Regulatory Matters

6 Months Ended

Jun. 30, 2012

Regulatory Matters [Abstract]

Regulatory Matters

NOTE 13. REGULATORY MATTERS

We and our subsidiaries are subject to various regulatory capital requirements administered by the banking regulatory agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we and each of our subsidiaries must meet specific capital guidelines that involve quantitative measures of our and our subsidiaries' assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. We and each of our subsidiaries' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require us and each of our subsidiaries to maintain minimum amounts and ratios of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). We believe, as of June 30, 2012, that we and each of our subsidiaries met all capital adequacy requirements to which they were subject.

The most recent notifications from the banking regulatory agencies categorized us and each of our subsidiaries as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, we and each of our subsidiaries must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below.

Our actual capital amounts and ratios as well as our subsidiary, Summit Community Bank's ("Summit Community") are presented in the following table.

									To be Well Capitalized
					Minimum Required				under Prompt Corrective
	Actual				Regulatory Capital				Action Provisions
Dollars in thousands	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2012
Total Capital (to risk weighted assets)
Summit	$	138,013	13.6	%	$	81,056	8.0	%	$	101,320	10.0	%
Summit Community		145,218	14.3	%		81,127	8.0	%		101,409	10.0	%
Tier I Capital (to risk weighted assets)
Summit		112,359	11.1	%		40,528	4.0	%		60,792	6.0	%
Summit Community		132,364	13.1	%		40,564	4.0	%		60,845	6.0	%
Tier I Capital (to average assets)
Summit		112,359	7.9	%		57,017	4.0	%		71,272	5.0	%
Summit Community		132,364	9.3	%		56,809	4.0	%		71,011	5.0	%
As of December 31, 2011
Total Capital (to risk weighted assets)
Summit		136,060	13.0	%		83,617	8.0	%		104,522	10.0	%
Summit Community		142,329	13.6	%		83,604	8.0	%		104,505	10.0	%
Tier I Capital (to risk weighted assets)
Summit		109,989	10.5	%		41,809	4.0	%		62,713	6.0	%
Summit Community		129,058	12.3	%		41,802	4.0	%		62,703	6.0	%
Tier I Capital (to average assets)
Summit		109,989	7.6	%		58,031	4.0	%		72,538	5.0	%
Summit Community		129,058	8.9	%		57,995	4.0	%		72,493	5.0	%

Summit Financial Group, Inc. ("Summit") and its bank subsidiary, Summit Community Bank, Inc. (the "Bank"), have entered into informal Memoranda of Understanding ("MOU's") with their respective regulatory authorities. A memorandum of understanding is characterized by the regulatory authorities as an informal action that is not published or publicly available and that is used when circumstances warrant a milder form of action than a formal supervisory action, such as a formal written agreement or order. Among other things, under the MOU's, Summit's management team has agreed to:

§	The Bank achieving and maintaining a minimum Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 11%;
§	The Bank providing 30 days prior notice of any declaration of intent to pay cash dividends to provide the Bank's regulatory authorities an opportunity to object;
§	Summit suspending all cash dividends on its common stock until further notice. Dividends on all preferred stock, as well as interest payments on subordinated notes underlying Summit's trust preferred securities, continue to be permissible; and,
§	Summit not incurring any additional debt, other than trade payables, without the prior written consent of the principal banking regulators.

Additional information regarding the MOU's is included in Part I. Item 1A – Risk Factors on our Form 10-K for the year ended December 31, 2011.