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Summit Financial Group Reports First Quarter 2016 Results

MOOREFIELD, W.Va., April 25, 2016 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (SMMF) today reported first quarter 2016 net income of $4.06 million, or $0.38 per diluted share, representing a decrease of 5.2 percent, or 7.3 percent per diluted share, compared to the $4.29 million, or $0.41 per diluted share, reported for the first quarter of 2015, and a decrease of 2.0 percent, or 2.6 percent per diluted share, compared to the $4.15 million, or $0.39 per diluted share, reported for the fourth quarter of 2015. Q1 2016 earnings compared to Q1 2015 and Q4 2015 were negatively impacted by increased personnel costs and other noninterest expenses as well as reductions in insurance commission revenue, which were partially offset by increased net interest earnings and reductions in write-downs of foreclosed properties.

Excluding from first quarter 2016 one-time items of income, gain, expense and loss, Q1 2016 core earnings approximated $3.96 million, or $0.37 per diluted share compared to Q1 2015 core earnings of $4.33 million, or $0.40 per diluted share, and to Q4 2015 core earnings of $4.08 million, or $0.38 per diluted share.

Highlights for Q1 2016 include:

  • Net interest margin remained stable compared to the linked quarter, but has declined 9 basis points since Q1 2015.
  • Achieved loan growth of $17.3 million or 6.3 percent (on an annualized basis). Loans have grown $57.6 million or 5.5 percent since Q1 2015.
  • Core revenue for the quarter is unchanged compared to Q4 2015, and is up $189,000 or 1.3 percent compared to Q1 2015.
  • Nonperforming assets as a percentage of total assets declined to 2.66 percent compared to 2.77 percent for the linked quarter, and 3.18 percent at Q1 2015; foreclosed properties are at the lowest level since Q2 2009.
  • Recorded charges of $109,000 to write-down foreclosed properties compared to $636,000 in Q4 2015 and $572,000 in Q1 2015.
  • Announced our entering into a definitive merger agreement to acquire Highland County Bankshares, Inc. headquartered in Monterey, Virginia.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, “I am pleased to report Summit achieved another quarter of solid performance, despite the challenges of higher overhead costs resulting from important investments we are making in both our people and in our infrastructure to assist to maintain our growth momentum. Our solid core earnings, growing loan portfolio and continued reductions in our portfolio of problem assets are all very gratifying to note; but I am particularly gratified by the opportunity represented by our pending acquisition of Highland County Bankshares. This deal will combine two financially strong banks with similar cultures, core values and guiding principles, as well as a shared commitment to build long-term client relationships by providing service beyond expectations.”

Results from Operations

Total revenue for first quarter 2016, consisting of net interest income and noninterest income, declined 0.5 percent to $14.6 million compared to $14.7 million for the first quarter 2015, and was unchanged compared to the linked quarter.

Total core revenue (excluding nonrecurring items, enumerated above) was $14.2 million for first quarter 2015, $14.0 million for the same prior-year quarter and $14.2 million for the linked quarter.

For the first quarter of 2016, net interest income was $11.8 million, an increase of 2.2 percent from the $11.5 million reported in the prior-year first quarter and increased $46,000 compared to the linked quarter. The net interest margin for first quarter 2016 was 3.50 percent compared to 3.59 percent for the year-ago quarter, and 3.51 percent for the linked quarter.

Noninterest income, consisting primarily of insurance commissions from Summit's insurance agency subsidiary and service fee income from community banking activities, for first quarter 2016 was $2.81 million compared to $3.14 million for the comparable period of 2015 and $2.87 million for Q4 2015. Excluding realized securities gains, noninterest income was $2.41 million for first quarter 2016 compared to $2.66 million reported for first quarter 2015 and $2.45 million for linked quarter. The quarter over year-ago quarter decline principally resulted from decreased insurance commission revenues, while the decline compared to the linked quarter was due to lower service fees on deposit accounts.

Summit recognized $250,000 provision for loan losses in first quarter 2016, as well as for the linked quarter and for the year-ago quarter.

Total noninterest expense increased 4.3% to $8.55 million compared to $8.20 million for the prior-year first quarter and increased 0.7 percent compared to $8.49 million for the linked quarter. Excluding from noninterest expense merger expenses, gains and losses on sales of foreclosed properties and write-downs of foreclosed properties, noninterest expense would have approximated $8.34 million for Q1 2016, $7.48 million for the comparable period of 2015 and $8.17 million for linked quarter. The Q1 2016 compared to Q1 2015 increase is primarily due to net additions of staff, general merit raises and higher incentive compensation.

Balance Sheet

At March 31, 2016, total assets were $1.51 billion, an increase of $16.1 million, or 1.1 percent since December 31, 2015. Total loans, net of unearned fees and allowance for loan losses, were $1.10 billion at March 31, 2016, up $17.5 million, or 1.6 percent, from the $1.08 billion reported at year-end 2015.

At March 31, 2016, deposits were $1.09 billion, an increase of $27.8 million, or 2.6 percent, since year end 2015. During Q1 2016, checking deposits declined by $1.5 million or 0.4 percent, while savings deposits increased $19.9 million, or 7.4 percent.

Asset Quality

As of March 31, 2016, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $40.1 million, or 2.66 percent of assets. This compares to $41.3 million, or 2.77 percent of assets at the linked quarter, and $46.4 million, or 3.18 percent of assets, at first quarter 2015.

First quarter 2016 net loan charge-offs were $407,000, or 0.15 percent of average loans on an annualized basis. The allowance for loan losses stood at $11.3 million, or 1.02 percent of total loans at March 31, 2016, compared to 1.05 percent at year-end 2015.

Capital Adequacy

Shareholders’ equity was $146.1 million as of March 31, 2016 compared to $143.7 million December 31, 2015. Tangible book value per common share increased to $12.98 at March 31, 2016 compared to $12.78 at December 31, 2015. Summit had 10,681,880 outstanding common shares at Q1 2016 quarter end compared to 10,671,744 at year end 2015.

Summit's depository institution, Summit Community Bank, Inc. (the “Bank”), is well in excess of regulatory requirements for a "well capitalized" institution at March 31, 2016. The Bank’s total risk-based capital ratio...


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