net charge-offs for the first nine months of 2004 were $119,000 versus $354,000 for the prior year, while the allowance for loan losses was 1.53% and 1.57%, respectively at September 30, 2004 and 2003.

The Company reported total equity of $36.2 million, which represents a total risk-based capital ratio in excess of 15% at September 30, 2004. Book value per share was up 11% from the comparable period of 2003 to end the third quarter of 2004 at $8.08.

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SUMMIT FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except share data) (unaudited)
										% Change
										3rd Quarter
		9/30/2004			12/31/2003			9/30/2003			2004/2003
Balance Sheet (at period end)
Cash and due from banks	$	8,620		$	9,854		$	7,705			12	%
Interest-bearing bank balances		3,605			341			2,859			26	%
Federal funds sold		6,171			201			1,009			512	%
Investments available for sale		64,844			90,887			79,489			(18	%)
Loans, net of unearned income		228,751			231,802			223,437			2	%
Less: allowance for loan losses		(3,511	)		(3,437	)		(3,517	)		(0	%)
Net loans		225,240			228,365			219,920			2	%
Premises and equipment, net		4,606			4,070			4,066			13	%
Other assets		9,927			10,203			10,069			(1	%)
	$	323,013		$	343,921		$	325,117			(1	%)
Noninterest-bearing deposits	$	40,571		$	37,037		$	31,294			30	%
Interest-bearing deposits		196,876			219,975			217,416			(9	%)
Total deposits		237,447			257,012			248,710			(5	%)
FHLB advances		47,518			52,317			43,100			10	%
Other liabilities		1,880			2,387			2,160			(13	%)
Total liabilities		286,845			311,716			293,970			(2	%)
Shareholders' equity		36,168			32,205			31,147			16	%
	$	323,013		$	343,921		$	325,117			(1	%)
Capital Ratios (at period end)
Total risk-based capital ratio		15.59	%		13.75	%		14.10	%		11	%
Tier 1 risk-based capital ratio		14.33	%		12.50	%		12.85	%		12	%
Leverage ratio		10.93	%		9.92	%		9.85	%		11	%
Selected Average Balances (year-to-date)
Total assets	$	328,810		$	322,766		$	318,228			3	%
Loans, net of unearned income		231,946			223,365			222,412			4	%
Investment securities		70,581			74,661			71,245			(1	%)
Total earning assets		312,616			307,234			302,653			3	%
Interest-bearing liabilities		257,454			257,733			252,999			2	%
Total deposits		240,749			244,180			237,753			1	%
Shareholders' equity		33,894			30,558			30,311			12	%
Share Data (at period end)
Book value per common share (1)	$	8.08		$	7.47		$	7.25			11	%
Shares outstanding		4,478,334			4,312,925			4,089,180			10	%
Stock performance (at period end)
Closing market price (1)	$	18.50		$	18.00		$	18.74			(1	%)
Shares traded - year-to-date (1)		143,785			463,061			396,622			(64	%)
Price/book ratio		2.29			2.41			2.58			(11	%)
Price/earnings ratio (diluted earnings per share)		21.0			22.8			23.0			(9	%)
Market capitalization	$	82,849		$	77,633		$	80,463			3	%
(1) Restated to reflect all 5% stock dividends.

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SUMMIT FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data) (unaudited)
	For the Three Months Ended
		9/30/2004			9/30/2003		%Change
Income Statement
Interest income	$	4,282		$	4,280		0	%
Interest expense		1,100			1,207		(9	%)
Net interest income		3,182			3,073		4	%
Provision for loan losses		33			100		(67	%)
Net interest income after provision for loan losses		3,149			2,973		6	%
Noninterest income:
Service charges on deposit accounts		117			143		(18	%)
Insurance sales commissions		130			119		9	%
Gain on sale of securities		44			12		267	%
Other income		257			484		(47	%)
Total noninterest income		548			758		(28	%)
Noninterest expenses:
Salaries, wages and benefits		1,340			1,284		4	%
Occupancy		174			168		4	%
Furniture, fixtures and equipment		160			163		(2	%)
Other operating expenses		370			701		(47	%)
Total noninterest expenses		2,044			2,316		(12	%)
Income before income taxes		1,653			1,415		17	%
Income tax expense		505			445		13	%
Net income	$	1,148		$	970		18	%
Net income per common share (1):
Basic	$	0.26		$	0.23		13	%
Diluted		0.23			0.20		15	%
Average common shares outstanding (1):
Basic		4,447,799			4,261,705		4	%
Diluted		4,941,316			4,843,354		2	%
Performance ratios
Return on average assets		1.44	%		1.19	%	21	%
Return on average equity		13.18	%		12.40	%	6	%
Net interest margin		4.35	%		4.13	%	5	%
Net charge-offs to average loans		0.13	%		0.39	%	(67	%)
(1) Restated to reflect all 5% stock dividends.

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SUMMIT FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data) (unaudited)
	For the Nine Months Ended
		9/30/2004			9/30/2003		%Change
Income Statement
Interest income	$	12,923		$	13,033		(1	%)
Interest expense		3,417			3,938		(13	%)
Net interest income		9,506			9,095		5	%
Provision for loan losses		193			502		(62	%)
Net interest income after provision for loan losses		9,313			8,593		8	%
Noninterest income:
Service charges on deposit accounts		377			417		(10	%)
Insurance sales commissions		381			333		14	%
Gain on sale of securities		66			367		(82	%)
Other income		943			1,257		(25	%)
Total noninterest income		1,767			2,374		(26	%)
Noninterest expenses:
Salaries, wages and benefits		4,044			3,877		4	%
Occupancy		500			501		(0	%)
Furniture, fixtures and equipment		473			483		(2	%)
Other operating expenses		1,375			1,826		(25	%)
Total noninterest expenses		6,392			6,687		(4	%)
Income before income taxes		4,688			4,280		10	%
Income tax expense		1,433			1,342		7	%
Net income	$	3,255		$	2,938		11	%
Net income per common share (1):
Basic	$	0.74		$	0.69		7	%
Diluted		0.66			0.61		8	%
Cash dividends declared per common share		0.07			0.00		100	%
Average common shares outstanding (1):
Basic		4,400,168			4,242,767		4	%
Diluted		4,914,210			4,822,627		2	%
Performance ratios
Return on average assets		1.32	%		1.24	%	6	%
Return on average equity		12.83	%		12.96	%	(1	%)
Net interest margin		4.21	%		4.15	%	1	%
Net charge-offs to average loans		0.07	%		0.21	%	(67	%)
Nonperforming assets to loans plus OREO, at period end		0.43	%		0.31	%	39	%
Allowance for loan losses to gross loans, at period end		1.53	%		1.57	%	(3	%)
(1) Restated to reflect all 5% stock dividends.

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Summit Financial Corporation,www.summit-bank.com, headquartered in Greenville, SC, is the parent holding company for Summit National Bank and Freedom Finance, Inc., a consumer finance company. Summit National Bank provides a full range of banking services designed to meet substantially all of the financial needs of its customers from its four full-service branches in the Upstate of South Carolina. Through its subsidiary, Summit Investment Services, Inc., Summit provides nondeposit investments and financial management services. Freedom Finance specializes in making small dollar installment loans to individuals from 11 branch locations throughout South Carolina.

Certain matters set forth in this news release may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. For discussion of certain factors that may cause such forward-looking statements to differ materially from the Company's actual results, see the Company's Annual Report on Form 10-K for the year ended December 31, 2003 and Quarterly Report on Form 10-Q for the period ended June 30, 2004.

CONTACTS:

J. Randolph Potter, President & CEO, (864) 240-5886

Blaise B. Bettendorf, Chief Financial Officer, (864) 240-5890

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