EX-99 2 a4869237ex99.txt EXHIBIT 99 Exhibit 99 Summit Financial Group Reports First Quarter EPS of $0.34 MOOREFIELD, W.Va.--(BUSINESS WIRE)--April 20, 2005--Summit Financial Group, Inc. (NASDAQ:SMMF) today reported first quarter 2005 net income of $2.4 million, or $0.34 per diluted share, compared with $2.5 million or $0.35 per diluted share for the first quarter of 2004. First quarter 2005 earnings were virtually unchanged from the prior-year quarter; a higher level of revenues, both from community banking and mortgage banking activities, was offset by higher expenses incurred in each business line. For the first quarter of 2005, the returns on average shareholders' equity and average assets were 14.53 percent 1.08 percent, respectively, compared with prior-year period ratios of 16.77 percent and 1.23 percent. H. Charles Maddy, III, President and Chief Executive Officer commented, "We continue to build our infrastructure in new markets and new business lines. We have focused our community banking expansion efforts toward markets with good commercial loan opportunities, and we recently opened our fifth branch in Virginia, while our sixth branch is due to open in early June. During this past year, we experienced commercial loan growth of 25 percent. Strong loan growth, however, has been mitigated by higher costs associated with expansion activities, including staffing and funding. In the December-January timeframe, we added three seasoned lenders who will become increasingly productive over the remainder of the year. "Our mortgage business continues to evolve at an acceptable rate. Originations are strongly ahead of last year's first quarter, but this is still a seasonal business, and the fourth and first quarter of each year are typically slower than the remaining two quarters. We are seeing a gradual strengthening since the beginning of the year, and anticipate that momentum will continue to build as we enter the second quarter of this year. "We began trading on the Nasdaq SmallCap Market on January 31, 2005. Although financial stocks have not performed well as a group this year, we believe that in the long run our listing will enhance the visibility and trading volume of Summit Financial Group." FIRST QUARTER 2005 CONSOLIDATED RESULTS Revenue for the first quarter of 2005, consisting of net interest income plus non-interest income, was $13.8 million, an increase of 19.7 percent over the first quarter of 2004. Net interest income increased 8.4 percent to $7.2 million, reflecting 12.2 percent growth in average earning assets partially offset by an 8 basis point drop in the net interest margin to 3.59 percent. Non-interest income for the first quarter of 2005 was $6.7 million compared with $4.9 million for the prior-year period, an increase of 34.9 percent. This increase primarily reflects the operations of the Company's mortgage banking unit, Summit Mortgage, (formerly known as Summit Financial, LLC) and is discussed below. Non-interest expense for the first quarter of 2005 was $10.1 million, a 28.3 percent increase over the $7.8 million reported for the first quarter of 2004. Salaries and employee benefits represented the largest portion of expense growth and increased 23.2 percent. The efficiency ratio was 70.26 percent for the first quarter of 2005 compared with 65.83 percent for the prior-year period. The efficiency ratio for the Company's Community Banking Segment, shown below, is a more accurate indicator of its performance compared with other community banks. Asset quality remains strong. Charge-offs were $87,000 for the first quarter of 2005, equivalent to an annualized 0.05 percent of average loans. Nonperforming assets were 0.20 percent of assets at March 31, 2005, down from 0.29 percent at March 31, 2004. At period-end, loan loss reserves were 0.84 percent of loans. Assets at March 31, 2005 were $907.3 million, an increase of 12.1 percent over the last twelve months. The increase was driven by portfolio loan growth of $91.6 million, up 17.0 percent to $629.2 million; commercial real estate loans, up 26.0 percent, and residential mortgage loans, up 11.6 percent, were the largest contributors to this growth. Deposits increased $7.0 million, or 1.3 percent, to $537.4 million. To support its strong loan growth, the Company increased short term borrowings by $87.2 million, to $129.7 million. Shareholders' equity at period end was $66.4 million, an increase of 9.4 percent over the last twelve months. Common shares outstanding totaled 7,039,840 at March 31, 2005. FIRST QUARTER 2005 OPERATING SEGMENT RESULTS Community Banking Financial Performance Net income for the first quarter of 2005 was $2.4 million, relatively unchanged from the prior-year first quarter. Total revenue increased 9.9% to $7.9 million, while non-interest expense increased 16.8 percent to $4.2 million due to staff additions and the recently-opened Harrisonburg, Virginia branch. The Community Banking segment's efficiency ratio was 52.90 percent compared with 50.44 percent for the prior-year first quarter. Mortgage Banking Financial Performance The Company's mortgage banking unit, Summit Mortgage, commenced operations during the third quarter of 2003. This segment originates first mortgages in the Company's community banking markets and debt consolidation second mortgage loans for borrowers nationwide. Loan originations in the first quarter of 2005 were $68.2 million, up 51.9 percent from prior-year period levels; loan sales were $66.8 million, up 61.4 percent from the 2004 first quarter. Revenue for the first quarter of 2005 totaled $5.9 million, an increase of 33.9 percent over the prior-year period, while non-interest expense increased 37.8 percent to $5.6 million. Net income for the first quarter of 2005 was $226,000 compared with $243,000 for the prior-year first quarter. Profitability in the most recent quarter was impacted by the continued change in the mix of loans originated. During first quarter 2005, 18.0% of the total dollar amount of loan originations were first mortgage loans as compared to 9.9% during the first quarter of 2004. Sales of first mortgage loans typically result in smaller margins than sales of second mortgage loans. ABOUT THE COMPANY Summit Financial Group, Inc., a financial holding company with total assets of $907.3 million, operates thirteen banking locations through its two wholly-owned community banks: Summit Community Bank, headquartered in Moorefield, West Virginia; and Shenandoah Valley National Bank in Winchester, Virginia. Summit also operates Summit Mortgage, a residential mortgage loan originator located in Herndon, Virginia. FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current projections. Please refer to Summit's filings with the Securities and Exchange Commission for a summary of important factors that could affect Summit's forward-looking statements. Summit undertakes no obligation to revise these statements following the date of this press release. SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF) Quarterly Performance Summary -- Q1 2005 vs Q1 2004 For the Quarter Ended Dollars in thousands, except per ----------------------- Percent share amounts 3/31/2005 3/31/2004 Change ---------------------------------------------------------------------- Condensed Statements of Income Interest income Loans, including fees $ 10,010 $ 8,314 20.4% Securities 2,258 2,527 -10.6% Other 25 32 -21.9% ---------- ---------- Total interest income 12,293 10,873 13.1% ---------- ---------- Interest expense Deposits 2,517 2,414 4.3% Borrowings 2,621 1,857 41.1% ---------- ---------- Total interest expense 5,138 4,271 20.3% ---------- ---------- Net interest income 7,155 6,602 8.4% Provision for loan losses 330 233 41.6% ---------- ---------- Net interest income after provision for loan losses 6,825 6,369 7.2% ---------- ---------- Noninterest income Service fee income 547 509 7.5% Mortgage origination revenue 5,856 4,319 35.6% Securities gains (losses) - 20 -100.0% Other income 264 94 180.9% ---------- ---------- Total noninterest income 6,667 4,942 34.9% ---------- ---------- Noninterest expense Salaries and employee benefits 4,542 3,686 23.2% Net occupancy expense 429 304 41.1% Equipment expense 493 429 14.9% Postage expense 1,567 1,353 15.8% Advertising 1,325 962 37.7% Other expenses 1,699 1,105 53.8% ---------- ---------- Total noninterest expense 10,055 7,839 28.3% ---------- ---------- Income before income taxes 3,437 3,472 -1.0% Income taxes 1,026 1,021 0.5% ---------- ---------- Net income $ 2,411 $ 2,451 -1.6% ========== ========== Per Share Data Basic earnings $ 0.34 $ 0.35 -2.9% Diluted earnings $ 0.34 $ 0.35 -2.9% Average shares outstanding Basic 7,039,784 7,020,126 0.3% Diluted 7,171,099 7,084,970 1.2% Performance Ratios Return on average equity 14.53% 16.77% -13.4% Return on average assets 1.08% 1.23% -12.2% Net yield on earning assets - taxable equivalent 3.59% 3.67% -2.2% Efficiency ratio consolidated(A) 70.26% 65.83% 6.7% Efficiency ratio excluding mortgage banking(A) 52.90% 50.44% 4.9% NOTE: (A) - 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, except per share amounts 3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 --------- ---------- --------- --------- --------- Condensed Statements of Income Interest income Loans, including fees $ 10,010 $ 9,814 $ 9,334 $ 8,744 $ 8,314 Securities 2,258 2,294 2,267 2,316 2,527 Other 25 30 33 32 32 --------- ---------- --------- --------- --------- Total interest income 12,293 12,138 11,634 11,092 10,873 --------- ---------- --------- --------- --------- Interest expense Deposits 2,516 2,456 2,451 2,390 2,414 Borrowings 2,622 2,366 2,122 1,904 1,857 -------- --------- -------- -------- -------- Total interest expense 5,138 4,822 4,573 4,294 4,271 -------- --------- -------- -------- -------- Net interest income 7,155 7,316 7,061 6,798 6,602 Provision for loan losses 330 292 293 233 233 -------- --------- -------- -------- -------- Net interest income after provision for loan losses 6,825 7,024 6,768 6,565 6,369 -------- --------- -------- -------- -------- Noninterest income Service fee income 547 592 575 562 509 Mortgage origination revenue 5,856 5,423 7,732 6,614 4,319 Securities gains (losses) - 32 (35) 17 20 Other income 264 287 273 239 94 -------- --------- -------- -------- -------- Total noninterest income 6,667 6,334 8,545 7,432 4,942 -------- --------- -------- -------- -------- Noninterest expense Salaries and employee benefits 4,542 4,607 5,055 4,740 3,686 Net occupancy expense 429 404 408 386 304 Equipment expense 493 473 433 441 429 Postage expense 1,567 1,361 1,703 1,435 1,353 Advertising 1,325 1,231 1,229 1,304 962 Other expenses 1,699 1,939 1,939 1,862 1,105 -------- --------- -------- -------- -------- Total noninterest expense 10,055 10,015 10,767 10,168 7,839 -------- --------- -------- -------- -------- Income before income taxes 3,437 3,343 4,546 3,829 3,472 Income taxes 1,026 986 1,420 1,155 1,021 -------- --------- -------- -------- -------- Net income$ 2,411 $ 2,357 $ 3,126 $ 2,674 $ 2,451 ======== ========= ======== ======== ======== Per Share Data Basic earnings $ 0.34 $ 0.34 $ 0.44 $ 0.38 $ 0.35 Diluted earnings $ 0.34 $ 0.33 $ 0.43 $ 0.38 $ 0.35 Average shares outstanding Basic 7,039,784 7,032,512 7,026,173 7,021,567 7,020,126 Diluted 7,171,099 7,149,981 7,174,852 7,108,161 7,084,970 Performance Ratios Return on average equity 14.53% 14.33% 20.06% 17.96% 16.77% Return on average assets 1.08% 1.07% 1.46% 1.29% 1.23% Net yield on earning assets - taxable equivalent 3.59% 3.69% 3.65% 3.64% 3.67% Efficiency ratio consolidated(A) 70.26% 70.50% 67.11% 69.61% 65.83% Efficiency ratio excluding mortgage banking(A) 52.90% 52.70% 51.68% 53.61% 50.44% NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles. SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF) Segment Information For the Quarter Ended March 31, 2005 Parent Community Mortgage and Dollars in thousands Banking Banking Other Eliminations Total ---------------------------------------------------------------------- Condensed Statements of Income Interest income $ 12,204 $ 302 $ 7 $ (220)$ 12,293 Interest expense 4,971 218 169 (220) 5,138 -------- ------- ------- -------- -------- Net interest income 7,233 84 (162) - 7,155 Provision for loan losses 330 - - - 330 -------- ------- ------- -------- -------- Net interest income after provision for loan losses 6,903 84 (162) - 6,825 -------- ------- ------- -------- -------- Noninterest income 689 5,856 1,298 (1,176) 6,667 Noninterest expense 4,198 5,597 1,436 (1,176) 10,055 -------- ------- ------- -------- -------- Income before income taxes 3,394 343 (300) - 3,437 Income taxes 1,029 117 (120) - 1,026 -------- ------- ------- -------- -------- Net income $ 2,365 $ 226 $ (180) $ - $ 2,411 ======== ======= ======= ======== ======== Intersegment revenue (expense) $ (906) $ (263)$ 1,169 $ - $ - ======== ======= ======= ======== ======== Average assets $867,224 $19,386 $78,885 $(73,334)$892,161 ======== ======= ======= ======== ======== SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF) Segment Information For the Quarter Ended March 31, 2004 Parent Community Mortgage and Dollars in thousands Banking Banking Other Eliminations Total ---------------------------------------------------------------------- Condensed Statements of Income Interest income $ 10,755 $ 207 $ 3 $ (92)$ 10,873 Interest expense 4,169 89 105 (92) 4,271 -------- ------ ------- -------- -------- Net interest income 6,586 118 (102) - 6,602 Provision for loan losses 233 - - - 233 -------- ------ ------- -------- -------- Net interest income after provision for loan losses 6,353 118 (102) - 6,369 -------- ------ ------- -------- -------- Noninterest income 624 4,318 888 (888) 4,942 Noninterest expense 3,600 4,062 1,065 (888) 7,839 -------- ------ ------- -------- -------- Income before income taxes 3,377 374 (279) - 3,472 Income taxes 999 130 (108) - 1,021 -------- ------ ------- -------- -------- Net income $ 2,378 $ 244 $ (171) $ - $ 2,451 ======== ====== ======= ======== ======== Intersegment revenue (expense) $ (759) $ (129)$ 888 $ - $ - ======== ====== ======= ======== ======== Average assets $790,721 $9,417 $68,282 $(71,397)$797,023 ======== ====== ======= ======== ======== SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF) Selected Balance Sheet Data For the Quarter Ended --------------------------------------------------- Dollars in, thousands, except per share amounts 3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 ---------------------------------------------------------------------- Assets $907,264 $889,489 $862,246 $849,555 $809,216 Securities 209,223 211,362 209,702 213,644 215,732 Loans held for sale, net 15,766 14,274 12,097 15,607 9,596 Loans, net 623,863 602,728 586,201 559,869 532,855 Intangible assets 3,461 3,499 3,537 3,574 3,612 Deposits 537,412 524,614 535,822 536,589 530,372 Short-term borrowings 129,697 120,629 77,518 71,350 42,547 Long-term borrowings and subordinated debentures 165,384 172,201 178,334 176,248 169,608 Shareholders' equity 66,400 65,708 65,289 58,975 60,674 Book value per share $9.43 $9.33 $9.29 $8.40 $8.64 SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF) Loan Composition Dollars in thousands 3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 ---------------------------------------------------------------------- Commercial $56,394 $53,226 $49,630 $49,294 $47,178 Commercial real estate 296,911 279,631 271,097 250,562 235,565 Residential construction 3,806 3,916 3,351 2,665 2,698 Residential mortgage 226,866 223,689 218,118 212,371 203,225 Consumer 37,066 38,948 40,559 41,787 41,060 Other 9,458 9,605 9,784 9,316 8,968 --------------------------------------------------- Total loans 630,501 609,015 592,539 565,995 538,694 Less unearned fees and interest 1,322 1,214 1,200 1,173 1,118 --------------------------------------------------- Total loans net of unearned fees and interest 629,179 607,801 591,339 564,822 537,576 Less allowance for loan losses 5,316 5,073 5,138 4,953 4,721 --------------------------------------------------- Loans, net $623,863 $602,728 $586,201 $559,869 $532,855 =================================================== SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF) Mortgage Banking Segment Loan Activity For the Quarter Ended --------------------------------------------- Dollars in thousands 3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 ------------ ---------- ----------- ---------- ---------- ---------- Loans originated Amount $ 68,929 $ 65,983 $ 75,791 $ 74,333 $ 44,935 Number 1,308 1,182 1,532 1,461 931 Loans sold Amount $ 66,761 $ 62,043 $ 79,927 $ 68,013 $ 41,376 Number 1,295 1,148 1,610 1,364 861 SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF) Asset Quality Information For the Quarter Ended ------------------------------------------ Dollars in thousands 3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 ------------- ---------- ----------- ---------- ---------- ---------- Net loan charge- off's $ 87 $ 357 $ 107 $ 1 $ 192 Net loan charge- off's to average loans (annualized) 0.05% 0.25% 0.08% 0.00% 0.15% Allowance for loan losses $ 5,316 $ 5,073 $ 5,138 $ 4,953 $ 4,721 Allowance for loan losses as a percentage of period end loans 0.84% 0.83% 0.87% 0.88% 0.88% Nonperforming assets: Nonperforming loans $ 836 $ 672 $ 1,465 $ 1,577 $ 1,448 Foreclosed properties and other repossessed assets 608 646 809 482 489 Nonaccrual securities 334 349 363 384 389 -------- --------- -------- -------- -------- Total $ 1,778 $ 1,667 $ 2,637 $ 2,443 $ 2,326 ======== ========= ======== ======== ======== Nonperforming loans to period end loans 0.13% 0.11% 0.25% 0.28% 0.27% ======== ========= ======== ======== ======== Nonperforming assets to period end assets 0.20% 0.19% 0.31% 0.29% 0.29% ======== ========= ======== ======== ======== SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF) Average Balance Sheet, Interest Earnings & Expenses and Average Rates Q1 2005 vs Q1 2004 Q1 2005 Q1 2004 ------------------------- ------------------------- Dollars Average Earnings/ Yield/ Average Earnings/ Yield/ in thousands Balances Expense Rate Balances Expense Rate ------------------------------------------- ------------------------- ASSETS Interest earning assets Loans, net of unearned interest Taxable $623,652 $ 9,902 6.44% $522,007 $ 8,217 6.30% Tax-exempt 9,108 164 7.30% 7,630 147 7.71% Securities Taxable 162,314 1,729 4.32% 172,397 1,975 4.58% Tax-exempt 47,876 793 6.72% 48,288 825 6.83% Interest bearing deposits other banks and Federal funds sold 2,717 26 3.88% 3,572 32 3.58% -------- ------- ----- -------- ------- ----- Total interest earning assets 845,667 12,614 6.05% 753,894 11,196 5.94% Noninterest earning assets Cash & due from banks 14,513 9,965 Premises & equipment 20,740 18,777 Other assets 16,442 19,161 Allowance for loan losses (5,201) (4,774) -------- -------- Total assets $892,161 $797,023 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits $127,994 $ 425 1.35% $115,233 $ 253 0.88% Savings deposits 50,727 79 0.63% 48,053 56 0.47% Time deposits 298,514 2,013 2.73% 301,375 2,105 2.79% Short-term borrowings 116,898 754 2.62% 54,183 172 1.27% Long-term borrowings and subordinated debentures 170,203 1,867 4.45% 165,465 1,685 4.07% -------- ------- ----- -------- ------- ----- 764,336 5,138 2.73% 684,309 4,271 2.50% Noninterest bearing liabilities Demand deposits 56,130 48,394 Other liabilities 5,316 5,847 -------- -------- Total liabilities 825,782 738,550 Shareholders' equity 66,379 58,473 -------- -------- Total liabilities and shareholders' equity $892,161 $797,023 ======== ======== NET INTEREST EARNINGS $ 7,476 $ 6,925 ======= ======= NET INTEREST YIELD ON EARNING ASSETS 3.59% 3.67% ===== ===== CONTACT: Summit Financial Group, Inc. Robert S. Tissue, 304-530-0552 rtissue@SummitFGI.com