Summit Financial reports improved third quarter results

MOOREFIELD -- Summit Financial Group Inc. today reported third quarter 2009 net income of $1.4 million, or .19 per diluted share, compared with a net loss of $7.7 million, or ($1.03) per diluted share, for the third quarter of 2008. Third quarter 2009 results reflect a decreased provision for loan losses, increased net interest income and continued control of overhead expenses.

Nonrecurring items for the third quarter of 2009 include $428,000 ($270,000 after-tax or .04 per diluted share) of securities gains; for the prior-year third quarter, nonrecurring items included an other-than-temporary-impairment ("OTTI") charge of $4.5 million ($2.8 million after-tax, or .38 per diluted share) related to the write-down of Fannie Mae and Freddie Mac preferred stock investments. Excluding nonrecurring items from both quarters, pro forma third quarter 2009 earnings were $1.1 million, or .15 per diluted share, compared to a 2008 third quarter net loss of $4.8 million, or (.64) per diluted share.

For the nine months ended September 30, 2009, Summit reported a net loss of $282,000, or (.04) per diluted share, compared with a net loss of $1.3 million, or (.17) per diluted share for the 2008 nine-month period. Excluding nonrecurring charges totaling $5.1 million pretax ($3.2 million after-tax) recorded for both nine-month periods, pro forma earnings for the first nine months of 2009 were $2.9 million, or .39 per diluted share, compared to $2.0 million, or .27 per diluted share, for the 2008 nine-month period.

H. Charles Maddy III, President and Chief Executive Officer of Summit Financial Group Inc., said in a prepared statement, "Our banking business remains healthy, although pressures continue from the impact of the weak real estate market and ongoing recession. We are taking every precaution to strengthen our financial condition and improve efficiencies to position Summit for the longer haul. We are managing our business to control discretionary expenses, expand our net interest margin, grow local deposits, and add capital as needed to remain comfortably in excess of 'well-capitalized' status in accordance with regulatory capital guidelines."

Maddy continued, "Summit Community Bank is located in some of the most dynamic job and real estate markets in the country. Strong population growth and growing household income in Northern Virginia had created extraordinary demand, but even this market finally succumbed to the impact of the recession. The majority of our problem loans have surfaced in Northern Virginia, where demographics still remain more attractive than most areas of the country. However, the market needs time to adjust. We are beginning to see signs of returning health, with firmer housing prices and lower inventories in certain markets. We continue to work with our borrowers to achieve positive outcomes, but final resolution is dependent on improved real estate demand and additional job creation.

"West Virginia, by comparison, has been a much more stable market -- lower population growth and lower loan growth. In West Virginia, we have very few problem assets and appear to be gaining deposit market share, thanks to some of our recently introduced savings products."

Total assets as of Sept. 30, 2009 were $1.58 billion, down $49.3 million, or 3.0 percent, since year-end 2008. Total loans, net of unearned interest and fees, were $1.17 billion, down $38.8 million, or 3.2 percent, since year-end 2008. The $38.7 million, or 18.0 percent, decline in construction and development ("C&D") loans was the primary factor contributing to the loan portfolio decline, while commercial real estate ("CRE") loans grew modestly over the past nine-months (up $5.4 million, or 1.2 percent).

CRE and residential real estate represent the majority of the Company's loan portfolio, accounting for 39.0 percent and 32.1 percent of total loans, respectively. C&D loans accounted for 15.1 percent, down from 17.8 percent at December 31, 2008, while non real estate-related commercial ("C&I") loans accounted for the remaining 10.7 percent of loans.

Summit Financial Group Inc., a financial holding company with total assets of $1.6 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.