Summit Financial Group, Inc. (West Virginia) :SMMF-US: Earnings Analysis: Q1, 2017 By the Numbers : May 30, 2017

Summit Financial Group, Inc. (West Virginia) reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Summit Financial Group, Inc. (West Virginia) – First Community Bancshares, Inc., First West Virginia Bancorp, Inc., TowneBank, American National Bankshares Inc., Regions Financial Corporation, City Holding Company, Peoples Bancorp Inc., Huntington Bancshares Incorporated and F.N.B. Corporation (FCBC-US, FWVB-US, TOWN-US, AMNB-US, RF-US, CHCO-US, PEBO-US, HBAN-US and FNB-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 16.37 million, Net Earnings of USD -1.62 million.
  • Net interest income margins widened from 80.73% to 83.29% compared to the same period last year.
  • Net loan assets changed 17.88% compared to same period last year and -1.14% from previous period, total deposits changed 18.88% compared to same period last year and 0.44% from previous period.
  • Year-on-year change in operating cash flow of 10.99% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 40.39% to 42.48%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 16.37 16.92 14.96 15.06 14.59
Revenue Growth (%YOY) 12.16 13.44 4.85 5.91 0.57
Earnings (mil) -1.62 4.71 4.28 4.24 4.06
Earnings Growth (%YOY) -139.78 13.63 16.94 5.81 -5.2
Net Margin (%) -9.87 27.84 28.63 28.18 27.84
EPS -0.15 0.44 0.4 0.4 0.38
Return on Equity (%) -4.18 12.19 11.25 11.44 11.21
Return on Assets (%) -0.37 1.1 1.06 1.1 1.08

Access our Ratings and Scores for Summit Financial Group, Inc. (West Virginia)

Market Share Versus Profits

Revenues History
Earnings History

SMMF-US‘s change in revenue this period compared to the same period last year of 12.16% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SMMF-US is holding onto its market share. Also, for comparison purposes, revenues changed by -3.29% and earnings by -134.30% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 80.73% to 83.29% and net interest income after provisions margins improved from 79.01% to 81.76% over this period. In addition, loan loss provisions as a percentage of net interest income were 1.83% this period , and 2.12% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 17.88% compared to the same period last year and -1.14% from the previous period. Total deposits changed 18.88% compared to the same period last year and 0.44% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SMMF-US‘s change in operating cash flow of 10.99% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings declined despite overall improvement in operating margins. Operating margins went from 40.39% to 42.48%. The decline in earnings seems to be largely because of one-time item. Pretax margins narrowed from 39.62% to -18.68%.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Summit Financial Group, Inc. (West Virginia)

Company Profile

Summit Financial Group, Inc. is a financial holding company, which engages in the provision of community banking and insurance services. It provides a wide range of community banking services, including demand, savings and time deposits; commercial, real estate and consumer loans; letters of credit; and cash management services. It also provides commercial, commercial real estate, construction and development, residential real estate, and consumer loans. The firm operates through the Community Banking and Insurance and Financial Services segments. The Community Banking segment consists of full service banks which offer customers traditional banking products and services through various delivery channels. The Insurance and Financial Services segment consists of three insurance agency offices that sell insurance products. The company was founded on March 5, 1987 and is headquartered in Moorefield, WV.

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